your progression of "Lifetime Wealth Ratio"

[johndoe]

It'd be interesting to see how people progress over time:  Lifetime Wealth Ratio = Net Worth / Total Lifetime Income.  More discussion on LWR here: https://www.evidenceinvestor.com/the-one-number-that-really-matters/  For my below numbers, net worth includes property values as estimated online and income is from the Social Security website.

end year ... age ... lifetime earnings ... LWR
2017      ...  30  ...    $464,000        ... 47%
2018      ...  31  ...    $518,000        ... 52%
2019      ...  32  ...    $573,000        ... 64%
2020      ...  33  ...    $628,000        ... 73%
2021      ...  34  ...    $686,000        ... 89%
2022      ...  35  ...    $748,000        ... 83%
2023      ...  36  ...    $826,000        ... 90%

Fitting a linear equation to both net worth and earnings (which are both assumptions!) I'm expected to get to 100% at about the end of 2026 at right around $1M!  Pretty crazy to think I'll have earned and retained the same by that point.  Plus this income includes taxes, so perhaps I'm already beyond the "break even" spot.

I'd be curious to see how others are doing, what ages / life situations have impacts on this, and how compound interest helps people further into this journey.

[Dicey]

I'm a lazy-ass FIRE person, so I can't be bothered with that kind of number crunching. I'm also not used to counting property values, because: lazy, plus we have to live somewhere, lol. I don't count vehicles either.

HOWEVER: In my pre-FIRE days, I counted everything.

The miracle of compound interest is that once it starts doing the heavy lifting, it's insane how it grows.

That's why it makes more sense to invest as much as you can as early as you possibly. Compound interest allows you to earn fewer dollars to reach your FIRE goal. This is why I don't advocate for accelerated payoff of mortgages, and treating said (affordable, tax-deductible, fixed rate mortgage) like bonds in your portfolio. Ignoring the mortgage, or mentally putting it in a separate bucket, can make your portfolio too conservative.

[ATtiny85]

I have no idea what my lifetime income is/was, so no denominator available.

[johndoe]

I'm a lazy-ass FIRE person

a WHAT?!  Sounds like an oxymoron to me :)  Out of curiosity, do you see property (either purchase price or "current value") as part of your net worth?  I would think "DPOYM" followers should count the asset since they're paying for the liability, right?

I have no idea what my lifetime income is/was, so no denominator available.

Even an estimate might be interesting, or helpful for other users

[Dicey]

I'm a lazy-ass FIRE person

Out of curiosity, do you see property (either purchase price or "current value") as part of your net worth?

In Pre-FIRE times, I counted home/rental equity, just because it helped with motivation. Then the forum came along, and eventually "Races". Most of the races count invested assets only, so I started thinking of RE separately. You get to a point where it just doesn't matter. We own two older, well maintained vehicles and an expensive RV, all debt free. I don't count them either, even though the rig is worth quite a bit more than we paid for it. Do whatever helps you reach your goals.

I would think "DPOYM" followers should count the asset since they're paying for the liability, right?

I'm not quite sure what you're asking here. For anyone, a mortgage* is a great hedge against inflation. It can also act as a bond in your portfolio. A "paid off" house is kind of a misnomer. You will always be on the hook for property taxes, utilities, insurance, and maintence. Every homeowner is "paying for the liability" if you think about it. If this isn't nt what you meant, please let me know and I'll try again.

*Requisite disclaimer: I'm US based, and I'm referring to long, low, affordable, fixed-rate mortgages.

[johndoe]

Thinking about net worth and 'how much could I spend on a car if needed?' I mentally revisited this, with the completion of another calendar year:

end year ... age ... lifetime earnings ... LWR
2017      ...  30  ...    $464,000        ... 47%
2018      ...  31  ...    $518,000        ... 52%
2019      ...  32  ...    $573,000        ... 64%
2020      ...  33  ...    $628,000        ... 73%
2021      ...  34  ...    $686,000        ... 89%
2022      ...  35  ...    $748,000        ... 83%
2023      ...  36  ...    $826,000        ... 90%
2024      ...  37  ...    $914,000        ... 98%

Pretty wild to think that after ~15.5 years of working I have basically the same as everything I've ever earned!  All my spending (and taxes) have been offset by compound interest / real estate values.  Tracking a growing net worth number seems like an arbitrary value, but this seems like a weird 'more tangible' stat - although I don't think it necessary signals any implication of ability to retire.  All hail compound interest!

