Key takeaways

• A massive 74% of U.S. adults don’t think it’s likely they will ever achieve their definition of a “high” net worth.*
• People tend to underestimate “high net worth,” citing $400,000 as the median average, which is significantly less than the broadly accepted definition of a HNWI: someone with at least $1 million in liquid assets. Getting clarity on your net worth is an important step toward financial wellbeing.
• Retirement investing plays a critical role in many millionaires’ portfolios. Of high-net-worth individuals who use the Empower Personal Dashboard™, retirement accounts – like 401(k) plans and IRAs – contribute 55% of their overall wealth.
• Tracking your net worth over time can be a valuable indicator of your financial health. Yet only 35% of U.S. adults are confident they understand what “net worth” means, even though most (91%) have heard of it.
• Michelle Brownstein, a CERTIFIED FINANCIAL PLANNER™ professional who works with high-net-worth clients, comments on the importance of net worth and advises how to build wealth over time.

Top Google searches around the concept of “net worth” read like a lineup of the rich(est) and famous: Jeff Bezos net worth. Elon Musk net worth. Kanye West net worth.

Most U.S. adults (91%) have heard of “net worth,” but only 35% are confident that they know what it means, according to a recent Morning Consult survey* of 2,200 adults commissioned by Empower.

But why does “net worth” even matter?

Everyone has a net worth. And knowing yours can help you manage your money better, according to Michelle Brownstein, a CERTIFIED FINANCIAL PLANNER™ professional and vice president of Empower Private Client Services.

“Your net worth is a bird’s eye view of your complete financial situation,” she says. “Tracking it over time is a valuable indicator of your financial stability.”

What is ‘net worth’?

Your net worth is what you own minus what you owe. You can calculate yours by adding up your assets and then subtracting your liabilities. Brownstein recommends Empower’s free net worth calculator, which aggregates a person’s financial accounts for real-time net worth tracking. Empower’s free tools enable more than 3 million U.S. households to plan for long-term goals like retirement.

Although the concept of “net worth” may sound straightforward, there’s often disagreement about exactly what should be included in a net worth calculation.

Assets & liabilities

For instance, only 35% of the U.S. adults we surveyed feel a mortgage should be factored into a person’s net worth, even though 59% agree they’d include home equity.

Checking and savings accounts, property values, financial investments and retirement funds are the only factors that the majority of U.S. adults would include in a net worth calculation. All of these are assets.

“It’s interesting that most people include their cash in net worth, but far fewer consider their debt,” Brownstein says. “This is simply incorrect as net worth by definition is total assets netted out against debt. Knowing where you stand can allow you to create a plan for debt management.”

What’s the average net worth?

Most (74%) people believe the average net worth of a U.S. adult is less than $100,000. A third of respondents (33%) think the average net worth sits between $10,000 and $29,999.

People’s net worth often varies by age, first as they increase their income and diversify their assets, and then withdrawal from earnings in retirement.

This is evidenced by the net worth of people who use the Empower Personal Dashboard. If the averages seem high, it’s because affluent households drive the figure up. The median net worth may provide a better idea for benchmarking.

Anonymized user data from the Empower Personal Dashboard accounts as of April 1, 2022

What is considered high net worth?

A person with a high net worth is known as a HNWI (“high net worth individual”). U.S. adults we surveyed gave a wide range of responses for what they’d consider a HNWI; the median average landed at $400,000.

This figure is much lower than the broadly accepted definition of a HNWI: someone with at least $1 million in liquid assets. Despite these discrepancies, the vast majority of adults we surveyed (74%) still don’t think it’s particularly likely that they’ll ever become a HNWI themselves. Only 3% say they already are.

However, knowing your net worth is an important starting point, according to Brownstein.

“In many cases, you don’t need to be a HNW investor to achieve your goals and long-term retirement needs,” Brownstein says. “The key is to make a plan and have a goal you’re working toward. Most likely, this does entail setting a net worth goal that will allow you to sustain your lifestyle when you retire.”

What makes a HNWI?

Here are the top six factors U.S. adults think are important to achieving a “high” net worth:

• Frequently checking in on and tracking their finances (65%)
• Having a high salary (64%)
• Having high earning potential from multiple sources (63%)
• Maintaining a diversified investment portfolio (59%)
• Being very frugal with spending (57%)
• Investing in property (55%)

Interestingly, nearly 3 in 10 (29%) think that getting help from family or receiving an inheritance is also important to achieving high net worth.

High earning potential

Those we surveyed place a high value on earned income. In order to achieve a high net worth, respondents believe a person needs to earn $100,000 a year. Income can certainly help, but it’s not everything.

“Making money is only part of how a person builds wealth,” says Brownstein, who works with high-net-worth clients with at least $1 million (and up to $30+ million) in their portfolios. “It’s also important to make sure your money is working as hard for you as you work to earn it.”

Diversified investing for the long haul

Brownstein says that today’s affluent have learned to make money “work” by earning interest, dividends, and returns.

Although most survey respondents (59%) agree that it’s important to maintain a diversified investment portfolio, fewer (46%) prioritize maxing out retirement accounts.

This may be to their detriment. Empower data indicates that retirement accounts – like 401k and IRAs – constitutes nearly 55% of the wealth of high-net-worth individuals.

Anonymized user data from the Empower Personal Dashboard, accounts $1-5M net worth as of April 1, 2022

“Tax-advantaged retirement accounts can be powerful investing tools,” Brownstein says. “If a 401(k) employer match is available to you, try to at least contribute enough to take advantage of it. As your income increases, consider increasing contributions to your retirement and brokerage accounts – don’t let cash sit idle.”