What Is Considered Mass Affluent Based Off Income, Net Worth, And Investable Assets

Average Net Worth For Above Average Person

The middle class is the best social class in the world because nobody messes with the middle class. Politicians endlessly pander to the middle class in order to gain votes to stay in power. When you’re in the upper class, you become a target for hate groups who can’t stand success in the great USA. If you’re poor, well that just stinks.

But what about the mass affluent? You might have heard the term bounced around here and there on the TV, online, or on the radio. Surely including the words “mass” to signify a large population and “affluent” to signify wealth is an even better class than the middle class? As far as I can tell, the mass affluent are yet to be negatively targeted by hate groups.

In this post you’ll learn about the various financial definitions that aptly describe the mass affluent. Furthermore, we’ll discuss why being part of the mass affluent has its benefits.

WHAT IS CONSIDERED MASS AFFLUENT?

The main reason why the mass affluent is not assailed by hate groups is because the mass affluent is still a working class group. The mass affluent didn’t inherit their money, they earned it through hard work. The biggest gripe about the rich is the unfair advantages they use to get ahead.

When parents can buy their mediocre kid’s way into elite private universities and then use business hookups to land their privileged children high paying jobs, people get pissed off. I remember several of my classmates at Goldman Sachs who were there simply because their parents were GS Asset Management clients or senior government officials. There are thousands of bright students who never get a chance to get ahead because they either can’t afford to go to the best college possible, or lost out to more connected students.

When you’re earning a high six figure or seven figure salary and you’re paying a lower effective tax rate than someone making $50,000 a year, people will question how this is fair. It still amazes me that one can earn millions of dollars a year and still pay a 15% effective tax rate. But if you donate a lot to charity and make long term investments, you too, can get there. But let’s stop griping about the very rich. Let’s properly define the mass affluent.

Mass Affluent Definition By Income (Low Hurdle)

To be considered mass affluent by income, one must make at least 50% more than the median per capita GDP of your surrounding area. If you consider your surrounding area all of America, than you must earn at least $67,000 a year individually since the per capita GDP in America is currently around $45,000. The average household income is currently around $52,000, which means if you want to be considered a mass affluent household, then you must earn at least $76,000 a year.

In San Francisco, where I live, the median household income is roughly $73,000. I would therefore need to make at least $102,200 to be considered a mass affluent household. Do a quick search of your city’s per capita income or median household income and multiply by 1.5X to see your mass affluent income level.

Related: What Income Level Is Considered Rich?

Mass Affluent Definition By Investable Assets 

The financial services industry, an industry in which I’m currently consulting for, defines mass affluent as an individual or household who has $100,000 to $1,000,000 in liquid assets to invest. That is a huge spread, but it is taking into consideration people of all ages and the opportunity for growth.

For example, Personal Capital focuses on clients who aggregate at least $100,000 in investable assets on their free financial Dashboard as potential wealth advisory clients. They have close to 500,000 registered Dashboard users and it would be very inefficient to call them all.

Goldman Sachs Asset Management, on the other hand, won’t even bother managing your money if you don’t have at least $5 million, and even that may not be enough. An acquaintance I know with $5 million could only have GSAM manage his money because his brother has over $25 million in assets with them.

The common cap is $1 million in liquid assets to invest as a definition because if you’ve got much more, then you’re obviously a millionaire and not part of the mass affluent crowd. Of course, a financial advisory firm would still love to manage your money when you growth your wealth far beyond $1 million. I’ve seen the range expand to $500,000 – $2 million thanks to the raging bull market.

Related: Who Are The Top 1% Income Earners?

Mass Affluent Definition By Net Worth

Median Net Worth By Age

Median Net Worth In America

The median net worth depends on one’s age. Given the median age in America is around 36.8 years old, the median net worth is only around $40,000 per individual. Yes, the United States is largely illiterate when it comes to managing their personal finances due to a confluence of overspending and underinvesting. The median net worth per individual in Australia is roughly $200,000 in comparison. As you can see from the chart on the right, the highest median net worth reaches around $230,000 for the 65+ age group.

Based on the mass affluent definition by income and by investable assets, I believe a a net worth of between $500,000 – $5,000,000 in net worth should be considered mass affluent. It’s very hard to have investable assets of $100,000 – $1 million if you don’t have a net worth of $500,000 – $2,000,000, unless you are gutsy enough to invest your entire net worth in the markets. Based on a US Federal Reserve report entitled, “Wealth In The US,” the mass affluent divide their net worth in the following way:

Principal Residence – 23%

Investment Real Estate – 14%

Liquid Financial Assets – 22%

Pension And Employee Retirement Plans – 16%

Insurance And Annuities – 9%

Privately Held Business – 16%

In other words, the mass affluent are highly diversified. Only roughly 1/5th of their net worth is in liquid financial assets, which therefore buttresses my $500,000 – $5 million net worth estimate if we set $100,000 – $1 million in investable assets as mass affluent.

Related: The Average Net Worth For The Above Average Person

DESCRIBING THE MASS AFFLUENT

Now that I’ve highlighted the hard figures to define the mass affluent class, I’d like to verbally describe what mass affluent means to me.

The mass affluent built their wealth the old fashion way through hard work and diligent savings. The large majority of the mass affluent work for companies and participate in tax-advantageous retirement plans. The mass affluent have a diversified net worth consisting of at least a primary residence and a balanced portfolio of stocks and bonds. It is not uncommon for the mass affluent to also invest in alternative asset classes as well.

