I’ll go first- I consider people who are “rich” to be those who have enough independent wealth to not have to work if they don’t want to, and (this is the important part), maintain at least a upper middle class lifestyle in the bargain. That probably translates to somewhere in the $150k-ish annual income from investments and/or ownership stakes.
I make the lifestyle point, because I wouldn’t necessarily consider someone with say… three-quarters of a million bucks in the bank, who’s willing to live like a beach bum on the investment income, “rich”. Maybe wealthy, maybe in a good position, but not “rich”.
Similarly, a doctor who lives a lifestyle that’s at the upper-end of upper middle class doesn’t necessarily qualify as “rich” either- one disabling accident, and his family is looking at a severe downgrade in lifestyle if he’s unable to work any longer.
But someone who could live an upper middle class lifestyle (or better) on the proceeds of their wealth? That’s a different class of wealth than most of us enjoy.
I agree with your definition. Rich is someone who could decide not to go in to work anymore and still have a very pleasant lifestyle.
The problem with defining rich by annual income is that it ignores how much different things like housing and childcare cost in different locations; a $200k salary in San Francisco is very different than a $200k salary in Wichita.
I need a little more wealth factored into the OP definition. To be able to live an upper middle class lifestyle without working is certainly nice, but you’re still subject to a catastrophic change in circumstances should something go wrong. For me, rich is simply being able to live as you desire without regard to such vulgar trifles as “money.” You think of an activity, and you can gear up as necessary to do the hell out of that activity. And if you do it only once, you maybe pack away the gear, maybe put it on display as a souvenir somewhere in one of your homes, maybe give it away to someone you fancy, telling them they’re doing you a favor to get it off your hands…but you’d never stoop to selling it to recover some of the cost. In short, finances don’t enter into your thought process (except for large investment acquisitions), you just are able to do whatever you please and discover the other barriers to happiness which money is alleged to be unable to surmount.
a lot of what people used to be considered well off or rich is surprisingly standard today
I mean mom and dad each have a nice car in the 70s and 80s dad got the new car while mom got dads old beater
houses with more than 2 bedrooms and one bathroom …everyone has their own 50 in flat screen tv and video game consoles their own computer more than one landline when I was a kid you got the old black and white tv to play Atari or Nintendo ………
going out to eat is more often than not a standard meal choice ……I could remember when burger king was a once a month thing that was looked forward to
I’m with you bump - you are rich when you are no longer dependent on a job to have a lifestyle that would be considered upper middle class. You can live like a pauper, but if you could quit your job and still live in a nice house, drive a newer model car, go out to eat and on vacation - you are rich.
If you can do all that, but need to hold a job to do it, you are middle class. Maybe upper middle class.
Not having to worry about money is the key, but I think you have to add an “if” or a “when” to that. I mean, I don’t have to worry about money now, particularly, but then I haven’t just bought dinner at the Ritz or first class tickets to New Zealand (for the sake of argument). Without being utterly stupid, how much would you spend if you had the opportunity? (ie, let’s exclude hiring the popstar-de-jour for a personal concert, but factor in a pretty full dose of treats and luxury).
So if you want to put a figure on it, I would go with the level of expenditure you could sustain without noticing or caring being about a quarter to a half million a year. And at that level, lets not argue about whether this is dollars, euros or pounds.
I think a lot of that was always upper middle class type stuff, but there has been a pretty sizeable migration into that strata with the rise of higher-paying tech jobs and some other jobs paying relatively more than in the past.
For example, my house dates from 1970, is the smallest house in my neighborhood at a little under 2100 sq feet, and has 4 bedrooms and 2 full/2 half bathrooms. My neighborhood’s always been upper middle class- lawyers, CPAs, tech types (it’s not far from Texas Instruments), middle managers, professors, etc…
My bar for considering someone “rich” is pretty high. I usually think of my clients that pay 25 million to 100 million+ to build ( or buy and renovate ) their homes as rich. I think of people paying 1 million+ for a 3 month vacation rental as rich. The average well-off dude with a million dollar apartment and a couple of million in savings, not so much.
OK, so what are the hallmarks of an upper middle class lifestyle?
I’ll feel rich when my wife and I can buy first-class tickets to Japan and travel there twice a year. Right now we can buy economy class tickets for about $1500 each and we do so perhaps once a year. A first-class ticket costs more like $5000.
I’ll feel rich when I can lease a new car every three years - a nice one, something in the $50K-$100K range. My current car doesn’t cost that much, and I’ll be keeping it for ten years.
I’ll feel rich when I can spend a week at an upscale hotel in Manhattan instead of a budget-friendly one in New Jersey.
I’ll SWAG an annual household budget of $150K-$200K to live like this; to assure that this level of income is reliable over the long term without working a job would require investments on the order of $5M-$10M. Choose the upper figure if you want your nest egg to endure, the lower figure if you don’t mind a high likelihood of eating your nest egg down to $1M-$2M before you die.
The richest people I know do this:
$2,500 per month (or more) on landscaping/gardeners
Major charitable contributions
weekly at home car detailing
catered parties
Art collections, wine collections, etc.
Great travel
Second (or third) home somewhere nice (lots of rich people in Seattle have a place in Palm Springs or AZ)
“business manages” to handle everything from paying routine bills to shopping for insurance)
Horses. Not sure why, but I see a lot of people spending serious money on horses (can include stables, herds of cows to train the horses, and all sorts of associated expenses).
Big boats.
Supporting adult children and grandchildren (sometimes appropriately, often not)
I usually look at it as “rich-lite”. It’s basically the highest tier of ‘normal’ consumer culture, whereas the real “rich” have bespoke stuff.
