Bloomberg recently published an interesting piece on millionaires who find that achieving this lofty milestone isn’t what it used to be. There are now more than 24 million households in the U.S. with a seven-figure net worth representing 18% of the total. One-third of them reached that goal in the past eight years, largely as a result of rising home and stock market values.
There are two primary factors suggesting a million-dollar net worth no longer guarantees a truly “wealthy” lifestyle. First, as shown below, the assets of those in the $1 to $2 million net worth range are heavily concentrated in illiquid categories as compared to their wealthier counterparts.
Note that 39% of the assets in these 12 million households is locked up in housing with an additional 33% in retirement funds. While these individuals do have some financial options, illiquidity may diminish their ability to spend freely and reduce the feeling of “having made it.”
The second issue is inflation. Bloomberg evaluated a fictitious “affluent” family in New York whose lifestyle included a suburban home, two Mercedes sedans, an Ivy League education for two children, an upstate weekend home, and a small boat. While this is indeed an enviable living standard, it is hardly outrageous in comparison to much of what we see on social media. The Bloomberg analysis found this package would currently cost about $2.1 million as compared to $1.4 million in 2017, an annual inflation rate of 5.2%. As a result, this package does not seem compatible with a net worth at the lower end of the millionaire spectrum.
A number of recent articles have described a sense of anger and hopelessness among younger generations. They are having a difficult time entering the job market, are saddled in many cases with student debt, are marrying later, and have a lower rate of homeownership. They have also accumulated fewer assets than their parents at the same age. The Bloomberg article describes another issue. Some younger people are now very discouraged because they have come to realize that even those who achieve what was previously considered wealthy status may not be able to enjoy a lifestyle consistent with their expectations.