In the United States, an individual’s net worth serves as a crucial indicator of their financial standing, particularly as they approach retirement. This metric, derived by subtracting liabilities from assets, varies widely across the population, significantly influencing the retirement lifestyle and economic security of millions.
Finance expert and author Geoff Schmidt assesses retiree wealth using the latest data from the Federal Reserve Board’s Survey of Consumer Finances.
Wealth Categories:
- Poor: Households in the 20th percentile, with a net worth of approximately $10,000, are categorized as poor. This group likely does not own a home and focuses financial resources on necessities.
- Middle Class: The middle class falls within the 50th percentile, with a median household net worth of $281,000 for Americans aged 65 and older. This typically includes home equity, savings, and a 401(k) account.
- Wealthy: To be considered well-off, a person must be in the 90th percentile, possessing a household net worth of $1.9 million. This level of wealth enables activities such as travel, charitable donations, and college funds for children. The 95th percentile, with a net worth of $3.2 million, is considered wealthy, allowing for estate planning and possibly ownership of multiple homes. The top 1%, or the 99th percentile, boasts a net worth of $16.7 million, representing the very wealthy who enjoy considerable financial freedom and luxury.
Average and Median Net Worth by Age (2023):
- Aged 55-64: Estimated average net worth of $1.18 million, representing the peak of wealth accumulation.
- Aged 65-74: Higher average net worth at $1.22 million, likely due to continued asset growth and the beginning of drawing down retirement accounts.
- 75 and older: Average net worth of $977,600, reflecting a decrease as individuals in this age group are further into retirement and may be drawing down assets more significantly.
Wealth Perception and Economic Class:
- According to Schwab’s 2023 Modern Wealth Survey, Americans consider an average net worth of $2.2 million as wealthy.
- Knight Frank’s research suggests a net worth of $4.4 million is required to be in the top 1% in America.
Economic Challenges in Retirement:
- A growing number of Americans are entering retirement with debt, with households led by those aged 65 and older experiencing a rise in debt from 38% in 1989 to 61% in 2016.
- CNBC reports a 614% surge in debt among those aged 70 and up from 1999 to 2021, with mortgages constituting the majority of the debt.
Importance of Financial Planning:
Net worth at retirement age in the U.S. varies significantly and is influenced by factors such as homeownership, savings, and debt. While the middle class and wealthy often enjoy financial security, a substantial portion of the population faces economic challenges. This highlights the crucial role of financial planning and management, including the valuable assistance of financial advisers, in ensuring a stable financial future throughout life.
