“Am I rich?” Odds are good that you answered “no” to that question, regardless of how much money you have. According to a report by investment bank UBS, only 28% of people with $1 million to $5 million in assets considered themselves wealthy. Even when you ask people with more than $5 million in assets, only 3 in 5 consider themselves wealthy.
So how much does it really take to make it big in America? How much cash do you need to be considered rich?
According to a 2017 survey by Schwab, it takes an average of $2.4 million to be considered wealth in the United States. Of course, that’s the national average — the figure varies widely from city to city and state to state. In Charlotte, NC, $1.8 million was considered enough to be wealthy by respondents. However, you needed $4.2 million to be considered wealthy in San Francisco.
So what is rich? It all depends on where you live, how you live, and who you hang out with. Still confused? Let’s get a little more specific on what is considered rich.
A million dollars?
A million dollars is worth less today than it was in the past, but it’s still a popular threshold to determine wealth. In 2005, Leonard Beeghley, author of “Society in Focus,” defined the rich as the top 5% of households, or those with a net worth of at least $1 million.
Today, Beeghley’s criteria for wealth are a bit out of date. Although a million bucks is still a serious chunk of change, it is no longer enough to put you in the top 5% of earners. As of 2012, it requires a net worth of $1.9 million to make it into the top 5%. To squirrel away that much cash, you’d need a household income of $208,810 or higher, according to theTax Policy Center. Getting into the exclusive 1% group is even more challenging. To secure a spot, you’d need to make a whopping $521,411 every year.
The Spectrem Group’s survey asked investors what net worth you need to be considered rich. Results varied widely by age. 45% of investors under 40 felt $1 million was the threshold, but only 22% of investors older than 60 felt $1 million was enough to call yourself rich.
For most of us, it can be hard to hear that many people don’t consider millionaires to be rich. But if you go by the numbers, that would mean the U.S. was bursting with rich people. According to the Spectrem Group, there are 8.6 million millionaires in the country.
A million dollars and a house?
So how much money is considered “rich”?
“A million dollars, excluding the value of your primary residence,” is the minimum amount required to meet the U.S. Securities and Exchange Commission definition of an “accredited investor.” This measure is useful because it excludes what for most people is their most valuable asset and focuses on more liquid assets, such as stocks, bonds, and investment properties. If you still have a million dollars in the bank after investing in real estate, you’re probably rich.
Double your current salary?
Perhaps the best definition of what makes someone rich is “double what [they] make,” whatever that may be, says Robert Frank of the Wall Street Journal. This definition addresses the subjectivity of wealth: a concept to be pursued, not possessed.
According to Frank, “richness” exists in relation to what we have and what we want. For someone who makes $25,000 a year, $50,000 would afford countless luxuries. But someone making $100,000 a year would consider it a pittance. Every individual’s benchmark for wealth increases in proportion to their current net worth. The more we have, the more we want to have.
$250k and a better tax bracket?
Annual income is another popular measure of wealth. If you have an annual income of $250,000, it’s safe to say you’re rich, although depending on your location, you may not feel rich.
The IRS determines your tax rate based on income thresholds that divide the middle class from the “rich” from the “ultra-rich.” If you earn more than $250,000, you will be hit with the new 3.8% net investment income tax. Moreover, if you make more than $400,000, your tax rate rises to the ultra-rich tax bracket of 39.6%.
If you have “no financial constraints on activities,” you’re probably rich. At least, that’s what half of the investors interviewed by the USB 2013 Investor Watch survey think. According to this survey, if you’re unable to do something you want — buy a yacht; visit the Space Station; build a small island — then you’re not rich.
This may sound like a privileged stance, but it also sheds light on the connection between wealth and contentment. If you have $1 million in the bank and are content with day-to-day luxuries like massages and nice dinners out, congrats! You’re as rich as you need to be. But if you possess an insatiable desire for more — more private jets, more mansions — you may never consider yourself rich.
This is probably why 8% of investors interviewed by the Spectrem Group considered people with less than $100 million in the bank to be “just” upper-middle class.
The top 1%
In the United States, it takes a household net worth of $6.8 million to join the maligned and admired 1% club. It’s hard to argue you’re not rich once you’re wealthier than 99% of your peers.
On a global scale, top 1% wealth becomes more attainable. All you need is an annual income of $32,000. The average laborer in Ghana would have to work 200 years to earn $32,000. This highlights the huge income (and cost of living) gap between countries. Click here to see how your income compares to global standards.
So am I rich?
Good question. A million dollars in liquid assets or an income of $250k are a good start. But if these benchmarks feel impossible, don’t lose hope: wealth is dependent on your lifestyle choices, location, and local cost of living. The New York Times has a nifty app that shows you how your household income ranks when compared to over 300 zones across the United States. Plug in your numbers! It may surprise you to learn how “rich” you already are.
Who wants to be a millionaire?
Who doesn’t? The good news is, building a $1 million nest egg is not as hard as it looks. If a 25-year-old saves $405 a month, they will have a $1 million by the time they hit 65 (assuming an average annual return of 7%). Even folks who start later in life can hit the $1 million target with relatively small monthly contributions. It just takes discipline and planning.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.