How much do you need to be rich these days?
Average household wealth, and what it takes to rank among Australia's wealthiest 1%.
Being a billionaire isn’t what it used to be. Back in 1990, Australia had one of them – the late media mogul Kerry Packer. But these days Australia has lots.
According to the just-released Australian Financial Review Rich List, there are now 150 individuals and families with an estimated wealth topping $1 billion. Collectively they control more than $600 billion in assets.
This year’s entry point just to make it onto the AFR’s list of Australia’s richest 200 was $718 million.
How to get on the rich list
There is no absolute dollar number that defines being rich. In simple terms, being rich on a financial level means having an abundance of wealth.
Australian Bureau of Statistics (ABS) data shows that the average net worth of Australian households in 2019-20 (its latest measurement period for individual households, released in April 2022) was just over $1.04 million.
Excluding the family home, investment properties, home contents and motor vehicles, Australian households on average held $445,000 in shares, bonds, cash, superannuation, and other assets.
Average household wealth has been growing steadily since then. ABS data for the December 2023 quarter, released in March, shows aggregated Australian household wealth rose for the fifth successive quarter, largely as a result of increases in residential property prices and investment assets including superannuation.
Analysis by global real estate consultancy Knight Frank quantifies what it takes to be among the richest 1%, based on information provided by private bankers, wealth advisers, intermediaries, and family offices.
Knight Frank’s 2024 Wealth Report, released in March, found that the minimum amount of money and assets needed in Australia in 2023 was US$4.673 million (about $7 million).
It was actually easier to get on the Australian rich list last year than it was in 2022, thanks to a weaker Australian dollar against the U.S. dollar and because of the financial impacts of slower economic growth.
To be among the top 1% wealthiest Australians in 2022 required a significantly higher amount of US$5.5 million (about $8.26 million).
According to Knight Frank, Australia ranked seventh in the world for the amount of money needed to be in the top 1% in 2023, down from third in 2022.
Monaco remained in the top position, where $US12.883 million (about $19.34 million) was needed.
How much money is enough?
It’s an age-old question and, unlike quantifying how much money it takes to be in the top 1%, there’s no absolute number in terms of how much money individuals and couples actually need.
That’s because financial needs are always very specific to one’s personal circumstances and spending needs.
For example, how much money people need to have a comfortable life in retirement can’t really be averaged out to an actual number because that ultimately comes down to individual spending levels.
Longevity risk – the risk of outliving savings – is a growing concern for many retirees in deciding how much money to draw down from their superannuation balance during retirement.
This is where sound professional advice matters. Vanguard’s research has found there is a strong correlation between the use of a financial adviser and retirement confidence.
Preparing well ahead for life in retirement is key. People with the lowest confidence about their retirement tend to be the least actively prepared.
Often they have never accessed financial advice and have little understanding of how they can achieve their retirement goals. They also expect to be more reliant on the government’s Age Pension after they retire than those with higher retirement confidence.
A good starting point for many Australians should be to seek out professional advice, especially in the context of retirement spending and understanding how the Age Pension may play an important role.
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