Are You Rich? How the Wealthy Are Defined
Are You Rich? How the Wealthy Are Defined
Emma Kerr Tue, July 13, 2021
The vast majority of Americans do not meet commonly held definitions of what it means to be rich in the U.S. Respondents to Schwab's 2021 Modern Wealth Survey said a net worth of $1.9 million qualifies a person as wealthy. The average net worth of U.S. households, however, is less than half of that.
But wealth is in the eye of the beholder -- a person's location, career, community, background and so many other factors can influence his or her perception of wealth. Those perceptions may be evolving as new generations enter adulthood and redefine success.
"The generations of today, Gen Y and Gen Z, they don't think about wealth and success the way boomers did, especially as it relates to finances," says Penny Phillips, president and co-founder of Journey Strategic Wealth in New Jersey and California. "It was, save my money, make some investments and when I'm 65, I'll try to take my first big vacation. Today, success is defined so much more by life experiences and impact and living for today."
Indeed, the annual Schwab survey found that respondents are lowering the bar for what they consider wealthy. Compared to 2021 standards, respondents to the 2020 survey described the threshold for wealth as being a net worth of $2.6 million.
The recent coronavirus pandemic may also have affected how consumers perceive wealth and shed new light on individual priorities amid the year's financial uncertainty and stress.
"With what's happened in the world in the pandemic, it's reframed priorities and brought about different emotions and behaviors," says Amy Richardson, a certified financial planner at Schwab, on the company's Intelligent Portfolios Premium team. "There might have been a shift in how people perceive what makes them happy and how much it takes to achieve financial independence."
Net Worth vs. Income
Net worth is the sum of an individual's assets, less liabilities. But individuals with high incomes don't necessarily have a net worth to match, and the reverse is true as well.
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