Are You Wealthy? 19 Ways to Define Wealth | NewRetirement (2024)

In a NewRetirement discussion group, someone commented that they were shocked to be called wealthy. He did not recognize himself in the term. Though, after reflection, he came to believe that he is wealthy – just by a different definition than he had originally held.

What is wealth? How do you define wealth? Do you think of yourself as wealthy? What does that mean to you? Your answers to these and other questions about your attitudes toward wealth can have a profound impact on your financial decisions and aspirations.

Are You Wealthy? 19 Ways to Define Wealth | NewRetirement (1)

Thesaurus.com lists 53 synonyms for wealth including abundance, affluence, cash, property, prosperity, richness, and worth. However, they don’t begin to cover what wealth really means.

Below are 19 different ways of defining what it means to be wealthy.

1. Highfalutin Spending Habits

The man caught off guard by being called wealthy, originally defined wealth by observed spending habits.

He said, “I never thought of myself that way [wealthy]. I grew up in a one bedroom apartment with parents and siblings, I never inherited money. My first job out of high school was as mail boy in a large corporation. I don’t fly first class or stay in luxury hotels. I don’t eat in the finest restaurants or buy wine that cots more than $15 a bottle. I don’t wear designer clothes. I refuse to pay $30 for cutting what little hair I have.”

At the other end of the spectrum, Eric commented that he actually now feels wealthy because he is starting to spend money in a more flamboyant way. He said, “I am beginning to embrace the thought [that I am wealthy] and started to enjoy it. First time in my life I’m paying for business class to Europe and just the other day bought a 14lb leg of Spanish Serrano ham.”

2. Inheritance

Many people don’t think of themselves as wealthy because they worked hard for their own money. Inherited wealth is a way many people define “being wealthy.”

Wealth by this measure seems to mean an inherited lifestyle or mindset — a sense of abundance and entitlement – that you can only be born into.

However, in 2018, 64% of the richest Americans on the Forbes 400 list were self-made. And, according to to Wealth-X’s World Ultra Wealth report, 72% of the global ultra wealthy population made their own money instead of inheriting it.

Read more about average inheritance — how much are retirees leaving to heirs?.

3. Net Worth

Spending habits or how you get your money aside, the most traditional definition of wealth is actually net worth. Your net worth is the sum total of your assets minus your debts.

What’s your net worth? How will it evolve over time? Use the NewRetirement Planner to find out.

4. Wealth is Purely Relative

Wealth might not be an absolute concept or singular definition. Wealth can be relative to a variety of factors like those below:

How do you compare to peers?

For many people, especially Americans, wealth is a relative thing. Are you keeping up with the Jones’? How do you compare to your neighbors? The people you grew up with? Your siblings?

Where do you stack up compared to all households in the United States?

Let’s take a look at the Net Worth for the top .1%, .5%, 1%, 5% and 20% for U.S. households. According to Federal Reserve data :

  • To be in the top .1% for net worth, you need $43,207,732
  • For the top .5%, you need $17,557,208
  • It’s only $11,099,166 to make it to the top 1%
  • You need $2,584,130 to be in the top 5%
  • It only takes $500,000 to be in the top 20%

NOTE: The typical American household has a net worth of about $97,000.

At a more local level, net worth varies tremendously between different states. According to 2019 data from the U.S. Census Bureau, the highest median net worths for homeowners are found in Hawaii ($1,139,603), California ($911,086), and Washington D.C. ($974,364).

The lowest are in Indiana ($180,654), Oklahoma ($182,466) and Mississippi ($191,736).

How do you compare to averages for cash, savings, home equity and other balances?

How does your income compare to the cost of living where you live?

Wealth can also be a measure of the expenses where you live. Living in a California district with high performing public schools is a whole lot more expensive than being in a small village in Mexico. It takes more to be “wealthy” in California than in the Mexican village.

Robin commented, “Are we wealthy in our area of the United States, yes. Would it be the same if I was transplanted to Los Angeles, New York or Miami? Probably not.”

How does your wealth in the United States compare to wealth in countries around the world?

According to a Credit Suisse report, the United States has the second highest (following Switzerland) average net worth per adult out of 162 ranked countries. The United States average net worth is $505,421.

However, we rank 26th if measuring the median which is a mere $79,274. (The average is much higher because there is a relatively small percentage of people who have the vast majority of money. The median is the number where half the adults have wealth above the median and half below.)

For context, Haiti (the lowest) has a median net worth of $193 and Luxembourg the highest at $259,899.

The Perception of wealth is relative by age

A Charles Schwab survey found that wealth is defined very differently by different age groups:

  • Gen Z thinks it takes $1.49 million to be considered wealthy
  • Millennials say $1.94 million
  • Gen X believes you need $2.53 million
  • Boomers declare that it takes $2.63 million

5. Your Expenses Are Lower than Income

Many people on the NewRetirement Facebook group consider themselves wealthy if their income is higher than their expenses while being able to do what they want to do – which should include a plan for funding all retirement expenses.

