WSJ Article: Never Mind the 1%. Mini-Millionaires Are Where Wealth Is Growing Fastest

[Keim]

Thats a fair point. My counter:
Having $1m is still a meaningful gauge as it puts you ahead of about 85% of the US.

Interesting discussion, thanks all!

That said, it is interesting but not really informative. The whole concept of "millionaire" is sort of click-baity these days. With current home prices, almost everyone who owns a home is already half-way or three-quarters of the way there.

For example, if you had $1M in assets, invested, and wanted to take 4% per year, that's only $40K. Well below the US mean wage. Not exactly living on Easy Street these days.

The word "millionaire" used to mean something very different than it does today. Using it to imply the old meaning is an interesting observation about how language (and the economy) changes, but, as I said, not really informative.

 

[Sojourner]

The whole concept of "millionaire" is sort of click-baity these days. With current home prices, almost everyone who owns a home is already half-way or three-quarters of the way there.

Exactly right, AND considering that most people have mortgages and therefore don't even own their homes outright, their true NW should not include the full retail value of their primary homes. I mean, would it really be accurate to call someone with say $250k in their 401(k) living in a $2MM home—with a $1.5MM mortgage—a "millionaire"?

 

[PatrickA5]

Exactly right, AND considering that most people have mortgages and therefore don't even own their homes outright, their true NW should not include the full retail value of their primary homes. I mean, would it really be accurate to call someone with say $250k in their 401(k) living in a $2MM home—with a $1.5MM mortgage—a "millionaire"?

I assume to be a millionaire, you'd have to have a Net Worth of a million.

The person you described only has a net worth of $750K, so not a millionaire.

 

[LateToFIRE]

Exactly right, AND considering that most people have mortgages and therefore don't even own their homes outright, their true NW should not include the full retail value of their primary homes. I mean, would it really be accurate to call someone with say $250k in their 401(k) living in a $2MM home—with a $1.5MM mortgage—a "millionaire"?

That's not how NW is calculated. Assets (home, portfolio, etc.) minus Liabilities (mortgage, consumer debt) = NW

What you described is mathematically not a millionaire, more like upper six figures NW.

 

[LateToFIRE]

Thats a fair point. My counter:
Having $1m is still a meaningful gauge as it puts you ahead of about 85% of the US.

Not to split hairs, but +$1M NW puts you ahead of ~91% of the U.S. household population, and on a global basis I'm sure it puts you at least 99% ahead.

Whether its anything to crow about depends a lot on your age and location. $1M at age 40 is very different from $1M at age 60. And how far that money could go varies a lot by where you live.

 

[Time2]

The word "millionaire" used to mean something very different than it does today.

I think someone here said this, [FONT=&quot] “If you have a million and live like a millionaire, you won’t have a million for very long.”[/FONT]

 

[Keim]

Not to split hairs, but +$1M NW puts you ahead of ~91% of the U.S. household population, and on a global basis I'm sure it puts you at least 99% ahead.

Whether its anything to crow about depends a lot on your age and location. $1M at age 40 is very different from $1M at age 60. And how far that money could go varies a lot by where you live.

I'm busted! Was too lazy to look it up.

 

[Sojourner]

That's not how NW is calculated. Assets (home, portfolio, etc.) minus Liabilities (mortgage, consumer debt) = NW

What you described is mathematically not a millionaire, more like upper six figures NW.

Right, I agree, and that was sort of my point. Are these surveys using actual home equity or just the retail value of people's homes? I would be very surprised if 45% of all college graduates over 55 have a true NW of $1MM+, considering that most of those folks do not own their homes outright. But maybe I'm wrong?

 

[jldavid47]

You're dang right home value should be counted in NW! That is part of the definition. I understand the rational for excluding for certain purposes, but that is a different metric IMO we should call that something like "Financial NW" or "Liquid NW," basically the portfolio assets you have for WD's which we tend to focus on in here. Yes, there are many varieties of calc's, but the OG is Assets-Liabilities=NW.

This is what I do. I have 4 reports in Quicken:

• Net Worth which includes all assets and liabilities
• Financial Net Worth which is NW minus"property" (real and personal)
• Liquid Net Worth which includes only non-retirement financial assets and liabilities
• Retirement Account Value which includes only retirement plan assets

For our purposes Liquid NW + Retirement AV = Financial NW. Stuff in Liquid NW has no tax implications if spent while stuff in Retirement AV does.

