Den­verites: “Wealthy” begins at $2M

The Denver Post - - BUSINESS - By Aldo Svaldi

Be­ing wealthy can mean dif­fer­ent things to dif­fer­ent peo­ple, but for res­i­dents of the Mile High City, the thresh­old is a net worth of $2 mil­lion, ac­cord­ing to the new Mod­ern Wealth In­dex for Denver from Charles Sch­wab & Co.

Na­tion­ally, the “fi­nan­cially com­fort­able” mark was $1.1 mil­lion and the “wealthy” mark was $2.4 mil­lion, ac­cord­ing to an on­line sur­vey of 1,000 peo­ple. In metro Denver, fi­nan­cially com­fort­able was de­fined as $541,700 and wealthy as $2 mil­lion, ac­cord­ing to a sur­vey of 500 peo­ple.

“Older gen­er­a­tions have a more struc­tured def­i­ni­tion of wealth, and it will be ac­com­pa­nied by a num­ber,” said Brad Bartick, man­ager of Charles Sch­wab’s down­town branch. “For oth­ers, it is lead­ing a rich life.”

About 29 per­cent of those sur­veyed in Denver de­fined wealth as hav­ing “a lot of money.” But 23 per­cent de­scribed wealth as be­ing able to buy what­ever they wanted or en­joy­ing life’s ex­pe­ri­ences. An­other 22 per­cent de­scribed wealth as liv­ing stress­free and hav­ing peace of mind, while 13 per­cent de­scribed it as fi­nan­cial se­cu­rity and sta­bil­ity.

Ge­og­ra­phy can in­flu­ence per­cep­tions of wealth. Phil­a­del­phia and Hous­ton had the low­est wealth thresh­old of the par­tic­i­pat­ing met­ros at $1.7 mil­lion each, while in Bos­ton it was closer to Denver at $2.1 mil­lion. New York­ers, not sur­pris­ingly, had the high­est def­i­ni­tion of wealth at $3.2 mil­lion, fol­lowed by San Diego res­i­dents at $2.7 mil­lion and Los An­ge­les re­spon­dents at $2.6 mil­lion.

Net worth is as­sets mi­nus li­a­bil­i­ties. For many peo­ple, home eq­uity can make up a big share of net worth, es­pe­cially in ar­eas with rapidly ris­ing home prices such as Denver.

Although $2 mil­lion may seem like a large sum, it may not gen­er­ate the life­style ex­pected in re­tire­ment if a large share of it is tied up in home eq­uity, said Char­lie Far­rell, CEO of North­star In­vest­ment Ad­vi­sors in Denver.

Un­like investments, a pri­mary res­i­dence doesn’t gen­er­ate in­come that can be spent in re­tire­ment. In fact, a home can eat up 3 per­cent to 4 per­cent of its value in in­sur­ance, prop­erty taxes and main­te­nance ev­ery year, Far­rell said.

“The big­ger the house, the less you have in dis­cre­tionary in­come,” he said.

When it came to build­ing wealth, the sur­vey found Denver-area res­i­dents had above-av­er­age con­fi­dence of achiev­ing suc­cess and did a bet­ter job han­dling their debts. But they lagged when it came to craft­ing a plan and tak­ing other steps needed to ac­cu­mu­late wealth.

“The num­ber isn’t as im­por­tant as the

process and the plan and the discipline,” Bartick said. A per­son’s nest egg may seem small, but start­ing early and stay­ing fo­cused can gen­er­ate a big num­ber over time.

Bartick said that dur­ing his ca­reer, which in­cluded time in Ore­gon, he knew of a doc­tor who earned large sums over his ca­reer but re­tired with mea­ger sav­ings and sur­vived on So­cial Se­cu­rity. He also knew a log­ger who never grad­u­ated from high school but started in­vest­ing early and con­sis­tently and re­tired a mul­ti­mil­lion­aire.

A sep­a­rate study from Phoenix Mar­ket­ing In­ter­na­tional found that 70 per­cent of U.S. house­holds were “non­af­flu­ent” with un­der $100,000 in in­vestable as­sets. An­other 25 per­cent had $100,000 to un­der $1 mil­lion set aside, while 5 per­cent had $1 mil­lion or more.

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