I'm interested in all sorts of stats on net worth -- as you can tell from many of my posts here. Not only do I track my net worth on a regular basis, but I look at what's happening with net worth numbers overall (such as in Median Net Worths -- Are You Ahead or Behind?) and use this information to share my thoughts on the subject (see Net Worth Increasing by More than Your Salary.) So when I saw some stats on Baby Boomers net worths in the March issue of Money magazine, I was interested to see what they had to say.
The stat that stood out to me the most was that Boomers have a 2.3 to 1 ratio of wealth to earnings on average. So if a Boomer has an income of $100,000 a year, on average, his net worth will be $230,000.
This, of course, generated several thoughts from me:
1. This ratio seems a bit pathetic to me. By definition, the Boomers are middle-age to older -- seems like they should have MUCH more saved than 2.3 times income. In fact, just eight pages later in the same issue of money, they list what people should have saved for retirement at various ages in relation to their income. Their list is as follows:
- Age 45 -- Should have saved 4.1 times current income
- Age 50 -- Should have saved 6.1 times current income
- Age 55 -- Should have saved 8.5 times current income
- Age 60 -- Should have saved 11.4 times current income
- Age 65 -- Should have saved 15.0 times current income
So, the average Boomer is waaaaay behind. Especially if he's 55 (on average), should have 8.5 times income saved and currently has 2.3 times saved. That's a BIG gap!
2. I look at this two ways for myself:
I have about six times current income as my net worth. And since I'm younger than their lowest age level, this seems like I'm in decent shape.
Better yet, I can live (fairly comfortably) on half of my current income. Hence my "real" retirement/wealth to income ratio is closer to 12 times. Pretty good. But it needs to be pretty good since I have a big retirement number I'm saving for.
If you're interested in Boomer finances, you may want to check out the March issue of Money. It's got a big feature section on Boomers, what they've saved, what they need to save, and the like. It's quite interesting stuff!
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