The Top 1% Net Worth Amounts By Age

Mega Mansion - What Is Considered Rich?

Tom and Gisele’s mansion

People like to throw around random net worth figures all the time when asked how much is considered rich or how much they would need to never work again. Often, the figures just sound nice, like saying “one meeeeleon dollars” without any mathematical justification.

This post puts some numbers behind ascertaining how much wealth one needs to be in the top 1%. Remember, having a large net worth is better than having a high income. The government goes after income more than it goes after wealth. For example, you can live in a $8 million mansion and get Universal Healthcare subsidies if you make less than ~$94,000 a year with a family of four.

So what do we know?

Based on my Top 1% Income Earners post, we know that in order to be in the top 1%, you’ve got to earn at least $380,000 in gross income a year. The data comes from the all-knowing IRS.

Based on my Net Worth For The Upper Middle Class post, we learn that the net worth range for the top 15% of all Americans between the ages of 45 – 74 is around $700,000 – $830,000.

Finally, I’ve shown numerous examples as to why earning roughly $200,000 – $250,000 gross a year per person and $300,000 a year per couple is the ideal income for maximum happiness. Being rich is sometimes a state of mind, and I’ll use these income figures in my analysis as well.

Given these data points, I’d like to construct two simple models to demonstrate what I think should be considered top 1% rich. All wealth and no income is not ideal. Similarly, all income and no wealth is not ideal either. There needs to be a balance.

Want More Money? Ask Yourself This One Question

Believe In Yourself, Squaw Valley

Once you believe, it’ll start raining money

In order to get rich, one of the most important things is believing you deserve to be rich. There are trillions of dollars out there for the taking. Why shouldn’t you enjoy some of the world’s prosperity as an honest, diligent, and talented individual as well?

I began developing my money mindset after reading countless stories of CEOs earning millions of dollars while driving their companies into the ground. They would get massive multi-million dollar severance packages for crap work that even a baboon could do. As soon as I started believing in my worth, my confidence shot up and the money started coming in.

IBM’s CEO got a $100,000 base pay raise to $1.6 million in 2015 along with a $3.6 million bonus in 2014, and a $13.3 million stock incentive reward payable in 2018. Meanwhile, IBM is down ~20% over the past two years while the S&P 500 is up 40%, a 60% underperformance! For half the compensation, you and I could do just as good a job as the IBM CEO. I’m picking on IBM here because I bought the stock in my active portfolio. One day this dog will bark!

On a more common level, I’ve seen people who are utterly unqualified get hired for jobs making multiple six figures with multiple six figures in stock options. Every time I see such an event I’m thinking to myself a couple things. The first is, What the hell were they thinking?!

The second question is the subject of this post.

Social Security Will Make Us All Millionaires In Retirement

Social Security Makes Us All MillionairesWhen I was driving home from San Mateo one day I took a wrong turn and ended up at Hillsdale Mall. There I saw an amazing relic, a Barnes & Noble bookstore! Before 2011, I used to spend an hour every week reading personal finance books at my local San Francisco B&N. It was a lot of fun, but like the trees in Dr Seuss’s story, The Lorax, the stores began disappearing.

There’s nobody I know under the age of 40 who believes Social Security will be paid in full when it’s time to collect. Maybe half of what’s owed, but certainly not 100%. As a result, many have smartly decided to write-off Social Security from their retirement plans in order to focus on accumulating enough assets on their own. Depending on an inefficient government during our golden years is dangerous. Instead, we must max out our 401ks and IRAs, while investing even more into after-tax investments.

Out of all the books on the Personal Finance bookshelf, I decided to pick one up on Social Security because it’s been off my financial radar screen for years. Here are some important bullet points we should all know about a program that will make us all millionaires if we work long enough!

The Average Net Worth By Age For The Upper Middle Class

Upper Middle Class LifestyleThe upper middle class, aka the mass affluent, are loosely defined as individuals with a net worth or investable assets between $100,000 to $2 million. Some also define upper middle class as those who are college educated with incomes in the top 15% – roughly $100,000 or greater for households or $63,000 or greater for individuals.

The upper middle class is different from the rich because there’s a good chance everybody can achieve mass affluent status if they work and save for a long enough period of time. The mass affluent didn’t inherit their money, they earned it through hard work. On the other hand, getting rich often takes a tremendous amount of luck.

