Author Topic: What's the best benchmarking tool out there for X wealth at Y age?  (Read 8076 times)

YTProphet

  • Stubble
  • **
  • Posts: 198
What's the best benchmarking tool out there for X wealth at Y age?
« on: September 30, 2015, 01:00:44 PM »
I know comparison is purported to be a killer of happiness, but I'm interested in finding out how I stack up to people my age vis--vis savings/net worth. What's the best and most accurate tool out there that you've found?

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #1 on: September 30, 2015, 01:11:32 PM »
if you're a mustachian why do you care you'll be in the top 1% of people your age.  i'm far and ahead of that.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10313
  • Location: la belle province
    • Here's how you can support science today:
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #2 on: September 30, 2015, 01:39:51 PM »
I know comparison is purported to be a killer of happiness, but I'm interested in finding out how I stack up to people my age vis--vis savings/net worth. What's the best and most accurate tool out there that you've found?

If you really want to rate yourself, there's no better data set available than the US census data.  So much of the 'financial factoids' that are tossed around online are misinterpreted or just plain wrong (for example, "the average cost of a wedding is now $xx,xxx").

Do a little data mining and you can evaluate yourself on just about any macro-economic level (income, debt, savings, debt-to-income, non-mortgage debt, value of tax-deferred accounts, expected SS payouts, etc) 

MDM

  • Walrus Stache
  • *******
  • Posts: 9407
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #3 on: September 30, 2015, 01:40:55 PM »
See also https://www.stlouisfed.org/household-financial-stability/publications-and-papers, particularly https://www.stlouisfed.org/~/media/Files/PDFs/HFS/essays/HFS-Essay-3-2015-Age-Birth-year-Wealth.pdf.

ETA one particularly good paragraph from the linked essay:
Quote
Although young families are often depicted by other observers as poor, such labeling might be a
stretch. The average young family has always been pinching pennies, given that it is just starting to
make money and has a lot of major expenses (marriage, children, house, etc.). Young families that
want to increase their chances of being wealthy should emulate the financial decision-making of
older families: maintain an emergency fund, pay down debt, put extra money in high-return invest-
ments, such as stocks, etc. Delaying the purchase of a house can also help in multiple ways.
« Last Edit: September 30, 2015, 01:44:28 PM by MDM »

DaveR

  • Stubble
  • **
  • Posts: 243
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #4 on: September 30, 2015, 05:33:28 PM »
+1 on MDM's Fed data. I also regularly use Census Bureau (census.gov) and Bureau of Labor Statistics (bls.gov) data series for a number computations. Non-media-biased government data has its merits.

mr_orange

  • Walrus Stache
  • *******
  • Posts: 5612
  • Age: 40
  • Location: Round Rock, TX
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #5 on: September 30, 2015, 05:47:21 PM »
Scott Burns has had some "wealth scoreboard" posts with ranges.  You may try searching those, but it probably won't give you the granularity you desire. 

Much of the other data consumable seems to be off of tax return data.  I find this data very unreliable, especially at higher incomes.  With all of the tax games that get played the gross and net numbers are very different. 

NetworthIQ has some good tools you can check out that sorts by age, but unfortunately there is a lot of selection bias on that site.  Most of the people willing to post are likely to be in the upper echelons of the spectrum so I am not sure how meaningful that data is. 

If you do Google searches there are other sites with calculators, but they generally don't disclose what data they're using to do the comparison so it is questionable how reliable the data is from those sites. 

Kroaler

  • Pencil Stache
  • ****
  • Posts: 781
  • Age: 28
  • Location: Greenville, South Carolina
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #6 on: October 01, 2015, 09:11:14 AM »
I gotta agree with the guy near the top. If your mustachian, your probably pretty high up already lol.

Sailor Sam

  • Magnum Stache
  • ******
  • Posts: 4127
  • Age: 38
  • Location: Steel Beach
  • Semper...something
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #7 on: October 01, 2015, 09:35:44 AM »
I found the Financial Samurai entertaining and aspirational. http://www.financialsamurai.com/the-average-net-worth-for-the-above-average-person/

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2198
  • Location: EastCoast
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #8 on: October 01, 2015, 09:49:37 AM »
if you're a mustachian why do you care you'll be in the top 1% of people your age.  i'm far and ahead of that.

