The Rise of Mini-Millionaires

About 16 million American families – just over 12% – have wealth exceeding $1 million, up from 9.8 million families in 2019. Nearly eight million families are multimillionaires, which means their wealth exceeds $2 million. This is up from 4.7 million.

This isn’t just the inflation we’ve experienced the last few years.

After inflation, real average wealth was up 23%, according to the Fed’s Survey of Consumer Finances. While the level of median wealth was much lower than the average, it actually rose more than the average between 2019 and 2022 – by 37%, adjusted for inflation – to $193,000. That means wealth inequality actually narrowed.

Who are these mini-millionaires?

They generally earn between $150,000 and $250,000 a year. They wouldn’t typically be considered rich, but upper middle class. Geography is a factor because cost of living varies. For example, the same house is worth more in some parts of the country.

This group has seen bigger wealth gains over the past three years than the top 10% of families. Indeed, the biggest wealth gains between 2019 and 2022 were among the approximately 13 million families in the 80th to 90th percentile of the income distribution. Their median wealth jumped 69% from 2019, adjusted for inflation, to $747,000 in 2022.

To be sure, for many American families the surge in prices since the onset of the pandemic means that wealth doesn’t feel as good as it sounds. Nonetheless, as these figures show, the increase in net worth for these families has outpaced inflation. 

Factors Fueling the Growth of Mini-Millionaires

Homeownership

The real estate market, particularly in certain high-growth areas, has contributed significantly to increasing personal net worth. Eighty-seven percent of this group owns their home. 

Investment in Stocks

Over 90% of these families report owning stocks, either directly or through retirement accounts, and 87% own their home. They benefited extraordinarily from low interest rates, cutting debt payments as a share of their incomes from 19% in 2007 to 12.9% in 2022.

Featured Article In an increasingly complex financial landscape, the importance of sound financial planning cannot be overstated. Learn about The 9 Rules for Selecting a Financial Advisor.

Diversified Income Sources

Another key factor is the diversification of income sources. Many of this group have multiple income streams, such as rental properties, dividends, and part-time businesses, adding to their overall wealth.

Tech Sector Opportunities and Entrepreneurship

Many mini-millionaires have emerged from the tech sector, leveraging advancements in areas like software, e-commerce, and mobile technology. The startup culture has also fueled this growth, with many entrepreneurs selling their businesses or taking them public.

Inheritance and Wealth Transfer

There's also a generational aspect at play behind the scenes. Baby boomers, one of the wealthiest generations in history, are passing down assets to their children, leading to a significant transfer of wealth.

Strategies for Building and Safeguarding Wealth

1. Diversified Investment Portfolio

To mitigate risk and maximize growth potential, mini-millionaires should focus on diversifying their investment portfolios. This includes a mix of stocks, bonds, real estate, and potentially alternative investments like cryptocurrencies or commodities.

2. Estate Planning and Asset Protection

Effective estate planning is crucial. This includes setting up trusts, wills, and other legal structures to protect assets and ensure a smooth wealth transfer. Asset protection strategies like insurance and legal structures can safeguard against potential lawsuits or losses.

3. Financial Education and Professional Advice

Continuous financial education is vital. Staying informed about market trends, tax laws, and investment strategies is key. Additionally, seeking advice from financial advisors, tax professionals, and legal experts can provide valuable insights.

4. Sustainable Spending and Lifestyle Choices

Maintaining a balanced lifestyle and avoiding excessive spending is important for long-term wealth preservation. This includes budgeting and planning for large expenditures.

5. Philanthropy and Social Responsibility

Many mini-millionaires are also focusing on philanthropy, recognizing the importance of giving back to the community. This not only contributes to social good but can also offer tax benefits and enhance personal fulfillment.

Importance of estate organization

The rise of mini-millionaires reflects broader economic and technological trends. As this group continues to grow, it's essential to not only build but also protect their wealth. Through smart investments, legal safeguards, continuous learning, and responsible lifestyle choices, mini-millionaires can ensure the longevity and impact of their wealth.

‍