Median and Average Net Worth

 

What’s the median and average net worth in Canada or the United States?
What should your net worth be when you’re 40 years old?
What’s the average net worth of married couples in Ontario?
This page will answer these types of questions 🙂

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Global Net Worth – Stats of other countries
Net Worth by Age – Benchmark by age group

Canadian and U.S. Median and Average Net Worths

 

 

Canadian Household Balance Sheet in 2015

16-09-canadian-net-worth-asset-debt-environics-2015-data

 

Additional Net Worth Data:

Addtional Notes:

  • The cities with the highest household net worths in Canada are Vancouver, Calgary and Toronto. 
  • There are about 320,000 Canadians who have $1 million in financial assets, not counting their principal residence. (about 1% of Canada’s population are millionaires)
  • Canadians in total have approximately $7.3 trillion ($7,300,000,000,000) of combined net worth, ($9.2 trillion in household assets and $1.9 trillion in liabilities.)
  • The median household net worth in the U.S. in 2010 was $77,300 according to the Federal Reserve. http://www.federalreserve.gov/Pubs/Bulletin/2012/articles/scf/scf.htm
  • Average: The sum of all the data divided by how many entries there are.
  • Median: The middle mark in a series, where half the population has more, and the other half has less.

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Global Net Worths

According to Credit Suisse’s annual wealth report, global wealth reached US $250 trillion in 2015, slightly less than a year earlier, due to the increased strength of the US dollar. The underlying wealth trends do, however, generally remain positive. The rise in household wealth was particularly strong in the US and China between mid-2014 to mid-2015. “Wealth is (nevertheless) still predominantly concentrated in Europe and the United States. However, the growth of wealth in emerging markets has been most impressive, including a fivefold rise in China since the beginning of the century,” said Credit Suisse CEO Tidjane Thiam.

There are 34,000,000 millionaires in the world. They make up 0.7% of the world’s adult population and accounts for 45% of the world’s collective wealth. In Canada, there were 1,100,000 people last year in 2014 worth at least US $1 million. That number dropped to 984,000 this year, thanks largely to the huge drop in the loonie. (source)

A person needs only $3,210 to be in the wealthiest 50% of world citizens. About $68,800 secures a place in the top 10%. Finally, the top 1% of the world’s richest people require a net worth of $759,900 or higher.

How Net Worth is Spread Around the World

15-10-global-wealth-by-country-map

14% of adults worldwide are middle class, with $50,000-$500,000 of assets. Global wealth is likely to continue to grow at an annual rate of 6.5% in the coming years, reaching 345 trillion US dollars in 2020, 38% above the current level of wealth. The US will remain the undisputed leader in terms of wealth, holding nearly a third of the global total.

The U.S.A. has the highest concentration of millionaires with 15.7 million people who have at least a million dollars.

15-10-number-millionaires-by-country-credit

How Net Worth is Divided By Global Population

15-10-global-wealth-pyramid

 

How to read this chart:

  • For the diagram above, if your net worth is over $1 million USD you are part of 34 million people who make up 0.7% of the world’s population and control 45.2% of all wealth.

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Older data: Top 20 countries in 2012 with the highest median net worth per adult. 

RankCountryMedian Wealth Per Adult (USD)
1Australia$193,653
2Luxembourg$153,967
3Japan$141,410
4Italy$123,710
5Belgium$119,937
6United Kingdom$115,245
7Iceland$95,685
8Singapore$95,542
9Switzerland$87,137
10Denmark$87,121
11Austria$81,649
12Canada$81,610
13France$81,274
14Norway$79,376
15Finland$73,487
16New Zealand$63,000
17Netherlands$61,880
18Ireland$60,953
19Qatar$57,027
20Spain$53,292

Notes:

  • The United States is ranked 27th on the list above with $38,786 per adult.

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Median and Average Net Worth by Age Group

Net worth takes time to build up so in general the older we get the wealthier we become. There are 2 main ways to grow wealth; savings, and capital appreciation. We can save more by cutting our spending, like by moving closer to work to save money on gas for example. We can also increasing savings by increasing our income, for example by finding a second job. Acquiring multiple income sources early on in life and keeping them for as long as possible is a great strategy to rack up lots of savings over time. Capital appreciation can be made by owning assets that will go up in value over the long term. As people grow older they tend to make higher incomes, and own more appreciating financial assets. Both are conducive to a higher net worth 🙂 For those who are not sure what to invest in, the simple solution is to diversify and invest in a little bit of everything using low cost, index funds, like the iShares S&P 500 Index (IVV) for example which aims to mirror the performance of the broad S&P 500 stock market index.

