I don’t feel comfortable being “wealthy”

I have been pondering over this post for several days. I fear it will be misinterpreted, but here goes.

I don’t feel comfortable being wealthy. Like it or not, justified or not, planned or not I meet the typical definition of wealthy. These days that seems a dirty word – even though I’m not near the eight figure mark let alone ten.

I just finished our income taxes and it actually feels like we did pay our fair share. We pay IRMAA premiums and tax on 85% of our Social Security. Don’t get me wrong, I’m not complaining. The good thing as I see it is, wealthy is better than being rich. 

The terms “rich” and “wealthy” are often used interchangeably, but there’s a subtle, yet significant difference between them.

A rich person might have a high-paying job and live a lavish lifestyle, but their financial security could be vulnerable if their income suddenly stops.

A wealthy person, on the other hand, possesses assets that generate income, providing them with greater financial independence and stability.

Being rich is about having a lot of money, being wealthy is about having financial independence and security.

How do you know which you may be? I think it’s a feeling of security, but you can always measure yourself against the data. For example from the Federal Reserve on net worth. What their surveys show.

Ages 45-54 median $247,200 average $975,800

Ages 55-64 median $364,500 average $1,566,900

Ages 65-74 median $409,900 average $1,794,600

Age 75 +     median $335,600 average $1,624,100

So, if you exceed these numbers you might be wealthy. 

Investopedia has an article explaining net worth at various ages. Thomas J. Stanley and William D. Danko, authors of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” offered this formula as rule of thumb:

“Ideal” Net worth = Age X Pretax Income / 10

For example if your income is $60,000 and you are age 55, your ideal net worth according to these guys is $330,000. That seems mighty low to me. 

In many cases home equity will exceed that number. 

On the other hand, it looks reasonable when compared with the Federal Reserve data, but I wouldn’t call it “ideal.”  Actually, I don’t think it’s wealthy either. 

Does it all matter? To someone getting by on $45,000, earning $100,000 may be wealthy and so on. Some people with modest earnings may have accumulated a hefty net worth. 

In any case, there are better ways to be wealthy that don’t involve money. In that regard I feel we are well into ten figures.