Cognitive Daily

Last week’s Casual Friday study was all about money. The basic question was simply what it means to be rich — how much income and net worth does it take before you consider someone to be wealthy? We received over 1,000 responses. Perhaps our most interesting finding was simply the diversity of opinions about what “rich” is. Here’s how the responses broke down:


While most responses fell between $100 thousand per year and $500 thousand per year, 95 people said an income of below $100 thousand was still “rich,” and 75 people said it would take $1 million or more per year to be wealthy! Another way to measure wealth is net worth — the value of assets (bank account, stocks, real estate) minus debts. Here are those results:


The most common response was the traditional $1 million. But over 100 respondents gave values of $200 thousand or less, and more than 100 thought it would take more than $5 million to make a person rich.

But we wanted to learn more than just what our readers think of as “rich.” We also wanted to find out if a subtle difference in the way the survey was administered could affect the results. Respondents were divided into four groups, each of which saw a different pair of images before completing the survey. Group 1 saw this:


Group 2 saw this:


Group 3 saw this:


And Group 4 saw no picture at all. To make sure respondents looked at the pictures, we asked a question about each picture (“which would you rather have?” or “which couple looks happier?”). Then we proceeded to ask the questions about wealth. Maybe if respondents think about consumer goods, or luxury items, or happiness, before responding, their answers will be different. And indeed, they were:


The group that saw the luxury items said it would take significantly more income to be rich compared to all the other groups. Interestingly, there was no significant difference in the results for those who saw consumer goods, happy faces, or no picture. The pattern for net worth was similar:


Once again, seeing pictures of luxury items significantly increased how much respondents said it would take to be “rich.”

Greta and I had a little debate before we did the study; Greta said she thought the high-value items might backfire, resulting in lower estimates. She thought standard consumer items would have a bigger impact on results — so, in a rare feat, I actually win bragging rights this week! A brief exposure to just two pictures of luxury items dramatically affects respondents’ definition of “rich,” while exposure to consumer goods has no effect.

But there are lots of other interesting tidbits in our data. We also asked respondents to tell us how much they would give away if they won a tax-free million dollars. None of the images made a difference — the average amount given was about $200,000 for each group, regardless of which picture they saw. What did make a difference in giving? Actual income. Those who said they earned over $100K per year would give away an average of $154,000 out of a $1 million prize, while those earning under $100K per year said they’d give away an average of $207,000 — a significantly larger amount!

As you might expect, those with higher incomes also defined “rich” as significantly higher-income and net worth compared to those with lower incomes. High income respondents defined “rich” as a net worth of over $4.3 million, while low income respondents said it would take less than half that much to be rich — an even $2 million.

Lower-income respondents also said they’d could be happy with a lower income — $45K per year — than higher-income respondents, who said they would need a minimum of $87K per year to be happy.

One question that perplexed our readers was this one:

How much income is enough? Supposing you cant give any of your income away, what is the ANNUAL income needed to maximize your personal satisfaction and happiness? In other words, how much money would you need each year such that any more could NOT make you more happy and satisfied?

One respondent replied “9999999999999999999999999999999999999999999999999”, while another said “2040723.89”. Others said “unbounded,” “infinite,” “there is no number,” and “No clue, less about the money and more about the game.” Not counting these absurdly large numbers, the average amount was about $325,000 (In case you’re interested, when the non-infinite numbers were included, the average rose to $9.27 X 10^45). Once again, high-income respondents had a significantly higher average ($470K) than low-income respondents ($293K).

I received a couple of emails suggesting that our data would be skewed by responses from outside of the U.S. Fortunately, our survey provider does offer a way to find out where (most) survey respondents are located. There was no significant difference in respondents’ income, regardless of location. There was also no significant difference in responses about what income and net worth it takes to be rich, or in what they would give away. However, non-U.S. respondents did say it would take significantly less income to be happy compared to their American counterparts: $45K per year versus $54K per year

There’s lots more analysis that could be done on this enormous data set. Responses could be broken into even smaller geographic units, like New York/California versus the rest of the US. We could consider finer gradations of income, family size, and more. If you’re interested in taking a closer look, let me know and I’ll send you the data set.


