Everyone wants their net worth to grow, but it’s nice to have a benchmark to compare your growth to in order to see how you are doing. Unfortunately, it’s not easy to find the average annual change in net worth. It is possible to find annual net growth targets, as in this Financial Samurai article, but these are rates to shoot for rather than averages. Seeing as this is the case, I decided to calculate the averages myself using median net worth data from the Survey of Consumer Finances conducted by the Federal Reserve every 3 years.
For those who don’t know, net worth is defined as the total of your assets minus the total of your liabilities. In other words, net worth is the value of everything you own (savings, investments, home, etc.) minus any debts you have (mortgage, student loans, car loans, credit card debt, etc.). You want your net worth to increase each year as you save money towards retirement.
Average Annual Change in Net Worth By Age
Net worth growth is mainly impacted by a combination of age and current net worth. Age has a big impact on net worth in general as you can see in this infographic about net worth and income. Basically, the older you are, the larger your net worth should be, as you are able to save and grow your net worth over a longer period. In terms of growth, age determines your risk factor. When you are younger, you can afford to take more risks because even if a risk doesn’t pan out, you have time to recoup your money. On the other hand, when you are older, you need to be more careful with your money. If you lose a substantial portion of your net worth right before you are supposed to retire, you likely will have to keep working longer to get by.
The Survey of Consumer Finances splits its respondents into the following age groups: under 35, 35-44, 45-54, 55-64, 65-74, and over 74. Since the survey is only taken every 3 years and with different people, it’s not straightforward to calculate an average annual growth rate. I have used 3 different methods to make this calculation, which are described below.
Calculation Method 1: Between Age Groups of the Same Year
The first method I tried compared the age groups in the same year, assuming 10 years between each age group (30 to 40 to 50 etc.). This was a simple comparison to make because I knew that all the net worth data matched with the appropriate age groups. The results from this calculation are shown here:
| Age | Average Annual Net Worth Growth | Average Annual Percent Net Worth Growth |
| < 35 | $5,207 | 47.38% |
| 35-44 | $6,007 | 9.53% |
| 45-54 | $4,879 | 3.96% |
| 44-64 | $718 | 0.42% |
| 65-74 | -$1,161 | -0.65% |
| Overall | $3,130 | 2.85% |
The problem with this calculation method is that each age group is separate. A 40-year-old will never become the 50-year-old in the next age group. Each age group has had to deal with their own share of problems that has affected them differently. For instance, someone who graduated college during the 2008 recession and had to take a lower paying job is not going to have as high of a net worth in 10 years as someone 10 years older who graduated earlier during a better economy and was able to get a better paying starting job. This method also does not take into account inflation, which can have a big impact on net worth over time. You also cannot use this calculation method to determine the annual net worth growth of the 75 and older group since there is no older group to compare them to.
Calculation Method 2: Between the Same Age Group Every 3 Years
The next method I tried compared how the net worth of each age group changed every 3 years. The assumption here is that most people in each age group will remain in the same age group three years later (for instance, a 40-year-old would be 43 and still in the 35-44 group), so they can be compared. The results I calculated are shown in the table:
| Age | Average Annual Net Worth Growth | Average Annual Percent Net Worth Growth |
| < 35 | $196 | 1.83% |
| 35-44 | $1,152 | 1.91% |
| 45-54 | $2,357 | 1.99% |
| 55-64 | $3,833 | 2.28% |
| 65-74 | $6,282 | 3.69% |
| 75 + | $6,078 | 3.83% |
| Overall | $3,316 | 2.90% |
This method clearly did not provide reasonable results. The average annual percent changes in net worth are tiny, even for younger people who should have the largest percent increases. The problem with this calculation method is that it ignores that the top 3 years in each group should move to the bottom of the next group, so the likely highest net worth individuals are always being replaced by lower net worth individuals from the group below. This means that, on average, there is essentially no change each year. What we are seeing instead is essentially inflation.
Calculation Method 3: Tracking the Same Group Every 9 Years
The final method I tried involved an attempt to track the same group of people over time. The assumption here is that since each group contains about 10 years worth of ages, then everyone in each age group should move up to the next group after 10 years. For example, a 35-year-old would be 45 in 10 years and a 44-year-old would be 54, both moving from the 35-44 group to the 45-54 group. Unfortunately, the survey was taken every 3 years rather than in increments that could add up to 10 years, so I had to approximate using 9 years instead of 10. I calculated how each age group compared to the next age group up after 9 years (for instance, comparing the change from the 35-44 group in 2010 to the 45-54 group in 2019, as these should be the same group of people).
| Age | Average Annual Net Worth Growth | Average Annual Percent Net Worth Growth |
| < 35 | $6,318 | 59.16% |
| 35-44 | $8,189 | 13.21% |
| 45-54 | $8,437 | 7.06% |
| 55-64 | $4,971 | 3.00% |
| 65-74 | $4,750 | 3.04% |
| Overall | $6,533 | 6.36% |
The results I got with this method were somewhat similar to the results I got when I calculated the annual net worth growth between age groups in the same year. Actually, they were even closer to the results of the first two methods added together, likely because the first method showed the increase by age and the second was mostly inflation. I like this method better because it ties the two factors together and thus more closely mirrors how net worth actually grows over time. It also accounts for external factors that may affect generations differently. However, it also has its own problems. In addition to the issue of using 9 year intervals to approximate 10 year intervals, there is also an issue with the < 35 age group. This age group covers a much larger range of ages than the other groups, 18-34 or 17 years compared to 10 years for the other groups. Therefore, after 9 years, about half of the people who were in the < 35 group before would still be in this same group. This means that the annual change in net worth calculated is likely an overestimation. This method also does not provide any information about the 75 + group, and it ignores changes in age group net worth from 2013-2019 since there is no group 9 years in the future to compare them to.
