One hundred years ago, millionaires were seemingly as rare as unicorns. They were mythical people who resided in ivy-covered estates and lived lives of conspicuous consumption.
Having $1 million in savings and investments in the year 1900 was equivalent to having $30 million today. Even by 1980, a time when a lot of baby boomers were still graduating from college, a $1 million bankroll had the spending power of about $3 million today.
Alas, becoming a millionaire is still a long climb for those who are not born into wealthy families. But, all things considered, it's much easier than at any point in contemporary history — assuming average stock market returns going forward. About one in 20 Americans, over 17 million people, are now considered millionaires according to Money magazine, and their ranks are growing by about 1,700 a day.
Nationwide, some 7.2 million households (about 5.8%) have amassed at least $1 million according to Kiplinger.com, which published the statistic last summer from Phoenix Marketing International, a company that studies the affluent. To meet the $1 million threshold, the company considered household assets such as education savings accounts, IRAs, 401Ks, brokerage accounts, savings and cash-value life insurance. Real estate holdings, such as home equity, were not counted.
Even in Tennessee, where median earnings are more than 15 percent below the national average, almost one in 20 households (4.67% to be exact) have a seven-figure sum in invested assets, not counting real-estate assets. Putting things in perspective, if you are a Tennessee citizen, you are about as likely to live in one of the state's 122,585 millionaire households as you are to have hazel-colored eyes.
Still, Tennessee ranked only 46th among the 50 states in concentration of millionaires, according to the Kiplinger's report. Georgia, by contrast, ranked as having the 32nd highest concentrations of millionaire households in the nation, with about 5.2%. If you're wondering, the highest concentration of millionaires is in Maryland where 7.87% of the population lives in millionaire households. The lowest concentrations of millionaires is in Mississippi where only 4.03% of the population live in millionaire households. Alabama weighs in with 4.61% millionaire households.
How millionaires multiply
How did this happen, this surge of literally millions of millionaires?
Well, a combination of factors, most notably a rising stock market which, except for a few brief, if sharp, downturns, has risen consistently for more than three decades, experts say.
Even as early as 1998, the authors of the best-selling book, "The Millionaire Next Door," argued that America's millionaires were not, for the most part, the heirs of wealthy individuals, but instead hard-working, frugal professionals and business owners who lived below their means and invested well.
Where are the millionaire households?
Tennessee - 122,585 households, or 4.67% of all homes
Georgia - 200,395 households, 5.2% of all homes
Alabama - 88,880 households, or 4.61% of all homes
Highest concentration - Maryland (7.87 %)
Lowest concentration - Mississippi (4.03%)
Source: Kiplinger.com/Phoenix Marketing International
"Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline," according to the book's authors. What's more, the authors argue that those who have conspicuous spending habits, in the form of fancy cars and oversized houses, are often flaunting their debts, not their wealth.
Meanwhile, the math of accumulating a million dollars across several decades is pretty straightforward. Almost anyone with steady employment and investing discipline can get to seven figures during a 40-year work career, personal finance experts say.
Dr. Bento Lobo, First Tennessee Distinguished Professor of Finance at the University of Tennessee at Chattanooga, says to amass a $1 million portfolio a person must save $8,300 a year (about $670 a month) and earn an average of 5.5 percent return on investments per year for 40 years. Lobo notes that someone earning the median Tennessee income, about $51,340, needs to save about 16 percent of income, pre-tax.
"As a rough rule of thumb, that's not a bad strategy," he says. "But the discipline of it is important."
Lobo says the trick is to begin salting away 15% to 20% of yearly earnings early in one's career to get in the habit of limiting consumption. It's much harder to roll-back spending (to accelerate savings) later on, he said.
"It's easy to raise consumption but hard to cut it back," he explains.
Whether $1 million is a reasonable retirement goal depends on your likely longevity and your health, Lobo says. If for example, your retire at 65, live 20 more years and draw down your savings 5% annually, that's about $6,600 a month, he says. For some, that's a comfortable sum, but for someone with a chronic health condition it might not be enough.
Cost of living matters, too
Of course, how far your money stretches matters, too. The so-called cost-of-living in Tennessee, for example, is 13.2 percent lower than the national average. Meanwhile, all those millionaires in the D.C. suburbs in Maryland pay a 21.4 percent premium — largely in higher taxes and housing costs — to live near the nation's capital.
Meanwhile, some say Tennessee, which has no state tax on inheritances and is phasing out the Hall tax on interest and dividend income, is well positioned to attract even more millionaires in the future.
"Historically, Tennessee is an immigration state with more people moving here [than moving out]," says Justin Owen, president and CEO of the Beacon Center of Tennessee, a free-market think tank that advocates for lower taxes. "In previous years, it was lower income people [moving in] who took more services. The fact that more and more wealthy people are [now] moving to Tennessee helps the state budget and allows us to provide more services for the state."
Before Tennessee eliminated the state tax on large estates in 2016, many wealthy retirees chose to live in neighboring North Carolina, which had tax policies friendlier to wealthy, Owen said.
"I do think good tax policy does help draw people here," he says.