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What are your TRUE chances of getting rich in America?
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AUTHOR'S NOTE: This document exists online in two different forms: one includes references, while the other does not. This page is the one without references. To see any references referred to in the text, please refer to the other version, which includes said references (links are provided throughout the page). END NOTE.
As pointed out in The super-rich, the 'plain' rich, the 'poorest' rich... even winning the maximum prizes available in high-profile sweepstakes like the Publisher's Clearinghouse won't get you into the 'rich' category without still more large gobs of luck to go with it. Some winners may find themselves in worse financial shape a few years after winning than they were before! And prestigious awards like the Nobel Prize, Pulitzer, or MacArthur Foundation Award fall even shorter in regards to propelling winners into the 'rich' class.
It appears that 69% of everyone qualifying as rich today basically inherited their wealth. So if you have a rich relative who really really likes you (and is considerably older than you), you may have a shot there.
Marrying into wealth isn't so different from inheriting it as many people think. For example, it might still be a requirement that you're related by blood to your spouse(!)
Unfortunately for the gold diggers among us, there's only roughly 31 such eligible men per year, and 31 women, throughout the entire country.
So is there any way to figure out the percentage of the newly rich getting that way from both outright illegal as well as maybe technically legal but unethical activities? Like both big-time dealers in illicit drugs, weapons, and human trafficking, as well as top corporate executives responsible for stealing the pensions or health benefits from thousands or hundreds of thousands of workers, or bilking investors, or secretly committing acts imperiling worker or customer safety or the environment?
Maybe so. For there are some estimates of money laundering to go on here. And all the money that's successfully laundered ends up making its owners smell like roses so far as the public or law enforcement is concerned in regards to their actions.
Basically big-time crooks must at some point 'launder' their money, or disguise it as legitimately gotten gains, in order to spend or invest it in any practical manner without incurring unwanted scrutiny or other problems from official society.
Today there's probably at least $1.5 trillion per year of money being laundered worldwide.
If the $318,000,000,000 of laundered money is distributed among criminal households in America in a fashion similar to that of legitimate funds, then even among criminal families only the top 1% of them would qualify as rich as defined on this site. And that 1% might possess close to 40% of the total annual income for the group. Or $127,200,000,000.
Overall nationwide of ALL the wealthiest 1% (legal and not), 77.38% make between $400,000 and just under $1 million per year, 22.6% between $1 million and less than $175 million, and 0.02% $175 million or more.
Assuming these proportions hold for crime families too, it appears negligible (zero) crime households of this sort are making anywhere close to $175 million a year.
So it appears all criminally financed wealthy households of this kind in America enjoy incomes above $400,000 a year, but well below $175 million a year.
As there's just some 1,464 newly rich US households each year, and we've already accounted for 1072 of them deriving from inheritance or marriage, that leaves only 392 in which any new criminally rich may emerge.
If the criminally rich gain in numbers at roughly the same rate as the officially sanctioned rich (which successfully laundered funds would enable), then their total number may grow at about 7% per year.
So we've got an estimate here of a total amount of criminally made money laundered into the system, plus percentages regarding what fraction of that money likely goes to what portion of the wealthy criminal population in America. And an idea for how much that wealthy population may grow annually.
We also have a ceiling for the actual number of newly rich criminals there could be: 392.
That is, in a year around 2005 where it just so happened that every newly wealthy household was generated either via inheritance, marriage, or crime-- and no other method whatsoever-- 392 would be approximately the maximum number possible for such criminals.
So since we're hurting here for more precise data, why not play with the numbers available to us, and see if that gives us an idea how far off or wrong the 392 number might actually be?
For instance, if 392 represented the total number of newly rich US crooks in 2005-- and approximately 7% the number of pre-existing rich crook population in the country-- then the total number of rich criminal households in America would have to be around 5,600. Out of maybe 132 million total households.
That would put the wealthy criminal element in America at roughly 0.00424% of the total population.
Hmmm. That sounds entirely plausible! Which is surprising to me personally, as I expected the opposite result. I.e., I did the calculation simply to get a sense of how preposterous it might be for all 392 newly rich in America each year without inheritance or marriage sources to usually stem from crime alone.
