What is the Average Net Worth of Retirees?

Average Net Worth of Retirees

Many people dream of the day when they will longer  be part of the daily grind. If age were the only requirement, I think it is safe to say most of us would retire as soon as possible.  But how much money should you have saved for retirement before you hang up your work boots? This answer will differ from person to person. The first step is making an honest assessment of your financial situation versus the average net worth of retirees. An easy way to achieve this is by figuring out your net worth and comparing with others in the same age group here. These figures can provide a clearer picture to help you plan for your future.

What is Net Worth?

If you feel you are ready to join the ranks of retirees, you should have a keen sense of your net worth. It is one of the strongest indicators of your financial status and an important tool to help you reach your retirement goals. You can calculate your personal net worth with some basic math. First, you need to add up the total value of all your assets and your liabilities. Then, subtract your liabilities from your assets to determine your personal net worth.

You should consider all assets, including bank accounts, stocks, bonds, mutual funds, real estate holdings, retirement savings, and partnerships in your tallies. All your debts, loans, and mortgages would fall on the other side of the ledger. This number will either be positive or negative, depending on the amount of debt you have accrued.

The Average American’s Net Worth at Retirement

The three major contributing factors to your net worth are home equity, retirement accounts, and cash savings. According to the most recent figures compiled by the U.S. Census Bureau in 2015, the national median for homeowners over the age of 65 was $201,500. Bear in mind that this figure is limited to households and may not take into account for the homeless or other members of the household who would not qualify as retirees.

Data collected from the Survey of Consumer Finances indicates that the total value of retirees’ assets has nearly doubled in the last 20 years and accounts for a large portion of a retiree’s net worth. However, it also means that they carry more debt due to mortgages. The median net worth of retirees when home equity is excluded drops to $59,780. The majority of the remaining funds are tied to retirement accounts while cash savings only account for a small fraction of a person’s overall net worth.

How Much Should I be Saving?

Most financial planners agree that a good rule of thumb for retirement is to save at least ten times your annual income. This figure may vary based on your lifestyle and spending habits, so it’s wise to sit down with a professional to discuss your options and decide what is best for your circumstances.

For those who are struggling to make ends meet, pay off student loans, and refinance home mortgages, contributing to your retirement funds may seem like a low priority. However, in a society where the future of social security is uncertain and employers offer less comprehensive pension plans, one thing is perfectly clear; it’s never too soon to begin thinking about retirement.

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Are you really aware of an asset meaning?

Whether you are a numbers person or not, finances become a major part of your life as you continue to propel into adulthood. As you are consistently reminded of the importance of investments, it is also imperative to understand the difference between an asset and a liability, especially if you are making purchases with the intent to create value.

So, what is the definition and meaning of an asset?

According to Dictionary.com, an asset is “a single item of ownership having exchange value.” Google.com also defines it as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”

Of course, other definitions include a balance sheet for liabilities and capital as well as generalized to anything that is useful or valuable.

Robert Kiyosaki, American businessman, investor and self-help author, puts the description of the meaning of an asset a little more simply:

Asset Meaning

His examples include real estate, businesses that don’t require you to work at them, and stocks and bonds as mentioned in his book, “Rich Dad, Poor Dad.”

However, certain items you own can also be considered an asset, even within your own home.

Conversely, these same articles could be liabilities. Liabilities, as defined by Dictionary.com are “moneys owed; debts or pecuniary obligations.” Kiyosaki explains them as any purchase that takes money out of your pocket.

As you dive into the world of researching which of your household items put money in your pocket and which are a straight cost, you’ll need to keep these definitions in mind. A major issue is that many people believe their goods are profitable when, in reality, they are not as valuable as they think or, worse, they are a bit of a disadvantage to the consumer’s pocket.

While this can be an often confusing topic, Suburban Finance is here to help clear things up. Below are common possessions that you may not have realized were assets (or liabilities):

  • Your carSome will actually deem your vehicle a more of a liability due to the amount of expenses that go into them over time. These include gas, maintenance, insurance and a loan. A car can surely be an asset, though, if the value is greater than the amount due on it. It is also classified in such terms as it can be sold for cash; however, it continuously devalues over time, not excluding the minute you drive it off the lot. While you can add your automobile to your overall net worth, you have to also deduct the liabilities on it when doing so along with determining the depreciating value. (Equally, include all liabilities in your total net worth calculation.) Many dispute on this topic, but you need to be able to establish the worth of the vehicle (trade-in value, what you gain over time, etc.) and the expenses you will accrue.
  • Fine art. Art and other collectibles, such as antiques, can add a considerable amount to your net worth. Of course, this type of purchase does not come without research. The rarer a piece, the more valuable; but the art industry is also very erratic. This is not an easy money-maker, even though its value can be limitless. This can be also be an initial expensive investment on top of an ongoing venture, since purchasing the original will be worth more than a reproduction. If you already have some items that you believe to have value, whether a reproduction or not, you should invest to have them appraised. This will be the best way to ensure you have a strong asset in your hands. Furthermore, you should be aware of the fact that home owner’s insurance may not cover your collectibles without special coverage.
  • Furnishings and appliances. Furniture, appliances and even clothes are considered what is known as non-earning or non-financial assets. These are items you own but do not provide extra revenue. One could say that appliances could also be considered an earning asset due to their efficiency in saving you time, which creates more opportunities for you to make money. If you are purchasing certain goods with the intention of investing, such as antique furniture or collectible items, you will (as mentioned above) want to consider getting them evaluated for value. While most household goods won’t necessarily produce more income, they do still represent part of your net worth. They are also useful for cases of bankruptcy and replacement cost in your insurance policy.
  • Guns. Firearm purchases have been on the rise, particularly with the gun-control laws. These purchases include both collectibles and commercial. Many investors are anticipating tighter regulations in the near future while others are concerned of the return of the federal assault weapons ban, which means any firearms in the banned categories will be illegal to produce. Those in circulation will, though, still be able to purchased and exchange hands with a fixed supply level. These commodities are very valuable to each owner, and they tend to appreciate over time. Guns are an investment that has a price dependent upon supply and demand. While still a strong subject, guns are, indeed, considered an asset due to their steady worth. As with any asset, they would also need to be disclosed if ever filing bankruptcy.
  • Your homeWhile common thought is that your home would be measured as an asset, Kiyosaki actually considers this to be more a liability due to the time and expenses spent on maintenance, mortgage payments, insurance, the home’s devaluation and the like. It’s likely that you may not sell the home for what it is worth due to still owning on the loan when you move. Renting a room, though, can help to turn this non-earning asset into a financial gain. Also, purchasing homes with the intent to rent to others would also turn home-buying into an asset. This is, of course, depending on who you ask. In the business world, homes are typically considered more of a liability due to costs in time and money. In spite of this, most homeowners will think of their house as a strong resource due to owning the property.

In summary, what is considered an asset and liability is often debated and dependent upon whom you ask. Just remember to keep in mind financial trends and potential value in items before attempting to turn household products into money in your pocket.