So where a middle class person might buy a suit at Men’s Wearhouse for a few hundred bucks, your upper middle class guy might drop a grand or two on one at Nordstrom, while the really rich guy will have one custom-made, or will get one that’s really expensive off the rack.
Your middle class guy will buy a 40-60" TV at a big-box store. Your upper middle class guy might get a 70" TV somewhere. Your RICH guy will get a custom home theater put in, complete with rack-mount digital media library and a custom-designed speaker system.
Rich begins at a quarter a million per year in interest after inflation. This allows you to never work again and have the vast majority of your needs met. It doesn’t allow entrance to any of the crazy rich circles but in day to day life money, or where it comes from, doesn’t matter. So 6 million in equity investments making 7% with 3% inflation and then 2 years ‘salary’ in bonds to protect against equity dips and one year in cash so total worth starting at 6.75 million not including homes.
JP Morgan doesn’t give you access to a private banker until you have 10 million in investable assets and that’s not a bad threshold since they know more about the rich then I do.
I define being ‘rich’ as someone who is independently wealthy, i.e. doesn’t need to work or bring home a pay check and yet can lead an upper middle class life without it with no problems and no increase in debt. To me, that’s ‘rich’, and it’s what I’m striving for. Doesn’t mean I won’t work if and when I get there, just that it’s a choice, not a necessity, as it is for me today.
Doesn’t matter how much stuff you have, how big or fancy your house or houses are, how expensive your toys are or where you vacation if you have to work. By the same token, doesn’t matter how modest all that stuff is if you can have it without going into debt and without having to work. If I could have my current life style, current houses, cars, toys, luxuries (cigars, tequila, etc) and not have to work while not going into debt I’d consider myself ‘rich’.
As you clarify later if might be defined in terms of a real expected return (not ‘interest’ per se which technically doesn’t include stock returns) high enough to fund a quite upper middle class lifestyle indefinitely without working.
The problem with just saying ‘don’t have to work’ is that that’s a function of age if you’re willing to expect to gradually spend down the (real) principle.
The $250k doesn’t go far in NY/SF argument has some validity but as you estimate $250k expected real return might start in the high single digit millions of NW. I’d say more conservatively 2% after tax real on a 60/40 stock/bond portfolio (assuming 4% pre tax real return on stocks as you do and 1% real pre tax return on bonds), so $12.5mil. But it’s that order of magnitude I’d agree, and IMO hard to say somebody isn’t rich especially at the upper end of that range even if they live in a high cost area.
Although people can define ‘rich’ however they want to. They can define it as what I’d call the super or hyper-rich, wealth that can support $millions/yr spending indefinitely. They can define it as couples making $250k in pre tax salary even living paycheck to paycheck with no savings (think nobody does that? I’ve known some).
Usually the definitions that really point to super/hyper-rich people are to try to take down a peg somebody who is just rich. Usually the definitions which include low asset people with pretty high incomes are to raise to more tax revenues with taxes on ‘the rich’ by broadening the definition.
Your perspective on what it means to be rich is…unique. Most people don’t think of being rich as some sort of long-term average condition. A person who spends his last dollar on a lottery ticket that wins $100M was poor, but is now rich, even if it happens when he’s 75 years old. OTOH, by all accounts MC Hammer was extremely rich, at least until he declared bankruptcy at the age of 35 - at which point he was officially poor.
So you can only be born rich or at least become rich early in you life? The goal should be to retire rich not just work to survive. It seems like you won and will die better then you started off. Congrats.
I think of rich as being able to not work and live a good middle class lifestyle with enough padding for medical emergencies, which isn’t quite the same as an average upper-middle class lifestyle. For a couple that’s still north of a million dollars, even more if they have children to put through college.
I think of wealthy as being able to not work and live a good upper-middle class lifestyle, which would be most of the plethora of multiple residences and yearly vacations and good cars. It wouldn’t be yachts and mansions, and you wouldn’t have to actually indulge in the above to be considered wealthy. In fact, if you were relatively frugal you could have a mansion and a yacht without the rest of the stuff and still be wealthy under the Elmer J Fudd criteria, it’s just that these days, most people on the edge of being wealthy would opt for the former rather than the latter.
I agree you have to separate out cases where people are rich but might not be in the future because investment returns are terrible, they make bad decisions, there’s confiscatory taxation, etc. They are still rich now.
However pullin’s point is still very relevant to defining rich as ‘can live comfortably without working’. By that simple definition every retired person who isn’t in financial distress is ‘rich’. You have to somehow correct for it to exclude a significant % of the whole population who have or will likely have comfortable retirement but nobody thinks are ‘rich’ at least by US or rich country standards.
Which I think is fairly simply done, roughly there’s never going to be any ‘scientific’ definition, by basing it on assets which would sustain higher-upper middle class spending at a conservative expected return indefinitely. Which comes out as per above in the range of perhaps $6-12mil which is probably the range in which most people would assess ‘rich’ begins anyway. And I do think an asset measure is mainly appropriate. Somebody who just started making several $100k a year is doing very well surely, but will only become ‘rich’ IMO if they sustain it, and establish an independent wealth asset base from it. Except again for political definitions designed to broaden the high-rate tax base, I don’t see much of an argument to call people ‘rich’ who would soon be in financial straits if they lost their jobs, even though yes that’s a future thing which hasn’t happened yet. ‘Rich’ and ‘I really need this job’ don’t go together well in my mind.
Your perspective on what it means to be rich is…unique. Most people don’t think of being rich as some sort of long-term average condition. A person who spends his last dollar on a lottery ticket that wins $100M was poor, but is now rich, even if it happens when he’s 75 years old. OTOH, by all accounts MC Hammer was extremely rich, at least until he declared bankruptcy at the age of 35 - at which point he was officially poor.