Use the cash flow chart in the NewRetirement Planner to assess your expenses relative to income. Pay close attention to savings drawdowns to cover your costs.

6. $1 million, $5 million, $10 million

There are 56.1 million millionaires worldwide. Millionaire can be a term synonymous with wealth. However, if you have $1m, are retired and are living an expensive lifestyle, you might go from wealthy to poor in a relatively short period of time.

The Schwab survey found that overall, Americans say they need:

  • $1.9 million to be wealthy in 2021 (down from $2.6 million in 2020)
  • $1.1 for financial happiness (down from $1.75)
  • $943,000 to be financially comfortable (up from $624,000)

7. Income Planning

The big pot of money – thinking in terms of millions – is one way to define wealth.

However, planned income is another way.

Bob and his wife strategized to collect pensions to maximize income to achieve wealth in retirement. He said, “Our friends consider us ‘wealthy’ although they have no idea what we earn. They base their thoughts on the fact that I receive a military retirement pension after 20 years in the U.S. Navy. And, currently work for the Navy as a civilian and will receive another government pension when I retire from that job. My wife and I both contribute the max to our 401ks.”

Strategizing for retirement income is one of the smartest ways to plan retirement. Want to learn more? Try one of these articles:

  • 3 steps to a retirement income plan from Nobel prize winner, Robert C. Merton
  • Explore 18 different retirement income strategies

8. Feel Financial Freedom

Michelle said, “To me wealthy means I can afford to do what I want in retirement. I cover my essential needs. Have the freedom to do what I enjoy.”

Here are 14 tips for achieving financial freedom.

9. No Stress or Worry

Perhaps the best way to determine if you are wealthy or not is to assess your stress and worry levels around money.

James said, “If you’re still paying attention or worrying about your assets you’re not wealthy.”

Although, lots of ostensibly wealthy people enjoy assessing their financial situation and that is okay too.

Best way to worry less? Create a comprehensive financial plan. The more detailed you make your plans, the less stress you will feel.

The NewRetirement Planner makes it easy. We are a personalized financial planning platform. Like a home gym for your money. We’ll you help you get organized, make better decisions and do better across savings, investments, Social Security, housing, debt, insurance, income, withdrawals, taxes and more. Design a plan to be wealthier, retire earlier, be more secure and achieve your goals.

10. Not Wanting – Having Enough

Many people believe that you are wealthy when you can afford to fund everything you could possibly want.

Tami said, “Yes. I believe I am wealthy. By the time I retire I will have enough to travel and help my children and grandchildren and even my niece and nephews. So, yes. I am wealthy beyond my wildest dreams.”

Jocelyn wrote, “I think the healthiest way to think about wealth is having enough. Do you have enough? Even that is a hard state of mind to find.”

11. Frugal Mindset: Able to NOT Spend

Some people who have big bucks in the bank, know that they are wealthy because of a mindset that prioritizes frugality.

Doug said, “I just sold my 94 Ford Ranger that I paid $3200 for 10 years ago. My ‘new’ truck is a 2000. I have 10 times my salary saved and just did a refi for a $600 mortgage. It’s all [significant savings and very low expenses] because of the mindset that let me drive a $3200 truck for 10 years.”

This is the mindset popularized by Thomas Stanley and William Danko in The Millionaire Next Door.

12. Projected Estate Value

Current net worth is the most common measure of wealth. However, your projected estate value at your longevity might be a much better measure.

David said, “My dad always used to say, ‘it does not matter where you start the race, it only matters where you finish.”

By this adage, wealth would be measured by your estate value at death. And, depending on your goals, you would be wealthy with anything between zero to millions left behind.

Did you know that you can use the NewRetirement Planner to calculate your estate value at longevity?

13. Retiring Early

While some people love to work and don’t necessarily do it for the money, achieving an early retirement is a relatively new way to think about or measure wealth.

Jim was clearly gleeful when he wrote, “We work hard, live well below our means, and have zero debt. Retiring in January at barely 56.”

It wasn’t too long ago that the vast majority of people worked until within a few years of the end of their life. Retiring with 20, 30, 40 or more years of life left is the ultimate in wealth.

Explore 19 tips from people who retired early.

14. Financial Security

Financial security is another popular definition of wealth.

Security is not an absolute number, but is an approach to personal finance that prioritizes protecting your money from risk. If financial security is your measure, you are wealthy if you can guarantee adequate lifetime income to cover a broad range of future possibilities.

The NewRetirement Planner enables you to run infinite “what ifs” to help you find security with your finances.

15. Health is Wealth

Cynthia extolled, “Health is wealth. If you haven’t maintained your health no matter the $$$ saved or interest drawn… Well, you know the rest. Stop comparing your pennies and start looking at your vital signs.”

Erik added, “People don’t like to work on their health because it’s hard. What good is money if you are in poor health due to poor life choices.”

16. An Attitude of Gratitude

“My wife and I are working to change our life attitude to gratitude. We are in a good place and our problems are really, usually just annoyances,” said Jack.

