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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 show 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 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).
People should therefore plan ahead and invest while they are still making an income so that, when they retire, they can rely on retirement distributions to last through their non-working years.
Here’s a look at the average and median net worth by age in the U.S., according to the Fed.
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:
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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.