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What Should Your Net Worth Be When You Retire?

You deserve a comfortable retirement. Keep reading to learn how to assess your assets and liabilities ahead of retiring.

Well-dressed mature couple enjoying wine with a fancy meal.

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Net worth can be a more useful way to gauge your financial situation, as it takes your debts into account in addition to the money you've saved. But what is a good net worth to have before you retire? In this article, we'll take a look at what net worth really means, what the average American household's net worth is, and what to keep in mind when assessing your situation.

What does net worth mean?

Net worth is the difference between a person's assets and liabilities. For example, if the value of your home, car, and other possessions is $1 million, and you owe $400,000 in various mortgage, auto loan, and other debts, your net worth is $600,000.

In other words, think of net worth as the amount of money you would have left if you sold everything you own and paid all of your debts.

To calculate your net worth, start by adding the value of your major assets. You can estimate the fair market value of your home and cars, and be sure to consider other valuable items. Include liquid assets like:

Note that you don't need to include every item you own. Other common categories include things like jewelry, art, collectibles, and home furnishings, but there is no set list of the items to include and exclude from net worth.

Then, add up your debts, which is usually a rather straightforward calculation. Add your mortgage and auto loan balances, too. And don't forget about any personal loans, credit card balances, and other debts you may have. Subtract this from the value of your assets to determine your net worth.

The average retiree's net worth in the United States

According to the Federal Reserve's latest Survey of Consumer Finances, which is conducted every three years, here is the average American household's net worth for the three age groups that cover the majority of retirees:

Head of Household Age Median Net Worth Average Net Worth
55–64 $212,500 $1,175,900
65–74 $266,400 $1,217,700
75 and older $254,800 $977,600
Data source: Federal Reserve Survey of Consumer Finances.

We won't get too deep into a statistics lesson, but the important thing to know is that the median net worth means that half of households in that age group have a higher net worth, while half are lower. And when the average is significantly higher than the median, as is the case in all three age groups here, it implies that there are some outliers with very high net worth. In a nutshell, the median is generally the better representation of the typical retired household's net worth than the average.

Net worth isn't the only factor in a financially secure retirement

One important point to keep in mind is that net worth isn't the only thing that determines quality of life in retirement. A household with a relatively low net worth could actually have a more secure retirement if they have a pension or other stream of income to cover living expenses, for example.

In a nutshell, the biggest factor in a financially secure retirement (for most households) is income, not net worth. It's true that a large retirement nest egg can be used to create an income stream from investments, but there are other sources to keep in mind, such as pensions, Social Security, annuities, and more.

The bottom line on net worth in retirement

The averages and medians mentioned here can be a good tool to determine where you stand relative to other retirees, but the most important takeaway is that there is no set net worth that you should have by the time you retire. The amount you need to be financially comfortable depends on a variety of factors, such as your other income streams, fixed and variable expenses, and your lifestyle.

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