What's the Appropriate Net Worth by % for a 27 year old?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
wholeinone04
Posts: 234
Joined: Thu May 27, 2010 12:45 pm
Location: California

What's the Appropriate Net Worth by % for a 27 year old?

Post by wholeinone04 » Thu Feb 20, 2014 2:21 pm

I've been looking into a new RE investment lately for about 50k here in SoCal and it's making me wonder what is an appropriate net worth by percentage. I'm 27, about to be married with a fiancee in med school taking on lots of debt :)

Currently, my net worth by % is:
retirement(401k, roth ira, hsa - 140k) - 44%
cash(85.5k) - 27%
home equity(conservative estimate - 90k) - 29% (this property is rented out, cash flow = $300/mo, I'm currently renting an apt.)

I am about to spend 23k on my wedding and if I were to put another 50k into RE investment my new percentages would be:

retirement(140k) - 48%
cash(12.5k) - 4%
real estate(140k) - 48%

Obviously the cash portion of my NW would go down significantly but I am able to save 2-3.5k in cash/month in addition to the 2k/month I contribute to retirement accounts so it would replenish relatively quickly.

I honestly have no idea what the right allocation for my net worth should be. I do know that I'm young, willing to take on appropriate risk, good at saving, and want to get a little bit more into real estate. There's not much risk of losing my job but if I did I also have decent sources of income from online sites, second job coaching, etc. Could also borrow money from my parents if situation called for it so don't think a temporary low EF is that big of a deal for me.

Would love to hear feedback/thoughts on current allocation, possible future allocation and so forth. I'm also interested in hearing your age and current net worth?

User avatar
G-Money
Posts: 2852
Joined: Sun Dec 09, 2007 7:12 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by G-Money » Thu Feb 20, 2014 2:32 pm

IMO, it doesn't really matter.

It's probably a good idea to have enough cash to satisfy your liquidity needs (with room to spare, in case of emergencies).

If the question is whether you place greater emphasis on paying down debt or saving for retirement, there have been countless threads on the subject. I think the Wiki also does a good job laying out the pros and cons. http://www.bogleheads.org/wiki/Paying_d ... _investing

In your case, with a likely bump in income when your future wife becomes a doctor, you probably want to put as much in tax-advantaged accounts as you can. The space is use-it-or-lose-it each year.

I simply would not get hung up on the percentages. Right now, your home equity represents a sizable portion of your net worth. That will likely decline as you continue to save for retirement (unless you also continue buying more expensive houses).

Just focus on saving as much as you can. Where you put your savings is far less important.
Don't assume I know what I'm talking about.

User avatar
Bogle101
Posts: 306
Joined: Mon Oct 01, 2012 10:14 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Bogle101 » Thu Feb 20, 2014 2:37 pm

I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.
25% S&P 500 | 25% Extended Market | 20% International | 10% REIT | 10% Sector Funds | 10% Cash

ericvt
Posts: 19
Joined: Mon Dec 24, 2012 7:17 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by ericvt » Thu Feb 20, 2014 2:49 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education...


I think this is extremely generous for an average "someone" with a college education at 29.5.

jackholloway
Posts: 945
Joined: Mon Jul 08, 2013 3:45 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by jackholloway » Thu Feb 20, 2014 2:50 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


I suspect that 300k at 30 is well above the average for someone with a college education. Typical graduation age is around 22, with a fair number of people taking a fifth year, so 30 is seven or eight years out of school, thus 300k is saving ~42k a year. IIRC, the median college grad income from http://en.wikipedia.org/wiki/Household_ ... ted_States is roughly 50k, so this is saving more than the median take-home salary.

That said, be proud if you have saved this much.

nfs
Posts: 54
Joined: Wed Jan 22, 2014 4:32 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by nfs » Thu Feb 20, 2014 2:57 pm

It's going to vary a lot based on life situations. I'm 31 and was married for a number of years. I have about $80k in retirement at this point - most of which was contributed by my employer (they provide 12% of salary into retirement account each year). If I hadn't been married or made the choices I made while married, I'd have significantly higher net worth than I do now... but I'm pretty happy with what I've got and the life experience I gained (pretty sure it'll save me more $$ in the long run!).

Grt2bOutdoors
Posts: 17259
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Grt2bOutdoors » Thu Feb 20, 2014 3:03 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


Average??? :shock: That is far above average - you are the 1% of your age group.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

mayday23
Posts: 85
Joined: Mon Feb 10, 2014 10:29 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by mayday23 » Thu Feb 20, 2014 3:06 pm

I’m 37:

Retirement accounts: $250K
Cash: $25K
Real estate: $90K

MrMiyagi
Posts: 357
Joined: Wed Jul 15, 2009 3:28 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by MrMiyagi » Thu Feb 20, 2014 3:06 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


I'm pretty sure a net worth of 300k before age 30 puts you in the top 1%...if not the top 0.1% It certainly isn't "about average" for someone with a college education.

