Do You Know if You Are Saving Enough?
I remember when I was in my 20’s hearing that if your salary was your age, you were doing well. I think in my 30’s people would say if you were making 2–3 times your age you were doing really well. A number of investment companies have said if you save 10% of your salary you are doing great and much better than the average person. I often wonder if I have saved enough at this stage of my life. Did I have too much fun in my early years and because of that will work until I am 88?
One thing is for sure: whatever I didn’t save in those years is behind me, and I can never get it back.
I find discussions about money and savings very difficult. In my life there are maybe three friends I could have those types of conversations with. My sense is that most people are in the same boat. Of course I could have the conversation with my mom and dad, but no matter how much I have saved, it isn’t enough in their eyes.
A few weeks ago I was reading an article that I thought was very interesting, and I found it helped me answer these questions:
- How am I doing?
- Have I saved enough?
- How do I compare against other people?
VIP Forum, a Washington-based group that researches wealth and wealth management practices, does the number crunching to create The Wealth Scoreboard. The basic data comes from The Survey of Consumer Finances, a survey done every three years by the Federal Reserve. The last survey was in 2004.
THE WEALTH SCOREBOARD
The table shows the median net worth for households as of 2004, arranged by age of the chief wage earner. To find your rank, go to the appropriate age category and find the net worth closest to yours (dollars in thousands):
| Age of Chief earner | Top 1% | Top 5% | Top 10% | Top 25% | Median |
| 80 or older | $3,349 | $1,770 | $1,149 | $536 | $188 |
| 70-79 | $9,198 | $1,945 | $1,106 | $489 | $183 |
| 60-69 | $10,188 | $3,075 | $1,522 | $699 | $232 |
| 50-59 | $9,554 | $2,223 | $1,180 | $570 | $188 |
| 40-49 | $4,710 | $1,297 | $746 | $353 | $113 |
| 30-39 | $1,971 | $451 | $272 | $121 | $39 |
| 20-29 | $607 | $206 | $103 | $30 | $6 |
I hope you find this chart very useful. I know I have.
Please post any comments you have regarding any financial metrics you have heard over the years or best practices that work for you.
September 18th, 2006 at 9:38 am
This 2004 Federal Reserve data is extremely enlightening. Thanks, Merrill!
Has anyone seen the histogram chart showing the # (or %) of households in each Net Worth category? I’ve been Googling and not finding it.
I don’t want to have to download the huge dataset and create the histogram myself using SPSS!
This is the taboo topic of conversation, but retirement planning is in the news all the time now. Most people I talk to feel bad about the amount they’ve saved. I highly recommend “The Number” book by Eisenberg. It talks a little about “the number” you need to retire, but A LOT about what your heart calls you to do during your later years.
September 21st, 2006 at 1:09 pm
Hey, Merrill — this is a very interesting chart. If these net worth numbers were all investable assets and you were to take 4.5 - 5% of the numbers, you would get the recommended annual income that someone with those assets could take from them and not eat into the principal. Unfortulately, a big part of these numbers for some groups is the value of one’s home — which you can’t spend in that way.
What’s also scary his how quickly a few years of Alzheimer’s or other nursing home care for an older person can go through hundreds of thousands of dollars. That puts a whole new light on the need to have some reserves!