Being a millionaire today isn’t what it once was. According to Bloomberg News, nearly one in five U.S. households now has a net worth above $1 million — and about one-third of them have reached that mark since 2017. Yet most of this wealth exists only on paper.
America is entering what experts call the “Era of the Illiquid Millionaire.” It’s not the worst problem to have, but it’s reshaping how society defines wealth, with major effects on the economy and public policy, reports Tribune News Service.
Much of this wealth surge comes from soaring stock markets and rising property values. Since 2009, U.S. stocks have climbed more than sevenfold, while real estate prices have jumped 125%. These gains didn’t happen by chance — they stem from decades of government policies that encouraged investment. In 1989, only 32% of Americans owned any stock; by 2022, that number had reached 60%.
The biggest driver of this change has been the rise of tax-deferred retirement accounts, the main way most Americans save. Since the 1980s, these accounts have replaced traditional savings, giving people a sense of prosperity that can be misleading. Retirement funds are illiquid — investors can’t withdraw money before age 59 without penalties or taxes, and withdrawals are taxed as income, often at higher rates than capital gains.
Housing is the other major source of wealth, making up around 40% of the average American’s net worth. Policies promoting homeownership — tax breaks, mortgage subsidies, and low interest rates — have fueled this trend. Yet homes are also illiquid assets. Selling a house involves high costs, and sellers must still find somewhere else to live, often in an expensive market.
This creates an illusion of prosperity. Many Americans feel richer by checking their brokerage accounts or browsing property listings, but real wealth is often far less than it seems. In fact, once taxes and penalties are considered, the average person may be about 35% less wealthy than they appear on paper.
These policies have achieved some goals, like ensuring people save for retirement and depend less on public assistance. But they also bring new risks. The government continues to push for more illiquid investments — such as allowing private equity in 401(k)s — even when asset prices are already high.
The illusion of wealth can also lead to higher debt, as more people take home-equity loans or borrow against retirement savings. And while these accounts may promise security for the future, they increase vulnerability to financial shocks today.
If markets fall sharply, millions of Americans who feel wealthy on paper could suddenly feel poorer — and start spending less. That drop in confidence could have serious consequences for the entire economy.
