How The Wealthy Are Defined In America In 2023: 5 Big Numbers
In 2023, what defines wealth? Is it having a million dollars saved in the bank? Or is it securing a six figures salary? Or abundant gold and diamonds? Well, let us break it down for you.
Americans continue to pursue the goal of accumulating their first million dollars. However, due to inflation, something that was priced at $1 million in 2019 would now cost $1.2 million.
In a recent survey conducted by the personal finance website LendingTree, which involved 2,000 American participants, 59% expressed doubt about the possibility of ever attaining wealth.With this context in mind, here are five figures that depict what it means to be wealthy in America today.
$483,000 - Needs to be earned in a year?
Americans participating in a Bankrate survey conducted by YouGov on June 5-7, 2023, revealed that they believe earning a yearly income equivalent to six figures is the threshold to be considered "rich." The figure $483,000 stands in stark contrast to the average annual salary of $75,203 reported for full-time workers in 2021 by the U.S. Census Bureau.
The survey conducted by Bankrate also unveiled that 72% of respondents expressed feelings of financial insecurity, primarily due to persistent inflation and increasing interest rates.
Despite the desire for higher incomes, financial experts emphasise that income alone does not equate to wealth. As Elizabeth Ayoola, a personal finance writer at NerdWallet, points out, one's financial standing depends on various factors, including assets and debt levels, regardless of their income level.
$2.2 million - Net worth needed to be considered wealthy
According to the Charles Schwab Modern Wealth Survey, an American is considered wealthy in 2023 if they possess a net worth of a specific amount. This survey, conducted online in March and based on responses from over 1,000 adults, inquired about the financial threshold necessary for a person in their locality to be deemed wealthy.
Despite being an annual survey, the expectation of this figure increasing with each passing year due to inflation does not hold. Surprisingly, in 2020, respondents believed that Americans needed a significantly higher amount of $2.6 million to attain wealth.
Rob Williams, who serves as the Managing Director of Financial Planning, Retirement Income, and Wealth at Schwab, highlighted that surveys of this nature are intriguing because they capture opinions and emotions. The real narrative, in Schwab's perspective, lies in the perception and sentiment associated with what it means to be wealthy.
$560,000 - Net worth needed to actually feel wealthy
That sum is the average net worth of Americans who actually feel wealthy in 2023, as measured in the same Schwab survey.??
According to Schwab's findings, nearly 50% of Americans consider themselves to be in a state of wealth. However, their actual average household wealth falls considerably below the desired benchmark of $2.2 million that they aim for.
In simpler terms, as Rob Williams stated, one can perceive themselves as wealthy while having a relatively lower financial balance.When respondents were asked to define what wealth meant to them personally, they mentioned financial assets and monetary resources.
However, they also emphasized intangible aspects such as well-being, good health, and the freedom to spend quality time with loved ones. This aspect of the survey was seen as positive by Williams.
$2.6 million - Net worth of richest 10%?
This substantial sum represents the net worth of the median American family in the upper 10% of income, a range that many would consider wealthy. This information is sourced from the federal Survey of Consumer Finances, which was recently released.
Cristian deRitis, the Deputy Chief Economist at Moody's Analytics, noted that, broadly speaking, households within the top 10% of income earners are often categorised as wealthy.Between 2019 and 2022, household wealth experienced remarkable growth, driven by factors such as unprecedented government stimulus checks, lockdowns that led to increased savings, and surges in stock and home values.
However, the euphoria has been tempered by the effects of inflation and rising interest rates.
Robert Brokamp, a Senior Retirement Adviser at The Motley Fool and a certified financial planner, pointed out that market fluctuations, which included a decline in the previous year and an incomplete recovery from late 2021 peaks, have contributed to the present financial landscape.
$1 million - Benchmark of American wealth
The term ¡°millionaire¡± may have lost some of its luster, but it remains a benchmark of American wealth.
Vanguard, the investment management company, sets the bar for high net worth at $1 million in investments.The recent Fed survey indicates that the average net worth for an American family is nearly $1.1 million, which may seem substantial.
However, this average is significantly influenced by the super-rich, while the median American family, representing the midpoint among all families, possesses a more modest $193,000 in net worth.
Financial experts often emphasize that wealth is not merely a numerical figure; it's a sensation or a sense of security for many Americans.
The Consumer Financial Protection Bureau offers a practical financial well-being calculator. This tool considers factors like your ability to handle unexpected expenses, the impact of gifts on your finances, and whether you have financial reserves left at the end of each month.
Robert Brokamp from Motley Fool summarizes it concisely: "Can you meet your financial obligations, achieve your objectives, and endure a financial setback? If you can answer 'yes' to these questions, you're in good shape."
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