Jack FFR1846
Posts: 5886
Joined: Tue Dec 31, 2013 7:05 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Jack FFR1846 » Thu Feb 20, 2014 3:08 pm

You're already running a business renting apartments. I would consider money in that business (in the equity of the houses) to be available at retirement time and thus a % that could be thought of as retirement savings. I plan to downsize at some point when I retire and expect that the equity in my house (it's paid for) will go towards retirement spending. I have built a year by year spreadsheet plan for expected income, spending, saving etc all the way until I'm gone. The sale of our house and subsequent buying of a smaller, less expensive house is in that plan. My dad rented multi-family houses and as he got older, he started selling them off.
Bogle: Smart Beta is stupid

likegarden
Posts: 2412
Joined: Mon Feb 26, 2007 5:33 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by likegarden » Thu Feb 20, 2014 3:12 pm

Ha! With 27 I had a small negative net worth. I just had finished college with an MS in engineering and 10k in student loans, started my first job, took a loan to buy some furniture for my appartment and buy a used car. I had perhaps $500 in savings. What else could someone expect..

wearymicrobe
Posts: 45
Joined: Sat Aug 18, 2012 11:27 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by wearymicrobe » Thu Feb 20, 2014 3:13 pm

ericvt wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education...


I think this is extremely generous for an average "someone" with a college education at 29.5.


Given that the true net worth of someone that is 27-29 and single in the United States is currently 8,700$ yeah a little optimistic.

BW1985
Posts: 1715
Joined: Tue Mar 23, 2010 6:12 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by BW1985 » Thu Feb 20, 2014 3:22 pm

wearymicrobe wrote:
ericvt wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education...


I think this is extremely generous for an average "someone" with a college education at 29.5.


Given that the true net worth of someone that is 27-29 and single in the United States is currently 8,700$ yeah a little optimistic.


lol. Maybe average for a 29 yr old on this forum, maybe, still probably on the high side though.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

MathWizard
Posts: 2652
Joined: Tue Jul 26, 2011 1:35 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by MathWizard » Thu Feb 20, 2014 3:41 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


Try the CNN caluclator at:

http://cgi.money.cnn.com/tools/networth ... index.html

You'll see a median net worth of less than $10K.

Ignoring age, and just looking at all US tax filesrs the Rich-o-meter at:

http://blogs.wsj.com/wealth/2011/07/28/ ... h-are-you/

shows $300K at the 70th percentile.

User avatar
grap0013
Posts: 1879
Joined: Thu Mar 18, 2010 1:24 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by grap0013 » Thu Feb 20, 2014 4:18 pm

BW1985 wrote:
wearymicrobe wrote:
ericvt wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education...


I think this is extremely generous for an average "someone" with a college education at 29.5.


Given that the true net worth of someone that is 27-29 and single in the United States is currently 8,700$ yeah a little optimistic.


lol. Maybe average for a 29 yr old on this forum, maybe, still probably on the high side though.


Me thinks college paid for by Mom and Dad + a windfall?

Most are not so fortunate. When I was 25 my NW was -220K and I had $300 in the bank. I walked for graduation on a Saturday and started work the following Monday because I needed the $ to pay the upcoming rent.
There are no guarantees, only probabilities.

wholeinone04
Posts: 234
Joined: Thu May 27, 2010 12:45 pm
Location: California

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by wholeinone04 » Thu Feb 20, 2014 4:57 pm

Not really a question of paying down debt vs. saving for retirement since I'm already maxing out 401k, Roth IRA and HSA(and paying for med expense out of pocket).

Seems like most people are saying just save/invest and don't worry about the percentages but at some point that advice has to be flawed right? It would be silly to have 100% of investments in a 401(k) right and no cash/real estate? Although I did like Jack's suggestion:

Jack FFR1846 wrote:You're already running a business renting apartments. I would consider money in that business (in the equity of the houses) to be available at retirement time and thus a % that could be thought of as retirement savings. I plan to downsize at some point when I retire and expect that the equity in my house (it's paid for) will go towards retirement spending. I have built a year by year spreadsheet plan for expected income, spending, saving etc all the way until I'm gone. The sale of our house and subsequent buying of a smaller, less expensive house is in that plan. My dad rented multi-family houses and as he got older, he started selling them off.


My property is doing well at 3.125% APR, 6 more years fixed, then 23 to go. Not sure how long I'll keep it but it could be considered part of retirement or even my cash portion very easily when I sell or do a cash out refi.
grap0013 wrote:
BW1985 wrote:
wearymicrobe wrote:
ericvt wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education...


I think this is extremely generous for an average "someone" with a college education at 29.5.


Given that the true net worth of someone that is 27-29 and single in the United States is currently 8,700$ yeah a little optimistic.


lol. Maybe average for a 29 yr old on this forum, maybe, still probably on the high side though.


Me thinks college paid for by Mom and Dad + a windfall?

Most are not so fortunate. When I was 25 my NW was -220K and I had $300 in the bank. I walked for graduation on a Saturday and started work the following Monday because I needed the $ to pay the upcoming rent.


