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Age 48 is one of those points where retirement starts feeling a lot less theoretical. Most people are beginning their highest-earning years, retirement accounts have hopefully had time to grow, and their mortgage may even be paid off.
However, retirement is close enough that financial gaps in your retirement plan become harder to ignore. That's why paying attention to your net worth can be important.
Net worth is the value of everything you own after subtracting your debt, providing a fuller picture than income alone. Here's how the typical 48-year-old's savings stack up.
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The average net worth sounds impressive until you look closer
According to the Federal Reserve's 2022 Survey of Consumer Finances, households headed by someone aged 45-54 have an average net worth of about $971,270. However, the median is much lower at $246,700.
The median is the "middle" number in the data. It's where half of households have less, while half have more. The nearly $730,000 gap between the average and median tells an important story. A relatively small group of wealthy households owns a large share of the nation's wealth, pulling the average much higher than what most families actually experience.
For readers wondering how they compare, the median is usually the number that matters.
Why the average can be misleading
Whenever net worth statistics make headlines, the average figure tends to get the most attention.
The problem is that wealth in the United States is heavily concentrated. A relatively small number of households hold an enormous share of the total assets. Their wealth pulls the average higher and higher, even when many households haven't experienced the same gains.
Think of it this way: If nine households have a net worth of $250,000 and one household has $8 million, the average will look much larger than what most people in the group actually have.
Where does net worth usually come from at age 48?
Many people imagine that net worth is something sitting in a bank account. However, most wealth at this age is tied up in a few large assets.
Home equity is the biggest one. Someone who bought a home 10, 15, or 20 years ago has probably benefited from a combination of mortgage paydown and rising home values.
Retirement accounts are another major contributor. By the late 40s, workers who have consistently contributed to a 401(k) or IRA may have accumulated a sizable balance, especially if they've received employer matching contributions along the way.
Other common assets include:
- Savings accounts
- Brokerage accounts
- Certificates of deposit
- Small business ownership
- Vehicles and other personal property
At the same time, debt still plays a role. Mortgages remain common, and some households continue to carry credit card debt, auto loans, or student debt well into their 40s.
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The bottom quarter of households are running short on time
One of the less encouraging findings in the Federal Reserve data is how many households have accumulated relatively little wealth by their late 40s and early 50s.
For those in the bottom 25% of the age group, retirement could become increasingly difficult without significant changes in savings habits. The challenge is mostly about the amount of time remaining.
A worker who falls behind in their late 20s has decades of potential investment gains. At 48, the window is much smaller. Every dollar can still make a difference, but that difference is smaller than a dollar invested earlier.
How much should 48-year-olds have saved?
According to Fidelity, a useful target is to have roughly six times your annual salary saved for retirement by age 50. That means if you make around $60,000 a year, you'll want to save about $360,000 for retirement. If you make closer to $100,000 a year, you'll want to save close to $600,000.
That guideline doesn't guarantee that someone will be fully prepared for retirement. There are many other factors involved, such as future spending, pension income, and Social Security benefits. However, it does provide a pretty straightforward way to measure progress and see if you're on track.
Someone approaching age 50 with significantly less than six times their salary saved may want to take a closer look at their retirement plan.
What to do if you're behind
Discovering you're behind your peers isn't exactly pleasant. The good news is that age 48 is far from the financial finish line. There are several strategies that can help strengthen long-term retirement prospects.
- Increased retirement contributions: Many workers underestimate the impact of raising contributions by even a few percentage points. A modest increase today can translate to tens of thousands of additional dollars by retirement, particularly for workers who still have 15 to 20 years left in the workforce.
- Focus on expensive debt: High-interest credit card debt can quickly consume money that could otherwise be invested. Paying down balances can improve monthly cash flow and free up more money for savings.
- Make a plan for home equity: For many households, home equity is their largest asset outside of retirement accounts. Some retirees plan to stay put and enter retirement mortgage-free. Others eventually downsize and use some of the proceeds to support retirement spending.
Bottom line
It may look like the average 48-year-old is approaching millionaire status on paper. However, the median net worth tells a very different story.
With a typical household net worth of $246,700, many Americans are entering the final stretch before retirement with far less wealth than the headline figures suggest. That's why it's important to look beyond averages and evaluate your own retirement plan based on your savings, debts, and long-term goals.
In many cases, peak earning years are still ahead for workers in their late 40s. According to ADP Research, income usually peaks between 45 and 64, which means that someone at 48 has many years of high income left. Sometimes, this is also when expenses like child care or college costs begin to decline.
If you've never taken the time to see how your retirement savings stacks up against recommended benchmarks, now may be one of the most valuable times to do so.
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