≡ Menu

Are You Worth More Than You Earned?


Are You Worth More Than You Earned?

Have you ever wonder how much money you’ve earned over the years?  I mean, it has to be a sizeable sum if you’ve been in the workforce for a while. I was thinking about this and came up with a natural follow up question. Is our net worth more than what we’ve earned? After all, wealth is what you keep, not what you earn. We have been maxing out our 401k and invested in passive income for years. As a result, our net worth is pretty good. So I thought our net worth is higher than our cumulative earnings. You might think you’ve got this one as well, but hold on…

This question is simple and the answer isn’t that hard to figure out. However, you might be disappointed with the answer. It is extremely difficult to be worth more than you’ve earned, especially when you’re younger. It gets a little easier as you age because of compound interest, but I’m sure only very few households can achieve this impressive feat. That’s because saving and investing aren’t enough. You need a lot of time and luck as well. It is not impossible, though.


For most of us regular employees, it is very unlikely to be worth more than we’ve earned. First, taxes take a big bite out of our paychecks. After that, we all have bills to pay. Money gushes out every month for housing, healthcare, transportation, food, clothing, entertainment, cell phone, and all kinds of other stuff. It’s tough to save when you add up all the expenses of modern life. In addition, we need to invest those savings. It is mathematically impossible for your net worth to surpass your cumulative earnings if you simply save it. Even if you save 50%, your net worth will only be 50% of what you made. You need to invest and grow those savings to even have a chance.

Financial advisors recommend saving 10% of your income for retirement. This might be fine if you plan to retire at 67, but 10% won’t cut it here. Your net worth will never catch up to your total earnings by saving 10%. You’d need to save and invest at a much higher rate to win this one. Let’s look at our household as an example.


First, we’ll look at how much we’ve earned over the years. The easy way to figure this out is to head over to socialsecurity.gov and check your Social Security statement. Great news – we can login after hours now! Previously, you could only log on during East Coast working hours because they shut down access in the evening for server maintenance. That was silly because the internet is accessible 24/7. Anyway, here is a graph of our household earned income.

Household earnings history

This graph is actually pretty neat to go over. My earnings increased rapidly when I graduated college and started working full time in 1996. It kept rising and peaked at $200k in 2012 when I quit working full time. The zenith in 2012 was an anomaly because I worked just 6 months and sold a bunch of stock options. Part of the gains was counted as earned income. As expected, my earned income took a sharp dive after I retired from my engineering career. However, I still had some income from blogging after early retirement.

My online income was excellent in 2017. It was the best year so far as a blogger and I made $65,388! It is so gratifying to make income doing something I enjoy. Self-employment is a much better fit for me than working in a corporation. Unfortunately, blogging isn’t very passive at this point because I spend 20-30 hours per week on it. That’s fine for now because I still enjoy blogging and I have time. Once our son goes off to college, I want to travel more and I’ll probably cut way back. That’s 10 years away, though.

Now, let’s see Mrs. RB40’s graph. She graduated at the same time I did, but went off to the Peace Corps for a few years. When she got back, she started working and gradually increased her income. In 2005, she quit work to get her Master’s degree and interned for a few years. Her earnings shot up after that and it is still rising at a good clip. She is doing very well with her current career and she isn’t ready to retire early yet.

Overall, our household income graph looks great and we’ve been able to save a sizeable amount every year. Here is what surprised me. Our cumulative income since 1991 is $2,909,858! Wow, that’s a ton of money. I can’t believe we earned almost 3 million dollars since we started working. That’s pretty amazing. You rarely notice how much money flow through your hands. We saved and invested diligently over the years (mostly), but our net worth is still below our cumulative earnings.

Net worth

Below is the chart of our net worth VS our cumulative earned income. The RB40 household started off at $0 in 1996 and we’ve done relatively well over the years. As you can see from the graph, our net worth is consistently below our cumulative earnings. This is expected because we have expenses. Also, we never received any large windfalls such as an inheritance or lottery winnings. Everything we have, we built from what we earned.

Household net worth

Unfortunately, I didn’t keep close track of our finances until about 2005, so we’re missing some data points. The interesting thing here is how much 2007 and 2008 set us (along with everyone else) back. Our net worth curve took a detour, but it is slowly catching up to the cumulative earnings curve. The last few years have been really good. The net worth is steadily catching up to than the earnings. At this rate, the two lines might intersect soon. However, the stock market has been very volatile in 2018. It might be difficult to grow net worth over the next few years. We will probably see a setback like in 2007 again at some point.

We’ll continue to invest and our net worth should surpass the earnings eventually. It might take more than a few years, but we’ll just have to keep at it. The next inflection point will be when Mrs. RB40 retires. She plans to retire in 2020, but it’s not set in stone. We’ll see what happens in the next few years. Anyway, while this is a difficult metric to achieve, it is possible with high saving rate and consistent investing over many years. We are getting really close at this point.

