How Rich is Rich?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are not rich. It’s all relative though. A $1.8 million house is middle class in my area.

That's not middle class. Grow up and understand what middle class is.

When you can’t afford full pay for a private college you are middle class. Sorry.

You can, you just choose to spend it on other things like a nice house.

We could afford to pay full pay and we'd be considered far more middle class than OP. Its all about prioriites. Our house is maybe worth $500K, maybe more. So, we could spend that extra for college.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are not rich. It’s all relative though. A $1.8 million house is middle class in my area.

That's not middle class. Grow up and understand what middle class is.

It's upper middle, so? It's still not rich. She can't live off this money not to mention live well. Money in your house equity (where you have to live) and in your retirement accounts is not accessible without penalties.

You can FIRE with less NW than OP, sure, but this means sacrifices and scrimping on lifestyle usually, esp. in HCOLA.
BUT
There is a point where there is enough wealth to have a nice home and even a second home, retirement savings and also have investment vehicles returning income you can live on, so that you do not rely on working. People can argue all day long how you can be working with 20 mil and have all of it buried in primary/second home and retirement accounts and I don't think it's quite realistic. Once you exceed a threshold of what a nice home in a good area costs you will not be likely upgrading endlessly to gobble up all your growing wealth (unless you are extremely stupid or won a lottery). Someone with 20 mil NW isn't going to buy 10-15 mil in RE to occupy themselves and have insane 401K, right? think. At some point your wealth spills into the active income producing investments and when it happens then you are truly financially independent but also comfortable and live well and can call yourself rich.

A 2 million dollar house is upper class.

[Anonymous]

Anonymous wrote:NET WORTH OF THE 95TH PERCENTILE

Top 5%

40-49
$2,551,500

50-59
$5,001,600

60-69
$6,684,220

Data source: Federal Reserve.

This is 401K wealth and house wealth. A lot of people will be retiring with millions at 65, it will make boomers look like poor cousins.. I wonder what the economy will be like and how much wealth transfer will happen with all these people starting to live large at 65 or deciding to give money to their kids/grandkids. I wonder what will happen to inflation when all this money becomes liquid and available for spending. Everyone not in top 5% is going to feel major squeeze

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are not rich. It’s all relative though. A $1.8 million house is middle class in my area.

That's not middle class. Grow up and understand what middle class is.

It's upper middle, so? It's still not rich. She can't live off this money not to mention live well. Money in your house equity (where you have to live) and in your retirement accounts is not accessible without penalties.

You can FIRE with less NW than OP, sure, but this means sacrifices and scrimping on lifestyle usually, esp. in HCOLA.
BUT
There is a point where there is enough wealth to have a nice home and even a second home, retirement savings and also have investment vehicles returning income you can live on, so that you do not rely on working. People can argue all day long how you can be working with 20 mil and have all of it buried in primary/second home and retirement accounts and I don't think it's quite realistic. Once you exceed a threshold of what a nice home in a good area costs you will not be likely upgrading endlessly to gobble up all your growing wealth (unless you are extremely stupid or won a lottery). Someone with 20 mil NW isn't going to buy 10-15 mil in RE to occupy themselves and have insane 401K, right? think. At some point your wealth spills into the active income producing investments and when it happens then you are truly financially independent but also comfortable and live well and can call yourself rich.

It's the minimum price at which homes start getting nice but there is still compromise (either a new house in a less than premium area or an older home in a premium area). There is nothing upper class about 2 mil homes in HCOLA. It's definitely solid UMC though. If you want no compromise you'd need about 4 mil for a really nice house in DC metro. You also may want to spend another 1-2 mil on a second home, which would objectively satisfy needs for comfort and luxury. Then you allocate enough money to your investment portfolio to return 5% without investing being a job and worrying about risk. with 10 mil of income returning wealth you can have passive income of 500K a year taxed at cap gains rate, enough to maintain your homes, take vacations and live rather comfortably. This isn't 401K wealth you cannot touch until 65, it's the money you have in investments or income producing assets like rentals, business, etc. It's what you can live on if you want to feel "rich". I'd say this would require NW of about 15 mil outside of 401K.

