Rapid City financial advisor Rick Kahler: Could you be a middle-class millionaire? There are now more than ever
The US has more millionaires now than ever before. According to Finmasters.com, data from the Credit Suisse Global Wealth Report shows that in 2023 there were just under 30 million millionaires in the US, an all-time high.
Given our current population of approximately 337 million people, that means nearly 9% of Americans have a net worth of a million dollars. Can that many of us really be that rich?
Answering this question requires looking at the numbers through an inflation-adjusted lens. Inflation depreciates purchasing power. For example, it takes $1.23 today to purchase what $1.00 bought in 2019. Stated another way, you would need a net worth of $1,230,000 now to equal $1,000,000 of net worth in 2019.
What happens if we go further back in time? According to The Wealth of the Nation by Robert Sobel, in 1929, just before the Great Depression, there were around 21,000 millionaires in the US. (The 1930 census reported a population of 123,202,660.)
In pure dollar terms, there are 1,429 times more millionaires today than in 1929. However, someone today would need $18,410,000 to buy what someone in 1929 could buy with $1 million. To get an “apples to apples” comparison, we would need to find out how many people in the US are worth over $18 million.
While I couldn’t find that exact statistic, according to the Visual Capitalist there are 38,500 people in the US worth over $50 million. A person typically needs a net worth of approximately $11 million to rank in the top 1% of wealth holders in the US. This threshold has fluctuated over time, but according to various sources, it is the generally accepted benchmark in recent years. As of 2024, about 1.3 million households in the U.S. fall into this top 1% category.
My best guess is that there are around 150,000 Americans worth $18 million or more, the equivalent of those worth one million in 1929. That gives us about seven times more inflation-adjusted “true millionaires” today.
What kind of lifestyle could you have with a net worth of $1 million as compared to $18 million? Experts tell us the most reasonable sustainable withdrawal rate from an investment portfolio is 3%. That means your $1 million will provide $30,000 a year. Adding Social Security benefits of, say, $18,000 to $30,000 a year would give you a retirement income of $48,000 to $60,000 a year. This is what I think of as a middle-class millionaire.
Three percent of $18 million, on the other hand, will give you a retirement income of $540,000 a year. At that rate, you could probably get by without bothering to file for Social Security.
Saving $1 million over a lifetime is certainly possible for middle-class earners who are willing to live on less than they make. A 25-year-old individual or couple that started today putting about $1,350 a month in retirement plans would have over $3 million by age 65, enough to provide an inflation-adjusted amount equalling today’s $30,000 a year. To accumulate $18 million by age 65, on the other hand, starting at age 25 you’d need to save $12,500 a month ($150,000 a year).
Clearly, equating a millionaire of today with a millionaire of 95 years ago makes no mathematical or financial sense. The point here is that in today’s world, a millionaire, especially one who is retired, is not “rich” by any stretch of the imagination. Reaching age 65 with a net worth of $1 million dollars is a way to provide a comfortable and secure retirement. It is also a reasonable and achievable goal for many middle-class workers who would, quite accurately, never describe themselves as wealthy.
Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include Coupleship Inc. and The Financial Wisdom of Ebenezer Scrooge.
photo: public domain, wikimedia commons
