If you are in your 50s and feel that the “average” net worth for people your age is more than $1 million, you may be tempted to pop a bottle of champagne or worry about why you don’t feel like a millionaire.
Before jumping to conclusions, it’s important to explain what these numbers mean and why most people don’t have a seven-figure bank account despite what the averages show.
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A Tale of Two Metrics: Average vs. Median
First, the number of millions of dollars is based on the average income, which is calculated by dividing the total wealth of a group by the number of people in that group. Sounds straightforward, right? The problem is, a few super-wealthy people — think tech billionaires and hedge fund moguls — can skew the average way up.
Now, the average net worth paints a realistic picture. This is the median value, where half of the group has more and half has less. For people in their 50s, the median net worth ranges from $278,880 (554) to $320,700 (ages 55-59), according to the Federal Reserve’s latest data. It’s a far cry from a million dollars and very close to what the “average Joe” in their 50s would experience.
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Why Is There a Big Difference?
The difference comes down to who is pulling the strings – or in this case, the averages. For every billionaire, there are millions of people with less wealth and the average puts all these numbers together. Here is a breakdown of the average and median net worth by age group:
By comparison, people in their 40s have an average net worth of between $598 and $782, with the middle class sitting low. This shows that although the economy is growing and growing, it is not growing equally for everyone.
What is Driving Net Worth in Your 50s?
Several factors contribute to the value of money at this stage of life. Home equity is often valuable, due to years of mortgage payments or rising real estate prices. Retirement accounts like 401(k)s and IRAs often account for another chunk and some people have investment portfolios or even business equity that adds up to their bottom line.
But debt can destroy all that. High mortgage rates, credit card debt and even student loans can drag down the value, especially for those who don’t have savings or investments.
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Are You Ahead of the Curve?
You’re ahead of the curve if your net worth is above the median for your age group — about $320,700 for the last 50 years. But comparing yourself to an average or middle number is not the ultimate goal. Whether you’re on track for your financial and retirement goals matters.
To get a clear picture of where you stand:
Calculate your net worth by adding everything (home equity, savings, investments) and subtracting debts (mortgage, loans, credit card balances).
Benchmark: Use benchmarks as a guide, but remember that they do not define financial success.
Focus on your goals: Ask yourself if you are saving enough money for retirement, keeping debt manageable and preparing for the future.
Increasing Your Value in Your 50s
If you feel like your net worth isn’t where it should be, there’s still time to take action. Here are some smart tips:
Research gifts: If you are 50 or older, take advantage of catch-up contributions to your 401(k) or IRA.
Pay the loan: High-interest debt, especially credit cards, can affect your financial health. Focus on reducing them.
Diversify your investments: Diversifying your money in stocks, bonds and other assets can grow your portfolio.
Reduce the amount needed: Small lifestyle changes can free up savings or investments.
Check out some additional fees. Whether it’s freelance work, consulting or rental income, extra income can increase your savings.
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Investing $100 a month starting at age 50 can grow significantly over 10 years, due to serious interest. With an average annual return of 6%, your $12,000 contribution could grow to $16,389, while a higher return of 10% could push it to $20,487.
The idea of achieving a million dollar average net worth may sound like a dream, but it is far from the reality for most people in their 50s. By understanding the difference between averages and medians – and focusing on your financial goals – you can set yourself up for a secure future, no matter where you stand now.
No matter where you are on your financial journey – whether you’re ahead of the pack or feeling behind – consulting a financial advisor can make a big difference. They can help you create a clear plan, maximize your investment and prepare for the future you deserve.
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