Saving Rate and Compound Interest

The best way to beat this is to increase your saving rate. I used our data to plot 10% to 50% saving rates. The portfolio is the standard 60/40 split between stocks and bonds. I used real historical data for the S&P 500 and U.S. Treasury bond to be more realistic. Check out the graph below.

Saving Rates

If we had invested 50% of all our earnings since we started working, our net worth would have surpassed the cumulative earnings in 2015. The 50% curve really shoots up in the latter years. That’s compound interest at work.

We saved and invested when we were young, but not at that rate. It’s a lot easier to save when you make more money. When we were making $60,000 per year, we couldn’t save as much because most of our income went to basic necessities.

I’m not discouraged, though. Our investments are compounding at a good clip now and our net worth gain has been outpacing our income every year since 2012. Eventually, our net worth will eclipse than what we’ve earned.  This is why I said it’s a bit less difficult as you get older. At some point, your investment gains and passive income should outpace your earnings. This is especially true after retirement. Your earnings curve will flatten out and most of the income will be passive at that point. You can see the bend point in our earning line in 2012. Once Mrs. RB40 retires in 2020, it will flatten out even more.

Why is this so hard?

Now please take my poll below.

Are you worth more than you have earned? Net worth vs total income (pre tax)

View Results

Loading ... Loading ...

I suspect we’ll only see a few affirmatives here. This one is very difficult because you have to be in a sweet spot to achieve this.

  • Lower income workers can’t save because almost everything goes to cover the cost of living.
  • High income earners pay a ton of taxes and their earnings curve rises too fast. Their net worth can’t catch up.

You’d need to be in a sweet spot where you can save and invest consistently over many years to have a chance. Another way to achieve this is to earn outsized returns on your investments early on. Earning big returns on your investment will push your net worth curve up fast. Investing in real estate might be another short cut because rental income is not earned income. A big inheritance probably would help a lot as well.

Ultimately, this is just a thought exercise. It’s a huge bragging point if you’ve got this, but most people can probably retire comfortably without it.

About 16% of our readers’ net worth surpassed their cumulative income. That’s fantastic! How did you do it? Please share your secret with us. Is it due to time in the market as I suspected? Or something else?


Budgets are $exy has a post about this too – My Lifetime Earnings and The New Wealth Ratio. Circa 2015.

If you need help keeping track of your finances, try using Personal Capital to help manage your investment accounts. It is very easy to check on your net worth and investment with Personal Capital. Check it out if you don’t have an account yet. It’s free!

Disclosure: We may receive a referral fee if you sign up with a service through the links on this page.

The following two tabs change content below.
Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
Get update via email:
Sign up to receive new articles via email
We hate spam just as much as you
{ 106 comments… add one }
  • Grant @ Life Prep Couple June 8, 2017, 1:53 am

    Not even close. My first thought was we would be but I was thinking after taxes. When looking at a before tax income I don’t see us chasing down that curve until a few years after we both retire. Neat little study though.

    • retirebyforty June 8, 2017, 6:09 am

      Yes, after taxes is a bit easier. We’re there if we look at after tax income. This one is really tough even for high income earners. They have to pay a lot of taxes.

      • Slice Finance June 8, 2017, 2:47 pm

        Do you use after-tax dollars for calculating savings rate? I do. I’d think it’s the same for this calculation as well.

        • Jim Wang June 9, 2017, 4:41 am

          I think you have to use after-tax. Personal tax rates change and you have to “normalize” the numbers somehow so it’s comparable. We use after-tax figures… but we also store gross income just as a matter of completeness.

  • Ernie Zelinski June 8, 2017, 2:14 am

    First, I haven’t worked for a good part of my adult life. I am talking about 15 years of it, which involved going to University without indulging in summer employment, or simply just goofing off for two years at a time. When I have worked, it has been mainly through self-employment, and that is only a few hours a day, lately just one or two hours a day. I will be 68 in June so my adult life consists of 50 years since I was 18. I only had about 6 years of employment as an Engineer and another year and a half as a part-time Instructor at a private vocational school.

    So let me cover the part since 1989 when I wrote my first book. I have been self-employed since then. At the time my net worth was MINUS $30,000 due to student loans. Since then I have earned around $2.6 million in pre-tax profits from my books. Near as I can tell, I will have paid at least 30 percent of this in income tax over the years, leaving me with $1.82 million in after-tax earnings. Weird, my net worth today will approach that much if I count the value of my half-duplex, my retirement account (Untouchable), and my prosperity account (Touchable). This does not include the value of my intellectual property, mainly my two retirement books, which are presently earning me around $20,000 in pretax profits per month.

    How did I achieve this? By having Untouchables and Touchables in my savings bank accounts and stock investments — and touching neither!

    Ernie J. Zelinski
    International Best-Selling Author, Innovator, and Unconventional Career Coach
    Author of the Bestseller “How to Retire Happy, Wild, and Free”
    (Over 325,000 copies sold and published in 9 languages)
    and the International Bestseller “The Joy of Not Working”
    (Over 300,000 copies sold and published in 17 languages)

  • Buy, Hold Long June 8, 2017, 2:43 am

    Very interesting. When I voted not many had said yes, in fact, no one had said yes just yet. Interesting case, thanks for sharing your thoughts.