13-07-median-average-net-worth-by-age-average-group

We’ve all seen charts like the one above. It shows statistically how much wealth is accumulated in each stage of people’s lives. But it only reveals how much other people are saving, not how much we should be saving ourselves.

The charts below are my personal opinion of net worth progression by age. Everything is in 2013 constant dollars.

  • “Sufficient” means just enough for a modest yet still dignified financial future and retirement. But having to work past the planned retirement age is likely.
  • “Good” means you have an average amount of wealth accumulated. You can expect to retire in your early to mid sixties if you wish, and enjoy a normal and comfortable retirement.
  • “Excellent” suggests you are in the top 10% of your age group. Your extra savings and investment returns can translate into longer vacations, more free time, or early retirement. You will have more options in your golden years and financial stress in your life should be at a minimum. 🙂
  • “Rich” is for a minority of the population who either have extremely high incomes or received some kind of gift or inheritance. People in this category can reach financial independence relatively early in life. Achieving high investment returns would not be their primary focus. Instead their top priorities should be financial literacy, wealth preservation, and inflation hedging because there is simply more for them to lose if they mismanage their finances. 😐 So their investment strategies, risk tolerance, and goals will typically be very different than people who fit in the other three columns.

13-07-target-net-worth-by-age-chart-wealth

How to use the tables above:

13-07-cost-of-living-vancouver-example

Different parts of the world have different costs of living. The tables above assume a lifestyle in New York City which uses a Consumer Price Index (including rent) of 100 points. Most cities however will have a lower index because they are cheaper to live in.

Use the cost of living world map to determine your city’s Consumer Price Plus Rent Index which you can use to find out the comparable net worth amount for your own city.

For example Vancouver, BC has a CPPRI of 79.68This means it costs $79.68 in Vancouver to buy the same goods and services as $100 in New York City. So for a couple around age 30 living in Vancouver who wants to have an “excellent” net worth, they should aim to have $318,720 in combined wealth ( or 0.7968 x $400,000)

Notes regarding the net worth targets above:

  • Assumes people will spend money responsibly even if they have a high earning potential.
  • Assumes people retire at age 65
  • Assumes couples will stay together and have 2 children (the average US birth rate) per household during the couple’s lifetime.
  • Since these numbers represent wealth, and not income, it’s better to view the tables as a relative measure of financial security, rather than standard of living.

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How to Calculate Net Worth

This is the formula to determine one’s net worth:

Total Assets – Total Liabilities = Net Worth

However what constitutes as an “asset” can sometimes be debatable.

Here is my suggestion for calculating the most accurate version of one’s net worth.

  • Do include your home’s fair market value or government assessed value
  • Do include your vehicle’s value (eg: blue book price)
  • Do include gold, diamonds, fine art, jewellery, collectables and other valuable possessions
  • Do include any stock options that have been fully vested
  • Do include full amount inside a defined contribution pension plan (eg: RRSP, or 401(K) balance)
  • Do include the total amount of contributions you’ve personally made to a defined benefit pension plan.
  • Do not include CPP benefits or Social Security benefits. Those are incomes promised by the gov’t, not personal assets in your control.
  • Do not include generic household items like furniture, clothing, etc

If you need one, feel free to download this net worth template spreadsheet (Excel) to help calculate your net worth.

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Other blog posts related to net worth

  17 Responses to “Median and Average Net Worth”

  1. The tables for median net worth for Canadians shows $89,014 in 2012 YET the comparison chart for median global net worth of the top 20 countries in 2012 shows Canada in 12th place at $81,610??? Why are these two figures not the same? They are both 2012 figures and both are median net worth.

