What's A Millionaire?

May 23, 2011

I always thought a millionaire was someone with assets worth $1 million or more.

Lately though, I've been seeing "millionaire" used to mean someone who makes more than $1 million a year. That's what politicians mean when they talk about a "millionaires' tax."

There's a big difference between these two definitions; people people who make $1 million a year are much more elite group.

Only one in every 400 U.S. households makes more than $1 million a year. But one out of every 15 U.S. households has at least $1 million in assets. (This measure includes things like stocks, bonds and investment properties, but it doesn't count equity in the home you live in.)

So shifting the meaning of the word away from assets and toward annual income is effectively redefining "millionaire" up the economic ladder.

Of course, the word has been in use for hundreds of years. And $1 million even 50 years ago was worth a lot more than $1 million today: In 1961, $1 million had the same buying power as $7.5 million today.

How rich does $1 million make you today? Imagine a 65-year-old couple retiring with $1 million in the bank and a desire to turn their money into a safe income stream.

They could put their money 10-year Treasury bonds — and get $31,000 a year in interest.

Or they could buy an annuity. If they fork over their entire $1 million nest egg, they can get an annuity that would guarantee them about $66,000 a year for life.

That's comparable to what a middle-class professional with a good pension plan might expect (though the annuity won't increase with inflation). It certainly isn't enough to live the high life we used to associate with millionaires. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.