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I thought this was interesting:

 

https://www.cnbc.com/2017/11/06/how-much-you-need-to-earn-to-be-in-the-top-1-percent-at-every-age.html

 

I'm looking at the 35 to 40 year old range. It jumps from $1.25 million to $3.2 million and an income of $320,000. Doesn't that seem like a pretty large jump compared to the other ones? Let's say you earn 10% for those 5 years and are earning the full $320,000 all 5 years. you'd still need to save close to $200,000 a year to hit that.

 

If we look at the 40 to 45 year old, you only need a $2 million jump and you have a higher starting range and salary. Interesting but I don't think the math adds up very well.

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Does the chart reflect actual net worth data, or simply what you get by multiplying the income by the multiplier?  As for where the multipliers come from, a quick review of the links in the article suggest some financial advisor made them up as guides.

 

The multipliers come from this article:  https://www.financialsamurai.com/the-top-one-percent-net-worth-levels-by-age-group/

 

Here's how that article describes them:  "The top 1% net worth figures are based on my latest net worth target income multiples. I believe most of us can achieve these income multiples if we meticulously track our net worth, invest our money wisely, and spend extra effort earning. One income stream is often not enough."

 

So, they appear to be just made up "targets," not actual data.

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Guest longinvestor

https://www.financialsamurai.com/the-top-one-percent-net-worth-levels-by-age-group/

 

Here's how that article describes them:  "The top 1% net worth figures are based on my latest net worth target income multiples. I believe most of us can achieve these income multiples if we meticulously track our net worth, invest our money wisely, and spend extra effort earning. One income stream is often not enough."

 

So, they appear to be just made up "targets," not actual data.

 

😉

 

The inflated multiplier is the marketing piece for meticulous net worth tracking and wise investing. Basically charge a convenient % fee in return for the mere hope of some straw man target. Someone has to dream, might as well dream big.

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I see some evidence that the net worth numbers are not simply objectives based on multiples.

https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/

https://dqydj.com/the-net-worth-of-different-age-groups-in-america/

 

The financial planners' mantra is to save early (30's and 40's) and start to dissave later, starting in the 50's.

interestingly, when one disaggregates the numbers, only the high earners and very high net worth households follow this pattern as the bottom 80 to 90% do not really save.

 

 

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Is this median or average? Because ar billionaires and going to distort things, like if Bill Gates moved to your neighborhood and suddenly the average net worth on the area is $250m or whatever...

 

You are technically correct about statistical distortion within the group. But stahleyp's reference group is only the top 1%. :)

Interesting link about those who feel relatively poor within the 1% (from 2014, so outdated but, if anything, the trend has accentuated):

https://www.cnbc.com/2014/03/31/the-other-wealth-gapthe-1-vs-the-001.html

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Is this median or average? Because ar billionaires and going to distort things, like if Bill Gates moved to your neighborhood and suddenly the average net worth on the area is $250m or whatever...

 

You are technically correct about statistical distortion within the group. But stahleyp's reference group is only the top 1%. :)

Interesting link about those who feel relatively poor within the 1% (from 2014, so outdated but, if anything, the trend has accentuated):

https://www.cnbc.com/2014/03/31/the-other-wealth-gapthe-1-vs-the-001.html

 

I don't see how that's different, no?

 

Take that top 1% of the general population and sub divide it into 100 parts. There's till going to be the 0.01% that might own a billion and skew what that 1% is vs the general pop. Or am I misunderstanding what you mean?

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Does the chart reflect actual net worth data, or simply what you get by multiplying the income by the multiplier?  As for where the multipliers come from, a quick review of the links in the article suggest some financial advisor made them up as guides.

 

The multipliers come from this article:  https://www.financialsamurai.com/the-top-one-percent-net-worth-levels-by-age-group/

 

Here's how that article describes them:  "The top 1% net worth figures are based on my latest net worth target income multiples. I believe most of us can achieve these income multiples if we meticulously track our net worth, invest our money wisely, and spend extra effort earning. One income stream is often not enough."

 

So, they appear to be just made up "targets," not actual data.

 

The article given is from a blogger well known for stretching the truth in search for pageviews. I take everything he says with a massive grain of salt.