What do the results mean?
I believe that the 3rd calculation method provided results that are the most likely to be accurate since it took into account both age and inflation. Here’s a table with rounded values based on that calculation for easier comparison:
| Age | Average Annual Net Worth Growth | Average Annual Percent Net Worth Growth |
| < 35 | $6,500 | 60% |
| 35-44 | $8,000 | 13% |
| 45-54 | $8,500 | 7% |
| 55-64 | $5,000 | 3% |
| 65-74 | $5,000 | 3% |
| Overall | $6,500 | 6% |
As expected, younger people have on average a much higher annual percent change in net worth. This falls off rapidly as they age, accumulate wealth, and become more risk-averse. The average annual percent net worth growth is reasonable at about 6%, but is still less than you would get on average by investing in passive index funds.
Interestingly, the percentages I calculated are pretty close to the percentage targets provided in the Financial Samurai article I mentioned at the beginning. He suggests a 50% – 100%+ growth rate for 18-30-year-olds and a 25% – 50% growth rate for 31-40-year-olds. The approximately 60% growth rate I calculated for the under 35 group is quite close to those targets. Similarly, the 13% growth rate I calculated for the 35-44 group is within the 10% – 25% he suggests for 41-50-year-olds, and the 7% growth rate I calculated for the 45-54 group is within the 5% – 10% he suggests for 51-60-year-olds. This suggests that these targets are indeed attainable.
I was surprised to see that the raw annual net worth growth actually decreased with age. I would have assumed that, even if the growth percentage dropped, the raw values would still stay pretty much the same or even continue to increase due to compound interest on a larger total net worth. The values themselves also seem small to me, although based on the average after-tax income in the U.S. of $41,293.64 (calculated by averaging the average after-tax income in each state), increasing net worth by $6,500 a year is actually equal to saving 16%, which is not bad for the average. However, assuming some of this increase is due to mortgage payments increasing home equity, the average savings rate is likely lower. This also means that people are probably not investing as much as they should be. You can read about the benefits of investing at a young age here.
Average Annual Change in Net Worth By Current Net Worth
Current net worth is another factor that affects net worth growth, particularly when calculating net worth growth percentages. People with a low net worth who grow their net worth by the same amount as people with a high net worth will have a much larger percentage of growth. For example, if someone with $10,000 in net worth gains an additional $10,000 in one year, that’s an increase of 100%. However, if someone with $100,000 in net worth gains $10,000, that’s only a 10% increase. This could be a factor that explains why young people have such high annual percent net growth.
It is also true that people with higher net worth should be able to increase their net worth more per year in raw numbers than people with lower net worth. If you have a lot of money and are taking advantage of compound interest such as by investing it, then that money should grow more than for someone with less money. For example, if someone invests $10,000 in the stock market and gets a 7% return, then they would have $10,700 by the end of the year. In comparison, someone who invests $100,000 at the same rate would end up with $107,000. That means that the person who invested more ended up making $6,300 more. Percentagewise, there’s no difference, but in raw numbers, the person who started with more money ends up with even more money.
Calculation Method: Tracking the Same Group Every 9 Years
The only method capable of approximating the annual change in net worth based on current net worth is the third method I tried above: tracking the same group every 9 years. By keeping track of the same group of people, it should be possible to see how net worth grows over time.
To implement the method, I first created categories of net worth in increments of $50,000: < $50k, $50k-$99k, $100k-$149k, $150k-$199k, $200k+. Then, using the same median net worth by age data as before, I analyzed the annual change in net worth from each of these net worth values to the net worth of the next age group up 9 years later. The results are shown in the following table:
| Current Net Worth | Average Annual Net Worth Growth | Average Annual Percent Net Worth Growth |
| < $50k | $7,455 | 43.22% |
| $50k-$99k | $7,628 | 8.38% |
| $100k-$149k | $8,374 | 6.75% |
| $150k-$199k | $3,439 | 1.87% |
| $200k + | $666 | 0.28% |
| Overall | $6,533 | 6.36% |
What do the results mean?
The annual change in net worth looks like what you would expect until net worth gets above $150,000. The low net worth groups experience the biggest percent increases, and this growth rate percentage decreases as net worth gets bigger. It’s worth noting that the < $50k group is composed entirely of people below the age of 45, which means they also can afford to take more risks with their money. However, I was not expecting the change in net worth to be so small above $150,000. You might assume that this is because the people with the largest net worth values are likely also the oldest, meaning that they are probably retiring and spending their savings. However, the people with these high net worth values are actually a mix of people from 45-74, and everyone with a net worth over $250,000 is between 55-64, when their net worth should still be growing. The real reason for the decrease in net worth is likely the 2008 recession, as all groups with a net worth over $250,000 had this net worth between 2001 and 2007, meaning 9 years later would be after the recession.
Conclusion
As expected, younger people and people with lower net worth values have the highest annual percent changes in net worth. This tapers off as people get older and net worth increases. However, contrary to my expectations, older people and people with higher net worth values are actually gaining less net worth annually in raw numbers despite the potential for much higher gains. This suggests that people should not become lackadaisical about their finances as they age and obtain higher net worth figures because there is still a lot of room for growth, and the median net worth values are still far from the amount recommended for a comfortable retirement. For those just looking for the average annual percent change in net worth, my calculations suggest it is about 6%.
Cozy Nest Egg 