  1. #1 bwv
    April 25, 2008

    There also seems to be a disconnect between incomes and assets. The largest bulge for income was $200-499K but $1-2 million for assets. But of course there is no way for $1-2 million in assets to generate an income of $200-499K. Many retirement planning scenarios recognize that people way underestimate what sort of income a couple of million dollars can generate (4-5% of total assets is about as much that can be taken without depletion). $4 million would at minimum be necessary to generate $200K per year while $499K would take $10M. This is all before taxes, which with state rates could be 40% or more

    Working with HNW individuals, I would say that for the stereotypical lifestyle of multiple residences and a private jet would take at least $1 million per year of after tax income and would cost much more for higher cost locations like NYC or San Francisco

  2. #2 Dave Munger
    April 25, 2008

    Good points, bwv.

    I’d be interested to know how net worth corresponds to income. Obviously $1 million won’t produce $300K in income, but people have other sources of income (jobs!).

    So what’s the typical net worth of someone making $300K per year? Maybe not much more than $1 million!

  3. #3 minusRusty
    April 25, 2008

    Many retirement planning scenarios recognize that people way underestimate what sort of income a couple of million dollars can generate (4-5% of total assets is about as much that can be taken without depletion).

    nitpick: Underestimate, or overestimate?

    I would think most people overestimate how much funding they can extract from a certain $$ figure. (E.g., “I estimate I can live off of $1,000,000 fairly easily”, until they find out how quickly that million evaporates or how little income it actually is able to generate.)

  4. #4 Ian
    April 25, 2008

    2 people who’s work may interest you…

    John Helliwell

    Mark Anielski

    I wish I’d known economics was so interesting 30 years ago…..

  5. #5 bwv
    April 25, 2008

    “nitpick: Underestimate, or overestimate?”

    yes overestimate, the original was a typo

  6. #6 Rachael
    April 25, 2008

    Yuck. I’m a little disgusted that people are willing to give away so little of the 1 million. I expected averages closer to half.

    I said I’d give away the whole thing, and I meant it. What’s wrong with the rest of you?

  7. #7 Bob Calder
    April 26, 2008

    The first poster mentioned high net worth individuals and then continued with “private jet” which while reasonably common, I consider a kind of fetish item. How many people separate this kind of behavior from satisfying more normal urges to be comfortable?

    Up to 1994 when I changed occupations, I also had clients who were HNW folks. When it comes to things like a Rolls Royce, the entire town of Palm Beach had only 25 registered at that time. (This info from the Chief of Police.) What happened is that people would buy one and keep it only a year or two, then fall back on a sub-fifty thousand dollar vehicle. The airplanes were all corporate owned and used primarily for business. Bud Paxton is still the only full size jet owner in Palm Beach to my knowledge.

    The majority of small jets are in Boca Raton where there is plenty of money too but the residents are by and large employed. The largest number of corporate jets there are owned by a time-sharing venture where you can impress your friends on the cheap.

    This is not unlike the yacht sharing, tax write off ventures of the 70s and 80s. In fact, yachts are a definite money fetish item and have been for a long time since you can pour substantial amounts of money into them. Take the Moon Raker for instance. When it was built, it was powered by twin gas turbine engines and at over 80 feet (a guess) I believe you could actually ski behind it. Now that is fetishizing at its finest.

  8. #8 Barn Owl
    April 26, 2008

    When it comes to things like a Rolls Royce, the entire town of Palm Beach had only 25 registered at that time.

    In addition to the private jets and the yachts, another top money fetish in the Palm Beach area has to be polo. Of course it is only seasonal, but with maintenance and stabling of your horses, green fees, transporting horses, paying and housing Argentinian pros and grooms, tournament entry fees, etc., a typical patron can expect to pay a minimum of $1 million each season. That was the estimate I heard a few years ago…it’s probably higher now, with gas prices affecting transport and hay costs.

    I’m not surprised at the percentage of the $1 million people would give away. As a friend’s mum says, “Them that gots it, keeps it.” In my experience, wealthy people are paranoid, ungenerous, and covetous of the weirdest things.

  9. #9 Clarissa
    April 26, 2008

    Rachael, there’s no need to be so judgmental. People have different living situations. I live where the median house price is $750,000. Most of the 750K houses are old and small. If I got a million dollars, it’d all go into buying a house.

    (Of course, it’d also free up my other income to be used on better ways in the future, so I imagine more of my future income would be given to charity.)

