How Wealthy Should You Be? - The Millionaire Next Door (2024)

FAQs

How Wealthy Should You Be? - The Millionaire Next Door? ›

Simply stated your household's net worth should equal 10% of the age of the main breadwinner times your household's annual realized income [adjusted gross income is a good substitute].

Simply stated, the typical millionaire next door type realizes an income (median) that is the equivalent of about 8% of his total household's net worth. In other words, the millionaire next door type with a net worth of, say, $2 million is predicted to have an annual realized income of approximately $160,000.

A simple rule of thumb, however, is more than adequate in computing one's expected net worth. Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

A millionaire is somebody with a net worth of at least $1 million. It's a simple math formula based on your net worth. When what you own (your assets) minus what you owe (your liabilities) equals more than a million dollars, you're a millionaire.

Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.

In the United States, the concept of being rich is often a subject of discussion, curiosity and, sometimes, aspiration. Charles Schwab's 2023 Modern Wealth Survey provides insights into this topic, revealing that the average American equates being wealthy with a net worth of approximately $2.2 million.

The 95th percentile, with a net worth of $3.2 million, is considered wealthy, facilitating estate planning and possibly owning multiple homes. The top 1%, or the 99th percentile, has a net worth of $16.7 million and represents the very wealthy, who enjoy considerable financial freedom and luxury​​.

The most recent data from the Fed's Survey of Consumer Finances took a snapshot of the American public at the end of 2022. At that point, a net worth of $3,795,000 was enough to put you in the top 5% of all American households.

The typical millionaire is in his/her late 50s. In fact, in my most recent national survey, the typical millionaire was 57. Those who are significantly younger than 57 should be aware of the fact that the Wealth Equation overstates what they should actually be worth.

Key Takeaways

A high-net-worth individual (HNWI) is a person with typically at least $1 million in liquid financial assets. An ultra-high-net-worth individual has a net worth of more than $30 million.

What net worth is considered upper class? ›

The upper class has an average net worth of $793,120 to $2.65 million, while the lower class has $16,900. The middle class ranges from $58,550 to $300,800. You can grow your net worth by saving and investing consistently, investing in the stock market, and being careful about taking on debt.

Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.

There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.

Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.

Net worth is the difference between the values of your assets and liabilities. The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.

Sometime around age 50, the average American can now expect a household net worth exceeding $1 million. How did so many 50-somethings become millionaires? Household wealth swelled at a record pace during the pandemic.

You now need a net worth of $5.8 million to be among the richest 1% of Americans, report finds. Americans need a net worth just south of $6 million to break into the richest 1%.

Choose the right career

And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”

Americans need $5 million in net worth to join the 1% | Fortune.