America has 5 wealth classes - do you know which one you're in? #marketwatch

Key Concepts

• Wealth Classes in America: The video outlines a five-tier system of wealth classes in the United States based on net worth.
• Net Worth: The total value of an individual's assets minus their liabilities.
• Lower 25% (Bottom Class): The starting point for many individuals in their wealth-building journey, often characterized by saving and debt repayment.
• Middle Class: Encompasses a significant portion of the population, with the lower middle class actively saving and managing debt, and the upper middle class reaching a median net worth of approximately $410,000 by retirement age.
• Upper Classes (Top 25%): This segment includes millionaires, where individuals may still maintain middle-class lifestyles due to the need to preserve their wealth for future decades.
• Feeling Rich: The perception of wealth, with some experts suggesting that one only truly feels rich when in the wealthiest 10%, able to make decisions unconstrained by cost, which can require a net worth of $4 to $5 million in some areas.

Wealth Classes in America: A Detailed Breakdown

Vanessa Wong, a personal finance reporter at MarketWatch, discusses her reporting on wealth and class in America, highlighting a five-tier system of wealth classes.

1. The Bottom 25% (Lower Class)

• Starting Point: This segment represents the initial stage of wealth accumulation for most individuals.
• Journey: It is described as the "beginning of your journey in building wealth."
• Normalization: It is considered "totally normal and fine" to be in this bracket, especially for young people who may feel "really behind."
• Progression: The video suggests that "most people make it into some rung of the middle class over their lives."

2. The Middle Class

• Lower Middle Class: Individuals in this group are typically engaged in "saving and paying off debt."
• Upper Middle Class: By the typical retirement age, many people reach this bracket.
  • Median Net Worth: The median net worth for the upper middle class is approximately $410,000.

3. The Upper Classes (Top 25%)

• Emergence of Millionaires: This is where millionaires begin to appear.
• Lifestyle vs. Net Worth: A notable observation is that "many continue to live middle class lifestyles despite their high net worths."
  • Reasoning: This is often because their accumulated wealth serves as a "nest egg that they're supposed to draw on from the next few decades."
• Subjectivity of Upper Class Experience: The experience of being in the upper class can vary significantly based on:
  • Age: Different age groups will have different financial needs and timelines.
  • Net Worth Composition: How net worth is made up (e.g., liquid assets vs. illiquid assets).
  • Financial Accessibility: Whether finances are easily accessible or "tied up in something like a house."

4. The Wealthiest 10% (Feeling Rich)

• Perception of Wealth: Some experts suggest that individuals do not "start to actually feel rich until you're in the wealthiest 10%."
• Decision-Making Power: This level of wealth allows for "decisions that aren't primarily limited by cost."
• Required Net Worth: In some geographical areas, achieving this feeling of being rich requires a net worth of $4 to $5 million.

Data and Research Findings

• The video presents a breakdown of wealth classes based on net worth, though specific figures for each of the five classes are not detailed beyond the median net worth for the upper middle class and the estimated net worth for feeling rich.

Key Arguments and Perspectives

• Wealth Accumulation is a Journey: The video emphasizes that starting at the lower end of the wealth spectrum is a common and normal part of the financial journey.
• Middle Class is Attainable: The progression into some level of the middle class is presented as a likely outcome for most individuals.
• Wealth vs. Lifestyle: A key argument is that high net worth does not always translate to a lavish lifestyle, especially for those in the upper classes who are planning for long-term financial security.
• Subjectivity of "Rich": The definition of "feeling rich" is presented as subjective and tied to the ability to make cost-unconstrained decisions, which requires a substantial net worth.

Conclusion

The video provides a framework for understanding wealth distribution in America, categorizing individuals into five wealth classes based on net worth. It highlights that while many start at the bottom, progression into the middle class is common, with the upper middle class achieving a median net worth of around $410,000 by retirement. The upper classes, including millionaires, may maintain modest lifestyles to preserve their wealth. The perception of truly "feeling rich" is linked to the wealthiest 10%, where financial decisions are not dictated by cost, a threshold that can require $4 to $5 million in net worth in certain regions. The reporting underscores that an individual's experience within a wealth class is influenced by age, the composition of their assets, and their financial accessibility.