Fight For The Deferred Compensation You Deserve

Deferred compensation

Make sure they pay you

Money doesn’t feel very special most of the time because we work hard for our money. When we get our paycheck or the proceeds from a successful investment, of course we deserve the money. It’s when we win the lottery or find a dollar on the street when we start experiencing that giddy feeling money sometimes brings.

I got a nice surprise in the mail from my old employer the other week. It’s shocking to think it’s been over three years since I last worked a stable job. The mail simply notified me that another tranche of employer stock was going to hit my brokerage account. Sweet! I haven’t thought about receiving deferred compensation in a while now given I’ve been so busy writing, consulting, finding new tenants, and managing my never ending bathroom construction.

Finance industry bonuses are generally broken out into cash, stock, and private investments, depending on your seniority. The more senior you are, the less cash you get. I was a Director (one up from VP) at my old shop, so my bonus was heavily weighted towards deferred compensation that was spread over three to seven years! That’s how firms make it expensive for employees to ever leave.

If you quit your job, you will lose your deferred compensation in finance much like how you’d lose your remaining unvested stock grants if you work at a startup. But if you have a dialogue with your manager, you just might be able to keep what’s yours.

Remember, everything is negotiable. The sooner you realize this, the more wealth you’ll be able to create!

The Cost Of Traveling To Asia: Time For Another Business Trip!

Angkor Wat, Cambodia by Linda Russell

Angkor Wat, Cambodia

Much of Financial Samurai’s culture is about bringing various worldwide perspectives to financial topics we care about. If we can assemble the best aspects of each culture onto one site, we could create a valuable resource of wealth and happiness for millions.

From 2011 – 2014, I traveled to Europe for several weeks at a time to understand the happiest people on Earth. We looked into more sensitive topics such as combatting apathy and whether it was so bad that America was turning into Europe with higher taxes, increased welfare, and an overall larger government presence.

I could go back to Hawaii or Lake Tahoe for a vacation, but I’ve decided it’s time to return to a region where I spent the first 13 years of my life. It’s been four years since I’ve been back and I’m curious to see how things have changed.

On this business trip, I’d like to research the following questions:

* Why are the Chinese so dominant in business in Malaysia? Malaysia is mostly made up of Malays, Chinese, and Indians with several rules favoring Malays. I wonder if those rules still exist. Are countries around the equator less productive? Or is this some type of misconception? I grew up in KL from 1988-1991 and want to better understand the country now as an adult. 

* What is the latest sentiment about China from the Taiwanese? When I lived in Taipei from 1984-1988, there was a lot of fear that China would invade Taiwan and take the country over. Now that China and Taiwan have prospered so greatly over the past 25 years, do they dare disrupt their fortunes over politics?

* How do South Koreans feel about the situation in North Korea? What is the existing attitude of South Koreans towards Japan and the United States? Are the family empires (chaebols) gaining or losing their significance? How is the manufacturing industry competing so well against Japan’s manufacturing industry? I’ve only been to Seoul once, but Seoul seemed like a dirtier, more chaotic version of Tokyo. Korean culture is the one culture I’ve never been able to fully connect with. 

Become An Accredited Investor: Private Companies No Longer Want To IPO

Investors shut out of private investments if not accredited

Investors shut out of private investments

Do you know what the market capitalization was of Microsoft when they went public on March 13, 1986? A mere $500 million (~$1 billion in today’s dollars). If you had bought just 100 shares of Microsoft at the $21 offering and rode it all the way up to its peak in 1999, you would have cashed out for $1.4 million. Of course the stock came tumbling down and then back up. But you’d still have around $1 million bucks today. Not bad.

I remember working on the syndicate with my US colleagues during Google’s IPO back in 2004. We took the company public at a $23 billion market cap. Meanwhile, Facebook went public in 2012 at a $100 billion market cap. See a trend here? Companies are going public later and later in the game, meaning the public is getting less and less of the upside benefit!

The people who are getting rich are 1) Private institutional investors such as the hedge funds, venture capital funds, venture debt funds, and private equity funds, 2) Accredited investors who are able to invest in such private funds, and 3) The employees qualified enough to get jobs at these hot startups. Everybody else is shut out!

Seeing if we can balance the scale is one of the main reasons why I decided to consult with Sliced Investing. Sliced Investing is lowering the bar to let more investors gain access to private company deals and private investment funds that were never available to the public or regular accredited investors before. For example, I never would have imagined being able to invest as little as $20,000 into Lyft’s latest fundraising at a $2.8 billion valuation. What’s $2.8 billion when Uber raised money at a $48 billion valuation last year? Working intimately with private companies over the past couple of years has really opened my eyes.