Why $5 million is the new $1 million, rich say $1 million just isn't what it used to be

[Herman Munster]

http://www.msnbc.msn.com/id/20586948/

Who wants to be a millionaire? A lot of people. After all, that’s synonymous with being rich.

But these days, many wealth seekers say $1 million is no longer enough to be considered wealthy. With the rising cost of living, and the lengthy retirements many people must plan for, financial experts say the new benchmark for the rich is $5 million.

“It can be said that the new $1 million is $5 million,” said Ajay Gupta, vice president, wealth management adviser at Merrill Lynch in San Diego. “We’ve seen a lot more $5 million net worth families than before.”

While the number of millionaires has nearly doubled in the past decade, the number of "penta-millionaires" has quadrupled. The number of U.S. households with $5 million or more in net worth has grown to 1.14 million as of last year from 250,000 in 1996, according to Spectrem Group, a Chicago-based research firm that focuses on the "affluent" market. There are about 9 million households with $1 million or more, up from 5 million a decade ago.

Financial advisers at firms like Merrill Lynch and Schwab Institutional say they are seeing growing numbers of multimillionaire clients. “It’s the fastest-growing segment (of our business),” said David Welling, a vice president at Schwab Institutional investment advisors in San Francisco.

For many affluent individuals, a $1 million nest egg is just not enough these days. “Everything costs more — gas, housing, education, health care, food — everything,” said Welling. “A million dollars used to be the magic number, and while it still is a lot of money, it may not be enough to retire or support the kind lifestyle people think it could.”

[Newsjock]

1. Class warfare

It's coming unless the arrogant stop being so arrogant. Me, I'd just like to have a net worth greater than zero.

[Raine]

2. That's true

especially when ranch style track homes in my area of Los Angeles County cost about a million bucks. A million doesn't go very far anymore.

[hfojvt]

4. Yeah, but if you sell one of those houses

You could buy the whole village of Wessington Springs, SD. You can live anywhere if you are retired. Just because you choose to live in one of the most expensive places in the world does not mean you are 'not rich'. A million will never go very far, if your eyes are bigger than your stomach.

[lumberjack_jeff]

5. Okay...

I'm generally unsympathetic to the argument that "$300k/year is middle class - look at how expensive homes are!" when people rationalize that places with lower costs of living have no employment, but I'm totally unsympathetic to the idea that *a million dollars* (I'm making the Dr Evil pinky gesture here) is chickenscratch because retirees simply must buy a home in the happenin' neighborhoods.

Suitcases are $200 at Costco. U-haul trucks are a couple hundred for a weekend.

A million bucks is still a million bucks. The bank will give you $50,000 each year on that kind of deposit. Most investors can do better.

[sandnsea]

9. Suitcases are $5.00 at a yardsale

Super nice ones are $10. A $200 suitcase is pure insanity. Just sayin'.

I agree with your point. $50,000 annual income is above median in itself. I am so tired of the whining of the rich.

[lumberjack_jeff]

12. When you have $1m, you shouldn't be seen with a $5 suitcase.

To do otherwise is lumberjack-ish. :-)

[sandnsea]

13. lolol

Funny.

But you know what. I live in a retirement town where lots of folks have million dollar stock portfolios. I see them at yard sales all the time. There's a level of money between working income and uber-wealth where people no longer feel the need to put on airs to prove to other people they have wealth. One of the wealthiest guys I know drives around in a 20 year old station wagon. It's a hoot.

[lumberjack_jeff]

14. Unlike "rich" there are a couple of ways to become "affluent"...

I define rich as the top 1/10th percentile. I define affluent as $1m+

People can still become affluent via frugality. It would be unexpected for those people to stop dancing with the one that brung 'em once they retired.

[snappyturtle]

3. My answer to this income disparity is to charge the rich more than

you would others not so wealthy. As far as I'm concerned at lot of them have been just lucky paper pushers or people with family trusts and they have never worked and don't know how to do much of anything anyway. Before I get flamed...Yes, I know there are exceptions.

[Trillo]

7. With the computer and sufficiently distributed information that becomes possible,

each individual could be a market of one. Corporations have already claimed to have established different prices for the same product in different markets.

Make 5 million? Your apple costs $100.00.
Make 10 thousand a year? Your apple costs $0.20.

[snappyturtle]

16. This sort of stategy seems equitable to me. nt

[Trillo]

18. I don't know if I would call it equitable,

more like a logical extension of free markets.

What is most curious about it is, conceptually, it could make a sales tax progressive.

[snappyturtle]

19. Yes......remember the tax cuts for the wealthy.....nt

[Trillo]

6. So in what period of time did this occur?

1996 to now? 11 years.

So how much did the minimum wage increase during the same time period that millionaires saw a "need" for a 5-fold increase to stay in the same place?

[sandnsea]

8. top 1% fight to be top .01%

Who gives a shit about these people anyway.

:crazy:

[Selatius]

10. One million used to be a lot, but that's because of perpetual inflation.

Eventually, a loaf of bread will cost 5 dollars, a gallon of milk 10 dollars.

[hatrack]

15. Hell, I went shopping last week, and a loaf of bread was $3.00

That is, decent whole wheat bread. The Bag-O'-Caulking known as "Wonder" or its facsimiles still comes in at around a buck, but . . . blecch.

[KillCapitalism]

17. You hit the nail on the head there.

I'd actually call it runaway inflation instead of perpetual inflation.

If you had a $1 million nest-egg to retire with 40 years ago, it would go a LONG way. You'd be able to retire very comfortably, take nice vacations, pay for the grandkids college educations, etc. Today if you have a $1 million nest-egg, you probably wouldn't be able to do much of the above. You'd be able to pay your bills and pay for your exorbitant health care costs, but that's about it.

[enid602]

11. inflation

Just wait a few weeks; $5MM will buy what $1MM does today.