By Nathalie Voit
Nearly 3 in 4 U.S. adults do not believe they will ever achieve “high net worth” status, according to a survey from digital wealth management firm Personal Capital.
When Morning Consult surveyed 2,209 U.S. adults in March on behalf of Personal Capital, 74% of respondents found it unlikely they will ever become a “high net worth individual” (HNWI).
Only 23% of respondents find it plausible they will become a HNWI. The remaining 3% of survey participants said they already are.
Additionally, definitions of what constitutes a HNWI are far-ranging and generally incorrect. The median average answer provided by survey participants was $400,000, far below the broadly accepted definition. Personal Capital said the general consensus in the financial services industry of a HNWI is someone with at least $1 million in liquid assets.
Meanwhile, just 35% of U.S. adults are confident they know what “net worth” even means, although 91% say they have heard of it.
According to Personal Capital, the average net worth of a U.S. adult is $564,888. When survey participants were asked what they thought the average net worth of a U.S. adult was, most (74%) incorrectly stated less than $100,000. One in three respondents thought the average net worth lay between $10,000 and $29,999. The figure is much closer to the median net worth of the average American, which is $46,573.
The large discrepancy between the median and average net worth of a U.S. adult is due to the influence of affluent households skewing the data.
The survey also showed participants overestimated the extent to which having a high earning potential or a high salary is necessary to become a HNWI and underestimated the importance of maxing out retirement accounts.
“Making money is only part of how a person builds wealth,” said certified financial planner Michelle Brownstein, who works with high-net-worth clients with at least $1 million (and up to $30+ million) in their portfolios. “It’s also important to make sure your money is working as hard for you as you work to earn it.”
Personal Capital said retirement accounts like 401k and IRAs comprise nearly 55% of the wealth of high-net-worth individuals.
“Tax-advantaged retirement accounts are powerful investing tools,” Brownstein said. “If a 401k employer match is available to you, try to at least contribute enough to take advantage of it. As your income increases, be sure to increase contributions to your retirement and brokerage accounts – don’t let cash sit idle.”
“Having a good bird’s-eye view of your financial situation is such an important exercise,” she added.
