What You Need to Know
- The average net worth Americans consider wealthy dropped nearly 27% from 2020.
- Advisors said financial freedom, rather than a specific dollar amount, makes a person wealthy.
- Americans are reprioritizing mental health and relationships.
It takes $1.9 million in net worth to be “wealthy,” according to Charles Schwab’s annual Modern Wealth Survey. That’s a drop of nearly 27% from 2020.
But there’s far more to wealth than money, survey respondents said, and advisors agree.
“Many of the most financially rich people are driven by forces that limit their ability to ever feel wealthy,” Joe Duran, head of Goldman Sachs Personal Financial Management, tweeted. “Sad but true. Wealth is a state of mind that for many implies safety and freedom. Very few ever feel it, rich or poor, because money can’t do that for you.”
We asked advisors and others on Twitter what wealth meant to them. One user said “5x of what you have,” while another cited the ability to pass money to the next generation.
But most responses centered around financial freedom, or as Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management, summed up:
1. Control of your time
2. Ability to work on what you choose
3. Freedom from money worries/stress
The dollar amount varies per person/geography, but whatever satisfies those requirements = wealth
— Barry Ritholtz (@ritholtz) May 12, 2021
The respondents to the Schwab survey reconsidered the average net worth it takes to be “wealthy” in 2021, to achieve “financial happiness” and to be “financially comfortable.” Schwab compared the findings in its new survey with those in its 2020 survey, which was fielded before the pandemic broke out:
- To be wealthy: 2021 – $1.9 million; 2020 – $2.6 million
- For financial happiness: 2021 – $1.1 million; 2020 – $1.75 million
- To be financially comfortable: 2021 – $624,000; 2020 – $934,000
The pandemic has refocused many Americans’ priorities and changed their perspective on what it takes to be wealthy, according to the survey.
Fifty-three percent of respondents said they were financially affected by the pandemic over the past year. Some saw their finances strained by the economic environment, others faced a salary cut or reduced hours or were laid off or furloughed.
Now, 68% of respondents say they have reprioritized what matters most to them: Mental health is more important than it was before, followed closely by relationships, financial health and physical health.
Post-Pandemic Optimism Emerges
These findings come at a time when a majority of Americans say they are optimistic about the state of the country overall and their personal financial prospects.