Although making a high income is nice, having a high net worth is more important. High incomes come and go. They are also taxed aggressively. In contrast, a properly managed net worth could last forever.
One of the best incentives to get rich today is the record-high estate tax limit of $11.4 million per person. In other words, Americans can all pass down up to $11.4 million to our heirs tax-free.
We can create a generation of adult kids who end up having zero motivation or self-pride to make something of themselves! Whoo-hoo!
$11.4 million is an incredible amount to pass on tax-free given the estate tax exemption amount was only $1 million in 2003.
The holy grail of personal finance is to amass a large enough net worth which spits out enough income to fully fund your desired lifestyle. If you can’t generate enough passive income to do so, sorry, but you are not yet financially independent.
On your journey to the promised land, it’s a good idea to gauge how you compare to others. After all, everything is relative when it comes to money. If we all have a $5 million net worth, being a multi-millionaire wouldn’t improve the quality of our lives at all.
The Median Net Worth Of Americans
Below is a chart from the Survey of Consumer Finances in 2016, the latest data available for 2019 as the Federal Reserve only conducts the survey every several years. One can assume the figures are even higher today.
- The Top 1 Percent has a median net worth of $10,700,000.
- The Mass Affluent (80th – 99th percentile) has a median net worth of $746,950.
- The Middle Class has a median net worth of only $87,140.
Let me share some analysis on each of the three classes below.
The Median Net Worth Of The Top 1 Percent
Lower-Than-Expected Growth
Back in 1995, the median for the top 1 percent was $3,734,607. Therefore, the median net worth for the top 1 percent grew by 187% during the 1996-2016 time period. This is much lower than I would have thought given the fierce rhetoric surrounding how rich the rich have gotten over the years.
If you stick $3,734,607 into a compound interest rate calculator, you will see that the top 1 percent net worth figure grows by 5.4% a year for 20 years. However, this 5.4% compound annual growth rate also happens to mimic closely the 5.6% compound annual growth rate of the S&P 500 between 1999 – 2008.
Highest Volatility
The median net worth of the top 1 percent is much more volatile than the two other categories. In 2007, the median net worth of the top 1 percent was $9,578,000. By 2010, however, the median net worth had dropped to $6,658,000, a 30.5% decline.
If I lost $3 million in net worth in just three years, I’d be depressed. Therefore, if you have a top 1 percent net worth, your #1 priority should be capital preservation, especially after a 10-year bull market. A $10,700,000 net worth should be able to spit out between $200,000 – $400,000 a year with little-to-no risk.
If you have no dependents, then living off $200,000 – $400,000 a year should be no problem for an individual or couple. One can assume that most people who have amassed a top 1 percent net worth, if they have children, are older and have independent adults.
Aligned With The Estate Exemption Amount
The estate exemption amount of $11.4 million in 2019 is bang in line with the 2016 median net worth for the top 1 percent of $10.7 million. Historically, now is absolutely the most tax-efficient time to be a top one-percenter. Time to get cracking.
The Median Net Worth For The Mass Affluent
Mass Affluent Should Be The New Middle Class
The mass affluent class is where most personal finance readers are or aspire to be. Anybody who cares about their finances enough to read actively and listen to personal finance topics is usually way ahead of the middle class.
Caring about your personal finances motivates you to save more, invest more, and figure out new ways to boost your wealth. Therefore, achieving a median net worth of $746,950 before becoming eligible for Social Security should be an achievable goal for the majority of readers here.
Using a 4% withdrawal rate, the mass affluent can fund $30,000 a year in gross expenses based on the $746,950 median net worth figure. Add on the average Social Security monthly check of $1,461 ($2,861 max), and the mass affluent has $47,532 gross to spend a year in retirement.
Given the mass affluent is defined as the 80th – 99th percentile income group, it is likely their average Social Security check is closer to $2,500. Therefore, the mass affluent should be able to spend closer to $60,000 gross a year in traditional retirement age.
