What income qualifies one as wealthy? (1 Viewer)

[Eric_L]

I've been watching some of the early rhetoric in the political campaign about 'the wealthiest Americans" and their tax responsibility. While candidates throw this term around quite loosely I have never seen one define what qualifies a person to being among the wealthiest Americans.

Lately I have been required to study a considerable amount about tax code and law. (far more than any human should have to!) I have not found any clear and consistent answer within about the definition of "Wealthiest American". There are a myriad of breakpoints and thresholds for an assortment of brackets, credits, phase-outs etc. There does not seem to be a set standard between the various items.

I know the income levels for the top 5%, top 1%, etc. of earners in America. Does being the highest earner out of 20 people make one wealthy? That would seem a low threshold. Highest earner out of 100? That would still mean there are millions of people in America who could call themselves the "Wealthiest". Is it a fixed dollar amount with inflation adjustments? What would that amount be? Does it vary by region? Marital status?

I am very curious about the income definition of wealthy. I want to know if public perception is similar or relevant to IRS policy. I wonder how much the definition varies across income strata (Does a person earning $40,000/yr consider wealthy to mean the same as someone earning $150,000/yr) The whole issue fascinates me.

What are your thoughts?

 

[ChristopherDAC]

If pressed, I would tend to classify the top quintile of income as "wealthy" and the bottom quintile as "impoverished", on the assumption that (these being relative terms) the middle three-fifiths of the populace is the normal range.

The fact is, however, that income is less important than property. If you own your home outright, for example, you aren't paying on a mortgage, & you don't have to worry about losing your housing if you lose your job. I would say that this makes you wealthier than another man with the same income who doesn't. Look at the statistics of property concentration, in land, in money property (stocks & shares) & so on. If, for example, the top 10% of population in income terms owns 90% of the property, then those people are certainly the wealthiest.

 

[ChrisMatson]

If you have to ask, you can't afford it.

 

[Paul Padilla]

"Shaq...is rich. The man who signs his check...is wealthy." Chris Rock

 

[Dennis Nicholls]

CDAC has a good point...income is only part of the equation.

According to average income, I'm lower class today. But since I paid cash for my house and can live off the interest on my savings, I'm much more wealthy than over-mortgaged guys living paycheck-to-paycheck.

There is also a huge geographic differential in what qualifies one for "wealthy". $100K a year in Detroit and you are wealthy. $100K a year in San Jose and you won't qualify for a mortgage on a tar-paper shack.

 

[Chris Lockwood]

There is no official definition of wealthy, but politicians love to distort it for their own purposes. There's not even a consensus on whether it's based on income or net worth.

 

[Garrett Lundy]

I'd say an income of $1million annualy or more is wealthy even in Hawaii/So Cal.

But thats 'new money' rich. Using 'old money' standards I'd say you'd need a minimum of 50,000 acres befor you're officially 'landed gentry'.

 

[Mort Corey]

To the rhetoric of the political pimps, wealthy is anyone that has a dollar more than you.

Mort

 

[Cees Alons]

"More than you spend."


Cees

 

[Joe S.]

There is no rock solid definition, it varies according to your situation. Someone who owns a $300 car in Ethiopia would be very wealthy, in LA they would be poor.

The best rule of thumb I've heard is to add up all the expenses you incur in a year and put it against your assets (or savings.) If you can afford to pay those expenses for a year out of savings, you are wealthy. So if someone incurs $30,000 of debt in a year and has $35,000 in liquid savings they can consider themselves wealthy. Whereas someone who incurs $1,000,000 of debt a year and has $100,000 on hand would not be, even though they make a lot more money.

I like this method because it can apply to anybody's situation and reinforces that it is not how much money you make but how much you save that actually matters in the end. You can't always make a million dollars, but most everyone can live within their means and have relative financial security. And with financial security comes life options and with life options you get the pursuit of happiness (IMHO).

 

[MarkHastings]

While I agree that salary isn't always the determination of wealth, I disagree with the definitions people are giving the term "Wealthy".

