Is It Better to be Mass Affluent or High-Net-Worth? Weighing the Differences


The mass affluent hanging out with the high net worth on a boat

The mass affluent hanging out with the high net worth on a boat

While ‘millionaire’ might not be as weighty of a title as it was decades ago, seven figures of wealth is a significant accomplishment that indicates success and stability. Mass affluent individuals, with their robust yet accessible wealth, form a vital economic backbone in the United States, while high-net-worth individuals (HNWIs) exert more influence across markets. Exploring these groups’ nuanced characteristics and strategies can help propel you toward a brighter financial future. HNWIs have more assets than those who are mass affluent but represent a smaller section of the population.

If you’re wondering how to grow or protect your net worth, consider talking to a financial advisor.

Who Are Mass Affluent Individuals?

Mass affluent individuals have between $100,000 and $1 million liquid assets with an annual household income above $75,000. While these individuals have less financial resources than high-net-worth individuals, they make up about 26% of America’s population. They are also the second-largest economic subsection of consumers in the country, living an upper-middle-class lifestyle and holding substantial liquid assets (as opposed to illiquid assets, such as real estate).

The defining factor of mass affluent individuals is the combination of income and assets. As a result, individuals who fit part of the definition (either an income above $75,000 or assets above $100,000) aren’t mass affluent individuals.

Who Are High-Net-Worth Individuals?

A high-net-worth individual (HNWI) is a person who owns at least $1 million in liquid assets, excluding assets like a primary residence or collectibles. Because definitions of individual wealth in America have soared well beyond the $1 million mark, HNWIs fall into one of three subgroups:

  1. High-net-worth individuals (HNWIs) have liquid assets between $1 million and $5 million.

  2. Very-high-net-worth individuals (VHNWIs) have liquid assets between $5 million and $30 million.

  3. Ultra-high-net-worth individuals (UHNWIs) own more than $30 million in liquid assets.

Due to their substantial assets, high-net-worth households often require specialized services from financial advisors and wealth managers, including investment management, tax advice, assistance with trusts and estates, and access to hedge funds and private equity firms.

HNWIs play a crucial role in the economy because they often invest in businesses, real estate and financial markets, which can drive economic growth, create jobs and stimulate innovation. Likewise, due to their financial standing, HNWIs often have access to exclusive investment opportunities, private equity deals and high-end financial products and services that may not be available to the general public.

Lastly, HNWIs typically prioritize multi-generational wealth. They work with estate planners and financial advisors to ensure a smooth transition of assets to heirs or beneficiaries. As a result, they usually arrange living trusts and create wills to ensure their wishes for their wealth are carried out in a detailed manner.

Mass Affluent vs. High-Net-Worth Individuals

Differences Between Mass Affluent and High-Net-Worth IndividualsDifferences Between Mass Affluent and High-Net-Worth Individuals

Differences Between Mass Affluent and High-Net-Worth Individuals

Here are three key differences between mass affluent Individuals and HNWIs:

  • Liquid Assets: Mass affluent individuals have less wealth than HNWIs. Specifically, their wealth ranges between $100,000 and $1 million in liquid assets. In addition, mass affluent individuals, by definition, have an annual income of at least $75,000, while HNWIs don’t have an income threshold as part of their categorization. Instead, HNWIs solely have liquid assets of more than $1 million. Plus, HNWIs break into distinct groups as their asset amount stretches upward.

  • Population Size: The mass affluent category encompasses around 26% of America’s population (a total of 32.3 million households). On the other hand, HNWIs account for 10% of the population (12.1 million households). As a result, mass affluent individuals represent a wider swath of the country’s demographics. HNWIs are a smaller segment, indicating a higher concentration of wealth among fewer households.

  • Distinguishing Characteristics: The two groups also have sets of defining characteristics. For example, 40% of mass affluent individuals are baby boomers. In addition, they are typically (though not exclusively) white-collar and married. Conversely, HNWIs tilt toward entrepreneurial activity and have typically built and sold a business in their lifetime.

