How Much Money Do You Need to be Considered Wealthy?

Transcript of Podcast Episode 246

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, how much money do you need to be considered wealthy?

Let’s just say that a million dollars isn’t what it used to be. And unlike with previous generations, being a millionaire doesn’t necessarily mean you’re rich. But how much is a lot of money? A recent survey by Charles Schwab & Co., Inc., tried to quantify it.

The study, published in June 2023, came up with a specific answer: on average, most people would consider you wealthy with a net worth of $2.2 million or more.[1]  But the details reveal some glaring discrepancies. For one thing, 48 percent of all respondents said they feel wealthy today, even though their average net worth is just $560,000.

There are some significant generational differences as well. The study of 1,000 respondents broke down the generations as follows: Gen Z, or people born between 1997 and 2001; Millennials, or people born between 1981 and 1996; Gen X, or people born between 1965 and 1980; and Baby Boomers, or people born between 1947 and 1964.

Whether they are considered numerically wealthy or not, Millennials are the most likely to say they “feel” wealthy, with 57 percent of them saying so. Baby Boomers are the least likely at 40 percent.

Perhaps not surprisingly, younger generations are far more likely to use social media, not only to see how others around them are doing, but also to find some financial advice. 59 percent of Gen Z and Millennials say they follow influencers who share financial advice on social media. Only 13 percent of Boomers do this.

The study has its limitations. For example, the study does not consider regional differences. In other words, $2.2 million can be worth a lot more or a lot less depending on where you live. The cost of living in New York, Massachusetts and Hawaii is more than 40 percent above the national average. It’s more than 10 percent below the national average in Mississippi, Iowa, Oklahoma and Alabama.[2] 

How much work have people done to protect the wealth they have? Only 35 percent indicated that they have determined their financial goals and have documented them in a formal plan.  Why so low? Nearly half of the respondents feel they don’t have enough money to need a plan. Some of the other reasons include that they feel it’s too complicated to create one, they don’t have enough time to develop one, or they haven’t had a major life event that requires one.

So how is it that almost half of the respondents said that they consider themselves wealthy when few of them actually meet the financial qualification? Maybe it’s because for most people, wealth goes beyond simple dollars and cents. 

According to the report, “Americans generally choose non-financial assets when asked to choose which better describes wealth.”[3]  This includes having a fulfilling personal life, not having to stress over money and enjoying experiences. All of these non-monetary concepts were preferred by 70 percent or more of respondents when compared to a monetary concept, such as having more money than most of the people they know. 

All this just shows how conflicted we are when it comes to wealth. True financial wealth, it seems, is less important than other types of wealth, like family and community connections. Perhaps this is the good news.

[1] Charles Schwab & Co., Inc. “Schwab Modern Wealth Survey, June 2023.” Aboutschwab.com. https://www.aboutschwab.com/schwab-modern-wealth-survey-2023 (accessed July 27, 2023).

[2] Kissell, Chris.  “Cost of living comparison by state.” Insure.com.   https://www.insure.com/cost-of-living-by-state.html (accessed July 28, 2023).

[3] Charles Schwab & Co., Inc. “Charles Schwab Modern Wealth Survey2023.” Aboutschwab.com.   https://content.schwab.com/web/retail/public/about-schwab/schwab_modern_wealth_survey_2023_findings.pdf (accessed July 28, 2023).

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