Understanding Your Net Worth and Percentile Ranking
Net worth is perhaps the most accurate measure of financial health. Unlike income, which measures cash flow, net worth measures the total value of everything you own minus everything you owe. Comparing your net worth against others in your age group—known as your net worth percentile—provides a benchmark to see how your wealth accumulation stacks up against your peers.
How Net Worth is Calculated
The formula for net worth is straightforward:
Net Worth = (Total Assets) – (Total Liabilities)
Assets: These include liquid cash, retirement accounts (401k, Roth IRA), brokerage accounts, real estate equity, and the resale value of vehicles or businesses.
Liabilities: These include any outstanding debt, such as mortgages, car loans, student loans, and high-interest credit card debt.
What Do the Percentiles Mean?
A "percentile" tells you what percentage of the population you have outperformed. For example, if you are in the 70th percentile, it means your net worth is higher than 70% of people in your specific age category, and lower than 30% of them.
Average vs. Median Net Worth
When looking at wealth data, it is crucial to distinguish between the average and the median. The average is often skewed significantly higher by billionaires and multi-millionaires. The median represents the "middle" person in the population and is usually a more realistic benchmark for most households.
Factors That Influence Your Ranking
Compound Interest: Those in older age brackets naturally have higher net worths because their investments have had decades to grow.
Home Equity: For many, the primary residence represents the largest portion of their net worth.
Debt Management: Aggressively paying down high-interest debt (like credit cards) is often the fastest way to increase your net worth.
Example Calculation
Imagine a 40-year-old individual with the following profile:
In the 35-44 age bracket, a net worth of $340,000 typically puts an individual in the top 20-25% of their peers (approximately the 75th to 80th percentile).
function calculateNetWorth() {
var cash = parseFloat(document.getElementById("cash_assets").value) || 0;
var inv = parseFloat(document.getElementById("investments").value) || 0;
var real = parseFloat(document.getElementById("real_estate").value) || 0;
var other = parseFloat(document.getElementById("other_assets").value) || 0;
var mort = parseFloat(document.getElementById("mortgage").value) || 0;
var student = parseFloat(document.getElementById("student_loans").value) || 0;
var cc = parseFloat(document.getElementById("cc_debt").value) || 0;
var age = document.getElementById("age_range").value;
var totalAssets = cash + inv + real + other;
var totalLiabilities = mort + student + cc;
var netWorth = totalAssets – totalLiabilities;
document.getElementById("res-assets").innerText = formatCurrency(totalAssets);
document.getElementById("res-liabs").innerText = formatCurrency(totalLiabilities);
document.getElementById("res-networth").innerText = formatCurrency(netWorth);
var percentile = getPercentile(netWorth, age);
document.getElementById("res-percentile").innerText = "Top " + (100 – percentile).toFixed(0) + "% (Percentile: " + percentile + ")";
var comparison = "";
if (percentile >= 90) {
comparison = "Excellent! Your net worth is in the elite top 10% for your age group.";
} else if (percentile >= 75) {
comparison = "Great job! You are well ahead of the median for your age group.";
} else if (percentile >= 50) {
comparison = "You are above the median. Keep saving and investing to move up.";
} else if (percentile >= 25) {
comparison = "You are currently below the median. Focus on debt reduction and increasing contributions.";
} else {
comparison = "Your net worth is in the bottom quartile. Consider a strict budget and aggressive debt repayment.";
}
document.getElementById("comparison-text").innerText = comparison;
document.getElementById("nw-results").style.display = "block";
}
function formatCurrency(num) {
return "$" + num.toFixed(0).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
}
function getPercentile(nw, age) {
// Data based on US SCF (Survey of Consumer Finances) approximations
// thresholds: [25th, 50th, 75th, 90th, 95th, 99th]
var thresholds = {
"18": [-10000, 15000, 80000, 250000, 500000, 1500000],
"35": [15000, 95000, 350000, 1000000, 2500000, 7000000],
"45": [45000, 175000, 650000, 1800000, 4500000, 15000000],
"55": [75000, 220000, 950000, 2800000, 6000000, 22000000],
"65": [100000, 280000, 1200000, 3500000, 8000000, 28000000]
};
var data = thresholds[age];
var p = 0;
if (nw < data[0]) {
p = (nw / data[0]) * 25; // Simple interpolation for bottom
if (p < 0) p = 5;
} else if (nw < data[1]) {
p = 25 + ((nw – data[0]) / (data[1] – data[0])) * 25;
} else if (nw < data[2]) {
p = 50 + ((nw – data[1]) / (data[2] – data[1])) * 25;
} else if (nw < data[3]) {
p = 75 + ((nw – data[2]) / (data[3] – data[2])) * 15;
} else if (nw < data[4]) {
p = 90 + ((nw – data[3]) / (data[4] – data[3])) * 5;
} else if (nw < data[5]) {
p = 95 + ((nw – data[4]) / (data[5] – data[4])) * 4;
} else {
p = 99;
}
return Math.round(p);
}