The most recent Survey of Consumer Finances released by the Federal Reserve shows the median U.S. household net worth is $121,700. But for older Americans, it's more than double that amount.
According to the Fed data, the median net worth peaks between ages 65 and 74 and then falls when retirees enter their late 70s and beyond. Americans ages 75 and up have a median net worth of $254,800. The average, which skews higher thanks to high net worth households, is $977,600.
Most people's net worth starts to decrease during their non-working years. This decline is not surprising, given that most people live on a fixed income during retirement (usually a combination of social security and investment distributions). Retirees should therefore make sure they have enough resources to last through their golden years.
Even better is to get an early start by saving and investing as soon as you start making money. Earning potential tends to peak in the decades leading up to retirement, according to salary data insights company Payscale. Data shows that women reach their peak earnings at the age of 44, earning on average $66,700, and men reach their peak earnings at the age of 55, earning on average $101,200 (not accounting for other variables like race and education level).
Here's a look at the average and median net worth by age in the U.S., according to the Fed.
Household net worth by age
| Age of head of family | Median net worth | Average net worth |
|---|---|---|
| Less than 35 | $13,900 | $76,300 |
| 35-44 | $91,300 | $436,200 |
| 45-54 | $168,600 | $833,200 |
| 55-64 | $212,500 | $1,175,900 |
| 65-74 | $266,400 | $1,217,700 |
| 75+ | $254,800 | $977,600 |
Source: The Federal Reserve
How net worth is calculated
Net worth refers to the total value of assets you own minus any liabilities or debts.
Net worth = assets - liabilities
In its study, the Federal Reserve lists several kinds of assets, including:
- Cash within bank accounts, such as checking, savings, money market accounts, etc.
- Prepaid debit cards
- CDs and savings bonds
- Government bonds
- Health savings accounts
- Investment accounts including 529 college savings plans and individual taxable investment accounts
- Retirement accounts, including IRAs, 401(k)s and 403(b)s
- Life insurance policies with cash value
- Annuities with equity
- Vehicles including cars, RVs, motorcycles, boats and helicopters
- Real estate, including rental homes and primary/residential homes
In calculating net worth, liabilities (aka debts) get subtracted from the value of assets amount. In the Fed's survey, debts included:
- Mortgages
- Home equity lines of credit or home equity loans
- Credit card balances
- Installment loans, including personal loans, auto loans and student loans
How to track net worth
While it's not necessary to obsess over net worth, you should start tracking it early so you have enough money in retirement.
Empower (formerly Personal Capital) is a free investing and budgeting app that makes tracking net worth easy. The app lets users easily see all their financial data, including all linked assets and liabilities, in one place.
Users also get access to Empower's free retirement planner tool where they can decide how much they need to retire (and at what age), then track their savings. Read Select's full review of Empower.
Use a budgeting app to set clear goals and plan ahead for retirement. Here are our favorite picks:
- Best overall free app: Mint
- Best app for serious budgeters: You Need a Budget (YNAB)
- Best app for over-spenders: PocketGuard
- Best app for investors: Empower
- Best app for couples: Honeydue
Why net worth is important during retirement
The amount you save up for retirement becomes your income after you no longer earn a paycheck, making net worth a critical factor in how well you live.
According to retirement-plan provider Fidelity Investments, people should have the equivalent of 10 times their income put aside by age 67 to have a comfortable retirement. Based on the U.S. Bureau of Labor Statistics' median American earnings data, this equates to roughly $514,280. However, it's impossible to predict what the economy will be like exactly, so a safer bet is to aim for more (some say as much as $1 million) if you want to be as worry-free as possible when you age.
Yet the reality is that most Americans retire with less than $1 million in the bank. In particular, women currently are behind on retirement savings compared to men.
The rule of thumb suggests that retirees should withdraw no more than 4% of their investments annually to cover everyday costs.
A person with $977,600 in a brokerage account could therefore withdraw $39,104 per year to live on according to the 4% rule. What's left over would stay in the stock market to continue earning year over year. A 75-year-old with the median net worth of $254,800 in a retirement account could hypothetically withdraw $10,192 per year according to this rule, or $849.33 per month.
But most people have more than $849 in monthly expenses, even if they've paid off major expenses such as a mortgage or vehicle. And $849 doesn't begin to cover variable costs like medical bills and home repairs, let alone extras like vacations, birthday gifts, etc. That's why building your net worth early is important.