  • Lazy Man and Money June 8, 2017, 3:26 am

    I don’t have Mrs. Lazy’s Social Security login handy, so I can’t complete the exercise, but I am fairly sure we are not close.

    We are just getting to the point now where our net worth each month grows by more what we earn. I call that the investing inflection point.

    We could probably strive for a goal like this and perhaps achieve it way down the line. However, I think it would be a hollow victory as it would have amounted to not living the best life we could have. To take one of your examples, we wouldn’t skip out on our trip around the world to try to close the gap just to reach a magic number to pat ourselves on the back.

    It’s still a fun exercise.

    By the way, this sounds like J$ from Budgets are Sexy’s version of the Lifetime Wealth Ratio – http://www.budgetsaresexy.com/total-lifetime-earnings-wealth-ratio/

    • retirebyforty June 8, 2017, 6:14 am

      I don’t think anyone needs to make this their goal either. It’s highly dependent on the ROI and most of us don’t need that much money for a comfortable retirement.
      You’re right about J$. That was 3 years ago and it took that long for me to write a follow up. 🙂

      • Adam June 8, 2017, 6:49 am

        J$’s LWR was so inspirational to me that I opened a separate tab on my household finance google doc spreadsheet to track it, updating SSA earnings (and fed/state/local taxes paid) each year and populating our net worth from another sheet whenever I manually update our account values. 42.84% — not terribly impressive, but I’m certain we’re ahead of most of our peers.

        Thanks for this post! It’s oddly reassuring to see how others achieved the same goals.

        • retirebyforty June 8, 2017, 8:46 am

          Keep it up! I’m sure you’ll get to 50% soon. Then it will keep getting better.

      • Lazy Man and Money June 8, 2017, 1:59 pm

        I didn’t mean to say that you “must have been inspired” by J$. Great minds think alike ;-).
        I’ve had similar things to happen to me with my blog.

  • Mustard Seed Money June 8, 2017, 3:30 am

    Unfortunately I am not worth more than I’ve earned. I’m rapidly approaching that mark but not quite there yet. Over the past 5 years I have been able to bump my savings rate up to 65% of my take home pay and 75% of my overall pay. My net worth has basically tripled in those five years a=and continues to steadily go up. The key for me was paying off my mortgage and then investing like a maniac since then.

    • retirebyforty June 8, 2017, 6:14 am

      Oh wow, great job! 75% saving is so much. Keep at it and you’ll be there soon.

  • Max Your Freedom June 8, 2017, 3:55 am

    I did this exercise last year, and was as surprised as you when I calculated cumulative earnings over the past 20 years or so. We ended up around $3M on a gross income basis. Our net worth hasn’t reached that level yet. We’ve been able to “retain” about 67% of our earning over the years if you include asset appreciation in our net worth number. Since we’ll continue to work a bit longer, our net worth curve will have a hard time catching up in the short term.

    This is a fun exercise. Thanks for sharing Joe!

    • retirebyforty June 8, 2017, 6:16 am

      Imagine how much people earned over 40 to 50 years and how much they kept. Most people just let money flow through their hands like water.
      $2M is a good chunk of change. Congrats!

  • FullTimeFinance June 8, 2017, 4:02 am

    Not even close since it was years before I got on the savings train. It has been rapidly catching up in recent years thanks to mR market and a much improved savings rate.

  • Jay June 8, 2017, 4:11 am

    Interesting article Joe, I hadn’t considered this calculation, but it’s a fun one. Right now I believe my net worth is less than lifetime earned income but I will pay more attention to this going forward!

    • David @ VapeHabitat July 26, 2018, 11:22 am

      Surely I am worth more than $10K/month))
      I am worth about $50K/month minimum)

  • FIREin' London June 8, 2017, 4:20 am

    Hi Joe,

    I am in the lucky position of having a greater networth (when all assets included) than my earnings total. This is down to two things really:
    1. Housing. Living in London, the house price growth has been insane. Even with the debt we carry to have got our home, the house price rises have knocked that out of the park (original home doubled in 12 years, new home has gone up more than 30% in less than 4 years)
    2. Constant and diversified Investments. I invest in a wide range of things, some of which have given some cracking returns which have really bolstered my investments – some luck in that!

    • retirebyforty June 8, 2017, 9:17 pm

      That’s great!
      Do you plan to stay in London or move to a cheaper location? We love London. There are so many interesting things to see and do.

      • FIREin' London June 8, 2017, 11:18 pm

        Hi Joe,
        It is more luck of being in the right place at the right time – it doesn’t help as the equity doesnt generate me any income, but there you go.

        I honestly don’t know – I am focusing on trying to be able to FIRE in London simply as then I will save more and it gives me the option – as you say there is so much to do, so many great restaurants (Gasp shock horror! :)) although we could always come and stay. For now though, heads down and try to save and make it to stay in London… let’s see!

        Well – give us a shout next time you come to London!

