Today I spent most of the day taking another look at the 2010 survey of consumer finances and analyzing it. In it there are many interesting facts on the financial situation of different demographic classes It breaks it down by net worth and income by age. I found that if you want to be in the top 50% financially it isn’t too incredibly hard because the bar is set incredibly low.
In order to be in to top 50% in the US you only have to make a combined household income of 45.8 thousand a year and have a net worth (Assets - Liabilities) of 92.3 thousand. Keep in mind this is household income so individually you only have to make a mere 22.9 and have a net worth of 46.15. Now if you want to be in the top 20% all you have to have is an individual net worth of 103.8 and an income of 46.125 thousand. Even the top 20% bars seems a bit low to me, because most graduates fresh out of college can earn more than that if they selected a degree that is in demand. I don’t mean to sound demeaning but it isn’t too incredibly hard to beat these numbers if you try. In fact there are many fields out there that you don’t even need to go to college and you can be self taught and surpass these numbers. Pretty much anything in the technology field you can be self taught and only pass a couple exams to be certified and still earn 50+ per year. But that is the hard part, actually going out of your way and trying. I have said before that there are very few people who actually figure out a plan that would work for them and actually try, but the ones who do generally do quite well.
Now I want to touch on retirement accounts, and what the averages are for the US. Keep in mind that the US is a culture of spending not saving, and very few people know the difference between saving and investing. The picture below are averages in the US for average net worth by age and average income by age. I think that everyone should strive to crush the average and be far above average to guarantee a secure future.
As you can see at retirement age for the household is at age 65 the average is only $100,000 saved in a retirement accounts. This is not exactly security in my mind. However, there are assets in other categories that make up for this lack of savings. The total amount in assets that generate a return is around $580,000. Some people might be thinking that this is a significant amount, but they forget that most Americans are heavily in debt and only a small portion actually become debt free. After all the liabilities are paid and all debts are settled the average is reduced to $266,200 as indicated by the net worth table leaving only $133,100 thousand per individual for retirement. How long do you think that you can stretch $133,000? If you are lucky you might be able to live a couple years after you stop working with that amount, and this lack of foresight is exactly why we hear stories of retirees living in poverty and developing anorexia.
I personally like the guidelines put forth by financial samurai and I think that everyone should strive to come close or even surpass these milestones and aim to max out the IRA contribution limits.
|THE AVERAGE NET WORTH OF THE ABOVE AVERAGE PERSON|
|Age||Yrs Worked||Avg Pre-Tax Savings||Avg Post-Tax Savings||Avg Property Equity||Avg Total Net Worth|
|22||0||$ -||$ -||$ -||$ -|
|23||1||$ 12,500||$ 7,500||$ -||$ 20,000|
|24||2||$ 30,000||$ 15,000||$ -||$ 45,000|
|25||3||$ 45,000||$ 25,000||$ -||$ 70,000|
|30||8||$ 154,500||$ 67,500||$ 17,500||$ 239,500|
|35||13||$ 273,000||$ 115,000||$ 30,000||$ 418,000|
|40||18||$ 410,500||$ 162,500||$ 70,000||$ 643,000|
|45||23||$ 573,500||$ 200,000||$ 117,500||$ 891,000|
|50||28||$ 771,500||$ 237,500||$ 162,500||$ 1,171,500|
|55||33||$ 1,011,500||$ 275,000||$ 225,000||$ 1,511,500|
|60||38||$ 1,306,000||$ 312,500||$ 290,000||$ 1,908,500|
|65||43||$ 1,670,500||$ 375,000||$ 375,000||$ 2,420,500|
|Source: FinancialSamurai.com 2012|