Much Less Volatile Net Worth
In 2007, the median mass affluent net worth was $661,632. In 2010, the median mass affluent net worth fell to $560,402 for only a 15.3% decline. In other words, the median net worth for the mass affluent fell by half the percentage amount as the median net worth for the top 1 percent. For those who cannot stomach volatility, being in the mass affluent class is the way to go.
If you are currently in the mass affluent class then it’s probably worth still having a bias towards capital growth rather than capital preservation. Losing on average 15% of your net worth in a bear market isn’t unbearably painful. Continue to dollar-cost average in a downturn based on existing risk-appropriate investments.
It’s Worth Geo-Arbitraging
Relocating to a lower-cost area of the country or the world is a wonderful solution for the mass affluent class. A $746,950 net worth has multi-million dollars worth of buying power if one moves to Mexico, Thailand, Vietnam, Malaysia, Taiwan, or many Eastern European countries.
Although $746,950 won’t get you far in San Francisco, it should provide for a comfortable life in Minneapolis, where the median home price is only $267,000 and the median rent is only $1,591.
The Median Net Worth For The Middle Class
Never Recovered From The Crisis
Unfortunately, the median net worth for the middle class looks like the EKG of a deceased person. Originally, I had thought its dark blue line in the chart was simply the horizontal axis and the mass affluent light blue line was the middle-class median net worth line.
If you have a median net worth of $87,140 and you are the median age of 38 in America, you’ve still got plenty of time to grow your wealth. But if you’ve got a $87,140 net worth in your 50s and 60s, life is going to be stressful financially. It is highly likely you will need to work longer or become dependent on government programs in addition to Social Security.
What’s most concerning about the median net worth for the middle class is that it actually peaked in 2007 at $118,025. The 26.2% decline in median middle-class net worth by 2016 should be one of the biggest causes for concern for everybody. A revolution is brewing.
Spooked Out Of Risk Assets
If you do not hold assets such as real estate and stocks, you cannot benefit from a recovery in asset prices. It looks like the middle class got shaken out during the financial crisis in 2008-2009 and never got back in. If the middle class had simply held all its assets until 2016, its net worth would have recovered and surpassed its 2007 high.
According to an ongoing Gallup poll, the rate of stock ownership in 2016 is down significantly since the years before the recession.
You are seeing a similar decline in homeownership rates. In 2004, the U.S. homeownership rate peaked at 69.5%. As of 2017, the homeownership rate is now only 63.8%.
Life Is Still Pretty Good
Despite the middle class falling behind the mass affluent class and the top 1 percent class, being middle class is still a great class. When compared with non-Americans, the American middle class has a more comfortable lifestyle than most people in the world.
Most of us think of ourselves as middle class no matter our level of wealth is because we have adapted to what we have. Once we start comparing ourselves to others who have more, that’s when our disdain becomes apparent.
If you are in the middle class and want to break out, these median net worth figures are telling us that owning risk assets like stocks and real estate over the long term will likely help.
The worst thing you can do is rent for life, spend money on stupid things you don’t need and never invest in the stock market. Unfortunately, it seems like this is what a significant portion of the U.S. population is doing.
Winner Take All Is Happening
According to the Survey of Consumer Finances, the top 1 percent owns 28% of all wealth in America. The middle class, on the other hand, only owns 21% of all wealth.
The inflection point where the top 1 percent begins to own more wealth than the middle class started in 2010. 2010 was also close to the bottom of the last stock market and real estate cycle.
The Median And Average Net Worth By Age
Let me leave you with one final chart to mull over. Here, you will see the median net worth and average net worth amounts by various age ranges. I’ve also included a recommended column to shoot for based on my average net worth for the above average person framework.
The median net worth amounts by age show that Americans are better off than what the median net worth for the middle class indicates. If you’re retiring at 64 with $187,300, you’ll likely be fine so long as Social Security is still around.
The average net worth amounts by age are very telling. It shows the average American household is technically a millionaire by age 55-64. Is it any wonder why everybody wants to come to America. However, thanks to inflation, a million dollars doesn’t go as far as it used to.
