
Dad, Are We Rich? - redm
https://wealthydoc.org/are-we-rich/
======
jedberg
My measure of rich is "Can I live my current lifestyle without regular income
from a job?". If the answer is yes, then you are rich. The trick here is to
make sure to keep your lifestyle costs in line with your salary when you first
start out, so that as your income grows you can save.

So yeah, if you want a big house and nice cars and nice vacations, you
wouldn't consider yourself rich compared to people who don't have those things
and don't want them.

But at some point, no matter how you live your life, you get to a point where
my initial statement is true, usually around a few tens of millions, which is
why we can draw a definitive line around there and call everyone above it
rich.

~~~
Zaak
I agree with you. For example, if I had 100 times my current yearly income in
savings/investments/etc, I could live my current lifestyle indefinitely
(barring eg, a market crash) because even with zero interest, the money would
last 100 years, and with minimal effort (ie index funds) the money would grow
over the long term at a rate greater than 1%.

Of course, that would require persisting in my current lifestyle in the face
of a massive increase in wealth, which takes nontrivial self-discipline.

~~~
challenger22
Look up the 4% rule and firecalc.com to learn how this 100x multiple is a lot
less, more like 25x realistically.

A lot of people are irrationally intolerant of risk. Try not to let fear
dominate your intuition about investing.

~~~
Mvandenbergh
That 4% is empirically derived from data covering the 20th century and is
appropriate for earlyish retirement. There's two reasons to be more
conservative:

1) We may be in a low-yield world for a long time.

2) Those studies were based on earlier retirement, not on people leaving the
workforce in their 20s and 30s, the way that some very lucky HN readers may
do.

~~~
magnamerc
To follow up with your first point, there's been some analysis suggesting that
financial markets today are more efficient than they were in the 20th century,
which means that price discovery happens more quickly. Historically, the
markets returned 8-10% for people invested in indices. I've heard that the
market returns today are closer to 3-4%, so even with FIRE you'd realistically
need to budget for 1-2% to accommodate for market fluctuations.

~~~
tedmiston
I'm not sure that the cited figure of 3-4% return today is truly
representative of recent years.

For example, for the popular pick VTSAX (Vanguard's Total Stock Market Index
Fund), if you look at the average total return % for recent windows of time:

\- YTD: 16.23%

\- 1-Year: 4.43%

\- 3-Year: 13.28%

\- 5-Year: 9.97%

\- 10-Year: 14.15%

\- 15-Year: 8.91%

The 1-year number is just skewed by the late 2018 market correction in the
short term.

Source:
[https://www.morningstar.com/funds/xnas/vtsax/betaquote.html](https://www.morningstar.com/funds/xnas/vtsax/betaquote.html)

------
sudosteph
It's a bit ridiculous to see the hoops that some of the wealthy will jump
through so they don't have to feel guilty about their position in the world.

The person writing this article is almost certainly "rich" by any reasonable
standard. Meanwhile, most families making 60k in the US (especially in areas
with the best job markets and high COL) - are not. The world income comparison
thing at the end is not meaningful in the slightest. If that is actually what
he's telling his children, he's doing a great disservice to them.

The difference between 60k income and 200k income matters for a lot more than
vacations. It impacts things that will directly affect opportunities for your
children. This includes:

\- Being able to live in a neighborhood with good public schools \- Being able
to live in a home without having concerns about the safety of it (both
neighborhood safety and environmental safety factors come into play) \- Being
able to afford additional educational experiences for your children - things
like tutoring, summer camps, musical instrument lessons \- Having higher
status professional connections that can help your child get into schools,
internships, jobs, or just expose your child to higher paying career options
in general.

The difference in long-term opportunity between middle and upper-middle class
is admittedly much smaller than the difference between middle class and
poverty, but it's still a real difference. It doesn't do anybody any good to
pretend like the children of the wealthy don't actually have a leg-up just
because their parents worked hard to get there or achieved class mobility on
their own.

