Last week the Federal Reserve revealed that last year the average net worth of American families topped $1 million for the first time, surging 42% from $749,000 in 2019.
Of course, that average is skewed by a small number of billionaires and multimillionaires. Inflation meant real wealth didn’t increase as much. And pandemic-era stimulus boosted asset values, perhaps beyond their fundamental values.
Yet it would be a mistake to therefore conclude that wealth gains are purely a phenomenon of the top 1% and flattered by inflation and asset bubbles.
First, even after inflation, real average wealth was up 23%, according to the Fed’s Survey of Consumer Finances, conducted every three years. Second, while the level of median wealth was much lower than the average, it actually rose more than the average between 2019 and 2022—by 37%, adjusted for inflation—to $193,000. That means wealth inequality actually narrowed.
Third, and perhaps most noteworthy, there really are a lot of true millionaires. About 16 million American families—just over 12%—have wealth exceeding $1 million, up from 9.8 million families in 2019.Nearly eight million families are multimillionaires, i.e., their wealth exceeds $2 million, up from 4.7 million.
A portrait of mini-millionaires
Who are these mini-millionaires? They generally earn between $150,000 and $250,000 a year. They wouldn’t typically be considered rich, but upper middle class. (This depends to some extent on where they live: The same house is worth more in some parts of the country.)
Rather than being left behind as all the gains in the economy accrue to billionaires, they have in fact seen bigger wealth gains over the past three years than the top 10% of families. Indeed, the biggest wealth gains between 2019 and 2022 were among the approximately 13 million families in the 80th to 90th percentile of the income distribution. Their median wealth jumped 69% from 2019, adjusted for inflation, to $747,000 in 2022.
To be sure, for many American families the surge in prices since the onset of the pandemic means that wealth doesn’t feel as good as it sounds. Nonetheless, as these figures show, the increase in net worth for these families has far outpaced inflation.
Over 90% of these families report owning stocks, either directly or through retirement accounts, and 87% own their home. They benefited extraordinarily from low interest rates, cutting debt payments as a share of their incomes to 19% in 2007 to 12.9% in 2022.
The Survey of Consumer Finances is the most detailed data set collected on household wealth. For the survey, 4,602 households completed detailed questionnaires, enumerating all assets, including real estate, stocks, bonds, bank accounts, retirement accounts, cryptocurrencies and so on, and all liabilities, such as mortgages, auto loans, credit-card debt and student loans. Net worth is defined as all assets minus all liabilities.
These insights have important implications, both for our national narrative and where the economy is headed.
College, savings and timing
Rather than being swallowed by the 1%, the economy, according to these numbers, is creating a growing upper middle class. Many people got there by pursuing college degrees, steadily building retirement accounts and purchasing homes. For the most part, they became wealthy slowly, and were well-positioned when pandemic-era stimulus programs boosted asset values.
Economists have often attributed the strength of consumer spending, which propelled economic growth to a sizable 4.9% annualized rate in the third quarter, to “excess household savings" amassed since 2019.
That might be the wrong way of thinking about it. Nancy Vanden Houten, U.S. lead economist for Oxford Economics, recently asked: Do households “have more excess savings, or is it just wealth now?" The implication of her question is that as people come to regard the excess cash in their checking accounts as wealth, they might be less likely to spend it. The rise of millionaires, in other words, might not be transitory.
Though stock indexes and measures of home prices, such as the median home price from the National Association of Realtors, are down from earlier this year as interest rates have climbed, their valuations are mostly higher than they were when the survey was conducted, from May to December of last year. Higher interest rates might eventually knock some people off their millionaire status, but likely haven’t yet.
‘Temporarily embarrassed’ millionaires
John Steinbeck once said the U.S. “didn’t have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist." Steinbeck meant their dreams of prosperity were delusional. And yet there’s a grain of truth to it. It is true that there are gaping disparities of wealth in the U.S. today. Nonetheless, many people whose wealth would define them as poor expect one day to be rich—and many, in fact, will be. For example, only 1% of families under 35 are millionaires, but that rises with age. By ages 55-64, 21% of families are millionaires.
This trend is particularly pronounced among college graduates, of whom 45% were millionaires between ages 55-64. That includes 26% of families who become multimillionaires and 11% with a net worth over $5 million.The average college graduate’s net worth is over $2 million now, though as usual this is skewed by those at the very top.
Make no mistake, there is still poverty and economic struggle in the U.S. Many families have little or no wealth, and limited prospect of accumulating any. And yet the idea that only the 1% are getting richer is at odds with the numbers.
Write to Josh Zumbrun at josh.zumbrun@wsj.com
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