I think the numbers would include any taxpayer with a “tax return profile” during the survey years that indicates the individual’s net worth falls into the top .25%. So it should include celebrities who have tax returns that indicate they have a high net worth.

The one thing we probably all know about those folks, though, is that their high incomes often are short-lived. A professional athlete, e.g., can make $5M a year… but as I calculated in another blog post (link below), she or he needs to live on “only” $500K and then save whatever else is leftover after taxes in order to be able to “retire” after 7-8 years and continue to live on $500K a year.

http://evergreensmallbusiness.com/financial-planning-for-top-one-percent/

Good comments Jennifer. Thank you for sharing. Happy New Year to you and your family, too. 🙂

I fall into the under $5 mil category and the numbers are dead on! The “low” amounts in Retirement Accounts are due to the Maximum being put into a Sep every year for 30 years from the income on a “pass-through ” business. We also bought rental properties and a building to house our business which will provide rental income for our upcoming retirement. Passive Investments are something we use, my husband and I are both Financial Advisors and know lower costs lead to better returns, Index Funds are our favorites. The high amount of cash on hand is due to having available funds to replace income in down markets and during slow business cycles And/OR an opportunity to invest in another property. We have mortgages on our first and second homes as we don’t believe in putting cash on hand into a ” dead” asset, especially at 3.75% with a tax deduction. We believe our money will earn more outside a house. I drive a 2012 Toyota Highlander, my husband a leased Jaguar. No one would ever think we are “1%” Frankly, I didn’t realize it until I read your article, we both started with literally nothing and slowly and steadily it grew. We always lived below our means and don’t buy crap we don’t need. We’ve been able to start and fund 529’s for grandkids, nieces and nephews at $50 a month (x5) We also give at least 15% of our income to various charities and I’m in the process of getting a charity I started up and running. We will always have more in common with ( and more fun with) the average working class person as that is the way we see ourselves (I worked in a stable from the time I was 8-21 and I tended bar all through college and my husband worked in a diner and retail for years) . I have more fun with the wait staff at a party than the guests. The presumptions people have about people in any “category” is pretty comical. You CAN’T judge a book by its cover…or its Assets! : ) Happy New Year and thank you for a great article.

Interesting thoughts Deborah. And I appreciate you taking the time to share them.

My experience serving wealthy and the entrepreneurial class? I don’t think the wealthy “know” this stuff better than the common man or woman on the street. But I do think the statistics suggest they do more “hands-on” investing… and that that gives them (in best cases) a way to build real wealth.

The low proportion in mutual funds does not necessarily indicate so small an allocation to passive investments. Per the data definitions (https://www.irs.gov/statistics/soi-tax-stats-personal-wealth-study-terms-and-concepts), Diversified Mutual Funds only includes, “mutual funds that are broadly composed of a variety of different kinds of investment instruments. Also includes mutual funds whose asset composition could not be determined.” Thus, the low value here may indicate only that the wealthy don’t buy funds that allocate across different asset types, which is to be expected.

Publicly Traded Stock includes domestic and foreign stock mutual funds, ETFs and individual issues. held in taxable accounts. Those holdings make up 10.75% of assets in the under $5 million category. Add the 12.37% Retirement Assets, a significant proportion of which may well be in passive investments at the bottom tier, and we’re over 23%.

Yes was about to make the exact same comment ragrding retirement plans–many of these wealthy individuals may be pulling in several million per year but only able to sock away exactly the same as the rest of us in retirement plans.
So, in other words, that statistic isn’t puzzling at all but just confirms that these folks play by the same rules as we do.
What is puzzling is why they don’t all participate! I know if you make $5M that deducting 18k isn’t much, it don’t leave $$ on the table!
My bet is that their “savy financial advisors” have convinced them not to participate but rather invest more in the lucrative (and fee-rich) hedge fund

Those are good points, Harry, about the nonlinear scaling and influence of time… Good points. Thanks for sharing them.

Good comments. Thank you Alan.