Average Net Worth By Age And Ways To Increase It (2024)

Are you richer than your neighbor? You can make an educated guess at the answer by reviewing your wealth relative to net worth averages.

If the comparison doesn't go your way, your next question may be: How can I raise my net worth so I can have more money than my neighbor? Let's tackle both queries. We'll start with a review of average net worth in the U.S. by age, then explain key wealth factors and the simple formula for improving wealth over time.

Why Net Worth Matters

Your net worth is the value of your estate, calculated as the sum of your assets minus the sum of your debts. Your assets include everything you own that has value, such as your home, car, bank accounts and investments. Debts are your credit balances, including any mortgages, car loans, student loans, personal loans and credit cards.

Net worth is important because it quantifies your financial strength. With high net worth, you have financial flexibility. With low or negative net worth, you'll have trouble borrowing money at competitive rates. Funding your retirement and leaving an inheritance for loved ones will also be challenging.

Average Net Worth By Age

The table below shows average and median net worth by age group, according to retirement plan administrator Empower. Empower collected the anonymous data from American users of its retirement-planning dashboard.

As a reminder, the average is the arithmetic mean, calculated by summing a group of numbers and dividing it by the quantity of numbers in the group. The median is the middle number when the data points are lined up in numerical order. Half the numbers are higher than the median and half are lower.

For every age group, you can see there is a large difference between the average and the median. This happens when there are a few outliers that skew the average. In this case, the outliers are very wealthy individuals in each age group.

Net Worth In Your 20s

The average net worth for twentysomethings is $104,878 and the median is $7,467.

In your 20s, you are early in your career and less stable in your finances. Your salary may be tidy, and you may have more debt than assets, possibly due to student debt and a car loan. Money can feel tight, and you may not have the lifestyle you want.

This is the time to begin building a stable financial future. Commit to holding your lifestyle steady until your debt load feels comfortable.

Also start contributing to your cash savings and retirement account monthly, even if you can only manage small amounts. These early retirement contributions could double in value three or four times by your 60s—so even small deposits at this stage are worthwhile.

Net Worth In Your 30s

The average net worth for thirtysomethings is $292,609 and the median is $35,435.

Between the ages of 30 and 40, you should gain clarity on your career path and income potential. It's also common in this age bracket to purchase a home. This can reduce your net worth temporarily and raise your living expenses. In the longer-term, those outcomes reverse. Homeownership will later support a higher net worth and lower living expenses as long as you don't refinance repeatedly.

Early in your 30s, you should be saving 15% of your income to a tax-advantaged retirement account.

Net Worth In Your 40s

The average net worth for individuals in their 40s is $740,646, and the median is $126,126.

In your 40s, look to improve your financial stability and net worth. Your target should be the average net worth, not the median. Achieving net worth at or near $700,000 before your 50th birthday puts you in contention for a comfortable retirement.

To grow your net worth, focus on raising your income without inflating your lifestyle. Use pay raises to increase your retirement contributions, stash more cash, and keep your debt balances minimal.

Net Worth In Your 50s

The average net worth for fiftysomethings is $1,345,922, and the median is $290,271.

This can be a challenging decade in terms of net worth. You may face large college tuition bills for your kids and, simultaneously, medical expenses from your parents. Continuing the practice of holding your lifestyle steady even as your income increases can help you manage large expenses without spending your retirement.

Net Worth In Your 60s And Beyond

The average net worth for individuals in their 60s is $1,654,961, and the median is $446,703.

In your 60s, you are nearing the end of your paycheck-earning era. This means it's the last sprint to raise your net worth before you retire. Revise your household budget so you can send every extra penny to pay down debt or shore up savings and investment portfolios.

Once you retire, make sure you have a sustainable withdrawal plan that aligns with your living expenses. Budgeting daily and one-off expenses will be critical in remaining solvent.

Factors That Influence One’s Net Worth

Factors that influence net worth include income relative to spending, investing discipline, homeownership and borrowing habits.

Income Relative To Spending

Higher income levels can support faster increases in net worth. However, this is always relative to spending habits. Someone who makes six figures and spends every penny is worse off than another who makes $65,000 and only spends 85% of it. The excess $10,000 can be used to fund wealth strategies, including homeownership, debt payoff, saving and investing.

Retirement Contribution Rates

Contributions to tax-advantaged 401(k)s and IRAs expedite net worth expansion. This is because capital gains, dividends and interest in these accounts are tax-deferred. Funds that would otherwise be used to pay taxes can remain invested and continue to grow.

