Hey- where's my share?
In Boston, nearly 1 in 20 households are millionaires
By Sasha Talcott, Globe Staff | January 1, 2006
The number of millionaires living in the Boston area, already one of the wealthiest regions in the United States, will surge 50 percent over the next five years, according to data from two wealth management companies that have studied the issue.
For a city that as recently as 30 years ago struggled with a decaying urban core, the expected influx is one more sign of its dramatic turnaround. By 2009, the number of millionaire households in the region is expected to increase to 88,000, up from 58,000 in 2004.
The projected growth rate parallels the national average. But because Boston starts out with a higher percentage of millionaires in its population -- nearly one in 20 households, more than New York, Chicago, and Los Angeles -- and because the overall population is barely growing, demographic specialists expect more impact here.
The wealth surge will shape the future of the region and the quality of life in Boston, both for future millionaires and those who are nowhere close. Already, businesses catering to the wealthy are flocking to the city: Steakhouse Smith & Wollensky, where the average evening diner spends $72, opened in the Back Bay in 2004. Financial services companies Northern Trust and Bank of New York recently set up new offices here to serve the wealthy, while Bank of America Corp. moved its global wealth and investment management division to Boston.
Those new high-end businesses mean more jobs. But the jump in millionaires may also drive up prices for numerous services and goods, including housing. Down the road, some economists worry about the deeper social implications of a rapid rise: The rich will enjoy ever more of life's luxuries, while the poor struggle to pay rent and dig out of debt.
Economist Mark Zandi said he sees two classes emerging in Boston and nationally: One earns above the region's median family income, about $75,000 in the Boston area, and lives in comfort, with job security, stock holdings, and little debt. The other half earns below the median, has far less job security, and worries about credit card debt and student loans.
''This reinforces the view that the folks who are doing well are doing very well, and the folks who aren't doing well aren't doing very well at all," said Zandi, chief economist for Moody's Economy.com. ''The middle class is bifurcating. It's becoming two classes."
The projected rise in millionaires will be fueled by several factors, said William Whitt, vice president of strategic marketing at Northern Trust, which obtained information on the growth in millionaires from demographic data company Claritas Inc. Several of Boston's key industries -- financial services companies, the technology industry and law firms -- all pay their high-level executives hefty salaries.
Separately, a generation of baby boomers is hitting its peak earnings years and saving for retirement in 401(k) plans -- creating a ''millionaire next door" phenomenon in which even a middle manager can save more than $1 million. That trend exists across the country, but Boston has a slightly higher concentration of people in management roles, and they earn about $10,000 a year more on average.
Economic growth also fuels the increase. The Northern Trust data defines millionaires based on a person's liquid investable assets, which excludes their homes but includes 401(k) assets, bank accounts, and stocks and bonds.
''You have a lot of wealth created through regular retirement savings plans," Whitt said. ''The upper middle management has managed to save quite a bit of money."
It's also a sign that a million dollars isn't what it used to be. Most people with only $1 million cannot afford to buy private planes or hire private chefs, said Beth C. Gamel, executive vice president at Pillar Financial Advisors in Waltham. ''Some of these things sound quite wonderful, but this is a very expensive lifestyle."
In the Boston area, the millionaires are scattered mostly across suburban towns, according to the Claritas data: In Lincoln and Weston, more than a quarter of the households are millionaires, the highest concentration in the region. The 02110 zip code of downtown Boston has 24 percent millionaires; Chestnut Hill has 20 percent.
The growth in wealth may be good news for Boston's nonprofits. Economists said the wealthy are more likely to give to charity and serve on boards.
The wealthy also want the best for their children -- and are willing to spend to get it. ''Money is a means to an end, it wasn't an end to itself," said Gordon Silver, a former senior managing director at Putnam Investments who left the company in August 2004. Silver, 58, sent his children to private schools. He joined the boards of several nonprofits, including The Wang Center for the Performing Arts and Massachusetts Eye and Ear Infirmary.
He also used his millions to travel: Since leaving Putnam, Silver has biked from Prague to Vienna, skied in Switzerland, and stayed at the Golden Door spa near San Diego.
For companies that serve the wealthy, business is booming. Marquis Jet, which sells debit cards redeemable for flight time on a fleet of private jets, said its sales have increased 67 percent nationally this year to $500 million, said its Boston-based chairman, William J. Allard.
Smith & Wollensky's business has been so good that the steakhouse opened for lunch, and executives have said they expect Boston to outperform most other locations in the next 10 years.
With its relatively safe streets, well-educated population, and amenities such as trendy restaurants and theaters, cities like Boston also tend to attract the affluent, who in turn attract more high-end amenities.
Not all Bostonians necessarily feel that the proliferation of millionaires and the growth of luxury businesses is a good thing. But whatever the drawbacks, most cities would probably envy Boston's situation.
Rob Gavin of the Globe staff contributed to this report. Sasha Talcott can be reached at email@example.com.
BTW, my brother is an IBEW construction electrician and says the only real work available for him in the USA that pays good wages is in Mass. He wants to keep living out in WA and AK, but there's no $$ out there......