What does it mean to be wealthy?
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What does it mean to be wealthy?
The IRS might describe it as landing in the top tax bracket—paying a 37% marginal rate. For the 2025 tax year, that means earning incomes higher than $626,350 (single) and $751,600 (married filing jointly). But while these figures mark the top of the income scale, they don’t necessarily capture what it feels like to be financially secure or truly wealthy. Charles Schwab’s 2025 Modern Wealth Survey, on the other hand, looked at 2,200 adults across different generations and discovered Americans felt they needed more than $800,000 in net worth to feel financially comfortable, and about $2.3 million to be considered wealthy.
The answer is clearly subjective, but must it revolve solely around money? Can wealth be measured not just by what is ample, but also by what is lacking? Namely, a lack of worry—does the specific amount of money matter as much as knowing there’s enough to never run out? This is where the Rich Ratio comes in: a simple calculation that measures wealth not by a one-size-fits-all dollar amount, but by comparing what you have to what you actually need.
The Rich Ratio: A Simple, Powerful Way to Measure Financial Readiness
The rich ratio takes what an individual has and divides it by what they need.
The rich ratio takes what an individual has and divides it by what they need.
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The have is total monthly retirement income available to spend. That includes Social Security, pensions, investment income (using the 4% rule or similar withdrawal guideline), part-time work, rental income, and any other spendable funds. The need is a monthly retirement budget—covering housing, food, travel, healthcare, family, and hobbies—that enables the desired lifestyle. When a rich ratio is greater than 1.0, it indicates that income exceeds needs, increasing the probability of eventual financial freedom. If it’s below 1.0, it may be time to course-correct.
Joe Rogan described wealth as the ability to pay for a nice dinner without regret. (Photo by: Vivian Zink/Syfy/NBCU)
NBCU Photo Bank/NBCUniversal via Getty Images
One reason the rich ratio may make wealth seem more flexible is that its effectiveness doesn’t depend on the amount of money involved. The formula applies equally to a public-school teacher retiring with $500,000 or an investment banker retiring with $5 million; it’s about individual needs, not impressive bank accounts. An illustrative example comes from well-known podcaster and comedian Joe Rogan. He described wealth as, “When you can just go to a restaurant, get a nice steak, order a bottle of wine, have a good time and not think about the bill that’s [what financial freedom is].”
Example Time
A future retiree with access to $7,000 monthly who needs $6,000 for living expenses could calculate the following: $7,000 ÷ $6,000 = 1.17
A rich ratio of 1.17 means that the individual is in excellent shape. Not only are their needs met, they even have breathing room. That’s the Joe Rogan guilt-free dinner, built right into the plan.
Are You Richer Than You Think?
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Now, consider another potential retiree earning a robust $30,000 monthly who needs $40,000 to meet expenses. The rich ratio is 0.75—a red flag. Despite having significantly more income than the person from the first example, they are less rich in reality. They may need to consider part-time work or even delaying retirement to trim expenses.
Are You Richer Than You Think?
A recent Nasdaq article broke down some differences between feeling rich and being rich, including signs that an individual may be wealthier than they think.
Earning more than the local median income: Those earning above their local area’s median may increase the odds of having more than they need. In 2024, the national median household income was approximately $83,730, while in California, it was about $100,600. Location can influence what one considers enough to live comfortably.The key savings benchmarks have been hit: According to the article’s author, the standard guideline is to aim for the equivalent of an annual salary saved by age 30, three times salary by 40, six times by 50, eight times by 60, and 10 times by 67.Not living paycheck to paycheck: Those without the stress of covering bills or groceries each month are in an enviable position compared to many Americans.The occasional splurge doesn’t cause financial panic: The Joe Rogan anecdote put into practice.The ability to invest rather than survive: Covering expenses is one thing, but having enough left over to invest money in the stock market, real estate, or a grandchild’s 529 plan is a surplus many don’t enjoy.The creation of a financial buffer: Whether it’s an emergency fund, travel cushion, or cash for peace-of-mind—these buffers can fortify the rich ratio.Bottom Line
Rather than having one single blanket definition, wealth may be in the eye of the beholder. However, it can also be viewed as a formula. Retirees don’t need to feel rich to be rich. By examining what they have, determining what they need, and calculating the difference, they put a numeric face on what may otherwise exist solely as vibes.
Retirees with a rich ratio above 1.0 cross a threshold. They’ve earned enough to cover their lifestyle, reduce stress, and maybe even order from the fancy dessert tray after a lovely dining experience.
Retirees with a rich ratio above 1.0 have earned enough to cover their lifestyle, reduce stress, and maybe even order from the fancy dessert tray after a lovely dining experience.
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