- In this video,
I discuss the average net worth of retirees
at age 65, 70 and 75, coming up next on Holy Schmidt.
- [Narrator] Holy Schmidt!
(paint splashes)
- Most of the videos on YouTube discuss finances,
net worth, savings, earnings,
for folks in their 40s, 50s and even 60s.
That unsurprisingly,
these numbers have a tendency to go up
the older someone gets
and the more that they earn and save during their lifetime.
This is the first video I've done,
in fact, that I've seen here on YouTube,
that discusses what happens to people's network
after they enter retirement.
And it talks about what their net worth is
at age 65, age 70 and age 75.
It's an important video
because there's not a lot of transparency out there
on what happens to someone's finances.
once they enter retirement.
It's almost like a black box
where the information just disappears,
which is a shame because for a lot of people,
they want to know what happens
after they get into retirement.
And there just isn't a lot of information out there.
And that's why I created this video for you.
In this video,
I discuss the mean and the median net worth of people
at 65, 70 and 75
and the outcomes are a lot different than you would expect.
Before we begin,
please make sure you click subscribe and notifications.
There's a lot happening out there in the world
and retirement for folks is changing daily sometimes
in terms of the rules and the information
and I work very hard to get what's happening out there
in here for you.
When someone enters retirement, the game changes.
They had just spent the last 30 or 40 years
contributing to their retirement nest egg
and now they're actually drawing down
on their retirement nest egg.
They're living off the return on their investments,
a pension, social security,
perhaps even some part-time work.
It is this dynamic
which causes a lot of concern for people in retirement,
because the message that they had received
up until that point was about preparing for retirement,
not what to do next.
With the safety of full-time employment gone
and the experience of living off of the returns
from your retirement savings,
the road ahead is both exciting and a little bit stressful.
Let's start off with age 65
because this is the next stop for a lot of you,
and of course you're naturally curious
about those numbers first.
The data I'm going to use
comes from the 2020 Survey of Consumer Finances
from the Federal Reserve Board so it's quite accurate.
The first number we're going to talk about is the mean,
which is just the average of all of the respondents
that the Federal Reserve Board talked to.
This data comes from both ends of the spectrum.
On the low end, people that have more liabilities
than they do assets,
this means that they're insolvent,
at the high end, people that have so many assets
that they couldn't possibly spend their way through them
during their lifetime
and those are going to go to their family members
when they pass.
At age 65, the mean net worth is $1,196,800.
Now I can tell you right now
that most of the people watching this video
don't have that amount.
A better number is the median,
median simply means there are an equal number of respondents
with a higher net worth
and an equal number with a lower net worth
so it's the person right in the middle.
That person has a net worth of $239,450.
So in other words,
less than 1/4 of the average net worth of the mean
of that group.
What do you think the average net worth
of a 70 year old would be?
Well, if you ask most people,
they would think that the 70 year old
would have drawn down on their pensions,
their 401ks, their savings, et cetera,
and their net worth would have gone down.
Interestingly, that's not really the case though.
At age 70, the average net worth
actually increases to $1,217,700, up 1.7%.
The median goes up to $266,400.
In other words, it goes up by 11%.
So why did both go up?
Well, there are a lot of theories,
but the one that's most likely
is that people are calibrating
during the first few years of retirement.
They're intentionally not spending as much as they could
because they don't want to get it wrong.
So if that's the case,
you'd expect the next five years to actually go down
and that's exactly what happens.
At age 75, the mean net worth goes down to $977,700
down 19.7% from the net worth at age 70.
The median goes down to $254,800 down 4.4% from age 70.
So why does the mean net worth goes faster,
downward from 70 to 75,
than the median during both time periods?
There are a lot of reasons,
the most likely reason for the increase between 65 and 70
is that those retirees at that age,
at least at the high end,
most likely own their own businesses,
they're not fully retired yet.
But by the time they hit 70 and they move towards 75,
not only are they out of the business,
but they're setting up trusts
and arranging their lives so that their assets
are moving into different pockets for their heirs.
If you liked this video and you'd like to see more of me,
please make sure you click subscribe and notifications
so that you get alerted the next time I post a video,
I post about twice a week.
Also check out this video
on the average social security payment in this country.
This is Geoff Schmidt, thanks for watching.