Think you know what it takes to be rich in America? The COVID-19 pandemic created an inflection point in Americans’ ideas about wealth — from how much is enough to afford a rich lifestyle to what being wealthy actually means. A new survey from Schwab captures a surprising snapshot of these constantly moving financial goalposts.
Respondents concluded that an average net worth of $2.2 million would be considered wealthy in 2023. This is unchanged from the $2.2 million mark recorded in Schwab's 2022 survey, but still well below the high mark of $2.6 million recorded in its pre-pandemic 2020 survey.
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Schwab's latest survey also reveals that roughly half of respondents say they already feel wealthy today, despite having an average net worth of only $560,000. This total represents only a quarter of the consensus threshold of being rich in America. So, what's going on here?
The survey authors explain that factors like family strength and good health increasingly factor into respondents' calculations of what "wealthy" means. According to the data, four in 10 Americans define wealth in terms of "well-being," while only three in 10 describe it in terms of "money."
Digging further into the surprising data, respondents chose "enjoying experiences" over "owning nice things" by a ratio of 70% to 30%. They picked "healthy work-life balance" (69%) over "maximizing my earnings" (31%), and they preferred "enjoying healthy relationships with my loved ones" (62%) to "having a lot of money" (38%). Finally, respondents agreed that "having time" (61%) is more important to them than "having money" (39%).
Jonathan Craig, managing director and head of investor services at Charles Schwab, said, “Americans today aren’t as worried about keeping up with the Joneses, and more importantly, they understand that they can be happier with fulfilling experiences and relationships, even if they have less money than them.”
Americans today aren’t as worried about keeping up with the Joneses...they understand that they can be happier with fulfilling experiences and relationships, even if they have less money than them.
Feelings of wealth led by millennials, Gen Z
The two youngest adult generations self-reported the highest levels of financial comfort. Roughly six in 10 millennials and five in 10 Gen Zers reported feeling wealthy, while only four in 10 Gen Xers and four in 10 Baby Boomers said the same.
Some of this could be down to younger generations having more optimism due to the longer runway in front of them before retirement. However, a recent study on Gen Z saving habits revealed Gen Zers dedicating an impressive20% of their salary towards retirement – markedly higher than millennials, Gen X and boomers – while starting at a much earlier age than older generations.
The basics of building wealth
It's possible to build wealth at any age. Follow these wealth creation basics to steadily improve your financial picture:
Start investing early in a steady portfolio that doesn't chase returns and has an appropriate risk profile for your age and financial picture. The easiest set-and-forget portfolio relies mainly on low-fee, market-tracking ETFs.
Max out your savings in your company retirement plan, to take advantage of tax-free savings growth and company matches (or "free money"). Self-employed workers can contribute to solo 401(k) plans, which allow you to contribute far more because you're both employer and employee.
Pay off high-interest debt. Credit cards have an annual interest rate of 24.59%, according to Forbes. These sky-high interest payments can eat away at any wealth building progress you're making elsewhere. Consider using a balance transfer credit card with 0% APR to get a breather from excessive interest while you whittle down your debt.
Watch your taxes. Adjust your withholdings to reduce your tax refunds and limit the amount that you're essentially loaning the government for free each year. Consult a tax planner or other tax resources to take advantage of all the deductions available to you.
Boost and then protect your credit. Good credit raises your financial ceiling by unlocking the lowest rates on loans and even helping with your job search. Check your credit score at a free site such asCreditKarmaor FreeCreditScore. Then get to work raising your score by paying off credit card debt, paying bills on time, raising your credit limit, and even requesting the removal of negative information like bankruptcies and collections.
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Americans need at least $2.2 million in assets to be considered rich, according to Charles Schwab's 2023 Modern Wealth Survey. The investment platform surveyed 1,000 Americans to determine the average net worth required to be considered wealthy in America.
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.
According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia.
It now takes at least $5.8 million to join the richest echelon in the world's largest economy, almost 15% more than about 12 months ago, according to research from Knight Frank.
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.
In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.
Earning more than $100,000 per year would put you well ahead of the median American household, which brings in $74,784 as of 2021. Assuming you're an individual without dependents, that salary would qualify you as upper class, according to three different definitions (Brookings, Urban Institute and Pew Research).
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.
Some sources define the upper middle class as anyone making a lot of money but haven't crossed the threshold to become truly wealthy. These individuals often have a net worth of at least $500,000 to $2 million.
The country with the highest barrier to 1% entry is Monaco, where more than $12.8 million is required to be part of that top-percentage-point category as of the end of 2023. The five countries with the highest bars to entry are Monaco, Luxembourg, Switzerland, the U.S. and Singapore.
To break into the hallowed 1%, an American needs $5.8 million, up from last year's $5.1 million (inflation comes for us all). That places the U.S. fourth globally in terms of assets needed to break ahead of 99% of the population.
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
The report found that breaking into the world's top-one-percent club is getting more difficult every year. In the U.S. in 2023, individuals needed a net worth of $5.1 million to be considered in the richest echelons of society. By 2024 this figure rose to more than $5.8 million, an increase of approximately 14%.
Americans need at least $2.2 million in assets to be considered rich, according to Charles Schwab's 2023 Modern Wealth Survey. The investment platform surveyed 1,000 Americans to determine the average net worth required to be considered wealthy in America.
An income of $300,000 a year is generally considered to be upper-middle class or even rich, particularly in regions with a lower cost of living. This classification can vary based on geographic location, family size and the local cost of living.
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.
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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Introduction: My name is Virgilio Hermann JD, I am a fine, gifted, beautiful, encouraging, kind, talented, zealous person who loves writing and wants to share my knowledge and understanding with you.
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