  • The Green Swan June 8, 2017, 4:55 am

    Great thought exercise Joe. I’ve actually run these numbers in the past and have kept them updated for curiosity sake. The hard part with high income earners is the increasing amount of marginal tax taken out.

    The other difficulty is high income earners typically don’t make a high income right away but it grows over time. That’s when the extra savings are available to invest, but it doesn’t give it much time to grow.

    It’s a challenge but it can be done. Definitely requires a frugal lifestyle and sound investing strategy. My wife and my net worth is up there, but not quite to the level of our cumulative incomes.

    • retirebyforty June 8, 2017, 9:18 pm

      You’re right about the high tax. That makes it harder to catch up. It’s easier if you earn a moderate amount and invest a high percentage of it.

  • Ms. Frugal Asian Finance June 8, 2017, 4:57 am

    Oh wow you were making really good money before you retired! I didn’t know I could check what I’ve earned throughout all those years on the Social Security website. But I don’t think it’s a lot since I’ve spent most of my life being a student ^.^

    I don’t know if we’re worth more than we earn since a lot of our income just goes to covering the basic necessities (i.e. housing, food). Mr. FAF is starting a new job, so hopefully our finances will turn over a new leaf soon! =)

  • Physician on FIRE June 8, 2017, 5:12 am

    Once you account for the now ~ $1.7M I’ve paid in taxes over the last 11 years, I’ve got a net worth that exceeds my after-tax earnings. We’ve had a nice run in the stock market after a big dip early in my career, and I’ve typically saved and invested the majority of my takehome pay.

    I wrote more detail in a post for InvesmentZen last fall http://www.investmentzen.com/blog/i-have-every-dollar-ive-earned-in-my-ten-year-career/


    • retirebyforty June 8, 2017, 6:18 am

      You’re not there yet. We’re looking at pre-tax income. You need $1.7M. 😉

      • Physician on FIRE June 8, 2017, 8:18 pm

        I do, but I don’t. Pretty much arrived at Enough. I won’t be surprised if we get there eventually, despite the fact that I plan to stop earning big money soon.


        p.s. Can I borrow $1,700,000?

        • retirebyforty June 8, 2017, 9:19 pm

          You’ll get there quicker once you stop making those big bucks.
          No loan to friends. 🙂

  • Mrs. Picky Pincher June 8, 2017, 6:14 am

    Yeah, I don’t think I am, but my net worth has definitely improved over the years. We’re still in the red, though, so it’ll be a while until we hit $0.

  • Mrs. Groovy June 8, 2017, 6:15 am

    Most definitely we’re worth more than we earned. When Mr. Groovy began his work career in 1986 his salary was $17,000. I had stretches of years where I earned less than $5,000. (I was an actress. At the time, earning $2,500 a year under union contracts was enough to keep health insurance and unemployment benefits. So I never fully realized I was living below poverty level.)

    Our highest combined salary before we retired was $130K. An influx of $250K from the sale of our NY condo didn’t hurt. But our investments did much better than that. Years of maxing out 401Ks, Roths, and other investing and keeping expenses low by moving to North Carolina are major contributors.

    • Mrs. Groovy June 8, 2017, 6:32 am

      P.S. Mr. Groovy thinks I’m either wrong, or it’s a close call. We don’t have SS statements in front of us as they’re on line. Last time I checked I had to unfreeze my credit freeze to prove who I was which was a pain.

      • retirebyforty June 8, 2017, 8:44 am

        I think it’s closer than you think. You worked for a long time and it adds up. Maybe you can check the next time you have to check social security. 🙂

  • Apathy Ends June 8, 2017, 6:28 am

    Not even in the same ballpark at the AE household!

    Really cool post Joe – totally agree, it is all about what you save/invest. I will have to play around with our numbers, but I expect it isn’t even close since our investments haven’t had time to compound and we have only been saving/investing diligently for a few years.

    • retirebyforty June 8, 2017, 8:44 am

      You’re young so you have a lot of time left to get there. Keep at it!

  • Jack June 8, 2017, 6:31 am

    We haven’t caught up to our total earnings yet but are closing in on it. Over the last 12 months we’ve increased our net worth at an average of $20,400 per month while we only made less than $15,300 per month. Love all that real estate and investment appreciation. If only it would go on forever. I’m assuming we’ll see a good hit to our NW pretty soon if the market goes down but that just means we get to buy our shares cheaper so I’m fine with that.

    • retirebyforty June 8, 2017, 8:46 am

      Great job! It’s a huge turning point when your net worth increases more than your earnings. There will be ups and downs, but we just need to keep going in the right direction. I’m fine with the stock market going down as well.

  • Sarah. June 8, 2017, 6:52 am

    I’m so impressed that you have numbers back that far, I wish (I love numbers, especially when they translate to $$$)!

    Truth be told, I didn’t realize that we might have enough to be FI until August 2015 and I didn’t start reading FI blogs until last month (of which I have my first, accurate, net worth statement). The good news is that all my saving and investing for the past 20 years means that we reached FI (somewhere along the way) which is great news because I’ve been a homemaker since 2005 and my husband is in the process of retiring!

