Are you richer or poorer than others your age? See how your net worth stacks up

Average Net Worth by Age – Here’s How They Compare

Have you ever wondered how your money stacks up with others your age? The best way to find out is not by comparing salaries or home values, but by looking at your net worth, which is basically how much you own minus what you owe.

The Fed’s Survey of Consumer Finances, widely viewed as the most reliable picture of American household wealth, shows how net worth changes across generations. Here’s what the latest data reveals about average net worth by age group:

Two clear trends emerge:

• Net worth rises steadily with age.
• Decreased net worth after retirement.

None of this is surprising. Net worth tends to rise with age with the effect of compounding, higher earnings and lighter financial burdens. In retirement, many people own their homes outright and have built up significant savings. But once salaries stop, income decreases and that money is gradually withdrawn.

Why net worth matters — and how to calculate it

Net worth is the value of what you own (your assets) after subtracting what you owe (your liabilities).

• Origins: Things such as cash, money deposited in savings or investment accounts, home equity, and valuables, such as jewelry.
• Commitments: What you owe, including credit card balances, student loans, car loans, mortgages, medical bills, and taxes.

To calculate your net worth, simply add up the cash value of all your assets, subtract your liabilities, and the result is your net worth.

Origins – Commitments = net worth.

“Full financial snapshot”

Net worth is widely considered the best way to measure an individual’s wealth. As Peter Lazarov, a financial advisor and chief investment officer at Plancorp, notes, it offers a much more “complete financial snapshot” than simply looking at income, savings or assets in isolation.

Take Jerry, for example. He might say he is worth $650,000 because his house is worth $400,000, he earns $100,000 a year, and he has $50,000 in savings and $100,000 in investments. But his salary is not money he currently has, and he still owes $200,000 on his mortgage and carries $50,000 in debt. These details change the picture and show why net worth gives a more honest view of financial health.

Another advantage: It’s easy to calculate and track over time. Checking your net worth regularly can reveal whether your financial decisions — like paying off debt or saving more — are moving you in the right direction.

Smart ways to grow your net worth over time

Net worth is not just a snapshot, it is a way to track your financial progress. Most experts agree that the best and simplest way to grow is to invest systematically and reduce debt over time.

Investing, doubling and settling debts

“Invest systematically in your retirement account and after-tax investments,” said Nicole B. Simpson, founder and CEO of Harvest Wealth Financial. “It allows you to allocate a smaller dollar amount over time while providing opportunity for incremental growth.”

Simpson also recommends paying off credit card obligations and large debts to keep what you owe as low as possible, especially before retirement.

Lazarov said the simplest way to increase net worth is to invest. One of the best ways to benefit is to contribute enough to employer-sponsored retirement accounts to qualify for the employer match, he said. In some cases, this may mean your company effectively doubles your contributions at no additional cost.

Lazarov also suggests setting up automatic contributions to low-cost investment accounts and high-yield savings accounts online. “I would encourage people to start with small, spontaneous contributions — small enough that you may not even notice the money is gone,” he said. “Over time, you can increase your savings if you feel comfortable.”

Think long term

At the same time, avoid focusing too much on short-term results, Lazarov said, because sometimes it’s necessary and beneficial to take steps that initially drag down your net worth.

Examples include buying a car to get to work, paying for a course that increases your earning potential, or even taking time off to recharge your batteries. Often times, these decisions can boost your net worth in the long run.