Since we talk so often with programs and professionals about how wealth impacts lives, we thought it would be interesting to discuss how some of the wealthy got their money. For some of you, this may dispel some myths (eg. “The rich inherit their money and don’t appreciate wealth!”).

For the most accurate reporting of wealth (…and really, we mean income), let’s look at the IRS which produces data reports for the top 400 tax returns with the highest adjusted gross income. Unfortunately, the latest report is for 2009. Ancient history to us but the IRS considers this up to date.

In 2009 it took $77.4 million in adjusted gross income to make the top 400. That might sound like a lot, but it’s down from $109.7 million in 2008 and significantly down from a record high of $138.8 million in 2007 (…can you say bubble?).

It took $77.4 million to get you onto the list, though; the average earnings were $202.4 million, a lot of money but well down from the $334.8 million average in 2007.

Boring stuff maybe, but here is where it gets interesting – How the top 400 made their money:

• Wages and salaries:  8.6%
• Interest: 6.6%
• Dividends: 13%
• Partnerships and corporations:  19.9%
• Capital gains: 45.8%

The top 400 averaged $92.6 million in capital gains income –16% of the total capital gains reported by all taxpayers. (Do the math and the whole 1% thing seems like an overestimate.)

Obvious conclusions:

• Working for a salary won’t make you rich.
• Neither will making only safe “income” investments.
• Neither will investing only in large companies.
• Owning a business or businesses, whether in part or partnership, could not only build a solid wealth foundation but could someday…
• Generate a huge financial windfall (selling a company, taking it public, etc).

The data clearly supports the last point. A total of over 3,800 taxpayers have made the top 400 since 1992, but only 27% appear more than once, and only 2% appear 10 or more times.