What is a "Millionaire"?

[uppityperson]

[ThomWV]

1. Its net worth, and you'd be surprised how many of them there are

If you own your own home, if you have gone through a career and saved regularly throughout its actually pretty easy to amass a million dollars worth of assets. It doesn't mean you have any money in your pocket, in fact it probably means for most of the time you didn't have any extra because it was saved, which you may read to say 'invested'.

[hfojvt]

4. it's not that easy

in 2002, only 8.5% of American households had a net worth over $500,000
but actually 20.6% of those over 65

but that means that alkmost 80% have less than $500,000 in assets
and 15.4% had less than $50,000 in assets.

[jmowreader]

2. Actually, it's FIVE million or more in net worth

Someone with one million in net worth is not considered a millionaire because it's too easy to slip below the $1 million threshold.

Five million is "millionaire" territory because they figure no matter what happens in the stock market or wherever else you've got your money stashed, you can come up with at least a million on any given day.

[Douglas Carpenter]

3. it's not what it used to be - that's for sure

I'm sure there are a lot of people living in say the San Francisco Bay Area or the Boston area who technically have at least a million dollars in assets if you included their home and their retirement plan. They are probably solidly middle class - but certainly not dripping with wealth as the term "Millionaire" once implied. A fairly ordinary but middle class residence in such population centers may very will hold a market value of six to eight hundred thousand or a million dollars. At one time this would have meant a breath taking mansion. These days it means no more than a reasonably nice but nothing special two or three bedroom apartment.

[FreeJoe]

5. It is just a name

Use the term however you want. The "dictionary" definition is anyone with a net worth over $1,000,000. Since the term is intended to be synonymous with rich and having a net worth of $1,000,000 isn't particularly rich anymore, people are looking at new ways to define it.

One method I find silly is switching the term to only count financial assets. The reason that I find it silly is that someone with $500,000 in investments and a $1,000,000 paid for home is not a millionaire. If they turn around and take out a $500,000 mortgage on their home, suddenly they are a millionaire despite not changing their net worth.

The other problem with simple measurements like this is with the way IRAs are treated. If you have a $1,000,000 traditional IRA, you can't take it out and spend $1,000,000. If you try, you'll owe a few hundred thousand dollars in taxes. So if you want to focus on people's net worths, I think it should be their net spendable worth.

I mention that part because I'm in the process of converting an IRA to a Roth IRA. On paper (OK, on my computer), it looks like my net worth is taking a big hit. In reality, it isn't really changing.