By Susan-Elizabeth Littlefield
/ CBS Minnesota
Good Question: What does it mean to be a millionaire?
MINNEAPOLIS— It's a headline that may come as a surprise: As USA Today reports, an average 50 year old in the U.S. now has a net worth of over a million dollars.
So, what does it mean to be a millionaire? Good Question.
In American society, it's a seemingly magic number.
Jeanne Boeh teaches economics at Augsburg University and says it's not what it used to be.
"If you had a million dollars 30 or 40 years ago… I would always use Gilligan's Island and they would sing about the millionaire. Well that's because a million dollars was worth a lot at that point. It's not any more," she said.
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Boeh explained that a million dollars in the bank levels out to a $40,000 a year retirement payout.
"You are not poverty stricken, but you are not wealthy," she said.
Asked about the headline, saying the average 50 year old has more than a million net worth, she explains that net worth is different than net pay.
"If you are living with a million dollars net worth, you are not living as if you have a million dollars income every year," Boeh said.
Net worth includes the equity in someone's home, paid-off cars and savings.
Boeh also says averages can be deceiving.
"You just have to pay attention to the median of anything. The median income is the way the average person lives, 50% above, 50% below. Don't pay attention to the average. The average is skewed by really rich people like Bill Gates and Jeff Bezos."
Data from the Fed shows the mean average for a 50 year old's net worth is $1.3 million. The median average of 50 year olds is just $305,000.
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The bottom line, Boeh says, "We need to keep saving."
Boeh says the younger you start saving, the better, because of compounded interest.
If you save $300 a month in your 20s, that's the equivalent of someone in their 50s saving $1,000 a month.
