Deep Dive
Shownotes Transcript
- If you're in your 50s, you probably know a lot of things, including but not limited to how to operate a VCR, who the heck Farrah Fawcett was, and how to take care of a pet rock. But do you know what your net worth is? According to the Fed, the median net worth for people between the ages of 45 and 54 is about $247,000. Now you may be wondering, is that good, is that bad? Well, let me put it this way. It's like single ply toilet paper in a gas station bathroom. Better than nothing,
but not by much. So what should your net worth be by the age of 50? Let's dig in and find out. But first, smash those like and subscribe buttons and share this video with everyone you know who has survived on this planet for at least half a century. Fun fact, they're called quincagenarians, or as I like to call them,
They do not like to be called that, to be very honest with you. No, they don't. Okay, in case it's been a hot minute since you've thought about your net worth, here's a quick refresher on what it is and how to calculate it. Your net worth is what you own minus what you owe. So you take the total value of your assets, things like your house, cars, investments, cash, and your collection of vintage Pez dispensers, minus your liabilities, things like credit card debt, student loan debt, and your mortgage debt.
and the resulting number is your net worth. That means you could have a million dollars in cash and investments, but if you also have a million bucks tied up in debt, you're not a millionaire, you're broke. - What? - That means it's time to sell the Pez dispensers, even little baby Yoda here, which maybe one day will be worth something, but right now it's worth about half a Yoda.
Okay, now that we've got that squared away, where should you be financially by age 50, considering most quinkies are ideally in the homestretch of their working careers and headed for retirement? Well, there's no exact figure, but I'm going to figure it out. So let's imagine an A-plus scenario that would put someone in a great position to retire in the next decade. You have no student loan debt, you drive a paid-for car, and at 22, way back in the day, you landed a decent job making around 30 grand a year, which was about the average starting salary for a college grad back in 1996.
And let's say you started investing 15% of your income in your company's 401k. Now let's crunch some numbers using our net worth calculator. And if you want to play along with your own numbers, I will link this free calculator below. Let's get cracking.
That's not good. That sounds like something's loose in there. Let's start with assets. And first up is real estate. Let's say because you were debt-free, you were able to save up and put $40,000 down on a nice little $200,000 home 20 years ago at the age of 30. Now, over time, that house appreciated to $500,000, meaning you have a total now of $500,000 in real estate assets. So we're going to add that in.
Boom. And for liabilities, let's say you got a 15-year mortgage back in 2004 at a 5.2% rate. Good for you. We're all jealous. So after 20 years, even with no extra payments, you would have paid off your mortgage five years ago. So your liabilities, aka debt, are $0. Good for you as well. Now, checking account. Let's say you keep about $5,000 in there to cover expenses along with a little bit of buffer. So we're going to add $5,000 to our number here.
And for savings, this is where you keep your emergency fund of three to six months of expenses. We'll call that $20,000 in savings, ready to protect you from life. Moving on to retirement accounts. So now you're 50 and you've been investing 15% of your income since the age of 22. Now, back then your salary was 30K.
But fast forward to today, and the median salary for someone in your age bracket is just over $64,000. So assuming you've been getting some pay raises every few years, and you're now at that median salary, you would have around $865,000 in that one retirement account, thanks to compound growth. Now, if you don't believe me, do the math, because we did.
And it took a long time. A lot of boring math later. So here's a chart for proof. And a quick side note here. Look at that last line. Even if you never got another raise and you kept investing 15% from age 50 to 65, you'd have over $4 million in your retirement account.
That's amazing. Now, let's talk about rate of return here, because a lot of people get confused. They're going, George, where are you getting these numbers, this rate of return? We're basing this off of what has happened in the actual stock market in the S&P 500 over the last few decades. And the average rate of return, depending on where you look and how you look at it, is about 10 to 12 percent. Now,
Accounting for inflation and a more modest return, let's even look at an 8% return. You would still end up with over $2 million. And guess what? Most of that money was not money that you contributed. It was all the effects of compound growth. Your money making you more money. Okay, back to the net worth calculation.
Let's say you've got a paid-for car. It's less than 10 years old. It runs fine, and it's worth $15,000. We're going to add that to the mix here. Boom. And in the other assets category, just for fun, we're going to say that your vintage Pez dispenser collection is worth $42. That'll really kick us over the edge here. That brings our total net worth to...
