How Much Income Is Considered Rich? (With Data)

Being rich is an aspiration for most people, and the way to build generational wealth is usually through a high income that or you're just simply born into a wealthy family, but then you run the risk of being a spoiled, trust fund kid. It's a beautiful yacht, but Papa is not enough. I have to compete with the Russian oligarchs and the Saudi Arabians who have 100 meter yachts and are taking over Saint-Tropez. Now, you don't need a fancy yacht or private jet to be considered rich, but a high income will make you a top earner. We're going through the top household incomes in the United States, according to the Federal Reserve, the IRS and census data. So let's get into it. Starting with the top 10% of household incomes, the income needed to be a top 10% household income in the U.S. is about one hundred and ninety one thousand dollars per year. And this is across all cities in the United States. But depending on where you live, which we will discuss later in this video, these top income figures can change drastically. Incomes will also vary depending on your age as well as education level. So as you can probably figure out, if you just graduate college and let's say the age of 22 in the top one or top 10% of income for you is going to be a lot different from, say, someone who's age 48 and in the middle or the peak of their career. The blog of dollars and data has neatly taken the data and summarize them into bar charts and tables for us. So I'll link them down below so that you can check them out after this video. But we can see that the 90th percentile income by age. So the top 10%, you can see that it varies quite a bit. Someone aged 35 or younger, their top 10% income will be one hundred and twenty two thousand dollars. But as they progress through their career, you can see that the top 10% income changes and is generally the highest in the 45 to 64 age range. As retirement nears, then you can see the income decline. And that's pretty natural. As people stop working because they're starting to retire, then their average income or their median income levels will come down. Now, separating this out even further, we can see more granular data for the age ranges in this table. And you can see that the top 10% of income peaks at age 45 to 49 at two hundred and seventy five thousand five hundred and three dollars per year. If you're right out of school and you start to earn more than seventy one thousand dollars per year, then boom, you're in the top 10% already. However, as you age, you're going to have to start leveling up your income as well. If you want to stay within the top 10% threshold, you can see that the biggest jump to stay in the top 10% is definitely between the ages of 35 and 39 and 40 to 44, where the top 10% income rises by over fifty three thousand dollars per year. Now, in my head, knowing that the median household income in the United States was seventy two thousand dollars per year, I was pretty shocked at these numbers because I thought they would be a little bit lower. Like I thought the top 10% income in the United States would be closer to maybe one hundred and fifty thousand dollars per year. But it seems like I was pretty wrong. And it's a lot higher, but not as high as the next bracket, which is the top 5% of all incomes in the United States. You actually need to earn an average of two hundred and ninety thousand dollars of a salary to be considered the top 5%. Now, similarly with the top 10%, we can see that the age ranges here for the top 5% fluctuate very closely, with the peak actually being in the 50s range at a high of four hundred and fifty eight thousand dollars between the ages of fifty five to fifty nine to go from the top 10% to the top 5%. If we're just comparing peaks to peaks only, then we're going to have to bring in about one hundred and eighty to two hundred thousand more dollars per year just to do that. The place where it's easiest to break into the top 5% of all incomes in the United States is definitely when you are younger, because the difference is just not that drastic. Someone straight out of school. Let's pretend they are a computer engineer. Their salaries and their offers can vary just based on the company and location. So a strong offer could actually land them in the top 5% of all incomes. And that just has to be over eighty six thousand dollars per year. However, if they apply to a similar company that just might not have that much of a budget, then their offer could be a little bit weaker and they could end up in the top 10% of all incomes. Still not a bad place to be, but you can see that the difference between 10% and 5%, especially when you're younger, is very small. But let's actually get into the top 1% of all incomes in the United States now, because that's where the details get pretty juicy. To be considered a high income earner in the top 1%, the average income needed is going to be six hundred and fifty two thousand six hundred and fifty seven dollars per year across the entire United States. We can see that by age. The distribution here is pretty similar to the top 10% earlier. Typically, earnings are going to peak when someone is between the ages of 45 and 55. Now, earlier to go from the top 10% to the top 5%, that difference in the salary, even at the peaks, was between 180 to 200K. But to go from the top 5% to the top 1% now, the peaks could be more than eight hundred thousand dollars