I keep telling anyone who will listen it's not that hard to save up this type of money. Get a STEM degree from a state school and you'll be guaranteed a job when you graduate making 60-80k, 10% raise within 1 year, 3% raises per year, another 10% bump after 4-6 years and then nothing ever again :)

Personally, I started working when I was 14 and have had at least 2+ jobs since. Had help from parents during school so I was fortunate to graduate with no debt and made some very lucky/timely investments(10k homebuyers credit, investment in AA stock, bought condo in 2009, etc). So that's probably why I'm a bit ahead of most but you can still do way above avg with only a slightly above average salary.

And unfortunately MD degree is nowhere near as lucrative as it used to be. You have to specialize now so that means 4 years of school plus 5-7 years residency(making around 50k), so we won't be seeing any of that nice doctor's salary for 10 years. Plus the 45k/year we're taking out in loans for her right now(although most of her classmates are taking 60k!) WCI had an interesting article on this the other day:

http://whitecoatinvestor.com/whats-your-problem/

YttriumNitrate
Posts: 1062
Joined: Tue Mar 26, 2013 12:13 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by YttriumNitrate » Thu Feb 20, 2014 5:10 pm

BW1985 wrote:lol. Maybe average for a 29 yr old on this forum, maybe, still probably on the high side though.

Even for this forum that's a bit high. From what I recall from the following thread, $100k at 29 is average on the bogleheads forum. http://www.bogleheads.org/forum/viewtopic.php?f=2&t=118082&start=100

User avatar
Meg77
Posts: 2129
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Meg77 » Thu Feb 20, 2014 5:28 pm

I don't think net worth percentages matter at all. The majority of Americans hold a huge portion of their net worth in real estate equity, particularly when they are younger and haven't accumulated much in retirement or investments yet. At the other end of the spectrum, many of the most wealthy/successful people hold 90% or more of their net worth in a business. There is no right or wrong answer in general. I understand the desire to look at your net worth, but a better metric is to consider your total asset allocation instead of net worth percentages. Whether you finance the real estate (or buy stocks on margin or use a loan to buy equipment for a business or whatever) impacts taxes and cash flow, but not your AA.

For the record, I am 30 and my assets and net worth are both heavily invested in real estate. I consider my rental properties a second "retirement" bucket for passive income, on the off chance the stock market tanks right as I get too old to work.

Cash - $38K (5%)
Brokerage - $24K (3%)
Retirement Accounts - $213K (28%)
Real Estate Equity - $322K (43%)
Notes Receivable - $155K (21%)
Total - $752K (100%)

Net worth percentages don't tell you too much. Consider how the assets in my portfolio above could vary. I could own a $322K paid off condo in Argentina, or I could have 10% equity in a $3.2MM strip mall, or I could own 100 residential rental properties with an average of $3K of equity in each (some paid off, some over-levered, etc).
"An investment in knowledge pays the best interest." - Benjamin Franklin

mx711yam
Posts: 89
Joined: Thu Apr 11, 2013 9:51 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by mx711yam » Thu Feb 20, 2014 6:03 pm

I turned 28 last week.

Net worth 280k.

100k retirement
20k cash
160k real estate

No windfall, student loans approximately 16k when I graduated. 2 income family.

Geist
Posts: 260
Joined: Wed Oct 09, 2013 11:36 pm
Location: Alaska

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Geist » Thu Feb 20, 2014 6:12 pm

I would echo the others to say that you probably don't need to worry necessarily about HOW your net worth is distributed. Align your assets in accordance with your personal priorities and goals, and the net worth balance will follow suit. Just to give a comparable data point, I'm actually in a very similar situation as you -- 27 y/o, impending marriage, SO (aiming toward) a medical degree, ... But still, our circumstances, goals, & priorities aren't identical, and you & I both are in significantly better positions than most people our age. So take it for what it's worth:

Total: $265k
Retirement: $109k -- 41%
RE (my home): $61k -- 23% ($120k/13-yr note remaining)
Taxable Investments: $50k -- 19%
Cash: $45k -- 17%

I gratefully had a full-ride scholarship through college, but otherwise I've saved everything up myself. I'm comfortable with the distribution of my assets, but that's not by design -- that's simply how it happens to sit, based on me following my financial plans & the goals/priorities that I've set for myself. Namely, save/invest aggressively from my income (30%-40% or more), contribute heavily to retirement, purchase & quickly payoff a home, and possess sufficient cash/taxable assets to avoid any other type of debt while living a comfortable (IMO -- could be spartan to another's eyes) lifestyle.

Bottom line: Establish your goals & priorities, follow them, and let it ride. At least for now, your net worth's distribution need not be a significant concern for you.

tj
Posts: 1989
Joined: Thu Dec 24, 2009 12:10 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by tj » Thu Feb 20, 2014 9:48 pm

Meg77 wrote:I don't think net worth percentages matter at all. The majority of Americans hold a huge portion of their net worth in real estate equity, particularly when they are younger and haven't accumulated much in retirement or investments yet. At the other end of the spectrum, many of the most wealthy/successful people hold 90% or more of their net worth in a business. There is no right or wrong answer in general. I understand the desire to look at your net worth, but a better metric is to consider your total asset allocation instead of net worth percentages. Whether you finance the real estate (or buy stocks on margin or use a loan to buy equipment for a business or whatever) impacts taxes and cash flow, but not your AA.

