Thursday, November 8, 2012

The naivete of the ultra-affluent

The ultra-affluent--those defined as the richest folks in America--took a lot of heat over the past several months as President Barack Obama and his challenger, Governor Mitt Romney, battled it out on the election stage and debated tax plans and economic policy.  Interestingly, the folks who fall into this "rich" category don't seem to know that they are in the  ultra-affluent group, and they were relatively sanguine about the results of the election.

According to Ipsos Mendelsohn Affluent Barometer (August 2012), the ultra-affluent are 1% of the U.S. population and are defined generally as households with income of $250,000-$325,000 plus per year, depending upon who you're consulting.  Those with household incomes of $250,000 or more--the line frequently used by President Obama and Democrats to mark where tax increases should hit--is how Mendelsohn identifies the "ultra affluent," which actually is the top 2-3% of Americans.  The U.S. government raises the bar to somewhere in the $325,000 neighborhood.

In survey results released in August, 49% of respondents in this "ultra affluent" group said they don't expect their savings or investment plans to change in 2013, regardless of the election winner.  A substantial number--55%--do expect to pay higher taxes if Mr. Obama is re-elected while 27% don't expect the election outcome to make a difference.

What's perhaps of keenest interest is how the most affluent think of themselves as less affluent.  Households that are in the top 20-25% of earners on average think that they are in the 38th percentile.  The ultra-affluent, in the top 2-3%, of earners on average think that they are in the 16th percentile.

The lack of awareness of economic status is a change from 2006-2007 when consumers tended to overestimate their wealth, or felt like they were on the verge of striking it rich.  I guess we can hypothesize that the market crash of 2008-09 caused this fairly radical shift in "affluency awareness."

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