We're not particularly mustachian (IMO, compared to most here) but we're still high, or off, the charts in the SL fed paper. Guess both of us having technical/well-paid jobs saves us? Only having seriously saved a few years our NW is "only" $400k (incl house - mortgage). But the average in our age bracket is $30k??! Even the 62+ only have a NW of about $200k. I'm not sure how this can be. I mean our age bracket is everyone up to 40, and maxing a 401k for just two years would put someone above the average! Sounds crazy low. Anyone with a house would have NW equal to 20% of the value.

Proud Foot

  • Handlebar Stache
  • *****
  • Posts: 1018
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #9 on: October 01, 2015, 09:49:54 AM »
I don't use other people as a benchmark to compare my net worth. IMO it can provide too far of a discrepancy for differences of income.  Someone making $500k and saving 15% will have a much higher NW than someone making $50k and saving 50%. It would be more realistic in my mind to use data of others within the same income range as you to compare to.  I personally use the Average/Prodigious Accumulator of Wealth from the Millionaire Next Door book for my benchmark. https://en.wikipedia.org/wiki/The_Millionaire_Next_Door  I did adjust their formula a little to use my average salary over the past 5 years to help smooth out years where I had a significant salary increase from the prior year.  I also use a 7% growth rate of the prior year's projected NW.  So my formula looks like this:

Current Year Projected NW = ((Avg Sal past 5 years * 10%) * age) + (prior year projected NW * 7%)

I am still early on in my journey so I am by far an Under Accumulator of Wealth.  I imagine most people here would be considered Prodigious Accumulators of Wealth. 

Cromacster

  • Handlebar Stache
  • *****
  • Posts: 1696
  • Location: Minnesnowta
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #10 on: October 01, 2015, 10:06:58 AM »
ARebelSpy once posted a formula that I find to be pretty good.

Average Person NW = (e^(0.075*Working Years)-1)*Current Salary

Mustachian NW = (e^(0.15*Working Years)-1)*Current Salary

These formulas take into account your workings years and compounding growth.  For me, it has stayed relatively consistent to how my NW is growing.  What would throw it off would be year 1 of a significant increase in salary.  This could be remedied by switching the salary to a time weighted average.

MDM

  • Walrus Stache
  • *******
  • Posts: 9407
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #11 on: October 01, 2015, 10:16:59 AM »
ARebelSpy once posted a formula that I find to be pretty good.

Average Person NW = (e^(0.075*Working Years)-1)*Current Salary

Mustachian NW = (e^(0.15*Working Years)-1)*Current Salary

These formulas take into account your workings years and compounding growth.  For me, it has stayed relatively consistent to how my NW is growing.  What would throw it off would be year 1 of a significant increase in salary.  This could be remedied by switching the salary to a time weighted average.

See http://forum.mrmoneymustache.com/welcome-to-the-forum/what-are-the-mustachian-milestones-for-saving/ for more discussion on the above.

maizeman

  • Magnum Stache
  • ******
  • Posts: 3575
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #12 on: October 01, 2015, 11:41:13 AM »
I've always really enjoyed this interactive graphic (now a few years out of date) from the nytimes that breaks out percentiles by geographic region in the US, so you're not in the position of living in St. Louis and comparing your income to folks in Silicon Valley paying $4,000/month for a one bedroom apartment.

http://www.nytimes.com/interactive/2012/01/15/business/one-percent-map.html

It has the same issue as almost every online resource about income in that it looks at household income rather than per-person incomes.* I suspect we're likely stuck with that, as tax datasets, where income isn't broken down by individual within households, seems to be much more widely used than the census data (linked above) that actually allows you to look at individual incomes.

*If you're single this is a very frustrating confounding variable. At the high end of the curve you're measuring yourself essentially entirely against "power couples" where both members are pulling down six figure incomes. Some sites will break down the returns into "married filing jointly" and single but then you have a whole new set of confounding variables: single people tend to be younger, and as you get older, the affluent are significantly more likely to be married while those with poor incomes are more likely to remain single.

mr_orange

  • Walrus Stache
  • *******
  • Posts: 5612
  • Age: 40
  • Location: Round Rock, TX
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #13 on: October 01, 2015, 01:40:43 PM »
ARebelSpy once posted a formula that I find to be pretty good.

Average Person NW = (e^(0.075*Working Years)-1)*Current Salary

Mustachian NW = (e^(0.15*Working Years)-1)*Current Salary

These formulas take into account your workings years and compounding growth.  For me, it has stayed relatively consistent to how my NW is growing.  What would throw it off would be year 1 of a significant increase in salary.  This could be remedied by switching the salary to a time weighted average.