For the record, I am 30 and my assets and net worth are both heavily invested in real estate. I consider my rental properties a second "retirement" bucket for passive income, on the off chance the stock market tanks right as I get too old to work.

Cash - $38K (5%)
Brokerage - $24K (3%)
Retirement Accounts - $213K (28%)
Real Estate Equity - $322K (43%)
Notes Receivable - $155K (21%)
Total - $752K (100%)

Net worth percentages don't tell you too much. Consider how the assets in my portfolio above could vary. I could own a $322K paid off condo in Argentina, or I could have 10% equity in a $3.2MM strip mall, or I could own 100 residential rental properties with an average of $3K of equity in each (some paid off, some over-levered, etc).


"Notes Receivable" - are you a loan shark? :-D

MrMiyagi
Posts: 357
Joined: Wed Jul 15, 2009 3:28 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by MrMiyagi » Thu Feb 20, 2014 10:14 pm

Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...

tj
Posts: 1989
Joined: Thu Dec 24, 2009 12:10 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by tj » Thu Feb 20, 2014 10:33 pm

MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...


I'm at around 250k and I'm 28. I also just had essentially a full year of underemployment/unemployment too.

I think buying real estate in 2009-2010 really helped a lot of us in our 20's. If you don't consider my real estate equity, I'm a very low six figure.

I'm definitely fortunate and thankful to not be as frivolous as most people seem to be. i certainly don't think I'm "average", as someone else mentioned.

keystone
Posts: 451
Joined: Tue Aug 28, 2012 12:34 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by keystone » Thu Feb 20, 2014 10:47 pm

Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better.


Haha, I glad many others caught that 300K at 29.5 is nowhere close to average. You are doing great, I can only assume your sense of average is distorted from spending too much time on these forums. I think this has happened to me at times. Watching some of the guests on Suze Orman helps bring me back to reality.

User avatar
Bogle101
Posts: 306
Joined: Mon Oct 01, 2012 10:14 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Bogle101 » Thu Feb 20, 2014 11:04 pm

Well this thread made me feel good and much less bummed about all the cash and time I wasted while in college and just after, my money could have been compounding for seven more years! My understanding of personal finance has grown throughout my time on the board so I only really compare myself to what other people post, my family who are all well to do and other classmates who are all rocking it in the finance field.

A few minutes googling after reading all these comments and it is shocking to see the average net worth of an average citizen. I also never took the time to realize that starting salaries outside of finance are much lower in comparison. Engineers in particular really should be making more.

I think what helped me most was great parents who helped me open a Roth IRA at 16, allowed me to graduate with no student loans and advised me to research John Bogle when I decided I was ready to invest.
25% S&P 500 | 25% Extended Market | 20% International | 10% REIT | 10% Sector Funds | 10% Cash

mx711yam
Posts: 89
Joined: Thu Apr 11, 2013 9:51 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by mx711yam » Thu Feb 20, 2014 11:07 pm

MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...



I'm actually a state police officer, so I don't make that much. Wife has a decent job, makes about as much as me. But I agree with tj I bought two homes that turned into rentals in 2009 and 2010 and a third home in 2012. Without that I wouldn't be close to where I am.

I always compare myself to others on this forum and it will drive you nuts. It seems like everyone here are doctors and lawyers making four times what I make.

User avatar
JamesSFO
Posts: 2898
Joined: Thu Apr 26, 2012 10:16 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by JamesSFO » Thu Feb 20, 2014 11:15 pm

I found Chris Farrell's Your Money Ratios helpful in thinking about this: http://www.amazon.com/Your-Money-Ratios ... 002YJK5O6/

Basically Farrell has some rules of thumb for each age of what your capital (excluding home equity) should look like to be on track for a retirement that replaces X% (say 65% or 80%) of your income at age 65:

Gold Standard - Age 65 @ 80% income Replacement shown:

Code: Select all

Age   Capital to Income (CIR)
25   0.10
30   0.60
35   1.40
40   2.40
45   3.70
50   5.20
55   7.10
60   9.40
65   12.00


Reading the book was helpful to me not because say at 27 the answer of somewhere between 0.1 and 0.6 is precisely correct, but rather because it gave me some easy fingers to the wind to think about what I should have saved.

User avatar
carorun
Posts: 311
Joined: Sun Dec 18, 2011 6:53 pm
Location: Chicago

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by carorun » Thu Feb 20, 2014 11:28 pm

I am 27. I don't own a home and I just started an MBA program part-time that I pay for out of pocket.

I'm doing great on the capital to income ratio, but I have nowhere near 300k saved. I actually don't think I've made that much since college. Kudos to you :sharebeer but I think if you're saving 10% of salary and have an e-fund, you're ahead of the game for 27.

tj
Posts: 1989
Joined: Thu Dec 24, 2009 12:10 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by tj » Thu Feb 20, 2014 11:30 pm

vachica wrote:I am 27. I don't own a home and I just started an MBA program part-time that I pay for out of pocket.

