What makes you rich? According to a Gallup poll done a few years ago, the public’s median definition of “rich” was either an income of $120,000 or assets of one million dollars. By that definition, a lot of people could be considered rich. Roughly the top 7% of Americans have a net worth of a million dollars or more.
More recently, MSN Money asked their more money-savvy readers to define “rich.” A majority of the more than 11,000 who responded felt that they would need at least five million dollars to consider themselves rich.
While the average American thinks assets of a million dollars makes a person rich, someone who actually has that amount in assets understands this isn’t necessarily the case. Face it, a million bucks just isn’t what it used to be.
If you are saving to fund your retirement, one million dollars will only provide an annual income of $30,000 to $50,000. That’s not exactly an income that will support a lavish lifestyle. By my calculations, a retired person would need to have three million dollars to generate an annual income of $120,000, which is the income threshold the American public thinks makes a person rich. Obviously, there is a big disconnect between the asset level and the income level in the perception of the average American. Personally, I would take an income of $120,000 any day over a net worth of a million dollars.
If these are the perceptions of people with average incomes, then how do the rich define “rich?” Do they consider themselves wealthy? An even newer survey done by the Chicago-based Spectrem Group asked affluent Americans (defined as people with assets of over $500,000) what it takes to be considered rich. Of those surveyed, only 22% said one million or more, 45% said five million or more, 25% said 25 million or more, and 8% said $100 million or more.
This may be a classic case of millionaires envying multi-millionaires, who envy billionaires, who envy multi-billionaires. The Wall Street Journal reports that in previous studies, when people have been asked what it takes to be considered rich, the answer is normally twice as much as what the person asked is worth. So, for most people, the real answer to “What is rich?” may be, “A little bit more than whatever I have.”
To emphasize this, another survey I came across found that those who earned less than $30,000 thought that a household income of $74,000 would qualify as rich. Those who made $30,000 to $50,000 said an income of $100,000 would be rich. And people in the top half of earners were more likely to say that an income of $200,000 makes you rich.
Various definitions of “rich,” of course, involve far more than just assets or income. For some, rich may be associated with high earnings, a lavish lifestyle, or having inherited family money. For others, rich could be represented by financial security, giving generously, or having abundant choices.
Nor do these surveys and figures take into account people’s lifestyle or spending habits. If a couple earns $300,000 a year, most people would consider them rich. If they spend $400,000 a year—as I have seen people do—then they may seem to be rich, but they are actually going backwards at the rate of $100,000 a year.
Obviously, however one defines it, “rich” is a relative term. Still, there is something I wonder about. Forbes magazine publishes an annual list of the world’s wealthiest people. Imagine opening that issue and seeing your name at the top of the list. Then, do you suppose, would you officially consider yourself rich?