Add up the house, the 401(k), the savings, then subtract everything you still owe. That's your net worth, and as you get close to retirement you want to know how it stacks up. The average net worth by age 60 won't tell you that.
For households in their late fifties, the average is a little over $1.4 million, and about eight out of 10 of them sit below it.
The average gets pulled up by the top
The middle household aged 55 to 59 has a net worth of about $320,000, while the average for those exact same households is that $1.4 million figure. Same survey, same people, same age, and both numbers are real. The average gets pulled up hard by the households with far more. The wealthiest 1% of that age group hold close to 30% of all the net worth in it.
The middle at 55, 60, and 65
In the Federal Reserve's most recent survey, the middle household aged 50 to 59 has a net worth of about $320,000. Move up to the 60 to 64 bracket and it climbs to just under $400,000. At 65 to 69, it's the same. The climb flattens out in the early sixties and stays there, right when the paychecks stop for most people. The money that was coming in from a job starts going out instead.
These are completely different households at different ages, not one family followed through time. It's a snapshot of where the people in each bracket stand right now.
How to find your own number, and the rest of the ladder
Take everything you own at what it would actually sell for today and subtract everything you owe, right down to the credit cards. The house counts at what it would sell for today, minus whatever is left on the mortgage. Whatever's left over is your net worth. That's how the Federal Reserve measures it, so it's apples to apples.
The middle is one line on the ladder. The top 25% starts right around $1.1 million, and that line barely moves either. It's about the same in your late fifties as in your late sixties. The top 10% is where differences start to show, beginning around $2.7 million in your late fifties and climbing to roughly $3 million from 60 onward. The bottom 25% sits under $85,000 and drifts lower from there.
Say you're 62 and you added it up and got $250,000. You're below the middle for your age. Half of every age group sits below the middle number, at every age, in every survey year. All it tells you is where you stand today against other people your age.
How much of that number is actually money
The Federal Reserve doesn't only publish net worth. It also publishes what these same households hold in financial assets: the checking account, the savings, the CDs, the bonds, the brokerage account, and every retirement account added together. Money, or things that turn into money without selling the roof over your head or the car you need to drive.
For households aged 55 to 64, one bracket covering both groups above, the middle net worth is about $364,000. For that same group, the middle financial assets number is about $64,000. That's the entire money side of a typical net worth in that age range.
Two things explain most of the gap. The first is that a lot of these households have no retirement account at all. Only 57% of that age group has one, so the 401(k) you're picturing is missing for more than four out of 10. The second is the house. Among households that own their home, the middle home equity is about $232,000, and 62% of those owners still have a mortgage.
That equity is real and it counts in the net worth number. It isn't paying you anything month to month. You're paying for it, through the mortgage, the property taxes, the insurance, the maintenance, and the repairs. Even a paid off house doesn't pay you, and you still pay to keep it up.
One person or two
There's one more split in these numbers, and it moves the benchmark more than age does: one person in the house or two. For a single person with no children, 55 or older, the middle net worth is $163,000. For a couple with no children, it's about $399,000. Retirement accounts tell the same story: about 36% of those singles have one, and for couples it's closer to 67%.
The gap runs deeper than those numbers make it look, because the bills in a one-person house don't shrink to match. One Social Security check comes in instead of two, and the property tax bill is the same either way. There's no second income to absorb the year the roof goes out. On your own, the part of your net worth that produces income has to carry more.
Split your number into two columns
Here's what to do with all of this, and it takes about 10 minutes at the kitchen table. Take everything that makes up your net worth and divide it into two columns. On one side, the things that can pay you every month. On the other, the things that can't. The house you live in doesn't pay you, and neither do the cars, the furniture, the tools, or the camper. The savings, the CDs, the bond fund, the dividend payers, and a rental if you have one, those can.
Say you're 62 and your net worth is $600,000. The house is worth $400,000 with $160,000 left on the mortgage, so that's $240,000 in equity. Two vehicles and everything in the garage, call it another $60,000. It's an even split: $300,000 that can't pay you and $300,000 that can.
The things that don't pay you still have real benefits. With the house, you're not paying rent, and rents go up while a mortgage payment stays the same. It still isn't money showing up in your checking account, and the checking account is what pays the bills once your paycheck stops.
While you're still working, it doesn't matter much what your money is doing on a given day, because the paycheck covers the bills. If the market drops, you keep going to work and the money has time to come back. Retirement changes that completely. The paycheck stops, and if nothing you own produces income, you start selling pieces of what you built to pay for the groceries. What you spend this month then depends on what the market says your shares are worth the week you sell them.
Moving part of the financial asset side into things that pay you can help put the paycheck back. Maybe not all of it, and definitely not overnight, but enough that some bills are covered by money that shows up whether the market is up or down that month. There's a handful of ways people do this: dividend stocks, high yield savings and CDs, bonds, rentals, and private mortgage notes.
That last one is the lesser known one. Someone buys a house, a private individual funds the loan instead of a bank, and the loan is secured by a first position lien on the property. First position means that if the borrower stops paying, the person holding the note is first in line ahead of anybody else who's owed money. I self-manage a couple dozen rentals of my own, so I know landlording comes with headaches, and it may not be the asset you want to take on right as you're trying to retire. With a note, the work is the evaluation, and whoever holds it has to do that on every deal before any money moves.