The key net worth figure to shoot for is $3,000,000 by 55-64 if you’re just starting out. After all, $3 million is the new $1 million. It may sound hard to achieve, but if you save $25,000 a year on average for 32 years and earn a 7% compound annual return, you will get to $3,000,000.
If you’re doing very well, it’s best to spend more of your income and wealth before the government comes for it. Your spending will also help the economy. No one knows how long the government will keep the $11.4 million estate tax level in place. So far the government has mainly focused on taxing income to redistribute wealth.
And if you’re doing just OK, it’s worth taking a little more risk to do better. If you don’t want to take more risk, then work longer hours, find a better paying job, or start a side hustle. Your children will thank you.
Even if you do nothing extra to improve your finances, know that life is still pretty great in America. Just try not to compare yourself too much with other people who have way more once you’ve decided to stop growing. Endless comparison is the thief of joy.
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Readers, what do you think of the median net worth figures of the top 1 percent, mass affluent, and middle classes? Did anything surprise you? Given most of us consider ourselves middle class, how can we help our middle-class brothers and sisters get ahead?
Would love to see an annotation for a multiplier for the Recommended – Average Household Net Worth.
I would guess that (on average) that the Top 1% will more often live in higher than average COL areas.
“It shows the average American household is technically a millionaire by age 55-64.”
Not crazy about this assertion, using the mean instead of the median. When you have a long tail distribution rather than a symmetric bell curve, the very wealthy dramatically shift the mean up, as your chart shows. The actual 50% level is 200some k, less than 1/4th that “average.” While that too looks great against the developing world, and with SS would still fund a nice retirement in a banana republic, it no longer stands out. Not when health care costs for retirement are estimated to be in that same ballpark of 200some k.
It’s not by accident that when we talk about real estate prices, household income, and wealth, the median is the dominant figure used. In no circumstances should we use the mean without at least mentioning the median.
Good thing the median net worth and the figures are mentioned everywhere in the post.
She think the average person probably doesn’t have 1) the time to read personal finance and 2) the extra money to invest. If you’re working more than one job to get by, it’s just not something of value to you.
As for the middle class not recovering from the financial crash, I can see why. It’s a scary thing. I had an adjunct professor in law school who was a 1 percenter, and he gave us all great financial advice. He said, “you’re young. Ignore what happens in the market, and let your money ride. Put it in an index fund, and don’t look at it.” That’s what I’ve done, and everything looks good, despite any financial crisis. I don’t know if everyone has the stomach for that though.
Wow. Sam, so much data :-). I think this is the best one liner – Endless comparison is the thief of joy. Good one and keep up the good work. I think once you cross a million, stop comparing and enjoy what you have, and above all be thankful.
Well said! I think once you cross a million, money suddenly starts becoming more of a game and less about survival. Gratitude is the ultimate lens that makes us feel rich.
I should start leveling up faster and boost my net worth to over $10 million dollars within my five year business plan! Multiply my net worth with self-storage acquisitions and equity partner(s)!
Financial Samurai “Recommended” column on “American Household Net Worth by Age” for 45-54 yr old
= YEP. DONE.
It looks like I’m beating the pants off the rest of the Millennials, though I still don’t have the $500,000 net worth that you recommend. Still, roughly $360,000 is not bad, right?
There’s a page on my 401(k) that estimates how much I’ll be able to draw at retirement. The thing estimates that I’ll be able to draw $192,000/year at retirement with only my 401(k) and Social Security. I’m fairly skeptical of that number, though, since I’m fairly solidly middle class and nowhere near mass affluent (yes, I know, “We all think we’re middle class”). I only just started making more than the median national salary (in a high HCOL area) this year, so it’s tough to imagine me suddenly having access to a lawyer’s salary or whatever come retirement.
Great article, though. Shame the middle class never recovered from the Great Recession, especially with another one right around the corner.