~~~
harryh
_The world income comparison thing at the end is not meaningful in the
slightest._

Why not? I would say that it's very important to understand that even middle
class Americans are quite well off when compared to the vast majority of the
rest of the world.

~~~
sudosteph
It's not meaningful because it doesn't address the heart of the question the
kid was asking.

A child doesn't ask if their parents if they're rich because they looked up
the GDP of various nations. They ask their parents if they're rich because
they see differences between the things they have access to and the things
their peers have access to.

Even a child knows that when they have a bigger house, receive better gifts,
visit more places - that they are different from their peers and even families
on TV. They deserve to know that most everyone they actually interact with
will consider them "rich" and treat them accordingly. They also deserve to
know that being "rich" is truly not the norm and that acting like everybody in
the USA has the exact same opportunities as them is going to leave them out of
touch with reality.

~~~
harryh
This is a great answer. Thanks.

------
g_sch
I think the author is a bit too narrow in their definition of "political
clout". They seem to define it as the ability to personally influence federal
policy. However, as a class, people with $4M in wealth or more have an immense
amount of political clout. Most contemporary US local, state, and even federal
policies are geared toward attracting and retaining these people. Think
property tax caps, mortgage interest deductions, zoning, traffic and transit
policy...etc.

If you have $4M in wealth, you might not be able to personally call up a
lawmaker and get them to pass your pet law, but governments everywhere are
bending over backward for you and people like you.

~~~
crispwafer
This is such a weird, backwards way of framing the situation.

People in that income/wealth group fund essentially the entire government
budget while also costing essentially nothing, so of course there is an
incentive to retain them, but generally governments are trying to just stop
one cent short of bleeding them so dry that they move away.

In 2018: "The top 1 percent paid a greater share of the federal tax revenue
(37.3 percent) than the bottom 90 percent combined (30.5 percent)." Put
another way - your local school would be in trouble if all you had were
families on $40k sending 3 kids to public school, it's being funded by the
family on $300k and sending their kid to a separate private school.

~~~
g_sch
> In 2018: "The top 1 percent paid a greater share of the federal tax revenue
> (37.3 percent) than the bottom 90 percent combined (30.5 percent)." Put
> another way - your local school would be in trouble if all you had were
> families on $40k sending 3 kids to public school, it's being funded by the
> family on $300k and sending their kid to a separate private school.

This kind of statistic would benefit from being balanced against the share of
income and/or wealth held by the top 1%. Taking wealth, for example: the top
1% owns 35% of the wealth in the USA as of 2014. [0]

This proportion has been increasing over time, so even if governments were
attempting to "bleed[] them dry" (I don't believe they are), they're not doing
so very effectively.

[0]
[https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...](https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States)

------
simonh
Some wealthy trust fund babies were asked how much wealth they thought they
would need to really feel financially secure long term. They had inherited
wealth ranging from tens, up to hundreds of millions. Almost all of them named
a figure about double their personal net worth, regardless of what that net
worth was.

~~~
bob33212
Humans naturally anchor to their social network. If those people grew up in
rural West Virginia with coal miner family income they would tell you that
250k/year is wealthy.

You have to actively resist this anchoring behavior. You have to remind
yourself that just because your neighbor has a 50k car, it doesn't mean that
your 10k car is not a good fit for you.

~~~
geggam
I came from a poor area. I used to think 80k/yr was rich.

Time passed, I got work in Silicon valley with a wife and kids. Living there I
think 500k would be middle class. Not even upper middle class.

Perspectives change as you are exposed

~~~
ac29
80th percentile household income in Santa Clara County is $200k/yr [0]. The
linked dataset doesn't go any higher, but I suspect 500k/year is 95th
percentile or above, which puts you in the upper class. Even in the Bay,
$500k/yr is the "own two homes and a few Porches" level.

[0]
[http://www.vitalsigns.mtc.ca.gov/income](http://www.vitalsigns.mtc.ca.gov/income)

~~~
geggam
If you are single maybe.

I think of a middle class man being what my old man was. Single income, wife
stayed home and he provided for everyone. 4 kids.

