It is a fair question, and there is no single correct answer, but there are two well-known rules of thumb that give a starting point. How much should my networth be depends on your age, income and goals, and the formulas below make the idea concrete. Keep in mind that they are rough guides, not targets.
Rule one: the Millionaire Next Door formula
In their 1996 book The Millionaire Next Door, the researchers Thomas Stanley and William Danko proposed a simple test: multiply your age by your annual pre-tax income from work and divide by ten. The result is the net worth you would be expected to have. If your net worth is double that figure, they called you a prodigious accumulator of wealth, and if it is half or less, an under-accumulator.
An example
A forty-year-old earning one hundred thousand dollars would multiply forty by one hundred thousand to get four million, and divide by ten to get four hundred thousand dollars. Under this rule, a net worth above eight hundred thousand would be a strong result, and below two hundred thousand a weak one. The formula was developed from a particular group of American households in the 1990s, so it is not an exact science today.
Rule two: salary multiples for retirement savings
Financial firms such as Fidelity have published guidelines based on retirement savings as a multiple of your salary: about one times your salary by age thirty, three times by forty, six times by fifty, eight times by sixty and ten times by sixty-seven. These apply to retirement savings, not the whole net worth, and assume you save about fifteen percent of your income, including any employer match, starting in your twenties.
What the survey data shows
Compare the formulas with real data. The Federal Reserve’s 2022 Survey of Consumer Finances found median net worth of about thirty-nine thousand dollars for households headed by someone under thirty-five and about one hundred and thirty-six thousand for those aged thirty-five to forty-four. The medians are far below the rule-of-thumb figures, which shows that many people are behind these guides, and that the guides are ambitious.
How much should my networth be if I am behind?
- Do not use the number to judge yourself. Many people start late or face costs such as education, childcare or illness.
- Increase your savings rate. Even a few extra percentage points make a big difference over twenty years.
- Cut high-interest debt first. It is a guaranteed return.
- Extend your working life if possible. Each extra year adds savings and reduces the time you must fund.
Why formulas have limits
- Income varies. A rule based on current income ignores earlier years.
- Costs differ. A family in a high-cost city needs more than one in a low-cost region.
- Goals differ. Someone who plans to retire early needs more than someone who will work until seventy.
- Pensions and property. Guaranteed income from a pension reduces the savings you need.
A better question
Instead of asking how you compare, ask whether your net worth is moving in the right direction and whether it will fund the life you want. A financial planner can model your specific case. Meanwhile, measure your own figure with our guide on how to figure out your net worth with a spreadsheet, and see the benchmarks in our look at the average net worth of a 30 year old. For a broader view, what counts as a good net worth compares several measures. Fidelity’s guideline is explained at fidelity.com.
Adjusting the rules for your life
If you have a pension, you can reasonably aim below the formulas. If you are self-employed with irregular income, aim above, because you must also fund your own safety net. If you plan to support children, parents or a business, build in extra. And if you are carrying student loans or a mortgage, look at net worth and cash flow together, since a negative net worth with a rising trend can be healthier than a flat positive number with no savings habit.
A yearly check-in routine
Once a year, calculate your net worth, compare it with last year’s and with one of the rules of thumb, and decide on one change. It might be raising your savings rate by one percentage point, paying an extra amount on a loan or reviewing your investment fees. A single yearly adjustment, repeated for a decade, usually does more than an occasional big effort.
The short answer
As for how much should my networth be, one rule says age times income divided by ten, another says a set multiple of salary in retirement savings, and real-world medians are lower than both. Use them for context, then plan around your own goals.
These are rules of thumb, not guarantees or personal financial advice.
