“How many millionaires are there in the U.S.?” That question was raised by our old pal @DividendMaster on X (formerly Twitter). The claim made was 1% of either households or the population were millionaires. I suspected that was way too low. There are two main variables to consider.
First is the population structure. Should it be the U.S. population? That includes kids, so maybe we should use U.S. population over age 15. Or should it be households? I prefer that but I can also see why individuals might be more useful.
Second, what assets and liabilities should we include? It’s entirely possible to have over $1 million in assets and not be very well off. If you have $900,000 in liabilities, should you actually be counted as a millionaire? And what type of assets should be included? The usual separation is between real and financial assets. Real assets are houses, cars, and more exotic instruments such as rare coins or precious metals. Financial assets are stocks, bonds, and other relatively liquid assets. For most of us, our house is a major component of our wealth. But houses are not very liquid. It takes time to sell one and there are many transaction costs. Stocks and bonds can be sold at minimal cost in virtually zero time. @DividendMaster prefers net asset value excluding real estate. I actually would like to use financial assets only. Here’s why.
Jay Leno Makes His First Appearance
Well, his first in GonzoEcon. His car collection is 181 vehicles. According to the duPont Registry,
Jay Leno car collection details. (Click for larger image)
So the cars are worth $52 million. His financial net worth is $450 million. Houses? Who knows? Let’s face it – Mr. Leno is a millionaire no matter how you add things up.
For car fanatics, the duPont Registry page catalogs each and every one of these cars. Here’s a bit of eye candy for car lovers.
Jay Leno eye candy (click for larger image)
Most millionaires are not as well off as Jay. The value of a house can easily be the difference in net worth between being a millionaire and being “poor.” Having said that, let’s dive into some research.
There are many technical issues about simply measuring wealth.[1] I’ll just point out something that is pretty obvious once you see it. Consider a family of four with a net worth of $10 billion. If the head of household owns everything, there is one billionaire. But if the assets are distributed equally among the household members, there are four billionaires. Like me, you probably don’t have to worry about that. Which is why it’s worth mentioning. See the endnote for gruesome details.
After delving into various data sources, I settled on three. The Credit-Suisse Research Institute publishes their “Global Wealth Databook” annually. The most recent edition is 2022. It
provides estimates for the level and distribution of wealth for over 200 countries for the period from 2000 to end-2021. It covers the pattern and trend of household wealth at both the regional and country levels.
Second is the Internal Revenue Service. Their data is obviously very detailed. But the most recent is from 2016. Nevertheless, this will be useful for a few purposes. The data is compiled as part of their “SOI Tax Stats – Personal Wealth Statistics” program.
Finally, the Federal Reserve Board compiles quarterly data on wealth at a very detailed level. This is probably the best source, as it is available through the first quarter of 2023. However, they don’t publish data on the percentages of the adult population falling into each wealth group.
A Quick Overview
Americans are wealthy. Credit Suisse reports the following:
Credit Suisse Table 3-1 (click for larger image)
(The % columns are the percentage of total wealth held by each group. The column on the far right is the Gini coefficient. Look it up.)
The adult U.S. population is 251,779,000. Fully 47.7% have wealth over $100,000. And 9.7% are worth over $1 million. Market capitalism works.
Now on to the details.
Credit Suisse Research Institute
These folks publish the Global Wealth Databook every year. The most recent version is 2022, covering the year 2021. They try to cover every country on the planet. I’ll focus on the U.S.
Section 2 of the report summarizes total wealth, financial and non-financial. There is data about each country including an estimate of the quality of the country’s wealth data. Table 2-1 summarizes the quality of wealth data for each country. Tables 2-2, 2-3, and 2-4 provide time series wealth data from 2000-2021. Table 2-4 breaks out wealth by financial assets, non-financial assets, and liabilities. That would be useful, but the data is for global region, not country. Table 2-5 shows changes in wealth by country for 2021. It turns out Table 2-2 answers some interesting questions.
Credit Suisse Table 2-2 (click for larger image)
As you can see, this table breaks wealth into three parts: financial, non-financial, and debt (liabilities). That allows us to calculate four important versions of wealth:
- Net wealth (financial + non-financial – liabilities).
- Net financial wealth (financial – liabilities).
- Gross wealth (financial + non-financial)
- Gross financial wealth (financial)
I’ll just note that what Credit Suisse calls “Wealth per adult” is what I call net wealth (first definition above). At least that’s what the data seems to say.
Table 3-1 shows the distribution of wealth for each country. Here’s the U.S.
Credit Suisse Table 3-1 with totals (click for larger image)
Credit Suisse Table 3-1 graph (click for larger image)
Here we have our first estimate of the wealth distribution in the U.S. Fully 9.7% of U.S. adults have wealth over $1 million. That’s 24,422,5263 adults. Once again we see that market capitalism works.
Table 3-3 repeats the percentage over $1 million, adding the percentage over $100,000. Nearly half the U.S. adult population has wealth over $100,000. And the percentage that are millionaires remains at 9.7%.
Credit Suisse Table 3-3 (click for larger image)
As we’ll see, these results are consistent with other estimates.
