Net worth can be a more useful way to gauge your financial situation, as it takes your debts into account in addition to the money you've saved. But what is a good net worth to have before you retire? In this article, we'll take a look at what net worth really means, what the average American household's net worth is, and what to keep in mind when assessing your situation.
What does net worth mean?
Net worth is the difference between a person's assets and liabilities. For example, if the value of your home, car, and other possessions is $1 million, and you owe $400,000 in various mortgage, auto loan, and other debts, your net worth is $600,000.
In other words, think of net worth as the amount of money you would have left if you sold everything you own and paid all of your debts.
To calculate your net worth, start by adding the value of your major assets. You can estimate the fair market value of your home and cars, and be sure to consider other valuable items. Include liquid assets like:
Note that you don't need to include every item you own. Other common categories include things like jewelry, art, collectibles, and home furnishings, but there is no set list of the items to include and exclude from net worth.
Then, add up your debts, which is usually a rather straightforward calculation. Add your mortgage and auto loan balances, too. And don't forget about any personal loans, credit card balances, and other debts you may have. Subtract this from the value of your assets to determine your net worth.
The average retiree's net worth in the United States
According to the Federal Reserve's latest Survey of Consumer Finances, which is conducted every three years, here is the average American household's net worth for the three age groups that cover the majority of retirees:
| Head of Household Age | Median Net Worth | Average Net Worth |
|---|
| 55–64 | $212,500 | $1,175,900 |
| 65–74 | $266,400 | $1,217,700 |
| 75 and older | $254,800 | $977,600 |
Data source: Federal Reserve Survey of Consumer Finances.
We won't get too deep into a statistics lesson, but the important thing to know is that the median net worth means that half of households in that age group have a higher net worth, while half are lower. And when the average is significantly higher than the median, as is the case in all three age groups here, it implies that there are some outliers with very high net worth. In a nutshell, the median is generally the better representation of the typical retired household's net worth than the average.
Net worth isn't the only factor in a financially secure retirement
One important point to keep in mind is that net worth isn't the only thing that determines quality of life in retirement. A household with a relatively low net worth could actually have a more secure retirement if they have a pension or other stream of income to cover living expenses, for example.
In a nutshell, the biggest factor in a financially secure retirement (for most households) is income, not net worth. It's true that a large retirement nest egg can be used to create an income stream from investments, but there are other sources to keep in mind, such as pensions, Social Security, annuities, and more.
The bottom line on net worth in retirement
The averages and medians mentioned here can be a good tool to determine where you stand relative to other retirees, but the most important takeaway is that there is no set net worth that you should have by the time you retire. The amount you need to be financially comfortable depends on a variety of factors, such as your other income streams, fixed and variable expenses, and your lifestyle.
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FAQs
The final multiple — 10 to 12 times your annual income at retirement age. If you plan to retire at 67, for instance, and your income is $150,000 per year, then you should have between $1.5 and $1.8 million set aside for retirement.
What is a good net worth in retirement? ›
The final multiple — 10 to 12 times your annual income at retirement age. If you plan to retire at 67, for instance, and your income is $150,000 per year, then you should have between $1.5 and $1.8 million set aside for retirement.
What is considered wealthy at retirement? ›
Super wealthy (99th percentile): $16.7 million. Wealthy (95th percentile): $3.2 million. Well off (90th percentile): $1.9 million. Middle class (50th percentile): $281,000.
What should my net worth be at age 65? ›
The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.
What is considered a good amount of money to retire with? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
What net worth is considered wealthy? ›
In the United States, the concept of being rich is often a subject of discussion, curiosity and, sometimes, aspiration. Charles Schwab's 2023 Modern Wealth Survey provides insights into this topic, revealing that the average American equates being wealthy with a net worth of approximately $2.2 million.
What percentage of retirees have $2 million dollars? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
What net worth is considered upper class? ›
The upper class has an average net worth of $793,120 to $2.65 million, while the lower class has $16,900. The middle class ranges from $58,550 to $300,800. You can grow your net worth by saving and investing consistently, investing in the stock market, and being careful about taking on debt.
Does net worth include home? ›
Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.
How many Americans have $1 million in retirement? ›
According to the Federal Reserve's latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more. This leaves a significant 90% who fall short of this milestone. Don't Miss: The average American couple has saved this much money for retirement — How do you compare?
There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.
What percentage of retirees have $3 million dollars? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
What is a high net worth retirement? ›
People tend to underestimate “high net worth,” citing $400,000 as the median average, which is significantly less than the broadly accepted definition of a HNWI: someone with at least $1 million in liquid assets. Getting clarity on your net worth is an important step toward financial wellbeing.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of May 2024, the average check is $1,778.24, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What is a good monthly retirement income? ›
More? Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.
Is $500,000 enough to retire at 70? ›
Using the 4% rule with $500,000 in savings, a 70-year-old retiree can count on receiving $20,000 in the first year, which is not exactly a princely sum. Many 70-year-olds won't live for 30 years in retirement, however, so you may consider taking out a little more each year.