The mass affluent believe there’s a strong likelihood they will eventually become millionaires in their lifetimes. That said, they clearly feel the sting of ever rising college tuition and health care costs. They earn enough to afford tuition, but they earn too much for their children to receive need-based scholarships.

The mass affluent wish to leave an inheritance for their children or their loved ones. Because most mass affluent people still need to work for a living, it’s common for them to have six months or more in cash reserves. Most mass affluent people realize they will never be extremely wealthy. But they are satisfied with their opportunities for advancement.

Based on the financial metrics in this post, I believe everybody should strive to become part of the mass affluent crowd. There are 33 million mass affluent people in the United States according to the Federal Reserve. Making six figures or reaching the seven figure net worth milestone is achievable based on occupations that are available to the masses today.

What social class do you consider yourself in?

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RECOMMENDATION TO BUILD WEALTH

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Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Austin says

    This is an interesting way to quantify the 90th through 99th percentile of income earners. The people who refer to themselves as upper middle class.

  2. Mrs PoP says

    Interesting. By your definition, we would certainly be considered mass affluent, but I’ve always just called this sector of the population upper middle class or heard it sometimes referred to as the professional class as many in it have professional degrees or certifications (PhD, MD, JD, etc).

    • Austin says

      Parents within this upper income range always tell their children (and themselves) that they are upper-middle-class. This class-centric identity makes sense to those who self-assign because while they don’t feel “rich” they also know they aren’t “poor”.

      The statistical reality, of course, is much different. Middle class probably falls between household incomes of $25,000 – $75,000 per year. I think we do our children, and probably ourselves, a great disservice by raising them to believe that making $200-$300K/year is “Upper-Middle-Class”.

      • Financial Samurai says

        Could you explain further why it would be a disservice (to whom) to raise our kids thinking $200-$300K is upper middle class? Is that b/c that income is so far out of reach for most people, even upwardly mobile people?

        Thanks

        • Austin says

          It’s a disservice because it skews their perceptions into something that is not real. It’s probably best if they are informed of the real way the world works. It’s interesting to think back on how naive I was concerning certain things and at what ages I had realizations otherwise. When I was in college I remember having the numbers presented that 90k was top ten, 120k was top five and 320k was top one.

            • Austin says

              My info was from college and about a decade old. Also, re prior article, I found out my dad sold his condo fully furnished so that helps to explain the high ROI.

            • Adam B says

              There needs to be a new “top” category. This 1% thing is becoming over hyped and over generalized. When 1% can mean $200k (not rich), all the way up to $200Mil (rich)….yet still be in the same general category, there’s a problem.

            • Hanapetals says

              I’d just like to impart my own experience as a mid-teenager having been raised with the mindset of 200-300k being upper-middle class (focusing mainly on the social aspect since that’s probably what I can describe the best). This is my account of life with the mindset of finding an amount most people label unattainable as a little above average. To quote Austin, “It’s a disservice because it skews their perceptions into something that is not real. It’s probably best if they are informed of the real way the world works.” I personally was very well informed growing up, what amount of money was considered a lot or a little; however perhaps because I was a child at the time (and still technically legally am), these numbers and class identifiers my parents were throwing at me seemed to be just that: random numbers and weird abstract concepts floating around. I wasn’t able to grasp the weight and meaning of say, 200k at all: it wasn’t a little amount, it wasn’t a large amount, it was just a number that had scarcely any impact on whatever I was doing at the time. Being an only child, I was strongly influenced by those I spent the most time with: my own parents. My parents are very capable working adults, so their attitude towards money is fully warranted. It was only later that I learned that what I had absorbed at the time was wrong: I can not hold a working adult’s perspective of money as a dependant minor.

              Because I was fortunate enough to have been born into a financially stable family as a sheltered and very much cherished child, I seldom thought about money or its significance. I still remember an incident when I ran into a classmate while grocery shopping; my mother being very health concious, had instilled in me that I was only allowed to eat organic. So when I saw my classmate reaching for a carton of bargain brand milk, I naively informed them (and their mother) that they should buy the organic kind because it was better. I simply didn’t understand the meaning of “can not afford” and only recently reminisce with more than a little embarrassment. Although small it may have been, that little episode represented my own severe ignorance; I assumed that just because I was able to chuck things in the shopping cart without looking at the price, that everyone else could too. I automatically took my own life quality and used it as a standard for others without thinking, as children do. I myself had very few friends to compare with (being an only child growing up almost exclusively in adult company tends to mess with the development of social skills for those in my own age group, but I digress), and it wasn’t until early high school that I started to realise anything was amiss.

              My social development finally(ish) caught up (though not without considerable effort), and I was able to go shopping and have sleepovers with friends for the first time. As I am very lucky to attend an extremely middle class high school rather than a private or “rich” school, I was able to receive a good dose of “reality” through my peers. It was a miniature epiphany when I realised 15 year old girls generally didn’t have credit cards, and generally didn’t go about dropping hundreds of dollars on yoga pants (10 points if you get the reference!), IEM headphones etc (though let it be noted that I did do my research and wasn’t shelling out entirely thoughtlessly). My parents occassionally bought things like that for themselves and I simply thought that I could do the same. By then I had been vaguely aware that I wasn’t too poorly off (though I never considered myself anywhere close to rich..that was the crazy children of the chinese billionares I read about, but then everything’s relative I suppose) but it wasn’t until one of my friends “borrowed” some of my things before she moved away that it truly registered in my brain that I had been taken advatage of.