Good luck having 2 homes and some porsches with only 500k in the valley
supporting a wife and kids

~~~
jjeaff
A $2.5m mortgage would cost you around $13k a month, Porsche lease less than
$1k a month. You've got about $15k a month left in take home pay what in the
world are you going to spend that on and still feel middle class?

~~~
geggam
Just to follow up here.

500k/yr is around 41k a month. Figure you are going to be paying about 40% in
taxes or 16,400 a month in taxes you get 24600 left

Considering you just spent 14k on a house and car you get 10,600k left.
Groceries for a family in the bay runs around 2k a month so now you are down
to 8k a month. Wife needs a car plus you need insurance gas and maintenance.
Parking runs what $45 / day or 1350... lunches run around 30/day or 900... you
haven't paid for clothes or extra curricular activities ( karate lessons 1k /
month )

Family is not cheap, Family in the bay is hella expensive

~~~
jjeaff
Are these karate lessons taught by Bruce Lee reincarnate? Because that is the
only way anyone is paying $1000 month.

------
rb808
I think the HN bubble is far detached from the real world. If you own 100k+ of
assets, most of the people in the world will see you as incredibly rich. If
you own a house in the Bay Area even with a mortgage most Americans will see
you as rich. Sure you might not feel rich because you have to go to the office
each day and you dont have a sports car, but you are.

Median and mean wealth per adult, in US dollars. USA: 61k World: 4k

[https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...](https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult)

~~~
throwayEngineer
The Physician takes for granted that his profession has a monopoly on
perscriptions and declaring medical necessity.

>Laughably some consider me rich

I know the article is supposed to hate on the 0.1%ers, but since Physicians
always say this crap about their income, it's important to know Healthcare
costs are terrible because he is paid so well.

~~~
magnamerc
Doctors are way overpaid. The barriers to entry to become a physician are un-
necessarily high, and I have a suspicion that that's by design. You only need
a moderate amount of intelligence to learn and apply medicine. If the barriers
to entry were lowered, then physician salaries would fall precipitously as
supply would outgrow demand.

~~~
trowawee
Disclaimer: I'm married to a doctor. That said, I agree with your point that
they are over-paid, but I absolutely don't agree with the idea that you only
need a moderate amount of intelligence to work as a physician. A slight
majority of my friend group is physicians, both through my spouse's education
and work and through a collegiate friend group that mostly went into medicine.
While I have many, many complaints about the medical profession and many of
the people who work at it, they are, virtually without exception, extremely
intelligent people. The ones who weren't washed out at some point in the 4
years of university and subsequent 8-12 years of training. Some of the
barriers to entry are excessive, but most of them are there because being a
doctor is incredibly difficult.

~~~
magnamerc
I didn't mean that to across the way it did. I know some doctors, and they are
extremely intelligent people, but it's a selection bias due to the high
educational requirements required to get into med school. I think my point is
that you don't need to be extremely intelligent to learn or apply medicine.
I'd say medicine is on par with engineering, but the requirements to become an
engineer are way lower than the requirements to become a doctor.

------
docker_up
My kids asked me this and I said we are "comfortable". We are easily 1%-ers in
terms of income level but we don't consider ourselves rich.

I consider someone rich who has the luxury of not working and still
maintaining a very good lifestyle. In Silicon Valley you can't do that without
substantial net worth.

The reason why we don't consider ourselves rich is because both my wife and I
have to work very hard. We love our jobs and don't mind working hard, but we
do have to work very hard. My work-life-balance is better than my wife's so I
do more of the child-rearing, but I still jump online to finish some work
after the kids are asleep.

~~~
rootusrootus
The way I look at it is that there is a significant difference between being
1%-er by income, and 1%-er by net worth. The former is not terribly uncommon
in the tech industry, but the latter is what counts as real wealth.

~~~
harryh
I very strongly suspect that the overlap between people in the 1% income level
and people in the 1% wealth level is extremely high.

