Tag Archives: millionaires

Do “real-life millionaires” buy McMansions?

Posted on by

The spending habits of millionaires tends to be a popular topic but few people discuss exactly what kind of house they live in:

A millionaire is a person with a net worth of $1 million or more. Net worth is the value of everything a person owns, minus all debts…

Such an individual could have a negative net worth, yet they drive a Range Rover and live in a McMansion. Meanwhile, the millionaire next door lives in a three-bedroom house and drives a Hyundai…

Although it’s a common misconception that millionaires spend their money on luxury vacations, clothing, houses, and cars, what I’ve learned in growing my own net worth — and speaking with other millionaires — is that after a certain point, money stops mattering as much as it once did.

This seems to line up with the accepted wisdom that many American millionaires are relatively frugal and made their way to that wealth through saving and hard work.

But, if millionaires are not buying all those McMansions, who is? The flip argument expressed above that there are plenty of people living a millionaire lifestyle or above their means does not apply in all cases either.

Part of the trick here might be disconnecting income from wealth. Having $1 million plus in wealth does not necessarily mean you have the kind of assets to put down a sizable down payment or make sizable payments on a large house. (Think of the people who have paid off their mortgages and have a lot in retirement and savings accounts – this is not always easy to access.) Some people might be willing to buy homes based on whether they can afford the monthly payments – does it roughly fall within 30-35% of my monthly take-home pay – while others would be unwilling to splurge on a McMansion.

To be honest, I have not seen a convincing article or set of data regarding McMansion owners. I would guess a good number are in the top 20% of earners in the United States but probably a good portion are also living paycheck to paycheck.

Debate the data: are millionaires leaving New Jersey in large numbers?

Posted on by

A new report suggests some millionaires have left New Jersey:

New Jersey lost roughly 10,000 millionaire households, but those affluent families who remain still account for 7 percent of the whole state, the researchers said…

A high tax rate for top earners may have led to some migration out of the state, according to David Thompson, the lead researcher.

By losing those 10,000 millionaire households, the Garden State returns to third, where it was ranked from 2010 through 2012. Since the last report, Connecticut lost only 1,000 millionaire households, as it vaulted to the second spot, the group said.

And alternative interpretations:

“If millionaires were truly trying to flee NJ’s top income tax rate, we probably would have lost a lot more when the rates were higher,” Whiten said. “But during the 2000s NJ almost doubled the number of tax filers above $500K at a time when the tax rate was increased on them, twice.”Wealth has been reported leaving the Garden State before, however. In 2010, a Boston College team found that in a five-year period some $70 billion in total wealth left for other parts of the U.S.

Last year, a report by the Morristown-based Regent Atlantic wealth management firm released a report entitled “Exodus on the Parkway” that claimed so-called “tax migration” began in 2004, with the state’s passage of the “millionaire’s tax.” The report found that a couple with an income of $650,000 who moved to Pennsylvania would save some $21,000 per year in taxes, adding up to $1.65 million over 25 years, if invested. Most families with incomes of $500,000 per year or more were departing New Jersey for either the Keystone State or Florida, the Regent Atlantic authors added.

“The phenomena is there, that people are leaving – but people in New Jersey have high incomes,” said Joseph Seneca, professor of economics at the Edward Bloustein School of Planning and Public Policy at Rutgers University.

My interpretation: no one really knows whether 10,000 millionaire households leaving is a big number or not. If the true figure was 5,000, might those who oppose higher taxes still argue that taxes are pushing a large number to leave? And if the true number was 15,000, would this be enough evidence that taxes really are making a difference? Because this appears to be an ideologically laden debate, each side can look at the 10,000 figure and make a reasonable interpretation.

Here are two ways around the issue that both make use of comparisons. The first way would be to compare the New Jersey leavings over the years. Is the 10,000 figure more or less than years past? The second would involve comparing the leaving rate across states. This new report looks at millionaires per capita across states but why not compare the leaving rate per capita across states? Then, people in New Jersey could decide whether they are concerned with having similar or different rates compared to states with other policies.

The migration patterns of the world’s millionaires

Posted on by

Here are the top destinations for the world’s millionaires:

According to a report from New World Wealth, the U.K. was the top destination in the world for migrating millionaires over the past decade. Between 2003 and 2013, the U.K. had a net inflow of 114,100 millionaires (people with $1 million or more excluding their primary residence)…

Singapore, with its tax-friendly policies and security, ranked second in attracting the world’s wandering wealthy. It gained 45,000 millionaires between 2003 and 2013. The U.S. ranked third, gaining 42,400 millionaires.

So where were all these millionaires moving from? Mostly China. According to the report, China had a net outflow of 76,200 millionaires during the 10-year period. India was the next largest loser, with a net outflow of 43,400, followed by France, Italy and Russia…

The study said that overall, London has the most millionaires of any city, with 339,300. New York ranks second with 300,100, followed by Tokyo (226,500) and Singapore (225,000).

Follow the money. Even as these millionaires then move to certain cities, there are certainly patterns within these cities as to where they move and with whom they associate. All of these top urban destinations for millionaires have strong finance sectors as well as some of the world’s most expensive housing even as some of them also have relatively poor areas, sizable immigrant populations, and numerous social problems within a short distance from the residences of some of the wealthiest people in the world.