That would leave the number stemming from actual legal breakthrough entrepreneurial successes like Steve Jobs of Apple Computer, superstar billing in music or films like Britney Spears or Cameron Diaz, or the biggest lottery wins in history as basically just statistical noise. So that in general very near 100% of the newly wealthy in America are getting there by way of inheritance, marriage, or outright crime.
Keep in mind the above figures dealt only with criminals like the higher ups of drug, prostitution, and slavery rings; crooks who must launder their money to get it into the conventional economic system.
But there's a whole other bunch of wrong doers who might never have to launder their money in such a way, as their profits are generated from 'inside' the system to start with, rather than outside: the white collar bunch who exploit secrecy, weaknesses in government regulations and law enforcement, the lag of policy updates behind technological advances, and plain old political corruption to wrongfully endanger or steal from their employees, investors, customers, or tax payers, leaving the rest of us facing the fallout for years or decades to come in environmental degradation, higher deficits and taxes, fewer public services, deteriorating infrastructure, looted pensions and benefits, higher prices, fewer good paying jobs, and slower innovation due to less honest competition. For those additional figures we'd have to plumb the estimates of securities fraud and other such elements occurring per year in America. And yes, I'll try to get to that too as I get the opportunity.
But just skimming some estimates for these seem to further support the overall criminal path to riches, and in the proportion speculated of here.
For example, one old estimate of corporate crime costs stands at 2.6 trillion dollars.
Yikes!
Although the reference above provides a breakdown of the total into items including tax fraud, a much larger number than that for total tax cheating is given in the 2004 article below: $311 billion per year. This larger figure may account for both the lost taxes from white collar corporate crime and the more easily defined crime lords described earlier.
And as the 2006 article shows, the number just keeps rising.
For the richer a crook gets from his crimes, the less likely the government will investigate his ill-gotten gains with a tax audit or other means.
Heck, besides doing its best to stamp out whistleblowing and independent audits and investigations, the government also bends over backwards in other ways to empower insider crime. Like literally hiding some possibly incriminating information under the rubric of "national security" or "executive privilege" or by utilizing other forms of censorship.
Of course the best and easiest way to avoid the availability of incriminating information is to not collect it in the first place. Or else avoid any credible analysis of existing information which might lead to you or your cronies getting into hot water.
One way the government does things like this is by basically allowing corporate lobbyists to write the rules of regulation under which big businesses (and even government agencies!) are run.
But despite them writing their own rules, these guys often can't even abide by those! Apparently due to them feeling they have everything so securely under their thumb that even their own custom-made rules are meaningless.
Another way government aids wealthy crooks and insiders is by making it easy for them to hide portions of their income or assets through use of various loopholes which serve to protect them from taxes or accurate accounting by outsiders. So often the actual net worth and income of the rich or the corporate are even larger than the awesome amounts indicated by the statistics released to the public.
I'm curious if this policy has anything to do with the fact many of our top governmental officials appear to be substantially better off than the rest of us (financially speaking). And election campaign laws have practically assured no poor person can run for office without the blessing of the rich themselves.
But just juggle the books in government or corporate business to shift millions or billions from employee pensions or health benefits (or small investors) to the pockets of you and co-conspirators, and often no one will care at all. Yeah, the employees will get a horrible surprise at retirement (or the next time they get injured or ill)-- as will the investors in their own aspirations-- but you and your cohorts will likely get away scot-free. That's how it's done in America.
But maybe you'd like some more information regarding the massive corporate and/or government crime going on in America these days. Well, for those of you presently visiting the version of this page which includes references, a sampling follows below [CLICK HERE to get the references page if necessary]:
Yikes!
Yeah, sure there's the occasional superstar like Apple's Steve Jobs or Britney Spears who defy the mainstream statistics. Plus a mega-lottery winner now and then. But those are so few as to rate as noise or rounding off errors in the numbers.
Plus there's a small multitude of popular entertainers and athletes whose incomes spike into rich territory briefly only to sputter out later, leaving those folks in the bottom 99% of income again at some point, if they didn't save for a rainy day.
Yikes! Surely that's not so! You might say. Not in America! That inheritance, marriage, and crime represent the only realistic paths to wealth!
Don't believe me? Then let's examine the numbers further...
Well, in order to earn $400,000 a year purely from something like interest, how big would your principal have to be?