Joe, just because someone has $300 in Ethiopia, they might be considered to have a lot of money, but that doesn't mean they are "wealthy".

Wealthy means you have a lot of riches and possessions. As to that exact number...well that is hard to determine exactly, but having more money than others do in your area, is not the real definition of being wealthy.

 

[Joe S.]

No, I said the amount of savings (or assets) you have compared to your personal debt load.

By your definition of riches and possessions, someone could have a million dollar home, a million dollar of jewels/gold, a million dollars in cash, but have $10 million dollars worth of debt. Are they then wealthy with a net worth of -$7 million? I would argue no, they are not. If their income got cut off for a year they would be wiped out, filing bankruptcy.

By comparison, someone working a blue collar job in a $150k house, $25k in savings, and no debt is actually in a much better financial situation. Again, lose a job for year they could ride it out on savings. == Wealthy IMHO.

If your debt exceeds your assets, I'm saying you are not wealthy. No matter how much you might appear to have in riches and welath, debt is as real as diamonds in determining personal wealth.

 

[MarkHastings]

Yes, your debt has a large part in it all. You can't claim to technically own stuff if you are in a ton of debt in order to pay it off. That's not the definition of 'wealthy'. The definition is being able to afford to buy those possessions and have a lot of them.Yes, exactly. My definition wasn't solely based on possessions. You also need the riches to back it up (and not a ton of debt). But at the same time, not having debt does not = wealthy either. You need both. You need valuable possession and riches (i.e. no debt) in order to be considered wealthy.

Again, "Well off" is not the same as "Wealthy".

 

[Bryan X]

I agree with Mark. In the example above, the person isn't wealthy. You could consider them 'well off' but maybe an even better title for someone in that position is 'financially sound' -- but certainly not wealthy.

 

[Joe S.]

What are riches if not possessions? I don't understand what you mean by that term. Name a "riches" you can have that you cannot hold in your hand or touch. I would argue it isn't real

If you like, you can just slide the scale up to match your expectations of "wealthy". I use 1 year of no income as my personal thumbprint, you could use 5, 10, or 20 if you like.

So to adjust the example above, if the guy owned a $150k house but had enough money to live with no extra income for 20 years, would that be wealthy for you? If yes, then use 20 years as your metric. The overall point is that for me:

wealth = assets + income - debts - expenses.

At what point that equation passes over in "wealthy" is incredibly subjective for each person. Possessions and displays of wealth are almost meaningless to net worth. Warren Buffet is one of the wealthiest people on the planet, yet he's lived in the same modest house for 40 years, I think it's worth ~$300k. So without all the glam and bling, is he not wealthy? Of course he is, but it's because his saved assets and income far, far outweigh his debt and expense load.

Heck of any interesting idea trying to define wealth and "richness", isn't it?

 

[MarkHastings]

That kind of depends on what you mean by "had enough money to live" means.

If someone lives in a $150k home, has $20,000 in the bank and can live on $1,000/year....then I say "No", he is not "Wealthy". I wouldn't even say he is "Well Off".

 

[Steve Kuester]

This is an interesting topic.

Unfortunately, I think most people would say that wealthy is anyone who appears to have more money than they do themselves.

My definition of wealth is rather vague, I suppose. I would say someone is wealthy if they truly do not need to worry about or be concerned with money for their particular situation in life. Like most in this thread, I would say there is no way to attach an actual dollar amount to the definition of wealth.

 

[Dennis Nicholls]

Intellectual property. Say, for example, the patents on major drugs, the copyrights to Disney films, the trade secret formula for Coca-Cola, or the trademark Intel.

 

[bobbyg2]

I think it's just an opinion...

Like, someone who makes $30,000/year may think that someone that makes $100,000/year is wealthy. As the person that makes $100,000/year may think that someone who makes $200,000/year wealthy.

 

[Garrett Lundy]

I think it was one of the Ceasars of Rome who said "No one should consider themselves wealthy unless they can afford their own army".