| The 5% club: | | | | somewhere in the middle. The Spectrum Group and |
| The Capgemini and Merrill Lynch 2006 World Wealth | | | | TNS Financial Services definition includes many items |
| Report found there were 8.7 million millionaires in the | | | | that don't add to your wealth such as your vacation |
| world-2.9 million in America, 2.8 million in Europe, 2.4 | | | | home and consumables. Further, it doesn't examine |
| million in Asia, 300,000 in both the Middle East and Latin | | | | how many millionaires are a slave to exuberant |
| America, and 100,000 in Africa. Given there are 114 | | | | lifestyles and are not "wealthy" at all. |
| million households in America then according to | | | | Similarly, defining wealth just in terms of investable |
| Capgemini and Merrill Lynch approximately 2.5%, or | | | | assets overlooks many assets that add to your |
| one in every 40 households, is a millionaire household. | | | | wealth such as your 401(k), stock options, real estate |
| However, according to the Spectrum Group and TNS | | | | investments, annuities, private stock holdings at market |
| Financial Services the number of millionaire households | | | | value, etc. |
| in America in 2005 was actually 8.3 million and 8.9 | | | | If we take the midpoint we arrive at 5.7 million, or 5% |
| million respectively. This means that approximately 7 | | | | of American households, with a true effective wealth |
| percent to 8 percent, or one in every 12 to 14 | | | | of $1 million or more. |
| households, is a millionaire household. So why the | | | | Although $1 million in net assets is certainly a milestone |
| difference? | | | | and something to aspire to, it won't provide for a truly |
| The difference is to do with the definition of wealth. | | | | wealthy retirement. However, those with this sort of |
| Capgemini and Merrill Lynch define wealth in terms of | | | | net worth enjoy a level of financial independence and |
| a household's investable assets, while the Spectrum | | | | could probably survive just off their wealth if they |
| Group and TNS Financial Services define wealth in | | | | were very careful, especially if the vast majority was |
| terms of net worth. | | | | invested in assets rather than non-income producing |
| Investable assets is a very restricted definition and | | | | items or services such as their principle home, cars, |
| includes only a household's assets that the owner can | | | | vacation home, etc. |
| readily move about and invest (such as stocks and | | | | The 1% club: |
| bonds). It doesn't include items like your home equity, | | | | The 5% club includes every household that is worth $1 |
| vacation home, 401(k), stock options, real estate | | | | million or more. Thus it includes those that are worth |
| investments, annuities, private stock holdings at market | | | | "just" $1 million and have financial independence and |
| value, consumables, collectibles, etc. | | | | those that are worth significantly more and are truly |
| Net worth is simply calculated by taking all your assets | | | | wealthy. |
| and deducting your liabilities, often excluding your | | | | Those that are worth $5 million or more are generally |
| principle residence, which is how the Spectrum Group | | | | considered to be wealthy. They are financially free and |
| and TNS Financial Services calculate your wealth. | | | | can relax and enjoy a wealthy lifestyle, living of the |
| So which definition of wealth is best? Probably | | | | income from their assets. |