The cost of living is much higher than just a few years ago — and so is the amount of money that Americans say is required to be considered wealthy.
Americans believe it now takes an average net worth of $2.5 million to be counted as rich, a 14% increase from last year’s $2.2 million, according to a new survey from Charles Schwab.
That may seem like a stretch for many, given that the median net worth of U.S. households stood at $193,000 in 2022, according to the Federal Reserve’s Survey of Consumer Finances. But the survey’s results reflect the typical American’s feelings about their wealth goals, and hint as well at the impact inflation has had on their views about money, said Rob Williams, managing director of financial planning at Charles Schwab.
“Wealth can be very personal and aspirational, and also, they haven’t done extensive calculations; it’s more how they feel — and that’s meaningful,” Williams told CBS MoneyWatch.
He added, “If you look over the last couple of years, it’s a bigger jump than it has been in prior years. The general trend of inflation is in part that when we ask what it means to be wealthy, the numbers go up.”
Americans say it takes much less wealth to live a financially comfortable life: an average of $778,000 in assets, the survey found.
While inflation has cooled, dipping below 3% in July for the first time since early 2021, prices are still sharply higher than they were prior to the pandemic. Overall, the cost of living has jumped about 21% since January 2020, according to government data.
At the same time, wages are now outpacing inflation, and the stock market has buoyed the fortunes of many investors, including people with 401(k)s and other retirement plans.
Who wants to be a millionaire?
About 1 in 5 of those surveyed said they believe they are on track to become wealthy, Charles Schwab found in its survey of 1,000 Americans between the ages of 21 to 75.
Younger Americans are the most optimistic about reaching this goal, with almost one-third of millenials and Gen Z expressing optimism about becoming rich during their lives.
That could reflect that these generations have more time to sock away money before they retire, which will provide more years of market returns to bolster their portfolios and wealth. These two generations were also more likely to say they’re currently wealthy, with about 12% of millennials saying they’re already rich, versus 8% for baby boomers.
But younger generations also had lower thresholds for what it takes to be rich, with Gen X pegging it at $1.2 million and millennials saying it requires $2.2 million. Boomers, meanwhile, had the highest yardstick for being considered wealthy, at $2.8 million.
“Wealth tends to rise on average as you get older and closer to retirement, so if you have more wealth now, you are likely to answer with a higher number versus someone just getting started,” Williams noted.