- A study by UBS found that only 28 per cent of investors with $1-$5 million feel rich
- Only 60 per cent with $5 million or more think they are wealthy
- The average annual income in America is $51,500
- The rich worry about losing their fortune, looking after family members and ‘keeping up with the Joneses’
- Millionaires would feel rich if they had ‘no financial constraints on their activities’
By Alex Greig
PUBLISHED: 12:08 EST, 28 July 2013 | UPDATED: 12:09 EST, 28 July 2013
How much money would you need to have before you considered yourself rich? Would it be $100,000? $500,000? According to a new study, among millionaires, that number should be at least $5 million.
The study, entitled ‘What is Wealthy?’, conducted by investment firm UBS, found that only 28 per cent of investors with between $1 million and $5 million in investable assets considered themselves rich.
Those with $5 million or more felt a little more comfortable – for that group, 60 per cent felt rich.
Mo’ money, mo’ problems: People with between $1 million and $5 million don’t think they’re rich
The study found that investors defined wealth not as having a finite amount of money but rather having ‘no financial constraints on their activities.’
This may seem strange to those of us who don’t inhabit the rarefied world of millionaires, especially when you consider that the median household income in the U.S. is $51,500 per annum.
But according to David Cay Johnston, a Pulitzer-prize winning author specializing in economics and tax, living as a millionaire among millionaires creates a chronic case of ‘keeping up with the Joneses’.
‘In New York City, being wealthy enough to own upright a property worth $5 million doesn’t make you feel rich, because you’re surrounded by people who can buy and sell you in a two hours income,’ he told ABC News.
‘There are always some people around you who have more. Also, having $5 million in Keokuk, Iowa, is a lot different than having $5 million in New York or Silicon Valley or Seattle.’
Rich hitch: 60 per cent of those with more than $5 million concede they are indeed rich – others believe freedom from financial constraints equates to true wealth
The study also found that among the rich, there’s a lack of confidence about the future. It seems that for millionaires, the more you have, the more you have to lose.
While the uber-rich fret about losing their money, more than three-quarters of Americans are living paycheck-to-paycheck, according to a study by Bankrate.com.
The Bankrate.com study found that half of all Americans have less than three months savings to depend on in straitened times, while a quarter have none at all.
‘To us, the surprise was that that many people with $1 million or more did not consider themselves wealthy,’ Emily Pachuta, head of investor insights at UBS Wealth Management Americas told ABC.
‘We think it shows a very interesting mindset shift. People have certainly experienced a shock from the volatility of the market, and they are very aware that it takes a significant amount of money to have that dual feeling of having enough money and no financial constraints.’
For many, being wealthy means the burden of taking care of relatives falls squarely on their shoulders.
It’s all relative: While the median household income in the U.S. is just over $50,000, those with millions often feel a need to keep up with the Joneses and don’t feel wealthy compared to richer peers
Four out of five of the 4,450 investors who answered the survey were providing financial support for aging parents and/or grown-up children.
‘This has a real impact on the definition of a comprehensive financial plan. The top two personal concerns for investors are long-term care and the financial situation of children and grandchildren,’ states the study.
‘When a financial plan addresses those two concerns, confidence in achieving goals skyrockets to 85 per cent [from 62 per cent].’
For the millionaires surveyed, security comes in the form of cash.
UBS found that investors maintain peace of mind by holding onto at least 20 per cent of their money in cash to cover for any emergencies and ensure they can make large purchases without having to sell assets.
As for the rest of us, the American Dream is becoming harder and harder to reach. According to a study by the Equality of Opportunity Project, one-third of those who are born into the top one per cent of wealth will earn $100,000 per annum by the age of 30, while only one in 25 of those at the bottom end of wealth will reach that income level.
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