Nearly 1 in 5 American Households Are Millionaires. Here’s the Catch.

The definition of a "millionaire" can be quite nuanced, leading to discrepancies in reported figures. For instance, the US has approximately 23.6 million adult millionaires, representing about 9% of the population. However, only 8.7 million Americans are considered "high net worth individuals." This difference arises from what assets are included in the calculation. Traditional net worth encompasses everything you own minus everything you owe, including your primary residence, investment properties, retirement accounts, brokerage accounts, cash, business interests, vehicles, and other valuable property, minus mortgages, student loans, auto loans, credit card balances, and other debts. Someone with a million-dollar home and $200,000 in mortgage debt, along with $300,000 in a 401k, would have a net worth of $1.1 million, making them a millionaire. In contrast, the financial services industry typically uses a more stringent definition for high net worth individuals, focusing on $1 million in investable assets. This generally includes cash, publicly traded stocks, bonds, mutual funds, private equity holdings, offshore investments, and investment real estate. It explicitly excludes a primary residence, collectibles, consumer durables, and personal possessions. Therefore, owning a million-dollar home contributes to traditional millionaire status but not to the high net worth classification. Consider three hypothetical individuals: 1. **Person 1:** Owns a $1.2 million home with a $200,000 mortgage and $200,000 invested. Their net worth is $1.2 million, making them a millionaire. However, most of their wealth is tied up in their home, not readily accessible for daily expenses or retirement without downsizing, renting out part of the home, or borrowing against equity. 2. **Person 2:** Has $1.2 million invested, rents their home, and has no significant debt. Their net worth is approximately $1.2 million, primarily in investable assets, meeting the high net worth definition. Even if they owned a home, their investment portfolio alone would qualify them. 3. **Person 3:** Has $700,000 in traditional investments plus several income-producing rental properties or a business worth millions. Valuing assets like private business equity and investment real estate can be more complex than public market investments. A business owner or real estate investor might be economically wealthier with more reliable income streams than someone with $1 million in a brokerage account, even if their "investable assets" are harder to quantify. The financial services industry prefers the "investable assets" definition due to its ease of measurement and comparison. High net worth individuals are further categorized into three tiers: * **Millionaire Next Door:** $1 million to $5 million in investable assets. * **Mid-tier Millionaire:** $5 million to $30 million in investable assets. * **Ultra High Net Worth Individual:** At least $30 million in investable assets. Globally, approximately 90% of high net worth individuals are "millionaires next door," 9.3% are "mid-tier millionaires," and 1% are "ultra high net worth individuals." This means roughly nine out of ten high net worth individuals have less than $5 million, and only one in 100 has $30 million or more. At the end of 2025, the US was estimated to have 8.7 million high net worth individuals, with an addition of 736,000 during that year. Extrapolating from global data, the US likely has around 7.8 million "millionaires next door," 812,000 "mid-tier millionaires," and 87,000 "ultra high net worth individuals." Comparing this to the 133 million American households, this translates to about 5.9% of households being "millionaires next door," 0.61% "mid-tier millionaires," and 0.07% "ultra high net worth individuals." This means roughly one high net worth individual for every 15 American households, one mid-tier millionaire for every 163 households, and one ultra-high net worth individual for every 1,525 households. It's important to note these figures combine different data sets (World Wealth Report and Census Bureau) and count individuals, so a household with two qualifying spouses would count as two high net worth individuals, potentially overstating the number of millionaire households. The 23.6 million "millionaires" versus 8.7 million "high net worth individuals" discrepancy is largely due to the inclusion of primary residence equity in the broader millionaire definition. Rising home values can make someone a millionaire without additional investment; for example, a $400,000 home appreciating to $1 million over 20 years. While home equity is valuable (can be sold, borrowed against, or inherited), it is less liquid than investable assets in a 401k or brokerage account. Millionaires whose wealth is primarily in home equity often have different levels of financial security than those with substantial investable assets. Social media often portrays wealth as being accumulated by young individuals, but true wealth typically takes time. The Federal Reserve's Survey of Consumer Finances, a comprehensive picture of US household wealth, shows a clear trend with age: * **Under 35:** Median household net