When is someone a ''millionaire"?

Lots of news stories toss around the word “millionaire”? But when is someone a “millionaire”? If someone put a $100,000 in a fund in 1982 and that investment is now worth a million but if the fund were cashed out there would be capitol gains on $900.000 would that person be a “millionaire”?

My vote would be when your net worth goes over 1 million. Not that that is really all that impressive anymore.

Mine would be that the person could raise a million in his or her own cash in less than 24 hours, without having to sell anything.

My definition would be $1,000,000 dollars in cash, securities, and other assets of some liquidity above any debt. In other words, I wouldn’t consider a guy with a $400,000 house (paid off) and stocks, bonds, and cash of $700,000 a true millionaire. A lady with a $60,000 condo (also paid off), $1,100,000 in mutual funds, and $20,000 in debt would qualify, though. She would have to sell her mutual funds, but that’s the way of the world. No reason keeping cash and low-interest super-liquid stuff around.

Does “millionaire” really mean much any longer? While I am no where close to that title it seems that it isn’t that rare any longer. What is considered rich now? Multi-millionaire? 20 million or 2 million?

I remember when the first Florida Lottery came out in the late '80s. My friend (about 18 at the time), his father and I were talking about the prize of 1 million dollars. My friend stated that if he won “he would never have to work another day in his life”. His father and I looked at him and told him he needed to re-think that statement. A million isn’t as much as it used to be.

But, onto your OP. Just making a million doesn’t make you a millionaire. After taxes you are coming up short. Spend any of it and the same applies. To be considered a millionaire your net worth has to be a million or more. Take your assets minus your liabilities. If what is left over is a million or more, congratulations. You are now a millionaire. Please send any leftovers to OBBN. Please!

Personally, I think the meaning is changing over time from someone who has a million in assets (which is getting less and less impressive over time) to someone who makes a million a year. For example, when I see politicians talking about “a tax on millionaires,” I think of a tax on those whose income is in that range.

I think it is getting to be a less and less useful term to differentiate the truly wealthy from the members of the upper-middle class who own a nice house and have invested wisely for retirement.

There’s an interesting bit on Wikipedia about the number of millionaires in the world. They define a millionaire to be anyone with a million dollars in net assets, not including their primary residence, and find that there were about 10 million such individuals worldwide in 2009. They also have statistics on people with more than $30 million.

Check out the US distribution of wealth. The median net worth for a family (not individual) in 2004 is a little over $93,000. The median net worth for a family in the 80th-89.9th income percentile is still only $313,400. Even when you get into the top 10%, the median net worth is still less than a million, suggesting that less than 5% of families (not individuals) in the country have a net worth of more than a million bucks. The figures are different if you measure by wealth percentile, but the same message comes through.

It’s not nearly as unusual as it was a generation ago, but it’s still fairly rare, less than 5% if you include the entire family’s net worth. So I think it’d be reasonable to call someone a millionaire according to the most straightforward definition: their net worth is at least $1 million. That makes a lot more sense to me than deciding that, because millionaires ought to be rarer than 5% of the population, we’ll change the definition to make that true.

Yeah - I like that one. Though I’d consider things like stocks in that equation - you have to sell them, but they are reasonably liquid. I suspect most “millionaires” (as in, someone pretty much anyone would consider “rich”) don’t keep a lot of cash around.

Just going on net worth, anyone my general age who’s had a good job and house and has been saving for retirement, especially in a high-priced area like mine (DC suburbs) has a fair chance of being a millionaire on paper. Depending on how you include / rule out assets (e.g. does the 401(k) count), that is.

I don’t think that’s a useful definition. Very very few people, even the ultra rich, are going to have $1 million sitting around in cash. It just doesn’t make sense to keep that much money in something that earns almost nothing. Even billionaires are likely to have to sell something to come up with a million in cash.

It might not be as much as it was then, but it was still more than enough to live on then.

Median US household income in 1985 was a hair under $28,000.00. Even assuming that your friend earned no interest on his million and realized no savings from being able to buy things outright rather than finance them, he’d still be able to live for 36 years on that money.

I wonder how that breaks down by age? I.e. for a family with primary income earner(s) between 21-30, I’d expect damn few to be millionaires – maybe .01%, the wildly successful entrepreneurs and descendents of extremely wealthy families. In the 31-40 group, that might increase to .1%, and include young professionals at the top of their field. And as people pay off their houses and save for retirement, the trend would continue so that millionaires might be 1% of 41-50 , 5% of 51-60, and north of 10% for 61+.

Those numbers are all WAGs on my part (hey, this is IMHO not GQ) but I suspect that being a millionaire by retirement is possible for much of the upper-middle class. It’s also possible for someone more solidly in the middle class if they save diligently.

I bet we perceive millionaires as relatively common because many know of millionaire relatives or acquaintances.

This is true IF you live a $28k a year lifestyle. However if you have a milliion and try to live like a “millionaire” you will be broke in no time. What I tried to explain to him is that after taxes you are taking home about $700k. He said he would by a nice house, about $150k at the time, that leaves him with $550k. He also said a nice car, a Mercedes I think, so figure about $40k and you down to $500k.

Now in his head having a million would allow him to live a upscale lifestyle. There isn’t much left to do that with $500k. Invested smartly and living well below your “means” and that million would last the next 50 years. But get it in your head that a million at 18 years old makes you rich and you can be broke in no time flat.

Also, if we use net worth as an indicator of being a “millionaire” I wonder how many that were are no longer due to the decrease in real estate values?

I blame The Game of Life for this perception. When I played this game as a kid the goal was to get into Millionaire Acres.
The real problem is that a million buck isn’t what it used to be - but when I was a kid the president made $100K.
<Ron Paul> I blame the Fed.</Ron Paul>

At this point, though, if you found an investment that earned 5%, you could live off 25K indefinitely without ever dipping into the base money. What taxes would you pay on that 5%? I’m not sure. You’d owe nothing except property taxes on the house and the car, so those expenses would be gone. You couldn’t live a fancy lifestyle on 25K a year, but you could certainly get by without having to work another day ever.

Let’s put it this way: If there is ever a remake of Gilligan’s Island, it’s going to be “…the Billionaire…, and his wife…”

That 25k is going to eaten away by inflation pretty quickly.

The general rule of thumb is that you can withdraw about 4% of your initial investment per year, increasing each year to account for inflation (so that, if you had 10% inflation, the next year you would withdraw $22,000). This is called the “Safe Withdrawal Rate,” and application of this 4% withdrawal rate means that you’re unlikely to run out of money.

Of course, the general rule was calculated for retirees. If you’re substantially younger than 65, you should probably decrease the withdrawal rate, to maybe 3% if you’re closer to 40.

Looking at the safe withdrawal rate shows how little a million dollars is: having a million dollars in investments will generate an inflation-adjusted $30,000 - $40,000 a year, which won’t give you a great lifestyle unless you have other income, such as from social security, pensions, etc.

Yeah, but you’d see significant savings from not having to finance stuff. Assuming you have no equity in a home at all, you’d pay $150,000 for a $150,000 house whereas people who mortgage pay $350,000+.

We’ve been through this before. You are giving up the money you could be making on that $150K in other investments, especially if they yield more than you pay for a mortgage after adjusting for the tax benefits. If you are lucky enough to have the value of the house appreciate that happens in both cases, except that in the mortgage case you get all the appreciation with less capital invested.

What investments yield more than 6% annually? :confused: