Building Wealth by Age: The Net Worth Formula That Actually Works

How much money should you have accumulated by now? If you’re unsure, you’re not alone. Most people don’t track their financial progress systematically — but those who do tend to build wealth more consistently. Your net worth tells the complete story of your financial health, revealing what you own minus what you owe. More importantly, when aligned with your age and income, it becomes a powerful benchmark for measuring whether you’re on track financially.

The Net Worth Formula: A Quick Calculation

Rather than guessing, use this straightforward formula to determine your target net worth:

(Your Age ÷ 10) × Your Gross Annual Income = Your Target Net Worth

Let’s walk through an example: If you’re 35 years old and earn $80,000 per year, your calculation would be: (35 ÷ 10) × $80,000 = 3.5 × $80,000 = $280,000

This gives you a clear, personalized target based on your specific situation. The beauty of this net worth formula is its simplicity — no complex spreadsheets required.

Understanding the Basics: Assets Minus Liabilities

Before targeting a number, let’s clarify what net worth actually means. It’s the difference between everything you own and everything you owe:

Your Assets Include:

• Cash reserves and savings accounts
• Retirement accounts (401(k), Roth IRA)
• Investment brokerage accounts
• Real estate properties
• Vehicles
• Personal valuables (jewelry, furniture, collectibles)

Your Liabilities Include:

• Credit card balances
• Student loan debt
• Mortgage obligations
• Auto loans
• Unpaid taxes
• Payment plans and other outstanding debts

A practical calculation: If you own a $400,000 home, $10,000 in cash, $50,000 in retirement accounts, and a $10,000 car (total assets: $470,000), but carry a $350,000 mortgage, $15,000 car loan, and $5,000 in credit card debt (total liabilities: $370,000), your net worth would be $100,000.

Age-Based Net Worth Targets Using Income Multiples

Your net worth should increase as you progress through different life stages. Financial institutions like Fidelity have developed income multiple guidelines that adjust by age:

At age 30, aim for a net worth equal to 1x your annual income At age 35, target 2x your annual income At age 40, target 3x your annual income At age 45, target 4x your annual income At age 50, target 6x your annual income At age 55, target 7x your annual income At age 60, target 8x your annual income At age 65, target 10x your annual income

This progressive approach ensures you’re building momentum. Someone earning $100,000 should aim for $100,000 in net worth by 30, growing to $1,000,000 by retirement at 65.

How Your Savings Rate Impacts Net Worth Growth

Not all salaries translate to wealth at the same rate. Your savings percentage directly influences how quickly your net worth compounds. Consider this 35-year-old scenario after 13 years of consistent saving and 5% annual investment returns:

Notice the pattern: higher earners don’t just save more dollars — they can afford to save a larger percentage of their income. This accelerates wealth accumulation significantly.

Personalization Matters More Than Generic Rules

While these benchmarks provide useful guidance, your ideal net worth depends on your specific circumstances. Someone earning $40,000 shouldn’t feel pressured to match the net worth of a $150,000 earner at the same age. Wealth builds at different paces for different people, and that’s perfectly normal.

What matters is consistent progress. Even with a modest salary, disciplined saving combined with investment growth can compound into substantial wealth over decades. The key is starting early — a 22-year-old earning $50,000 will dramatically outpace a 35-year-old earning $100,000 if both maintain consistent savings rates.

The Real Goal: Building Sustainable Retirement Income

High net worth numbers look impressive, but here’s the critical caveat: if most of your wealth sits in your primary residence, you may lack the investment income needed for retirement. A $1 million net worth concentrated in a $900,000 home leaves only $100,000 in liquid, income-generating assets.

As you approach retirement, focus on diversifying your net worth across investments that generate ongoing income — not just accumulating total assets. Consulting with a fee-only financial advisor ensures your net worth trajectory aligns with retirement readiness, not just a number on paper.

Track your progress annually, adjust your savings rate as your income grows, and remember: the net worth formula works best when paired with consistent action and realistic long-term planning.