Although they may be part of the two-comma club, it’s essential not to label them as “wealthy.”
A significant portion, nearly two-thirds (64%) of millionaires in the U.S., do not identify themselves as “wealthy,” according to a recent study by the insurance company Northwestern Mutual. This percentage represents a slight decrease from last year’s figures, when 68% of millionaires expressed the same sentiment regarding their financial status.
“While having a million dollars is certainly a considerable amount, it is crucial to recognize that financial confidence does not stem solely from monetary assets,” states Douglas Benson Jr., the founder of Benson Wealth Management, in an email communication. This perspective highlights the complex relationship between wealth and self-perception.
When assessing net worth, individuals often include retirement accounts and real estate holdings. By this broader definition, approximately 24 million Americans can be classified as millionaires. However, Northwestern Mutual adopts a stricter definition of a “millionaire,” which requires individuals to possess at least $1 million in investable assets while excluding retirement savings and home equity. Under this particular criterion, the number of qualifying individuals is significantly lower, although pinpointing the exact figure proves challenging.
According to an alternative wealth assessment by Capgemini, around 7.9 million Americans own at least $1 million in investable assets. This translates to only 3% of the U.S. adult population meeting this specific definition. It is worth noting that this measure is broader than that of Northwestern Mutual, as it encompasses retirement accounts as well.
The millionaires surveyed in Northwestern Mutual’s study represent a segment of America’s wealthiest individuals, who not only possess a net worth exceeding $1 million but also have at least that amount readily accessible in their financial accounts. This insight sheds light on the financial landscape of affluent Americans.
Why do America’s wealthiest individuals not feel ‘wealthy’?
Money consulted certified financial planners (CFPs) who specialize in advising high-net-worth clients to explore whether this trend is consistent among their clientele and to understand the underlying reasons for such feelings.
Eric Roberge, the founder of the Boston-based wealth management firm Beyond Your Hammock, recounts a conversation with one of his clients, who holds over $3 million in investable assets. The client expressed, “Why do we feel so poor?” This question reveals a poignant reality that many affluent individuals grapple with.
According to Benson, whose practice in Iowa collaborates with Northwestern Mutual, several social and economic factors contribute to why millionaires may not perceive themselves as wealthy, despite their substantial assets that surpass approximately 97% of U.S. adults. These factors intertwine to form a complex web of financial perception.
On the economic front, recent episodes of inflation have significantly diminished the purchasing power of $1 million. In many regions of the country where the cost of living is disproportionately elevated, having $1 million may not guarantee the anticipated level of financial comfort, Benson notes. This disparity highlights the challenges faced by high-net-worth individuals in maintaining their lifestyle.
Even in states like New Mexico, “that trend absolutely resonates,” asserts Nathan Sebesta, owner of Access Wealth Strategies. He emphasizes that many of his high-net-worth clients experience similar sentiments, suggesting that social comparisons play a pivotal role in their feelings of inadequacy.
For many of his affluent clients, social dynamics weigh heavily on their self-perception as they often find themselves comparing their wealth to that of multimillionaires or even billionaires. This continuous comparison fosters a sense of dissatisfaction, regardless of their financial standing.
“Wealth has become a moving target,” he remarks, indicating a shifting benchmark for what it means to be affluent in today’s society.
Roberge elaborates that individuals often feel the need to exceed the wealth of those around them to truly “feel wealthy.” However, as individuals accumulate significant wealth, their social circles tend to evolve, resulting in new friendships formed with individuals who possess even greater financial means. These changes can shift one’s perspective on wealth and success.
“Now you’re surrounded by people who have even more than you — even though you’re well-off, too,” he explains. “This cycle is unending, and those who fail to acknowledge this phenomenon will continuously feel as though they are lagging behind.”
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