January 01, 1970
If you think that millionaires grew up surrounded by wealth, never having to work a 9-to-5 job and becoming rich by making risky investments, you're wrong.
New data shows that 77 percent of millionaires surveyed in 2016 for U.S. Trust's Insights on Wealth and Worth came from middle class or working class households. A slim majority (52 percent) said that most of their wealth came from earned income, while 32 percent credited investing.
Millionaire and multi-millionaires, in fact, come from a wide range of careers, according to a survey by the Spectrem Group, a research firm studying affluent and high net worth investors. The most common occupations among the wealthiest Americans are: manager (16 percent), professional (15 percent) and educator (13 percent).
The Factors Driving Wealth
There are more millionaires in the U.S. than ever, according to the latest estimation of the Spectrem Group. In 2015, the U.S. had 10.4 million households with assets of $1 million or greater, in addition to their homes, a 3 percent increase from 2014. Among those households, 1.2 million were worth between $5 million and $25 million.
According to Steve Shepherd, wealth advisor with Tompkins Financial Advisors in White Plains, NY, what created the net worth of the millionaires was not being born into wealth, but having a certain outlook on life. When they were asked by U.S. Trust to identify the three values that were most emphasized by their parents, the millioniares reported educational achievement, financial discipline and the importance of working.
Education plays a significant role in laying the foundation for creating wealth. A survey of millionaires by BMO Private Bank showed that 90 percent of those polled had earned college degrees. Among all Americans, only 36 percent aged 25 -29 had graduated from college, according to a 2015 study by the National Center for Education Statistics.
Tompkins Financial Advisors see another factor associated with wealth among their clients: having a lasting marriage. People who are married are economically better off when they retire compared to singles who never tied the knot, according to studies from Ohio State University and the National Bureau of Economic Research (NBER). On average, married people accumulate ten times the assets of single people by the time they retire, the NBER found. By contrast, the average divorced person loses 77 percent of the net worth he or she had while married, an OSU study showed.
The Investing Habits of Millionaires
Saving money at an early age pays off, says Shepherd. Multi-millionaires surveyed in the U.S. Trust study on average began saving at 14, held their first job at 15 and had invested in equities by age 25.
Many millioniares put their money in conventional investments. In the U.S. Trust survey, 83 percent used buy-and-hold investment strategies for part of their wealth, while 89 percent said equities and debt instruments had generated the bulk of their portfolio gains.
Shepherd says he and his colleagues at Tompkins Financial Advisors see a majority of these millionaires focused on reducing the tax impact and risk in their investment strategies. The survey showed that 55 percent said it's more important to minimize the impact of taxes in investment decisions than to pursue the highest possible gains with no regard to tax consequences. Similarly, 60 percent said lowering their risk exposure is important, even if it results in a lower yield.
And here's one other common characteristic of millionaires worth noting: 78 percent of them relied on financial professionals to help manage their investments.
Some of this material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
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Investing involves risk including loss of principal. No strategy assures success or protects against loss.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. LPL Financial is a separate entity from Tompkins Financial Advisors. The investment products sold through LPL Financial are not insured Tompkins Trust Company deposits and are not FDIC insured. These products are not obligations of Tompkins Trust Company and are not endorsed, recommended or guaranteed by Tompkins Trust Company or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible. Tompkins Financial Corporation, Tompkins Trust Company and Tompkins Wealth Advisors are not registered broker/dealers and are not affiliated with LPL Financial.
1 - cnbc.com/2016/03/07/record-number-of-millionaires-living-in-the-us.html [3/7/16]
2 - forbes.com/sites/maggiemcgrath/2016/05/23/the-6-most-important-wealth-building-lessons-from-multi-millionaires/ [5/23/16]
3 - businessinsider.com/ap-liz-weston-secrets-of-next-door-millionaires-2016-8 [8/22/16]
4 - cnbc.com/2016/05/05/are-you-a-millionaire-in-the-making.html [5/5/16]
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