    Some day, when I have the time, I’m going to try and find my previous tax filings and make a best guess at Earnings versus Worth (it won’t include passive income, although I’ve never taken out of my investment accounts so that will make things easier). What app do you use to create your graphs?

    Looking forward to following along on your journey. Thanks for sharing.

    Besos Sarah.

    • retirebyforty June 8, 2017, 8:49 am

      I wish we had those missing data from the early years. I think my net worth reached $100k around 2000. Not sure, though.
      Congratulations on achieving FI. That’s a great accomplishment.
      I just used Excel to create the charts.

  • Steve @ familyonfire.org June 8, 2017, 7:56 am

    Unfortunately this tough for us to check as we spent a lot of time working overseas which don’t show up on the SSA website. However it is an interesting thought exercise

    • retirebyforty June 8, 2017, 8:51 am

      Ahh… It would be harder with overseas earnings. The earnings are on your tax forms, right?

  • Friendly Russian June 8, 2017, 8:00 am

    Not even close to my total earnings, but I am aiming at it. We are maxing out all the pre-tax investments available for us and save in a taxable account as well.

    • retirebyforty June 8, 2017, 8:52 am

      Keep at it and you might get there someday. 🙂

  • Al June 8, 2017, 8:03 am

    Yes. We are worth more than we have earned although Mrs. still earns money. Real estate has been kind to us and allow us to hold greater asset value with less money. Being worth more than you earned is ultimate definition of FI.

    BTW, until you can devowed yourself of the mental aspect, you are not either FI or retired. Must happened psychologically as well as physically to be true.

    Great question.

    • retirebyforty June 8, 2017, 8:53 am

      That’s great! Congratulations! I thought that real estate would be the wild card for a lot of people.

  • J. Money June 8, 2017, 8:19 am

    The Lifetime Wealth Ratio™!!!! YES!!!!

    One of the best calculations you can make with your money. And I know so because The New York Times said so when thy referenced it many moons ago 🙂 We need to make it “a thing.”

    • retirebyforty June 8, 2017, 8:54 am

      You’ll get there someday. 🙂 The lifetime wealth ratio is a fun calculation to make. It’s really tough to get more than 1, though.

  • Dividend Growth Investor June 8, 2017, 8:32 am

    Ha, I seem to be a little over 100% as of December 2016 ( using net worth and lifetime income for the same time period for comparability purposes). Pretty cool actually. Over time, the power of compounding should make sure that this ratio is much higher…

    • retirebyforty June 8, 2017, 8:55 am

      Congrats! That’s really awesome and shows dividend growth investing is the way to go. Great job.

      • Dividend Growth Investor June 8, 2017, 9:47 am

        Well, it is also likely due to being an aggressive saver too, and living like a college student up until a couple of years ago. It is probably also due to some luck, which is unlikely to be repeated again. I think you are very close to 100% yourself – will probably get there in a few years..

  • Mr. Tako June 8, 2017, 8:37 am

    Boy that’s a tough one Joe. We have quite a ways to go before we exceed our pre-tax earnings.

    If I look at post tax earnings, things look better. We’ve roughly doubled what we saved over the years. As we had a 50% or better savings rate, this means we’re slightly above the post-tax number.

    • retirebyforty June 8, 2017, 8:57 am

      If we’re lucky, we’d be there very soon. Maybe 2-4 years. However, I think it’s better to get there later. It’d be better to invest more when we’re still youg.
      Post tax looks better for us too. I’m not sure how much taxes we’ve paid over the years, though. I’ll have to go through all our tax forms.

  • The Tepid Tamale June 8, 2017, 9:58 am

    Not even close, but what a great exercise! Thinking from that perspective can really help you as you think about purchases. You may be less inclined to spend the money, when you are trying to get your net worth to surpass what you have earned!

  • Tim Kim @ Tub of Cash June 8, 2017, 10:09 am

    Hmm, not even close for us! My wife and I are still relatively in the beginning phase of our careers/working life. Tuition payments have hurt the most. But as you’ve pointed out, it should get easier down the line. Since time + compounding results in exponential returns, and not linear ones!

  • savvy June 8, 2017, 10:14 am

    Unfortunately, it’s a no for me. I’m only worth about 50% of what I’ve earned after subtracting SS and Medicare.

  • Retiresoon June 8, 2017, 10:37 am

    Taxes is a killer on this for high income earners …

    If uuu make $500k:
    -$200k taxes
    Let’s say you save 60% = $180k
    That’s a 40% savings of gross and it’ll take a while to get that $180k to $500k … 15 years?

    • retirebyforty June 8, 2017, 9:24 pm

      Yeap, this is a hard one for both high and low income earners for different reasons. Quite interesting.

  • freebird June 8, 2017, 11:19 am

    That’s pretax W2 income only, right? My records go way back so I can see they crossed after 12 years of full time work. Must have been the late 1990s bull market that pushed it over. Since that time it’s stayed ahead, except it dipped very slightly under at the end of 2008.