              After a period of sulking and sniveling about betrayal all the while being too terrified of punishment to tell my parents, I became intensely aware of the value of money and social class (researching fervently online to fill the holes in my knowledge, this is around when I first found Financial Samurai) extremely paranoid of how freely I spent in front of others, especially my friends. Who knew if they wanted to be friends with me or my stuff? To prevent myself from being a target again, I adopted a false attitude towards money (Oh my handbag? Thanks!! My aunt gave it to me for my birthday, I could *never* spend hundreds of dollars on a bag.) and always made sure to keep my lips tightly shut or lie when the topic of finances came up. It wasn’t a comfortable situation to be in, and behind my painstakingly constructed veneer, I felt unsafe and unable to trust anyone.

              That summer, my parents shipped me off to a day SAT camp which cost a little under four grand. I went in knowing that those in the class belonged to families who could afford to be set back a little (or more, if they had additional children) for the sake of a possible better education for their offspring. Quickly making friends with one of the girls, I thought, “ahh, here is someone who won’t cry over a couple lost dollars, here is someone who won’t screw me over for having stuff because she has even more. I am safe to be myself.” However, they say that when you are around someone enough, you start picking up their habits and slowly becoming like them. That saying certainly proved itself true with me; going shopping with her was like a breath of fresh air, I could speak my mind as she did and not be judged for being myself. Unfortunately, her spending habits also rubbed off on me.

              Until then, I had been spending (if it’s too much, please don’t judge) a pretty consistent amount, around $150 a month. By then I had been quite consciously aware that this wasn’t my money, I just had the sheer luck of being born someone who had access so I shouldn’t blow it. My new friend had no such inhibitions. She swiped her black card with as little thought and as much practice as if she was merely brushing her hair and acted like it was her right to own anything she wanted. She encouraged me to spend as unreservedly as she did, and her hedonistic (if I may) lifestyle was both tantalising and liberating. The month that I became friends with her, my bill came out to be a little over a grand.

              My father simply laid the statement on my desk without a word and basically let me stew in a cesspit my own guilt. I already knew firsthand how valuable money was, and uncontrollably spending like I had (especially at my age) was both extremely irresponsible and just plain stupid of me; moreover, it showed that I had little respect and appreciation for the blood, sweat, and tears of my parents. I vowed that I would never spend their money so rashly again and my parents took it as a lesson learned (which it most definitely was). I still remain friends with that girl, but do restrain myself to simply shopping vicariously through her. Regrettably, thanks to that stunt I developed a slight inclination towards materialism which resulted in a drive to do well in school and learn about finance to equip myself so I would be able to ultimately uphold and surpass the standard of living quality my parents have gifted me.

              Wowie. Apologies, didn’t quite mean for it to end up being that long. Extra points and a good job if you made it this far! If not, that’s perfectly understandable as time is valuable and could definitely be spent doing more productive things rather than reading a random teenager’s ramblings. As a sort of disclaimer, I consider $200-$300k upper middle class because my parents do, and also in relative to those who are worth astronomically more. Therefore… in my experience, no real disservice has been done (to me at least..a portion of my parent’s wallets were indeed the sacrifice for me to learn my lessons), my perceptions haven’t been so much as “skewed” as simply having higher expectations and standards for myself, and by this age, it’s going to be very difficult to not be at least semi-aware of how the “real” world works when the internet and all our parents, guardians, and teachers are breathing down our necks about it (but hey, anything’s possible I suppose). TL;DR: I was raised believing a far larger than normal salary was just a little higher than normal, and my conclusions now are that money is precious, no matter how much of it you have (I’ll make an exception for the truly insanely wealthy out there), that money is also relative to the total amount you are worth, that conspicuous consumption can be both alienating and very dangerous (afterall, I could have been kidnapped or something far worse, and not just stolen from), and that I will have an extremely hard time adjusting if I can’t keep up at least my current lifestyle which gives me a reason and an innate motivation to work hard in school and do my best.

            • Financial Samurai says

              Thanks for sharing your perspective! Very interesting.

              A lot changes when you actually have to go out and try and make that kind of money. It’s definitely not easy, and even if you do get to those levels, there’s a chance you might not stay there for as long as you like.

              I was making good money between 2003-2007 and then everything got reset lower due to the financial crisis.

  3. nbsdmp says

    O.k., I have a major issue with this article that I would love to get some further clarification on:

    As a person who earns one of those significant incomes you talk about in your opening, can you please explain to me how somebody who makes seven figures can pay only a 15% effective tax rate? Believe me, I’ve looked high and low…and without donating $1M to charity each year, or writing off losses carried forward from other investments…believe me, on new money earned…taxes greater that 15% are paid. I think it is a huge injustice to say that the “rich” only pay 15% without putting some real facts behind it. If your answer is 100% cap gains and living in a state that doesn’t have a cap gain tax that still does not get you there. If it is a combo of cap gains and charitable giving…then you should say, “hey when somebody gives 30% of their income their taxes go down, so don’t bitch about the wealthy…why don’t you start giving like they do. (i.e. Mitt Romney)”

    I realize that there are a ton of really smart people out there employed only to avoid taxation, and yes in any one or series of calendar years you can shuffle income from one pot to another and have a tax mitigation strategy…but trust me, you eventually pay the piper on new money. If there is a way I can reduce my tax bill by 2/3rds, please point me in the right direction. Sorry for the soap boxing, but misinformation fires me up sometimes.

    • Dave @ The New York Budget says

      Many of the wealthiest people are earning their money through investments. Earnings through investable assets are taxed at 15%. Of course, this is a sneaky way for the government to tax the rich less heavily since the middle class and the poor make a MUCH smaller percentage of their money through investments, so while their income tax rate may be lower based on wages, their effective tax rate is a whole different story.

