Few Millionaires are Rich These Days

When Bernie Sanders released his tax returns, he triggered taunts about being a millionaire – a rich socialist! Bernie did achieve richness temporarily: for two years his success as an author made him a income millionaire. Presumably his net worth is also well over a million. But unlike demi-billionaires, ordinary millionaires don't live rich.

Median U.S. household income is a bit over $60,000. As Thomas Heath points out in The Washington Post, a retiree with $1 million probably can't reach that income level. Even retirees with two or three million shouldn't expect to live large.

These days living rich probably requires at least $20 or $30 million. According to Spectrem, almost 12 million U.S. households have at least one million in investable assets, but only about 170,000 have more than $25 million.

Quiet Old Firm Launches Marketing Blitz

Brown Brothers Harriman, an old-time Wall Street partnership, shed its securities underwriting and sales units when Glass-Steagall came along. As a private bank it has gone about its business quietly – until last month. To my surprise, this ad greeted me on the last page of The New York Times news section. The following Sunday, BBH ran a two-page spread in the Times magazine. Banner ads popped up online, directing viewers to the BBH web site.

The web site, content rich, offers briefings on services, staff bios and  generous helpings of articles from three publications – for investors, business owners and women – arranged by issue and sorted by subject. Under "Wealth Management and Trusts" is this exemplary article on spousal access trusts. (The design of these trusts undoubtedly guards against the risks associated with spouses who plan to become ex-spouses. Even so, spousal access trusts must be grist for at least one financial thriller.)

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From 2010 to 2015, according to Spectrem data reported in Penta, the number of households with investable assets of $20 million to $100 million grew by more than 105,000. That's a 64% increase. Over a million households now have investable assets of $5 million or more. Among those with $5 million but less than $10 million, many should cross the $10 million threshold as their business and real estate wealth gets transformed (bring on the Gatorade barrel!) by liquidity events.

As wealth managers gear up for the growing market now emerging in the top financial tiers of the nations's 124.6 million households, they may find BBH's marketing blitz worth studying. 

Is $5 Million the New Million?

In 2015, for the first time, more than one million U.S. households had a net worth of more than $5 million. 

A report from Phoenix Marketing International also estimates that the number of HNW households, those with at least $1 million in investable assets, has reached a new high of more than six million. 

From the Databank: Millionaires and Billionaires

1.1 Million

Number of new millionaire households in the U.S. last year, as estimated by Boston Consulting Group.

7.1 Million

Total number of millionaire households in the U.S.

16.3 Million

Total millionaire households worldwide.

32

Percentage of wealth that Americans with more than $1 million are holding in cash, according to State Street's Center for Applied Research.

50

Number of new names on Forbes latest list of U.S. billionaires.

492

Total number of U.S. billionaires.

1,645

Total number of billionaires worldwide.

Living Like a Millionaire, on $30,000

The campaign by fast-food workers for higher pay, like $15 an hour, leads to a striking comparison.

Assuming full-time employment (perhaps a stretch in the case of fast-food jobs) $15 an hour produces an annual income of about $30,000.

Using Tiger 21's rule of thumb, a millionaire – that is, someone with investable assets of $1 million – should spend no more than 3% a year. Result: an annual income of $30,000.

Related posts
Millionaires Aren’t What They Used To Be

Millionaires: No Longer Worth Marrying

Wall Street's Fungal Creep

Heidi Moore's tirade against the push to advertise hedge funds may be a bit over the top, but she does have a way with words:

For most people in the US, Wall Street is not an everyday concept. It's more like a haunted Victorian mansion on the edge of town where your 401(k) retirement plan lives: it takes a long time to understand how to get there and you're pretty sure something's not right about it, but you're too scared to get close enough to check. ***

As you might expect, that's an illusion. Wall Street is in your backyard … in your schools and roads … in your bank account, charging you fees on your checking account ;…[and] in your driveway, where your car sleeps as you pay off your auto loan – a debt that has already been sliced and diced and sold to a trader at a bank somewhere. ***As a result, Wall Street is not so much like a haunted Victorian mansion as a quiet, creeping fungus right where you live: it grows fast and takes root everywhere, silently.

