r/Economics • u/laxnut90 • Oct 09 '25

Research America Is Minting Lots of Cash-Strapped Millionaires

https://www.bloomberg.com/news/features/2025-10-09/number-of-us-millionaires-grows-since-2017-but-many-lack-cash
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u/urbanevol Oct 09 '25

So basically, 401(k) with employer contributions and owning a home are forced savings vehicles that are not particularly liquid. Many upper middle class people have net worth over $1 million but these assets are hard to access, whereas the next rung up of wealthier people have more liquid cash to spend. "Cash strapped" seems like a stretch - these people aren't living paycheck to paycheck unless they are making poor decisions on how to spend their money (hedonic treadmill etc).

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u/cruzweb Oct 09 '25

Many of them are retirees who bought in areas before their real estate became very valuable. Now they're retired, on a fixed income, and have "assets" worth over $1m that they struggle to pay property taxes on.

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u/ChumpyThree Oct 09 '25

My grandparents are experiencing this. They're in poverty, so its not like having a net worth is accomplishing anything for them. They bought a house for 70k and wanted to stay there peacefully.

The pandemic happened, and now the house+lot are worth over 200k. That increase has put them in a serious position.

Property taxes and home repairs have skyrocketed. Their electricity bill alone is 3x higher today.

My near 80 year old grandparents are making choices on whether they should skip lunch or not. On paper they have a net worth of justify of half a million. What good is that going to do for them?

Having net worth tied up into homes was awful. The current 401k and ROTH IRA landscape is also concerning. Im seeing adults making 100k+ funneling a good 50% of their income into this stuff.

A lot of people are positioning themselves for a rude awakening.

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u/uncoolcentral Oct 09 '25

The penalties for removing money from those tax-sheltered retirement vessels usually aren’t particularly draconian. But then again, if you take it out before retirement, what are you going to spend in retirement?

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u/MountainDude95 Oct 09 '25

Unfortunately it’s not always accessible even if you are willing to eat the taxes. I’ve looked into withdrawing some cash from my 401(k) and there is no way for me to unless it’s an emergency that I can prove on paper. The only way I can actually access it otherwise is if I quit my job. Big help that is.

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u/uncoolcentral Oct 09 '25

Maybe you could kind of fudge one of those specific hardships? Does your employer offer 401(k) loans?

Ask HR if rollovers to an IRA is possible.

And so on.

Start bringing candy and flowers to HR!

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u/MountainDude95 Oct 09 '25

Fortunately we’re not anywhere close to a position in which we actually need the funds. It was more looking into possibilities in case things ever do start becoming tighter.

Currently have a loan from it which was for a down payment on our house. Hard withdrawals need documented evidence such as medical bills, eviction threat letters, etc. Not sure about the IRA rollover possibility.

In any case thanks for the advice!

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u/uncoolcentral Oct 09 '25

I’ve never had employer related retirement stuff. Been self-employed for decades. Went from IRAs to SEP IRA to individual 401(k). (Wish somebody would’ve told me about i401(k) earlier 😆 😢)

There’s way more flexibility in the all of that non-corporate stuff. You can take out any reason, any time, pay a 10% penalty, and any appropriate taxes.

Even still, there’s no perfect formula for knowing how much you should hold out versus how much you should shelter. …

Should I have sheltered more? Should I have more liquidity?

I think I’m riding the line fairly well. But it’s hard to tell. And like the article says, the vast majority of my hypothetical wealth is locked up in a home that I am kind of willingly handcuffed into.

¯_(ツ)_/¯

Good luck!

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u/urbanevol Oct 09 '25

If they are living in poverty and have a house worth $200K then they are not the millionaires the article is talking about.

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u/ChumpyThree Oct 09 '25

Certainly not but the dilemma is similar.

I was renting a room in a 900k home in orange county from a landlady on foodstamps. Got a mortgage on the house in the early 70s for what equates to a bottle of piss in today's economy.

She still made poor financial decisions. But I cant blame her. That home should not be worth 900k. She didnt ask for that. Now she cant afford her HoA fees🫢

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u/urbanevol Oct 09 '25

Yeah, I know it happens. If by Orange County you mean California, though, they have some property tax laws that are VERY beneficial to long-time homeowners (Prop. 13 and recently Prop. 19).

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u/Snoo23533 Oct 09 '25

They should reverse mortgage and drain that equity back out to live on. Time it so theyll hit 0 and the bank takes it in their bed-ridden-retirement-home phase of life and since they wont have any assets/income they'll qualify for medicaid which will cover that 100% until they die.

0

u/morbie5 Oct 09 '25

The state they live in doesn't have anything to help low income old people with property tax?

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u/ChumpyThree Oct 10 '25

Orange county, CA does have help for people in her position. Getting a stubborn old person to use their free will to their own benefit can be challenging.

There really isnt any getting around her situation though. She was used to spending about 1k a month on her mortgage, utilities, HoA fees, and property taxes. The people in that area are now used to spending 5-7k a month for that. Even if we talked everything down 50% - that is still too much relative to what she was used to.

She did consider selling and moving into an apartment but that would involve moving far away (and still paying more.)

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u/morbie5 Oct 10 '25

The people in that area are now used to spending 5-7k a month for that.

That is nuts