    This metric looks best for those who have been working longer and whose salary growth was heavily front-loaded (meaning biggest bumps early in their careers). Obviously a high savings rate is required along with investment returns at least matching the popular stock indexes. Picking the right lottery numbers can help too 😉

    • retirebyforty June 8, 2017, 9:25 pm

      Wow, that’s great! Just 12 years of full time work? That is very short.
      You must have saved a high percentage early on in your career. Great job!

  • Dads Dollars Debts June 8, 2017, 12:54 pm

    I am definitely not worth more then I earn. My net worth currently is maybe 2 months of income. Sad, but I am on the up and up with a $5-6 K increase every month in net worth!

  • Young and Finance June 8, 2017, 3:43 pm

    Yes taxes will have a major impact on how much of your income you are able to accumulate. Also lets not forget things such as benefits that are taken directly out of your paycheck. Although going to a good cause, it too has a negative impact on how much money you accumulate over time.

  • Martin Stone June 8, 2017, 7:06 pm

    Not even close – $9 million earnings, $4 million net worth. Taxes are the killer here especially years with large stock option gains. If I take out $4 million in approximate fed and state taxes then I am close.

    • retirebyforty June 8, 2017, 9:27 pm

      You still have $4 million. That’s better than 96% of the US (guesstimate.)
      $9 million earnings is up there too. Nice job!

  • Joe June 8, 2017, 9:43 pm

    Net worth way more than earnings due to company stock options, which aren’t counted towards my earned income. Also have a lot in appreciated stock which I haven’t sold.

    More interesting calcuation to me would be am I worth my cumulative AGI?

    • retirebyforty June 8, 2017, 10:21 pm

      Congrats! That’s great.
      You’ll pay a ton of taxes when you exercise those stock options, though.
      Is it possible to be worth more than your cumulative gross income? That counts investment income too. I guess you’d have a chance if you don’t sell.

  • Joe June 8, 2017, 11:33 pm

    Did you count investment income? Investment income would not have been included in the socialsecurity.gov earned income numbers. For example, those numbers don’t include dividends and interest. My stock option income was mostly in the form of long-term capital gains, so wasn’t categorized as earned income… That’s why I said maybe using AGI would be a more challenging metric for me.

  • Jim Wang June 9, 2017, 4:42 am

    While you saw the dip in 2007-2008, isn’t it amazing how quickly it recovered? I think that’s worth noting. 🙂

  • JC June 9, 2017, 5:10 am

    Interesting analysis Joe. Looks like I’ll have to do some digging to see where we stand, but I know we’re not close to being on par which is a shame although to be expected.

  • Mr ten June 9, 2017, 6:15 am

    What an interesting thought experiment!

    I like how the metric can be applied across all income levels to gauge financial success.

    Many people get caught up on the big net worth number, but you be making over a million dollars a year and never hit this ratio due to high spending and low savings.

    On the other hand, you could only be earning fifty thousand a year and have a higher ratio than those million dollar earners. In theory, because you have been forced to live on less, you could hit FIRE earlier.

    I’m definitely the wild card here due to real estate and have easily surpassed the Lifetime Wealth Ratio (LWR).

    It helps that buy and hold real estate is the most tax favored asset out there. Crazy how much earned income is taxed. My marginal tax bracket is always less than 3% as a result of the real estate portfolio and being classified as a reit pro.

    • retirebyforty June 10, 2017, 9:46 pm

      Real estate seems to be the common way to achieve this. Great job!

  • Erith June 9, 2017, 7:37 am

    I did this exercise a few months ago. I worked out exactly what both I and my husband earned from our first pay cheques onwards, and sadly we are nearer 60%. A combination of a spendy lifestyle for a few years, putting both our kids through private schools and university debt free, supporting my parents for a few years, and some gifts to start our kids off in their first homes. However since 2010, we have reversed the trend. Every year our net worth has grown by more than our income, despite some lovely holidays. So if I was doing it for just my retirement years, the picture would be entirely different!

  • Nicoleandmaggie June 9, 2017, 11:56 am

    I don’t need to look at the SS page to know we’re not even close.

  • Dave @ Married With Money June 9, 2017, 4:35 pm

    For sure a looong ways away. My net worth is realistically pretty bad – in part due to having a couple expensive cross-country moves.

    Over time, I’d like to start bridging that gap though. But honestly as long as I’m making good progress toward being financially independent I’m a happy camper 🙂

    • retirebyforty June 10, 2017, 9:48 pm

      I think that’s the right mindset. Great job. 🙂

  • UpFromWageSlavery June 9, 2017, 8:17 pm

    Yes! This fact actually just hit me a couple of weeks ago. I taught for seven years and lived a frugal life. But the lion’s share of what made it possible was the purchasing of three houses during the downturn. So the real secret was luck, but also heavily leveraged investment properties that have double and tripled in value in the past few years.

    • retirebyforty June 10, 2017, 9:48 pm

      Thanks for sharing! Great job with real estate.