[Fomerly known as something]

I’m also too lazy to add up my current lifetime earnings.  I’m likely 90% or more but it’s not a metric I keep track of. And I only have a vague idea of my net worth prior to about 2014.  I mean I knew because I would add it up, but I didn’t record it then.  Of course I’ll freely admit I often “forget” to add back in my current sizable cash amount I have on hand right now for sequence of return risk with FIREing this year.

I do have my not paid off home as part of my overall net worth but it is not part of anything but my oh shit worst case
Scenario retirement plan.  (In the worst case, it will be sold and the money from the home would be used for long term care as long as it lasts).

[GilesMM]

I hit 100% LWR in year 7 working, 200% in year 20 and 300% in year 25 which was the year after I retired (market gains).  Hope this helps.

[jrhampt]

If you're looking for lifetime earnings, and easy way to pull that should be off your SS statement (or log in to see the years). 

[erp]

Is lifetime earnings here pre or post-tax?

I do kind of like this ratio theoretically, because it seems like it's more of a measure of efficiency. I've been lucky to be a pretty solid earner, and I think a byproduct of that is I've been relatively inefficient on the frugality side of the equation - it works out okay when looking at absolute numbers, but would show up more strongly in a tracking measure like this one.
Cool!

[AuspiciousEight]

Back of the envelope math says I'm somewhere around 140%, but this is largely an artifact of when I started investing (2008) and the length of time in the market than anything else.

The reason I started investing in 2008 is simply  because that's when I first had disposable income to invest in the market. It has very little to do with my skills or abilities or anything, and is simply an artifact of when I was born and what stock market I invested the money into, which was simply my home country stock market (USA).

[secondcor521]

Divorces, gifting, and inheritances all impact the numerator but aren't part of the denominator.

Compounding is a factor that really starts impacting things two or three decades in, and the ratio doesn't directly take this into account.

I personally think that "FIRE ratio" or FIRE stash / expenses is a more important metric.  I could have a LWR of 1000% but my FIRE ratio is 10 I'm still in bad shape.

[Christof]

Thinking about net worth and 'how much could I spend on a car if needed?'

we recently had the the need to think about a new car and I was thinking about the decisions we have to make, the time it takes to register a new car, all the driving we have to do to find the car we want.... I do not like new cars, I do not like them Sam-I-am... Money isn't the issue...

https://www.mrmoneymustache.com/2011/04/19/how-to-come-out-way-ahead-when-buying-a-used-car/

[Telecaster]

I would think "DPOYM" followers should count the asset since they're paying for the liability, right?

I'm not the person you asked, but as a proud DPOYM member, I view housing and by extension the mortgage interest as an expense.  The cost of eliminating the mortgage interest expense is more than the cost of keeping it, so I keep the mortgage.   

Counting the house as an asset (and hence subtracting the mortgage liability) can be useful in some cases, but for the most part it isn't actionable information, so I just skip it. 
 

[Much Fishing to Do]

I think around 90-100% as I think both lifetime income and Net Worth just over $5M.  What I think has interestingly hurt me was the relatively recent couple of huge years I had where I lost about 40% of what I earned to various taxes immediately. (If this ratio was using after tax dollars I'm definitely over 100%).  The last few years I've gone from risky portfolio to more conservative and from tightwad to not giving a F** re: spending (that day was the day I realized all I was doing was spending my kid's inheritance) so doubt it will progress in the right direction.

[erp]

I ended up finding the info to calculate this more easily than expected, and came up with a 56% ratio. This does count at least some of the compound interest earnings because it's based on my taxable income (and some of the compounding is taxable) and I didn't account very well for real estate in the value either.

I think it's a kind of neat idea, and it is a number that's very sensitive to:

• tax rates (if you have a few years of high income-high tax years, that's much trickier than many years of low income-low tax); and,
• time in market, since that will raise the numerator but not the denominator of this function.