per year, even up to one point two million dollars per year. That's a really huge contrast. And that kind of just goes to show you how much more income is being skewed to the top 1% compared to the top 10 or the top 5%. Now, the one variable that I haven't talked about yet is the impact of education on income levels. It turns out that education plays a massive role when it comes to how our incomes shape throughout our entire careers. The data shows that as your education increases, your income is correlated as such. So the following blog, DQYDJ, which actually means don't quit your day job, examines how different levels of education changes the average median and top 1% of incomes. What I found fascinating here was that if you did not graduate high school, let's say you dropped out in the 12th grade your senior year versus if you got a high school diploma just a year later, the median income differed by over twelve thousand dollars a year. And the top 1% of income differed by over fifty thousand dollars a year. By having a college degree, the income disparity was even higher. You can see that the median income for a bachelor's degree is sixty five thousand dollars per year, while the top 1% of bachelor degree holders will go up to the four hundred and seventy eight thousand dollar income level. That's pretty on par with a lot of top 1% of earners in the nation. Now, not surprisingly, or maybe a little surprisingly, having a master's or professional school degree or doctorate will actually catapult your earnings into the moon and the cosmos and the UFOs. If we just take a look here, the professional degree median income is one hundred and eighteen thousand dollars, whereas the top 1% of income for people that get a professional school degree is over a million dollars. For those of you that don't know what a professional school is, examples could include medical school, law school, pharmacy school and business school, et cetera. Did I mention that you can also catapult your earnings if you like this video and subscribe to the channel? Because that's really how you can do it. And maybe you'll get to meet a UFO as well. Now, depending on where you live, how much you need to feel rich is going to vary really widely. So someone in Oklahoma City could feel really rich on, say, one hundred thousand or two hundred thousand dollars per year versus someone in New York could need a lot more of a salary to feel that same level of rich. So this website called Smart Asset used a paycheck calculator to figure out the after tax income, and then they compared that income across 76 different cities and adjusted for the cost of living using the data from multiple sources. Since Oklahoma City has about a 14% cost of living lower than the national average, your money goes a lot further there. So according to their calculations, $100,000 in Oklahoma City is worth $84,498. Compare that to New York, where $100,000 is worth $35,791 after taxes and accounting for the cost of living. That means someone making $200,000 per year in Oklahoma City could feel richer than someone making double that, $400,000 per year in New York City. However, I would probably argue that I would still want the $400,000 salary by living in New York City, especially when you consider the different types of benefits that you can get and the types of convenience that you can get by living in the city. It all depends on what you personally think will make you feel rich. So if it's convenience and variety, then perhaps living in New York will give you just that. You could eat a really nice lunch, followed up by a world class museum, and then perhaps you grab some dinner along the way and then maybe watch a basketball game at Madison Square Garden. I also think by having a bigger salary, no matter where you are, you're going to get a lot more flexibility and options when it comes to that money. It's easier to save more when you are just making on aggregate a lot more money. And if you want to be really frugal with that high salary as well, then you can probably take home more money as well. Looking at what it takes to become a top 1% income in every state, we can see that the list here is led by Connecticut, Massachusetts, New Jersey, New York, California, and so on. You actually need an income floor of over $952,000 to be considered a top 1% income in Connecticut. But getting into the top 1% can fluctuate quite a bit by state. So the bottom five states are the following. West Virginia at $367,000 per year will get you in the top 1%. Mississippi at $381,000 per year. New Mexico at $411,000. Kentucky at $445,000. And then Arkansas at $450,000 per year. So we can see that the top 1% income by state really fluctuates at $367,000 for the low end versus $952,000 at the high end. This study is also interesting because it noted that southern states in general have the lowest income thresholds to get into the top 1%. It points out that six out of 10 states with the lowest income thresholds are actually located in the southeast versus the highest income thresholds are going to be on the west and the east coast in places like California, New Jersey and Massachusetts. I'll link the full report down in the description below so that you can check it out after this video. If you're curious about your state. Another point that I want to bring up is that if you're watching this video from the US, the UK, Australia, Canada, New Zealand, Switzerland, Europe, places