Here’s the net worth that puts you in the top 10% of American households by age

If you don’t track your net worth, you may not know if you are really making financial progress in life or not.

You might think you’re making progress on your savings or debt payment plan, but unless you’ve accounted for all your investments, savings, and debt and tracked them over time, you’ll never know for sure. Net worth represents all of your assets and liabilities and can give you a much better picture of your overall financial health.

The way to increase your net worth is simple: spend less than you earn, reduce your debt and invest the rest. How you navigate this path is up to you, but following it consistently will result in building a substantial net worth over time. And time is often a major contributor to net worth.

It’s no surprise that Americans in their 50s and 60s are worth more, on average, than people in their 20s and 30s. They had much more time to travel on the path to high net worth. So if you want to compare yourself to something, make sure you compare yourself to people in your own age group.

For aspirational readers looking for a high level to aim for, getting into the top 10% of your age group might be just what you’re looking for.

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Here’s the net worth that puts you in the top 10%

The best available data on Americans’ net worth comes from the Federal Reserve’s Survey of Consumer Finances. Every three years, the Fed conducts a survey asking a sample of American households about their entire financial lives. Everything from their income to their retirement savings, home and credit card debt is on the table for the Fed. The Fed also collects standard demographic data from those households, including the ages of household members.

The most recent survey results are from the end of 2022. At that time, the average household had a net worth of $192,700. The top 10% of American households had a minimum net worth of $1,936,900. Here’s how it looks by age.

*For households with couples, the age reference person is the man in mixed couples and the older person in same-sex couples. Data source: Federal Reserve. Calculations by author.

Note that these numbers are as of the end of 2022. Many people have most of their net worth tied up in stock investments and their primary home. Both assets have seen substantial gains over the past two years. As a result, the bar is probably higher today. However, the top 10% numbers in 2022 remain an aspirational goal to strive for.

Growing your net worth to elite levels, such as the top 10% of American households, requires a plan. That’s the easy part. The hard part is sticking to that plan. If you can make steady progress day after day and month after month while you’re still young, it’s only a matter of time before you reach your goals.

How to join the 10%

Increasing your net worth is as simple as putting your money to work where it provides the greatest long-term financial returns. This can be anything from investing in the stock market or real estate, to paying off debt, to pursuing an education in a new, higher paying field. All three have different degrees of risk and expected returns, so it might make sense to contribute to several different buckets at once.

Paying off high-interest debt is one of the best uses of any extra cash you might have. The stock market produces an average annual return of approximately 10%. If you can pay off a credit card with a 25% interest rate, that’s a guaranteed 25% return on your “investment.”

However, many in the top 10% have at least some debt. The average household in the top 10% has $375,000 in total debt, mostly mortgages. Few people should rush to pay off their mortgage in their journey to build their net worth. It’s one of the lowest interest-bearing debts you could have, and saving outside of your home provides liquidity in case of an emergency. In most cases, you can beat your home mortgage interest rate through smart investments.

A smart investment choice that can significantly increase your net worth is to take advantage of retirement accounts. Nearly every household in the top 10% of net worth invests in retirement accounts such as 401(k)s or IRAs, with an average balance of $558,600.

The tax advantages alone could provide additional funds to invest because you get an upfront tax deduction for any contribution to a traditional retirement account. Additionally, your employer may offer a 401(k) matching contribution, which is typically worth 50% or 100% of your contribution up to a certain limit. You will be hard-pressed to find another investment that provides an instant 100% ROI.

As mentioned, there are many ways to navigate the path to a high net worth. By consistently spending less than you earn, paying off your highest-interest debt, and investing strategically in your retirement accounts can put you on the path to joining the 10%. If you execute this plan long enough, you will definitely find your net worth headed in the right direction. Even if you never join the top 10%, you’ll likely have plenty to enjoy a comfortable retirement.