Sincerely,
ARB–Angry Retail Banker
In a bull market, the game is definitely stacked in favor of people with a high net worth at the start of the bull market. A 10% return on $100,000 gives you $10,000. Nothing to scoff at but a 10% return on $10 million produces $1 million. That is a large number. The same % return but totally different dollar outcome.
Capital preservation is key once you have made it. A 30% reduction in net worth might impact someone’s lifestyle if already FI but a 30% increase in net worth might have little bearing on spending habits.
If middle class, I would try to have as invested in investment assets as possible heading into the next bull market run..
Hi Sam, thanks for the interesting post. Does net worth include a subtraction for mortgage? Have a hard time believing how the median net worth for the <34 group could be positive assuming they live in an average mortgage financed house. Thanks!
Yes net worth includes a subtraction of mortgage debt. The home value is listed as an asset and the mortgage is the debt amount, so unless they’re underwater, the home will be a net positive to their net worth.
Thanks! Obviously was I mistakenly taking equity as an asset (instead of home value) and the mortgage balance as a liability, but your explanation makes sense.
In that case, i’m a little worried about where the <34 age group is!
This is great benchmarking stuff! It’s natural for us to compare to one another even though we’re all on a different path. I was amazed to see how stagnant the middle class is VS how accelerated the top 1% is. It suggests that it is hard to get out of the middle class and it is easier, once you are wealthy to continue to grow your wealth to new heights.
Since you receive so many survey respondents, I’m wondering would it be possible for you to do a survey of net worth and associated age of the readers here? Maybe it can help us gauge the progress of each other.
See this post:
https://www.financialsamurai.com/net-worth-targets-by-age-income-work-experience/
https://www.financialsamurai.com/the-average-net-worth-for-the-above-average-person/
I expect all readers here to be above average because average people do not read personal finance sites. Let’s rock!
Love this stuff! Comparing your net worth against others is probably a bit of a losing game. I think it’s good to track your progress, but you need to base it on YOUR ultimate goal – not what society believes you should be worth. However, this does provide some awesome insight into America’s wealth. Thanks for another great post!
Are you requesting net worth for an individual or a couple? My spouse and I have separate property totaling 2 million in assets each, so do I vote in the 4 million category or 2 million? “[the mass affluent] average Social Security check is closer to $2,500”. Do you mean a couple’s or an individual’s? We will each draw $2,000 at 62. This is an important detail that affects retirement, estates and estate planning.
Household net worth.
Social Security check is individual.
Financial Independence is the detachment from other people money – their money can no longer enslave you.
Financial Freedom is the freedom from money itself – money plays no role in the true meaning of your life. This is where all passions are rooted.
The math for FI is very simple: Annual Living Expenses ÷ 0.04 = Financial Independence Target.
If you passed the FI marker, you are more financially secured than the 52 States financial budget.
FS is half correct with regard to high net worth – the fundamental component to the FI equation.
The other half is Annual Life Style Expenses – the critical component to the FI equation.
99 percents of the readers on FS still have many years before the crossing of the FI mile marker because of the Annual Life Style Expenses – ALSE prevents many you from crossing over the high net worth barrier.
On the average and with diligent, most people will achieve FI in 10 to 35 years. All your efforts will be governed by the mathematical equation above.
If you crossed the FI mile marker before the age of 45, it is time to think about Financial Freedom. This is much harder to implement because many deployed Financial Independence strategies are now work against passion.
This is why many FIRE achievers found themselves in the uncharted territory beyond the FI mile marker.
Passion spawns progress. Life feeds on progress. Without progress, life will wither and drain out of existence.
Very interesting read! My question is how would you assess what class you are if you are still in your early 20s as opposed to near retirement age? My net-worth is significantly higher than my peers and I’ll probably reach the ‘mass affluent’ net worth in my mid 30s.. I’ve always wondered if I fall into the lower middle class just because of my age? I’m also not taking into account any family wealth only what I have saved and invested myself.
Good question. Check out this guide: https://www.financialsamurai.com/the-average-net-worth-for-a-30-year-old/
Does net worth include primary residence equity?