I'm doing great on the capital to income ratio, but I have nowhere near 300k saved. I actually don't think I've made that much since college. Kudos to you :sharebeer but I think if you're saving 10% of salary and have an e-fund, you're ahead of the game for 27.


Absolutely agree with this.

User avatar
zaboomafoozarg
Posts: 1853
Joined: Sun Jun 12, 2011 12:34 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by zaboomafoozarg » Thu Feb 20, 2014 11:44 pm

Grt2bOutdoors wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


Average??? :shock: That is far above average - you are the 1% of your age group.


I am in roughly the same position relative to age and net worth, and the odd thing is it feels decidedly average after reading a lot of posts here. Maybe that's because I don't usually take age into consideration. Or maybe the posts where someone has $2+ million by the age of 30 stick with me more.

wholeinone04
Posts: 234
Joined: Thu May 27, 2010 12:45 pm
Location: California

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by wholeinone04 » Fri Feb 21, 2014 12:12 am

tj wrote:
Meg77 wrote:I don't think net worth percentages matter at all. The majority of Americans hold a huge portion of their net worth in real estate equity, particularly when they are younger and haven't accumulated much in retirement or investments yet. At the other end of the spectrum, many of the most wealthy/successful people hold 90% or more of their net worth in a business. There is no right or wrong answer in general. I understand the desire to look at your net worth, but a better metric is to consider your total asset allocation instead of net worth percentages. Whether you finance the real estate (or buy stocks on margin or use a loan to buy equipment for a business or whatever) impacts taxes and cash flow, but not your AA.

For the record, I am 30 and my assets and net worth are both heavily invested in real estate. I consider my rental properties a second "retirement" bucket for passive income, on the off chance the stock market tanks right as I get too old to work.

Cash - $38K (5%)
Brokerage - $24K (3%)
Retirement Accounts - $213K (28%)
Real Estate Equity - $322K (43%)
Notes Receivable - $155K (21%)
Total - $752K (100%)

Net worth percentages don't tell you too much. Consider how the assets in my portfolio above could vary. I could own a $322K paid off condo in Argentina, or I could have 10% equity in a $3.2MM strip mall, or I could own 100 residential rental properties with an average of $3K of equity in each (some paid off, some over-levered, etc).


"Notes Receivable" - are you a loan shark? :-D


Haha I definitely had to google "notes receivable" and came to a similar conclusion :)

zaboomafoozarg wrote:
Grt2bOutdoors wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


Average??? :shock: That is far above average - you are the 1% of your age group.


I am in roughly the same position relative to age and net worth, and the odd thing is it feels decidedly average after reading a lot of posts here. Maybe that's because I don't usually take age into consideration. Or maybe the posts where someone has $2+ million by the age of 30 stick with me more.


First thing, the average net worth of posters on BH forum will be way above average american net worth(by age, job, whatever). Second, those who are in the 200-300k NW range before the age of 30 probably bought RE after the housing bubble and probably started working right out of college, living below their means, saving, etc. That's all I've done and I'm there - haven't had to make many sacrifices.

There's also no point in comparing yourself by age if say you left school with a ton of debt, just got your MBA or you're a resident right out of med school. People like me(engineers) start off at a high salary right out of college so we are able to accumulate more rapidly than others(if we have little debt). I think it's more important to look at it from the perspective of when did you start earning instead of age.

I also just remembered this post I read a while back that was pretty interesting on the subject:

http://www.financialsamurai.com/the-ave ... ge-person/

Geist
Posts: 260
Joined: Wed Oct 09, 2013 11:36 pm
Location: Alaska

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Geist » Fri Feb 21, 2014 1:06 am

MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...

I'm in the US military... so nothing too incredible for pay. Out of college, I started at around $45k/yr. 6 years later, I'm at around $80k/yr. The biggest factors for me were just getting through college with no student loans, saving aggressively, and keeping my expenses well under control. I really started saving with a Roth IRA while I was a junior in college, and things have just been building from there. Plus, military pay ramps up pretty quickly in the first 4 years (levels off somewhat for a few years after that), so it was easy for me to stay at the same (low) level of spending while saving most of the rest. Non-taxable combat pay (during 2 deployments) has also helped. All just a matter of setting goals & priorities for yourself, and a lot is possible.

autonomy
Posts: 328
Joined: Fri Jan 24, 2014 2:22 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by autonomy » Fri Feb 21, 2014 8:17 am

Geist wrote:
MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...

I'm in the US military... so nothing too incredible for pay. Out of college, I started at around $45k/yr. 6 years later, I'm at around $80k/yr. .


Your profile says you're in Oklahoma. According to CNN, if one makes $80K in the most expensive cities in OK (Edmond/Lawton), they would need an equivalent of $117.5K in Boston (other cities push the equivalent salary into mid-high 120s). Even for engineers, salaries here are around 80-100K. So, you're making a LOT of money for your area.