This is my definition of when *I think* most people would objectively feel rich. This doesn't describe my personal situation or personal opinion when I would feel rich myself, which for me mainly concerns financial independence to not have to work even if lacking luxury described above.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You live in a 2 million dollar house and are asking this? Yes you are rich.

You can't leverage it unless you take a HELOC and invest the money so well you get positive cash flow after making loan payments, e.g. beat interest rate well enough. A house you live in is not an income property. In HCOLA your housing will be $$$ if you don't want to live in a complete dump, hers isn't extravagant anything for the area. Can she downsize and live in a 2 bedr condo? Yes, but not until kids are on their own. Again, it's a nest egg that cannot be cashed out just like 401K until some time in the future without huge penalty.

That's actually all you need to leverage it (Getting a heloc).

And I don't know why you're talking about investing the funds from heloc to get a return above interest. Are you forgetting that your house is an appreciating asset?

If you want to keep your house you have to pay your HELOC back. You will be making payments and paying more than what you borrowed back because of interest. It's basically like having a mortgage again even if your house is paid off. You will need to make this money you borrow grow and return income to cover the cost of your loan payment. Each month you have to invest this money to produce the return greater than the loan payment, so that you can feel like you are having this extra cash flow you are lacking. When you don't produce the return you have to dig into your loan principal, e.g. eroding it and paying back what you borrowed instead of it working for you. Your house appreciation isn't a guarantee.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are not rich. It’s all relative though. A $1.8 million house is middle class in my area.

That's not middle class. Grow up and understand what middle class is.

It's upper middle, so? It's still not rich. She can't live off this money not to mention live well. Money in your house equity (where you have to live) and in your retirement accounts is not accessible without penalties.

You can FIRE with less NW than OP, sure, but this means sacrifices and scrimping on lifestyle usually, esp. in HCOLA.
BUT
There is a point where there is enough wealth to have a nice home and even a second home, retirement savings and also have investment vehicles returning income you can live on, so that you do not rely on working. People can argue all day long how you can be working with 20 mil and have all of it buried in primary/second home and retirement accounts and I don't think it's quite realistic. Once you exceed a threshold of what a nice home in a good area costs you will not be likely upgrading endlessly to gobble up all your growing wealth (unless you are extremely stupid or won a lottery). Someone with 20 mil NW isn't going to buy 10-15 mil in RE to occupy themselves and have insane 401K, right? think. At some point your wealth spills into the active income producing investments and when it happens then you are truly financially independent but also comfortable and live well and can call yourself rich.

A 2 million dollar house is upper class.

Re-posting again as quotes got corrupted.

It's the minimum price at which homes start getting nice but there is still compromise (either a new house in a less than premium area or an older home in a premium area). There is nothing upper class about 2 mil homes in HCOLA. It's definitely solid UMC though. If you want no compromise you'd need about 4 mil for a really nice house in DC metro. You also may want to spend another 1-2 mil on a second home, which would objectively satisfy needs for comfort and luxury. Then you allocate enough money to your investment portfolio to return 5% without investing being a job and worrying about risk. with 10 mil of income returning wealth you can have passive income of 500K a year taxed at cap gains rate, enough to maintain your homes, take vacations and live rather comfortably. This isn't 401K wealth you cannot touch until 65, it's the money you have in investments or income producing assets like rentals, business, etc. It's what you can live on if you want to feel "rich". I'd say this would require NW of about 15 mil outside of 401K.

This is my definition of when *I think* most people would objectively feel rich. This doesn't describe my personal situation or personal opinion when I would feel rich myself, which for me mainly concerns financial independence to not have to work even if lacking luxury described above.

[Anonymous]

There is no objective definition for the word rich.

For your daughters, I would tell them that you don’t feel rich, but feel very comfortable and plan to not need any financial support from them in older age and will leave them something when you die, but that they will still have to work and have careers of their own in order to get by. Given the assets you described, all sounds true to me.

[Anonymous]

If one is in the top 5 percent, they are indeed rich. Just because the 1 percenters have so much more doesn’t take that away. Since the amount the one percenters have is so huge, those in the five percent feel like they are middle class by comparison (flying economy or biz with points instead of private plane for example). But they are rich. The one percenters are super rich.

Class is another thing altogether.

