Net Worth for Retirees: How To Tell Whether You’re Poor, Middle Class or Rich
Your net worth is the total result of your savings, investments and assets minus debts, and in retirement, it’s one of the most accurate measures of financial health after you stop working. Unlike income, which often decreases once you retire, net worth reveals whether you’re financially secure — and which wealth class you fall into.
Here’s a look at net worth ranges for retirees, so you can see whether you fall into the poor, middle class or wealthy category.
Defining Economic Classes in Retirement
In retirement, your economic class can be broadly categorized into four distinct groups, each defined by its net worth and financial capabilities, ranging from retirees with limited resources to the wealthy. According to Moneywise, here are the net worth categories of the poor, middle class (and upper-middle class) and rich:
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Poor retirees: Poor retirees are in the lower 20th percentile and may have a net worth of around $10,000. This is often without property ownership, forcing many to rely mainly on Social Security or minimal pensions.
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Middle-class retirees: Comprising the 50th percentile, with a median net worth of approximately $281,000, this group typically includes home equity, retirement savings, and a 401(k) plan.
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Upper-middle-class retirees: These retirees possess a net worth between $201,800 and $608,900. They have diversified assets and enjoy a comfortable retirement cushion.
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Rich retirees: In the 90th percentile, with net worth starting at $1.9 million, this group has much more financial freedom and is able to afford luxuries and legacy planning.
Find Out: What Is a Good Monthly Retirement Income?
Read Next: 5 Clever Ways Retirees Are Earning Up To $1K per Month From Home
What Is the Average Net Worth at Retirement?
According to data from the Federal Reserve, the average net worth for those aged 65 to 74 was $1,794,600, which is more than four times the median net worth of $409,900. This significant difference is because the super-wealthy skew the average much higher.
Although $409,900 seems like a decently sized nest egg, it won’t provide enough retirement income for most Americans. For example, if you invest that amount at a 5% interest rate, it will only produce $20,495 in income each year, as previously reported by GOBankingRates.
Where you live and your lifestyle also play a big role in how far your money will go. Nearly $20,500 per year won’t be enough in high-cost-of-living states like California or New York. Social Security can help, but it still may not be enough.
Many financial advisors say you’ll need at least 80% of your pre-retirement income to live comfortably. According to the Fed’s report, the average American will need at least $56,240, based on the U.S. median household income of $70,300.
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