Based on the interest currently generated by my own savings it appears that number would be roughly around $35 million.
So someone a millionaire 35 times over could swing it.
With income taxes roughly amounting to 50% for gigantic lottery wins in America, that means someone who won around $70 million all for themselves (no need to split it with a pool of ticket buyers) could get rich-- IF they immediately stuck the money into interest bearing accounts and waited a full year to spend a penny. And never ever withdrew more than a single year's worth of interest annually.
In 2003 the USA boasted 2.3 million millionaires. A 14% increase in a year, according to CNN. Or perhaps some 322,000 new millionaires for the year.
So can we determine how many 35x millionaires are created in the US each year on average?
Hmmm. That number is apparently very hard to come by. But let's try making an educated guess.
Turns out somebody documented the fact there were around 70,000 individuals worldwide in 2003 with $30 million or more in financial assets each.
Yeah, I know. I said 35x millionaires were needed to reach the level of wealth defined here. And these figures at hand will only help determine numbers relating to 30x millionaires. So we are fudging a bit. But still our calculations should get us into the general ballpark for the purposes of this page. And if 30x millionaires could find a way to get a better interest rate than I currently do, then they might achieve the magnitude of wealth we're looking for after all. That's not entirely implausible. After all, folks with a much bigger principal than I possess should have more options interest-wise.
For reasons of comparison with other estimates here I'm going to assume that each of these individuals basically accounts for the lion's share of the income for their immediate family or household.
So we've got 70,000 households worldwide in 2003 possessing $30 million or more in financial assets each.
Around 2001 Merrill Lynch coined the term "ultra-high-net worth individuals" or "UHNWIs" to describe these folks. Another source said they expected this group would grow by roughly 7% each year around 2005 and thereabouts.
So we've got roughly 70,000 of these "ultra-high-net worth individuals" in 2003, with some analysts expecting this number to grow by around 7% annually.
That would give us approximately 4,900 new 30x millionaires or better a year worldwide, circa 2005.
So how many of these are new US millionaires? Maybe 1,464 if the 30x and better millionaires number is proportional to the total US share of global millionaires.
So there's possibly 1,464 new 30x and better US millionaires per year.
Or about one chance out of 202,061.
That means if somehow you could make the whole world maintain its current state indefinitely-- with the only difference being you yourself were immortal-- then you'd need only wait another 202,061 years to definitely become rich yourself! Hooray!
But wait! The above figures include those who basically inherit their wealth. So what's the number who get rich without such an advantage?
Apparently around 454 per year. Of course this number may still include many who get rich by marrying into wealthy families. Could we possibly estimate that number? Maybe.
Let's see: It appears over two million marriages a year take place in America. So over four million (at least some 1.56% of Americans) marry each year.
So for our purposes here virtually all (100%) American marriages including a person of such wealth will also include a much poorer mate.
Unless of course already wealthy households are willing to part with more than 20% of their wealth to help the new family unit enjoy wealthy status. In that case the number of newly rich achieving their wealth without benefit of inheritance or marriage could be lower.
But let's be optimistic!
392 per year amounts to 26.8% (rounded off from 26.7759) of the total 1,464.
Unfortunately, it appears almost all of them do it by breaking the law. As described earlier on this page.
But once in a blue moon someone seems to make it in legal fashion.
Note that the fact these channels never work for more than 1% of those who try them, at most (based on official historical records of wealth) and likely truly work for only something like 0.0004% of the population (according to the information listed in this page: a rate no better than pure random luck, as in a lottery), has done nothing to diminish the credibility of those authors and political groups among the populace, as there's virtually zero media scrutiny of their claims. Before, during, or after the fact. So those authors and political operatives reliably rake in the profits and other benefits of their claims year after year, decade after decade, with no one of prominence challenging the truth of their statements.
Why? Partly because the truth is so hard to come by-- and even if acquired, difficult to analyze. And after that, awfully complex to present to the man in the street.
Haven't you noticed that aspect of this page? The bewildering, overpowering nature of the details and complexity necessary to get at the truth?
Another reason those folks aren't challenged on their claims is Americans-- like all folks everywhere-- want to believe their country is the best place in the world; special. Better than other places, in all the ways that matter most.
