How financial priorities and asset allocation often changes as wealth grows.
In the early 19th century, John Jacob Astor became the first multi-millionaire in the US. Astor built his fortune through a fur trade monopoly, exports to China and owned New York City real estate, which are uncommon sources of wealth for the average millionaire today.
While fortunes like Astor’s were built through concentrated ownership and trade, today’s millionaires are far more likely to reach that status through consistent saving and investing.
In fact, today’s millionaires are more likely to be The Millionaire Next Door rather than Mr. Monopoly. Due to strong stock market returns, appreciating home prices and inflation, approximately 18% of US households are millionaires. According to a recent Bloomberg article, home equity and retirement accounts comprise 72% of the assets of households with a net worth between $1MM and $2MM. There are approximately 24 million millionaire households today, and the US is creating 1,000-1,200 new millionaires each day.
The most common age for someone to become a millionaire is 61. Most millionaires reach this milestone after years of disciplined saving, often later in their careers as retirement becomes a more immediate consideration. At this stage, wealth is often concentrated in housing and retirement accounts, as shown below.
As wealth grows beyond the $1MM milestone, the mix of assets and financial priorities often begins to shift as well. At around $5MM, retirement and non-retirement investment accounts typically become the most important assets. If someone reaches $10MM, ownership of a business and diversified investments in stocks, bonds and mutual funds often become the dominant sources of wealth, while a primary residence may continue to increase in value but represents a smaller percentage of overall net worth.
Many successful professionals reach the $1MM mark earlier in life on the way to much higher levels of wealth, as higher levels of income allow them to invest in taxable accounts across a broader range of asset classes. Whether reached later in a career or earlier along a wealth-building journey, crossing this milestone often brings new financial considerations.
What Should You Do When Your Net Worth Crosses $1Million?
1. Keep the good habits that got you here. Most people don’t know exactly when they cross this benchmark. It often happens gradually through regular 401(k) contributions, market growth, or rising home values. Continuing to spend less than you earn and maintaining disciplined financial habits will help keep you on track.
2. Begin serious planning for retirement. Around age 61, many investors reach an important point in their financial lives. Portfolios have grown large enough that strong returns can meaningfully improve outcomes, while downturns can have greater impact. As retirement approaches, allocation decisions and timing choices become increasingly important to support long-term goals. Decisions such as when to claim Social Security and when to retire become increasingly important, making thoughtful financial planning especially valuable.
3. Review insurance and estate planning. A higher net worth creates new opportunities, but it also means there is more to protect and more to lose. Make sure the foundational parts of your financial planning such as insurance coverage, beneficiary designations, and estate planning documents are in good order.
4. Consider investing beyond retirement accounts. Employer retirement plans remain a core wealth-building tool, but they come with contribution limits and withdrawal restrictions. Taxable investments beyond company retirement plans expand the range of available investments and may allow portions of a portfolio to be taxed at long-term capital gains rates rather than ordinary income rates. They also provide greater flexibility in how and when assets are used.
5. Be cautious with more complex investments. For investors who reach the $1MM mark earlier in life, alternative investments seem exciting, but many come with additional costs and complexity. Investments that generate K-1 tax forms (partnership structures for example) can complicate tax preparation, increase the cost, and often require filing extensions. Before investing, consider whether the potential benefits outweigh the added complexity and whether the investment represents a reasonable portion of your overall portfolio.
Navigating the Next Stage of Wealth
Berkeley Capital Management advises Millionaire Next Door clients as well as successful professionals who are building meaningful wealth. If your net worth has recently crossed the $1MM mark and you’re unsure what comes next, we’re happy to have a conversation about navigating the next stage of your financial journey.
