1% = NW 8.3M, inc 380K

[FIRE'd@51]

Clearly, the $8.9 million number is the average net worth of those in the top 1%. The threshold to reach the top 1% is much lower.

Conceptually, if you were to rank the net worths of the roughly 115 million households in the US, 1.15 million would comprise the top one percent. My guess is $8.9 million is the average net worth of those households.

 

[Danmar]

Clearly, the $8.9 million number is the average net worth of those in the top 1%. The threshold to reach the top 1% is much lower.

Conceptually, if you were to rank the net worths of the roughly 115 million households in the US, 1.15 million would comprise the top one percent. My guess is $8.9 million is the average net worth of those households.

Actually the article refers to the $8.9mm number as the threshold to reach the top 1%. I take this to mean the minimum required to be in the top 1%. It is also clear that the income requirement and the asset requirement are independent. Ie no connection so my previous comment re 25 times doesn't make too much sense other than it would seem more difficult to make the 1% based on assets rather than income. Maybe this reflects real estate appreciation or inheritence effects?

 

[Hiredgun]

You can easily be in the 1% for income but it will still take MANY years to reach the 1% net worth. Although I could pursue the 1% net worth, I plan to be RE way before that point and many others with a good perspective on life will go this route.

Just look at Mr. Money Mustache (Blog), he quit after he hit around 800K in his 30s, he could have worked until 40+ and hit the 1% net worth, but decided it wasn't worth it. I agree!

 

[obgyn65]

Well I am not in the top 1% with my NW and I am fine with that. What counts is what you do with your money and that what you do makes you happy. Even better, is when what you do helps other people.

In my opinion, we are set for life at a couple of million $ saved for say a 40-year retirement time period. No need for a bigger nestegg, unless you have multiple expensive houses, a few girlfriends or boyfriends, and many kids.

Clearly, the $8.9 million number is the average net worth of those in the top 1%. The threshold to reach the top 1% is much lower.

Conceptually, if you were to rank the net worths of the roughly 115 million households in the US, 1.15 million would comprise the top one percent. My guess is $8.9 million is the average net worth of those households.

 

[sanfanciscotreat]

The median net worth is the amount at which half of the 1% is below this point and half is above. The average net worth is so much higher because there are a few with tremendously high net worth above and beyond the median, such as the three Chick Fil A family members who have a net worth of slightly more than one billion dollars each.

 

[Danmar]

I doubt anyone tries to make the top 1% of assets. You just keep saving and investing and end up where you end up. Years later somebody tells you what the top 1% asset threshold is and you say that's nice, whatever.

 

[rodi]

I doubt anyone tries to make the top 1% of assets. You just keep saving and investing and end up where you end up. Years later somebody tells you what the top 1% asset threshold is and you say that's nice, whatever.

Or you inherit it.

 

[gerntz]

I know there are a couple methods of estimating net worth of the top 1% of households (as opposed to income which is easier because of tax returns). From what I skimmed, the IRS estimate is only about $1.5M whereas the fed reserve survey yields $9M.

See

How Much Money Does It Take To Be In The Top 1% of Wealth and Net Worth in the United States

I haven't gone through the math / original papers so I can't really form an opinion about which is more accurate (less biased) but just based off gut feel the $1.5M sounds more realistic.

Two things:

-The citing of the IRS data is what I have seen used in the past for determining wealth. No idea which is right/wrong.
- On good authority, we all know those people with their own businesses like the Dunkin Donuts guy didn't get rich on their own.

 

[MichaelB]

The hard data that most analysts use can be found here Income, Expenditures, Poverty, & Wealth - The 2012 Statistical Abstract - U.S. Census Bureau

The Fed has a separate study that is also useful, here http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf

 

[NW-Bound]

On page 77 of Ref. 2, I spotted the following that might be of interest.

In 2010, the top 10% in income made at least $142,300. The top 10% in net worth had at least $952K. The numbers were per household. Again these two groups are not the same, meaning a membership in one group did not mean one would belong in the other. You would think there is a big overlap, however.

So, if we grab 10 persons randomly throughout the US, on the average at least one would have a household income of $142K or higher, and one would have a household net worth of almost $1Mil+ (it could be the same person or not).

Does that jibe with your gut feeling? I think it's reasonable for the income number. For the net worth number, I have no clue.

 

[traineeinvestor]

On page 77 of Ref. 2, I spotted the following that might be of interest.

In 2010, the top 10% in income made at least $142,300. The top 10% in net worth had at least $952K. The numbers were per household. Again these two groups are not the same, meaning a membership in one group did not mean one would belong in the other. You would think there is a big overlap, however.

So, if we grab 10 persons randomly throughout the US, on the average at least one would have a household income of $142K or higher, and one would have a household net worth of almost $1Mil+ (it could be the same person or not).

Does that jibe with your gut feeling? I think it's reasonable for the income number. For the net worth number, I have no clue.

I find both the numbers you quote and the USD8.3M for the 1% believable - there are plenty of households containing persons whose occupations/ incomes or personal circumstances will allow them to accumulate the $952K or $8.3M - many professionals (lawyers, accountants, doctors, dentists etc), bankers, fund managers, entrepreneurs, senior business executives, sports stars, entertainers (film, tv, print, music etc) and others. Add in those who receive an inheritance or other windfall. I couldn't find any hard data but the numbers sound plausable to me.

 

[ejman]

Net Worth numbers are the hardest to determine. I think this is why most countries end up taxing income instead of Net Worth although a few countries in Europe make a stab at it. Taxing NW really sharpens the skills of folks on how to hide assets. I should think if the US started to tax NW one would see a sharp decline in America's Net Worth.

 

[Danmar]

US tries to tax net worth on death. At least for fairly high net worth decedents. I find these figures reasonable.

 

[NW-Bound]

A household making $142K should be able to accumulate $1M, as it is only 7X. I did not have high confidence and wondered because Americans have been accused of being such spendthrifts.