      In your specific case. I would recommend investing the VAST majority of that high income if you don’t already. Then, you can retire early and enjoy that 15% rate.

      • ndmpsd says

        Dave/Jay…you guys just don’t get it. So does the states you live in not tax capital gains at all? 15% is just the federal tax. Secondly, yes I’ve invested 70% of the my income for well over a decade, yes my money make more money than my day job pays me…yeah I can retire early and I am “lucky” enough to have some of my income be taxes at cap gains rates which is long term money. You make $1m in the stock market in three months, it is not taxed at long term cap gains…it is earned income.

        It amazes me that people love to say oh this rich guy paid so little…and it is perpetuated with skewed facts like you threw out there to spin it. Sam if you wanted to accurately portray why Warren Buffet or Romney paid so little in taxes you should do on article on why that was…nobody would like to see that it really isn’t that low when you take out losses carried forward from losing ventures or charitable donations…it would make what you are sensationalizing not quite as sexy. Thanks for the link…if you take the time to read the article: HE GAVE over 30% OF HIS EARNINGS TO CHARITY!?!?! Show me once person who is bitching about his 13.9% tax rate that gave as much as him and I’d become a Mormon myself. I’m disappointed that you obviously very intelligent guys don’t grasp this…

        If we raise the tax rate on money that has already been taxed once…all investment would dry up along with jobs. Why risk your capital for so little return? Hell stuff it under the mattress…I think everybody should try running a business and risk/deploy their own capital before they judge or comment on how much other people should pay in taxes…I’d be the first person in line to sign up for a flat tax, it is the only fair way.

        with that said, have a great weekend! Beer time :)

        • Adam B says

          Thank you, this man gets it.

          All you hear about are the select FEW in the media that pay an effective tax of around 15%. For some reason, people use this as some average for the regular “rich guy.”

          This is simply not the case for the vast majority. All it does is stir on the hate for the rich, and the media loves a good story.

          • Nbsdmp says

            Adam, thanks for your comment, it’s nice to know I’m not the only one that gets it. I love how its “the sound of crickets” when the real facts are discussed and it doesn’t support the “agenda”. This is why I’m disappointed in the article, it perpetuates mis-information. The link I attempted to post (not sure what happened) goes through the state by state cap gains. If I sell a rental property for $1m more than I paid for it, but paid income tax on the rental income all along the way, you build up something called “basis”, so yeah when I take $1m off the table in a year, but I have basis to cover it all, it would appear than my taxes are way lower…I give up…go ahead and hate those who take risk, create wealth, & jobs.

            • Adam B says

              Yup. People don’t like to read stories or studies that don’t align with their existing belief system. People love them a good dose of confirmation bias.

              You see it everywhere in the media…..global warming, income inequality, immigration, religion, everything.

              The fact that the Romney tax thing blew up in the media and caused such a commotion indicates how little registered voters actually know about the people they are voting for, or issues they are voting on. They grasp on to the ONE SIDE of the story that supports what they believe, yet choose to ignore the rest. I really do not understand why. I’ve always been too curious about anything and everything to let my pre-conceived biases dictate my opinion when there’s so much information (and mis-information) widely available. Knowledge really is power today, and it’s sad that so many people take the “ignorance is bliss” approach. Whether they think they’re doing it or not.

              All the recent anti-rich hoopla going on right now is indicative of the latter more than ever. You’ve got half the country that doesn’t even pay net taxes, relying on some sort of govt aid…while chastising the same people (top earners) that even make that aid a possibility. They make a fuss about how little some of these top earners pay in taxes, all the while not paying taxes at all theme selves. They criticize how the economy is being run, all while spending more than they make and swimming in massive debt themselves. Oh the hypocrisy and irony. Meanwhile the guys who actually take the risks, make the money, create the jobs, pay the taxes, and basically ARE the financial support pillars that the government sits on – are the bad guys. Why? Because some CNN anchor did a story on some rich dude that paid 13% m tax rate.

            • nbsdmp says

              Sam, thanks for adding the little clarification…I know you get what we are saying & honestly I wish you would even be more emphatic about why that’s a extreme case and how the 1%’s actually do pay a vastly skewed amount of taxes relative to what is called the middle class. How about taking the tax return of a baseball or basketball player making $10M a year…do you think he is only paying 15% on their income, nope! Look at Phil Mickelson who got lambasted a few months back because he gripped about paying taxes in Cali…bet you his rate is not 15%…hell that is just state taxes!

              I think it would be great if down the road you put together a little article about what people are really paying in taxes across all income brackets…of course we can always take facts to make grandiose statement to make our opinion look clearer. When you wrote the article my first thought was I’m firing my CPA, every year I ask about tax mitigation…it is was it is, you will pay unless you are doing shady stuff. It also brought to mind a great comment you made one time in an article about how now that you are retired you are taking advantage of all the government funded “free” stuff that is provided to citizens…good stuff Sam, keep the articles coming!

            • vbofw says

              The point that the 15% “loophole” is overstated by the media is fair. It shouldn’t be a generalization of all the rich.

              But Sam’s point is it’s ridiculous ANYBODY could pay that rate on that high an income.

              Seems like an easy fix that everybody would agree is fair. If only we had a functioning congress!

      • Steve says

        Buffett and Romney are extreme examples, Sam…and you know it. Look to to the bottom of the top one percenters, where folks are easily paying 34-35% marginal income taxes at the Federal level — that’s with charitable deductions, mortgage deductions, long term cap investment gains, yadda yadda yadda.