  10. #10 Bob Calder
    April 26, 2008

    Funny you should mention that. I just came back from the barber shop where I heard that the Oxleys are shutting down the Boca Polo fields.

    The Wellington Polo fields service Palm Beach but the really bizarre thing they have is a gated community for horses. There are faux chateaux and you think, wow look at these houses. But there are no residences other than those for trainers and grooms. The people live elsewhere and drive about a half hour to the farms.

  11. #11 Uncle A;l
    April 26, 2008

    The threshold for being a wealthy person is spending an ounce of gold/day without care, forever. So has it ever been. One would require rather a larger income than that given government teaching its productive citizens to do without (and its unproductive citizens to do each other).

  12. #12 Rachael
    April 26, 2008


    I’m sorry but I just don’t believe that you need to live in a 750,000$ house (+ another 250,000 for accessories), and find it slightly shocking that you do.

    Besides, there’s plenty in the Bay Area under this price, as 10s on Google will tell. How about leaving the Bay Area, and combining riding a bike with taking the Bart? A comfortable but modest condo is also a more sustainable option.

    But whether or not some people are in quirky living situations where they really do need million dollar homes is besides the point; both groups on average gave away 200,000$. The average person isn’t in a situation where they need 800,000-1,000,000$ for anything — and that’s a fact.

  13. #13 Barn Owl
    April 27, 2008

    I just came back from the barber shop where I heard that the Oxleys are shutting down the Boca Polo fields.

    Wow, Royal Palm Polo closing? And I thought the rich were only getting richer, in this economy. 😉

    I’ve heard from trainers and pros that the Wellington polo community is a very strange society – not surprising, I suppose. A wealthy businesswoman like Beverly Rawlings can “own” a team of polo players, including 10-goaler Cambiaso, and “win” the US Open, without ever even sitting on a horse or swinging a mallet. In some ways I have more respect for the owners who actually play, but then polo is an insanely dangerous sport, and some say that a 1- or 2-goal patron(a) has no business playing high-goal polo. One can be seriously injured or killed, even in a practice game, as Skeeter Johnston’s family knows. And of course team owners in professional baseball, football, and basketball don’t actually play the sports, either.

  14. #14 CanadianChick
    April 27, 2008

    personally, I think net worth is a more important deciding factor in determining ‘wealth’ than income is, but even that is rife with flaws. I disagree with bwv’s premise that the respondents were linking assets and income, however…I don’t think that respondents were looking at assets as being income-generating, but more a determination of durable worth.

    I have a reasonable income, after taxes, some would consider me “rich”. However, I’m asset poor, have high debt (mostly student debt), and live in an area where the house I rent would have a list price of about $650,000…and it’s not a lot of house, despite Rachael’s protestations to the contrary.

    However, if I was debt free and living somewhere where a reasonable family home could be purchased for less than $3000 a month, I’d probably consider myself quite well off. However, I’m not willing to relocate in order to be “well off”.

    I also think the concept of “rich” is poorly defined. One man’s rich is another man’s comfortable – and I’m not dealing in perceptions here, but in what working defintion people use. Is rich having enough money to pay the bills easily and afford a few luxury items, or is rich having so much money that you need bodyguards for your children and staff to manage the money?

    Give me a million tax free (all our lotteries are tax free here) and I probably wouldn’t give much to charity at the beginning. It would, however, free me up to give more of my income to charity over the next 20 years or so…

  15. #15 Bob Calder
    April 27, 2008

    Getting back to Dave’s discussion, I wonder if there is a way to measure respondent’s income versus ability to measure certain costs objectively out of the data he has already.

    For instance a person earning under 40,000 may not have an effective grasp of the cost of managing 15 million in assets. On the other hand do all income groups have an equally good grasp of what it takes to be happy? How much does a yacht cost per foot these days? Was the house on an ocean front lot? It was butt ugly and could easily be 400,000 as 4,000,000. BTW Dave, why do people spend millions on crappy looking houses when they could spend the same amount on well-designed ones.

    There is a terrific article on testing autistic spectrum disorder kids. (argh can’t remember where) A philosophy researcher thought the questions used were a little too open to interpretation and after rephrasing them, the autistic kids performed differently.

  16. #16 Jim Thomerson
    April 27, 2008

    Many years ago I was told of a study which asked the question, “How much more income do you need to live well? Respondents from all income levels replied, “About 25% more than my present income.” Sounds about right to me.