  • Ten Factorial Rocks June 10, 2017, 6:21 am

    Joe, You are right on that you need to be in a certain sweet spot for this metric. As I calculate mine, I get that NW is almost at the same level of my cumulative pretax earnings. This metric is easier to achieve in 50’s more than 40’s more than 30’s, due to gains and passive income compounding. More than any instructional value, this is a ‘feel good’ metric in my view.

    • retirebyforty June 10, 2017, 9:49 pm

      It is a feel good metric. It feel like you achieve something that’s very rare. You’re almost there, keep at it! 🙂

  • Dividend Diplomats June 10, 2017, 8:35 am

    RB 40 –

    Damn! So close, actually, and that’s going to be mainly due to my 60%+ savings rate each and every month (some occasions are > 70%+). That’s what I’ll attribute it to – staying consistent with savings/investing and minimizing expenses as much as fricken possible. Maybe by 2019 I’ll cross, obviously/sadly – depends a bit on the markets.


    • retirebyforty June 10, 2017, 9:50 pm

      Great job! Keep at it. You’re right about the market. You’ll win either way, though. If the market drops, then it’s a good buying opportunity. 🙂

  • Ms. Montana June 10, 2017, 9:42 am

    I think we are a bit above, but that is in part due to years in the military where we had on base housing. And that we bought 3 homes that have all 2x to 3x thier value. Plus we rarely broke 50k combined income, so taxes have always been low.

    • retirebyforty June 10, 2017, 9:51 pm

      That’s great! Nice job. It’s pretty amazing how much you guys have been able to achieve with smaller income.

  • GetRichBrothers June 11, 2017, 3:44 pm

    Great read. I suspect it will be at least another decade and a half before I will expect my investing income to exceed my earned income. As you said, it’s the years in the market that will tip the scale.
    Take care!
    – Ryan

  • Done by Forty June 12, 2017, 9:12 am

    I’m definitely not at the point where we’re worth more than we’ve earned, and I think our financial independence plans might make it so we never do. Still, it’s a pretty cool group to aspire to.

    Cool post: a neat way to think about how much money has passed through our fingers over time.

  • Diva Q June 15, 2017, 12:23 pm

    This is a very interesting exercise Joe. Cumulative Income over 19 years is $1,927,258 and net worth is $1,775,500, I’m still roughly $152K short. Looking back my earned income in 1998, it was $23,630, wow that was so little, 11 years later I finally made 6 figure income.

    On the positive side of looking at this, I only spent $7,987 ($151,758 / 19) a year of my earned income for the past 19 years. And this is without accounting for all of those huge amount of taxes I’ve paid the past several years.

    • retirebyforty June 16, 2017, 5:01 pm

      That’s really good! Keep at it. You’re almost there.

    • Joe April 25, 2018, 12:27 am

      Wow, how did you spend so little? My gosh, that’s the most shocking comment I’ve ever read on a personal finance blog. What is your housing situation?

  • Lance @ My Strategic Dollar June 17, 2017, 6:35 am

    Does anyone ever feel like they are paid what they’re worth? Working for a company that you don’t own will never make you feel that way I don’t think. You’ll always be working for a company you don’t own and contributing to the bottom line for someone else….maybe that’s just me.

  • Terminator June 25, 2017, 1:15 am


    Can i ask you what job you had to make that much money ?

    Thanks 🙂

    • retirebyforty June 25, 2017, 8:59 am

      I was a computer engineer. I made pretty good income, but not really that high. Lots of people made more money than I did.

  • Mr. Mofi October 15, 2017, 8:12 am

    Great piece, thought provoking. Especially the point showing that real estate investing can lead to +100% ratio more easily than earning a wage and investing it.
    Currently, we are sitting at 24.04% of cumulative income as net worth. This is in the context of having started full time work in 2015 and(me at least) living the college student lifestyle for 10 years before that. I’m keen to project out when achieving a ratio of +100% will be possible. Right now that is so far off that the accuracy of the prediction would be questionable. Maybe if I stop earning as much and/or invest in a bunch of properties it could be achieved within 10 years. Challenge accepted!

  • Chris Urbaniak @ deliberatechange.ca April 23, 2018, 3:22 am

    Good morning Joe,

    Nice idea. I’ve tracked our (after-tax) savings rates for well over a decade, but never thought to compare total income to net worth. We’re doing well, although I’ll keep the specifics under wraps for now 🙂

    Here’s a thought, too: What if we all did a similar exercise but for the non-financial aspects of our lives? Of course this is a FIRE blog, but what good is FIRE if we’re not also giving back to society in some meaningful way? And so I pose the analogous question to everybody:

    Have you contributed more than you’ve benefited?

    This could be charitable giving, or leading and empowering others (leadership multiplier effect), or volunteerism, or raising a family to love others, or writing a popular instructional & inspirational blog, etc.

    In our case, like with most people I assume, we would absolutely fail the test of contributing more than we’ve received over our lives, although we’re certainly trying to change that and encourage others to do the same 🙂

    • retirebyforty April 23, 2018, 12:28 pm

      I think I gave back more than I got. The problem is the threshold is not that high. I don’t think I benefited that much from society. It’s mostly families that helped me out. I gave back plenty already and will give a lot more.
      Blogging is a great way to give back too. That’s what keeps me going. Thanks!

