In the midst of an unprecedented wealth surge in the U.S., financial insecurity remains widespread, even among millionaires. According to a new survey by Edelman Financial Engines, only 33% of millionaires—those with assets between $500,000 and $3 million—consider themselves wealthy.
Surprisingly, many feel that even $3 million isn't enough to provide financial security, highlighting the growing disconnect between wealth accumulation and financial confidence in America.
The survey surveyed over 3,000 adults aged 30 and above from June 12 to July 3, including 1,500 wealthy Americans with household assets ranging from $500,000 to $3 million.
Why Millions Don't Mean Wealth
The wealth gap continues to widen, with the net worth of the top 1 percent (those with over $11 million) surging by nearly $2 trillion to a record $46.2 trillion in the first quarter of 2024, primarily driven by gains in their stock portfolios, according to Federal Reserve data.
Furthermore, a recent report suggests the top 25 wealthiest people in America paid only $13.6 billion in federal income taxes between 2014 and 2018, despite their total income growing by $401 billion during that time.
However, the Fed's survey of consumer finances reveals that wealth creation has been primarily concentrated among homeowners since housing prices began to surge in the lead-up to the COVID-19 pandemic in 2020.
"Homeownership doesn't feel like wealth," said Jean Chatzky, personal finance expert and CEO of HerMoney.com, who worked with Edelman Financial Engines on the report. "Homes are an asset that we use every day, it's not like the balance in your retirement account or your savings account."
Simultaneously, persistently high inflation drove up the cost of living, squeezing household budgets and leaving less disposable income. In June, Bank of America (BofA) analysts predicted that the US housing affordability crisis would persist until at least 2026, citing persistently high interest rates and home prices as the primary culprits.
Inflation's Ongoing Impact
The Consumer Price Index (CPI), a primary gauge of inflation measuring average price changes in consumer goods and services, rose 2.5 percent in August 2023 compared to the previous year. While this marked a decline from the pandemic-era peak of 9.1 percent in June 2022, elevated inflation levels continued to strain household budgets.
Despite the recent cooling of inflation, prices are still rising, albeit slower. To cope with the financial strain, data suggests that an increasing number of people are turning to credit cards to cover everyday expenses.
The Escalating Burden Of Credit Card Debt
According to the New York Fed and TransUnion, a record $1.14 trillion in credit card debt now burdens Americans, with the average consumer balance reaching $6,329, a 4.8 percent increase from the previous year.
An increasing number of borrowers are struggling to keep up with their credit card payments, carrying balances month to month and experiencing delinquency. According to the New York Fed's report for the second quarter of 2024, approximately 9.1 percent of credit card balances became delinquent over the past year.
A recent survey by Edelman Financial Engines revealed that nearly half (44 percent) of Americans consider credit card debt to be the most significant obstacle to building wealth.
"Debt is, and has always been, a savings killer," Chatzky said. "High interest rate credit card debt, more than other sorts of debt, is a savings killer, because when you have it, you have to feed the beast. You can't save, you can't invest."
"That stands in the way of people building actual wealth and therefore feeling wealthier," she said.
The Price Tag Of Wealth
A survey conducted by Edelman Financial Engines revealed that most people (approximately 65 percent) would need $1 million in savings to consider themselves wealthy. However, 28 percent estimated a higher figure of $2 million or more, while 19 percent set the bar even higher at $5 million or more.
Interestingly, among those already millionaires, 68 percent believed that $3 million was necessary to feel wealthy, and 40 percent required a minimum of $5 million. Regarding their salaries, 58 percent of respondents indicated they would need to earn an average of $100,000 to feel comfortable covering their daily living expenses.
Additionally, a quarter of the participants stated they would require a salary exceeding $200,000 to achieve financial security. Experts often emphasise that financial security is not solely determined by income but rather by adopting prudent financial habits such as saving more than spending, maintaining a diversified investment portfolio, and seeking advice from a financial advisor.
"Feeling wealthy can also be connected back to not having to worry about money," said Isabel Barrow, the director of financial planning at Edelman Financial Engines. "It's living within your means and not getting over your head in debt."
A separate planning and progress study conducted by Northwestern Mutual in January surveyed over 4,500 adults and found that only one-third (32 percent) of millionaires considered themselves wealthy, while nearly half (48 percent) believed their financial plans required improvement.
"For most Americans, 'feeling like a million bucks' is less about believing you're rich and more about exuding confidence and clarity about the future," said John Roberts, chief field officer at Northwestern Mutual.