They may be onto something. Research shows that gratitude increases as we age. Better yet, gratitude is proven to improve health, happiness and your finances too.

17. Time is Wealth

Time is finite. Money is not. By this measure, focusing on how much time you have is a far more important measure of wealth than anything financial.

James discovered this a bit late. He recounted, “So I am 65 and about 3 months into retirement. I now realize I could have gone at 55. Now I can’t spend it all [money] unless I get stupid, even with traveling and skiing all winter and living till 100. Health and aging well is all that matters now. Time is a precious commodity that no matter one’s assets is unavailable at any price. Use what time you have wisely.”

Are you saving too much for retirement? (It is more common than you might think.)

18. Happiness is Wealth

“If you are happy and content, you are wealthy,” said Julie.

One can argue — and many have — that everything we do in life is done because we think and hope it will lead to happiness.

19. Wealth is Having a Financial Plan You Are Happy With

While only 33% of Americans have a financial plan in writing, Schwab’s 2021 wealth survey shows that 54 percent of Americans who have a written financial plan feel “very confident” about reaching their financial goals, while only 18 percent of those without a plan feel the same level of certainty.

Those with a plan also feel wealthier and maintain healthier money habits when it comes to saving and investing.

Furthermore, planners are:

  • 15% more likely to feel financially stable
  • 37% more likely to have an emergency fund
  • 28% more likely to be debt free
  • 29% more likely to consider risk tolerance when investing
  • 26% more likely to be aware of fees and investment costs
  • 24% more likely to regularly rebalance their portfolio

Do you have a written financial plan and is it up to date? NewRetirement makes it easy.

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Are You Wealthy? 19 Ways to Define Wealth | NewRetirement (2024)

FAQs

What qualifies you as wealthy? ›

Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

How do you define your wealth? ›

Wealth measures the value of all the assets of worth owned by a person, community, company, or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts.

What percentile is a $3 million net worth? ›

The 95th percentile, with a net worth of $3.2 million, is considered wealthy, facilitating estate planning and possibly owning multiple homes. The top 1%, or the 99th percentile, has a net worth of $16.7 million and represents the very wealthy, who enjoy considerable financial freedom and luxury​​.

What is the net worth of the top 1%? ›

LOS ANGELES - Recent data from the Federal Reserve reveals that by the end of the fourth quarter of 2023, the wealth amassed by America's wealthiest 1% reached an unprecedented milestone of $44.6 trillion.

What percentage of Americans have a net worth of over $1000000? ›

Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.

What is considered wealthy vs rich? ›

But while everyone in this group is rich, it does not mean they are wealthy. To be considered wealthy, your assets must be more substantial than your liabilities, with them generating an income large enough to cover your fixed expenses (such as rent or mortgage payments, car payments and insurance premiums).

What is considered upper class? ›

Middle class: Those in the 40th to 60th percentile of household income, ranging from $55,001 to $89,744. Upper middle class: Households in the 60th to 80th percentile, with incomes between $89,745 and $149,131. Upper class: The top 20% of earners, with household incomes of $149,132 or more.

What is considered retiring wealthy? ›

Even $800,000 in retirement savings doesn't necessarily mean you're wealthy — it just means you'll have enough to retire comfortably for 25 to 30 years. According to some surveys, you need at least $2 million in net worth to be considered wealthy.

What is wealth vs income? ›

Wealth is the value of assets you own, like money and property. Income is the amount you make in a certain period, like your salary.

What net worth puts you in the top 5%? ›

Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.

Does net worth include home? ›

Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).

How many people have a net worth of $1000000? ›

Let's break it down with a cold splash of truth. There are about 22 million people in the US sitting on a net worth of over $1 million. That might seem like a hefty squad of millionaires to you, but let's put things into perspective. That's less than 7% of the U.S. adult population, my friend.

What is a good net worth by age? ›

Average net worth by age
Age by decadeAverage net worthMedian net worth
40s$713,796$126,881
50s$1,310,775$292,085
60s$1,634,724$454,489
70s$1,588,886$378,018
4 more rows

How many people have $2000000 in savings? ›

Among the 47 million households headed by someone age 60 or older, 7% had household investable assets of at least $2 million, Drinkwater said. Only 6% of the 89 million households in the U.S. headed by someone 40 to 85 years old has that amount, Drinkwater said.

What percentage of wealth is by age? ›

As of 2019, individuals under 40 years old held just 4.9 percent of total U.S. wealth despite comprising 37 percent of the adult population. Conversely, individuals over age 54 made up a similar share of the population and held 71.6 percent of total wealth.

What income is considered upper class? ›

Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131. Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.

What is the upper class income? ›

Upper-middle class: $94,001 – $153,000. Upper class: greater than $153,000.

What is considered wealthy by age? ›

Net worth is the difference between the values of your assets and liabilities. The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.

Is a net worth of 3 million good? ›

And while that may seem like a lot of money, high-net-worth individuals — those with more than $1 million in investable assets — believe they will need more than double that to retire comfortably, with the average person in this pool estimating they will need $3 million.

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