        • Adam B says

          This is true. The media uses these extreme examples and portrays them as the norm. It makes a good story.

          The reality for the vast majority is much, much different.

          A government that forces anyone to give up half their income, and calls it “tax”, is robbery. Plain and simple.

          • Andy says

            15% is the rate for long term cap gains on investments. To say the $$ is double taxed is wrong as well since you only pay on the gains. Many elite rich only get paid with Dividends and stock.

            • Adam B says

              I paid 20% in long term capital gains tax this year. Where is this 15% cap you speak of? Maybe I should fire my CPA.

          • Steve says

            Andy — For what we invest that’s not in 401Ks (or IRA rollovers from 401Ks), the long term cap gains from those invested assets are double taxed. Let’s say I walk away with 56% of my gross (Fed plus CA marginal tax rates in 2013), invest a portion of that, & extract long term cap gains from it. Then I am taxed 23.8% on it. Erego DOUBLE TAX.

            Adam B — You may have paid more than 20% long term cap. Did you include your “Net Investment Income” tax of 3.8%? This is for those HOUSEHOLDS that make more than $250K per year. So the fire chief down the street from me plus his wife who works for the County? Yeah, they make more than 250K per year. Not exactly Warren Buffett. But you get this one, dude!

            Sam — Stealth wealth is great. Catch me at your local Costco, which I drive up to in my 13.5 year old Japanese car that cost $26.5K new back in August 2000. And that’s when I’m not biking or walking around town on the weekends, almost getting killed on my bike while traversing the 101 overpass. But yes, the IRS knows the score. That said, save for my wife, nobody else does.

            • Adam B says

              Steve,

              I’m not sure what’s included, isn’t the 3.8% some medicaire thing? I honestly don’t remember, but it was well over 20% (definitely NOT the 15% stated here). I sold a website for quite a large sum last year, and asked my CPA what the sell was being taxed at and it was definitely in the 20′s. My income tax is in the 39% bracket – single filer. I’m sure that has an effect on my capital gains. Uncle Sam wants his monies =)

            • vbofw says

              Steve – long term capital gains in 401ks are *not* double-taxed. You’re contributing pre-tax. Don’t base your rate off your gross, based it off your gross less $17.5k for 401k. You only pay taxes once – when you withdraw.

        • nbsdmp says

          Sam, I’m glad to see some of the spirited debates and conversation going on with this post…it seems the comments got led astray from your original topic, but hey it got people thinking…so kudos there!

          As far as writing an article or a couple, I do plan on taking you up on that…These are things that I am passionate about and it is fun at the same time. The diversity of opinions is what makes the world go around (and honestly keeps it from being boring!) There are a few events transpiring that I would love to share the story of once the dust settles, I’ll keep you posted!

          • Steve says

            vbofw — That’s what I said….NOT in 401Ks. ~80% of my wife’s and my savings inflows last year were not in 401Ks. That means DOUBLE TAX.

            • CP says

              Late comment – sorry. I’m confused by this. If you invest $1,000 of after-tax money, grow it to $1,750 and then sell it after one year, you are only taxed on the gain of $750 (at long-term cap gain rates). The $750 gain has never been taxed. Alternatively, if you invest $1,000 of after-tax money in a stock paying a 3% dividend, the $30 dividend has never been taxed to you (directly). The corporate profits that were used to pay the dividend were taxed at the corporate level and then will be taxed again as a dividend on the personal level. That’s double taxation (the government has received revenue twice on the same pool of money).

  4. Even Steven says

    We fall into the Mass Affluent, sounds fancier when I first saw the term, I expected yachts and islands, not a bump up from average/middle class. I did like this line though ” Most mass affluent people realize they will never be extremely wealthy.” I won’t be buying an NBA team but ill be a season ticket holder is what I got that from that.

  5. Dan @ The Mad Real World says

    I am 32 and right in between the numbers for 30 and 35 years old. My distribution of pre-tax savings, after-tax, and equity is much different though.

    I only have about $5,000 pre-tax, then 60% equity in rental properties, and 40% after-tax. Only have so much in after tax because I just refinanced. Will use it to purchase another property this year. Then my percentage will be much higher for equity.

    The important thing is net worth and access to cash or ability to earn cash.

    Also my tax rate has been going down the last few years. 3% last year then 2% this year. That is with some capital gains from stock sales also. The rental propeties have some great tax benefits.

  6. Ace says

    Sam,

    The term “Mass Affluent” is actually a marketing term, but I personally like to use it as a class demographic.

    I consider the “mass affluent” to be a subcategory of the upper middle class. My thinking is that many people in the upper middle class are simply living “pay check to pay check”, and have few liquid assets (but often, an incredible level housing wealth!).

    My thinking is very close to your thesis.

    I believe this is the most important economic/political demographic in the United States (and actually, in the developed world). If you want to sell your stuff, this is whom you sell to. If you want to be elected to a national political office, this is whom you must please.

  7. The First Million is the Hardest says

    I wouldn’t have thought so when I opened this article, but we fall into the mass affluent category. Probably on the low end of the category in terms of net worth & investable assets, but I didn’t realize how we compared to the per capita income in our area until I just Google-d it. Interesting stuff.

