Is a six-figure salary enough to make someone feel wealthy nowadays? What about a $500,000 salary?
In an inflationary period, wealth benchmarks are fluctuating targets. Everything appears to cost more.
According to Bankrate, cumulative inflation has increased prices by 22% since early 2020. To put it another way, you would need to spend around $1,220 in late 2024 to achieve the same purchasing power that $1,000 provided in January 2020.
The average American makes little less than $60,000 per year, according to federal figures. However, most of us believe you need twice or three times as much to reach financial security, let alone wealth.
“There’s so much that goes into the perception of being wealthy,” said Sarah Foster, a Bankrate economic analyst. “Inflation is a huge part of it.”
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“The idea of having a fancy car in the driveway and a beautiful family home used to be the stereotypical idea of the middle class, and now it’s feeling more and more exclusive,” she told me.
The highest-paying positions now pay in the $400,000 area. However, a $400,000 salary will not place you in the top federal income tax rate in 2025.
Here are seven incomes that represent American riches at the end of 2024.
$626,350
Earning more than that in 2025 will result in the highest federal income tax rate for individuals, 37%.
In our progressive tax structure, the bigger your income, the higher your tax rate. The highest rate is allocated for top earners.
The rise in tax brackets demonstrates the influence of inflation. In 2020, the 37% tax rate applied to individuals earning $518,400 or more.
$520,000
According to Bankrate’s July Financial Freedom Survey, Americans believe this is the average amount of income required to feel wealthy.
According to Census data, such pay places you comfortably in the top 2% of American earners.
Interestingly, when Bankrate asked Americans what wage would make them feel just comfortable or financially secure, they provided a significantly lower figure: $186,000.
“Comfortable is, you have everything you need, whereas rich is being able to do a little more on top of that,” said Foster, of Bankrate.
$483,000
That is the salary Americans thought they would need to feel rich in 2023, according to the same Bankrate survey.
$400,000
In recent projects, the Biden Administration has used that figure as a rather arbitrary income criterion for those they believe to be extremely wealthy.
In 2023, President Joe Biden advocated tax increases for the wealthiest. However, he promised that individuals earning less than $400,000 would not face increased taxes.
When the IRS launched a campaign against rich tax cheats that year, they told the public that audit rates would only rise for those earning over $400,000.
As an annual compensation, the value is roughly equivalent to the top 2% of American earners.
Why $400,000?
“That’s a number everyone can understand,” said Caleb Silver, editor-in-chief of Investopedia, a financial media website.
$340,667
According to a recent estimate by GOBankingRates, the top 5% of earnings in West Virginia will have an average income of this much in 2023.
In Connecticut, however, the average income in the top 5% earned $676,016.
“Wealth, and how much you need to feel wealthy, depends a lot on how much you spend, and on where you live,” Silver told me.
Top incomes are rapidly rising. In 2018, only two states’ top 5% earned more than $500,000 on average. In 12 states in 2023, the richest 5% earned more than $500,000 each.
According to Andrew Murray, head of internal research at GOBankingRates, some individuals appear to live in a distinct reality. “I couldn’t even imagine that amount of wealth.”
$295,000
According to the 2022 Census, your income ranks among the top 5% of American households.
That’s the minimum. In 2022, the wealthiest 5% of households earned an average of $499,900.
$270,214
Empower’s September Secret to Success study found that the average annual wage required for financial success is this amount.
The survey’s notion of success varied greatly with age. The average Baby Boomer believes a salary of $99,874 per year indicates accomplishment. Gen Z members received $587,797.
“Younger generations are doing the math,” explained Rebecca Rickert, Empower’s head of communication. “They foresee a world in which they’ll need a big cushion in order to make it.”
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