What Should Your Net Worth Be at Age 60?

Net worth is one of those useful yardsticks that help us track our finances. It's essentially the value of everything you own minus the value of what you owe. One reason it matters is that it isn't about how much you earn. Some people with big paychecks have low net worths because they spend a lot of that cash on things that don't actually build wealth.

Think of your net worth as a way to take your financial pulse and see how much you've chalked up in the assets column. If you're aged 60, your net worth gives you a good insight into how ready you are for retirement. If you're not where you want to be, there's still time to act.

How to calculate your net worth

To calculate your net worth, you'll need to work out what you own (assets) and owe (liabilities). You'd then subtract the liabilities from the assets to get your net worth.

For example, let's say you have the following:

• $1,250 in a savings account
• $500 in a checking account
• $350,000 in a retirement account
• A home worth $400,000

Your assets would be worth $751,750.

Next, subtract your liabilities. For the purposes of illustration, let's say you owe:

• $150,000 on your mortgage
• $20,000 on an auto loan
• $4,000 on your credit cards
• $1,200 on a personal loan

Your liabilities would come to $175,200. Subtract them from your assets. In this scenario, your net worth would be $576,550.

What should your net worth be at age 60?

The word "should" is complicated when it comes to people's finances. Should can bring with it a sense of guilt and obligation that are often unhelpful. Plus, if your net worth isn't as high as you'd like it to be at this stage of life, ruminating on what you should have done differently won't make a lot of difference. The trick is looking at how you can change or manage your situation now.

For many people, their 60s is the final stretch of time to build assets and pay down debt before retirement. In an ideal world, your net worth, particularly your retirement savings, will give you enough money to cover your living costs when you stop working.

According to a survey by Empower, the average net worth for people in their 60s is $1,603,384. Before you panic, know that averages can be skewed by a few people with huge balances. The median net worth for people in their 60s is only $489,261. This gives us a more realistic idea of the average American's situation. Even then, your life may be very different from the average person. Rather than look at what other people are doing, consider whether you have enough to fund your old age.

To work out how much you'll need, take a look at your current spending habits. What is your current income, and how much do you spend each month? What's your monthly spending likely to be when you retire? Many financial planners recommend estimating your post retirement costs at about 80% of your current ones.

It might be that you don't have to factor in commuting and other work-associated costs. You may also have paid down your mortgage by this point, as well as other types of debt. But if you're planning on traveling for six months of the year or pursuing an expensive hobby in retirement, you'll need to be realistic about what it will entail.

How to improve your net worth

If your net worth isn't as healthy as you'd hoped, there are steps you can take to turn things around. Try to be realistic, particularly if you've struggled to meet financial goals in the past. You may not be able to become a millionaire overnight, but you might be able to position yourself better for the coming decades.

• Pay down debt: Debt is a financial millstone that can drag on your available cash supplies, particularly as you enter your old age. Whether it is credit card debt or your mortgage, make a debt payment plan so you can retire with as little debt as possible.
• Contribute to tax-advantaged accounts: There are several different tax-advantaged retirement accounts, such as a work sponsored 401(k) or an individual retirement account (IRA) and it's worth understanding how they work so you can pay less tax. The limits on how much you can contribute change once you're over 50, allowing you to make some catch-up contributions.
• Cut your spending: Improving your net worth requires money. To get it you may need to take a careful look at your budget and identify some non-essential expenses you can cut. A budgeting app might help you see where your money goes, or you can take the old-fashioned pen and paper approach.
• Increase your income: If you can't see any wiggle room in your budget and are still worried about your nest egg, consider ways to up your earnings. This might involve taking on more hours at work or even a side hustle.

Bottom line

Your net worth is a useful indicator of where you stand financially, but it isn't the be all and end all. Use your net worth calculations to see how you stand financially, including how balanced your assets are. For example, if all your cash is tied up in a home you don't plan to sell, you might look into building up other forms of savings or investments for your old age.