The Composition of Wealth: The Top 1% holds 40% of U.S. Wealth

Source: Edward N. Wolff (2017). Survey of Consumer Finances – I highly recommend you give the paper a read, it really gives quite a thorough breakdown.

NOTES & OBSERVATIONS

The top 1% of the nation holds 40% of the wealth

By Top 1%, it is net worths of $10.3M or more.

Of course, if the money goes to the top, it means the bottom decreases in net worth/wealth.

…and together, the top 1% owns more than the 90% combined

Isn’t that mind boggling?

The top 1% of the country owns more in net worth and assets than the bottom 90% altogether.

Seems to be a trend, seeing as the richest 1% in the world have more assets than the poorest half of the world’s population, holding 42.8% of global wealth.

Greatest gains in wealth were by the top 20%

Those of you with $471K or higher in net worth, are in the top 20%, and you’ve seen the biggest rise in wealth in the past decade or so.

And the paper states that the ones who truly benefited were the top 0.1, the top 0.5 and the top one percent.

The top 1% got 45% of the growth, and the the top 20% enjoyed 100% growth between the periods of 1983 and 2016.

The richer you become, the less significant your house becomes

Part of my long-term goal, is strangely, exactly that — to have my home be 25% or less of my total overall net worth.

I am currently hovering at 37%, and it will take a number more years before it drops to 25% (need to amass a net worth of $1.2M first), but once I reach that, I will feel ‘secure’.

The richest have more assets in their business, and then stocks

Kind of makes sense – if you think of billionaires like Jeff Bezos, they certainly have more in their business and stocks than in things they own like their homes.

At 7.6% with a net worth of $10.3M or more, this means their homes are worth around $782,800 which .. to be honest with you, doesn’t sound crazy. It doesn’t sound crazy because that’s what homes go for in high demand cities like Toronto!! My parents’ home as an example, is already at $1M.

The top 1% owned 40% of all stocks in 2016, the top 10 10% owned 84% of those stocks and the top quintile owned 93%.

Again – makes sense. If you are struggling, and are working poor, you don’t exactly have free income on the side to invest, if you’re struggling in the day-to-day just to put food on the table.

The richest don’t have much in their pensions..

Again, makes sense.

They have it in their businesses or in real estate, or stocks, over a company plan – likely because they are not employees but business owners.

That is NOT TO SAY that only business owners can become rich – only 10% of businesses succeed, and only 1% of those businesses or less, actually make it to those stratospheres.

You can certainly be rich as an employee, but it will take a lot more time, savings, and patience to reach those levels. Instead of a BIG BANG where you have a company, sell it, become an instant millionaire in very rare cases, you are going to be a millionaire with compounding interest and growth over time.

“The Great Recession wiped out 40 years of gains”

…and the aftermath was that the rich became richer, and the rest stagnated. By 2010, wealth was lower than where it was in 1969, and it hit African-Americans much harder than Caucasians, and as a result, it forces them deeper into poverty as they are unable to save more money to get out of the vicious cycle.

Hispanic households made gains between 1983 to 2007, but then once the recession hit, their average net worths dropped in half, much steeper than Caucasian households.

The worst hit, were the youngest households, those under the age of 35, seeing their net worth between 2007 and 2010 decrease more than 46%, with the trend continuing as they were unable to save more.

The middle income earners, between 2001 and 2007, also increased their debt by 57%, but after 2007, even though their debt increased between those 6 years, their overall debt-to-income ratio dropped because their incomes & wealth increased.

Number of millionaires almost doubled from 1989 to 2001

The number of anyone with a net worth of $5M or more (penta-millionaires) increased 3 and a half times, and $10M or more (deca-millionaires) grew more then 5X.

A lot of it was due to the stock market rebound / increase.

Thoughts?