Or put another way, US$2.1m today is equivalent to what US$1m was about 30 years ago – which helps explain why there are so many more millionaires than there were a generation or two ago.
Even with the rising ranks of millionaires, it’s a milestone that remains frustratingly out of reach for most. Average wealth is pulled upward significantly because the top 10% hold two-thirds of total household wealth and are worth an average of US$8.1m. The bottom half of households, measured by wealth, hold just 2.5% of the total and are worth US$60,000 on average.
The gap between the wealthiest Americans and everyone else has widened since the pandemic, as high-income families reap the benefits of rising home values, ballooning stock prices and outsize income gains. Lower- and middle-income Americans, by comparison, are increasingly struggling under the weight of rising costs and are falling behind on utility bills, car loans, credit card payments and even the cost of filling up at the gas station.
In interviews with nearly a dozen recently minted millionaires, not a single one said they felt wealthy in today’s economy. Most said they felt financially stable and prepared for an emergency – a job loss, say, or unexpected medical cost – but none said it felt like the kind of money that would allow them to live lavishly or retire early.
Instead, they said they quietly marked the occasion, by going out for ice cream or booking a weekend trip, then carried on with their everyday jobs and lives. “The only thing that’s different now is: I buy organic strawberries every time I go to the store,” one millionaire in California said.
For American millionaires, the truth of the achievement is less about cash and more about amassing assets that bump up their overall net worth. Only about 4 to 6% of millionaires’ wealth is readily available as cash, according to data from the Survey of Consumer Finances.
Much of the nation’s household wealth sits in retirement accounts, and that share has grown dramatically. In 1989, retirement made up just 7% of millionaire wealth. By 2022, that share had more than tripled.
Recent jumps in the stock market have padded Americans’ retirement portfolios, creating a new crop of US millionaires. But economists stress that the financial structure of retirement has changed in the past couple of generations. Employee pensions that used to guarantee a certain amount of money every year have largely been replaced by 401(k)s and other plans that have put pressure on people to independently save and invest more of their own money for retirement. As a result, Americans are increasingly on the hook for funding their own retirements.
Keith Messinger, a retired civil engineer in Lexington, Kentucky, and his wife, a former teacher, recently became millionaires after 25 years of aggressively putting money toward their retirement account. It was a bumpy road to get there, Messinger said, especially after he depleted his funds a few times to cover routine expenses.
US$1 million today buys what about US$$480,000 did 30 years ago. Photo / 123RF
“I looked up at 42, and I’ve got US$0 in my retirement plan,” recalled Messinger, now 68. “I said, ‘Well, the million-dollar boat has sailed. That’s no longer reachable.’”
Still, he decided to invest heavily in his shares of his employee-owned company. Messinger had calculated he’d end up with a net worth of US$500,000 by the time he retired. But the recent run-up in the stock market – which doubled his savings in five years – has helped him reach his original goal.
Messinger retired at age 65, earlier than he wanted to, because his wife got sick. They’d just bought a trailer camper with plans to travel the country when his wife became disabled and largely bedbound. Messinger has since sold the trailer.
“The phrase I use is: I’m comfortable,” he said. “I can’t spend money willy-nilly, but I don’t worry about the day-to-day.”
Even becoming a multimillionaire doesn’t usually make people feel entirely secure, said Megan Gorman, managing partner at Chequers Financial Management, who works with high-net-worth clients.
“I work with people across the wealth spectrum,” she said. “Even wealthy people never feel completely at rest. There is always that concern: Am I going to be okay?”
A big way Americans have long used to build wealth is through home ownership: housing represents about 30% of millionaire wealth, a figure that hasn’t changed all that much from 30 years ago.
But building wealth through equity is tough for significant parts of the population because house prices have gone up so much. Mortgage rates have also risen dramatically since the pandemic, hovering near 7% for much of the past three years.
“After the pandemic, we’ve seen a lot of affordability issues for people wanting to buy in,” said Zillow chief economist Mischa Fisher. But affordability has started to improve again. “Going forward over 15 to 25 years, it’s still a good way to build wealth, even if it’s challenging right now.”
That’s what happened to Los Angeles resident Steve, who spoke on the condition that he be identified only by his first name to protect his financial details. Steve and his wife bought a home for about US$167,000 in the Eagle Rock neighbourhood of Los Angeles in 1994. That house is now worth just over US$1m.
A steady mortgage rate and lower property taxes helped Steve and his wife save about US$1.5m for retirement. He feels stable but not as though he’s living a lavish lifestyle.
“I live a frugal lifestyle, but I’m not concerned if I have to go out to eat and prices have risen,” he said. “If I need to buy something, I know I can.”
As the median age of a first-time home buyer has risen, now to 40, so has the age of millionaires. Households headed by someone 65 or older now represent 42% of millionaires, up from 28% in 1989, Federal Reserve data shows.
But young millionaires still exist, especially those who made it big in the expansion of the tech industry.
Marvin Xu, a 27-year-old software engineer in Seattle, crossed the million-dollar threshold last year. He credits his hefty compensation package – about US$240,000 a year, including equity and benefits – and stock market investments for helping drive up his wealth. His frugal lifestyle has helped, too. Xu limits travel to local campgrounds and national parks and hardly dines out.
“I live by myself in a small, simple apartment; I always cook at home,” he said. “In general, I don’t spend a lot. And everything I don’t spend, I invest.”
Making it to US$1m felt significant, Xu said, especially because he grew up in the early aughts hearing his father, also a software engineer, talk about how it would take an entire lifetime to save that much.
“It’s a really nice milestone,” he said. “But of course a million dollars then isn’t what it is now. I don’t have the US$1m my dad was talking about all those years ago.”
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