The Average Net Worth by Age and How to Build It

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Editor's Note: This story originally appeared on Personal Capital.

Have you ever wondered how you stack up against other people financially? It’s not uncommon to want to measure our financial situation with others who are in a similar age range or stage of life.

These comparisons are often made on an income basis. In other words, how much money do you make compared with other people your age or in your life stage?

But it’s often more revealing to make the comparison on the basis of net worth.

Do you know your net worth? You can calculate your net worth in minutes when you sign up for Personal Capital’s free and secure financial dashboard.

Once you do that, you’re ready to see whether you’re ahead of the game or not.

What Is Net Worth?

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Net worth is determined by subtracting everything you owe to creditors from everything you currently own. Or put another way, it’s the value of your assets after you’ve subtracted all your debts and liabilities.

Let’s consider John. He owns a home currently valued at $300,000. His current mortgage balance is $150,000, so John has $150,000 in home equity that counts toward his assets.

In addition, John has an investment portfolio worth $150,000 and outstanding debt of $180,000 in the form of credit card debt, a car loan and his mortgage.

To calculate John’s net worth, we’ll subtract his total liabilities (outstanding debt) from his total assets (home equity and investment portfolio). Not counting possessions like his car, furniture, electronics, jewelry, etc., John’s current net worth is $120,000.

$150,000 home equity + $150,000 investment portfolio – $180,000 outstanding debt = $120,000

Average Net Worth by Age in America

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Personal Capital conducted proprietary research to determine the average and median net worth of the American investor. (Median net worth is closer to the typical American, while average net worth is higher because of the very wealthy.)

It’s worth noting that people who use the Personal Capital Dashboard tend to adhere to smart money practices: maintaining a comfortable emergency fund, contributing regularly to their retirement accounts, and optimizing their investments for tax efficiency.

As a result, these people tend to have a higher-than-average net worth.

Following are the average and median net worths of Personal Capital Dashboard users, broken down by age.

Age by Decade | Average Net Worth | Median Net Worth
20s $96,514 $10,214
30s $369,493 $88,908
40s $859,463 $260,792
50s $1,352,564 $439,840
60s $1,724,581 $608,346
70s $1,687,852 $538,489
80s $1,508,976 $451,822
90s $1,311,788 $397,550

How to Build Your Net Worth

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As the data shows, net worth tends to increase over a person’s lifetime until the 60s. At this stage, net worth gradually begins to decrease as income falls during retirement and funds from investment accounts are withdrawn to meet living expenses.

Building net worth is a gradual process that occurs over the course of a person’s lifetime. Here are some tips for building net worth during each decade of life.

In Your 20s

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For many people, the 20s are the years of their life when they are starting their professional lives and possibly a new career. Their earning potential may be somewhat limited, which might make it seem difficult to build net worth during this decade.

The key is establishing good financial habits and disciplines that will help you build net worth over the rest of your life, such as setting aside a certain percentage of pay each month to save and invest.

One of the main things working in the favor of 20-somethings from a net worth-building perspective is time. These individuals have the rest of their lives to build net worth, which enables them to benefit from the power of compounding returns.

With compounding, money is earned not only on the amount of the initial investment but also on the money the investment earns. This can play a big role in building net worth over the long term.

In Your 30s

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By the time they reach their 30s, many people have started to advance in their careers and earn more money. This provides greater opportunities to build net worth by increasing the percentage of money devoted to saving and investing each month.

At the same time, though, many 30-somethings have also taken on more financial responsibilities as they marry and start families, such as buying a home and vehicles, purchasing life insurance, and raising children.

One of the keys to building net worth during this life stage is continuing to prioritize saving and investing.

It can be easy for higher earnings to get swallowed up in mortgage and car payments, child-rearing expenses, and splurging on a few luxuries like nice vacations and a fancy dinner now and then.

Instead, it’s important to maintain the saving and investing disciplines that were established in the previous decade and even increase the percentage of income saved, if possible.

In Your 40s

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The 40s are the beginning of what are often the peak earning years for many people, especially married couples in which both spouses work full-time. But like in the previous decade, these individuals and couples may also be facing higher expenses.

In addition, many 40-somethings may also be part of the so-called “sandwich generation,” who are providing care for aging parents and young children at the same time.

These and other growing financial responsibilities can make building net worth especially challenging during your 40s. One way to meet the challenge is to avoid falling into the trap of what’s sometimes referred to as “lifestyle creep.”

As their income grows, some 40-somethings are tempted to try to “keep up with the Joneses” by moving into a bigger home, joining a country club, driving exotic cars, or going on expensive vacations.

It’s OK to enjoy the fruits of your labor, but keeping expenditures like these in check will go a long way toward building net worth during this life stage.

In Your 50s and 60s

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The 50s and 60s mark the beginning of the “stretch run” toward retirement for many people. The time window for building net worth during the wealth accumulation stage of their life is starting to shrink as retirement draws closer.

The good news for many people, though, is that their income has reached its peak while their expenses may have started to fall as children move out of the house, complete college, and become responsible for themselves financially.

Given the shrinking window before retirement, the most important net worth-building step for many people in their 50s and 60s is to max out investment in their retirement accounts.

It’s also critical to start paying down outstanding debt during this time. This includes a primary residence, if possible. Eliminating a home mortgage can boost net worth considerably while also providing more financial flexibility during retirement.

In Your 70s and Beyond

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As the data shows, your 70s and beyond are generally considered to be a time of wealth preservation and distribution instead of building net worth.

The goal for most people in their 70s and beyond is to make sure that the wealth they’ve built over their lifetime lasts long enough to provide them with a comfortable retirement and allow them to enjoy the retirement lifestyle they desire.

During this life stage, the focus usually shifts to budgeting and portfolio withdrawal. Retirees can either withdraw a set amount of money each month or withdraw a percentage of the portfolio balance each month.

With the first strategy, the amount of income is more predictable, which makes budgeting easier. But you generally have more control over the portfolio’s overall drawdown and potential longevity with the percentage method.

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