Last week, I wrote about a study that evaluates the most important issues for wealthy people, and a new study released recently, sponsored by Fidelity, also takes a look at the attitudes of the super-rich.
If I were to have $1 million in investible assets — the value of what I have available to invest in stocks, businesses, etc., not including retirement savings or what’s needed to cover my expenses — I don’t believe I’d feel wealthy. To me, wealthy means not having to work. While I could take $50,000 a year out of this pot for 20 years, and if that “income” were to be combined with that of a working spouse, I could live a middle-class life where I do now. Of course, after 20 years, I would have nothing of this left. The real power of having $1 million in investible assets is the income that this value of investments can generate. Playing it very safe, taking only 2% of the investment to allow years of great returns to offset years of negative returns, I would be working with an “income” of only $20,000. The good news about this approach is that 20 years later, I’d still have wealth; the bad news is that’s not a living wage in most areas of the United States.
If my investments could generate over $100,000 each year, I would feel wealthy. At that conservative rate of 2%, I’m looking for an initial investible net worth of $5 million. That’s the point that I’d feel wealthy. 42% of Fidelity’s survey 1,000 respondents with an investible net worth of over $1 million don’t feel wealthy. They need, on average, $7.5 million to consider themselves among the wealthy elite. 58% of the respondents do consider themselves wealthy. This set of individuals pointed to $1.75 million in investible assets as the point at which they began feeling wealthy.
There’s quite a difference between those who do not consider themselves wealthy, who estimate they’ll cross that threshold at $7.5 million, and those who do consider themselves wealthy, who claim to have come to that realization at $1.75 million.
Although we could point to the Global Rich List again to gain a greater perspective on our place among the community of the world, but that has little bearing on our day-to-day experiences. Much of this comes down to the meaning and sense of the word, “wealthy.” This is a word that can mean different things to different people. For the purposes of the Fidelity study, this may not have been defined, leaving the respondents to come up with their own interpretation of the questions based on their understanding of the word.
I would love to hear comments from readers on the issue of wealth.
What does it mean to be wealthy? If you consider yourself wealthy, at what point (and level of net investible assets) do you believe you crossed that threshold? If you don’t consider yourself wealthy, how much do you need to feel wealthy?