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Thus my broadening to include a comparison to the rest of the nation in my working definition.
Your comparison is arbitrary, why 10% and not 15% or 5%? Saying the "well the top 10% sounds rich to me" is not saying anything, that all hinges on the distribution of wealth. The US does not have a good distribution of wealth, so the top 10% does not really capture the "rich" both in terms of income and wealth. The rich make up the top 2-3% or so.
Someone who is rich should be able to afford a number of luxuries, yet a 60 year old with a home worth $300k, $650k in a retirement account and $50k in the bank will at best be able to afford a decent retirement. The retirement accounts, which are relatively new, change things. A retirement account, like a pension or social security, shouldn't really contribute to your net worth.
Anyhow, to match the millionaires in the book "millionaire next door" today's millionaires need to have almost 50% more. I believe the average net worth in the book was around $3 million, that would be around $4.5 million today.
Your comparison is arbitrary, why 10% and not 15% or 5%? Saying the "well the top 10% sounds rich to me" is not saying anything, that all hinges on the distribution of wealth. The US does not have a good distribution of wealth, so the top 10% does not really capture the "rich" both in terms of income and wealth. The rich make up the top 2-3% or so.
Someone who is rich should be able to afford a number of luxuries, yet a 60 year old with a home worth $300k, $650k in a retirement account and $50k in the bank will at best be able to afford a decent retirement. The retirement accounts, which are relatively new, change things. A retirement account, like a pension or social security, shouldn't really contribute to your net worth.
Anyhow, to match the millionaires in the book "millionaire next door" today's millionaires need to have almost 50% more. I believe the average net worth in the book was around $3 million, that would be around $4.5 million today.
You are correct, it is somewhat arbitrary. That's why it is a working definition. I could easily say it is the top 5%. Lets stop flapping our gums and look at some real numbers. According to the census (Statistical Abstract: Income, Expenditures, & Wealth, Family Net Worth Mean and Median) in 2004 the mean for ALL households was $448,200, median was $93,100. I am certain the significantly wealthy skew these results high (poor is poor, but their is no upper limit on wealth).
I haven't seen a bell curve of the census data, but am confident that $1m and up are near the extreme end of the curve.
Given the census numbers, I still contend that $1m meets any reasonable definition of rich.
We'll just have to agree to disagree RE retirement accounts being considered part of net worth.
PS-Not a point, but a clarification. Your ex. cites a 60 year old. They would be able to tap their retirement assets. Thus a measly $1m would provide some decent added comforts, as they wait for SS to kick-in in a few years. Your example also hints at my other working definition of rich: If you can afford to retire/live off investments at a lifestyle with which you are comfortable, you are rich.
I was career military, an enlisted man. The pay charts are public knowledge. During my career I had very little influence on my take home pay checks. But I did control how much I invested.
To me, in my career, I had very little control over how much I earned. But I could change how much I spent.
I retired as an E6, my peak salary is public knowledge. It was not a lot.
However from living frugal and investing I was able to build a Net Worth that peaked are very nearly $1million.
Granted a million today is not as 'big' as it was in the 60's.
There is no way that I could have driven my income up high enough in my career; to have built a Net Worth that large. I did it by lowering my cost-of-living.
There are no circles, rather pointing out that you're playing a little game. You are trying to equate "rich" and "millionaire", yet today you can't do that. Having a million today doesn't mean you're rich. The title of the thread is "Is This True That Rich Folks Are Frugal".
I'm not talking about the "lifestyles of the rich and famous", but rather people that are rich. Again, the topic of the thread.
There's no accepted definition for "rich". The whole thing is a game. Compared to 99% of the people in the world, my 52K a year income makes me "rich".
It's all relative.
The % of Americans who have household assets of $1M or more is pretty small <5%...So yes, I think having a high net worth in one of the world's richest countries qualifies as rich by any objective standard.
Yes, there are different levels of rich. Obiously you want more than the $1M to $2M in assets. That's nice for you.
No, its around 15%. Social security alone is around 12% though, medicare adds another 3%.
But the part of the FICA tax gets refunded to you (unless they changed that) if you are a small business:
First, your net earnings from self-employment are reduced by half of your total Social Security tax. This is similar to the way employees are treated under the tax laws, because the employer’s share of the Social Security tax is not considered wages to the employee. Second, you can deduct half of your Social Security tax on IRS Form 1040. But the deduction must be taken from your gross income in determining your adjusted gross income. It cannot be an itemized deduction and must not be listed on your Schedule C.
I approach things a little differently. I will consider myself rich when the interest I earn from my investments allows me to meet my necessary expenses.
I approach things a little differently. I will consider myself rich when the interest I earn from my investments allows me to meet my necessary expenses.
Given the census numbers, I still contend that $1m meets any reasonable definition of rich.
Right you contend that, but none of the information you just cited adds anything to the discussion. You are citing a mean and median, yet its the distribution that matters. But drawing some line at some income level is arbitrary, you agree, yet continue with this line of reasoning. The important question is what the particular amount of money affords the person and here the type of assets matter a lot. Someone with $1 million net worth minus home equity and retirement accounts is much different than someone with $1 million in net worth including retirement and home equity.
Quote:
Originally Posted by Keim
Your example also hints at my other working definition of rich: If you can afford to retire/live off investments at a lifestyle with which you are comfortable, you are rich.
I'm not interested in redefining what is meant by "rich", the word already has a particular, if perhaps vague, meaning. Being able to afford a comfortable retirement is not what most are going to consider rich, they have something much more in mind.
Regardless, the millionaire title is from a period where the dollar was worth far more than it is today and most people had pensions, etc instead of 401(k)s. By the time someone in their 30's retires a million is going to be very common place.
But the part of the FICA tax gets refunded to you (unless they changed that) if you are a small business:
You never got a refund for FICA taxes, what would be the point of that? If you are self-employed you can deduct 50% of the FICA taxes, but that doesn't change the fact that you are paying ~15% in FICA taxes. The reason for the 50% deduction is to give the self-employed person equivalent tax treatment as the employed person. The employed person doesn't pay taxes on the employers contribution to FICA taxes (which is of course half of them), just the 50% they contribute. That is to say, the 50% deduction prevents you from playing federal income taxes in addition to the FICA taxes on half your FICA taxes.
Anyhow, self-employed people pay ~15% in FICA taxes, not 12% as you stated. I'm not sure why you feel the need to call me names for correcting something you stated.
I know of a brain surgeon who used to make 10K an hour. After he quit working he went broke and is now living off of social security alone. It is not how much you make, it is how much you save. Granted, if you can make more then you can save more, but you still have to save. People who are frugal now can save even more later. Like the Millinaire Next Door says, You cant just play a great offence, you also have to play defense.
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