  8. Archaicx says

    “It’s very hard to have investable assets of $100,000 – $1 million if you don’t have a net worth of $500,000 – $2,000,000, unless you are gutsy enough to invest your entire net worth in the markets”

    I’m glad you qualified that statement. It looks like I’m gutsy by your standards (not sure how to feel about that). I’m 30, but my net worth is closer to that of the 35 year old… just add the property equity column into the post-tax savings one and everything is pretty much on par. I did notice a few years back when my investable assests went over $100k that I started getting a lot more calls from the brokerage. They consider me a “high-net worth individual”, but I don’t consider myself that at all…

    I will be taking about 10-15% out for a personal business start-up in the near future, so the 16% number was intriguing.

    • e.p. says

      I’m in a similar boat to you, 31 with almost all of my net worth is stocks (plus a cash reserve and a bit of equity in the house) and ever so slightly behind the ‘above average’ curve (had two kids in my early 20′s, wife is a stay at home housemaker/homeschooler. Decisions that for me come before net worth!).

      You and I are young and we can afford to be aggressive -as we get older you’ll want to get a bit more conservative, mixing in real estate and bonds. I wouldn’t be worried about having it all in stocks at this point in your life. We can weather another stock market crash (backing the truck up when stocks are cheap) its people in their 50s, 60s who are funding their kids’ college tution and looking to retirement who can’t weather that kind of storm.

      -e.p.

    • Financial Samurai says

      To me, anything above 50% of your net worth in one asset is “gutsy” or “risky” to me. Good luck on the new business! Maybe you’d like to share your story with us one day. Good luck!

  9. Brian says

    I decided to vote based on the class lifestyle I live versus my income and assets. While numbers are good for benchmarks, I have witnessed many people slide from mass affluent to economy based on a few poorly timed and ill advised purchases.

    Come to think of it, it seems that the minute they started defining themselves as an upper class, they began spending and acting the part (or the perceived part).

    • Ruckster says

      Interesting comment. As stated in the article the mass affluent will never come close to the top 1% but remain one bad bubble or layoff away from falling back into the “middle class”.

      Also the mass affluent rarely have much financial freedom, as most of their assets are tied up in non-liquid assets like primary residence, 401k, and college funds.

      Overall, I’d say being in the mass affluent category is exactly where most people planning for FI want to be. They have enough income to save and plan for FI and still have enough to travel and enjoy some of the finer things in life.

  10. JT says

    The mass affluent are just as easily a target, and have already been made one. Look at where payroll taxes top out — mass affluence.

    As someone already pointed out, this is a marketing term. The mass affluent have more than just government to worry about. The difference between middle class and mass affluence is pretty much eroded by the difference in cost of a luxury import car and a durable, cheap Japanese car. Mass luxury clothing, jewelry, etc further evens out the disparity. Incomes are just high enough to tolerate some additional luxuries over the middle class.

    I live in a community of “mass affluence,” and if the parking lot exists as any indicator, there’s no doubt that much of the benefit of higher wages is being pissed away by many.

    The mass affluent are “rich” enough to accumulate substantial assets, and too “poor” not to. Kind of uncomfortable in that way, really.

    Income is such a terrible yardstick.

  11. Jason @ Islands of Investing says

    I was very surprised to see the huge difference between Australia and US average net worth you highlighted, as someone living in Australia myself. After looking into it further, turns out the average wealth of Australian’s is about the highest in the world, which shocked me.

    I think a big reason for this is property values – they have really taken off in the last 10 – 15 years, and now seem to be around the most expensive in the world, particularly relative to incomes. Great for those who own, which I’m sure contributes to the net worth stats – not so great for the younger generation trying to get into the market. The ‘resources boom’ over the last 10 years probably generated a fair bit of wealth too, with all the natural resources we have here to dig up and ship to China in particular.

    So I don’t think that necessarily means the average Australian is any more financially literate or investment savvy than the US or any other part of the world – more a matter of being on the receiving end of some fortunate economic headwinds (they do call it ‘the lucky country’ after all!)

    Cheers,

    Jason

  12. Ace says

    I think becoming a part of the “Mass Affluent” class (or sub-class) is a very reasonable goal for many people.

    Basically, obtain a college education and/or skill/certification in a more highly compensated occupation. Purchase a family home and make regular retirement contributions of even just 10% of income.

    Over a lifetime career, these folks shouldn’t have too much trouble accumulating a $500,000plus 401K, and a paid off home. Once you add social security payments, I think this social group would be living a reasonably comfortable retirement.

    Throw in a pension…. Maybe an excellent retirement.

    • Ryan says

      Who is getting a pension these days? And how much SS do you think the 20 and 30 year olds will get when they retire?

      • Ace says

        Actually, there are some people getting pensions. Government and military people. Many members of the mass affluent class are reserve military members.
        Teachers/professors have pensions. Etc.

        And yes…. Despite all the political noise: Social Security will still be here 40 years from now. Social Security is the primary pension for the middle/lower class (and the mass affluent). Eliminating this would be political suicide.

        Now tinkering with the FICA tax rate and benefit amount; that will likely happen. Less noticeable.

        • Steve says

          “Some” is approximately 14% of all U.S. workers, according to 2011 data. That’s a pretty small percentage. LINK: http://www.ebri.org/publications/benfaq/index.cfm?fa=retfaq14

          And why not set one’s sights higher, Ace? I don’t want “reasonable.” When somebody tells me to “be reasonable” I usually stick my butt cheeks against a wall and fart loudly. And that might explain why I have no social plans this evening.

          • Ace says

            Steve,

            I think aiming to be in the one percent is just fine. I’m just recognizing that it is literally not an obtainable goal for 99% of the population.

