Understanding Millionaire Status: How Many Are Truly Millionaires Without Counting Their Home?
Discover why counting home equity can distort the real picture of millionaire status. Learn the difference between net worth and liquid assets, and how many Americans truly have $1 million in investable assets.
💡 Learn more: Check out our guide on The Debt Trap Most Beginners Fall Into for deeper insights.
Understanding Millionaire Status: How Many Are Truly Millionaires Without Counting Their Home?
When people hear the word "millionaire," they often picture someone with a seven-figure net worth, a beautiful home, and financial freedom. However, a deeper look at net worth reveals a more nuanced reality. Many so-called millionaires owe their status largely to the value of their homes rather than liquid assets they can readily access. This distinction matters because true financial security depends on more than just paper wealth. Let’s explore the difference between total net worth and investable assets, and why counting home equity can paint a misleading picture of millionaire status.
💡 Learn more: Check out our guide on The Debt Trap Most Beginners Fall Into for deeper insights.
Table of Contents
🏠 What Defines a Millionaire?
At its simplest, a millionaire is defined as someone whose net worth totals one million dollars or more. Net worth is calculated by adding up all valuable assets—such as cars, real estate, businesses, collectibles, and cash—and then subtracting all liabilities like debts and loans.
Despite the straightforward math, debates arise over what should count as part of net worth. Some argue that non-liquid assets like homes or collectibles shouldn’t be included because they aren’t easily converted to cash. However, net worth by definition includes all assets, regardless of liquidity. The key is recognizing the difference between net worth and liquid or investable assets.
💰 Investable Assets vs. Home Equity
Investable assets refer to liquid wealth that can be quickly converted into cash. This includes money in bank accounts, stocks, bonds, mutual funds, and retirement accounts. While assets like real estate and collectibles have value, they are generally not considered investable assets because they are harder to sell and their market values fluctuate.
Home equity—the market value of a home minus any mortgage debt—is often the largest asset on a person’s net worth statement. However, it is not liquid wealth. Accessing home equity typically requires selling the home, refinancing, or taking on a reverse mortgage, all of which involve significant time, costs, or risk.
📊 How Many Millionaires Are There Without Counting Their Home?
According to data from UBS Global, approximately 24 million people in the United States have a net worth of $1 million or more when including the value of their home. This represents about 7% of the U.S. population and roughly 9% of adults.
However, when home equity is excluded, the number of true "investable asset millionaires" drops sharply to about 6 million, or only 2.3% of adults. This means only about 1 in 43 adults have at least one million dollars in liquid assets they can access immediately.
This is a critical distinction. While many individuals appear wealthy on paper due to their home’s appreciated value, far fewer have the liquid wealth to achieve financial independence or retire comfortably without relying on selling their property.
🔍 The Reality of Being “House Rich but Cash Poor”
Owning a home with significant equity is an accomplishment that reflects years of savings, discipline, and financial stability. However, home equity is not spending money or income. It cannot be used to pay bills, invest, or cover unexpected expenses without converting the equity into cash through selling or borrowing.
For example, a couple in their sixties who fully owns a $750,000 home but holds only $250,000 in savings technically qualifies as a millionaire. Yet, they may still need to work or rely on limited income sources because their liquid assets fall short of covering living expenses. Meanwhile, a renter with $1 million in stocks and cash could feasibly retire immediately, despite having zero home equity.
💡 Why Liquid Assets Matter More Than Net Worth on Paper
Net worth is a common financial benchmark, but it often obscures the true financial freedom a person has. Liquid assets provide flexibility—they can generate income through investments, fund emergencies, and enable lifestyle choices without the need to sell property.
Financial independence depends on passive income streams and accessible cash, not just the value of illiquid assets. Someone with a million dollars in investable assets and income-generating investments is in a fundamentally different position than someone whose million-dollar net worth is tied up in their home.
📉 The Retirement Challenge of Home Equity Millionaires
Many retirees appear wealthy on paper due to home equity but struggle financially because they lack sufficient liquid assets or income. Maintaining a high-value home can be costly, and without steady income or accessible cash, retirees might find themselves "house rich but cash poor."
Options such as downsizing, renting, reverse mortgages, or cash-out refinancing can convert home equity into usable funds, but these require action and often come with trade-offs. Without liquid assets or passive income, retirees may face difficult financial decisions despite a seemingly strong net worth.
📈 The Rise of Home Equity Millionaires
In recent years, soaring real estate prices have pushed many homeowners into millionaire status based almost entirely on home equity. For instance, someone who purchased a modest home in California two decades ago may now have a net worth exceeding one million dollars thanks to market appreciation.
Yet, this surge in home equity does not automatically translate to financial security. Many of these homeowners are still working and managing tight budgets because their liquid assets remain limited.
🔑 Key Takeaways
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Net worth includes all assets minus liabilities, but it does not reflect liquidity.
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Home equity is a large but illiquid part of many people's net worth and cannot be easily accessed as cash.
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Only about 2.3% of U.S. adults have one million dollars or more in liquid investable assets.
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Financial independence depends on liquid assets and passive income, not just total net worth.
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Retirees with high home equity but low liquid assets may struggle financially despite appearing wealthy on paper.
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Balancing home equity with liquid investments is crucial for true financial stability and freedom.
❓ Frequently Asked Questions
What counts as investable assets?
Investable assets typically include cash, stocks, bonds, mutual funds, and retirement accounts—assets that can be quickly converted to cash or generate income. Real estate, vehicles, and collectibles generally are excluded due to lower liquidity.
Why isn’t home equity considered liquid wealth?
Home equity requires selling the property, refinancing, or taking out a reverse mortgage to access as cash. These processes can be costly, time-consuming, and may impact living situations, making home equity less accessible than other assets.
Can someone be a millionaire without owning a home?
Yes, individuals can accumulate over one million dollars in investable assets without owning property. Such individuals often have portfolios that generate income and provide financial independence regardless of housing status.
How does home equity affect retirement planning?
Home equity can boost net worth but doesn’t generate income. Retirees relying heavily on home equity may need to downsize or use financial products like reverse mortgages to fund living expenses, which requires careful planning.
What is the difference between being "house rich" and financially independent?
"House rich" means having significant net worth tied up in property but limited liquid assets, while financial independence means having enough liquid assets and passive income to cover living expenses without needing employment.
🔚 Final Thoughts
Counting home equity as part of net worth inflates the number of millionaires but can obscure the true financial picture. While homeownership is a valuable asset that builds wealth over time, it does not replace the importance of liquid assets and passive income for financial freedom. Understanding the difference between total net worth and investable assets is key to evaluating real wealth and planning for a secure financial future.
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