It's no secret that the United States has a large wealth gap that has been widening in recent years. According to Federal Reserve data, the top 1% of U.S. household incomes held about 26.5% of household net worth as of June 2023, Reuters reported. This ratio is up about 1.5 percentage points from 2019, before the COVID-19 pandemic.
Read more: 7 ways the upper middle class will get wealthy in 2024
Read next: 6 genius things wealthy people do with money
The U.S. Census Bureau found that the share of income held by the top 5% of earners will increase to 23.5% by 2022, up from 23.0% three years ago, continuing a trend that dates back to the 1980s. Meanwhile, the share of the nation's wealth held by the bottom 40% of earners has fallen from 7% to 6.7% over the same period.
These numbers support the idea that the rich are getting richer and the poor are getting poorer. But how true is that? Here are three truths and two myths about this idea.
sponsor: Protect your assets with a Gold IRA. Take advantage of gold's timeless appeal with a Gold IRA, as recommended by Sean Hannity.
Truth: The super-rich are getting (super)richer
Oxfam's research has found that the world's richest 1% of people have accumulated almost two-thirds of the new wealth created in recent years — “six times more than the bottom 90% of humanity,” the report said, citing data from Credit Suisse.
Myth: All the poor will get poorer
This is (mostly) not true. The lowest-income Americans have owned a smaller share of the nation's wealth in recent years, but that doesn't mean they have less money. In fact, Reuters reports that the combined net worth of the bottom fifth of earners is expected to grow 27% to $4.2 trillion by the end of the second quarter of 2023, up from $3.3 trillion four years ago.
Truth: The wealthy benefit more from tax cuts
Once you have accumulated enough assets, you can afford to invest in tax-advantaged assets. For example, according to data from the Survey of Consumer Finances, as of 2022, 93% of high-income households had a tax-advantaged 401(k) or other retirement plan, while many low-income Americans had no retirement plan at all. The wealthy can also afford to wait for tax benefits on long-term and short-term capital gains.
Myth: Rich people get richer because they're good at managing their money
This is a common misconception, but it ignores the fact that many wealthy people go bankrupt. According to a blog by famous penny stock investor Timothy Sykes, the average millionaire goes bankrupt at least 3.5 times. While Sykes doesn't cite a source for this statistic, there's no denying that the wealthy can afford to hire the best financial advisors and investment professionals.
Truth: People who grow up poor can become wealthy
As GOBankingRates previously reported, a study by “Rich Habits” author Tom Corley found that 41% of 177 self-made millionaires surveyed grew up in poverty, and one of the keys to escaping poverty is a willingness to take risks.
“Growing up in poverty forces you to take risks in the pursuit of wealth,” Corley says, “so overcoming the fear of taking risks becomes a habit.”
More from GOBankingRates
This article originally appeared on GOBankingRates.com: Are the rich getting richer and the poor getting poorer? 3 truths and 2 myths about building wealth
