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The median net worth at age 40 is around $135,300. This is according to the Federal Reserve’s most recent Survey of Consumer Finances (SCF). However, what your net worth should be depends entirely on your personal situation. Your net worth should reflect not only your income and opportunities, but also your financial plans and long-term strategy. Households with more ambitious plans and lifestyles – for example, someone who wants to retire early – will need a considerably higher net worth to achieve their goals. Households with more conservative plans, for example someone who intends to retire at 70, might not need as much.

Comparing your situation to the average household can be a useful way of checking in on your finances, but it should always come in the context of your own financial planning. Here’s how to think about it. You can also use this free tool to get matched with a fiduciary financial advisor for free if you’re interested in discussing your personal situation.

The authoritative data on household finance comes from the Federal Reserve, most notably in its Survey of Consumer Finances released every few years (most recently in 2022).

This data is generally better than most other research because it attempts to capture all households in the country. By contrast, much (if not most) research produced by private third parties typically has significant sample bias. Frequently, this occurs when an institution only surveys its own customers or members of a specific cohort. This will typically generate results skewed high, since an existing customer base will usually exclude low-income households.

From there, we can break this issue down further into two categories: median net worth and average net worth. A median measure reflects the midpoint of the dataset, while an average (or “mean”) reflects the middle of a dataset after you include all values. Here, median net worth is generally considered more representative of all households. This is because wealthy households can skew the data upward, making it appear as though most households possess more wealth than they have.

The Federal Reserve studies net worth in cohorts. For ages, it publishes the net worth of households between the ages of 35 – 44. This makes it a relatively good indicator of net worth by age 40, the midpoint of that range.

A financial advisor can help you determine an appropriate strategy for your current net worth and goals.

There are several ways to consider wealth. First, we can look at net worth itself.

The Federal Reserve defines net worth as all assets minus all liabilities. This includes financial assets, such as investments and cash, as well as nonfinancial assets, such as vehicles and real estate. Liabilities similarly include both secured debt, such as mortgages and vehicle loans, and unsecured debt, like student loans and credit cards. This means that major assets can influence both sides of the ledger. For example, the value of a home will be offset against any remaining mortgage on it.

Working from that definition, at age 40 household net worth is around:

• Median: $135,300 (better reflects the situation of all households)

• Average: $548,070 (better reflects the total wealth in circulation)

One thing to remember about this definition of net worth is that it includes many nondiscretionary utility assets. This means products that you use and depend on, like your home and vehicle. These do affect your net worth through value (assets) and debt (liabilities). However, unlike with a financial asset, if you sell nondiscretionary assets you will have to replace them. If you sell your home, you will need to find another place to live. If you sell your car, you will need some other way to get around.

The SCF includes this in the measure of net worth, in part, because that necessary spending is common but situational. For example, when most people sell their home they will need to spend that money to acquire a new one. But some people might move in with a third party, allowing them to keep the full equity of their sale. Someone else might sell their car while moving to a big city, where they don’t need to buy a new one.

But remember, assets that you use and depend on are not the same as purely financial products. Most of the time, if you sell this asset you will need to replace it.

We can also consider before-tax income. This reflects the taxable earnings of all households. As a result it will inherently skew downward, as many of the wealthiest households tend to earn much of their money from investments and capital gains. However, at age 40 earned income is around:

Finally, we can consider total assets. This reflects the holdings of all households, both financial and nonfinancial before any liabilities. That makes total assets a good way of measuring existing value among U.S. households. However this does not reflect usable wealth, since converting these assets to cash would require paying any associated debts. At age 40, the average household holds assets worth around:

• Median: $310,400

• Average: $729,650

Consider speaking with a financial advisor if you have questions about growing your net worth.

So, what do you do with this information?

Well, don’t use this data to keep score. How you stack up to everyone else is not valuable information in and of itself. Instead, the important question is how you stack up against your personal needs and financial plans.

Now, there is some value to using the average household as a bellwether. If you are far behind the median household, then that might be a good sign that you should review your finances to make sure that you’re still on track to meet your own goals. If you’re far ahead, then that might be a good sign that your current financial plans are working. But in both cases, you want to put the averages in context of your own planning.

If you want to increase your net worth, there are many strategies you can pursue. Arguably the best place to start is to speak with a financial advisor. Boosting your net worth is a long-term project, and it takes long-term planning. A financial advisor can help you build that kind of plan.

Beyond that, the next best low-hanging fruit is to increase your saving rate and to look at how you have balanced your cash vs. investments. It’s easy to keep more money than you need sitting around in cash and, while that can give you liquidity and a sense of security, it does little to grow your overall wealth. Increasing the share of income you save, and increasing the share of savings that you invest, can be good ways to boost net worth.

To boost savings, often a good solution is to cut spending. In particular, look for habits. What are regular ways you spend money that you can cut back on? This can be a structured way to shift spending to saving over the long run. While working in periodic, small amounts is certainly good, setting up a long-term plan to boost your savings is even better.

Finally, look to your debts. Paying down debt increases your net worth on more than a dollar-for-dollar basis, because it boosts both your immediate and long term wealth. In the short term, every dollar of debt you pay reduces the liabilities side of this formula and increases your net worth. In the long term, paying debt reduces your long-term interest payments, increasing your net worth by the money you will save over time.

Save, invest, spend wisely, and never forget to manage your debt. Also, consider speaking with a fiduciary financial advisor for professional guidance.

By age 40, the median household has around $135,300 in net worth. Most of this comes from home value and retirement accounts. The important number, though, is not how other households are doing. It’s how you are doing relative to your own goals.

• Net worth really is an important number. Most of your financial goals, from homes and education to retirement, will depend on your ability to build wealth in excess of debt. So let’s review how you can review your own net worth. 

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

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