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Its not median or average.  Its percentile.  Its more similar in concept to median - median is the 50th percentile.  This is the 1st percentile. 

 

Its due to (1) inheritances and (2) point when entrepreneurial efforts start to get critical mass for many people in that category. 

 

I think regarding #2 there are a lot of people who have private businesses that are hard to estimate value of for purposes of determining net worth, and these value estimators based of fed reserve household net worth studies may underestimate the value of.  By the time someone is in their 40ths though, they may finally be starting to pull excess $ out of the business rather than reinvest, resulting in $ that is invested in "easier to value" items for purposes of the fed reserve study, such as real estate and marketable securities. 

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The article given is from a blogger well known for stretching the truth in search for pageviews. I take everything he says with a massive grain of salt.

 

Yeah I was surprised to see an article on CNBC about FinancialSamurai. Almost reads like a  thinly veiled advertorial.

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Its not median or average.  Its percentile.  Its more similar in concept to median - median is the 50th percentile.  This is the 1st percentile. 

 

Its due to (1) inheritances and (2) point when entrepreneurial efforts start to get critical mass for many people in that category. 

 

I think regarding #2 there are a lot of people who have private businesses that are hard to estimate value of for purposes of determining net worth, and these value estimators based of fed reserve household net worth studies may underestimate the value of.  By the time someone is in their 40ths though, they may finally be starting to pull excess $ out of the business rather than reinvest, resulting in $ that is invested in "easier to value" items for purposes of the fed reserve study, such as real estate and marketable securities.

 

What I'm saying is that within the first percentile, there's likely a wide distribution, and that since it's probably a power law, that can be skewed quite a bit by a bunch of billionaires. So if you compare that first percentile to the rest and say "to be in the first percentile you need X", you might not actually be accurately representing most of the individuals that compose that first percentile since 0.95 of it might have on average $1m (random number to make a point) and 0.05 of it at the top might have 500m on average. So you're taking the average of the sums in that first percentile rather than look at the median person in that first percentile, and that makes a difference.

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Its not median or average.  Its percentile.  Its more similar in concept to median - median is the 50th percentile.  This is the 1st percentile. 

 

Its due to (1) inheritances and (2) point when entrepreneurial efforts start to get critical mass for many people in that category. 

 

I think regarding #2 there are a lot of people who have private businesses that are hard to estimate value of for purposes of determining net worth, and these value estimators based of fed reserve household net worth studies may underestimate the value of.  By the time someone is in their 40ths though, they may finally be starting to pull excess $ out of the business rather than reinvest, resulting in $ that is invested in "easier to value" items for purposes of the fed reserve study, such as real estate and marketable securities.

 

What I'm saying is that within the first percentile, there's likely a wide distribution, and that since it's probably a power law, that can be skewed quite a bit by a bunch of billionaires. So if you compare that first percentile to the rest and say "to be in the first percentile you need X", you might not actually be accurately representing most of the individuals that compose that first percentile since 0.95 of it might have on average $1m (random number to make a point) and 0.05 of it at the top might have 500m on average. So you're taking the average of the sums in that first percentile rather than look at the median person in that first percentile, and that makes a difference.

 

I dont think this is the case.  When percentile's are reported, you report the threshold you need to breach to get into that percentile, not the average within the percentile.  That is the definition of percentile.

 

Top 1% means you make more then 99% of others.  It doesnt mean the average of those that make more than 99% of others.  There is not a skew from billionaires. 

 

There are others (more academic than financial samuri) that have done studies using the IRS reported percentile levels and the fed reported.  That said, this data is consistent with what financial samuri is implying - that an 8 digit net worth is required at certain ages to be in the 1st percentile.  The link below is what I have used before when I was looking into this.  The wealthiest age cohort, based on the 1st percentile threshold, is 60-64 (just before retirement). 

https://dqydj.com/net-worth-by-age-calculator-united-states/

 

I was surprised at first too by that finding - that an 8 digit net worth was required at certain age levels to be in the 1%.  That said, if you ever have any doubts as to the number of multi-millionaires in this country, drive along the coast from Florida up to Maine, or from San Diego up to Seattle.  Count the number of mansions and massive boats.  I'm always shocked whenever I travel anywhere in the world on the water, the number of massive boats there are.  I am always left thinking - who owns all of these $500k+ boats? 

