Who Wants to Be a Millionaire?

     I read recently on the Forbes website that 15 percent of Baby Boomers are millionaires. Can that possibly be true?

     But then, a million dollars isn't what it used to be. According to a 2016 report from the Federal Reserve, it takes a little more than $10 million to be in the top 1 percent. So $1 million might make you "comfortable" but it doesn't make you "rich."

     After all, if you own an average-type house and have been making your mortgage payments for 30 years, you probably now own it outright. And it's likely worth close to half a million right there. Add to that your IRAs, or 401Ks, maybe a second home, a boat, whatever, and, yeah, I guess I can see that 15 percent of us are millionaires.

     Plus, if you count the real value most of us have in Social Security and some of us have in pensions (for example, if you have a $20,000 a year pension, at a 4 percent withdrawal rate, that could be considered the equivalent of owning a half-million-dollar asset) then a lot more of us are millionaires . . . at least, of a certain kind.

     That's not to say probably at least 15 percent of us don't make $1,500 a month in Social Security, don't have a 401K plan and don't have a pension either . . . but that's a subject for another post.

     So anyway, despite all the reports of a slow-growth economy, the lack of wage gains, the greed of the 1 percenters, and the woe-is-me articles you see in the media . . . sometimes, we're better off than we think.

     With that in mind, I saw this piece from my friend Jeremy Kisner of Surevest Wealth Management in Phoenix, Ariz., who also produces a helpful website focused on "planning great retirements." He refers to a book first published in 1996, but the concepts and principles are no less true today than they were back then. And if you don't think so, I checked: the figures Kisner uses are current numbers.

     So, for some perspective . . .


     One piece of advice that has served me well, and I often repeat is: "When what you see and what you hear are in conflict, believe what you see." However, one area where that advice does not hold up is in judging how wealthy people are. We often see people who appear wealthy but are not, and visa versa.

     The book that really demonstrated this, with research, statistics and stories, is The Millionaire Next Door by Thomas Stanley and William Danko. The book's major argument is that the vast majority of millionaires do not look or act like we would expect based on popular culture.

     Most Americans would define "wealthy" the same way as Webster's dictionary: "People who have an abundance of material possessions." It is hard to believe that most millionaires do not have fancy watches, sports cars or extravagant homes. In a word, they are frugal, living on an average of 7 percent of their net worth. In other words, a household that has a net worth of $1 million, on average only spends $70,000 per year.

     "These people cannot be millionaires! They don't look like millionaires, they don't dress like millionaires, they don't eat like millionaires, they don't act like millionaires -- they don't have millionaire names. Where are the millionaires who look like millionaires?"

     The person who said this was the trust officer of a bank who was hosting a dinner for ten first-generation millionaires. The trust officer had an expensive suit, an expensive watch and a nice car. He was not a millionaire, but he thought he was looking the part. Naturally, he was surprised when the bank's wealthy clients did not look the part.

     Here are some other interesting facts and figures about millionaires:

     About 5 percent of Americans are millionaires (1 in 20). Most of them -- about 95 percent -- have between $1 million and $5 million.

     More millionaires identify as Democrat (58 percent) than Republican (38 percent).

     Many do not drive luxury cars. Ford is the second most popular car behind Mercedes, but ahead of BMW. In addition, cars are typically not the current model year and are rarely leased.

     94 percent are married.
     
     83 percent attended public schools, and 80 percent have college degrees.

     97 percent are homeowners and have on average lived in the same home for over 20 years.

     80 percent are self-made, first-generation rich. Less than 20 percent inherited significant money (at least 10 percent of their wealth).

     Most millionaires who own their own companies are in dull, low-tech businesses such as construction trades, farming, mobile-home parks, pest control, retail stores. Professionals with advanced degrees, like doctors, dentists, lawyers and accountants, are also well-represented among this group of everyday millionaires.

     On average, they save and invest 20 percent of their realized household income.

     I find the truth about the "millionaire next door" much more motivating and inspiring than the myth. The myth is that wealthy Americans inherited their money or had a large windfall (e.g. stock options). The fact is America is still the land of opportunity where poor people can -- and do -- go from nothing to significant wealth. Many hard-working Americans create life-changing opportunities for themselves, their children and grandchildren through hard work, and systematic saving and investing. We celebrate it, write movies about it, and our libraries are full of books about it.

     So if you are the millionaire next door, I applaud you! And even if you're not, let's be friends.