Are high income people 'rich'? Not necessarily. Sometimes however we see income used interchangeably with wealth. For example a news story might talk about 'rich' or 'wealthy' people but only cite income statistics but not net worth. This is a point that Free Money Finance has complained about in the past. Income is not the same as wealth. You can for example have someone who makes 6 figure income but has negative net worth, like maybe a new doctor with high student loan debts. And you can also have people with relatively low incomes but very high net worths, like a retiree with a very large nest egg built over a lifetime.
However there is a pretty high correlation between income and wealth. Most low income people aren't rich and most high income people are not poor. There are always exceptions but if you look at the statistics the trends are quite clear. I decided to see what kind of information I could find to show the tie between income and wealth. Can we look at a high income and assume that person is wealthy? How likely is a high income household to also have a high net worth?
The Survey of Consumer Finances (SCF) has info on income and assets in one place.
You can also find discussion of the topic in the Federal Reserve paper Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances Table 4 on page 17 has the net worth data per income group.
Here is the data out of the most recent SCF for 2010 (figures in thousands):
| income percentile | median income | median net worth |
| Less than 20 | $ 13 | $ 6 |
| 20–39.9 | $ 28 | $ 26 |
| 40–59.9 | $ 46 | $ 66 |
| 60–79.9 | $ 72 | $ 129 |
| 80–89.9 | $ 113 | $ 287 |
| 90–100 | $ 205 | $ 1,194 |
Focusing on the top 10 % income group we can see that their median income is $205k and their median net worth is $1,194k. Half of the people in the top 10% make under $205k and half of them make over $205k. There is no upper limit on that group so the top .001% makes a very large annual income. We also know that half of the people in the top 10% have net worths making them millionaires and then some. This does not however mean that people who make over $205k are all millionaires. There are some millionaires in the 90-95% group making under $205k and some non-millionaires in the 95-100% group making over 205k. In fact the net worth of the people in the top 10% income bracket could range from severely negative to billions. And any income percentile group will have a range from bankrupt to millionaires and then some. I doubt there are any billionaires in the bottom income bracket but theres certainly many millionaires.
Looking at the median net worths tells us that 50% of the people in each group has more or less than that amount. So for the bottom 20% of income earners 50% of them have net worths of less than $6000 and 50% of them have net worths over $6000. Then at the top 10% of income earners half are below $1.194M and half are above $1.194M.
While income doesn't really tell us what someones net worth is, we can say that most people with incomes over $200k are millionaires.
Now if we drop down to the top 20% we have a median income of $113k and the 80-89.9% group has a median net worth of $287. That group seems much less likely to be millionaires. I'm certain there are a good number of millionaires in that income group but we don't know what portion of those people are millionaires.
I don't have more information on how net worth varies within given income groups. I tried to find that but couldn't come up with anything. It would be nice to have a better distribution of net worth values for each income level. But we'll have to make due with just the median figures.
SCF 2010 also has the percentiles of net worth (in thousands):
| Percentile of net worth | median | mean |
| Less than 25 | - | $ (13) |
| 25–49.9 | $ 32 | $ 36 |
| 50–74.9 | $ 157 | $ 169 |
| 75–89.9 | $ 483 | $ 528 |
| 90–100 | $ 1,864 | $ 3,716 |
So that shows us a little of how net worths are distributed but not related to incomes at all.
--
Posts