            There is a considerable sacrifice involved in trying to get into this level. Unless you inherited your wealth, married into wealth, or are just lucky, chances are folks reading this are in the 99%.

            As we get up in age, I think most of us will start to realize that at some point, more income isn’t really very satisfying. More stuff is just a hassle.

            I’m at that point. I’m more concerned about taking care of a future generation.

            But anyway, if you make it to the top 1%; good for you!

            • Adam B says

              Ace,

              That is an extremely common misconception, and one that really gets under my skin.

              The reality is that the FAR MAJORITY of millionaires are first generation affluent that did not inherit their wealth in any way, shape, or form.

              The reality is that the FAR MAJORITY of millionaires are just regular, hard working, intelligent people that decided they weren’t victims and to stop blaming a “suppressive government”, or “broken economy” on their money problems.

              Their backgrounds range from extreme poverty to regular middle class folk.

              Sure, luck is involved (as it is in anything). But if you take away the wealth of these same millionaires, the FAR MAJORITY would be able to build it right back up using the same hard work, persistence and intelligence that enabled to build up their wealth in the first place.

              The common myth that you need to be lucky or somehow inherit good fortune to become wealthy or financially free in this country is just another excuse people make to victimize their situation and take the accountability off their shoulders.

              Sure, the global economy is in the dumps, but there has literally never been a time in the history of mankind where personal success and financial freedom has been more attainable. There may be a very select few who are unable to do this due to mental / physical disability – but we really do live in a time where most people would rather have an iPhone or new TV than spend any amount of personal resources on their success one way or the other.

              All you need to do is look at the medium income in the U.S, and compare it to the average revolving debt the everyday American has under their belt.

        • Financial Samurai says

          I like the idea of getting rich in the private sector, and then joining the public sector and then getting rich off the government. The only downside is that you have to work for the government for 20+ years to get that pension for life. Might be dead and bored by then.

          • Ace says

            I have observed somewhat opposite scenarios. I have seen retired military people start successful businesses or move into good corporate jobs.

            And then there is the retired Cook County Sheriff buddy of mine. He collects an excellent pension. His wife retired from a corporate job with a 401k and collects Social Security. They have moonlighted in the real estate business for decades.

            Then there is the fellow whom works for UPS as a technician/mechanic. He has a pension plan in addition to a 401k.

            All of these people are part of the “mass affluent” class. Once you throw in teachers/professors etc. I would have to say pensions are more common in this particular demographic segment.

            • Steve says

              Ace — I think your last point was reasonable. But…

              Adam B. — I completely agree with you. And I see 1st gen-ers all the time in the Bay Area.

            • Ace says

              Adam,

              ???? Not sure that I understand the rant? Most millionaires are actually part of the upper middle class/mass affluent, so yes, they would be first generation.

              I’m simply looking at empirical evidence. Income and wealth are actually two different things! Most millionaires are NOT in the 1% of income. They are simply people who live a modest lifestyle and save & invest prudently.

              You may be a successful software millionaire, but you are whistling past the grave yard. So…… I’m not really sure we are disagreeing?

            • Adam B says

              My apologies if I misunderstood.

              I read something to the effect that 1% is unattainable to the majority unless you inherit or marry into wealth, which I don’t agree with. If that’s not what you meant, sorry :)

              Wealth and income are separate to an extent, I agree.

            • Ace says

              Well…… Adam B,

              Please don’t take this the wrong way. It’s basic math. The top 1% income earners make more than 99% of the population. So the probability is that most Americans will be in the 99%!

              I’m not sure this blog is really useful for some one whom is in the top 1% of annual income. I might be mistaken, but I thought this blog was intended to help people with more common incomes obtain financial independence or at least a comfortable retirement?

              I don’t really understand all this paranoia. Most people are far too busy living their lives to care about the top 1%. Is this a West Coast thing? Because the rest of the country could give a f$$k!

  13. The Alchemist says

    There’s something disturbingly slick and manipulative in the term “mass affluent”. No doubt some marketing maven got paid big bucks for inventing that one! Yeah, baby— stroke the egos of those potential clients! People LOVE to be called “affluent”— isn’t that the same as “rich”, after all?? The word “mass” gets blown out of the water once “affluent” hits the ear. Man, that makes me feel special! I think I’ll go buy a Ferrari!

    OK, ok, maybe I’m a bit cynical. It’s just that the ranges described, especially on the low ends, *don’t* sound especially affluent here in the Bay Area. I qualify as MA based on this, but the cost of living here renders these numbers pretty pedestrian. Besides, 65% of my net worth sits in my retirement accounts. That probably has a lot to do with my not feeling particularly affluent. The cost of housing does the rest of the job of making one feel poor here.

    Dollar numbers like these correspond solidly with “middle class” ’round these parts. Not upper middle class, just plain old generic middle class. Which is pretty scary. “You mean you gotta have bank like THAT just to be middle class??” In this neck of the woods, yep.

    The so-called middle class is an endangered species anyway, and not just in Sili Valley. The problem is just sort of magnified here. And I’m not really convinced, Sam, that “Nobody messes with the middle class.” We get messed with all the time. The rich get lawyers and accountants, the poor get subsidies, and the middle class get taxed. We’re the ones who follow the rules and pay the fees and the taxes and “do the right thing”. We’re not rich enough that taxes (when our hired hands can’t find loopholes for us to avoid them) comprise a mere annoyance, but we’re not poor enough to get any of the “help” so generously available to the poor. We do most of the paying.

    I’m also not convinced that politicians pander to us. But that’s a whole ‘nother topic.