And maybe more than anything else, Americans want to believe in the American dream.
But the truth shows that to be overwhelmingly a lie.
Who wants to accept that? Certainly not me! Nor most other Americans, I'm sure.
But anyone who truly craves freedom and opportunity must seek out the truth of their existence. To do otherwise is to court failure at the least-- and calamity at worst.
So it's just another lottery, where pure luck will usually be the major determining factor of success or failure (unless you're already wealthy). See further below for more on pure luck ventures.
Got a great idea you think could make you rich? There's very little chance of that. Sure, your idea might be great, but it's much more likely to be effectively stolen from you in one manner or another rather than bringing you great rewards. Or else you'll simply never be able to gather the resources needed to launch it.
This is why stories about the very very few folks who did succeed in such efforts (like Steve Jobs of Apple Computer) are so well known to practically everyone around the world: they are the ultra rare exceptions.
And all this is despite the fact that the very best company workers might be 50 times more valuable to their employer, than the worst. And yet the very worst in the company may well often get the top positions and top pay(!)
For the vast majority of small business folk, having their own business basically offers them a bit more freedom of personal decision-making and (often) greatly dilutes the power of others to 'boss them around', as the self-employed tend to possess lots of 'little bosses' (customers) while the plain employed usually suffer one or two 'big bosses' (an immediate supervisor, etc.) instead.
In recent history the self-employed usually were forced to effectively work more hours for less pay than the average plain employed person. So it could often be a toss up as to which worker was truly in a superior situation.
But in places like America the edge may now be going to the self-employed, as regular employers are increasingly squeezing their workers to put in similar numbers of hours for similar amounts of pay as the self-employed. Add to that the increasing job and wage insecurity for plain workers these days, and it appears virtually everyone may soon be living like the majority of the self-employed have for perhaps generations.
Only the truly self-employed may enjoy at least slightly more autonomy and security than the plain employed. Plus, there's always the 'lottery' factor for those truly self-employed who are capable of both recognizing a golden opportunity if it appears, and scaling up their organization to exploit it-- as well as willing to do so. That 'lottery' factor is what largely accounts for the success of people like Michael Dell of Dell Computer, who was self-employed in college building PCs for others, and seized a rare opportunity to eventually put his organization in the top tier of computer companies worldwide.
But let me reiterate: most of the self-employed NEVER see such a rich opportunity come their way. And of those who do, fewer still have the skills or other resources available to suitably ramp up their operations to exploit it before someone else. And of the tiny number who both get such an opportunity and can effectively scale up to meet it, some simply choose not to. Why? Because money isn't everything, of course. And often chasing it too far and hard will force you to become a different person entirely, as well as lose many or all of your loved ones-- much the same as might happen if you acquire a drug addiction.
Americans in general have always been among the hardest working folks in the world. The entire nation seems to have inherited a strong work ethic from the Puritans: some of the earliest colonizers from Europe. And in the centuries since, the country has gradually and steadily handed over ever more control over its destiny to purely commercial interests (i.e. business interests and employers as opposed to public interest and employees), sometimes to the detriment of everything else. So today average Americans tend to be at least in the top two or three of the hardest working populations in the world, if not number one. And this may still hold even if the populations of third world countries are included, where in general life tends to be much harsher than that in developed nations.
#6: Saving your way to riches is also out for the vast majority of us-- even where we give up everything which makes life worth living to attempt it.
Getting rich via savings is inextricably linked for most Americans to working harder and/or longer hours [see above for more on that topic]. And becoming wealthy by retirement age through extraordinary life-long personal savings efforts is often touted by various financial sources who wish to directly or indirectly capture our income in their investment pools-- or perhaps merely manipulate us into a futile pursuit of riches for their own (financial service institutions') benefit.
But the percentage of Americans who can afford to religiously adhere to such savings plans for a lifetime is exceedingly small. So small that the actual figure for those achieving wealth in this fashion appears to be negligible.
For instance, let's say you only aspire to be rich during your retirement years. From 65 to 83 (83 is the average American's life exectancy at age 65). Recall you'll require an effective after-retirement income of at least $400,000 a year to be rich by the definition of this page. Ignoring the relatively small addition interest will add to this (especially after income taxes are eventually levied against what you withdraw, and inflation also diminishes your real buying power), you'd need to pile up some $7.2 million in the bank by retirement age to insure a minimum of $400,000 per year withdrawals from age 65 through 83.