~~~
rootusrootus
That may very well be true, but I don't have any good data. To hit 1% in
income, you need to make about 750K a year. To hit 1% in net worth, you have
to clear a bit more than 10M. So the question would be how many people hit
750K for a year, or a few years of their life, without accumulating 10M in net
worth? Depending on lifestyle and location, I bet there are plenty of people
who make a load of money but also spend a load of money.

~~~
harryh
Look at it from the other direction: How many people are in the top 1% of NW
but fail to be in the top 1% of income? Surely some but I bet not a ton.

EDIT: I found this - [https://economix.blogs.nytimes.com/2012/01/17/measuring-
the-...](https://economix.blogs.nytimes.com/2012/01/17/measuring-the-top-1-by-
wealth-not-income/)

"Some readers wondered if the 1 percent by wealth weren’t an entirely
different group of people from the 1 percent by income. But there is
substantial overlap: the Fed data suggests that about half of the top 1
percent of earners are also among the top 1 percent in the net worth category.

Almost all the rest of the top earners are still in the top 5 percent when it
comes to net worth."

~~~
saltcured
Going by the thresholds above (I don't know that they are correct), sitting on
$10M in assets would require a 7.5% annual income return to reach the $750k
threshold. That sounds very unlikely, if the person is living on passive
investment income.

Even with a well-performing stock or real estate portfolio, to have that level
of returns you are mostly talking about unrealized gains. Those would not
count as income if someone is living in equilibrium, growing their assets over
time. You would only realize those investment gains as income if you were
liquidating your assets to fund a lavish but limited duration lifestyle.

Edit: noting your addendum, I guess we're looking at the difference between a
technical implication (you must have this income if you have these assets)
versus a behavioral trait (most people don't live frugally or complacently
with big piles of assets)...?

------
octosphere
> The bad news is that 1M isn’t what it used to be. It would take 20M to match
> the buying power of 1M from a century ago.

Wholly disagree with the purchasing power notion. I have lived frugally for
years and 1M is enough to set me up for life (providing I don't have kids).
This is because budgeting is now an ingrained habit and I wouldn't suddenly
stop budgeting just because I can now spend more on things.

~~~
war1025
Having kids is the wrench in the gears for many people I'd guess. There's a
reason for the term DINK (Dual income, no kids).

Edit: Also to clarify, I absolutely agree with the living frugally thing, and
think most people would be in general better off if they focused less on
spending every penny they make.

~~~
Spooky23
The costs of having children are dramatically over-costed on internet forums.

People going the DINK route are mostly prioritizing careers over life. It's a
vicious cycle for many, who end up changing their mind and spending alot of
money and opportunity cost trying to make up for it.

~~~
lotsofpulp
It's not the cost of birthing/feeding/clothing/daycaring. It's the cost of
having a house in the best school district you can afford, sending your kids
on ski trips or international vacations with their friends who also have
higher income parents, and various other activities that are involved with
being in the "up and coming" social group.

~~~
stevekemp2
I think that's an America-centric view. In a lot of places in Europe it
wouldn't matter what neighborhood you lived in - the schools available would
be equally good.

~~~
gowld
That covers one segment of the conversation, but "move to Europe" isn't a
solution for most people not in Europe.

------
chrismeller
So “comfortable” (or what I will equate with upper-middle) is now somewhere
between 100k and 15m?

Even excusing cost of living differences (BFE Kansas vs Market District, SFO
or Manhattan), that’s a _hell_ of a range.

Assuming I’m single and have no kids one of those is, to me at least,
comfortable to the point that I’m comfortable traveling pretty much whenever
and wherever I want. The other is quite literally “f __* you” money.

~~~
ultrasaurus
I tuned out there as well. To describe upper middle class as those earning
between 112k and 1.5MM a year... well sounds exactly like what someone
peddling financial advice to doctors might say.

------
Zaak
I have some Pacific Islander friends that consider me rich because I live in a
nice house (rented), own three cars (bought used), and have a steady desk job
(after many years of recurring job instability).

Of course, that's wealthy compared to most of the world.

------
scoutt
I think the questions following 'are we rich' can be harder to answer, because
the answer may produce a different (bad/good) _lesson_ in a child. Like...

 _why are we rich? / why are we not rich?_

or maybe...

 _if we are rich, what are we doing for those who are not?_

etc...