Moore may be right about the targeting of seven-figure 401(k) balances. Still, Wall Street already markets 10,000 mutual funds and a thousand or more exchange-traded funds. The 8,000 or so hedge funds, most of which underperform the S&P, will have plenty of competition.

One quibble: Contrary to Moore's assumption, the U.S. has nowhere near nine million millionaires. We have about nine million millionaire households. The number of individuals with investable assets of $1 million or more is closer to three million. 

Millionaires Aren’t What They Used To Be

Reporting on the latest Spectrem survey of millionaires, The Guardian places people with $1 million among the "super-rich." The Telegraph describes them as "mega rich."

Are Americans with investable assets of $1 million really extremely rich? Or, as noted here recently, are they actually too poor to afford a comfortable retirement?

Most truly rich people will tell you that $1 million is small change. To most other people, especially those wrestling with high credit-card balances and student loans, $1 million still sounds like a vast fortune.

For sure, $1 million isn't what it used to be.

To live like a millionaire lived in 1987, you today need $2 million.

To live like a  millionaire lived in 1976, you need $4 million.

To live like the millionaire of 1959, you need $8 million.

To  live like the millionaire of 1945, you need $13 million.

And to live like the millionaire of 1935, you need $17 million.

Millionaires: No Longer Worth Marrying

These days, The New York Times laments, mere millionaires have to keep working; they can't afford to retire. Decades of inflation have reduced $1 million to nonwealth:

In 1953, when “How to Marry a Millionaire” was in movie theaters, $1 million bought the equivalent of $8.7 million today. Now $1 million won’t even buy an average Manhattan apartment….

 Remarkably low bond yields make 2013 an especially tough time to retire with a mere $1 million. Or maybe not. Truth is, retirees usually get the short end of the stick, one way or another.

 In 1980, for instance, Treasury bonds yielded double digits – around 10%. After the high taxes of the era, a retiree netted maybe 6%.  No, strike that. In 1980 a retiree netted less than nothing. That year the inflation rate was 12%.

As The Times suggests, retirees need common stocks in order to achieve positive returns. And they shouldn't let Mr. Market's mood swings scare them. That's easy for wealth managers to say, difficult for ordinary people to do.

Oddly, Mr. Market's mood swings don't scare anybody, even the most timid millionaires, when for no good reason he sends the Dow up 30%.

Do Most Millionaires Have Million-Dollar Incomes?

Of course not! These days, even someone lucky enough to have $25 million invested might have to stretch in order to generate $1 million of investment income. Unfortunately, almost nobody – including president Obama – pays attention to the difference between those with a million to invest and those making a million before taxes. See Glenn Kessler's Does a majority of millionaires really support the Buffett Rule? 

The Washington Post's fact checker includes data on the Spectrem Group's millionaire surveys. Although these surveys are popular indicators of what's what in the high-net-worth world, they're not based on random samples. In other words, not surveys a president should rely on.

Not even in an election year.

Millionaires Aren't What They Used to Be

As reported on The Wealth Report, the latest Spectrem survey shows the number of U.S. millionaire households edged up to 8.6 million, close to the 9.2 million recorded before the Great Recession. But that's before accounting for inflation.

To make the threshold for the $1-million-and-up roster back in 1997, a household would need about $1,400,000 in today's dollars. (And those who believe the CPI has been understating inflation would say that estimate is low.)

Moral: The current crop of "millionaire households" aren't necessarily rich  Many need all the wealth-managment assistance they can get.

Just Enough Rich People

Spelling mansion

Robert Frank wonders, Does America Have Too Many Rich People? Not according to a Gallup poll on wealth. As Frank notes, only about 1% of Americans are millionaires, and mere millionaires are a long way from rich.

Millionaires are more prevalent in Congress. Among the 87 new Republican members, The Washington Post reports, at least 24 are millionaires.

Even so, have-nots outnumber haves: "At least 30 had liabilities [other than home mortgage debt] totaling $50,000 or more in 2010."

The U.S. probably does have enough rich people. But I wish many more Boomers were going to retire as millionaires.

How Many Millionaires Are There?

If you include residential real estate in computing net worth, the number of millionaires around the world exceeds the population of Australia. See More Millionaires than Australians.

