Whether it’s healthy or not, we all make comparisons in many aspects of our lives – where we live, what we do for a living, what kind of car we drive, even how we raise our kids.  But society doesn’t talk openly about money and so we look to the experts to set benchmarks and rules of thumb for where we should stand financially.

Related: How much of your income should you save?

One of the first personal finance books I read was The Millionaire Next Door by Thomas J. Stanley and William D. Danko.  In it the authors study the characteristics of millionaires and compare the behavior of what they call prodigious accumulators of wealth – individuals who have a high net worth compared to their income – versus under accumulators of wealth – those who have a low net worth compared to income.

Average net worth by age

I was disheartened to read that as a 25-year-old earning about $50,000 per year, I should have an expected net worth of $125,000 to be considered an average accumulator of wealth (age x income x 10%).  I had less than half that amount, which made me worse off than an under accumulator of wealth – certainly not millionaire material.

But I soon realized this was a flawed and useless metric for anyone under the age of 40.  Most of us begin our careers with negative net worth and it takes years of saving, investing, and compounding to accumulate wealth.

Related: How I plan to be financially free by 40

This chart shows the net worth of average accumulators of wealth by age, according to the authors:

Age Salary Avg. Net worth UAW PAW
20 $40,000 $80,000 $40,000 $160,000
25 $50,000 $125,000 $62,500 $250,000
30 $60,000 $180,000 $90,000 $360,000
35 $70,000 $245,000 $122,500 $490,000
40 $80,000 $320,000 $160,000 $620,000
45 $90,000 $405,000 $202,500 $810,000
50 $100,000 $500,000 $250,000 $1,000,000
55 $110,000 $605,000 $302,500 $1,210,000
60 $120,000 $720,000 $360,000 $1,440,000

A decade later and my current net worth is now in-line with the “average” described in the book but nowhere close to becoming a prodigious accumulator of wealth anytime soon.

Retirement savings checkpoints

Recently I stumbled on another metric that looks at how much you should have saved up for retirement at your current age.  The retirement savings guide was published by JP Morgan Asset Management and uses a model to determine how much you should have saved at certain checkpoints in your life.

For example, a 35-year-old who earns $100,000 per year should have $150,000 save up for retirement by now.

Current age $50,000 $75,000 $100,000
Checkpoint x Current Salary Checkpoint x Current Salary Checkpoint x Current Salary
30 0.4 0.6 1.0
35 0.7 1.1 1.5
40 1.2 1.6 2.2
45 1.7 2.3 3.0
50 2.4 3.1 3.9
55 3.3 4.2 5.2
60 4.4 5.5 6.7
65 5.7 7.1 8.6

How to use:

  • Go to the intersection of your current age and your current salary.
  • Multiply your salary by the checkpoint shown to get the amount you should have saved today, assuming you continue annual contributions of 5% going forward.
  • Example: for a 40-year-old making $100,000: $100,000 x 2.2 = $220,000

I’m not quite 35, and I don’t make $100,000 per year, so if I use the $75,000 column as a rough guide I should have $82,500 saved for retirement by now.  My last RRSP update revealed that I had $92,500 invested in my retirement account.  Interestingly, the commuted value of my defined benefit pension is about $82,900.

Related: Why I save outside of my defined benefit pension plan

Final thoughts

Stanley’s metric says that I’m an average accumulator of wealth while JP Morgan’s checkpoint says I’ve got twice as much saved for retirement as I’m supposed to at my age.

It can be fun to compare net worth and retirement savings to see where you stand, but you should take these age-based savings benchmarks with a grain of salt.

Remember that we all get out of the gate at different times and at different speeds.  If you stayed in school to earn a graduate degree you might be years behind your peers and deep in debt to start your career.  But with an increased earning potential you may quickly catch and surpass those in your age group.  In this case it’s not about where you start but where you finish.


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