 

[CaptTom]

Talking with some guys about this today, one of them suggested a better definition of "millionaire" would be someone with $1M+ annual income. Makes more sense (in terms of it being a synonym for "very wealthy") to me.

In theory, one could add the value of their pension, expressed as the amount it would cost to buy an annuity with the same monthly payment, to their net worth. Depending on the context, this might not be as dishonest as it seems.

 

[explanade]

I don't list my home on my spread sheet tracking financial assets.

Zillow shows my home worth several times more than the price I paid and even greater than my remaining mortgage.

But I don't look at Zillow often nor my mortgage balance.

In theory my home equity is worth about 10-15% of my portfolio value. Just don't think about it though but I guess if I needed money I could tap into it.

 

[Kork13]

Talking with some guys about this today, one of them suggested a better definition of "millionaire" would be someone with $1M+ annual income. Makes more sense (in terms of it being a synonym for "very wealthy") to me.

Eh, I don't really feel the need to try redefining "millionaire" ... by definition, it refers to wealth, not income.

I also don't equate a high income with being "very wealthy" either ... although one would certainly hope that the former leads to the latter, it all depends on how that income is employed. I've always thought of "wealthy" as having alot of money (as in, high NW)... "rich" as having a very high income. In the end, it's probably a distinction without a difference, but the story I tell myself is that I'd rather be wealthy than rich. Wealth is a product of discipline, patience, and responsibility, as an ideal to seek after. A "rich" income doesn't hold the same sense of honor & values to me, and if anything, encourages luxury & waste. I guess I'm oddly old-fashioned about this.

 

[NoiseBoy]

I pulled this from the opening summary in the Federal Reserve's report:

The homeownership rate increased slightly between 2019 and 2022, to 66.1 percent. For families that owned a home, the median net housing value (the value of a home minus homesecured debt) rose from $139,100 in 2019 to $201,000 in 2022, as home values increased and housing debt was rather flat. Net housing values grew substantially for families across the usual income distribution, reaching their highest levels on record.

I haven't dug into the article enough to find out what method they used to determine a home's current market value, but it's clear from this paragraph that that is what they are using to calculate a family's net worth.

 

[Time2]

Talking with some guys about this today, one of them suggested a better definition of "millionaire" would be someone with $1M+ annual income. Makes more sense (in terms of it being a synonym for "very wealthy") to me.

That takes to many out of the term millionaire, in that only 1/10 of 1% of households earn a million or more. I agree though, from my prospective, that is very wealthy!

 

[bonvoyage]

This is what I do. I have 4 reports in Quicken:

• Net Worth which includes all assets and liabilities
• Financial Net Worth which is NW minus"property" (real and personal)
• Liquid Net Worth which includes only non-retirement financial assets and liabilities
• Retirement Account Value which includes only retirement plan assets

For our purposes Liquid NW + Retirement AV = Financial NW. Stuff in Liquid NW has no tax implications if spent while stuff in Retirement AV does.

This is a good way to keep track of the various forms of net worth and closely matches my own approach. The one thing that I don't include in our financial NW is the lump sum for our pensions (wife's and mine) as I don't want to include it until it's actually in hand which won't happen until we reach 65.

 

[yclipse]

I have made these two points for a long time:

1. Being a millionaire ain't what it used to be.

2. The news media and the political chatterers pay far too much attention to "billionaires" and "the 1%," and have almost entirely ignored those who have accumulated wealth in the range of $10 - 99 million. There are very few American billionaires. I would imagine that the number of those who have an 8-figure net worth is much, much larger and broader in our society.

 

[Rustic23]

When I graduated from college, the salary of a Second Lt. In the Airforce was $6,000 a Year! I was in Heaven! There were millionaires around, but no Billionaires that I ever heard of.DW and I kid each other about being millionaires, but it isn't the millionaires of our childhood.

 

[bluelight]

The key bit:

...the economy, according to these numbers, is creating a growing upper middle class. Many people got there by pursuing college degrees, steadily building retirement accounts and purchasing homes. For the most part, they became wealthy slowly...​

Sounds like us!

