Who are the Bogleheads - age adjusted net worth

[Don Christy]

Taylor's thread about Who Are the Bogleheads http://www.bogleheads.org/forum/viewtop ... 7#p1269919 stated one poll indicated 48% have net worth over $1 million. Another poll indicated the average age as 42. I'm interested in what the "age-adjusted net worth" would be. How about we use age 50 for these purposes.

So take your current NW and use a discount rate of 5% (not that the % matters that much, but let's all use the same % to get to comparable values) and figure out your NW at age 50. Unless you ARE 50, please don't answer with what your NW WAS at 50, rather what it WOULD have been at 50 using a 5% rate.

So if you are 30 years old, and have a current net worth of $300,000.00 your

NW(50) = $300,000 * (1.05) ^ 20 = $795,989.31.

If you are 60 years old, and have a current net worth of $2.0million, your

NW(50) = $2M / (1.05) ^ 10 = $1.228M

[zaboomafoozarg]

$514,000

I'm a failure D:

[BigFoot48]

Google will do that calculation for you if your HP 12C's battery is dead.

[Don Christy]

Google will do that calculation for you if your HP 12C's battery is dead.

I see you're NOT using data from another poll that found a lot of engineers here! I'm a recovering Electrical Engineer, still using 15C. The finance guys all use 12Cs.

[Don Christy]

$514,000

I'm a failure D:

Not relative to the median in the US, but maybe compared to the mean (darn Bill Gates and Warren Buffet screw the mean).

http://www.census.gov/compendia/statab/ ... 2s0721.pdf

For families with head of household 45-54, the mean NW In 2007 wass $661K and the median is $182K.
Don

[grabiner]

I'm surprised nobody has shown up below $250K. When I got started as a Boglehead, I had a net worth of about $30K invested in Vanguard and TIAA-CREF, and I was 29; it took me several years of saving and investing, and the 1997-1999 bull market, to get to $250K assuming a 5% future growth rate.

[jpsfranks]

Income being ignored, anyone with a negative net worth really does not do well in this calculation no matter the circumstance.

[zaboomafoozarg]

Google will do that calculation for you if your HP 12C's battery is dead.

Pfft, who'd want to use one of those, I've got a TI-89.

[tarnation]

Google will do that calculation for you if your HP 12C's battery is dead.

Pfft, who'd want to use one of those, I've got a TI-89.

Pfft, who'd want to use one of those, I've got a HP-48GX. (and Emu 48 for desktop )

[yobria]

Of course this poll underrepresents the expected net worth of younger folks, as it ignores any new money those under 50 will be contributing.

It's also going to overrepresent any married person who reports the combined net worth of both spouses.

Nick

[Don Christy]

Of course this poll underrepresents the expected net worth of younger folks, as it ignores any new money those under 50 will be contributing.

That's true. No consideration for savings and earnings on savings. For a young Boglehead, this will severely underestimate the likely NW(50). In the case of young non-Boglehead, there's no consideration for excess spending, debt service, and poor investment performance. The approach likely overestimates NW(50) for that cohort!

It's also going to overrepresent any married person who reports the combined net worth of both spouses.

Nick

Also true, but I believe the census data also looks at family NW. So it's not unreasonable, but notable.

Oh well, I guess it's very difficult to design a poll to get a good picture of age-adjusted NW...

[Don Christy]

I'm fairly surprised to see ~32% with NW > $2M at 50...

[Aptenodytes]

I'm fairly surprised to see ~32% with NW > $2M at 50...

Not too surprising if you take into account selection bias (people on this forum are more successful than average) and reporting bias (among forum members the most successful are more likely to take the poll).

[NAVigator]

Google will do that calculation for you if your HP 12C's battery is dead.

Pfft, who'd want to use one of those, I've got a TI-89.

Pfft, who'd want to use one of those, I've got a HP-48GX. (and Emu 48 for desktop )

I've heard that Jack uses a slide rule.

Jerry

[Cash]

Of course this poll underrepresents the expected net worth of younger folks, as it ignores any new money those under 50 will be contributing.

It's also going to overrepresent any married person who reports the combined net worth of both spouses.

Nick

+1.

[JustinR]

Of course this poll underrepresents the expected net worth of younger folks, as it ignores any new money those under 50 will be contributing.

It's also going to overrepresent any married person who reports the combined net worth of both spouses.

Nick

Yea, after thinking about it this poll doesn't make any sense.

I like the idea though, but I don't think there's any way to make it work...

[Mel Lindauer]

Google will do that calculation for you if your HP 12C's battery is dead.

Pfft, who'd want to use one of those, I've got a TI-89.

Pfft, who'd want to use one of those, I've got a HP-48GX. (and Emu 48 for desktop )

I've heard that Jack uses a slide rule.

Jerry

That's true and he keeps it right on his desk.

[JasonF]

Although it's customary to include the value of illiquid assets in the calculation of your net worth, I tend to ignore these items (equity in home, autos, jewelery, etc...) since many of us (me included) have a bias to overestimate their value. To eliminate this bias, I simply focus on my goals established for liquid investment assets (stocks, bonds, cash, etc...) that are marked to market daily. It gets trickier if you own rental properties and interests in other businesses, so that's why I keep a typical balance sheet (including the value of illiquid assets) but really focus on building the value of income-producing assets.

