Are You Rich? Where Does Your Net Worth Rank in America? (Published 2019) (2024)

Here’s the wealth distribution among households around your age, with your bracket highlighted:

I am extra wealthy note.

When we looked at income ranks recently, many people were surprised (and some annoyed) that our calculator told them they were “rich.” Even though their incomes were high, many argued that after paying their mortgage, student loans and child care and other expenses, they had little left over.

They have a point. Can you really feel rich if your income, however large, barely covers your expenses? Perhaps wealth (the net total of all your assets minus your liabilities) is a better measure.

Wealth can have its flaws, too, as a measuring stick. Housing costs and other living expenses can vary widely by area.

But wealth generally buys security. It can smooth over financial setbacks like a period of unemployment, an expensive car repair or unforeseen medical bills. It can enable you to start a business, pay for an education or put a down payment on a house. And wealth in the form of a home serves as shelter as well as a hedge against rising rents.

Maybe this is what it means to actually feel rich, even if your income is small and your life is not fancy.

A lot of families can’t afford that feeling. The median household has a modest $97,000 in wealth, while households at the very bottom are actually in debt.

Two million is probably rich. One million isn’t quite what it used to be.

What is rich when it comes to wealth? In the past, “millionaire” was synonymous with being rich. But how much does being a millionaire mean today?

The answer depends on how old you are.

If you’re younger than 35 and you have a million dollars, then yes, you are rich. You are above the cutoff for the 99th percentile of household wealth for that age, which is $998,000.

But the story gets murkier if you’re older. A million puts you close but not quite to the 95th percentile for families headed by someone 35 to 44, and it doesn’t even put you in the 85th percentile for those 55 and over.

Having two million dollars would put you close to the top 10 percent of wealth at almost any age, except for families headed by a person 55 to 64, where you’d need $2.1 million.

The multiples of wealth and income

Although wealth and income are linked, the relationship is weaker than you’d expect. Consider people with large inheritances; retirees with little income but high savings; and recent college graduates with high incomes but lots of debt. In addition, a family’s income can be quite volatile from year to year. A study that tracked families for over 44 years found that 39 percent of Americans spent a year in the top 5 percent of the income distribution.

The societal imbalances are more acute for wealth than for income. Being in the 95th percentile of incomes in a city like New York means that you make at least four times as much as a person in the middle. But a family in the 95th percentile in net worth nationally has 25 times as much wealth as a family in the middle.

It can be easier to understand this lopsidedness when you think of wealth and income in ratios. Households at the 50th percentile of income make $53,000 a year and have $97,000 in median net worth, for a ratio of wealth to income of almost 2 to 1. The top 20 percent of families have a wealth-income ratio of 3 to 1. For the top 10 percent, it’s nearly 6 to 1.

Across different age groups, these ratios vary widely. For instance, most households today don’t have twice their incomes saved by age 35. But most households in late middle age have three times their incomes saved. Households in retirement age have a much higher wealth to income ratio, but that’s because many are working less than they were in their prime working years.

Race and wealth

The wealth gap between white and black Americans is stark. The typical white family has 10 times as much wealth as the typical black family, and eight times the wealth of a typical Hispanic family. As of 2016, the gap between the median black family and the white family has grown to $154,000, up from $133,000 in 2013.

The economists Moritz Kuhn, Moritz Schularick and Ulrike I. Steins make use of an interesting concept known as the rank gap. That is, how would the wealth rank of families change if you compare them across race? They found that a black family in the 50th percentile of wealth has a rank gap of negative 30 points. This means that the typical black family is as wealthy as a white family at the 20th percentile. This pattern persists for wealthier black families: A family at the 90th percentile of black wealth has about the same wealth as a family in the 65th percentile of white wealth.

These gaps are nothing new, of course, yet many Americans aren’t aware of them. The issue has come up in the presidential race, with Democratic candidates advocating policies like homeownership assistance in formerly redlined neighborhoods and government-run savings accounts given to every child at birth.

Why is wealth so skewed?

Why are the wealthy so much wealthier than everyone else?

One reason is that the rich tend to store their wealth in businesses and stocks, and those in the middle class store theirs in housing.

The top 10 percent of the wealthiest households own nearly 90 percent of the stocks in America, while those in the bottom 90 percent own a little more than half of all the real estate in America.

So you can think of wealth inequality as a race between the stock market and the housing market, according to Mr. Kuhn and his colleagues. In periods when home prices are rising, wealth inequality tends to shrink as the wealth in the middle class grows. But during periods when the stock market outperforms real estate, wealth inequality tends to increase.

Another reason is that income inequality feeds wealth inequality, according to economist Owen Zidar. Even if the rich and the poor had the same proportion of stocks and bonds, and saved at the same rate, the rich would simply put away more money.

“There’s a difference between 10 percent for a millionaire and 10 percent for someone in the middle class,” Mr. Zidar said. “That’s where incomes matter.”

Why we know so little about wealth and why it matters

If any of these numbers surprise you, you’re not alone. Net worth is a much more complicated concept to capture than salary. It’s spread across homes, cars, debt, and stocks and bonds in many accounts.

Nevertheless, the government does try to catalog wealth through the Survey of Consumer Finances, run by the Federal Reserve. It’s the best data we have on wealth, in part because the Fed often spends hours with each one of 6,254 survey respondents, to outline every detail of their holdings.

The Fed also makes extra effort to get an accurate reading on the holdings of the rich, surveying a special list of America’s wealthiest families. These households make up a disproportionately large share of the interviews that the Fed conducts: 24 percent of all the interviews in 2016.

But even this approach fails us for the top 0.1 percent of wealth, whose total net worth is still up for debate.

Matthew Smith, Mr. Zidar, and Eric Zwick collected recent estimates on the superrich and showed that the top 0.1 percent of families own roughly 9 percent to 22 percent of the total wealth in the United States.

Generally speaking, you can divide the approaches in estimating top wealth into two camps: based on surveys or based on tax data. Researchers from the Federal Reserve supplement their Survey of Consumer Finances with data from the Forbes 400. Estimates from both Emmanuel Saez and Gabriel Zucman, and Mr. Smith, Mr. Zidar and Mr. Zwick, rely on administrative income tax data.

The second approach relies on strong assumptions for what the rate of return is for each asset. But the key disagreement between these researchers is what the return on bonds should be. Mr. Saez and Mr. Zucman assume that bond returns are the same across all households, while Mr. Smith, Mr. Zidar and Mr. Zwick assume that wealthier families receive higher returns than middle-class families as they tend to have more financial instruments to choose from. Counterintuitively, a higher return implies lower wealth, while lower returns imply higher wealth.

These numbers matter, particularly if you begin to consider a wealth tax as a policy proposal. If the wealthiest families are less wealthy than we thought, it could mean billions of dollars in less revenue.

Net worth doesn’t necessarily capture all the resources that a family has at its disposal. You may have family members to watch your children. You could have a rich social network to support your business or career. These can be hard to measure, of course, but maybe one day we’ll be able to make a quiz for that, too.

By Quoctrung Bui, Kevin Quealy and Rumsey Taylor