Yes.
Eliminate estate taxes, implement inheritance taxes.
An estate tax is levied against the estate of a dead person and therefore is seen by many as a form of double taxation. Why do we tax estates? We should be taxing inheritances. The purpose of the tax should not be to raise money for the government, but to prevent the rise of a hereditary American aristocracy.
So instead of an estate tax, it should be an inheritance tax, which is paid by the inheritors, and it should be graduated on a steeply rising asymptotic curve to the point where even an 80 billion dollar inheritance would leave no more than a billion (while a billion might leave half a billion). Also, it should have a very large exclusion. The exclusion should be large enough to preclude all talk about how it might break up family farms, and so forth, say forty million in today’s dollars, and is should be tied to leading economic indicators.
For years, the exclusionary portion of the estate tax was held stationary, to the point where it began to jeopardize family farms and businesses. This was probably a deliberate strategy by those who didn’t like it. Make it affect more people and you have a chance of getting the whole thing tossed out.
The tax needs to be paid by the inheritor, not the estate, then it would be taxed depending on how much each inheritor was receiving, not as a lump sum. This also encourages breakup of mega-wealth for, if Jeff Bezos died today and left his fortune in 40 million dollar chunks, evenly spread among several thousand inheritors, all of them would be in the exclusion range and pay no taxes.
The whole point of inheritance taxes should be to prevent all the wealth from getting concentrated into too small a segment of the population. When this happens the economy either tanks, or a large numbers of people are pushed outside of it. History says riots, revolutions, and a quick slide into third world-like status usually accompany this.
I have no problem with someone making as much money as they can (providing it is made legally, ethically, and, hopefully, morally). I have no problem with a person who makes eighty billion dollars doing with it as they please (within the law) and exercising the power that comes with it. I have a problem with someone who did nada, except collect it from daddy’s estate, exercising that kind of power — OVER ME. So should you.
It doesn’t matter if everyone else is “taken care of.” What do you call serfs and slaves with nice homes, cars, central air, giant flat screen televisions, and wonderful health care? “Serfs and slaves” is still the correct answer.
Of course, estate taxes and inheritance taxes could both be useless if current efforts to radically extend human lifespans are successful. Better start planning for that now, before the opposition gets organized.
Disagree. “So should you”. Don’t tell us what to think. If I make billions and want to give it to my family, that is my choice, not yours or the government’s.
@Snazster Envious? Move to Cuba or China and they will support your ideas of stealing money.
@PG I agree with your sentiment, but not the way you said it. Snazter has a legitimate argument. While I disagree with it, it still deserves more than a simplistic and disrespectful answer.
Because socialism is bad; very bad. It’s been proven to be disastrous everywhere it has been attempted. It might work for some insects, it does not work for humans in any group larger than a pretty small tribe.
In fact, it’s every bit as bad as letting .01% of the population scoop up the vast majority of the wealth and income.
Trouble is, people make a religion out of this stuff.
“If you are against unlimited concentrations of wealth then you are a socialist.”
So if you don’t like cold you should permit and encourage unlimited heat? If you don’t like hot summers you should move to Antarctica? If you live in place that is having a drought you should permit and encourage floods? If you live in a place that floods you should eliminate all water, everywhere on the planet?
We call people with this kind of mindset “extremists.” It’s great to have ideals, but saying that because some amount (a lot or a little) is good, and that, therefore, more (or less) is automatically better is . . . well . . . it’s becoming more and more common these days.
Absolutes are easy. For the media, it sells papers and gets web hits, for the politicians, it focuses their voters (you are good and with us or you are evil and against us). And people grab on because they don’t like to think for themselves; because finding decisions in gray areas can be hard.
Like trying to figure out when the needs of the many outweigh the needs of the few. If you just accept that as a universal truth, you are a communist, clinging to an ideal that can never be successfully implemented. On the other hand, holding that the rights of the individual always outweigh the good of society is effectively saying that your neighbor’s right to swing his fist does not stop at the end of your nose. Saying otherwise would be interfering with his rights. This is also called anarchy. Anarchy seldom lasts long because people quickly discover they are willing to accept almost anything else to eliminate it.
