Defining High Net Worth

Contributed by: Lewis J. Walker, CFP®

The question asked by the client seemed simple enough. “How do you define ‘high net worth,’” he wondered?  Net worth may be defined in subjective terms, as may be wealth. The Greek philosopher Epictetus proclaimed, “Wealth consists not in having great possessions, but in having few wants.”

Financial services regulators and financial institutions generally define a high net worth individual (HNWI) as having liquid assets over a certain figure. For example, the Securities Act of 1933, Regulation D, defines an accredited/qualified investor as one with an annual income of at least $200,000 in each of the past two years ($300,000 for joint income), or a net worth of at least $1 million, excluding a personal residence.

When a broker or financial planner talks about a “Reg D” investment, he or she means an investment available only to accredited investors that meet the above requirement. These generally are private equity type investments in real estate or other ventures that are not liquid and may require longer holding times. Tax incentives may be a feature. Regulators want to be sure that the investor has the net worth to handle lack of liquidity and potentially higher risk/reward ratios.

Some investments may have minimum investment thresholds of $25,000 to $50,000 or more. Separately managed equity or fixed income investment accounts often have minimum investment amounts of $100,000 per account. Nothing in this commentary should be construed as an offer to buy or sell a security. Offers generally are made by prospectus which should be reviewed carefully to understand all cost and risk factors.

According to Investopedia, the most common definition of high net worth is $1 million in financial assets. An investor with less than $1 million but more than $100,000 in savings may be considered “affluent,” but in some circles, “sub-HNWI.”  Investopedia pegs the upper end of HNWI at $5 million, at which point one becomes a“ very HNWI.” Over $30 million, congratulations, you are a “ultra HNWI.”

In 2016 it took a minimum of $1.7 billion to make the cut on the FORBES 400 list. Bill Gates topped the list at $81 billion. CEO Jeff Bezos came in 2nd at $67 billion. Donald Trump came in at 156, with a net worth of $3.7 billion. Per a Capgemini World Wealth report, approximately 4.45 million people in the U.S. qualified as HNWIs, 1.3% of the U.S. population and the most in the world. Approximately 61% of the global HNWI population resides in four countries: USA, Japan, Germany, and China.

Having $1 million in financial assets is a feat, something billions of people on our planet can only dream of. But if you plan to live off of your nest egg for 20 to 30 years in retirement, perspective is warranted. What about future buying power? It takes $1,570,000 dollars to buy what a million did in 1996, a mere 20 years ago. It takes $2,210,000 to buy what a million dollars did in 1986. Plus, if your $1,000,000 is in a traditional IRA or some other qualified retirement plan, withdrawals are taxed at ordinary income rates at the federal level, and potentially, at the state level depending on where you live. A chunk of your million belongs to the tax man. Inflation and taxation must be figured into long-term strategies. No wonder retirement in a state with no income tax is appealing to HNW individuals, especially when the sale of a major asset with huge embedded capital gains is concerned. Who said, “taxes don’t matter”?

With everything else one has to fund over a working life—buying a home, raising children, paying for educations, paying off debts, perhaps caring for aging parents, continuing education and training, building a business or professional acumen, taxes, inflation, lifestyle demands, and fun—meeting retirement targets requires discipline. Start early. Time is more important than timing. Invest in your career. Develop a career that brings meaning and purpose, something that may be carried into a post-retirement scenario, if you wish to do so. The idea of a gold watch and out the door at 65 is “sooooo last century.”

A million ain’t what it used to be, but it’s a start!


Lewis Walker is a financial planning and investment strategist at Capital Insight Group; 770-441-2603.  Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of  SFA which is otherwise unaffiliated with Capital Insight Group.  This information is based on sources believed to be reliable; however, their accuracy or  completeness cannot be guaranteed.  There is no  guarantee that any opinion or suggested possibility will happen.


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