I don't think I'd calculate it regularly though. This is the sort of number which tells me something kind of neat (that I've essentially saved about 1/2 of my total lifetime earnings), but it probably shouldn't be optimized for. The best way for me to maximize this number would be to keep growing the net worth but make less income - I'm not sure if that's an especially actionable outcome?

[johndoe]

I hit 100% LWR in year 7 working, 200% in year 20 and 300% in year 25 which was the year after I retired (market gains).  Hope this helps.

Holy cow that seems so good!

[Turtle]

Divorces, gifting, and inheritances all impact the numerator but aren't part of the denominator.

Compounding is a factor that really starts impacting things two or three decades in, and the ratio doesn't directly take this into account.

I personally think that "FIRE ratio" or FIRE stash / expenses is a more important metric.  I could have a LWR of 1000% but my FIRE ratio is 10 I'm still in bad shape.

Yep, as someone whose stash number has been affected by all three of those, I’m not sure what good this comparison really is.  It might be fun to check, but unless it’s downloadable from the Social Security website, I don’t really think I’ll bother with retyping/manual adding of that many years of numbers. 

[Turtle]

Well, it turns out that high school math is good for something.  I figured out a quick way to get my lifetime earnings number.

Since I’m a W-2 worker who has never owned a company or paid separately into Medicare, the math is actually pretty simple.  Divide lifetime Medicare taxes by .0145 to get the total amount of earnings Social Security has on file.

1,625,035 for me.  I’m at about 135% LNW including inherited 401k, about 80% without it.

TNW is about 90%, but actually the total earnings are reduced by things which come out pre-tax, like corporate health insurance and such.

[Dicey]

I read YMOYL when it first came out. Calculating you lifetime income is the first exercise in the book. It seemed pointless to me then and it still does. I also hate Birkenstocks (I have skinny feet) and don't want to live in a rented house in Berkeley with five roommates.

It just feels like a meaningless metric to me. I care much more about what I have now than what I made via employers.

DH and I have a penchant for buying ugly houses, and making them safe and pretty again for a fat profit, which is not W-2 income. It is also intermittent and very lumpy. We have both received inheritances post-FIRE.

I also think the older you get, the less it matters. Example, our property taxes were $13,000* per year. That's how much I made in my first full-time,  "career" job. That blows my mind, but it doesn't matter in any material way. In fact, our property taxes have risen to $14,000+ per year. Meh. it is what it is.

Start saving and investing early has a lot more impact than calculating your LWR.

Fortunately, there's a million ways to FIRE, so it doesn't do any harm to calculate this number, either.

[Rockies]

This is an interesting metric. I estimated my lifetime earnings since I dont know for sure.

Looks like i'm not doing so well compared to others here. Below includes the value of my house. Am I spending too much, or investing too conservatively? It got a lot better in the last year due to me realizing that my home was worth more than I had previously been accounting for.

Age   Year   Lifetime Earnings   Lifetime Wealth Ratio
24   2010   $60,000.00   13.33%
25   2011   $80,000.00   18.75%
26   2012   $130,000.00   32.31%
27   2013   $180,000.00   35.56%
28   2014   $235,000.00   35.74%
29   2015   $300,000.00   33.33%
30   2016   $370,000.00   40.81%
31   2017   $440,000.00   34.77%
32   2018   $515,000.00   56.31%
33   2019   $595,000.00   63.87%
34   2020   $678,000.00   61.21%
35   2021   $766,000.00   62.01%
36   2022   $856,000.00   59.00%
37   2023   $949,000.00   60.59%
38   2024   $1,047,000.00   59.22%
39   2025   $1,145,000.00   74.15%

[johndoe]

Looks like i'm not doing so well compared to others here. Below includes the value of my house. Am I spending too much, or investing too conservatively? It got a lot better in the last year due to me realizing that my home was worth more than I had previously been accounting for.

It looks like you're doing well to me! 

Not that I know enough to have a useful opinion, but interesting that 2019-2024 you maintained ~60%.  Perhaps some big spending increases occurred in there?  The previous five year period you nearly doubled LWR