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1. Let me clarify that I am not taking any position on the amount of mortgage debt that millionaires hold, per se. What I have done is try to argue the point that most millionaires (in the Stanley study) do not pay down their mortgages.

Please also understand that I said one could assume 45% of millionaires, who have owned their homes LESS than 23 years in Stanley's sample currently carry mortgages of $300,000 or more. I never suggested that of ALL millionaires 45% carry that amount in mortgage debt. I cited the $300,000 figure to show that it appeared to be a significant amount of the original purchase price of the millionaire home. Comparing the outstanding mortgage to the original purchase price of the home, suggests more about the how the mortgage was treated than comparing that same mortgage to the current value of the home.

2. Admittedly, Stanley used a “sample” of the millionaire population in which the average net worth was close to $10,000,000. A decidedly “richer” group than the millionaire population as a whole. So I understand that one might be led to believe that the numbers may be skewed upward a bit. However, I think the figures for average net worth and home value are more skewed by how many millionaires are in each group than by the actual figures themselves. (I show this in point 3). In any regard, that's why I made it a point to say that I don't think you can combine statistics from the Stanley study with those from the IRS.

Keep in mind that the IRS study also uses a “sample” of millionaires to come up with its figure. They [IRS] use the Federal estate tax returns filed for decedents who died in a particular year. Estimates of the living population are then derived by using a multiplier, based on appropriate mortality rates, and then are applied to this sample.

In addition the IRS's Study of Income (SOI) pointed out that one of limitations of using estate taxes is the natural tendency for the values reported for all assets to be conservative. This is especially true for hard to value assets, such as real estate and closely held businesses.

3. Let's look at the IRS study vs. Stanley's.

In Stanley's study the average wealth was about $9.2mm.

In the IRS's study the average net worth of those with a net worth GREATER THAN $5mm (N=85,000) is $14.1mm. This is the group that is most comparable to the Stanley group of 733. The average home value of this group is $660,000.

$660,000 is quite a bit more than the average home value of $277,000 for the entire sample. The average home value for those whose net worth is LESS THAN $5mm (N=963,000) is $244,000. Thus the LOWER wealth group, the group worth less than $5mm, the group that is NOT comparable to the Stanley group of 733, influences the home value figure much MORE than the highest groups.


Now,

If you look at the IRS study, you must agree that most millionaires probably do not have mortgages greater than $300,000. But I (or Stanley) was never talking about MOST millionaires. Only the ones in the Stanley study. In addition, I wasn't commenting on the amount of mortgage debt. I was commenting on the treatment of the mortgage. The amount of debt is only a clue in that regard.

All this to say, that I think my assessment of the Stanley millionaires, the 733, is right on.

- They tend NOT to pay off their mortgages early
- 60% of all surveyed carry mortgages
- 80% of those that bought their homes less than 23 years ago carry mortgages
- 45% of those that bought their homes less than 23 years ago carry mortgages of more than $300,000


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