Your “solution” to concentrated wealth places too much wealth into the hands of corrupt politicians. NO GOOD can come from allowing excessive amounts of wealth from private citizens to be STOLEN by the evil, corrupt politician.
It amazes me how, despite millions of examples of how bad gov’t manages money and power, people still advocate for more of the same.
I would rather take my chances with having a few too many undeserving wealthy folks around rather than a society where gov’t controls and calls all the shots.
You worry too much about a trivial matter and further your cure is worse than the disease.
Nope. What I suggest is that they are encouraged to break it up into, say, 50 million dollar chunks or less (in today’s money). With multiple inheritors and/or contributions to various qualifying organizations, the government can’t get a dime of it.
Regardless, you are saying don’t let the government have any money because they are corrupt. That’s kind of like saying you are never going to have your car repaired because so many mechanics are crooks.
Would you really just let your car fall apart or would you try to find other mechanics, or at least keep a better watch on the ones you are stuck with?
Admittedly, with Congress, you might be right. More than a third of the House and over half of the Senate have law degrees, and lawyers consider being amoral to be admirable in their profession, while the rest of us equate amoral with immoral. Legal and ethical behavior are two different things and NEITHER if them is the same thing as moral behavior.
Also, with PACS and around 93,000 big contributors providing about 80% of their campaign contributions, they have a lot of incentive to play favorites. Also, most spend over half of their time just trying to raise more money, presumably stealing time from their employers . . . us.
Coincidentally, consider that 93,000 is about the same number (83,600) as that of households in the US that have 50 million or more in wealth. Also consider that their interests may not be completely the same as those of us with only a few million, or the 94% of the population with substantially less, including the “common” millionaires, yet, when they show up no-notice in DC and call their representative, or one of their senators, for a quick meeting, they probably don’t have a problem getting it.
And don’t even get started on lobbyists and the very rich giving them insider information, which members of Congress used to be free to profit by. Presumably, the STOCK Act in 2012 cracked down on this but we have no way to tell if it is being enforced or, perhaps worse, selectively enforced when it come to the President, the vice-President, and Congress. Congress deliberated less than 14 seconds before voting unanimously to exclude their own financial transactions from public review when, logically, they would be more visible, rather than less so, than those of the general public.
Nor should we get into gerrymandering, and many other questionable activities.
Why couldn’t the $40M chunks of wealth just be reassembled back into the original amount and avoid the tax completely? Like all of Bezo’s inheritors become investors in the same company?
Good idea to tax the inheritors, since they will be getting the funds for the first time. But whether the estate pays or the inheritor pays…. I guess it doesn’t matter from the government’s POV.
Taxing the estate above a certain amount encourages the wealthy to spend more and give more while living.
I’ve noticed and now understand why adult parents want to help out there kids more, even after their kids are adults. It feels much better to help your children with their struggles alive than dead. At least when alive, you know what the problem is, have control over your money, and can see a real difference.
re: “It feels much better to help your children with their struggles alive than dead.”
YES.
With ~$3.5 mil net worth, three single family residences (primary and rental in our HCOL coastal state, “vacation” in a LCOL midwest state), both of us 60+ with chronic and potential health issues, why should we make our two 35+ adult offspring wait until after our demise to start benefiting from funds we are planning for them to eventually receive anyway?
As long as our gifts remain under the IRS annual gift tax threshold, and do not negatively affect our overall financial position or somewhat lavish lifestyle, why not? Not only does it reduce our tax deferred assets (making our future government forced RMD withdrawals smaller), it also helps to keep our offspring living nearby rather than moving to a LCOL state.
Ok, I guess our true motivation has been exposed. But if our offspring are going to be slaves or serfs to someone’s money, I’d rather it be to our money. We don’t treat them like our slaves or serfs (well, ok, except for when it comes to providing our hardware and software IT support). I hope they don’t feel like slaves or serfs to us!
