RMS recently posted a link to the Knight-Frank Wealth Report. https://drive.google.com/file/d/10asn6jrZgogsKLWuNp8jFVSxhVf9kSGe/view
As I skimmed through it, one datum in one graph jumped out at me. The graph shows the net wealth thresholds, by country, to join the top 1%. The datum is the US threshold of US$4.4M.
What’s your initial reaction to that datum?
It grabbed my attention because my initial reaction was that it seemed low.
The accompanying article does not mention what’s included in net wealth, but very early in the report, thresholds for Ultra-high-net-worth individual (UHNWI) at US$30M including primary residence, and High-net-worth individual (HNWI) at US$1M, including primary residence, are defined.
I’m assuming they’re being consistent, and the $4.4M threshold includes primary residence, which buttressed my initial reaction.
In discussions here, one definition of ‘rich’ that had received a lot of support was having enough wealth to comfortably support an UMC lifestyle without a job.
Is $4.4M enough wealth to make you feel comfortable quitting your job?
Keeping in mind the $4.4M includes primary residence, that only would leave somewhere around $3M to invest after subtracting the value of a comfortable residence and some rainy day cash. Investing in bonds with 2% to 3% yields would provide $60k to $90k in income, and if you weren’t working, that would have to cover medical insurance.
The article did compare the 1% thresholds to their UHNWI threshold, which suggests that the 1% threshold is for individuals, not couples or families.
So my second reaction was that $4.4M is an individual threshold, so for a couple it would be somewhere around $8.8M, although the part about including primary residence clouds things a bit since many couples share a primary residence.
With $8.8M between us, I could perhaps see DW and me being able to quit our jobs and still live comfortable UMC lives, once we structured our assets to generate income as well as appreciate. We’d have somewhere approaching $7M to invest to generate income, and even in safe bonds at about 2% that would give us $140k in income, and I’m pretty sure we could live comfortably on that, but that still doesn’t compare favorably to a lot of totebaggers’ earned incomes.
But I’d have thought that people at the 1% level would be wealthy to the point of their wealth generating a lot more income than that, or at least being able to (I suspect many of the 1% have a lot of investments targeted at growth rather than income). Perhaps in my dreams, I’m not aggressive enough with my investing.