like that, if you live in a nice country, you're already really rich compared to the rest of the world. Roughly half of the world's richest 1% of people live in the United States, according to Branko Milanovic, a World Bank economist. And you can actually see the full breakdown here of some of the other countries in the world. Now, back in 2013, the number considered to be a top 1% income in the entire world was $34,000 US dollars per year. Adjusted for inflation, that roughly is $43,000 US dollars per year right now. So here's a table of the distribution of global wealth. And you can see that more than half of global adults make less than $10,000 per year. This really should give you some perspective on how we're doing in the United States and other top earning countries. And sometimes if you are in a position where you are making the median income in a really nice country, then we should just really acknowledge that and be grateful for what we do have. Another positive thing about making this type of income is that if you want to go and travel to a lower cost of living country or perhaps you want to move there, then your money is going to go a lot further due to just the nature of currency conversion. OK, so we know what the top earners make. But how do we get into the top 10%, the top 5% or the top 1% of income earners in the United States? I have some ideas. Now, since the top 10% of salaries is generally between $150,000 to $250,000 per year, one of the most guaranteed ways to get you into that income bracket is basically to get a doctorate or professional degree. The average salary for those degrees is already going to fit into the top 10% of incomes in the United States. The top 10% will probably also include those that are really successful in the corporate system. So those that have climbed the corporate ladder, perhaps they're a VP, they're a director, a highly paid software engineer that's an individual contributor for, let's say, Meta or Google or something like that. You can definitely get there that way as well. If you aren't someone in those positions, what we should be really paying attention to is the key concept of trying to decouple our time to our pay. So let's actually listen to one of my favorite clips from Naval Ravikant and what he has to say. The first thing, if you're going to make money, is that you're not going to get rich renting out your time. Even lawyers and doctors who are charging $300, $400, $500 an hour, they're not getting rich because their lifestyle is slowly ramping up along with their income and they're not saving enough. They just don't have that ability to retire. OK, so there's a lot of truth to that. In my opinion, renting out your time isn't going to get you to those income levels of the top five or the top 1%. And even if you're a doctor or lawyer, your lifestyle could ramp up rather quickly. His main recommendation is to own a piece of a business or have a prolific enough of a side hustle that it generates you some additional income as an additional stream of income. Getting an additional stream of income or perhaps owning a piece of a business or running a business and making money through it isn't going to be easy. It's going to take a lot of work. And most people out there just aren't willing to put in the work to make it happen. Now, one of the YouTubers that I personally watch in my free time is Alex Hermosi. I'm sure you guys have probably seen his face somewhere on social media. But if you've seen his videos, you'll know that he has some great nuggets of wisdom on how to build a business and how to become successful over time. One of his favorite methods of becoming successful is called the rule of 100. And I'm personally trying this rule of 100 as we speak. So the rule is pretty simple. You want to pick one primary action and you want to do 100 of those actions for 100 days. The idea is that if you do 100 of these actions, then the results will follow. For example, you could do 100 sales calls per day. You could do 100 minutes of content creation per day. You could do 100 minutes of writing every day if you're a content writer, or perhaps it's spending $100 of ad spend per day for your business. The idea here is that volume and consistency will build your skills and build your success over time. Sufficient volume is really important, especially in the beginning when you're trying to acquire a new skill. And a lot of people just aren't willing to put in the work of 100 minutes per day. So in the beginning, when I was creating videos, I would make one video per day, every day. And basically I did 260 straight days of making short form videos. Now, I don't know if I spent, you know, 50 minutes or 100 minutes on making those videos, but it definitely probably averaged about an hour. I think the mere act of consistency really improved my skills a lot. So maybe try to take that rule and apply it to your life. It doesn't have to be 100 actions every day. Perhaps it's 50 every day, 75 every day, whatever it is. As long as it's consistent, I think the consistency is the most valuable thing there. All right. So let me know how much money you think you need to feel rich in the comments. I would be really curious to hear what you guys think. I'm going to leave another video for you guys to check out right here or right here after this video. Make sure to subscribe to this channel and I'll see you guys in the next video. Thank you for being here. Peace.