[scrabbler1]

I am nearly 49 so the age adjustment has no real effect. Including the value of my other possessions doesn't have much of an effect, either. I am in the just-over-$1M group.

[gkaplan]

I ran out of fingers and toes.

[FinanceFun]

This is a highly flawed method that is bias'ed toward older bogleheads. Income growth is not accounted for. For example, when I was 21 I made $35k per year. At 27, I was at ~$100k. Now at 32, I make $250k - $400k ($315k in 2011). The model you are presenting does not take this into account.

[Grt2bOutdoors]

One other flaw, you are assuming compounded returns of 5%, how many on this board have been able to realize 5% compounded returns without a period of loss? Things do not rise in perpetuity. Also, are you including home equity as part of net worth. How many here believe they will realize 5% in compounded annual return on their home?

[amarone]

It's also going to overrepresent any married person who reports the combined net worth of both spouses.
Nick

I just realized that I did this using my age. If I had used either my wife's age or our average age, we would have been in a different category.

[Midpack]

This is a highly flawed method that is bias'ed toward older bogleheads. Income growth is not accounted for. For example, when I was 21 I made $35k per year. At 27, I was at ~$100k. Now at 32, I make $250k - $400k ($315k in 2011). The model you are presenting does not take this into account.

Probably true. My calc came out to $2.1MM, but my NW was actually less than that at age 50. And I did not receive an inheritance or some other windfall, just save-invest-repeat until I reached FI+.

[DartThrower]

I ran out of fingers and toes.

Were you including Linda Ronstadt's net worth?

[Rodc]

One other flaw, you are assuming compounded returns of 5%, how many on this board have been able to realize 5% compounded returns without a period of loss? Things do not rise in perpetuity. Also, are you including home equity as part of net worth. How many here believe they will realize 5% in compounded annual return on their home?

Houses in general have risen at inflation plus a little. Five percent nominal is about the long term average nominal return on intermediate treasuries.

Maybe not achieved over the short term, but not a bad back of the envelop number to use. Make it 4% or 3% if you wish. If one is close to 50 it won't matter, and if far from 50 this all sort of falls apart on other grounds so the exact number does not matter all that much.

[HongKonger]

Sorry but what is the hat in the calculation?

[amarone]

Sorry but what is the hat in the calculation?

It's the caret symbol and is above the 6 key on my keyboard. It means "to the power of". So 4^2 = 4 squared. You can use that symbol in Excel or in Google (and no doubt other places).

[HongKonger]

Sorry but what is the hat in the calculation?

It's the caret symbol and is above the 6 key on my keyboard. It means "to the power of". So 4^2 = 4 squared. You can use that symbol in Excel or in Google (and no doubt other places).

And how do I do it on a regular keyboard?

[amarone]

Sorry but what is the hat in the calculation?

It's the caret symbol and is above the 6 key on my keyboard. It means "to the power of". So 4^2 = 4 squared. You can use that symbol in Excel or in Google (and no doubt other places).

And how do I do it on a regular keyboard?

Shift-6 does it on mine.

And if the symbol is not on your keyboard anywhere, you can hold down the Alt key and enter, on the numeric keypad, 0094

[Rodc]

Sorry but what is the hat in the calculation?

It's the caret symbol and is above the 6 key on my keyboard. It means "to the power of". So 4^2 = 4 squared. You can use that symbol in Excel or in Google (and no doubt other places).

And how do I do it on a regular keyboard?

If you are on a Windows machine you can just use the built in calculator (set view to scientific). Button is third row, fourth column.

[HongKonger]

Sorry but what is the hat in the calculation?

It's the caret symbol and is above the 6 key on my keyboard. It means "to the power of". So 4^2 = 4 squared. You can use that symbol in Excel or in Google (and no doubt other places).

And how do I do it on a regular keyboard?

If you are on a Windows machine you can just use the built in calculator (set view to scientific). Button is third row, fourth column.

Thanks ..its still all wrong though! Either I am estimated to gain $1,000 in the next 11 years or a little in excess of 2.5m :lol I'll take the latter thanks.

[yobria]

My easyallocator app captured the combined investment accounts of a couple thousand Bogleheads/Diehards at one point. The average portfolio was $500K, and there was a fairly even distribution of ages between 20s and 70s.

So these numbers seem a bit high, unless people have a large amount of non-financial assets, on average.

Nick

[i<3Investing]

It doesn't help that my net worth has only been positive for about a year...

At my current savings rate:
Right now: 254k
In one year: 404k
In two years: 538k
3 years: 658k

I like where this is going

[ilmartello]

Perhaps we need a more significant calculator.
lol.

If over 50, enter net worth at 50/ divide by 2 if you are married.

If below 50, enter net worth at 50 , assuming realistic assumptions for wage growth plus savings. Perhaps income going up by 4 percent a year, account for your savings rate and 5-6 percent annualized return. Divide by 2 if you are married.

