Boston condos for sale: Net worth are you wealthy? Here’s how much you need?
Most Americans say that to be considered “wealthy” in the U.S. in 2021, you need to have a net worth of nearly $2 million — $1.9 million to be exact.
That’s less than the net worth of $2.6 million Americans cited as the threshold to be considered wealthy in 2020, according to Schwab’s 2021 Modern Wealth Survey.
Here’s the net worth each generation says you need to be considered wealthy in 2021:
- Millennials (ages 24 to 39): $1.4 million
- Gen X (ages 44 to 55): $1.9 million
- Baby boomers (ages 56 to 74): $2.5 million
The drop in the net worth expectations could be due to the Covid-19 pandemic, according to Schwab. Over half of Schwab’s 1,000 survey respondents, 53%, reported that they were financially impacted in some way by the pandemic. About 1 in 5 say they were laid off or furloughed, while about 26% report their salary was cut or their hours were reduced.
A drop in income can impact net worth, which is essentially a calculation of all of a person’s assets — including cash in checking and savings accounts, financial investments and the value of any real estate or vehicles owned — minus all their debt, including credit card balances, student loans and mortgages.
Still, even before the pandemic affected employment, most Americans had nowhere near a net worth of $1.9 million. Prior to the pandemic, U.S. households had an average net worth of $748,800, according to The Federal Reserve’s 2019 Survey of Consumer Finances. The median, or midpoint, net worth of all U.S. households was much lower, just $121,700 in 2019
Fed Real Estate Survey
Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. Their latest survey data covers responses from 2013-2016.
The study revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).
These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.
There are many who see that statistic and point toward how broad the range of respondents are for the Federal Reserve survey. Their study includes all economic and social groups and also includes all age groups. The argument is that older respondents have a higher likelihood of being homeowners, while the homeownership rate among younger survey takers is much lower.
Recently, the Joint Center for Housing Studies at Harvard University focused on homeowners and renters over the age of 65. Their study revealed that the difference in net worth between homeowners and renters at this age group was actually 47.5 times greater!
Homeowners over the age of 65 are much more financially prepared for retirement and often own their homes outright if they were fortunate enough to purchase their homes before the age of 36. Their 30 years of mortgage payments have paid off as they gained equity through their monthly payments and as home values appreciated.
It is no surprise that lifelong-renters have had a hard time accruing net worth as the latest Censusreport shows that the Median Asking Rent has been climbing consistently over the last 30 years.
As a homeowner you put your monthly mortgage payment to work for you, building your net worth with every payment.
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