BTW, they both have jobs they enjoy, so they are productive members of society and not simply leeching off their parents.
Besides, I would feel way too guilty if I had the means to help out and did not do so (which explains why at one time we had two “vacation” homes in that midwest state).
Why would you feel guilty for not helping your kids if they’re doing okay? I’m asking because my parents have a sizable estate at this point, and my siblings and I similarly have good jobs, and my parents have stood firm in their “promise” to cut us off financially once we finished school. I even pick up the check when we go out to dinner, and it actually feels nice to be able to do it. It makes me feel “self-made” and proud, even though in reality I also recognize how privileged I am that I got through undergraduate and law school with no student loan debt. I don’t resent my parents at all for not helping us as adults. And more than that, I’m grateful that they’ve got a big enough nest egg that they won’t run out of money in retirement, which is their top priority now, as it should be.
Isn’t your parents paying for law school for 3 years after college, helping you out massively as an adult?
Most folks graduate college at 22. So having $200,000 – $300,0000 covered from 22-25 sounds like a great gift to me.
What am I missing? Perhaps our definition of adult is different? Most say 18 is an adult age.
Survival of the fittest is the mother of all inventions and creativity. Your lives are living and benefiting from the modern progress because of the past and present of geniuses who possessed the survival of the fittest instinct.
You are hurting your kids if you give them financial resources for the basic survivals beyond the college years (22). In some extreme cases, the 18th birthday is the best time to throttle back financial support to stimulate the “Survival of the fittest” edge for your children.
It is a high probability you are an investor if you are a reader of FS. You would feel dump by invest in a stock that has no capital growth and or zero dividend – that is exactly the mistake you are making just because you want to protect and cuddle your genes.
Some levels of taxations are important, estate tax or inheritance tax, just to make sure the wealth accumulation does not get out of hand as in the past.
Any innovation has its shelf life. Wealth accumulation prevents new innovation because in most cases, it propagates stupidity genes and suppresses genius genes from the population.
Do invest in your children dreams and aspirations, but not their biological desire for more comforts and pleasures.
Your financial wins in many cases are better off for genes outside of your bloodline – whose innovations and creativity have the greater probability of building a better world for your great, great, great, great, great grand children.
This is nothing more than the self-preservation regardless of logic, and it is being mistaken as “LOVE”.
The primary point of the estate tax is to collect on those untaxed capital gains that got a step up basis at the time of death. The very wealthy shouldn’t get a free pass. So it’s either the estate tax or the step up benefit. We were (currently) already compensated for the risk by having a lower tax rate on LTCG.
Is the American household a household of four?
If you want to get busy.
Are your figures for 2019? The charts only go up to 2016.
The 2016 Survey Of Consumer Finances is the latest report. They do these surveys every 3 years or so. Once they compile the data, it takes another year or so to put out the report. You can expect the numbers to be higher today.
I used to think your recommended net worth is too high, but I’m coming around. It looks about right to me now. The top 1% increase their wealth through investing, not working. The middle class needs to learn that lesson. Working is great, but you need to invest to keep up.
Unfortunately, I think the middle class will keep falling behind. The mass affluent will barely keep up. The real solution is the top 1% needs to spend more. If they keep investing so much, they’ll keep pulling ahead. Spread it around a little. You can’t take it with you, right?
Something you’re not taking into account is that the middle class and wealthy class have different people in them every year. They aren’t the same people over time. I am in the poverty level right now but will be considered wealthy 5 years from now.
Joe,
I think the main reason the top 1% don’t spend more is that they already own all the “consumables” they need. I don’t think having more stuff moves the satisfaction level for them. Instead of buying just for the sake of buying they invest which continues to build their wealth.
The middle class will catch up BIG once the bear market arrives. We all will, compared to the super wealthy.
Just got to hold on.
How? I’m not sure I understand. Is this based on the previous 2016 analysis that shows that the mass affluent fared the best, post-recession? Could you please clarify? And thank you very much for always providing fantastic insight and content! :) Robin
Sure. Let’s say Warren Buffet is worth $50 billion and is 100% exposed to the stock market. You are worth $1 million and have 100% cash.