Thanks for posting this.  I did the math on my numbers today using these formulas and we are at about 90% of the Mustachian number.  So I guess I am more frugal than I thought I was.  We're at 327% or so of the average person NW using these numbers. 

If we switch our salary to a time-weighted average we're at 132% for the Mustacian number and 481% of the average person NW.  Our weighted average salaries are about 68% of our current salary. 

Our salaries have increased quite a bit in the last several years and my "accumulation percentage" (what is kept plus investment gains as a percentage of income) has gone from 35% to roughly 50%.  I made a graph for this in the spreadsheet I keep weekly which I have attached a screenshot of for reference.  It amazes me that folks on here have more than 70% savings.   The best I have ever done is close to 60% and that includes the gains for that year as well.  I guess everything is relative.  By the Olympian standards of MMM I am not very frugal. 

catccc

  • Handlebar Stache
  • *****
  • Posts: 1681
  • Location: SE PA
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #14 on: October 02, 2015, 12:53:38 PM »
I mostly agree that comparison is a happiness killer, but when it comes to net worth, for me, I like to see people in similar circumstances that are just slightly ahead of me because I find it motivating. 

Rather than going with a generally accepted X NW at Y age, I think you should seek out a niche- people that care about their NW are more likely to be relevant yardsticks.

For this, I use networthshare.com
Here's mine:
https://www.networthshare.com/portfolio/sustainablesavings

You can look around at NW by age (in 5 year ranges) and salaries (in 10K ranges) and see where you fall.

Cognitive Miser

  • Stubble
  • **
  • Posts: 133
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #15 on: October 12, 2015, 02:29:00 PM »
This is a little dated, but I've been using this calculation for a few years:

http://lesia.com/wp-content/uploads/2007/03/MSN_MoneyCentral_Financial_Report_Card.pdf

(It's really only relevant in the U.S. because you need to look at your Social Security annual statement to do the calculation.)

Aussiegirl

  • Stubble
  • **
  • Posts: 104
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #16 on: October 12, 2015, 03:34:55 PM »
I know comparison is purported to be a killer of happiness, but I'm interested in finding out how I stack up to people my age vis--vis savings/net worth. What's the best and most accurate tool out there that you've found?

Maybe track what your wealth is vs what it should be given your age and income.   That way you're not comparing with others, but with what you should be.   The Millionaire Next Door by Thomas J. Stanley and William D. Danko had a formula for doing this.  http://www.thomasjstanley.com/blog-articles/163/How_Wealthy_Should_You_Be.html

Target Net Worth = Age X Annual Pre-Tax Income / 10 

As a MMM follower, your net worth should be well north of twice what the Target Net Worth gives.   And that multiple should grow every years.

A quick online calculator for this is:  http://www.hughcalc.org/wealth.cgi  Note that I haven't checked on weather this is correct or not.


DaveR

  • Stubble
  • **
  • Posts: 243
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #17 on: October 12, 2015, 04:41:55 PM »
This landed in my inbox today... http://mem.merrilledge.com/fall2015/sd_article_retirement.aspx

Looks like the big brains at a big bank caught onto the 4% SWR and are (gasp!) even recommending retirement needs based on how much you spend instead of how much you earn pre-retirement. Of course, they also talk about how moving from 5% to 6% savings rate has a big future payoff.

But, for the purpose of this thread, they also how you stack up against the "best retirement savers" with numbers for the top 10%. I would assume the their fancy ratio is built on aggregated data from the big bank's customers, so provides some sort of 90% NW threshold. I'd also assume that the average mustachian is off the cart (I am) so this ratio doesn't tell us much other than considerably better than average.

BigBangWeary

  • Stubble
  • **
  • Posts: 117
    • The Great Canadian Housing Bubble Co.
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #18 on: October 13, 2015, 05:09:42 AM »
Thanks for sharking DaveR!

Does anyone else feel that these types of calculations fall short for Mustachians? We made the very conscious choice to live somewhere doing something that would give us an extremely high income compared to what we knew for the sole purpose of ER. Now unlike many of our peers, we have not fallen victim to lifestyle creep, and have continued to save like we were students.

When calculations have me apply our current 'earnings' to our future needs, it seems silly. I have not become accustomed to living off anywhere near to what I make, nor do I plan to in retirement.