Let's also assume you can't or won't get serious about saving for retirement until around age 45. That gives you 20 years to build up $7.2 million. Savings you can't use for anything else in the meantime. That works out to $360,000 per year for 20 years on average, or $30,000 per month.
$30,000 PER MONTH.
The average American household only brings in around $40,000 PER YEAR.
But let's say you instead begin 20 years earlier-- age 25. Surely you can manage it now, right?
This early bird savings plan will require you to put away $180,000 per year for 40 years, or $15,000 per month on average.
$15,000 PER MONTH.
Again, the average American household only brings in around $40,000 PER YEAR. If somehow they could live without food, shelter, clothing, transportation, and all else indefinitely, it would take their entire year's salary to put away only 2.7 months of what's required for building retirement wealth in that period.
But even for those few who can achieve such a goal, the accomplishment could be a hollow victory, as it required them to avoid most of the things which made life worth living, such as getting married and raising a family, among other things.
So attempting to honestly save your way to a fortune may well be an unnatural act so far as the cosmos is concerned. And thus be greatly hampered by natural forces.
Of course it may be tough to discern which came first in many real-world cases: the good fortune or the wasteful or dishonest behavior. But they do seem to have some sort of consistent relationship over time.
But education alone won't make you rich in America-- or anywhere else.
No more than around 500 folks in America make their living solely from writing fiction. And most of those never ever get rich.
Indeed, as of late 2007, in the entire history of the world(!) ONLY ONE author has ever managed to become a billionaire: J.K. Rowling of Harry Potter fame. If the second billionaire author takes as long to appear as the first did after the invention of writing itself, there's thousands of years to go before we'll see the next one!
If you believe your best shot at wealth will come largely via a great stroke of luck, you have lots of company: 40% of Americans of close to average income or below believe the same.
In addition, circa 2005 you're far far more likely in America to become poorer rather than richer, as time goes by.
Namely that luck, like water, always wants to reach a lower place. That is, all luck wants to be bad. And the better quality and more quantity it begins with, the worse and faster it wants to sour.
Think of money as being analogous to luck for a moment. If the nature of luck is as I describe here, and money is basically just one tangible form of luck, then large amounts of money will tend to want to pool where it can either do the most damage, or the least good.
So if money were very much like luck, it would naturally accumulate in vast quantities around only a very small percentage of the population, in order to at least minimize its productivity or other benefits to anyone at all (including its current owners).
As H.L. Hunt (born 1889, died 1974) once said, "...for practical purposes, someone who has $200,000 a year is as well off as I am." William Henry Vanderbilt and John Jacob Astor made similar statements concerning various amounts adjusted for inflation.
Certain anecdotal evidence this could be true abounds. For instance, check out lottery and sweepstakes winners. These often seem to consist of individuals who are on their deathbed (or very near to it), or else business folk who are already wealthy by the standards of most others. And when the winners belong to neither of those groups, they are likely to effectively be deranged in some manner-- abysmally ignorant, immature, naive, or suffering other adverse mental issues of some kind which will almost certainly negatively affect their ability to spend or invest their winnings in a wise or efficient manner.
I'm not saying all big money winners belong to such groups. I'm just saying a substantial percentage seem to. And that would seem to back up some of the ideas presented here on the nature of riches in general.
Apparently they do, according to at least one 1998 Businessweek article (SOAKING THE RICH DOES WORK by Peter Coy).
I hope there was at least ONE of you this year!
As for everyone else in the USA, we'd better hunker down. It's all uphill from here.
Of course we could also try leaving the US to become a citizen of another country, where average folks like us might have it a little easier. And where might that be? Almost any other developed nation in the world. For the USA is rapidly losing ground to just about all of them in practically every measure but for mounting debts and military expenditures. Read the awful truth here.
Unfortunately, many of those other countries aren't very eager to let Americans in these days. At least not as full-fledged citizens. Largely due to the incredible damage done by the Bush Administration to the reputation and credibility of Americans everywhere.
If whilst hunkering down you'd like to also try changing the status quo in America, reading this might be a good place to start.