How wealthy should you be for your age?

When you’re working hard to build your wealth, it’s tough to tell whether you’re underperforming or overperforming compared to other people your age. Is there any useful way to measure yourself against your peers? We take a look at a formula – and some local data.

The net worth formula for those aged 40-plus

The Millionaire Next Door formula has been around for years. It’s in US dollars, so it’s a bit high, and it’s only a guide, but fun to run the numbers and see where you stand.

Your income [pretax annual income] x your age / 10 = your expected net worth by age

If you’re below that net worth, the authors describe you as an ‘under-accumulator of wealth’. If you’ve reached that number, you’re an ‘average accumulator of wealth’ (actually, you’re probably knocking it for six in New Zealand terms – more below). If you’re at double that number, you’re a ‘prodigious accumulator of wealth’; you’re really maximising your income.

As an example, Helena is 45 years old and earns $120,000 from all sources, before tax. Here’s how her calculations look:

45 x 120,000 = 5,400,000

5,400,000 / 10 = 540,000

If Helena’s net worth is $540,000, she is an average accumulator of wealth. If her net worth was well below, she would be an under-accumulator and if it was $1,080,000 or more she would be an outstanding wealth builder.

The net worth formula if you’re under the age of 40

If you’re under 40, the standard formula spits out an unrealistically high number, so The Money Guy has designed an alternative:

Your income x your age / (10 + (40 – your age))

Roy is 26 and earns $120,000:

26 x 120,000 = 3,120,000

3,120,000 / (10 + (40 – 26)

3,120,000 / 24 = $130,000

How do you compare to other Kiwis your age?

Not quite reaching that ‘average’ net worth goal? You might still be outperforming your peers here in Aotearoa. Here’s the median individual net worth for New Zealanders, according to Stats NZ’s latest data (year ended June 2021):

Age bandMedian net worthLife stage
15 to 24$3,000A lot of people are still in school in this age bracket; many are studying, earnings are low and student loans are high.
25 to 34$34,000Fewer students; people becoming more established in their earnings; some will be partnering up, which can help save money and build wealth faster.
35 to 44$117,000KiwiSaver is starting to add up; many people have bought homes and/or partnered up at this age. Kids add to the expenses.
45 to 54$229,000These are the peak earning and peak spending years. People may be trying to support themselves, possibly some kids and maybe their parents. But incomes are at their highest level.
55 to 64$363,000As retirement approaches, people get more serious about saving. The kids are older and KiwiSaver accounts should be looking their plumpest.
65 to 74$433,000This is the highest individual net worth for any age group, buoyed up by high homeownership rates, even though this generation didn’t benefit much from KiwiSaver.  
75 plus$412,000Net worth slowly begins to decline as earned income stops and retirement spending increases. Home ownership rates in this age group are very high.

Becoming an outstanding wealth builder

How do you build wealth? Here in New Zealand, homes and real estate made up 43% of total household assets, so property is an important way that Kiwis build wealth.

But you don’t necessarily need to own a home to build wealth. Investing in a diversified portfolio of income-producing assets is generally considered an excellent way to build wealth over the long term. A diversified portfolio might include KiwiSaver, other shares and managed funds, and a small proportion of higher-return, higher-risk assets – Zagga’s peer-to-peer mortgage loans fall into that category. You can learn more about becoming a Zagga investor here

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