Agree. Though I didn't have a college degree and was a single parent for many years. My maximum yearly income was well under $200K in a very high COLA.

I also have no liabilities and paid cash for my current home and my cars. I don't consider my home in my net worth. What I did was save the max in my 401Ks and IRAs and always lived beneath my means and only bought things when I had the money to pay for them. When I remarried, I married someone who has the same financial values that I do.

 

[ArmchairMillionaire23]

I found this article very interesting, and think many members of this site qualify as "Mini-Millionaires" as the WSJ defines it.

An unlocked link to the article is here: https://www.wsj.com/us-news/never-m...fsw4oph4sry&reflink=desktopwebshare_permalink

Thanks for the summary. I was unable to read the article. All I got was...

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[ychuck46]

My issue is when home equity is taken into account for who are millionaires or not. I have never used the value of our home when calculating our wealth and any increases over the years. To me liquid or relatively liquid assets are a much better determiner of who is wealthy or not, since a home is so illiquid except for borrowing against the equity. Just my personal preference; your mileage may vary.

 

[rayvt]

Right, I agree, and that was sort of my point. Are these surveys using actual home equity or just the retail value of people's homes? I would be very surprised if 45% of all college graduates over 55 have a true NW of $1MM+, considering that most of those folks do not own their homes outright. But maybe I'm wrong?

In these click-bait articles, they not only include home value but the retail value not the equity. That's the simple way to write an article about millionaires. And be vague about the details of "millionaire" status.

I think that the only reason to include home value/equity in these figures is to boost up your Net Worth number. But it's bogus. The number doesn't mean anything, it's just a number. What truly counts is liquid(ish) net worth, and that excludes your house because as has been said many times, you have to live somewhere.

 

[LateToFIRE]

In these click-bait articles, they not only include home value but the retail value not the equity. That's the simple way to write an article about millionaires. And be vague about the details of "millionaire" status.

I think that the only reason to include home value/equity in these figures is to boost up your Net Worth number. But it's bogus. The number doesn't mean anything, it's just a number. What truly counts is liquid(ish) net worth, and that excludes your house because as has been said many times, you have to live somewhere.

Um, I take exception to your statement. I'm a "millionaire" by any definition you choose (liquid portfolio, exclude home, include home, etc.), so have no reason to split hairs here other than I just don't agree with your logic. Suppose you have +$1M of home equity in your primary residence. Why wouldn't you count that. You can borrow against it, you can use a reverse mortgage, you could rent it out and go live someplace cheaper, or you could just sell it, buy a cheaper home and pocket the difference. There is no one size fits all. Definition of NW is Assets minus Liabilities. Who's to say that real assets should not be counted or don't matter. That just sounds completely arbitrary and one dimensional.

 

[freedom2022]

I think someone here said this, [FONT=&quot] “If you have a million and live like a millionaire, you won’t have a million for very long.”[/FONT]

+1

 

[dunkelblau]

I think someone here said this, [FONT=&quot] “If you have a million and live like a millionaire, you won’t have a million for very long.”[/FONT]

This statement would imply that a million dollar net worth has low staying power, and I doubt this is true, at least for those who reached it by slow accumulation, which should be the vast majority.

Now a statement like "if you have a million and live like how non-millionaires think a millionaire lives, you won't have a million for very long", then I'd say it's more likely to be true, because the popular image of what a millionaire can afford goes well beyond what a typical millionaire thinks he/she can afford. Basically the tldr for the Stanley & Danko book.

 

[Andre1969]

Home equity is one of those things that I really don't know how to account for. I try to use the phrase "invested assets" or something like that whenever these types of conversations come up, and keep home equity out of it.

Right now, for instance, if the Redfin estimates are to be believed, I have about $400-500K equity in my house. But, I just don't think about it, because I can't do anything with it, without it costing me money. With the way mortgage rates are now, borrowing against that equity would probably result in a bigger bill than the first mortgage!

But, that equity still has some importance. Especially if I decided to sell. It would either make one helluva nice down payment on another house, or possibly even get me into one free and clear, if I decided to downsize. So net worth, which includes home equity, isn't a useless number, but one of those "take it with a grain of salt" numbers, I guess.