Exclude debt and equity on primary home. Add in net equity on vacations or rentals or otherwise invested homes.

[FrugalInvestor]

Of course this poll underrepresents the expected net worth of younger folks, as it ignores any new money those under 50 will be contributing.

Nick

Absolutely true. My net worth went from a negative number to a very respectable number between the ages of 40 and 50.

[swaption]

Perhaps we need a more significant calculator.
lol.

If over 50, enter net worth at 50/ divide by 2 if you are married.

If below 50, enter net worth at 50 , assuming realistic assumptions for wage growth plus savings. Perhaps income going up by 4 percent a year, account for your savings rate and 5-6 percent annualized return. Divide by 2 if you are married.

Exclude debt and equity on primary home. Add in net equity on vacations or rentals or otherwise invested homes.

Why would you exclude equity in primary residence? No reason for this. If I have $300K, buy a house for cash, you are saying my net worth has gone down by $300K?

[FrugalInvestor]

Perhaps we need a more significant calculator.
lol.

If over 50, enter net worth at 50/ divide by 2 if you are married.

If below 50, enter net worth at 50 , assuming realistic assumptions for wage growth plus savings. Perhaps income going up by 4 percent a year, account for your savings rate and 5-6 percent annualized return. Divide by 2 if you are married.

Exclude debt and equity on primary home. Add in net equity on vacations or rentals or otherwise invested homes.

If you're using net worth to measure one's ability to live comfortably in retirement from investments it doesn't make sense to divide by two for marriage. Some number over one for sure, but two is much too high.

[travellight]

I agree, swaption. It should all count; that would equalize renters with more financial equity versus home owners who could sell their home and rent.

I don't think those married with nonworking spouses should divide by 2. It is simplest to report this as net household net worth. One's expenses do not double per person; the mortgage is the mortgage, etc. Those with two earning persons in the household/couplehood should report combined net worth.

[Ice-9]

$514,000

I'm a failure D:

I'm no millionaire by 50 either. 589,338.84 using this online compound interest calculator. Included mortgage debt and Zillow's estimate of house value.

Without including mortgage and house, the 50-yr-old projection becomes 562,515.66.

Nearly all of that will be tax-deferred (or tax-free) through the benchmark age 50.

[Christine_NM]

There's something odd here. At age 68 my age-adjusted net worth is over $1M. But at age 50 I actually had only $220,000. That was one heck of a bull market.

That's including home values at both ages, but it's 90% investments. I included homes at both ages since they were paid for out of investments.

[travellight]

I used my mint.com for net worth. It doesn't have tangible household assets but has all my properties at zillow'ish values and all bank accounts. It does not have my pension or life insurance though.

[chaz]

I ran out of fingers and toes.

Me too.

[Rodc]

There's something odd here. At age 68 my age-adjusted net worth is over $1M. But at age 50 I actually had only $220,000. That was one heck of a bull market.

That's including home values at both ages, but it's 90% investments. I included homes at both ages since they were paid for out of investments.

The calculation says that if you invested no new money you should have had about $400,000K.

If you added new money then the calculation is definitely wrong.

[bungalow10]

I used my mint.com for net worth. It doesn't have tangible household assets but has all my properties at zillow'ish values and all bank accounts. It does not have my pension or life insurance though.

I forgot to include pensions. I'm only 33, but I think the combined present value of DH's pension plus mine is about 100k.

eta: okay, probably not 100k. More like 75k.

[travellight]

yea, I could leap up to the next category if I added pension.

[bobblehead]

This is a very interesting poll.

At age 26 with a NW of $57k, my age-adjusted NW was only about $186k. I wanted to add in a savings rate of $20k/year for comparison, so I created an excel sheet that has cell A1 = 57000. A2=A1*1.05+20000, A3=A2*1.05+20000, etc. After 24 years (age 50) the net worth comes out to be $1.004M! I think the savings rate makes a huge difference for a young person. Is there a way to factor this into the one-line formula?

[FinanceFun]

This is a very interesting poll.

At age 26 with a NW of $57k, my age-adjusted NW was only about $186k. I wanted to add in a savings rate of $20k/year for comparison, so I created an excel sheet that has cell A1 = 57000. A2=A1*1.05+20000, A3=A2*1.05+20000, etc. After 24 years (age 50) the net worth comes out to be $1.004M! I think the savings rate makes a huge difference for a young person. Is there a way to factor this into the one-line formula?

You would also need to factor in income growth. So you may do $20k per year now, but when your income doubles you should be putting in $40k.

[bobblehead]

I did think of increasing the 20k yearly, but I figured if the 5% is real return and we are talking about age 50 NW in today's dollars, my inflation-adjusted deposits might stay close 20k. I don't have any kids yet so who knows which way that savings rate will go!

[Christine_NM]

Rodc -

Thanks, that explains it. At age 50 I started upping my savings rate because the mortgage was paid off that year. So if I backed out all that saving (it was not much compared to today's nominal result, not more than $30,000 per year till retirement)... that would leave me with a number, but it would be pretty meaningless.