worth $39,000, average $184,000. * **35-44:** Median household net worth $136,000, average $550,000. * **55-64:** Median household net worth $365,000, average $1.6 million. * **75+:** Median household net worth $336,000, average $1.6 million. The significant gap between median and average figures highlights the impact of a small number of very wealthy households skewing the average upwards. The typical millionaire is estimated to be 62 years old, with only 1.4% of households headed by someone under 30 having a seven-figure net worth. A Ramsey Solutions survey of over 10,000 American millionaires found that participants spent an average of 28 years working, saving, and investing to reach the million-dollar threshold, with an average age of 49. Eight out of ten consistently invested through employer-sponsored retirement plans. Only 31% averaged $100,000 in annual income over their careers, and one-third never earned $100,000 in a single year, suggesting that high income isn't always a prerequisite for millionaire status. However, this was a voluntary study and not representative of all US millionaires, with most participants closer to the $1 million mark. The survey identified common careers like engineer, accountant, teacher, management, and attorney, but this doesn't indicate the highest likelihood of producing millionaires; larger occupational bases can produce more millionaires even if the percentage of millionaires within that profession is small. Crucially, a job title often obscures whether an individual is an employee or a business owner. A physician could be a salaried hospital employee or own a private practice, potentially owning the building and renting out offices, or even a regional healthcare group. An attorney might work for a firm or hold an equity position. Ownership can create assets that grow significantly beyond wages, becoming increasingly important at higher wealth tiers. Research using administrative tax records found that over 69% of people in the top 1% of income received pass-through business income, rising to over 84% for the top 0.1%. These are often "America's everywhere millionaires"—ordinary-looking regional and local business owners in fields like medical and dental offices, professional and technical services (e.g., trade contractors), legal services, management companies, financial investment activities, automobile dealerships, and oil and gas extraction. Their businesses are privately held, and their wealth isn't tied to public stock prices. The connection between business income and wealth is powerful: owners receive income while holding equity in the asset generating it. Marriage is strongly associated with wealth. An analysis of Federal Reserve data found that approximately 22% of married or partnered households headed by someone 65 or older held at least $1 million in financial assets, compared to 9% for single older households. Married households often benefit from two incomes, two workplace retirement plans, shared expenses, and greater opportunities to save and invest. While marriage itself doesn't guarantee wealth, shared financial goals and responsible behaviors within the relationship are key. Home ownership is also strongly linked to wealth. Federal Reserve data shows a median net worth of approximately $400,000 for homeowners versus $10,400 for renters—a 38-to-1 difference. While homeowners tend to be older and further along financially, home ownership contributes to wealth through mortgage principal reduction, property appreciation, long-term housing stability, and forced savings. However, while a home can make someone a millionaire, it doesn't directly contribute to investable assets, representing a liquidity trade-off. An independent analysis found that approximately 40% of millionaire household wealth was held in stocks, bonds, investment funds, and retirement accounts, compared to 24% for non-millionaire households. Millionaires not only have more money but also tend to hold a larger portion in appreciating assets. As wealth increases, there's a shift from primary residence wealth towards retirement accounts, publicly traded investments, investment real estate, private businesses, and other income-producing assets. Accumulating wealth typically requires investing beyond one's primary residence. To illustrate how much one needs to invest to reach these numbers, assuming a 7% annual compounding rate and inflation-adjusted contributions, starting with nothing: * **To reach $1 million:** * 20 years: $24,000/year * 30 years: $11,000/year * 40 years: $5,000/year * **To reach $5 million:** * 20 years: $122,000/year * 30 years: $53,000/year * 40 years: $25,000/year * **To reach $30 million:** * 20 years: $732,000/year * 30 years: $318,000/year * 40 years: $150,000/year Time is a critical factor; starting early significantly reduces the annual investment required. A W-2 employee can absolutely reach $1 million by starting early, contributing consistently (especially to capture employer matches), increasing contributions with income, keeping money invested, avoiding unnecessary withdrawals, and utilizing IRAs, HSAs, or brokerage accounts in addition to a 401k. A 25-year-old investing $5,000 annually (over $400/month) could be a millionaire in 4