What Are You Really Worth?
Published on December 16, 2014
Are you worth your weight in gold?
Chances are, probably not. According to a recent New York Times article, Americans aren’t saving enough. To find out how you stack up, follow these three simple steps:
1. Know your Social Security benefits
2. Weigh your lifetime wealth ratio
3. Gear up your retirement game plan
Know Your Social Security Benefits
Your Social Security statement sums up all your taxable earnings over the course of your lifetime. You can access it online at www.ssa.gov/myaccount. Here are just some of the benefits of signing up for online access:
- Track and verify your earnings every year
- Estimate your future benefits if you are still working
- Secure a letter with proof of your benefits if you currently receive them
- Manage your benefits
Other important Social Security information you can get:
- Your monthly payment if you work until full retirement age (67)
- Your monthly payment if you work until 70
- Your monthly payment if you retire early at 62
- The number of Social Security credits you have. You need 40 credits to qualify for benefits, which you earn when you work in a job and pay Social Security taxes. (This is used to determine eligibility for retirement or disability benefits or your family’s eligibility for survivors’ benefits when you die.)
Having this information will help you and your financial planner make more informed decisions about your future and your retirement investments.
Weigh Your Lifetime Wealth Ratio
Let’s say that you started working in 2002 and your lifetime earnings are $729,500. Wow, that’s almost a million dollars!! Is that good? How does that stack up against others?
Well, it depends. Have your earnings been stable over the years in question? What are your current expenses? You need to look at more than just what you have earned; you need to take a hard look at what you have spent. Is the money going out as quickly as it comes in? Or do you save?
A useful number to help determine how well you are saving is the Lifetime Wealth Ratio. This concept was introduced by the budget blogger J. Money. If we look at the ratio of what you are saving in comparison to your earnings, it would look like this:
Net Worth ÷ Total Income Earned = Lifetime Wealth Ratio
|2004||45,000||First real job after college|
|2009||75,000||Real job + freelancing|
|2010||75,000||Real job + freelancing|
|2011||78,000||Real job + freelancing|
|2012||78,000||Real job + freelancing|
|2013||85,000||Real job + freelancing|
|2014||85,000||Real job + freelancing|
|Total Income Earned||$729,500|
|Total Net Worth (savings, cash, other assets)||$50,000|
|Lifetime Worth Ratio||14.59%|
The goal is to have as high a ratio as possible. If you have more than a 10 percent ratio you are doing OK; if the ratio is higher than 25 percent—even better. This shows that you are not only earning but you are saving and investing your money. And, compounding can help your savings even more!
Gear up Your Retirement Game Plan
Ensuring a comfortable retirement will not just happen by itself. And you can’t count on Social Security to be your retirement plan. Financially savvy investors know they need to have control of their retirement plan. And, for those who understand alternative investment options, a self-directed IRA can be a great way to build retirement wealth more aggressively. This investment vehicle allows individuals to invest in nontraditional assets that they already know and understand such as real estate, mortgages and other loans, private hedge funds, precious metals, limited partnerships, commercial paper and notes, and more.
For information about ensuring that your retirement game plan is in gear with a self-directed retirement plan, contact Next Generation at (888) 857-8058 or Info@NextGenerationTrust.com.
We do not give investment advice and strongly recommend you consult your trusted financial advisors about your specific self-directed Traditional or Roth IRA and your retirement investments.Back to Blog