A few weeks ago I tweeted:
The easiest way to tell if someone is out of touch financially—ask them whether they think $1 million is a lot of money.
While most people responding to this tweet agreed with me, some pushed back as well. There were some skeptics who argued that $1 million used to be a lot of money, but it wasn’t anymore. Considering that we recently experienced the highest inflation of the past 40 years, I understand the feeling.
But, is that feeling true? Is $1 million still a lot of money? Or do you need a bit more to “make it” in the U.S. today?
To answer this question, I will look at the purchasing power of $1 million over time and how rich $1 million would have made you throughout history. To start, let’s analyze what you can actually get with $1 million.
What Can You Get with $1 Million?
Near the turn of the century, being a millionaire was all the rage. The Millionaire Next Door was first released in 1996 and in 1999 Who Wants to be a Millionaire? became one of the most popular gameshows in the United States. Back then having $1 million was a statement that you had made it in a big way.
But what about in 2025? According to the BLS’s CPI calculator, $1 million in 1996 would have the same purchasing power as $2 million today. In other words, if Thomas Stanley and William Danko had to re-write their bestselling book, they would need to title it The Multi-Millionaire Next Door.
But the overall inflation rate doesn’t tell the full story. Because some goods have gotten more than twice as expensive over this time period. One such good is real estate, especially in high cost of living areas.
For example, in Los Angeles the median home price increased from $231,141 in 2000 to $878,396 by 2022, up nearly 4x. The same is true in New York, where the Case-Shiller Home Price Index has increased by 216% (a 3.16x increase) since 2000:
So while having $2 million today would give you the same overall purchasing power as someone with $1 million in 1996, if you live in a high cost of living area, you’re probably going to need a bit more.
How much more? Given the change in home prices in places like LA and NY, I’d say $3 million. Of course, this could change if real estate prices end up coming down a bit, but who knows? Either way, $2 million is the minimum to get back to the traditional $1 million in purchasing power and you might need a bit more depending on where you live.
While looking at price changes is one way to tackle this problem, another option is to compare the distribution of wealth over time. In other words, how rich did $1 million make you in the past and how rich does it make you today?
How Rich Does $1 Million Make You?
If we could go back in time to the late 1990s and look at the wealth of every household in the U.S., we would find that having $1 million (in net worth) put you around the top 5% of households. This figure comes from the 1998 Survey of Consumer Finances, the gold standard of wealth data compiled by the Federal Reserve.
Well, according to the 2022 Survey of Consumer Finances (the latest data available), a net worth of $1 million would have put you in the top 19% of U.S. households. So while having $1 million still makes you well above average today, it doesn’t have the same relative buying power as it once did.
So, how much wealth would you need to have (as of 2022) to be in the top 5% of U.S. households? $3.8 million. In other words, you would need about $4 million today to feel relatively as wealthy as someone with $1 million did in 1998.
We can visualize this over time by looking at the 95th percentile of net worth (in nominal dollars) of U.S. households from 1998 through to 2022:
This chart explains why people who have a few million dollars today may not feel as wealthy as millionaires of prior decades did.
Unfortunately, the rise in wealth at the upper end of the spectrum has created this dynamic. This partially explains why housing prices in places like LA and NYC have risen faster than the overall price level in the economy. There is an intense competition for limited goods (like real estate) amongst the upper middle class and prices have risen accordingly.
So while $1 million is still a lot of money, unfortunately, you aren’t going to be able to throw your financial weight around because so many more people have $1 million as well. But this is just part of a long-term trend to more millionaires (mostly due to the decline in the long-term purchasing power of the U.S. dollar). As Arthur T. Vanderbilt II stated in Fortune’s Children:
Before the Civil War, there were fewer than a dozen millionaires in the United States. In 1892, the New York Tribune published a list of 4,047 millionaires, over 100 of them having fortunes that exceeded $10 million.
Today, there are more millionaires than ever. Capgemini did a study that found that there were 7.4 million millionaires in the U.S. in 2023. However, they defined a millionaire as someone who has $1 million in investable assets. Given that the typical millionaire household has roughly 30% of their assets in their home, many of the millionaires in Capgemini’s study likely had $3M (or more) in total wealth. This means that the total number of millionaires in the U.S. today is much higher.
Though $1 million doesn’t have the same buying power as it did three decades ago, there are many reasons why it’s still a lot of money.
The Bottom Line: Why $1 Million is Still a lot of Money
Whether we are looking at changes in prices or overall wealth, $1 million isn’t what it used to be. Today, you’d need anywhere from $2 million to $4 million to have the same buying power as millionaires around the turn of the century. But, focusing too much on the raw numbers misses a bigger point.
Because if I had to choose whether to be a millionaire in 1998 or today, I’d take today every time. The issue isn’t purchasing power, but the absolute level of goods and services that you can get today vs. 30 years ago. Though you could buy a better house back then with $1 million, just about everything else is better today.
We have better technology. We have better healthcare. We have better entertainment options. We have better shipping and logistics. And so forth. The device you are reading this blog post on is multiple orders of magnitude more advanced than anything that was available in the late 1990s.
When viewed from this perspective, $1 million goes further today than ever before. Of course, not everyone will agree with me. Some will say that relative purchasing power is all that matters. For some things, this is definitely true. But I’m not sure that this argument holds more broadly.
Because if you gave every millionaire in the late 1990s a chance to switch places with a millionaire today, I bet the vast majority of them would do it. What they would give up in relative bargaining power they would more than make up for with a higher standard of living.
Then again, I’m a hyper-optimist. I believe that things are getting better in general over time. And though the U.S. dollar is declining, $1 million is going to continue to buy a whole lot for the foreseeable future.
Happy investing and thank you for reading!
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This is post 437. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data