  • The Poor Swiss April 23, 2018, 4:47 am

    Wow, far from it! Even from a few years, it’s a lot of money that went through my account. Very interesting calculation.

  • Tom @ Dividends Diversify April 23, 2018, 4:51 am

    Hi Joe, Interesting question, that I don’t immediately have an answer for. I will have to do a little personal research on our past earnings. It kind of reminds of the Millionaire Next Door Book where the author had a theoretical formula of how much you should be worth based on current earnings. I thought that formula was a little misleading if current earnings were not representative of the past. Many times they are not. Tom

    • retirebyforty April 23, 2018, 12:29 pm

      Check your numbers and let us know. I think it’s really difficult to achieve.

  • jim April 23, 2018, 11:24 am

    Interesting topic.

    I did some rough math and figured if you save 20% of your pretax income and earn 10% investment returns than your net worth should exceed your lifetime earnings after working about 33 years. So its doable to hit before retirement for basicaly anyone but depends on having very healthy savings and good investment returns.

    My wife and I are at about 70% now and should hit the level in 5-10 years.

    • retirebyforty April 23, 2018, 12:30 pm

      33 years is a long time, but doable. I wonder if it will really work out in real life, though. Real life has a lot more ups and downs than a simulation. Good luck!

  • GYM April 23, 2018, 10:40 pm

    Wow $200K annually in 2012 at your career’s zenith! Way to exit while at the top! Your graphs are amazing.

    I recently added up my earnings since I started working and it is about the same or slightly below what I have saved up now with my net worth but this is mainly due to housing price increases and investing (I have to run the numbers again but can’t remember off the top of my head). I wasn’t exactly frugal with my money in my 20’s, spending $5000-$10,000 annually on travel 🙂

    • retirebyforty April 24, 2018, 8:43 am

      $200k was mostly due to my stock options. I had to exercise them before I quit. The graphs are pretty neat. It’s interesting to see how income correlate to life stages.
      Your net worth must be great then. Since you’re Gen Y, you didn’t have as long to accumulate. Nice job!
      We spent money on travel too. It was well spent. 🙂

  • Leigh April 24, 2018, 12:22 pm

    I’m actually pretty close – about 75% of the way there. Like GYM, real estate increases, aggressive saving, and a good run up of the stock market have made a big difference. I’m guessing if I looked at my combined numbers with my husband though, we will be a lot further and it will take a lot of time to get to 100% or further, probably until past when we both stop working.

  • Codrut @ AboutStrollersBlog.com April 25, 2018, 4:42 am

    You’ve said… ‘rental income is not earned income’ — how come? Is this in US?

  • Terry April 25, 2018, 10:08 am

    Healthcare is the real killer in retirement , most people have problems even affording insurance in retirement before medicare age and even employer insurance you can take with you is more expensive after you retire. Taxes, not so much unless you have high income if that is the case money is not a problem , right? Make a ton of money, save and invest.

  • Xrayvsn April 25, 2018, 10:48 am

    I actually just did a similar type financial evaluation of myself to see how I compared with the concept driven by the Millionaire Next Door about the prodigious accumulator of wealth. There methods didn’t quite apply to me because I am a physician so I had a few things against me (longer education means delay in earning; more education meant higher student loan debt, and low pay during residency with final jump when became an attending). Jim Dahle of White Coat Investor tried to address this issue for physicians with expected net worth based on years of practice and average salary. My numbers specifically were that my net worth ended up being 35% of my cumulative wage. Using white coat investor formula my ratio was 1.073 (so I had a little higher than expected net worth for my wages).

    I do have a question about the social security values listed. Do they include money that went to benefits (such as funding a 401k)? If so, then my cumulative wage earnings would be even higher accounting for that.

    Great topic and thanks for sharing.

  • Financial Sloth April 25, 2018, 9:22 pm

    Hey RB40. Great post. I just spent about 30m signing up and going over my SS account. That alone was worth your post. Thanks!

    We are in the minority that do have a NW significantly higher than our lifetime earnings for a few of the reasons you named. A good deal of RE income and some dumb luck (and significant) capital gains on a few properties combined with a small inheritance helped quite a bit. Another part is that we have never made “big” money. We are habitual savers and like to constantly reinvest what we can into passive income streams. We are now entering some better earning years, but if we just calculate prior years, total earnings is pretty weak.

    Our goal then is to keep NW ahead of earned income as our salaries and other earned income starts to grow.

    Wish us luck! – FS

    • retirebyforty April 26, 2018, 8:42 am

      Nice job! That’s very impressive. It’s better to be lucky than good. Keep being lucky!

  • It is funny you mention this …. I live overseas … and have doubled my gross total income over the past 20 years via real estate … so my present net worth is approximately double my past 20 years of income – and it was accidental … I just started buying houses and bam 🙂 Michael CPO

Leave a Comment