[Anonymous]

Anonymous wrote:If one is in the top 5 percent, they are indeed rich. Just because the 1 percenters have so much more doesn’t take that away. Since the amount the one percenters have is so huge, those in the five percent feel like they are middle class by comparison (flying economy or biz with points instead of private plane for example). But they are rich. The one percenters are super rich.

Class is another thing altogether.

Rich middle class- a level above upper middle class.

[Anonymous]

Anonymous wrote:If one is in the top 5 percent, they are indeed rich. Just because the 1 percenters have so much more doesn’t take that away. Since the amount the one percenters have is so huge, those in the five percent feel like they are middle class by comparison (flying economy or biz with points instead of private plane for example). But they are rich. The one percenters are super rich.

Class is another thing altogether.

+1. Every time this topic comes up (which is way too often) there are always people describing rich as being yachts, private jets, etc. That is indeed rich, but that doesn’t mean there aren’t other types of rich. A billionaire may think what a person with $20mn in assets has is cute and quaint, but that doesn’t mean the latter isn’t rich too.

[Anonymous]

Anonymous wrote:But is rich assets or income? I say income.

Rich is your income from assets. Not from labor.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If one is in the top 5 percent, they are indeed rich. Just because the 1 percenters have so much more doesn’t take that away. Since the amount the one percenters have is so huge, those in the five percent feel like they are middle class by comparison (flying economy or biz with points instead of private plane for example). But they are rich. The one percenters are super rich.

Class is another thing altogether.

+1. Every time this topic comes up (which is way too often) there are always people describing rich as being yachts, private jets, etc. That is indeed rich, but that doesn’t mean there aren’t other types of rich. A billionaire may think what a person with $20mn in assets has is cute and quaint, but that doesn’t mean the latter isn’t rich too.

+1 Only about 200,000 households in the US are worth more than $25M. Everyone thinks 1% means them, but they are only 0.06% of the population.

[Anonymous]

Anonymous wrote:I am jaded because we are not rich but work with and live near rich people. I define "rich" as at least $20m in net worth—enough for a ski or beach house and a net jets account.

$20 million does not get you a net jets account. Sure if you want blow it, but not if you want to have it for your heirs.

[Anonymous]

Anonymous wrote:My daughter called out my wife on her talk about the “rich” people and her saying is “middle” class people.

I have an average job and my wife does not work. But I had a good job at one point and bought a big house with a big downpayment we still live in.

My daughters threw out, you literally live in house now worth 1.8 million. My friends think I am rich from my address. My wife is we are middle class. She then throws out well how do you afford house. My wife responds well we have a small mortgage as put down a lot back in 2017 when Dad has a higher salary.

A few weeks later my daughter fresh out of college I helped with her 401k sign up. I was encouraging her to do more. It will be worth a lot one day. She asks how much I have in my 401k I say well I have two million and mom has one million. She goes I thought you were middle class. I then explain that’s for retirement.

She then asks any other secret month. Well I say I still have $350,000 of pre IPO vested RSUs from prior company but that I also can’t sell and maybe 100k in younger sisters 529 but that I can’t sell either and Mom has a 100k cash balance pension. Year that’s it.

But I am still middle class based on income.

No man wrote the above post.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You are not rich. It’s all relative though. A $1.8 million house is middle class in my area.

That's not middle class. Grow up and understand what middle class is.

It's upper middle, so? It's still not rich. She can't live off this money not to mention live well. Money in your house equity (where you have to live) and in your retirement accounts is not accessible without penalties.

You can FIRE with less NW than OP, sure, but this means sacrifices and scrimping on lifestyle usually, esp. in HCOLA.
BUT
There is a point where there is enough wealth to have a nice home and even a second home, retirement savings and also have investment vehicles returning income you can live on, so that you do not rely on working. People can argue all day long how you can be working with 20 mil and have all of it buried in primary/second home and retirement accounts and I don't think it's quite realistic. Once you exceed a threshold of what a nice home in a good area costs you will not be likely upgrading endlessly to gobble up all your growing wealth (unless you are extremely stupid or won a lottery). Someone with 20 mil NW isn't going to buy 10-15 mil in RE to occupy themselves and have insane 401K, right? think. At some point your wealth spills into the active income producing investments and when it happens then you are truly financially independent but also comfortable and live well and can call yourself rich.

A 2 million dollar house is upper class.

Not in the suburbs inside the beltway.