$1.4 million. That's incredible. But again, this is an A-plus scenario, assuming that you did all the right things in your 20s, 30s, and 40s, and you had no major financial setbacks. So your report card may look a little different. Because what is life without a few major financial setbacks? I made a huge, tiny mistake. And while there's no official ranking here, I did create my own scoring system to help you self-assess where you're at. And I call it the Camel Financial Scoring System, or KFSS for short.
Now, I've updated the grading scale specifically for this video. The original scale was for folks in their 30s. Then I made one for all the quadragenarians out there. And now, for all of you in your nifty 50s, there's a new version for you. Again, there's no shame here. This is not to be a form of judgment. It's just good to know where you stand. So, here is the grading scale. Take notes. If you've got a net worth of $100,000 or below, that's an F. You have not been investing for a long time. You've been carrying debt for a long time. No bueno.
Now a net worth of 101,000 to 500,000, let's call that a D. Remember the median net worth for people between the ages of 45 and 54 is just over $247,000. So unfortunately, a D is pretty normal. So you're not alone if that's you. Now a net worth of 501,000 up to 750,000, we will call a C.
that's pretty good we're getting somewhere now a net worth of 751 000 all the way up to a million we're gonna call a b and finally you get an a and a gold star if you have a net worth of over 1 million dollars by age 50. and if you remember from the last video what your net worth should be by age 40
And a scenario was a net worth of $500,000 or more. So what that tells me is 10 years of compound growth and good financial habits makes all the difference because in just a decade, you were able to double your net worth. And for all you overachievers out there, you're wondering how to get the A plus from Professor Camel. If you're around 50 years old and your net worth is $1.4 million or higher, I will grant you the plus. Congratulations. - Congratulations, you played yourself. - Now, if you're looking at your net worth and your grade going,
I'm nowhere near where I need to be. Don't get your cargo shorts in a wad. I am here to help. There are still things you can do to get back on track and start building wealth. And I'll get to those in a moment. But first, if you're in your 50s, you've probably seen your fair share of scams and fraud. I mean, you had Enron, you got the Ponzi scheme, you have FTX, Fyre Fest, and worst of all, Ticketmaster fees. We're on to you, people.
We're on to you. So how do you keep your personal info away from scammers, spammers, and big data brokers? Well, for that, I use and recommend DeleteMe. They scour the internet to find and remove your info from hundreds of data broker sites, and then they send you an easy-to-read report. And I got my report right here. In just the past two months, they've removed my info from 41 sites, and they've saved me 33 hours.
Thanks, Delete Me. So seriously, go help protect yourself from the risks of identity theft and online scams with our friends at Delete Me. Right now, you can get 20% off by going to joindeleteme.com slash george or just click the link in the description. And by the way, remember that three to six month emergency fund we talked about earlier? Well, a great place to store that 20K is a high yield savings account where you can earn some sweet interest.
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in the description. Okay, back to our net worth scenario. Let's play this out. Let's say you're 50 and you've got that D net worth of $247,000 and $10,000 in debt. Not great, but it's what we got. So what do we do next? Well, you gotta get serious about paying off your debt fast.
Now remember, debt is a liability that detracts from your net worth. Broke people pay interest, wealthy people earn it. And until you're out of debt, you're paying it. So after that debt is knocked out, you've got that three to six month emergency fund. Now you're ready to start building for the future instead of paying for the past. So start by investing 15% into retirement accounts like a 401k and a Roth IRA and choose some decent funds inside of those.
When we studied 10,000 millionaires, we found that a paid-for home made up a huge chunk of their net worth. So getting rid of the mortgage through extra payments should be a priority once you're already investing. Because think about this. Once your house is paid off, you can start investing way more into retirement and take advantage of those catch-up contributions, which are now in play since you're over 50.
So if you do the right things with your money, it's not too late to get your net worth up, even if you're in your 50s. But do not put this off. Okay, time is of the essence. You got to get started now. And remember, while I want you to have financial security and peace of mind, having millions of dollars in assets should not be your ultimate goal in life. You can have a great life without being a multimillionaire, and your net worth is not your self-worth. Plus, we're grading on a curve here, so you all get an A for watching this video.
Think of me like the cool substitute teacher who shows up with an old TV on a pushcart and just blasts schoolhouse rock until the bell rings. Now it's worth noting here that by the time you're 50, a huge part of your net worth should be due to compound growth in your retirement account. So if your nest egg is feeling a little on the small side, check out this video to find out how much you should have in your 401k by age and what you can do to catch up
if you're behind. Oh, and let me know in the comments what your grade is on the KFSS scale, and if you're feeling extra vulnerable, include your current net worth. Thanks for watching. We'll see you next time.