Many people perceive being wealthy as having a nice house, a late-model car, and a summer cottage but the kind of money possessed by the wealthiest 1% of the world's households has dwarfed this concept. This segment of the population owns large portions of major corporations, multibillion-dollar investment funds, islands in the Caribbean, and even rocket ships that are taking them into outer space.
The average net worth of the 1%, also known as the richest 1% of the global population's households, has mushroomed in recent decades. It now towers above the net worth of the average citizen higher than ever before. Here are some basic facts about how that 1% lives.
Key Takeaways
- The top 1% of household net worth in the U.S. started atjust shy of $13.7 million in 2023.
- An individual would have to earn an average of $407,500 per year in order to join the top 1%. A household would need an income of $591,550.
- The median household income was $74,580 in 2023 and $45,440 for individuals.
- The widening gaps in wealth and income stem from a variety of factors, including increasing dominance of public and private equity by the wealthiest and tax breaks.
- There were 2,781 billionaires in the world with a cumulative wealth valued at $14.2 trillion in 2024.
America's Richest: A Demographic Breakdown
It's important to understand just how much this portion of the U.S. population earns before looking at the demographics of the top 1% in the U.S. An individual would have to earn an annual average of $407,500 per year to join the top 1%. A household would need a yearly income of $591,550.
Compare that to the median real earnings of all workers in the United States in 2022: $45,440 for individuals and $74,580 for households.
The media and politicians have largely portrayed this group as Wall Street fat cats but demographic analysis reveals a different picture. The wealthiest 1% are spread across many industries and come from many backgrounds. They include medical professionals, entrepreneurs, executives, and those who inherited their wealth.
The top 1% in the U.S. earned over 20% of the total adjusted gross income (AGI) in the U.S. and paid just under 40% of all federal income taxes, according to Internal Revenue Service (IRS) data.
2,781
The number of billionaires counted in Forbes’ 37th annual list of the world’s billionaires. Combined, these individuals were worth more than $14.2 trillion in 2023.
The Widening Wealth Gap
The net worth of the top 1% of American households rose steadily through the second half of the 20th century and beyond, according to the Economic Policy Institute.
- The wealthiest 1% in the U.S. had net worths equal to about 125 times that of the average American household in 1962.
- Their net worths were about 225 times the net worth of the average household by 2009.
- The gap between the richest and the poorest in the U.S. more than doubled between 1982 and 2016.
The minimum net worth of the top 1% of households is roughly $13.7 million. The top 10% have a net worth of about $1.9 million.
160%
Percentage increase in wages received by the top 1%from 1979 to 2020, compared to 31% for those in the bottom 90%.
The growth in the wealth of middle-class Americans virtually ground to a halt somewhere around the turn of the 21st century. The median income for middle-class Americans rose at an average rate of 1.2% per year from 1970 to 2000. The rate slowed to 0.3% per year from 2000 to 2018.
The wealth of the top 1% continues to outstrip that of the entire middle class. In fact, the top earners hold more wealth than the middle and upper-middle classes put together.
There are various reasons for the disparity but one important factor is outsized stock ownership among the richest Americans. The 1% own more than 50% of the equity shares in both private and public companies. Much of their wealth comes from soaring stock prices.
That, of course, can leave them vulnerable to declines in stock prices. However, they may get even richer if they take some stock gains and reinvest the money in investments catering to rich investors such as hedge funds and private equity ventures.
Underlying Causes of the Wealth Gap
Much of the growing disparity can be traced to the steady flow of tax breaks for income, gifts, and estate taxes. These can disproportionately advantage wealthy Americans. The first $13.61 million of an estate is exempt from taxes as of 2024. That figure is up from $12.92 million in 2023.
The middle class also benefits from this reduction in taxes but it allows the wealthy to retain a much greater portion of their assets and pass that on to their heirs. In fact, there's been a lot of debate about how the Tax Cuts and Jobs Act (TCJA) passed by the Trump administration in 2017 influenced the wealthiest Americans. The Trump White House consistently defended the bill, saying it helped put money back in the pockets of the middle class. Others disagreed.
Economists Emmanuel Saez and Gabriel Zucmanargued in their book The Triumph of Injustice (2019) that the tax reform bill gave the wealthiest households an effective lower average tax rate than the rest of the U.S. population.
The richest person in the world on April 21, 2024 was Bernard Arnault of France who had a net worth of $218 billion. The richest American was Jeff Bezos with a net worth of $197 billion.
Criticism of the Top 1%
There's been a lot of criticism of the world's ultra-rich, especially those living in the United States. They've been accused of hoarding their wealth, lobbying for tax breaks, and not contributing their fair share in taxes.
Many politicians want more taxes on the wealthy. Senator Elizabeth Warren (D-MA) proposed a tax on ultra-millionaires as part of her 2016 campaign to become the Democratic presidential candidate for the 2020 election. Senator Bernie Sanders (I-VT), also a candidate, pushed for an estate tax hike so billionaire heirs would pay more in taxes. But ideas like this fail to gain traction.
President Joe Biden managed to get some measures through in his Inflation Reduction Act of 2022 that pursue new revenue sources from wealthy Americans. These include:
- Additional IRS funding to pursue unpaid taxes from those earning $400,000 or more.
- A minimum corporate tax of 15%.
- A 1% tax surcharge on stock buybacks to discourage excessive use of profits to reward shareholders and executives.
How Much Income Is Necessary to Be in the Top 1%?
An individual would need an income an average of $407,500 per year to join the top 1%, and a household would need an average of $591,550.
What Is the Net Worth of the Top 1% of Americans?
The world's top 1% is formed by the richest individuals. The top 1% of household net worth in the U.S. started at$13,666,778 in 2023.
What Percentage of the Population Has a Net Worth of $1 Million?
Roughly 10% of Americans have a net worth of $1.9 million or more. Compare that to the top 1% of the American population, which has a minimum of almost $3.7 million per household.
The Bottom Line
Like the poor, the rich are always with us. Disparity in income is inevitable in a capitalist society and a free-enterprise economy. However, the fact that the disparity seems to be increasing is a source of growing concern for many.
The share of the nation's wealth in the U.S. held by the top 1% increased from 23% to nearly 32% between 1989 and 2018. The amount of wealth held by the 1% continues to grow.
Correction–April 23, 2024: This article has been corrected to update Forbes information regarding the number of billionaires in the world and their accumulate wealth. It has also been corrected to cite that the net worth of the top 1% was $13.7 million, not $13.7 billion.