How to Calculate Your Net Worth

To see which category you fall in, you can calculate your net worth with a straightforward formula. To do so, you’ll subtract your liabilities (specifically, any substantial debt you carry) from your assets. Remember, while mass affluent individuals and HNWIs don’t count their primary residences in their net worth calculation, counting your primary residence toward your net worth if you aren’t in one of those categories helps you see your full financial capacity.

Here’s an example: Say your home is worth $500,000 and you have $300,000 left on your mortgage. You have two cars worth a total of $15,000. In addition, you have $10,000 in your bank account and $50,000 in your retirement account. You also have $20,000 in remaining student debt and $25,000 in auto loans.

So, your total assets are: $500,000 + $15,000 + $10,000 + $50,000 = $575,0000

And your total liabilities are: $300,000 + $20,000 + $25,000 = $345,000

Therefore, $575,000 – $345,000 = a net worth of $230,000.

How to Increase Your Net Worth

Increasing your net worth is realistic even if you aren’t a mass affluent individual or HNWI. Here are three tried-and-true strategies to expand your net worth:

Use Compound Interest

Compound interest is a powerful financial concept that involves earning interest not only on the initial amount of money you invest (or save) but also on the interest that accumulates over time. This way, your money grows at an accelerating rate.

As a result, begin investing or saving as early as possible. The longer your money has to compound, the more significant the growth will be over time. Furthermore, instead of withdrawing your earnings, reinvest them back into your investments or savings. This tactic enhances the compounding effect.

Invest Consistently

Successful investing requires contributing regularly to your portfolio, regardless of market conditions. Remember, the stock market has provided an annualized average return of over 10% in the last 50+ years. So, a monthly deposit to your investment account during both economic booms and busts will help you get further than trying to time the market or throwing all your money into a savings account.

Investing in a fund that spreads your capital across different asset classes helps diversify your portfolio, maximizing opportunities across the market. Lastly, it’s critical to periodically review your investment strategy and make adjustments based on your financial goals, risk tolerance and market conditions.

Minimize Debt

Minimizing debt involves managing and reducing liabilities, such as credit card debt, mortgages and loans. Doing so reduces the interest you pay and frees up more of your income for savings and investments. Specifically, by focusing on paying off high-interest debts first, you’ll save money over time. This rule can also apply to delaying investments to prioritize debt. For example, a $10,000 credit card balance with a 20% interest rate will incur more debt through interest than a retirement account growing at 7% per year.

Bottom Line

SmartAsset: Differences Between Mass Affluent and High-Net-Worth IndividualsSmartAsset: Differences Between Mass Affluent and High-Net-Worth Individuals

SmartAsset: Differences Between Mass Affluent and High-Net-Worth Individuals

Understanding the distinctions between mass affluent individuals and HNWIs provides valuable insights into navigating America’s diverse financial landscape. Mass affluent individuals, comprising a significant portion of the population, possess substantial liquid assets ranging from $100,000 to $1 million, with an annual household income above $75,000. On the other hand, HNWIs have a net worth of over $1 million. On an individual level, calculating net worth by subtracting liabilities from assets offers a clear perspective of your financial wellness. Implementing the right strategies fosters financial growth, stability and security, paving the way for a more prosperous future.

Tips for Mass Affluent and High-Net-Worth Individuals

  • Building wealth can be challenging because of debt problems or the lack of investment knowledge. In addition, retirement planning raises questions about tax liabilities, lifestyle choices and risk preferences. Fortunately, a financial advisor can help you gain clarity on these issues and move forward with a customized financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • For a more detailed guide for breaking into a higher economic status, here are seven ways to boost net worth.

Photo credit: ©iStock.com/Anchiy, ©iStock.com/EXTREME-PHOTOGRAPHER, ©iStock.com/VeranikaSmirnaya

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