The "Single-Digit Millionaire" — And the Dying Middle Class
$10 million is the "new $1 million" ... and some stocks to help you get there ...
Every year, the folks over at Investopedia calculate the cost of the “American Dream” — you know, the sticker price of a spouse, two kids, a house, a car and “enough” to retire.
It’s an interesting exercise.
Interesting — but flawed (for investors).
In 2023, the Investopedia folks pegged that “American Dream” at $3.4 million.
In this year’s study — released a few weeks back — that cost skyrocketed to $4.4 million.
That’s right: We’re talking about a single-year jump of 29% in the “sticker price” of the “American Dream.”
Talk about “sticker shock.”
Some of the increase is due to a change in methodology. But it also tells us something:
Being a millionaire in America ain’t what it used to be.
Especially a “Single-Digit Millionaire” (a net worth under $10 million).
Or, put another way, “Single-Digit Millionaires Are America’s New Middle Class.”
At a time when $10 million is the “new $1 million,” you need to aim higher … do better.
Even getting partway there is a difference-maker.
And you can do it … with my help.
A Special “Club”
“America’s Millionaire Club” added 500,000 people last year — the most on the planet, and a 7.3% increase that brought the membership ranks to 7.43 million, tech-consultant Capgemini said. All told, those folks had combined assets (investible assets, excluding the primary residence and any collectibles) of $26.1 trillion – about the same value as the entire U.S. economy.
But most of the growth came at the very top: The number of Americans worth $30 million or more surged 7.5% to hit 90,700. And those folks controlled a combined $7.4 trillion.
But let’s turn our attention back to the bottom of that “Millionaire’s Club,” where a bit of number-crunching analytics leads me to some very interesting conclusions.
Interesting … and sobering.
That “American Dream” price tag? It’s a “lifetime” cost. But “millionaires” are anointed by a point-in-time “snapshot” — a chosen net worth measure that’s north of the $1 million threshold.
And if you dig down, you see that a key piece of this year’s “American Dream” is $1.6 million in retirement savings. That tracks as accurate, since the 2022 U.S. Federal Reserve Survey of Consumer Finances (the most recent available) found that the average net worth of American households was $1.06 million.
And that, my friends — even as a “net” number — is a “Single-Digit Millionaire.”
And as a money manager I spoke with told me, that’s not enough: It’s nowhere near enough.
“Think about it, Bill … at $1.5/$1.6 million — assuming that 4% a year withdrawal — you’re talking about $60,000 a year … plus whatever you get from Social Security,” the money manager said. “That’s maybe enough for some super-rural region … and watching your pennies … but you won’t be doing much” in your Golden Years.
Could you live on $60,000 a year? How about 20 years from now — when that $60,000 has the same “buying power” as $30,000 today?
Besides, most folks in America don’t have $1.6 million.
While the Fed’s Survey of Consumer Finances says U.S. households have an average net worth of $1.06 million, the median net worth (viewed as a more accurate snapshot of the typical American household) is only $192,900.
According to Pew Research, that’s “middle class” — a family with annual earnings of about $150,000 and a net worth between about $58,550 and $793,000. But I’ve already demonstrated that’s an underwhelming amount of financial firepower — meaning those numbers no longer reflect reality.
But even if you believe those numbers, the middle class is a boat with a big hole in its hull — and is sinking.
Pew analysts found about 51% of Americans lived in middle-class households last year — down from 61% in 1971 — which is why more “Americans are more apart [financially] than before.”
Here’s why this matters …
UBS talked to millionaires as part of a poll asking for the meaning of wealth. And two-thirds of those polled said the real goal wasn’t big houses, fancy cars or rich trips, it was “financial security” — where no single “setback” could trigger a financial wipeout.
In short, they want freedom from worry.
With so many Americans surviving in a paycheck-to-paycheck reality, that’s a great goal to work towards.
And it’s achievable — if you follow a fairly simple blueprint.
Step 1: Just Get Started
There’s always a reason to “stand pat” – to wait until “things look better.” Right now, there’s the dockworkers strike, growing real-world threats (the Middle East), and digital threats that escalate by the day.
Go back 125 years and you can find scads of similar examples — any of which would’ve kept you from getting started.
In 1900, the U.S. economy was worth $590 billion. And the Dow Jones Industrial Average — not quite four years old at the time — opened that New Century at 66.08.