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As a similar measure of how I'm doing...I've begun monitoring the each year the Forbes 400 Net worth threshold (currently around 2 billion) vs my own net worth, and the ratio.  The ratio itself is not that meaningful, but it can be meaningful to look at how the ratio has changed over time. 

 

There is a large skew in wealth, mainly driven by the way our economy is structured to provide massive rewards to scalable value-adding creations.  That large skew in wealth results in a small minority bidding up luxury goods, high end restaurants, vacations, private schooling, etc.  If you are interested in purchasing goods/services in this category, your personal CPI is largely affected by this wealth skew.  ie if this is you...in a bull market, if everyone is making money in the stock market, and you've invested in conservative bonds, not keeping pace...you're getting poorer in real terms of your personal CPI.

 

My goal therefore is to not lose pace with this skew and keep up with it, so as to be able to keep up with my personal CPI, which is why I monitor this ratio year-over-year. 

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It's just clever marketing.

 

Early boomer grandpa dies, kids (30-40's) inherit. Net-worth increases.

$ received pay off motgage, monthly mortgage payment is now discretionary cashflow.

 

Distort cause/effect. Wealth of $X = income requirement of $Y. You're under it. You have to do something.

Bait/switch. Income is really a proxy for discretionary cash (cash in - cash out), these OTHER numbers are what you would need.

Capture. Commit 70% of your 'freed' mortgage payment. You too could retire as one of the 1%, AND have some extra cash to spend!

Reinforce. Friends envy you. Comes your turn ... this is the guy who helped us.

 

The question never asked? .... what are you REALLY going to do with an income of 470K every year.

It's way more than most people could possibly ever need, and at this level most people could buy a new house, AND FULLY PAY IT OFF, every 2 years.

The primary beneficaries would seem to be your therapists, liquor store, and drug dealer.

 

.... Can't possibly have the client asking this!

    distract them with the pretty coloured forecasts instead  ;)

 

SD

 

 

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What I'm saying is that within the first percentile, there's likely a wide distribution, and that since it's probably a power law, that can be skewed quite a bit by a bunch of billionaires. So if you compare that first percentile to the rest and say "to be in the first percentile you need X", you might not actually be accurately representing most of the individuals that compose that first percentile since 0.95 of it might have on average $1m (random number to make a point) and 0.05 of it at the top might have 500m on average. So you're taking the average of the sums in that first percentile rather than look at the median person in that first percentile, and that makes a difference.

 

As the above poster pointed out, that's not how percentiles work.

 

Apart from that, I have a) my doubts about the methodology and the results of this CNBC news clickbait and b) it's probably counterproductive to focus on what random people supposedly own or earn at what age.

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watsa_is_a_randian_hero explained it well.

 

Anecdotally, whenever I looked where my earnings and net worth fall, the numbers were pretty consistent with https://dqydj.com/net-worth-by-age-calculator-united-states/ and https://dqydj.com/the-net-worth-of-different-age-groups-in-america/ numbers. Although it's likely that all the numbers are coming from the same single source anyway.

 

 

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"it's probably counterproductive to focus on what random people supposedly own or earn at what age."

Had a glimpse at the unedited version and I really admire that position.

 

You may want to appreciate that your attitude is unusual. If it were the norm, markets would be efficient and investment boards such as this one would lose some of their utility. :)

 

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"it's probably counterproductive to focus on what random people supposedly own or earn at what age."

Had a glimpse at the unedited version and I really admire that position.

 

You may want to appreciate that your attitude is unusual. If it were the norm, markets would be efficient and investment boards such as this one would lose some of their utility. :)

 

I _TRY_ not to focus on it :) . Not saying I'm always successful.

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Thanks for explaining how I was wrong, guys. It's how we learn. I somehow got into my head that they just sliced the pie in 100 slices and then divided the sums in each by the numbers of individuals in each. Cheers!

 

Well, my reply "I dont think this is the case" because not everybody understands this, and its possible that the writers of these articles misrepresent the word "percentile."

 

That said, my explanation is consistent with the statistical definition of percentiles, and how academics have used the term in context of wealth/income. 

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