  17. #17 Barn Owl
    April 27, 2008

    Once again, high-income respondents had a significantly higher average ($470K) than low-income respondents ($293K).

    I’d be interested to know how respondents arrived at the numbers that led to these averages. My impression is that many people in the US don’t have a very good grasp of microeconomics (which may arise from poor math skills and/or avoidant behavior). I did a few quick calculations with some recent price increases for food and gas in the US:

    Assume a 20 mile commute to work, 5 days per week-that’s about average where I live (though mine is half that):

    vehicle A gets 20 miles/gallon in the city
    gas = $2.50 per gallon = $2.50 per day = $12.50 per week = $50.00 per month
    gas = $3.00 per gallon = $3.00 per day = $15.00 per week = $60.00 per month
    gas = $3.50 per gallon = $3.50 per day = $17.50 per week = $70.00 per month

    vehicle B gets 15 miles/gallon in the city (e.g. Chevy Suburban)
    gas = $2.50 per gallon = $3.33 per day = $16.63 per week = $66.52 per month
    gas = $3.00 per gallon = $3.99 per day = $19.95 per week = $79.80 per month
    gas = $3.50 per gallon = $4.66 per day = $23.28 per week = $93.12 per month

    Is the driver of vehicle A making $20 more per month than this time last year? Is the driver of vehicle B making $26.60 more per month? If not, is either driving less, carpooling, going into debt, economizing elsewhere?


    US food prices rose 4% in 2007. If I lump together all my food costs (including eating out infrequently), plus dog food for my Labrador retriever, plus other items I buy at the grocery store (paper goods, shampoo, cleaning stuff, etc.), I probably spend $400 in an average month. My costs have increased $16 per month…and yet, most faculty at my university received no raise. Nothing that I can think of became less expensive, and my other expenses (mortgage, utilities, insurance, property taxes, etc.) stayed the same, or increased.

    I suspect a lot of people in the US are going into debt, but are perhaps in denial about it or just don’t care. I still see a lot of trucks and SUVs on the road, a lot of unnecessary driving, and a lot of eating out. Estimating the amount of income or net worth required to be “wealthy” is pretty pie in the sky, if you have no clue how to budget or economize for inflation responsibly.

  18. #18 Ivy
    April 28, 2008

    A million dollars is not a significant amount. If I got it, I’d save it.

    My husband and I just retired @55. I figure we’ll live at least another 30 years. So we need enough money for 30 years and to be able to pay for several years of *good quality* long term care. What if one of us gets alzheimers, macular degeneration, or needed dentures (Medicare doesn’t cover dental, I don’t think). God only knows how expensive that will be in 30 years and whether there will be enough money in social security to cover the health care needs of the baby boom.

    Also we live in uncertain economic times. Invest that million in the current shaky stock market and you could easily lose 25% fairly quickly and, yes, the value would probably eventually go up, but it would take years. I know too many people who have had to return to work because their investments tanked in the last bear market.

    So anyone getting a windfall of a million should save it ALL. No special cars or vacations or nicer homes. Just save it. Trust me, you’ll need it later.

  19. #19 Dave Munger
    April 28, 2008


    I agree that economic times are shaky, but your conclusion seems rather overstated to me: “anyone getting a windfall of a million should save it ALL.”

    Surely you don’t really NEED the million — because you’re already retiring without it. I’m not saying it’s greedy to keep the money, but I do think it’s interesting how quickly someone can move the benchmark of what they “need.”

    I too would probably keep most of a windfall like that, even though I’m comfortable with the amount of money I have now. But I don’t think it’s about what I need, it’s just human nature to always want a little more.

    As the results of this study seem to show, the more you have, the more you want.

  20. #20 ivy
    April 28, 2008

    No, I don’t think *I* will need it, but I don’t know who in my family or circle of friends will. So I’d still save it. Yeah, I’m totally anal about saving which is why I have plenty of money. When we came to the US, we were *very* poor and it’s colored my world-view. When I die, whatever money is left (I suspect it will be a substantial amount cuz I am not a spender) will make my siblings more comfortable in their old age.

  21. #21 Rob
    April 28, 2008

    So what about the people who would give the whole $1m away? Is there any trend in those people? What makes them willing to be generous, and does the luxury goods item make people think twice?

New comments have been disabled.