User avatar
damjam
Posts: 837
Joined: Thu Mar 25, 2010 7:46 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by damjam » Fri Feb 21, 2014 8:33 am

JamesSFO wrote:I found Chris Farrell's Your Money Ratios helpful in thinking about this: http://www.amazon.com/Your-Money-Ratios ... 002YJK5O6/

Basically Farrell has some rules of thumb for each age of what your capital (excluding home equity) should look like to be on track for a retirement that replaces X% (say 65% or 80%) of your income at age 65:

Gold Standard - Age 65 @ 80% income Replacement shown:

Code: Select all

Age   Capital to Income (CIR)
25   0.10
30   0.60
35   1.40
40   2.40
45   3.70
50   5.20
55   7.10
60   9.40
65   12.00


Reading the book was helpful to me not because say at 27 the answer of somewhere between 0.1 and 0.6 is precisely correct, but rather because it gave me some easy fingers to the wind to think about what I should have saved.


I liked this book. However, be aware that the author makes many assumptions (that he makes clear if you read it fully). Some of those assumptions are, I believe, things like SS will continue to exist in its present form, you will only need 80% of your pre-retirement income, and that you make a salary that is under the SS income cap. But it is a data point, if you wish to use it.

It's been a while since I read this book, so I may be mistaken. Like a good Boglehead I borrowed it from the library (so I can't check for his assumptions).

But whatever the assumptions, I remember thinking the goals seemed a bit low. That's for my situation. For all rules of thumb take with a grain of salt. Personally, I like the "shoot for 20% of gross income saved for retirement each year" rule of thumb.

3Wood85
Posts: 76
Joined: Thu May 24, 2012 5:59 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by 3Wood85 » Fri Feb 21, 2014 9:10 am

According to Mint.com my net worth is around $250,000.

I assume this is average for a 25 year old college educated male?

MrMiyagi
Posts: 357
Joined: Wed Jul 15, 2009 3:28 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by MrMiyagi » Fri Feb 21, 2014 9:15 am

Geist wrote:
MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...

I'm in the US military... so nothing too incredible for pay. Out of college, I started at around $45k/yr. 6 years later, I'm at around $80k/yr. The biggest factors for me were just getting through college with no student loans, saving aggressively, and keeping my expenses well under control. I really started saving with a Roth IRA while I was a junior in college, and things have just been building from there. Plus, military pay ramps up pretty quickly in the first 4 years (levels off somewhat for a few years after that), so it was easy for me to stay at the same (low) level of spending while saving most of the rest. Non-taxable combat pay (during 2 deployments) has also helped. All just a matter of setting goals & priorities for yourself, and a lot is possible.


Um does the military pay for your living expenses (rent, food) and reverything else? Are you paying the same income tax rate as us? I mean after taxes, 45k turns into ~30k. Even if you lived extremely frugally...I don't see it possible saving more than say 20k a year with a 45k salary (unless everything is paid for by the military - rent, health insurance, food, etc). I guess maybe the recent stock market run-up helped too. :mrgreen:

I'm always amazed by these stories (mostly because I'm broke and just barely reached ZERO net worth this year). Congratulations though on a job well done.

User avatar
JamesSFO
Posts: 2898
Joined: Thu Apr 26, 2012 10:16 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by JamesSFO » Fri Feb 21, 2014 9:21 am

damjam wrote:I liked this book. However, be aware that the author makes many assumptions (that he makes clear if you read it fully). Some of those assumptions are, I believe, things like SS will continue to exist in its present form, you will only need 80% of your pre-retirement income, and that you make a salary that is under the SS income cap. But it is a data point, if you wish to use it.

It's been a while since I read this book, so I may be mistaken. Like a good Boglehead I borrowed it from the library (so I can't check for his assumptions).

But whatever the assumptions, I remember thinking the goals seemed a bit low. That's for my situation. For all rules of thumb take with a grain of salt. Personally, I like the "shoot for 20% of gross income saved for retirement each year" rule of thumb.


He totally makes assumptions like that and they are spelled out. Along those lines, 100% excluding your primary residence in the CIR (capital to income ratio) is pretty brutal for many people as well who early in their life have much of their wealth in their home equity.

That said, I still think the value is high for a relatively easy to compute set of ratios/tables that clearly scale with age/income and give you a finger to the wind about how your are doing.

MrMiyagi
Posts: 357
Joined: Wed Jul 15, 2009 3:28 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by MrMiyagi » Fri Feb 21, 2014 9:22 am

mx711yam wrote:
MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...



I'm actually a state police officer, so I don't make that much. Wife has a decent job, makes about as much as me. But I agree with tj I bought two homes that turned into rentals in 2009 and 2010 and a third home in 2012. Without that I wouldn't be close to where I am.

I always compare myself to others on this forum and it will drive you nuts. It seems like everyone here are doctors and lawyers making four times what I make.


