Depending upon your world view, getting into “The 1%” is either shameful or commendable. Regardless of your perspective here, let’s look at what it takes to actually be in the top 1%.
Measuring Wealth
There are two main ways to measure wealth: income and net worth.
It turns out that there is little correlation between income and wealth. For example, after medical school and residency, physicians can earn a salary of $250,000. Yet their net worth is often negative due to the effect of student loans. On the other hand, there are teachers and software developers with salaries that never surpass 6 figures, but they can achieve a net worth over $1 million by mid career.
Therefore, I prefer net worth as the most reliable measure of wealth.
The Top 1% for Net Worth
Getting into the Top 1% means that your net worth is in the 99th percentile, which in turn means that out of every 100 randomly selected households in the United States, your net worth is greater than 99 of them.
According to the 2016 Survey of Consumer Finances from the Federal Reserve, it takes a net worth of around $10 million to get into the top 1%. A net worth of 1.2 million will get you into the top 10%, and the median (50th percentile) net worth is around $100,000. This is shown in the graph below, constructed by dqyjd.com.
Breaking it Down by Age
For most of us, our net worth starts out negative and then gradually increases throughout our life until retirement. Therefore, it would not make sense to compare the net worth of an 18-year-old to the net worth of a 65-year-old.
Using the net worth by age calculator, I constructed the following chart of the top 1% net worth by age group. The data becomes less reliable in the higher percentiles, so these are rough estimates.
Notice that for someone in their early 20’s, anything over a 6 figure net worth would get them near the top 1%, whereas for someone at a typical retirement age of 65, it would require around $15 million.
Take Away Points
If you’re going to make it in to the top 1%, you need to do a lot of working and a lot of saving. Thankfully, if you live a modest lifestyle, you don’t need to get anywhere near the top 1% to reach financial independence and earn your freedom. There’s really no point in accumulating money with no additional purpose. For most people, assuming no pensions or social security, accumulating between $1 million and $3 million in liquid assets will be more than enough to pursue your passions and do whatever you want in life.
This is a great perspective. When I hang out with some of my rich friends it is easy to forget that I’m in the top 2-3% by Net Worth or Income. Plus this scale is for one of the richest nations on the planet. Many of us have already won the money game. But it helps to be reminded.
I agree with WealthyDoc –
I don’t feel like I’m rich, but yet being in the top 2-3% means I am. I mentioned this to my wife the other day and she said ” well that’s cause we hang out with well off people”. True , we do and I guess that’s good, but boy does it skew your perspective.
Good reminder.
Being in the top 2-3% in terms of net worth could reasonably qualify someone as “rich”. But remember that according to the data, the often chastised 1%-ers are those with a net worth of at least $10 million.