If the S&P 500 corrects by 30%, Warren loses $15 billion and you lose nothing. You were once $50 billion behind, now you are only $35 billion behind. You basically caught up to Warren by $15 billion.
The ore you have, the more you have to lose.
Except that’s exactly opposite of the majority of current scenarios. Warren Buffet, being the savvy businessman he is, currently has a much higher percentage of his portfolio in cash; most of us who have our mere $1M in managed retirement portfolios are fully invested as our financial advisors always tell us to ride out market swings. Bear market arrives, both Warren and us lose 20% of our invested funds; Warren pulls the trigger and re-invests his free cash at market lows. Market eventually recovers – we get back to break-even; Warren not only recovers but is now far ahead due to his market timing. So maybe for a year there is a narrowing of the wealth gap, but longer-term, Warren is the bigtime winner. I don’t know of any of my peers with $1M portfolios that are sitting in more than 20% cash, let alone 100%.
29 with 400k net worth.
Want to be FI by 40 with 3 million. Got a bit to go.
What’s your income trajectory looking like?
Oh boy. A lot of people on here with $10,000,000 +. I need to step up my game!!
Joshua:
Or not, perhaps. My wife & I are in the $2-3 million range which excludes house & vehicles & represents investments only. Consistent employment, frugality, saving & persistent investing are our keys. Couldn’t be happier or any more pleased with our quality of life. We aggressively saved & invested to retire at age 50 (55 now.) I do not feel compelled to attempt to hit the $10 million mark. 2 daughters in college which is covered via Vanguard 529 plans we established many years ago & those proceeds have doubled (those values also excluded from range vote.). Each year I take 1-2% in dividends from stocks acquired via direct stock purchase plans. DUK/T/NLY/NYCB/XOM, etc. Our most troubling expense is health insurance (thanks to politicians & obamacare.). Otherwise extremely pleased with what we have accomplished & our lifestyle. And still live a very frugal existence. This post submitted for those readers seeking profiles of others.
I’m surprised by how many are over 20 million. Would love to see a post on how someone gets there….
1-3 million seems very doable in this country
By lying.
Only 1% of the 17,000+ survey participants say that they have a net worth of $10 million or more. Given $10.7 million is the median net worth of the top 1%, I would say the survey participants are telling the truth.
I am surprised about the $20 million vote though.
After accounting for outliers, it was interesting to see that the net worth for the majority of your readers was spread fairly evenly across the spectrum. Just goes to show your content appeals to wide variety of people in all sorts of personal finance situations. GOOD JOB!
Thank you! I do feel that over the next 3 to 5 years, I need to appeal to a wider audience though.
I agree, that “having a high net worth is more important.” But few people are willing to take the steps to create a high net worth. The difference between the top 1% and the middle class will likely exist for a long time as people are focused on the immediate gratification of buying things now rather than building a net worth that will have money work for them, instead of working for your money.
I was a bit surprised that the top 1% had the largest decline in net worth as I would have thought that once you reach that level of wealth you can afford to take risk off the plate.
Median values are much more informational than average numbers as they can be skewed quite a bit by the extremes. I guess I fall into the mass affluent range already based on your figures although I think the range of 80-99% is a bit too generous. I think there should be subdivisions of top 5%, top 10%, and top 15%.
Ultra rich have most of their assets in real estate or stocks and bonds which are volatile. Cash component is limited. 30% is at par with the market drop so this is not surprising at all.
Quote: “If you have a median net worth of $87,140 and you are the median age of 38 in America, you’ve still got plenty of time to grow your wealth. But if you’ve got a $87,140 net worth in your 50s and 60s, life is going to be stressful financially. It is highly likely you will need to work longer or become dependent on government programs in addition to Social Security.”
I have plenty of TIME to achieve Multi millionaire Net Worth
Would love to see that breakdown as well.