    • Thanks for catching that Gord 🙂 I’ve fixed the mistake now. The $89,014 figure is actually from an older study 2011. It’s a shame our net worth dropped between those two years. I think it has to do with our stock market under performing during the last few years. In the beginning of 2011 the S&P/TSX Composite index was at 13,300 points. But one year later it had fallen to 12,200 and didn’t really recover through the rest of 2012. The housing market was also kind of flat in 2012 so that didn’t help our wealth either. But I’m expecting our median net worth to be back up around the $85K to $90K mark this year in 2013. The stock market index has been performing better, hovering around 12,800 throughout most of the year so far, and our home prices are also up from 2012 on average. Since more than 2/3rds of Canadians own our own homes, this is good news I think 😀

  2. Does your net worth calculation include net present value of future pension benefits?

    • Great question Michael 🙂 Regarding the median and average net worth figures above sourced from external studies, I don’t know if future pension benefits were considered. I’ve read through some of the studies which those numbers were derived from and didn’t find any information regarding whether or not pensions were factored into any of those statistics 😕

      As for the two “Target Net Worth” tables I’ve created near the bottom, it depends on what kind of pension plan you have, how safe you think it will be in the future, where you live, and how you think.

      For defined contribution pension plans, which is becoming more common these days, I believe it would make sense for most people to include their pensions in their net worth calculations. This is because the value of the pension is easy to determine because it’s usually the current balance in your pension plan account. A defined contribution plan is held in either a trust company or insurance company that is separate from your employer. Technically, you own that money. Even if your employer goes bankrupt, your money is safe.

      For defined benefit pension plans it gets a little more complicated. Calculating the Net Present Value of future pension benefits may produce different results depending on the assumptions used in the calculation for example with the interest and discount rates. If your company offers a one-time, lump sum payment option rather than monthly payments, then that would be another way to determine your pension’s current value. Another method to calculate the NPV is to see how much of your pension your spouse would receive in a settlement if you were to get divorced, and double that amount 😉

      The other considering is that sometimes defined benefit pension plans can change or be restructured. Nortel, for example, filed for creditor protection in 2009 and its retirees had their pensions slashed. The pensioners and laid off workers are still fighting to get their fair share of what’s left of the tech company. The problem is Nortel owes $36 billion to creditors and pension liabilities, but they only have $9 billion so it’s unlikely any group of stakeholders in the battle will be made whole. I read an article last year where the CAW union, which represents about 6,000 unionized Nortel employees said that the “The U.S. folks don’t like coming to Canadian courts because Canadian judges, in the main, are far more reasonable and understanding of the plight of the people as opposed to the monies,” Haha. He added that UK Judges aren’t given the same “wiggle room” and tend to follow precedent law. The Nortel dispute has been going on for many years with settlement battles in 20 different countries. Early death can also change the value of future pension benefits. Some companies pay a lump sum to the family if an employee dies before retirement age. Other types of pension plans may provide a dependent pension benefit. These factors will also affect the outcome of the NPV calculations.

      And then there’s the conversation about whether or not to add the NPV of public pension plans like Social Security (U.S.), or the Canada Pension Plan to our net worth. Some might argue government pensions are more reliable than company pensions so we should consider them too. We all pay into the CPP as working Canadians and so far the plan is solvent and sufficiently funded. Then this raises other questions like should people nearing retirement consider Old Age Security when calculating their net worth.

      So in terms of should one add the NPV of future pension benefits to his or her net worth, I think that’s up to the individual. Personally I do not include my defined contribution pension because my plan’s account balance is so small compared to my other investments that its impact will be negligible towards my wealth, and I only include major financial assets in my monthly net worth updates to keep it clean and simple. Also I don’t actually have any direct access to it and can’t spend it unless I stop working at the company.

      Some people don’t factor in future business income or payments from a rental property into their net worth calculations either. They believe future income streams should not be a part of the current balance sheet; one’s net worth is equal to the value of current assets net of current liabilities – future income plays no role in this calculation. However others might disagree because often businesses are valued based on how much cash it can generate in the future. It’s certainly very difficult to define exactly how net worth should be calculated. It’s not only a question of whether something is an asset or not. A pension plan is clearly an asset. Yet it’s not necessarily part of one’s net worth.

      For defined benefit pensions, most people I know don’t include the NPV of their future benefits in their net worth simply because of the complications listed above. However, for investing purposes I would include it in my asset allocation calculations. So if a fair NPV with a 20% discount rate of our future pension benefit is $100,000 for example, then we should count that towards the fixed income portion of our portfolio when making asset allocation decisions with our other investments, even though we wouldn’t count it towards our net worth since we don’t actually have this money 🙂

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