how much wealth you should have built in your twenties, thirties, forties, and beyond.
In Your Twenties
Don’t worry too much about your current net worth when you’re just starting out. If you graduated from college with student loans, it may very well be negative.
Instead, focus on building your net worth. You should start as soon as you get your first job. Most companies offer a retirement savings plan, such as a 401(k) or 403(b). If you don’t have access to these types of retirement plans, you can save on your own using a Roth IRA.
The beauty of these retirement accounts is that once your money is transferred from your paycheck into your savings account, it can grow and accumulate until you withdraw it for retirement. Your best bet is to set up an automatic transfer of at least 6% of your salary into your retirement account.
After that, aim to reach your first net worth goal by age 30.
Net Worth by Age 30
By age 30, your goal should be to have an amount equal to half your salary saved in your retirement account. If you’re earning $60,000 in your twenties, aim for a net worth of $30,000 by age 30. This milestone can be achieved through saving and investing. Let’s say you start investing $3,466 annually ($288 monthly), starting at age 23. If your investment account earns a 7% annual return, you will reach a net worth of $30,000 by age 30.
If this sounds overwhelming, or if you’re starting later in your career, don’t worry. These are guidelines for saving, not hard-and-fast rules.
Net Worth by Age 40
By age 40, your goal should be to have a net worth equal to double your annual salary. So, if your salary rises to $80,000 in your thirties, you should aim for a net worth of $160,000 by age 40.
Additionally, it’s not just your retirement contributions that help you build your net worth. You can increase that number in other ways as well. For example, owning real estate is another path to increasing your net worth. Like other types of financial assets, real estate appreciates over time. Ultimately, the benefit of investing in real estate is that even a small down payment grows exponentially as the value of the home increases.
Net Worth by Age 50
By age 50, your goal should be to have a net worth equal to four times your annual salary. If you earn $100,000 in your forties, your net worth goal at age 50 is $400,000. This number may seem large, but by starting to save and invest early in adulthood, time will work in your favor to grow your money. And if you start later, try to save more aggressively.
In your forties, you may have children who are growing up and heading to college. Don’t neglect your retirement savings for the sake of your children. Instead, encourage your kids to work and cover some of their own expenses. And if you’re falling behind on your financial goals, consider finding a side job to boost your income.
Net Worth by Age 60
By age 60, you should be on track with a net worth equal to six times your annual salary. If your salary is in the $100,000 to $160,000 range, multiply that by six, and that’s your net worth goal.
At this stage, your net worth benchmarks depend on your retirement needs. Depending on where you live and your lifestyle, those needs will vary. A common rule of thumb is to replace 15% of your pre-tax working income in retirement throughout your lifetime. If your retirement dreams are grand and involve exotic travel, you may need more.
In contrast,
If you are seeking a peaceful retirement in an affordable community, you may need less. Finally, if you wish to retire early, you will need a higher net worth than those who plan to work until age 70 or older.
Frequently Asked Questions (FAQs)
Is net worth an annual figure?
Net worth is cumulative, not annual. It is the total value of the assets you have accumulated up to that point. This includes any cash in your bank account, any investments in a brokerage or retirement account, and any real estate you own, regardless of how long you have held these assets.
What is the typical net worth in the United States?
According to the latest Federal Reserve study on net worth, the average net worth among American households was less than $750,000 in 2019. The median net worth was $121,700.
Source: https://www.thebalancemoney.com/net-worth-targets-by-age-4142956
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