Are All Americans Becoming Wealthier, or Just The "Millionaire Class"?

Are All Americans Becoming Wealthier, or Just The "Millionaire Class"?

A few weeks ago I wrote about the increasing use of the term "Investor Class" as an inaccurate and generally disparaging synonym for the rich.

The same day I wrote that piece, a reader sent me an article by Christopher Ingraham that appeared December 7, 2017, in The Washington Post. It was titled, "Economy is creating millionaires at an astonishing pace. But what's it doing for everyone else?" In it he refers to another group that he calls the "Millionaire Class."

Ingraham references a paper, issued in November 2017 by New York University economist Edward N. Wolff, that finds the number of households with a net worth of $1 million (measured in constant 1995 dollars) increased from 2.4 million households in 1983 to 9.1 million in 2016, a growth of 279%. The total number of households increased by 50% during this period, meaning the number of millionaires increased at over five times the rate of increase of the overall population.  Keep in mind that all these numbers refer not to income but to net worth—the total value of a household's assets (including retirement accounts, homes, and other property), minus debts.

Wolff notes in his study that the bulk of the increase in the number of millionaire households happened between 1995 and 2001 and was due directly to the run-up in stock prices. He notes that more recently the increase in real estate values has nudged the number of millionaire households upward.

Ingraham writes that, "In 1983 fewer than 3% of households had a net worth greater than $1 million or more in constant 1995 dollars. By 2016 over 7% of households were worth that much." His take is that the creation of all these new millionaires is more of what's wrong with America. Yet there is another way of viewing it.

Ingraham refers to data from the Pew Research Center that finds the middle class is shrinking while the lower middle class and poor increased by 4%. He uses this as evidence of increasing income inequality as the poor get poorer and the rich get richer.

Confusingly, data that I found and reported on in August of 2016 finds just the opposite. According to a study by Stephen J. Rose with the Urban Institute, between 1979 and 2014 every class of American became wealthier. The upper middle class (households earning between $100,000 and $350,000) increased from 12.9% to 29.4%. The poor (households earning under $30,000) contracted from 24.3% to 19.8%.

Related: If the Rich Get Richer Do the Poor Really Get Poorer?

It isn't astounding news that people who invest in stocks and real estate increase their wealth faster than those who don't. These are the two asset classes that have the highest returns over almost any lengthy time period. If you want to build wealth you first need to be frugal—that is, have the ability to save money to invest—and then you need to invest in either businesses (stocks) or real estate.

Anyone with a few hundred dollars can own a slice of hundreds of the same stocks and real estate properties owned by the rich. Starting small and investing modest but consistent amounts over time is the way many people build wealth until they do indeed accumulate a net worth of a million dollars. This is not a sign of something wrong; it is an achievement worth celebrating.

It seems to me all the reference to "investor classes" or "millionaire classes" is an attempt to shame and demagogue the uber rich. However, using these terms also shames everyday Americans who take pride in being responsible for their financial future and who take advantage of opportunities to provide security for that future.

Rick Kahler
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Rick Kahler, MSFP, ChFC, CFP is a fee-only financial planner, speaker, educator, author, and columnist.  Rick is a pioneer in integrating financial planning and psycholog ... Click for full bio

Most Read IRIS Articles of the Week: Feb 19-23

Most Read IRIS Articles of the Week: Feb 19-23

Here’s a look at the Top 11 Most Viewed Articles of the Week on, Feb 19-23, 2018

Click the headline to read the full article.  Enjoy!

1. Don’t Get Pinged by the Social Security Earnings Limit

I’d like to introduce you to Peggy. Born in 1956, Peggy will be 62 in 2018. She has worked in retail her whole life, the past twenty-five years spent in management. Peggy divorced from her husband 14 years ago, is still single and has no children. — Dana Anspach

2. We're Back to “Bad News is Good News” and “Good News is Great News”

This week the markets shrugged off last week’s fears and went back to the slow and steady melt up, despite economic news that looked likely to once again rock the boat. — Lenore Elle Hawkins

3. Q1 2018 Factor Views

Themes established in 2017 across a wide range of markets and factors continued to resonate through the fourth quarter. Economic growth was strong and supportive of equity markets across the globe, a range of volatility measures reached all-time lows, and business and consumer sentiment remained elevated. — Yazann Romahi and Garrett Norman

4. A Beneficial Basket of Commodities

Advisors and investors that feel they are hearing more and more about commodities and the corresponding exchange traded products in recent months are right. That is a natural result of dollar weakness and yes, the greenback is floundering again in 2018. — Tom Lydon

5. 3 Trends Shaping the Future of Asset Management

As the industry works to cope with new regulation, wades through an outpouring of new products, learns to satisfy investors’ shifting priorities and manages the active-passive debate, the viability of business units will be questioned, and at times radical measures will be taken. Peter Hopkins

6. 5 Ways Advisors Leave Money on the Table, and What to Do About It

My hope is that this article points out some opportunities for you to make more money and serve your clients at a higher level and that you decide to do something about it. — Bill Bachrach

7. The Market Has Gone Wild! Is It Time to Change Your Investment Strategy?

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind ... — Lauren Klein

8. How to Deepen Client Relations and Capture New Business Using Engaging Content

Why financial advisors NEED to understand much more clearly the power of good digital market. With tools like AdvisorStream, it’s easier than ever to get the content you need to drive leads and referrals today! — Kirk Lowe and Matt Halloran

9. Three Ways The Most Successful Gain Big Attention

How do some firms and ideas go from nowhere to everywhere in a few short months? All of a sudden a restaurant becomes popular, a gas station gains a cult following, or a Broadway show becomes too popular to get a ticket for years. — Maribeth Kuzmeski

10. Who Are the Hottest FinTech Firms and Influencers Around the World?

"Worldwide, $27.4 billion poured into fintech startups in 2017, Accenture reports, up 18% from 2016. With so much in play, it’s not surprising that 22 companies are new on this, the third edition of our list."  — Chris Skinner

11. The New Stock Market Normal Is Not What You Think!

Many sensational headlines have been written the past few weeks about market declines, but two things have increased for sure: the viewership and the ad revenues of financial media organizations — Preston McSwain​​​​​​​

Douglas Heikkinen
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IRIS Co-Founder and Producer of Perspective—a personal look at the industry, and notables who share what they’ve learned, regretted, won, lost and what continues ... Click for full bio