Average Net Worth of the 1%: Here's how much the super-rich in the world are really worth

 

Many people perceive being wealthy as having nice houses and a pleasure yacht. But the kind of money that the wealthiest 1% of the world's households has dwarfs this concept. This segment of the population large portions of major corporations, multibillion-dollar investment funds, islands in the Caribbean, and even rocket ships taking them into outer space.

The average net worth of the 1%, aka the richest 1% of the global population's households, has mushroomed over the past two decades. It now towers higher above the net worth of the average citizen than ever before. Here are some of the basic facts about how the 1% lives.


KEY TAKEAWAYS

The minimum net worth of the top 1% is roughly $11.1 million.

A person would need to earn an average of $823,763 per year in order to join the top 1%.

The widening gaps in wealth and income stem from a variety of factors, including the wealthiest's increasing dominance of public and private equity, and tax breaks.


Demographic Breakdown

Before looking at the demographics of the top 1%, it's important to understand just how much this portion of the population earns. According to the Economic Policy Institute, gaining entry into the top 1% club requires an average annual income of $823,763.

That's a far cry from the annual income of $40,085 reported by the average taxpayer (the bottom 90%). Those who want to become part of the top 0.01% would need to live in a household making an average of $2.9 million annually.

Although the media and politicians have largely portrayed this group as greedy, uncaring Wall Street fat cats, demographic analysis reveals a very different picture. The wealthiest 1% are spread across many industries and come from many backgrounds. They include medical professionals, entrepreneurs, and executives, as well as those who inherited wealth.

According to IRS data, the top 1% earned over 20% of the total adjusted gross income in the U.S. and paid just under 40% of federal income taxes. They also accounted for just under one-third of all charitable donations.



A Worldwide Condition

The number of billionaires on Forbes’  35th annual list of the world’s wealthiest exploded to an unprecedented 2,755 in 2021—660 more than in 2020. Altogether, they are worth $13.1 trillion, up from $8 trillion on the previous year's list.

Wealth-X, a "wealth intelligence" research and marketing firm that is also part of the Euromoney Institutional Investor PLC Group puts the U.S. population of billionaires at 927. There were 410 billionaires in China. The total wealth of U.S. billionaires was $3.71 trillion.


The Widening Gap

The Economic Policy Institute reports that the net worth of the top 1% of American households has risen substantially. In 1962, the wealthiest 1% had net worths equal to approximately 125 times that of the average American household. Their net worths were shown to be approximately 225 times the net worth of the average household in 2009.


 The gap between the richest and the poorest more than doubled between 1982 and 2016.

172%

Percentage of the rise in the wages for the top 1% from 1980 to 2020—compared to 31% for those in the bottom 90%.

The minimum net worth of the top 1% of households is roughly $11.1 million. The top 10%, on the other hand, has a net worth of about $1.2 million.


 The wealth of the middle class is also rising, but it primarily rose between 1970 and 2000; median income increased by 41% during this time at an annual average rate of 1.2%. From 2000 to 2018, the rate was 0.3%.

The wealth of the top 1% continues to outstrip that of the entire middle class. In fact, the top earners hold more wealth than the middle and upper-middle classes put together. There's a variety of reasons for the disparity, but one chief factor is that they own more than 50% of the equity in both private and public companies. And they've also benefited from surges in the stock market. These gains help them reinvest their money back into exclusive investments like hedge funds and private equity ventures.

Underlying Causes

Much of the growing disparity can be traced to tax breaks on income, gift, and estate taxes, as well as the decline of labor unions in America. Although the middle class also benefited somewhat from the reduction in taxes, it allowed the wealthy to retain a much greater portion of their assets and pass them on to their heirs.

As of May, 9, 2022, the richest person in the world is Elon Musk, with a net worth of $268 billion.

In fact, there's been a lot of debate about how the Tax Cuts and Jobs Act (TCJA) of 2017—passed by the Trump administration—has influenced the wealthiest Americans. Though the Trump White House consistently defended the bill, saying it helped put money back in the pockets of the middle class, others have disagreed. For example, in their book The Triumph of Injustice (2019), economists Emmanuel Saez and Gabriel Zucman argue the tax reform bill gave the country's wealthiest households an effective lower average tax rate than the rest of the U.S. population: those who fall in the bottom 50%: 23% versus 25% for the working and middle class, and 28% for the upper-middle class.

Criticism of the Top 1%

There's been a lot of criticism of the world's ultra-rich, especially those living in the United States. They've been accused of hoarding wealth, lobbying for tax breaks, and not contributing their fair share in taxes. Responding to the criticism, many politicians are calling for more taxes on the wealthy.

Senator Elizabeth Warren proposed a tax on ultra-millionaires as part of her campaign to become the Democratic presidential candidate for the 2020 election. Senator Bernie Sanders, on the other hand, has pushed for an estate tax hike, meaning billionaire heirs would pay more in taxes. Their rationale? Taxing the ultra-rich would help cut down on the nation's income inequality.

President Joe Biden has also proposed significant increases in taxes on the wealthy. Outlined in April 2021, they include raising the top marginal income tax rate to 39.6% (starting with individuals earning $400,000 a year) from the current 37% (starting at people earning more than $518,000). The top tax rate on capital gains and unqualified dividends would also rise to 39.6%, up from a maximum of 20% now.

 Biden also wishes to increase the corporate tax rate to 28%.

How Much Net Worth Is Needed to Be In Top 1%?

The minimum amount of net worth to be considered in the top 1% is $11.1 million.

What Is the Net Worth of the Top 1% of Americans?

The total net worth of billionaires in the U.S. is $3.71 trillion.

What Percentage of the Population Has a Net Worth of $1 Million Dollars?

Roughly 10% of Americans have a net worth of $1.22 million or more.



The Bottom Line

Like the poor, the rich we always have with us: Disparity in income is inevitable in a capitalist society and a free-enterprise economy. However, the fact that the disparity seems to be increasing is a source of growing concern for many. The uneven impact of the COVID-19 pandemic shed a brighter light on the situation, though in fact, it had been developing for years: In the U.S., the share of the nation's wealth held by the top 1% increased from 23% to nearly 32% from 1989 to 2018.

Even billionaires such as Warren Buffett have expressed amazement that they often pay less in taxes than their employees do. Whether the 1% should be left alone or whether their wealth should be somehow shared will doubtless be an ongoing debate.


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