XPost: ca.politics

Here's the Net Worth That Puts You in the Top 10% of American Households
by Age
By Adam Levy – May 25, 2024 at 4:05AM
KEY POINTS
Tracking your net worth can ensure you're making good financial progress.
The wealthiest Americans are older and invest in the stock market.
Building good financial habits early can put you in the top 10% later on.
The $22,924 Social Security bonus most retirees completely overlook
And here's how to put yourself on a path to join them.

Tracking your net worth is one of the best ways to ensure you're making progress in improving your finances.

Your net worth takes into account all of your assets and liabilities to
provide a full picture of your current financial standing. It can be
much more enlightening than simply looking at your retirement account
balance or how much you have left to pay on your student loans.
Regularly looking at both sides of your personal balance sheet, so to
speak, is a great way to make sure your finances are on the right track.

Consistently saving more than you spend, paying down your debts, and
investing what's left is the formula for growing your net worth over
time. And time is often a big contributor to building a substantial net
worth.

So, while those in their 20s or 30s might be looking at how much the
wealthiest Americans have, they might be more interested to know how
much people their age are worth. Likewise, people in their 50s and 60s
could get a false sense of how wealthy they are relative to their peers
when you factor in people in their 20s and 30s who are still paying off
their student loans.

If you want a high bar to aim for, making it into the top 10% by age
group might offer the motivation you need to save more and build your
wealth.

A couple in a rooftop pool looking at the New York skyline.
IMAGE SOURCE: GETTY IMAGES.

Here's the net worth that puts you in the top 10%
Every three years, the Federal Reserve conducts a survey of American households, cataloging various financial and demographic details,
including household assets and liabilities. The most recent data from
the Fed's Survey of Consumer Finances comes from the end of 2022.

At that point, the top 10% of all American households had a net worth of
at least $1.94 million. Here's how that breaks down by age group:

AGE GROUP* NET WORTH OF 90TH PERCENTILE
18-29 $281,550
30-39 $711,400
40-49 $1,313,700
50-59 $2,629,060
60-69 $3,007,400
70-plus $2,862,000
*FOR COUPLES, THE REFERENCE PERSON IS THE MALE IN MIXED-GENDER COUPLES
AND THE OLDER INDIVIDUAL IN SAME-SEX COUPLES. DATA SOURCE: FEDERAL
RESERVE. CALCULATIONS BY AUTHOR.

As you can see, the wealthiest Americans tend to be older, and that
makes sense. They have had more time to grow their careers, pay off
debts, and let their investments compound. The bulk of the wealth for
the top 10% comes from investments in stocks and mutual funds as well as
their primary residence.

That said, older households also had more opportunities to take on added
debt and dig themselves deeper into a hole. Compound growth can work for
or against you. The most indebted families are actually in their 30s and
40s, not their 20s, even though the median and top 10% of households are
better off over time.

Growing your net worth requires a plan and the discipline to stick to
it. If you consistently make progress starting in your 20s and 30s,
you're more likely to climb to the top 10% of households by the time
you're in your 50s and 60s. Here's how you can get yourself to elite
levels of wealth.

How to build elite levels of wealth
If you want to grow your net worth, you have to put your money to work
where it provides the greatest long-term returns. That's not necessarily investing in the stock market, although that's often a key component of achieving a high net worth.

If you're carrying high-interest debt, it likely makes sense to put most
of your savings toward paying off those balances. Credit cards currently
charge interest rates in the 20% range. Paying off those balances is
like effectively receiving a 20%-plus annual return on your "investment."

That said, not all debt is bad. The vast majority of high-net-worth
households are homeowners with mortgages. While the returns on real
estate investing aren't necessarily better than investing in stocks,
buying a home to live in is a great way to build wealth. That's because
a part of your monthly mortgage payment goes toward building equity in
your home.

There's plenty of low-hanging fruit for investing in the financial
markets, too. If your employer offers a 401(k) match, that might merit
priority over any debts or other commitments. There are few other
opportunities to earn an immediate return of 50% or 100% (depending on
the terms of your match). Even using a tax-advantaged savings account
like an IRA can provide a nice boost to your net worth thanks to the tax savings it provides.

Making a plan for how you allocate your savings toward your current
debts and potential investments is the first step to building your net
worth. The second step is just executing the plan and waiting for your
efforts to pay off. Even if you never make it to the top 10% of
households, you'll certainly find yourself in a better place tomorrow by exercising good financial judgment today.

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