Say for example, you earn $200,000 after tax, save $150,000 per year, and live off of $50,000, what is the point of telling me I need x percentage of that nearly $300,000 pretax number? Works for an average wage-earner, but I think many Mustachians don't fit this mold.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #19 on: October 13, 2015, 06:18:12 AM »
if you're a mustachian why do you care you'll be in the top 1% of people your age.  i'm far and ahead of that.

We're not particularly mustachian (IMO, compared to most here) but we're still high, or off, the charts in the SL fed paper. Guess both of us having technical/well-paid jobs saves us? Only having seriously saved a few years our NW is "only" $400k (incl house - mortgage). But the average in our age bracket is $30k??! Even the 62+ only have a NW of about $200k. I'm not sure how this can be. I mean our age bracket is everyone up to 40, and maxing a 401k for just two years would put someone above the average! Sounds crazy low. Anyone with a house would have NW equal to 20% of the value.

no one saves in america.  those numbers you see are the norm .. people work til they cant work anymore and spend everything they have and hope the govt will take care of them. 

i like the mustachian formula ... but we are far and above that and we've only been serious for almost 2 years now.  (and by serious we save around 65% but still live on a ton compared to MMM)  I think this is mostly due to my ESOP at work its nuts.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27761
  • Age: -999
  • Location: Traveling the World
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #20 on: November 08, 2015, 12:07:57 PM »
ARebelSpy once posted a formula that I find to be pretty good.



Huzzah!  I'm glad someone is using it.  :D
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #21 on: December 30, 2015, 03:40:18 AM »
That merril lynch thing is nice we turn 30 this year and will have saved more than the best savers who are 40. Mustachianism is fun

Apples

  • Pencil Stache
  • ****
  • Posts: 877
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #22 on: December 30, 2015, 01:02:08 PM »
ARebelSpy once posted a formula that I find to be pretty good.



Huzzah!  I'm glad someone is using it.  :D

OK silly question.  What is the "e" in the formula?  Is it like log "e" or a variable I should intuitively know what it's referring to, like lifetime earnings?  Or is this some secret excel formula thing?  Thanks for helping out the slow person in the room :p

Edit:  Nevermind, I went over and read the other thread linked to and found where you gave the excel formula.  Thank you for that!  DH and I are only a few years out of school, so the UAW/AAW/PAW formulas don't work well for us yet.  We would be UAWs even if we saved 75% of our gross salaries!
« Last Edit: December 30, 2015, 01:08:47 PM by Apples »

JLee

  • Walrus Stache
  • *******
  • Posts: 5497
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #23 on: December 30, 2015, 02:08:50 PM »
Comparison is the thief of joy (Theodore Roosevelt)

This thread reminds me of that quote. Congrats to all the high-saving high earners, though. :)

if you're a mustachian why do you care you'll be in the top 1% of people your age.  i'm far and ahead of that.
Not necessarily. Not everyone has been mustachian for five or ten years.
« Last Edit: December 30, 2015, 02:10:25 PM by JLee »

gecko10x

  • Bristles
  • ***
  • Posts: 420
    • SawyerPF
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #24 on: December 30, 2015, 02:36:40 PM »
Isn't the real question: Are you on target to hit your FI goal?

How about this formula:
Annual additions to stash to hit goal =
(p(1+r)^n - f)r / ((1+r)^n-1)

Where:
f = FI goal (25x expenses)
p = present stash
r = rate of investment return
n = number of years to FI goal


MDM

  • Walrus Stache
  • *******
  • Posts: 9407
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #25 on: December 30, 2015, 04:40:37 PM »
Isn't the real question: Are you on target to hit your FI goal?

How about this formula:
Annual additions to stash to hit goal =
(p(1+r)^n - f)r / ((1+r)^n-1)

Where:
f = FI goal (25x expenses)
p = present stash
r = rate of investment return
n = number of years to FI goal

Needs to be multiplied by -1, but otherwise spot on.  Compare w/ cell C62 on the 'Misc. calcs' tab of the case study spreadsheet: http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228

gecko10x

  • Bristles
  • ***
  • Posts: 420
    • SawyerPF
Re: What's the best benchmarking tool out there for X wealth at Y age?
« Reply #26 on: December 30, 2015, 06:21:46 PM »
Ha, never even looked at that spreadsheet 🙃