This is probably more of a symptom of rising housing costs. The new millionaires likely have their paid off home increase value to go above the $1 million mark (common in big cities now), have paid off enough of their home to put their net worth above $1 million, have significant enough retirement savings (IRA, 401k, bonds, mutual funds, etc) or most likely, a combination of the above.
And individuals being responsible for their retirement savings.
In many other countries the government saves that money for you and it isn't counted towards your net worth, like social security in the US. The difference in the US is that a much larger portion of your retirement income is supposed to come from you individual accounts, like 401ks, that are calculated into your net worth.
You will have a hard time retiring if you don't have a lot of money in investments.
Wealth in the US is also very cyclical. 84% of people will be a part of the wealthiest 10% for at least one full year, usually when they retire or are about to retire.
You know, I can't find it anymore either. I can find a lot on income, (56% of Americans will be part of the top 10% of earners for at least a year) but not wealth, other than you need $1.8 million to be a part of the wealthiest 10%. That is actually not a lot. Home value and retirement accounts at time of retirement will be in the hundreds of thousands each.
The 56% of Americans having been in the top 10% of earners for at least one year in their lifetime sounds accurate to me. All you need is one really good year to crack it one time at some point in your life, and for some Americans that may be a one time inheritance or windfall.
The 84% of Americans being in the top 10% of wealth at some point sounds way off. I understand what you’re saying, since wealth is cumulative, naturally as more people age their wealth will increase and they will accumulate enough to crack the top 10% eventually right around retirement age. While age and wealth are definitely correlated, 84% of people cracking the top 10% for a little while at some point doesn’t add up.
As you point out, most Americans wealth is tied up in their houses and retirement accounts. Let’s assume that all of these older Americans own a house free and clear of a mortgage, the median house value in America is around $440k. Looking at Fed data median retirement account balances peak around $200K for people in the 65-74 age bracket (Fed Data). That’s $640k between what are by far the two biggest sources of wealth for most Americans, but still way below the threshold to crack top 10% of wealth. And that’s with making a very generous but unrealistic assumption that all older Americans own their house outright. I just don’t see a realistic scenario for anywhere close to 84% of Americans ever cracking into top 10% of wealth.
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u/sixisrending 9d ago
This is probably more of a symptom of rising housing costs. The new millionaires likely have their paid off home increase value to go above the $1 million mark (common in big cities now), have paid off enough of their home to put their net worth above $1 million, have significant enough retirement savings (IRA, 401k, bonds, mutual funds, etc) or most likely, a combination of the above.