If it makes you feel any better, I think most physicians are negative net worth (or not even close to 300k certainly) until probably their mid 40s. I'm in my 30s and still in residency, and I can tell you, very few of my colleagues have a 300k net worth. The ones that do did MD/Phd (so no 300k student loan debt) or had parents that paid for all their education PLUS had a well paid spouse (not in medicine). Even the ones that had parents pay for their education barely break 50k net worth while working through residency/fellowships (3-10 years)... Grass is always greener on the other side of the fence.
Last edited by MrMiyagi on Fri Feb 21, 2014 9:44 am, edited 1 time in total.

angelescrest
Posts: 890
Joined: Tue May 27, 2008 10:48 am
Location: The Third Coast

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by angelescrest » Fri Feb 21, 2014 9:24 am

grap0013 wrote:Most are not so fortunate. When I was 25 my NW was -220K and I had $300 in the bank. I walked for graduation on a Saturday and started work the following Monday because I needed the $ to pay the upcoming rent.

My students would be thrilled if they all had a job they could start the week after graduation.

angelescrest
Posts: 890
Joined: Tue May 27, 2008 10:48 am
Location: The Third Coast

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by angelescrest » Fri Feb 21, 2014 9:34 am

zaboomafoozarg wrote:I am in roughly the same position relative to age and net worth, and the odd thing is it feels decidedly average after reading a lot of posts here. Maybe that's because I don't usually take age into consideration. Or maybe the posts where someone has $2+ million by the age of 30 stick with me more.

One of the things I enjoy about hanging out with fellow Bogleheads is that you often reflect who you interact with. I gain great perspective and am constantly challenged that I could be saving and investing better. I never pat myself on the back. If my financial culture developed only through my coworkers and friends, I would probably feel like I should be spending more money, driving better cars, and taking vacation every few months.

User avatar
Ketawa
Posts: 1888
Joined: Mon Aug 22, 2011 1:11 am
Location: DC

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Ketawa » Fri Feb 21, 2014 9:36 am

MrMiyagi wrote:Um does the military pay for your living expenses (rent, food) and reverything else? Are you paying the same income tax rate as us? I mean after taxes, 45k turns into ~30k. Even if you lived extremely frugally...I don't see it possible saving more than say 20k a year with a 45k salary (unless everything is paid for by the military - rent, health insurance, food, etc). I guess maybe the recent stock market run-up helped too. :mrgreen:

I'm always amazed by these stories (mostly because I'm broke and just barely reached ZERO net worth this year). Congratulations though on a job well done.


Off topic, but I'm in a similar situation. 26 years old, almost 5 years since graduating. BAH and BAS (housing and food) allowances are untaxed benefits. I also don't pay state income tax. For fun, I calculated how much it would take in civilian pay to have the same after-tax income, ignoring things like Traditional 401k contributions. I am paid $85k pre-tax, which is about the same as a civilian making $96k. This doesn't count health benefits.

User avatar
anonforthis
Posts: 414
Joined: Sat Oct 19, 2013 1:45 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by anonforthis » Fri Feb 21, 2014 9:38 am

I"m 34 and my approriate net worth about 480K. I eat a lot of bean and rice and no vacation.

Grt2bOutdoors
Posts: 17259
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Grt2bOutdoors » Fri Feb 21, 2014 10:33 am

zaboomafoozarg wrote:
Grt2bOutdoors wrote:
Bogle101 wrote:I am 29.5, and my net worth is right around 300k (taxable + Roth IRA + 401(k) + cash). I think that's about average for someone with a college education, but on this saving / investing forum alot of people are doing much better. As far as %'s of net worth - that is totally dependent on your short term and long term goals. With a wife who will soon be doctor im sure you'll be just fine.


Average??? :shock: That is far above average - you are the 1% of your age group.


I am in roughly the same position relative to age and net worth, and the odd thing is it feels decidedly average after reading a lot of posts here. Maybe that's because I don't usually take age into consideration. Or maybe the posts where someone has $2+ million by the age of 30 stick with me more.


There will always be outliers on the net worth spectrum. I have three friends - one hit the proverbial tech lottery, worked for a company that gave everyone options and stock grants right down to the janitor, his net worth at age 28 excluding home equity exceeded $1MM. Did he work hard? yes, but so did I and my other two friends employed in other fields and yet we didn't get there until a much later age mainly due to our saving and investing. To save and invest means the deferral/denying one of consumption - that is, real sacrifice. One who is given something can make the claim that it is a form of compensation but you will never see an offer letter stating a known and sum certain value of those options - it's mainly a factor of luck that determines the difference between ones options being in the money as opposed to being worthless. I don't count realistic home equity - in fact, the real estate market in my neighborhood has still not recovered (down 15%) from the housing debacle, that's why I say realistic. Maybe it will recover in 25 years, maybe not, until then it's a place to live. I only compete against myself, I don't compare myself to others because this being an anonymous forum unless you see independently verified personal financial statements you really don't know how they are getting from zero (if they really started there at all) to point C on their way to point E - escaping the rat race. Look back from where you started, like the Newport ad - you've come a long way.....I started out with $20 (when someone asks me "what's $20? - I just smile")
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

tj
Posts: 1989
Joined: Thu Dec 24, 2009 12:10 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by tj » Fri Feb 21, 2014 12:44 pm

3Wood85 wrote:According to Mint.com my net worth is around $250,000.

