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How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thom

by gbacon 9y ago

How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?

kiliantics 9y ago
A millionaire is hardly wealthy these days. Upper middle class rich, sure. But not "an estate to leave to my heirs" rich. Someone who got a good middle class start, went into the right career, and had everything work out pretty well (no major financial misfortune or an injury or sick family member) while saving responsibly, can become a millionaire in a few decades today. They can probably afford a nice house, which their kids can carve up to have their own nice middle class start. This group of people is still insanely privileged but it is nothing on the obnoxious levels of real inherited wealth in the upper crust.
- ataturk 9y ago
  Speaking as one, I can tell you that having a couple million takes the edge off of everything in life. You don't sweat buying a house or pretty much any new car anytime you want it. The monthly bills are in the noise as far as concerns in life. I still go to work every day but I won't be working until age 65, that's for certain; not full time, anyways. My kids will be able to be entrepreneurs if they wish, they have a comfortable fallback that I never had. Less stress in life is a good thing. What's different today is that inflation and high taxes have wrecked the middle class. The truly rich are the $100M and billionaire types whose wealth has run away from the rest of the people. Almost none of the truly wealthy are that way because they were smart (merit) only a few are. The rest . got rich either because they were lucky or because of some angle they could exploit such as favorable connections or regulatory capture. Above them, Old Money rules the world by at least one order of magnitude.
personjerry 9y ago
Isn’t this article about Europe though?
- empthought 9y ago
  It's called "Thatcherism" for a reason.
closeparen 9y ago
A median-income household owning a median-priced house and making the standard 15% 401k contribution will clear "millionaire" by retirement age, easily.
- aaronblohowiak 9y ago
  And yet “Fifty-seven percent of Americans don't have enough cash to cover a $500 unexpected expense”. We suck at saving as a country.
  - closeparen 9y ago
    Most of the value contributing to millionaire net worth is going to be in 401ks and home equity, neither of which you could reasonably access to pay a $500 expense. It would be pretty weird to have <$500 in checking at the same time as 5-6 figures in retirement + home equity, but possible. It helps that 401k is a payroll deduction and there's really no bargaining with yourself on whether to pay the mortgage this month (whereas it's easy to splurge instead of saving extra cash).
    - fgjjgutjvnu 9y ago
      But if you have that net worth, wouldn't it be easy to get a loan over 500$ from a bank?
    - smsm42 9y ago
      You can access 401k under "financial hardship", after paying taxes and 10% penalty. Of course, it's rarely worth it for $500 - it'd be better to find a credit card with 0% APR or other credit option, if you have access to those. I imagine most people with 401k's do have access to credit. Am I wrong? You can also loan against 401k (though there are limits, but if you have it for a while loaning $500 would not be a problem, though again fees could make it a bad deal). Advantage is that while you lose the growth for the time of the loan, you are paying interest to yourself, not somebody else.
      - 9y ago
tikhonj 9y ago
I haven't looked at the data, but my guess would be that it's the difference between weighing based on individuals (number of individual millionaires) vs total wealth. The latter is going to be dominated by the richest part of the distribution.
tomlock 9y ago
This sounds like a big number, but consider this - if less than 10% of Americans are millionaires then this means that millionaire parents are more than twice as likely to have millionaire children as non-millionaires. This shouldn't gel well with someone who values meritocracy/social mobility.
- njarboe 9y ago
  Parents have influence on how well their children do. Nature and nurture. Is this not the whole point of parenting? If millionaire parents are only twice as likely to have millionaire children I would be surprised.
- xorfish 9y ago
  Handling money responsibly is the easiest way to become a millionaire, not inheritance. Upbringing is important and I think children of millionaires are more likely to develop healthy spending habits.
contravariant 9y ago
Clearly those four in five millionaires aren't responsible for much of the total wealth.

by gbacon 9y ago

How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?

kiliantics 9y ago

A millionaire is hardly wealthy these days. Upper middle class rich, sure. But not "an estate to leave to my heirs" rich. Someone who got a good middle class start, went into the right career, and had everything work out pretty well (no major financial misfortune or an injury or sick family member) while saving responsibly, can become a millionaire in a few decades today. They can probably afford a nice house, which their kids can carve up to have their own nice middle class start. This group of people is still insanely privileged but it is nothing on the obnoxious levels of real inherited wealth in the upper crust.

ataturk 9y ago
Speaking as one, I can tell you that having a couple million takes the edge off of everything in life. You don't sweat buying a house or pretty much any new car anytime you want it. The monthly bills are in the noise as far as concerns in life. I still go to work every day but I won't be working until age 65, that's for certain; not full time, anyways. My kids will be able to be entrepreneurs if they wish, they have a comfortable fallback that I never had. Less stress in life is a good thing. What's different today is that inflation and high taxes have wrecked the middle class. The truly rich are the $100M and billionaire types whose wealth has run away from the rest of the people. Almost none of the truly wealthy are that way because they were smart (merit) only a few are. The rest . got rich either because they were lucky or because of some angle they could exploit such as favorable connections or regulatory capture. Above them, Old Money rules the world by at least one order of magnitude.

personjerry 9y ago

Isn’t this article about Europe though?

empthought 9y ago
It's called "Thatcherism" for a reason.

closeparen 9y ago

A median-income household owning a median-priced house and making the standard 15% 401k contribution will clear "millionaire" by retirement age, easily.

aaronblohowiak 9y ago
And yet “Fifty-seven percent of Americans don't have enough cash to cover a $500 unexpected expense”. We suck at saving as a country.
- closeparen 9y ago
  Most of the value contributing to millionaire net worth is going to be in 401ks and home equity, neither of which you could reasonably access to pay a $500 expense. It would be pretty weird to have <$500 in checking at the same time as 5-6 figures in retirement + home equity, but possible. It helps that 401k is a payroll deduction and there's really no bargaining with yourself on whether to pay the mortgage this month (whereas it's easy to splurge instead of saving extra cash).
  - fgjjgutjvnu 9y ago
    But if you have that net worth, wouldn't it be easy to get a loan over 500$ from a bank?
  - smsm42 9y ago
    You can access 401k under "financial hardship", after paying taxes and 10% penalty. Of course, it's rarely worth it for $500 - it'd be better to find a credit card with 0% APR or other credit option, if you have access to those. I imagine most people with 401k's do have access to credit. Am I wrong? You can also loan against 401k (though there are limits, but if you have it for a while loaning $500 would not be a problem, though again fees could make it a bad deal). Advantage is that while you lose the growth for the time of the loan, you are paying interest to yourself, not somebody else.
    - 9y ago

tikhonj 9y ago

I haven't looked at the data, but my guess would be that it's the difference between weighing based on individuals (number of individual millionaires) vs total wealth. The latter is going to be dominated by the richest part of the distribution.

tomlock 9y ago

This sounds like a big number, but consider this - if less than 10% of Americans are millionaires then this means that millionaire parents are more than twice as likely to have millionaire children as non-millionaires. This shouldn't gel well with someone who values meritocracy/social mobility.

njarboe 9y ago
Parents have influence on how well their children do. Nature and nurture. Is this not the whole point of parenting? If millionaire parents are only twice as likely to have millionaire children I would be surprised.
xorfish 9y ago
Handling money responsibly is the easiest way to become a millionaire, not inheritance. Upbringing is important and I think children of millionaires are more likely to develop healthy spending habits.

contravariant 9y ago

Clearly those four in five millionaires aren't responsible for much of the total wealth.