The Federal Reserve Board
The Fed publishes a ton of data on household finances. For my purposes, the “Distribution of Household Wealth in the U.S. since 1989” is best.[2] (If you follow that link, be sure to read the endnote.) Here’s the short version:
Federal Reserve Board Net Wealth Distribution 2023, Q1 (click for larger image)
And here are the details:
(click for larger image)
This is the percentage of total wealth held by each group. “TopPt1” means the top 0.1% of wealth. “RemainingTop1” is the other 0.9% of the top 1%. You get the idea.
A full 31.26% of total wealth is held by the top 1%. If we exclude real estate, that percentage rises to 38.27%. I leave it to you to calculate the wealth elasticity of the demand for real estate. (Economist humor, sorry.)
The top 10% of the wealthy (excluding real estate) hold 79.15% of the wealth. Market capitalism works, but it produces a distribution of wealth that is far from equal.
The Internal Revenue Service
The most recent IRS data is for 2016. Here’s the population definition:
The estimates are limited to that segment of the population for whom personal wealth is at least equal to the estate tax filing threshold in effect for the estimation period.
The data includes Total assets, Debts and mortgages, Net worth (assets – debts), Personal residence, and Other real estate. I’ve calculated two measures: net worth minus personal residence and net worth minus personal residence minus other real estate.
One problem is not all millionaires are included. Specifically, the cutoff estate value of $5.45 million excludes a large number of people with wealth between $1 million and $5.449 million. A second problem is exactly what “Under $5.45 million” means. Footnote 1 in the table says,
Includes individuals with zero or negative net worth. Estates with combined gross assets and prior taxable gifts exceeding $5.45 million are required to file in 2016.
I asked the IRS to interpret the above. Here’s what they said:
The Personal Wealth study is created by using Estate Tax data for a given tax year to estimate the U.S. population who are alive and exhibit similar qualities. Estates are required to file a Form 706 if the their total gross estate exceeds the Federal filing threshold for a given year. In the Personal Wealth Bulletin Article the term gross estate and gross assets are used interchangeably. For estate tax purposes, the gross estate includes all property or interest in property before reduction by debts (except policy loans against insurance) and mortgages, or administrative expenses.
An estate tax return is required in the case of every decedent whose gross estate, at the date of death, exceeded the legal filing requirement in effect for the year of death. Included in the gross estate are items such as real estate, tangible and intangible personal property, certain lifetime gifts made by the decedent, property in which the decedent had a general power of appointment, the decedent’s interest in annuities receivable by the surviving beneficiary, the decedent’s share in community property, life insurance proceeds (even though payable to beneficiaries other than the estate), dower or curtesy of the surviving spouse (inherited property), and, with certain exceptions, joint estates with right of survivorship and tenancies by the entirety.
All that being said, the “Under $5.45 million” group represents the estimated number of people alive whose total assets exceeded the filing threshold in 2016, but had debts (except policy loans against insurance) and mortgages, or administrative expenses that precluded then from having a net worth above $5.45 million in 2016. (734K-583K is roughly 151K people in the U.S who fit this description. I should state for clarities sake that net worth is equal to total assets minus total debts. I hope that this is clear and explains the differences in the two figures.
With that, here’s the IRS data:
IRS Personal wealth 2016 (click for larger image)
Conclusion
There are a lot of millionaires in the U.S. For comparison, here are the top 11 countries sorted by number of millionaires. (Reminder: the percentages are of the total population in each group.)
Credit Suisse Table 3-3a (click for larger image)
In case you’re wondering, I included 11 countries because I wanted Switzerland to be on the list. Also, I’ll issue my standard warning about data from China. Don’t believe it.
In Table 2-1 Credit Suisse includes their estimate of data quality. China is rated “Good.” As far as I can tell, data quality has the following scale:
- Good
- Satisfactory
- Poor
- Very poor
Frankly, this makes me a little skeptical of the Credit-Suisse research. China and the U.S. are both rated Good. That is, frankly, impossible.
- From Credit-Suisse Research Institute, “Global Wealth Databook” page 116. Available at https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html. Accessed July 13, 2023. “To determine the precise features of the top wealth tail, we rely heavily on the rich list data provided by Forbes and other sources. We make particular use of the number of billionaires reported by Forbes, since the data are available for many years and are broadly comparable across countries. We recognize that rich list data have limitations. The valuations of individual wealth holdings are dominated by financial assets, especially equity holdings in public companies traded in international markets. For practical reasons, less attention is given to non-financial assets apart from major real estate holdings and trophy assets, such as expensive yachts. Even less is known – and hence recorded – about personal debts. Some people cooperate enthusiastically with those compiling the lists; others jealously guard their privacy. There are also different country listings for nationals and residents, which is especially evident for India, for instance. The true legal ownership within families – _as opposed to nominal ownership or control – _adds further complications. Reassigning family holdings above USD 10 billion, say, to individual members might well result in several billionaire holdings, so the number of billionaires would increase in this instance. In other cases, reassigning the family wealth would reduce all the individual holdings below the billionaire threshold. For all these reasons, rich list data should be treated with caution. At the same time, the broad patterns and trends are informative, and they provide the best available source of information at the apex of global wealth distribution.” ↑
- The link takes you to the data page. In the upper right corner of the window look for the “Full CSV” download. This gives you a zip file containing 27 csv files. There’s lots of good stuff here. The table I used is dfa-networth-levels.csv. ↑