Since that time, we’ve been through World War I and World War II, the Korea and Vietnam wars, two Gulf Wars, the beginning and end of the first Cold War, and the start of the New Cold War, 9/11, countless presidential elections, the Panic of 1907, the Great Depression, the Great Financial Crisis and the Great Recession, the Crash of ’29, the Crash of ’87, the civil rights protests of the 1960s, Watergate, the Savings and Loan Crisis, the Dot-Com Bubble, the COVID-19 Pandemic, and those are just the highlights.
Today, the U.S. economy has grown to $28.78 trillion — nearly 49 times bigger.
And the Dow has zoomed to 37,815 – 572 times higher.
I know what I’m saying here: The Crash of ’87 captured my attention — and got me started investing in the first place.
Step 2: Focus on “Money Doublers”
Stocks have delivered an average return of 11% annually over the past 10 years.
At that rate, it would take 6.55 years for your nest egg to double.
Anything you can do to accelerate that a bit will help. For instance:
At 12%, your money will double in six years.
At 15%, it’ll double in 4.8.
At 20%, it’ll double in 3.6.
One place to find “double-your-money” investments is with companies that have powerful projected growth rates for revenue and profits. Stock prices tend to follow profit growth, so if you search out the best players, you’ll have a higher probability of growing your cash.
Here at Stock Picker’s Corner (SPC), we search out powerful storylines — narratives like:
The AI Era, which is more than just chipmakers. One company recently mentioned: Corning Inc. GLW 0.00%↑, which makes fiber-optic cable for AI data centers.
Real Income, which demands a “bottom-line,” cash-flow mindset for high-yield wealth plays. One true “passive-income” play: AGNC Investment Corp. AGNC 0.00%↑, a real estate investment trust (REIT) that invests in residential mortgage securities.
Special Situations, like the “utility-in-the-making” Hallador Energy Co. HNRG 0.00%↑.
The New Cold War, which intersects with AI and Special Situations, is helping drive deglobalization and will drive hefty opportunities in drones, cybersecurity, defensive weaponry, and more. One (high-risk) firm to study: Space venture Rocket Labs USA Inc. RKLB 0.00%↑ .
Biotech Blockbusters, which will be defined by the “Next Blockbusters,” personalized medicine, AI and data, and consolidation. One interesting example: Leading “Pet Biotech” Zoetis Inc. ZTS -0.98%↓.
The Private-Equity Tidal Wave, where we’re seeing more growth and dealmaking in companies that don’t trade on public exchanges. One leader: Dealmaker Apollo Global Management Inc. APO 0.00%↑.
Step 3: Invest Long-Term
Be a Wealth Builder, not a Wealth Killer.
As I demonstrated above, both the U.S. economy and U.S. stocks tend to rise over time. And longer stretches put the odds – and profits – on your side.
For Wealth Builders like us, it’s the long run that matters. Indeed, if you look at the stretch between 1928 and 2022 – and slice that into 10-year increments – 94% have been positive.
The longer you go, the greater the odds you’ll navigate “events” like some of the ones I listed earlier. The better the chance that you can “smooth out” the near-term whipsawing that tends to accompany them. And the greater the chance you’ll have at smoothing out any of the mistakes that all of us occasionally make.
I’m not necessarily advocating a “buy-and-hold-forever” strategy.”
In his book, “Same As Ever: A Guide to What Never Changes,” author Morgan Housel tells us that a holding period of 10+ years is the ideal span — for generally the same reasons I’ve outlined here.
Wealth Builders invest.
Wealth Killers trade.
By focusing on the long haul, you avoid the ultimately ruinous allure of short-term trading, or speculative vehicles like options – which retail investors should avoid at all costs.
Even better: You can magnify those long-term gains — and reap more of that “money-doubler” strategy — by embracing the “Accumulate” strategy: Establish foundational stakes in the stocks you like. And look to add to those holdings on pullbacks or as you save more cash to invest.
When you think about it, it’s pretty simple really.
Do this long-term and you’ll “graduate” from the “Single-Digit Millionaire” Club – and achieve new, and “real,” millionaire status.
Remember, $10 million is the new $1 million.
See you next time;
I didn’t realize that a funeral was part of the American Dream regardless of the costs …. I’d be more than happy to miss out on that as a guest, and surely as the main act.
Apart from that: Yes, there are lot of big ticket items. However, whether a particular one is part of your individual dream, American or otherwise, is your choice. For some it may just be being with family and friends and not having to worry about how to fill the fridge, where to live and what to wear.
I wish everyone all the best with accomplishing their dream, whatever it may be in their case!