Reading the nation’s wealth statistics can spark financial anxiety. After all, headline statistics suggest that being a millionaire in America is relatively common.
More than 24 million households across the U.S. have a net worth greater than $1 million, according to Bloomberg. (1) That’s more than 18% of all households. (2)
On the surface, it looks like one in five households is thriving and could retire whenever they like. However, dig deeper, and you discover why so many families are struggling financially, even if they’re officially in the seven-figure club.
Real financial security isn’t about how much you own on paper, but how easily you can access money when you need it.
Liquidity — or your ability to easily buy or sell an asset — is a key component of wealth.
For instance, if you have $1 million but almost all of it is trapped in an asset that is difficult and expensive to sell, you’re only really a millionaire on paper. This is not an asset you can rely on during a sudden emergency or confidently estimate the net gain after taxes and expenses.
By comparison, if you have $1 million invested in an asset that you can offload in a single day and pay minimal taxes and transaction costs, that money probably feels more like genuine wealth.
Unfortunately, much of U.S. household wealth is trapped in a relatively illiquid asset: the family home. For many ordinary families, homeownership is synonymous with the ‘American dream,’ which is why much of their savings and investments are dedicated to building home equity.
This property obsession can mean other assets get neglected. As of 2021, the median household net worth excluding home equity was just $57,900, according to Pew Research. (3)
Not only is that significantly lower than the seven-figure threshold. It’s also nowhere near enough for a comfortable retirement.
While it is technically possible to tap into your home equity in retirement, perhaps by downsizing or using home equity loans, there are practical limitations to these approaches. After all, you still need a place to live if you sell the family home.
With this in mind, British consulting firm Henley & Partners uses a net-worth measure that excludes the value of a household’s primary residence.
According to its latest report, there are only six million liquid millionaires in the U.S. (4) That’s roughly 2.2% of the country’s adult population, based on 2024 Census estimates. (5)
In other words, only about one in 45 U.S. adults is genuinely wealthy and well-prepared for a comfortable retirement.
In theory, retirees, or soon-to-be retirees, should make up a chunk of this group. Americans reportedly believe they need about $1.3 million to retire comfortably. (6) However, in reality, few of them meet this target.
According to a study by the Congressional Research Service, 9.2% of older adults between the ages of 55-64 have more than $1 million in their retirement accounts, excluding home equity. (7)
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Leaving the bulk of your fortune trapped in your home is probably not the best idea. Not only is it riskier to have all your eggs in one basket. It’s also difficult to retire while depending on an asset that doesn’t generate cash flows every month.
To make your financial future and eventual retirement more comfortable, consider gradually shifting more of your savings to other assets.
For retirement, invest through tax-advantaged accounts such as the 401(k) and Roth IRA. And for money you need before then, invest via regular brokerage accounts or park savings in accounts that pay a higher return than inflation.
If you’re approaching retirement with little to no liquid investments, adjust your long-term plans accordingly. Perhaps you could include a potential home equity loan in your retirement plan, or eventually sell your home and free up cash by downsizing to a smaller, more affordable one.
Consider the impact of an additional monthly payment toward rent or interest payments on your retirement budget. Work with a tax planner or financial expert to determine and account for all the transaction costs and tax liabilities associated with these strategies.
Understanding your net worth on a deeper level could be the key to your peace of mind and financial well-being.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Bloomberg (1); Census Reporter (2); Pew Research Center (3); Henley & Partners (4); United States Cenusus Bureau (5); Northwestern Mutual (6); Plan Sponsor Council of America (PSCA) (7).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.