We present here estimates for the number of accredited investors by age in the United States for full-year 2016. In our accredited investors in America post, we estimated around 9.86% of households qualify as accredited… and using ages here reveals a very interesting distribution. Our accredited investor estimates range from .52% for householders aged 25-29 up to 16.56% for households headed by someone aged 80 or more.
What’s the Accredited Investor Criteria in America?
The Securities Act of 1933, §230.501 defines what you need to qualify as an Accredited Investor. For a couple or individual to qualify, these are the most common methods:
- $1,000,000 in net worth for a couple or individual outside equity in a primary residence (see our Net Worth Percentile Calculator, which allows excluding equity)
- (or) A couple which earned $300,000 the last two straight years and expects to continue in the current year.
- (or) One individual who earned $200,000 the last two straight years and expects to continue in the current year.
Accredited investor status is required for certain investments, such as angel investments, hedge funds, private equity, and others. It’s also commonly the first screen for franchising.
What can Accredited Investors Invest In?
For public investments, he SEC requires that companies and private funds register security offerings and mandates specific disclosures. Alternatively, once an investor qualifies as an Accredited Investor, that investor can then invest in private placements. That includes things such as venture capital funds, pooled real estate crowdfunds from a company such as RealtyShares, angel investments, hedge funds, and other private placements such as franchises.
Number of Accredited Investors by Age Estimates
As stated above, households with a head of a certain age were up to 32x more likely to be accredited than younger households. When graphed, you can see that the accredited investors by age distribution is heavily skewed toward older households.
Here is that estimated data in table form:
|Age Min||Age Max||Total Households||Households Accredited||Percentage|
All our data comes from the 2016 Survey of Consumer Finances, so we use households as our base unit for convenience. However, the law itself states that this only applies to a natural person and his or her spouse. There is no such thing as an ‘accredited investor household’, so the actual numbers will differ some at the margins.
Accredited Investor by Age Methodology
The Federal Reserve SCF microdata is the base for all of this data, the so-called “gold standard” for net worth studies. Individual survey questions apply to a household head and a secondary person (often a spouse), so we attempted to divide income between them. Here is our criteria:
- Net worth MINUS primary home equity >= $1,000,000
- Household Income >= $300,000 and Normal Income >= $300,000
- Either of
- Household Head Income >= $200,000 AND Normal Income >= ($200,000 + Spouse Income)
- Spouse Income >= $200,000 AND Normal Income >= ($200,000 + Household Head Income)
There are errors on two sides:
- We over-count households on the margin where there is a non-married person with significant earnings and/or net worth living with a married couple.
- We under-count if pension or investment income would have qualified an investor (but not a couple).
Also note that our estimates aren’t too confident, especially for younger households. Here is the actual number of household responses in each age range for the public set (before the SCF imputations) and the estimated number of accredited investors surveyed:
|Age Range||Households Surveyed||Est. Accredited Investors|
|18 – 24||205||3|
|25 – 29||357||3|
|30 – 34||441||10|
|35 – 39||492||49.2|
|40 – 44||535||72.8|
|45 – 49||576||128.2|
|50 – 54||658||172.4|
|55 – 59||743||271.6|
|60 – 64||703||266.8|
|65 – 69||577||218.2|
|70 – 74||366||135.4|
|75 – 79||270||104.6|
You can apply your own judgement to how much you trust individual age group accredited investor estimates. Caveats aside, the numbers are reasonable estimates of the distribution by age and raw quantity of accredited investors.
Conclusions on the Number of Accredited Investors By Age
As you might expect, there are many more older accredited investors than younger accredited investors. We’ve done some work on DQYDJ on how income changes over a career, and net worth usually accumulates over time. From households headed by a 25-29 year old to 80+ year olds, there’s a whopping 32-fold increase in accredited investors.
Though the resolution on this data isn’t perfect, it lets us estimate some interesting facts:
- The median age of an accredited investor is between 60 and 64 years old
- 25.7% of all accredited investors are in their 50s
- Only 6.22% of accredited investors are in their 30s or younger(!)
While you might have assumed the broad conclusion, the degree of the skew is perhaps a bit surprising. The fact remains, though, that accredited investors are rare, and young accredited investors even more-so.
For more on age based measures of affluence and wealth, see our income percentile by age and net worth by age calculators. Let us know if you see anything interesting mashing up those articles with this one. And certainly also let us know how this data strikes you – more skewed than you thought, or about in-line?