Personal Finances

My Financial A1C

The A1C is the number that a diabetic uses to determine how well they’re doing managing their diabetes. Over time, a diabetic who consistently runs a high A1C, they face significant health risks. By checking their A1C regularly, diabetics can track how well they’ve been managing their diabetes over time.

When I read about J. Money’s “Lifetime Wealth Ratio”, I thought about how similar it was to the A1C. The LWR could be used as a raw score to tell myself how I’ve been doing in saving for retirement. In a nutshell, the LWR measures how much of my lifetime earnings I’ve been able to retain. It’s:

LWR = Total Net Worth / Total Lifetime Earnings

Calculating my network consists of summing up my retirement accounts, taxable accounts, bank accounts, savings accounts, and estimated property values, and then subtracting from that my mortgage, debits and other liabilities.

Computing my total lifetime earnings involved logging into my account at https://www.ssa.gov/ and look at my Earnings Record. This record includes any wages reported to the Social Security Administration over my life and lists both earnings taxed for Social Security (which is capped) and Medicare (which is uncapped). I decided to computed my LWR using my Taxed Medicare Earnings because it was uncapped and a more honest picture of how I’m doing:

My LWR is near 35% which according to J. Money’s made-up scorecard is doing pretty good. Those negative years were when I was in school and the bump around 2013 was a job change. The trend looks good, up and to the right. With compounding, inflation, and property appreciation, I wonder if it will reach 100% or higher.

What’s your LWR? I’d love to hear if you think this is a useful measurement or not.

Hasta luego!

2 thoughts on “My Financial A1C

  1. Before the recent crash, I was at about 80%. After the crash, I’m at 65%. Not sure what to make of those numbers. They ignore gov’t transfers during my decade of poverty (EITC, etc), so my LWR is therefore overstated.

    1. This crash has been crazy. I haven’t checked yet how it’s affected my number and probably won’t until we’re a few months past it. Stay healthy and safe!

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