------
koolba
The Cosby Show had a great take on this question:
[https://www.youtube.com/watch?v=gJ92MLZSMXM](https://www.youtube.com/watch?v=gJ92MLZSMXM)

------
didip
Being rich is a measure of assets generating income relative to future
expenses.

Once your passive income can cover your monthly expenses, you are already
veering into rich territory.

------
bagacrap
The wealth figures for X percentile seem low. I wonder where he's getting
them. When I Google it, 2.4M was the 95th percentile two years ago.

~~~
mrep
The income levels are also way off on globalrichlist.com

$60,000 a year makes you the 11,425,788th richest person in the world? US
median household income was $59,039 in 2016 and if there are 125 million
households in the US, then that means you are only the 62th million richest
person in the US alone let alone the world.

~~~
gowld
Due to the mixture of children and adults and eldert, singles and households,
it's impossible to correctly combine stats from multiple sources, or even
properly understand a single metric.

------
legitster
> Using the popular “4% rule” 1M would generate 40K per year before taxes –
> hardly a way to live in style! That income is less than 80% of the average
> U.S. household income.

This is hands down the worst way to look at this number. That's income for
_not doing anything_! That's also generational wealth! 1M dollars in the bank
is an order of magnitude better than a 40k year salary and it's a bit of a
joke to compare them against each other.

------
maerF0x0
I think a massive issue in America is the growing Urban vs Rural wealth
divide. Progressive tax brackets that make sense in the countryside are
punitive in an urban environment.

Eg: making $150k in SF isnt "that much" yet it's taxed at a higher rate than
someone making the same where housing is 50% cheaper (or more). I'm starting
to think that tax brackets ought to be converted to PPP within their
respective zone.

------
legitster
The vast majority of policy happens at the local level. Zoning, municipal
ordinances, occupational licensing, elected judges, etc. Unless you live in
NY,LA,SF the 0.01% has little impact on these.

Even making over $100k can have a huge and oversized impact on politics. They
are the ones who can afford time to show up to PTA meetins, public hearings,
donate to campaigns, etc. The average American city is designed to meet their
needs.

------
_ah
I think there's an important distinction to be made between _rich_ and
_wealthy_.

 _Rich_ is defined by income level, and often by lifestyle. A high-spending
star athlete can be rich AND broke. There's a reasonable argument to be made
that a high-income, high-expense lifestyle in the Bay means that you are NOT
"rich".

 _Wealthy_ is a measure of saved, investable assets. Wealth is not income-
dependent, and ideally grows over time rather than diminishing. A person with
wealth may also be rich depending on the income generated by that wealth and
their local cost of living, however they may also be merely comfortable.

The key point is: if you are Rich, good for you! But use that income to build
Wealth which will serve you better.

~~~
DanBC
> I think there's an important distinction to be made between rich and
> wealthy.

No there isn't, these are synonyms in any decent dictionary. Chambers uses
them to define each other.

"Rich: having a lot of money, property, or possessions; wealthy"

"Wealthy: possessing riches and property; rich or prosperous".

Everything else in your post is just stuff you've made up, which is mildly
interesting but has nothing to do with those words as they're used in the real
world.

------
seanalltogether
It's interesting to me that most classifications put middle class at the point
when you earn more then 50% of the population. You would think middle class
should be defined as the 50% of people that straddle the middle of the income
bell curve.

------
cr0sh
I don't typically worry about my level of income or whatnot, except when I
think of retirement (which I also don't think will happen, honestly).

I'm more concerned on whether my family (wife and dogs - no kids - talk about
a money sink) is happy and safe. On that level, we are doing very well.

We have a roof over our head in a relatively safe, if older, neighborhood. We
have reliable vehicles (ok, both of mine are money pits - but off-roading
ain't cheap). We have electricity, water, cooling and heating. We have time
and money for regular entertainment and minor "luxuries". We have good health,
and can afford a doctor's or dental visits. We have vision care. We can and do
eat well. We have time for leisure and laying around doing virtually nothing
if we want. We can afford hobbies and other interests.

By such a measure, and yes it is arbitrary and may not fit with other's ideas
- we are "rich". But more than that, we are happy and safe. We have decent
incomes, modest savings, and virtually zero debt (other than our mortgage,
which is secured debt and doesn't really count - we didn't buy our house as an
investment, but rather to live in - amazing idea, huh?).

Yes, we both know we are rich. To that end, when and where and how we can, we
also donate to charities and other non-profit causes, respective to our
values.

At the same time, I know monetarily I am not "rich" compared to even my local
peers in the software engineering realm. I am sure that if I tried and looked
(though my age might be a hindrance), that I could probably break six figures
as an SWE here in the Phoenix area. It kinda irks me that I haven't yet,
despite having over 25 years of experience, but it's mainly because I tend to
enjoy and thrive at working for smaller software engineering businesses which
tend to have few employees, and smaller client contracts. I'm fine with that,
as I am happier in such places than in larger ones with more internal
politics; or at least that's how I perceive it.

I don't make as much as I could - but I make enough to keep my family and I
happy, safe, and comfortable. That's my definition of rich, for as little as
it's worth I guess.

------
teachrdan
Was anyone else surprised that Dinesh D’Souza defines anyone who earns up to
$15 million as "Upper Middle"? That can't be correct, can it?

