Millionaires have always received mixed reactions. Some believe that being a millionaire is a sign of success, others see millionaires as profiteers, supporters of capitalism or worse, crooks. The term is loaded with meaning.
However, many Quebecers want to become one, seeing the popularity of lotteries, among other things. Millionaires arouse envy.
But what does it mean to be a millionaire today, in an era where the average price of a single-family home exceeds $600,000 in the Montreal region? And by the way, in which asset class have Canadians invested their wealth, the one discussed in the Global Wealth Report 2023 from the firm UBS, which my colleague Nicolas Bérubé talks about?
While digging, I discovered some surprising things. Among other things, that Generation X, which was said to be sacrificed, has just seen its wealth exceed that of the baby boomers. I’ll come back to it.
When I was young, the idea of being a millionaire was practically unthinkable. It was reserved for a few exceptional cases, especially in Quebec, this land of faithful born for a small bread. This is no longer the case today, with inflation which has eaten away at the value of money, in particular.
In fact, to compare yourself to a millionaire in 1980, you would have to have assets of around 3.3 million today, if we rely on the consumer price index (CPI). Or, today’s millionaire could be compared to a person with assets of “only” $302,000 in 19801.
In short, we no longer have the millionaires we had…
According to the UBS report, Canada had more than 2 million millionaires in 2022, or 1 in 19 Canadians. And again, these are millionaires in American dollars, for the purposes of international comparison. It’s still a lot, more than in most countries.
Except that the wealth that is taken into account does not only include the financial assets and rather liquid investments of citizens, but also their homes and the value of their retirement plan. It is therefore not surprising, in this light, that the average wealth of Canadian adults amounts to US$369,580 (nearly CAN$500,000), according to UBS.
In Canada, Statistics Canada maintains a register of Canadian household wealth for each quarter. A household has just under 2.5 people in Canada, including children. At the end of 2022, their average wealth was C$927,680, having reached 1 million at the start of 2022, before the stock and real estate markets fell.
In other words, the average Canadian household is a millionaire today.
Where are their assets? On average, 38% are in real estate (once the mortgage is subtracted) and 19% are in their retirement plan, according to Statistics Canada data. The real value of these plans is not necessarily known to households, since they are often promises of possible income, not current value.
In Quebec, a larger share of assets is found in the retirement plan. The difference is probably explained by the many public and parapublic sector employees who benefit from such plans and the lower value of homes here.
Moreover, to have demonstrated it in a column in 2021, a civil servant of the Quebec government, whose average salary is around $70,000 today, has a retirement plan which is worth more than $750,000 after 35 years on duty. And for executives who earn $100,000, the value of the plan after age 35 is around 1.4 million2…
Boomers and X
Furthermore, while digging, I discovered that for the first time, the wealth of Generation X exceeded that of baby boomers in 2022.
This overtaking is notable, in the context where Generation X has long criticized the baby boomers who preceded them, jealous of their numerous paying jobs, in addition to more generous social benefits.
In 2022, therefore, Canadian Generation X households saw their wealth reach $1.35 million, on average, or $100,000 more than the 1.25 million boomers, according to Statistics Canada data.
It must be said that boomers are no longer adding to their assets as much as before, as many of them are retired. According to the definition used by Statistics Canada, in fact, boomers are today between 58 and 77 years old.
Furthermore, Generation X households like millennials have seen their wealth explode by 255% over the past 10 years! In contrast, people aged over 77 saw their net worth decrease by 28% in 10 years, while boomers benefited from an increase of 48%.
The Canadian portrait is enviable internationally, with Canada finishing in 9the rank for average and median wealth, according to UBS. The wealth of Canadians, however, varies considerably from east to west.
Quebecers, in particular, are significantly less wealthy than the average. The average net worth of Quebec households at the end of 2022 was $684,800 compared to $927,860 for Canadians.
In addition, the relative wealth of Quebecers, put in proportion to the Canadian average, has declined considerably since 2010. At the time, the average Quebec household had assets of $426,000, or 83.8% of the average Canadian wealth ( $507,800).
This proportion declined rapidly until 2017, probably due to real estate, before reaching a low of 73% in 2021, then recovering for the first time in 2022, to 73.8%.
Consolation prize, so to speak: wealth has risen significantly faster than inflation in all regions for 10 years. The average Canadian increase is 66%, double inflation (31%), while that of Quebec was 47%.
Quebecers therefore still have some catching up to do, if they still have to want to…
1. The CPI is imperfect, since it does not fully take into account economic growth and living standards, nor the increase in the value of certain assets, such as property. Housing still appears in the CPI consumption basket and remains an interesting indicator for comparison.
2. For the purposes of the example, I restated the average salary to $70,000, although it was $63,617 in the 2021 column (the most recent salary available for calculations was from 2017 ). For the 2021 chronicle, see here:
2023-09-16 12:00:10
#longer #millionaires
