Dear Reader

About six weeks ago, I posted this chart on X.

It comes from The College Investor, and it estimates what your net worth should look like at every age from 30 to 45.

At 30, the number is about $72,000.

By 35, it climbs to roughly $193,000.

A 40-year-old comes in just above $500,000…

And by 45, the estimate reaches $711,000.

I asked people a simple question:

Are you above or below the number for your age?

The answers surprised me.

Some people were miles ahead. Others were well below the line. Overall, the responses looked surprisingly close to an even split.

Before we finish today, I’m going to ask you the same question.

But first, you need to understand what those numbers actually represent. You see:

These Aren’t Actually “Average” Millennials

Despite the headline, The College Investor didn’t survey a bunch of 37-year-olds and discover they each had roughly $317,000.

They built a model using a hypothetical millennial.
​
And their hypothetical millennial:

• Graduates with a bachelor’s degree
• Starts working at 22
• Remains continuously employed
• Carries typical student debt
• Saves consistently
• Invests along the way
• And eventually buys a home

The savings rate starts around 7% of income in the twenties and rises as the person gets older.

In other words, they’re not modeling some financial superhero. They’re modeling someone who follows a pretty normal wealth-building playbook and sticks with it.

So I wouldn’t dismiss the chart out of hand.

It does give you a somewhat reasonable picture of where someone COULD end up after following a fairly conventional financial path for a couple of decades.

But if you want to know what Americans actually have, you get a very different picture.

Here’s What Americans Actually Have

The Federal Reserve’s latest detailed household-wealth survey puts average net worth for people aged 35 to 44 at roughly $682,000.

The median is only about $156,000.

For households under 35, the gap is roughly $135,000 versus $33,000.

By ages 45 to 54, average net worth exceeds $1.2 million, while the median sits around $250,000 – one-fifth as much.

You don’t need a statistics degree to understand why this happens.

Imagine Elon Musk walks into a bar with a bunch of ordinary people.

Suddenly, the average net worth of everyone in the room jumps into the billions.

Nobody else got richer – one enormous outlier launched the average upward.

That’s essentially what happens with national wealth data.

A relatively small number of wealthy households drag the average far above what the person in the middle actually has.

But here’s a takeaway that I think is critical:

You Don’t Want to Be Anywhere Near the Median

The median gives us a much better picture of where the typical household stands.

But “typical” is not where I’d want to aim.

Look at what happens once you get close to retirement.

The median net worth for households aged 65 to 74 is roughly $430,000.

Using the rough 5% withdrawal rule I prefer, that supports about $21,500 a year.

And remember, that $430,000 includes the value of the house you live in.

So for many households, the amount actually available to generate income in retirement is considerably smaller.

Social Security and other income can certainly supplement that.

But the numbers still reveal just how far the typical household is from genuine financial freedom.

The median tells us where the middle is. It doesn’t tell us how the financially strongest households are doing.

For that, we need to look at percentiles.

Are You in the Top 10%?

DQYDJ took the Federal Reserve’s Survey of Consumer Finances and broke the data into wealth percentiles by age.

The numbers give you a much more granular picture.

For households aged 30 to 34, the median net worth is about $64,000. The top 10% starts around $436,000.

Between 35 and 39, you need roughly $1.14 million to cross into the top 10%.

At 40 to 44, that number rises to around $1.42 million.

And by 45 to 49 onwards, you need at least $2 million.

Now, these numbers can be useful benchmarks.

But eventually, they stop being very helpful.

Because the amount you need has much more to do with how much you spend than whether you rank in the 70th or 90th percentile.

Which is why I prefer a much simpler benchmark:

The Rule of 250

Take your monthly expenses and multiply them by roughly 250.

If you spend $5,000 a month: $5,000 × 250 = $1.25 million.

That’s your rough financial freedom number.

Why 250?

Because it roughly works out to a 5% withdrawal rate…

A rate where you can withdraw from your portfolio without running out of money for decades.

So instead of asking whether you have more money than the average 40-year-old, you should be asking something far more relevant:

How much do I need to fund the life I actually live?

That number can vary wildly from person to person.

If you spend $4,000 a month, the Rule of 250 gives you a target around $1 million.

Someone spending $15,000 a month needs closer to $3.75 million.

And even those are only rough estimates.

Your taxes, other income, investment returns, age, and spending flexibility can all change how much you actually need.

But the framework forces you to focus on the variable that drives your own financial freedom – your life.

There’s a reason it’s called personal finance – it really is personal.

The College Investor chart can show you one reasonable wealth-building trajectory.

Federal Reserve data can tell you what other households have accumulated.

Percentiles can show you where you rank.

None of them knows how much your life costs.

And once your investments can support that life without requiring another paycheck…

I consider you financially free.

That doesn’t mean you have to stop working.

I certainly don’t plan to.

I enjoy what I do, and I expect I’ll keep doing it long after I technically need the income.

The change is that work becomes voluntary.

You get to decide what deserves your time without a paycheck making the decision for you.

To me, that’s a far more meaningful definition of wealth than hitting some arbitrary percentile.

But even after spending this whole newsletter telling you not to obsess over benchmarks…

I’m Still Curious About Where You Land

As I said in the beginning of this issue…

About six weeks ago, I asked my followers on X whether they were above or below The College Investor estimate for their age.

The responses were surprisingly close to an even split.

Now I want to know about Letters From a Heretic readers.

Use whichever comparison feels most relevant to you – whether it’s The College Investor chart from the beginning, the Fed’s average and median numbers, or the percentile chart.

I just want to know one thing:

Do you consider yourself above or below average financially for your age?

Hit reply and tell me.

You don’t need to send your exact net worth.

Just give me your age and tell me above or below.