See also the other articles in The Economist's report on global leaders. Although some of the material is familiar, you'll read about wealth going "tribal" and a top wealth-holder seeking therapy at Tiger 21.

Rounding Up the Millionaires

Robert Frank's Wealth Report spotlights a new survey of high-net-worth-investors, produced by U.S. Bank and Harris Interactive. Most respondents indicate they've maintained their long-term investments but have not seen their net worth return to 2008 highs. Welcome to the club.

The survey's full name is impressive: The Private Client Reserve of U.S. Bank Millionaire Investor Insights Annual Survey. Reserve? Innovative term for a financial services unit. As a noun, the Oxford Dictionary tells us, "reserve" is generally used in the plural: "financial reserves," "military reserves." The second meaning may be closer to U. S. Bank's intent:

A place set aside for special use, in particular

• an area designated as a habitat for a native people.
• a protected area for wildlife.

Hope this doesn't mean millionaires are an endangered species.

Why Many Millionaires Don't Feel Wealthy

From Fidelity's new study of millionaire households:

[N]early half (46%) of millionaires do not feel wealthy, more than twice as many compared to last year's survey (19%). This is likely due to the fact that millionaires have seen dramatic declines across their holdings.

I think Fidelity is on to something.

At least Fidelity could find more than 1,000 millionaire households to survey. What's more, those "millionaire households" were defined narrowly, excluding 401(k)s and other employer retirement schemes. Apparently investment real estate was excluded as well.

Even so, most of the households Fidelity surveyed aren't rich. Rich requires $20 million, $30 million or more, depending on who you ask and where you live. As Robert Frank suggests in The Wealth Report, feeling "wealthy" may be more a matter of choice.

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Commercial: The Fidelity study finds that hard times have caused millionaires to thirst for financial information. Merrill Anderson's newsletters can help quench that thirst.

The New Mass Affluent

What's that, bro? The over $5 million in investable assets you were so proud of has shrunk to a bit under $3 million? Welcome to the world of the mass affluent, as defined by Bank of America.

Those mere millionaires we mentioned recently really are moving down-market.

Millionaires Endangered, Too

As noted below, some billionaires became mere millionaires last year. But the mere millionaires were vanishing, too. According to the Spectrem Group, millionaire households in the U.S. declined from 9.2 million in 2007 to 6.7 million in 2008.

Go North, Young Wealth Manager

Investment advisers who sincerely want to be rich need new clients with new money. Where to find them? North Dakota!

Oil boom is changing the landscape and finances of North Dakota, writes Phillip Sherwell in the Telegraph. America's newest Black Gold Rush is gushing millionaires. What's more, "America's least-visited state is one of just three with a budget in the black - a surplus of $1 billion for its 635,000 residents."

Millionaire Households

The number of U.S. millionaire households rose again last year, to almost 10 million.

(Remember, most millionaire households contain no millionaires; rather, they contain two or more people whose investable assets add up to at least $1 million. Roughly three million Americans are estimated to be individual millionaires.)
If you have just read Jim Gust's post below, another thought may occur to you: Poor people are woefully under-represented in millionaire households!

Meet the Penta-Millionaires

From Julie Jason's column in The Advocate:

If you have more than $1 million, should you feel rich? Only if you have more than $5 million, suggests a recent Spectrem Group survey. Almost half of survey respondents said they would consider you rich if you had $5 million; 25 percent said $25 million; and 8 percent said you needed $100 million to be rich.

So who are the penta-millionaires? According to Catherine McBreen and George Walper Jr., authors of "Get Rich, Stay Rich, Pass It On," almost all are college graduates, and 63 percent have advanced degrees.

Forty-eight percent are retired. Of those still working, 22 percent are senior corporate executives, 15 percent are business owners, 10 percent are physicians and dentists, 7 percent are attorneys, 6 percent are consultants and 9 percent represent other professions.

How did these people get rich? Most 97 percent say they got rich from hard work, according to Walper, even though some said family connections, 13 percent or inheritances, 25 percent played a role.

What about financial goals? Eighty-four percent want to ensure they have a comfortable standard of living during retirement, according to Walper.

Three out of four use financial advisers, according to Walper, and 43 percent live off income produced by their investments.