I assume this is average for a 25 year old college educated male?


That is way above average.

fareastwarriors
Posts: 894
Joined: Tue Feb 14, 2012 12:31 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by fareastwarriors » Fri Feb 21, 2014 1:01 pm

tj wrote:
3Wood85 wrote:According to Mint.com my net worth is around $250,000.

I assume this is average for a 25 year old college educated male?


That is way above average.



If that is average, then I way, way below.


Maybe it is the average in Qatar.

Geist
Posts: 260
Joined: Wed Oct 09, 2013 11:36 pm
Location: Alaska

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Geist » Fri Feb 21, 2014 4:25 pm

MrMiyagi wrote:
Geist wrote:
MrMiyagi wrote:Good god, what profession are you guys in...300k by age 30? WOW. Guessing finance...

I'm in the US military... so nothing too incredible for pay. Out of college, I started at around $45k/yr. 6 years later, I'm at around $80k/yr. The biggest factors for me were just getting through college with no student loans, saving aggressively, and keeping my expenses well under control. I really started saving with a Roth IRA while I was a junior in college, and things have just been building from there. Plus, military pay ramps up pretty quickly in the first 4 years (levels off somewhat for a few years after that), so it was easy for me to stay at the same (low) level of spending while saving most of the rest. Non-taxable combat pay (during 2 deployments) has also helped. All just a matter of setting goals & priorities for yourself, and a lot is possible.


Um does the military pay for your living expenses (rent, food) and reverything else? Are you paying the same income tax rate as us? I mean after taxes, 45k turns into ~30k. Even if you lived extremely frugally...I don't see it possible saving more than say 20k a year with a 45k salary (unless everything is paid for by the military - rent, health insurance, food, etc). I guess maybe the recent stock market run-up helped too. :mrgreen:

Yes, military members do have a few tax advantages... We receive a tax-free housing allowance (based on rental rates in the area) & also a tax-free food allowance (~$250/mo this year). Many states do not charge income taxes on military pay (I think about 20-ish states do that). If/when we deploy to combat zones, our income is tax-free at the federal level. We also receive free healthcare for ourselves (subsidized premiums for families). I'll never say that the military is poorly compensated -- in my personal opinion, we are reasonably paid/compensated (mostly...the lower-enlisted ranks are quite meagerly paid). Most people will not become rich in the military, but with some good frugal & savings habits, it's not terribly difficult to be successful.

I honestly don't know how much (in dollar figures) I've saved each year, but I've basically just followed the general idea of "save early, save a lot, save always." I started my build-up when I was 20 y/o, and have never saved less than 20%-25% of my gross monthly income...frequently more than 40%. It's just a matter of consistency.

User avatar
BrandonBogle
Posts: 1909
Joined: Mon Jan 28, 2013 11:19 pm

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by BrandonBogle » Fri Feb 21, 2014 4:38 pm

This thread has given me quite the pick me up. Like the minority (apparently), I thought $300k at 30 was average or so. Maybe I need to stop comparing myself to other BHs then? I had to work 3 jobs during school, paid every penny myself, worked in high school, bought my cars over the years myself, and opened my first IRA at 15. I spent 9 months unemployed after undergra, but I did have the benefit of being able to move back to home after that (having now drained my e-fund) and finding a job right away. So I worked a regular full time job while getting my Masters. I spent 18 months at home "rent-free". Other than that, no financial help in my adult life from mom or dad. But I don't drive a fancy car, don't travel all that often, etc. and felt why am I so behind everyone else. So now I get to go home proud of this value. Thanks everyone!

travellight
Posts: 2687
Joined: Tue Aug 12, 2008 5:52 pm
Location: San Diego

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by travellight » Fri Feb 21, 2014 9:25 pm

If you guys keep this up, I predict you will all be worth 5 million by the time you're 60. :beer

JimmyD
Posts: 694
Joined: Fri Sep 27, 2013 4:03 pm
Location: Smyrna, GA

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by JimmyD » Sat Feb 22, 2014 2:49 am

Stick us in the "My wife's a doctor and we save like mad, but still have a negative $85,000 net worth" category due to her loans still being on the books. Praying to god PSLF comes through.

Nukeboilermaker
Posts: 289
Joined: Mon Apr 11, 2011 9:49 am

Re: What's the Appropriate Net Worth by % for a 27 year old?

Post by Nukeboilermaker » Sat Feb 22, 2014 9:43 am

I'm also 27 and you are doing very well, as are a few other young posters. The people in this forum are all way way above our country, culture, and social averages. My net worth is 225k and I'm clearly saving a much larger percentage of my income than a vast majority of my coworkers. In states such as CA and NY I think it's natural for your net worth to be more skewed towards real estate. A coworker sent me this article since I'm such a big proponent of savings/investing

http://www.timothysykes.com/2013/08/scary-saving-facts/

It shows just how far above average the people in this forum are, even if you are younger and first establishing yourself financially. But another thing to note is that net worth is a proper metric of your financial progress. There are people with millions in investments but a very small net worth due to over borrowing.

Post Reply