Over time, your 401(k) balance can easily become your largest asset. For this reason, average 401(k) balance metrics are often similar to average net worth metrics.

Investments

Cash accounts historically earn interest rates below the prevailing inflation rate. That means cash deposits gradually lose purchasing power over time.

Investments in the stock market, on the other hand, outpace inflation by nearly 7% on average over the long term. This average includes both value stocks and growth stocks, though the growth category has been stronger in the last 15 years. Equity investing over time creates a second source of rising net worth alongside wage and salary income.

Homeownership

Home equity is the term for net worth related to your home. Home equity is equal to the home's value minus the mortgage loan balance. This amount naturally rises over time through two factors: The home's value increases, and you pay down the mortgage balance monthly.

Another factor to note is the inflation-busting power of a fixed mortgage. A fixed mortgage payment holds your housing costs steady for 30 years. That's one of the best inflation hedges there is.

Debt and Loans

Debts chip away at net worth because paid interest raises the cost of things you buy, sometimes significantly. This is why it's important to use debt primarily for items that create value, like property or education loans. Property appreciates and education increases your earnings power.

When you finance things that lose value immediately, like clothes or vacations, you lower your net worth in two parts—once for the purchase price and again for the interest.

How To Increase Your Net Worth

You can increase your net worth by spending less than you make and using the excess funds to invest in appreciating assets. This is simple to explain, but hard to implement. The primary steps and principles are explained below.

Set Financial Goals

Setting financial goals is a strategy for staying focused on your net worth objectives. Begin by calculating your net worth today and comparing it to the average net worth by age data above.

Then examine your budget and allocate funds for debt repayment, saving, and investing. Your short-term financial goals will be to fulfill those allocations. You can also set goals for annual net worth increases based on your budget.

Pay Off Debts And Loans

Debt repayment is a priority when you have high-interest, revolving debt balances. Low-cost loans like mortgages and most student debts are far less toxic than credit card balances carrying interest rates of 20% or more.

Often, the best strategy is to pay down one account at a time. The cheapest method is to focus on the highest-rate balance first, but it may be more motivating to pay off the lowest balance first.

Save Habitually

The simplest way to fulfill a savings goal is to automate transfers from your checking account to your savings account. Ideally, you'll time these transfers to occur on the same day you deposit your paycheck. That way, the money is swept to the other account before you can spend it.

Invest Wisely For The Long Term

Long-term investing is safer and more reliable than short-term trading. If you have access to a tax-advantaged retirement account, long-term investing is also more tax efficient.

Target a retirement contribution rate of 15%. Start this program in your late-20s and you will be well on your way to high net worth and a comfortable retirement. Note that you may eventually max out available 401(k) contribution limits. When that happens, invest excess funds in a taxable brokerage account.

If you don't know what to invest in, opt for S&P 500 funds and a smaller allocation in U.S. Treasury debt. For more options, see my guide on Vanguard retirement investing.

Increase Your Income

Your budget may reveal that it's impossible to pay off debt and invest 15% of your income. In that case, you'll have to create the funding you need by increasing your income. You might ask for a promotion, seek out career training, work with a mentor or start a side hustle.

Reduce Expenses

You may also be able to free up funding by reducing your living expenses. Strategies here include relocating to a cheaper home or swapping your car in for a bicycle and public transportation. Smaller efforts like buying generic food products, limiting restaurant meals, and using cashback loyalty programs will also help.

Monitoring Your Net Worth

Once you have a net worth plan in place, monitoring your wealth keeps you informed and on track. Set a date on your calendar to review your net worth annually. Be prepared to change course if your annual progress doesn't meet your expectations.

Common reasons for disappointing net worth progress include:

1. A stock market downturn has lowered the value of your investments. Historically, stock market downturns are temporary events. Stick to your plan. Focus on the fact that your retirement contributions purchase more shares when stock prices are low.
2. Your income declined so you could not repay debt, save and invest as planned. Make a new budget and plan given your current circ*mstances. If you were laid off, focus on replacing your income first. Rework your budget after that problem has been solved.
3. You did not repay debt, save and invest as planned, but your income didn't change. Review and adjust your budget. Automate debt repayments, savings deposits, and investment contributions. If spontaneous spending is an issue, chop up your credit cards and use cash for purchases whenever possible. When the cash runs out, you know you've used your budgeted funds.

Bottom Line

Average American net worth metrics are useful for gauging your own performance. But don't let the numbers limit you. Look to outpace the average and realize the extraordinary by following this formula: Increase your income, hold spending steady, pay off debt, and invest in assets that appreciate over time.

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