This isn't a traditional Help a Reader post in that it really isn't a financial situation where someone is seeking input to apply to their life. However, it is an interesting question, so I asked the reader who emailed this to me if it was ok to share it with the group. He was fine with it, so here goes:
As far as the numerous studies, that have given us the number of High Net Worth households, which do you think is most accurate?
Merrill Lynch's study shows that for 2010 3.1 million US households as having at least million dollar in assets not including primary residence.
Spectrem Wealth shows for 2010 8.4 million US households as having at least million dollar in assets not including primary residence.
Boston Consulting Group shows for 2010 5.2 million US households as having at least milion not including primary residence.
Deloitte's study shows for 2010 10.4 million US households as having at least million including everything.
TNS shows for 2007 (the latest I could find for them) 9.9 million US households to having at least a million not including primary residence.
I'm not sure how all collect the data but I know TNS is done through household surveys. Which makes me think that it is not too accurate.
Merrill's is based on actual wealth of overall US and then them trying to break it down scientifically. This seems to be a more accurate way of doing it.
Not sure how Spectem does it, It does say on the website the do survey thousands of wealthy households but not sure how they came up with 8.4 million.
Based on what I know, I personally think Merrill's number is most accurate and that if primary residence and personal luxury items were included Deloitte's number might be good also -- maybe a touch too high even with primary real estate included. I'm going by data showing that 50% of people own their house outright mainly the retirees.
In Northeast and West Cost median house is approx. 400 to 500 thousand. This will push up the numbers fast. I mean if Merrill is right then about 2.7% of US households have over a million and looking at where I live now which is Indy, I would say probably more like half that amount for net worth when including prim residence, I would say 4 or 5% and where I grew (Princenton NJ) 2.7% sounds right and maybe even higher than 9% including real estate.
So In my mind, overall for the US I would say 2.7% are millionaires without primary residence and 8.8% are millionaire households with P.R for 2010.
Now 2011 and 2012 will be a different story!
What do you think? Am I way off?
Again, it's not a traditional question and there really isn't any application we can get from finding the "real" answer, but I thought it would be an interesting conversation. What's your take on the issue?
First, I'm not sure why you're guessing lower than Merrill Lynch (2.7% v. 3.1%).
Second, phone surveys can be surprisingly accurate, as long as the researchers know what they're doing. However, in this case it would almost certainly be relying on people self-reporting their net worth, which means relying on lots of guesses and estimates. Most people probably don't know exactly what their net worth is.
Posted by: Rich Schmidt | July 08, 2011 at 09:51 AM
I agree with Rich that the error hear might be self reporting. However if people equally over and under report their net worth it wouldn't be a big deal. I'd be curious if this is actually true though. I don't know if people would be more likely to over or under estimate their net worth.
Posted by: No Debt MBA | July 08, 2011 at 12:23 PM
The 2.7% of housholds being millionaires pretty much jibes with what Jean Chatzky said in her book "The Difference".
Posted by: mysticaltyger | July 08, 2011 at 02:04 PM
There are other data sources.
Here is one table from Census, I'm sure there are others.
http://www.census.gov/compendia/statab/2011/tables/11s0716.pdf
This particular table breaks out the classes as zero to 1.5 million, 1.5 - 2 million, etc. so doesn't break at exactly $1 million.
Posted by: Steve | July 12, 2011 at 12:57 PM
Rich I'm not guessing lower than Merrill. Do the math 3.1 million/ 118 million US households = 2.7%
Regarding your second point, that's why I like Merrill's numbers the best.
To get an actual networth can be tricky, most people overestimate real estate value, and don't take taxes into account for retirement accounts.
Posted by: james | July 12, 2011 at 08:00 PM
I think it would be really interesting to compare these numbers to data from earlier on in the twentieth century (in both hard data and numbers adjusted for inflation).
Posted by: Jay | July 15, 2011 at 03:21 PM
what is also interesting, is that average networth of an US houshold has gone down from 2007 to 2009 $595,000 to 481,000, while I guess a more accurate reading would be the median which dropped from 125,000 to 96000, based on these charts and tables its hard to figure out where the other percentiles are at. I'm trying now to see if I can figure out top 10% and 25% based on this data I pulled it from http://www.federalreserve.gov/pubs/feds/2011/201117/201117pap.pdf
Posted by: james | July 17, 2011 at 07:35 PM