Professionals say it takes $5 million to be rich

Houston Chronicle:

For some it might be $100,000. Others might say it's $1 million, $5 million or even $100 million.

Or maybe it's simply having a happy family.

Never mind the back-and-forth squabbling between presidential candidates John McCain and Barack Obama over who owns what and how much, there doesn't seem to be a magic number that universally defines "rich."

"It's really in the eye of the beholder," said Mike Kreach, chief investment officer at Houston-based Amegy Bank. "Basically, the less money you have, the less money you think you need to become rich. The more money you have, the more money you think you need."

Kreach said most people in finance use the $5 million mark, and apparently others agree.

In a January telephone survey of 253 people with at least $500,000, 45 percent said it takes at least $5 million to qualify as rich.

Another 25 percent said $25 million, and 8 percent picked $100 million, according to the Spectrem Group, a consulting firm that specializes on research about wealth.

For the Internal Revenue Service, earning $349,700 qualified for the top-tier 35 percent tax bracket in 2007.

The Securities and Exchange Commission, meanwhile, requires individuals to earn $200,000, couples $300,000 or households to show they have $1 million in the bank before they're considered wealthy enough to safely invest in lightly regulated instruments like hedge funds.

The U.S. Census Bureau, which in its most recent annual Current Population Survey in 2006, estimated that 2.3 million households — or 1.9 percent — brought in at least $250,000, the highest figure it measures.

"I think as you get more wealth, you set the bar higher," said Tom Wynn, director of Chicago-based Spectrem Group. "The expectations increase as you move up."

While the term "millionaire" once was a synonym for "rich," it's not necessarily anymore.

To business litigator John Zavitsanos, eight figures seem to be the dividing line.

"To me someone who has a net worth of $10 million to $15 million probably doesn't have to work again as long as they don't go crazy," said Zavitsanos, whose clients include many wealthy Houstonians. "But most people who have a net worth of less than $15 million don't think of themselves as rich."

To Ron Brandt, rich means two things: Not having to work for a paycheck and not considering cost when shopping for a luxury item.

Beyond that, wealth is sort of hard to define, said Brandt, senior vice president in charge of private banking at Sterling Bank in Houston.

He thinks "rich" when he sees a client with a net worth of $100 million.

"But when I see $5 million, I think 'Wow, that's going to be a great customer,' but I don't think 'Whoo-ee! Rich! They can do anything they want.' "

To be rich in Houston? To Charlie Neath, that requires household income in the $200,000s to have all the bases covered.

Neath, a Realtor with John Daugherty Realtors in Houston whose sales have included four $1 million plus homes this year, remembered in the 1980s when the magic number for income was $100,000.

"The new $100,000 is $250,000," he said.

Kreach said it's important to keep wealth in perspective. An income of $47,500, the U.S. median, stands among the wealthiest 1 percent globally.

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This story does not mention McCain's glib statement at the Warren forum on what is rich but it does put it in perspective. McCain may have been being subtle because the income his family receives from his wife's business is around $5 million annually. It is nice to know that those at the US media are in the top one percent in the world. That is a number you are not likely to get Obama or any Democrat to admit to.

There is also the difference between income and wealth. When all those rich folds start buying up property around you the value of yours goes up raising your taxes with without raising your cash flow. Then you have less after tax income but are worth more.