    All the cynicism above notwithstanding… it’s GOOD to be “mass affluent”! It’s even better to technically be MA, but keep living “middle class” or below, while striving to achieve REAL affluence. And yeah, once you hit $5m, I think you’re getting there…

    • Financial Samurai says

      Thanks for your optimism! :)

      Who pays for the mega-billion dollar bullet train from SF to LA? Not the middle class. Well… the homeowners through property taxes and the wealthy through Prop 60 (forget) on people who make over $200,000.

      No, I stand by my claim that the middle class is the best class in the world. I’ve been poor, rich, and now middle class, and I can honestly say the way I’m treated now is awesome. I finally feel like government officials are trying to please me because they need the votes.

      But the best thing is… to be financially rich, but perceive as middle class. That is what the Stealth Wealth Movement is all about.

      • Steve says

        I agree here, Sam. The bottom of the top one percenters get particularly F’d. I paid 34% marginal rate in 2013. I’m not going to share the dollar total. It’s a lot. And my butler couldn’t find me any loopholes. But I did save a pile on a case of Grey Poupon.

      • Adam B says

        How do you make the government perceive a lower income (legally)? =)

        I’d love to dip into that secret.

  14. Jef Miles says

    Hey Sam,

    Wow 40K net worth really is nothing.
    What do you think the reasons are for this? Are people not long term planners, lack of income or maybe a combination of both?

    Great poll to, good way to get everyone engaged :)

    • Financial Samurai says

      Lack of financial discipline and financial education really.

      We are bombarded in the US with images of a glitzy lifestyle. We have access to tons of credit to make it happen. Then we blow ourselves up.

      Aussies lead the world in per capita wealth!

      • Yuse L. says

        I’m a very stingy buyer. I only go clothes shopping once a year (during the huge sales), buy cheap, healthy food (you’d be surprised at how cheap vegetables are — massive month supply of kale runs less than five bucks), and only treat myself on occasion. I work at a non-profit and make around the median income level for my city, so I can only save about $600 bucks a month. But I’ve been following Sam’s advice for the last few years and have kept running my own business on the side earning between $5k and $10k a year. That, plus a very aggressive distribution in stocks has allowed me to reach the 45-54 age range for net worth in my mid-20s. I also save an additional 14% into a retirement account managed by TIAA-CREF.

        I know so many people with little to no savings because as soon as they are in the green they have to go out and buy something big.

        • Financial Samurai says

          Well done with your frugality and savings discipline! You won’t need financial support from others, but alas, you may be the one providing support to those who didn’t show spending restraint.

          Please help spread the word!

  15. jimmy says

    I have to agree with Sam over 50% in one asset class is risky. 70% in SPY is risky.
    I agree with the comment that fed tax rates starts at the mass affluent level, which I feel is wrong since we are up to our eyeball’s in debt. Going back to the 1960′s tax bracket of the lowest being 20% and the highest 91% is where taxes should go till the debt is gone. How Buffet only pays 15% is crazy, I’m fine with this if the yearly deficit was balanced, but it’s not.

  16. Ace says

    Sam,

    In regards to personal safety: My observation is that the “mass affluent” live out in the suburbs among the middle class. The reality is that the mass affluent are culturally middle class. They naturally blend in.

    I think that in the central cities, there is a much greater contrast between wealth and poverty. It’s just simply more noticeable. Consider the homeless issue in San Francisco for example ( and many other cities too).

  17. No Nonsense Landlord says

    I have the net worth beat handily, fir all age groups even those older than me, so it makes me feel good. I even beat the average post tax savings and average RE equity.

    But the average pre-tax seems high…

  18. krantcents says

    When it comes to class measurements, I prefer to not fit in. Not that I am a nonconformist, but it seems arbitrary. Being mass affluent seems more of an award for achievement which is less class conscious. I prefer identification with a set of values or achievement although I fit best in mass affluent.

  19. Ruckster says

    I live in Seattle and the Mayor and his city council are hell bent on raising the minimum wage to $15 an hr. The mayor just released his proposal yesterday. I believe San Fran is headed in the same direction.

    It’d be great if you could post an article on your thoughts on the whole minimum wage/living wage debate.

    Personally I cannot stand the government overstepping their bounds. Essentially they are inducing rapid inflation and forcing businesses to either leave the city or layoff workers and increase automation. By increasing the pay of the bottom tiered workers they will reduce the buying power of the middle class. What ever happened to starting from the bottom and working your way to the top?

    There seems to be a troubling movement of entitlement in this country. People in this movement try to place a stigmatism on folks making 6 figures. They chastise large corporations and blame the 1% for their lot in life.

      • Mysticaltyger says

        @Ace…Or buying fewer coffees at Starbucks and having more from home, effectively reducing hours/jobs for Starbucks & other restaurant industry workers.

    • Mysticaltyger says

      Just to comment on the problem of high living costs in places like Seattle & San Francisco. I think the crux of the problem is REAL ESTATE COSTS. Until you can find a way to build enough housing so that rents/home prices are reasonable, the people at the bottom rung of the wage scale (whatever that wage is) are going to be outbid for housing. And as you pointed out, increasing the minimum wage increases their buying power on one hand (if their hours aren’t reduced or they’re not laid off) but decreases it on the other as the cost of groceries, restaurant meals, etc. goes up.

      The other thing that would really help low wage workers in urban areas is convenient & reliable mass transit. This makes it feasible to live a decent lifestyle without a car.

      Jacking up the minimum wage to $15 an hour is stupid IMO. It hurts more than it harms.

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