Research & Analysis for Business
and Investment Clients
Net Worth Ranking Analysis – United States
SAN FRANCISCO – DECEMBER 2013
Are you rich? To answer this question Onyx Rsearch analyzed United States Federal Reserve data collected from hundreds of US households. Two key metrics give you a solid idea of where you stand relative to other American households. The first is net household income (annual income from salary, wages, retirement, and investment income) The second is household net worth (your assets minus your liabilities).
This article analyzes how net worth is distributed across US households. Net annual income statistics were analyzed in the previous article.
( View net annual income analysis article )
Net Worth Statistics
A great way to visually understand how net worth is distributed is by plotting net worth probability vs. net worth. As you would expect there are many households with moderate net worth and a few households with very high net worth as plotted in the figure 1 probability disbtribution. This graph shows what percentage of US households fall into each bin defining a $200,000 ($200k) spread (net worth span). For example, just over 3% of American households have a net worth between $800k-$1M. Click on the image to open a larger display.
Figure 1. US household net worth probability distribution. Each bin shows the probabilty you are in a specific net worth range (Each bin spans $200,000 - $200k).
The green line is a bi-exponential decay curve fit. In simple terms, an exponential decay indicates that there is a non-linear falloff as net worth increases. It tells you that it is a Big leap to double your net worth. This is also evident if we add the first three bins (49% + 14% + 8% = 71%) – You have a seventy-one percent chance that your net worth is between $0 and $600k.
Cumulative Distribution of Net Worth
While it is interesting to see how individual bin probabilities are spread out, a more convenient way to look at net worth data is to accumulate the bin probabilities. By plotting the cumulative probability you can quickly see where you rank when compared to other American households using figure 2.
Figure 2. Cumulative net worth probability. Use this graph to see where you rank relative to other US households. Click on the image to open a larger display.
Figure 2 plots the US net worth cumulative probability distribution. To determine your rank, find your net worth on the x-axis and move vertically along the y-axis until you touch the yellow curve. Match this intersection point to the cumulative probability value on the y-axis label. This probability is your net worth ranking.
As an example, let's say that you are a millionaire (Net Worth = $1M). You would be in the 81st percentile. That means that your net worth is higher than approximately 81 out of every
100 people that you see on the street.
The cumulative probability graph in figure 2 has dotted lines in three different colors (red, green, and blue). Dotted lines define thresholds. The first (green) defines the 50% threshold. If you achieve a net worth of ~$165,000 ($165k), then you easily top 50% of wage earners. If your net worth exceeds $2.3M, then you're in the top 10%. Now for the Big Question. How much does it take to become a member of the infamous 1%? That number is marked by the blue dotted lines. In order to be in the rarefied air, your net worth must exceed $8.25M.
Want to know how you can improve your net worth rank? Contact Onyx Research for an initial consultation.