~~~
gowld
You just can't fit such a wide range into a small number of levels. And at
higher wealth numbers, there is a huge difference in _total wealth including
past expenditures_ for the same _current wealth_.

------
samingrassia
Rich = can you live off the interest from the risk free rate(US Treasury
coupon)?

In the US - thats about $5mm saving or pretax $100k interest income.

------
xwdv
_I’m_ rich, but _you’re_ not: The only suitable answer for a child who asks
this question.

------
themagician
Only wealthy people have a hard time figuring out what the correct measurement
is for rich. It’s a total lack of perspective.

It’s always laughable to me what rich people consider “middle”. It’s like the
word has a different meaning. Middle, to a wealthy person, extends from the
middle all the way up to the top 10% by any measure. Maybe even to the top 5%
of they want to talk about how expensive it is where they live, which is
totally a choice they are wealthy enough to make. Poor people are treated as
non existent.

This kind of tone deafness is why Trump won and why he will continue to win.
The actual middle class is tired of hearing about how people making $100k+,
with $750k in assets who say, “a million isn’t what it used to be” are somehow
in the same socioeconomic class as the actual middle class.

I’m not sure that wealthy Americans understand just how many of their fellow
countrymen are in their 30s, 40s and beyond making $20 an hour and living
paycheck to paycheck. Average household income is two people working just a
few dollars above minimum wage to support their kids.

~~~
scient
I think you are the one lacking perspective here. The same way you are trying
to make a point, I can make a counter point. The person making $20 is
considered comparatively rich by someone making less than a dollar a day in
some underdeveloped country. Everything is relative. If you make $100k and you
live paycheck to paycheck because of housing costs, education costs, grocery
cost etc., how can you claim their should shut up because they are rich?

~~~
themagician
Everything isn’t relative. The middle is still the middle.

When you are in the top 10% by income claiming to be in the middle you are
failing to realize that their are some 250 million people in your own country
that are below you. The people who make your coffee, butcher your meat,
package your products. You are failing to realize that there are 100-200
million people living either an actual middle class life or are in poverty by
any standard you would understand.

Living in a place with high costs is a choice. It’s s choice that wealthy
people get to make. Living in San Francisco in a small studio on a $100k+
salary and jokingly “feeling poor” is a choice that wealthy and privileged
people get to make. It’s a choice I’ve made. It’s probably a choice you’ve
made. But I’m not going to pretend for a moment, if I’m being honest, that my
life even approaches an actual middle class life. I get to live in one of the
best places on the planet with the best food, weather, museums, drinks, bars,
technology, etc.. I have access to the best of everything… how the hell is
that being in the middle? Go spend a summer in middle America where everything
is cheap and see how most people actually live. Hell, take the BART to the end
of the line and drive one town further and try living and working there for a
bit.

