You Need This Much Money to Be Rich in America, Data Reveals (2024)

You Need This Much Money to Be Rich in America, Data Reveals (1)

Earning more money can make it easier to pay the bills, fund your financial goals and spend on hobbies or “fun,” but what income is considered to make you rich? The answer can depend on several factors, including where you live, what type of job you have, how much you save or invest and how you typically spend your money. If you’re looking for help to reach your financial goals and be considered “rich” in your own eyes then consider building a plan and working with a financial advisor.

What Income Is Considered Rich?

Pinning down an exact income level that qualifies you as “rich” is difficult, as there are numerous studies and surveys that attempt to measure it. To keep things simple, let’s consider where the Internal Revenue Service (IRS) sets the bar for the top 1% of earners first.

According to the most recent data available for fiscal year 2019, an income of $540,009 per year puts you in the top 1% category. Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you’re in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.

What Is a Rich Monthly Income?

The amount of money you need to make each month to be rich depends on which metric you’re using. If you’re going by the IRS standard, then you’d need to make approximately $45,000 a month to be rich. On the other hand, if you’re aiming for the top 1% as measured by the EPI, you’d need a monthly income of $68,277.

To reach that level of income, you’ll likely need to have something more than the typical 9-to-5 job. Examples of people with monthly incomes in that range can include successful business owners, celebrities, athletes and online influencers or content creators.

How Much Income Do You Need to Be in the Top 20%?

The real median household income in the U.S. is around $71,000, according to the latest Census Bureau data. In order to be in the top 20% of income, you’d need to earn nearly double that amount or an average of $130,545 per year.

That’s according to a SmartAsset study of income distributions in the 100 largest U.S. cities. The study found a wide range of income distributions geographically, with residents of San Francisco needing an income of $250,000 or more per year to land in the top 20%. Meanwhile, you’d need an income of $70,444 to be a top 20% earner in Detroit.

It’s important to remember that the definition of what it means to be rich is subjective. Someone who makes $250,000 a year, for example, could be considered rich if they’re saving and investing in order to accumulate wealth and live in an area with a low cost of living.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Rich vs. Wealthy: What’s the Difference?

Being rich is one thing, but being wealthy can mean something entirely different. Someone who’s rich may have cash available to spend on luxury goods or take expensive vacations. A wealthy person, on the other hand, might be more focused on increasing their net worth and creating a long-lasting financial legacy.

So, what’s the cutoff to be considered wealthy? Again, it’s subjective and there are lots of different numbers that may be tossed around. Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

That’s how financial advisors typically view wealth. The average American, on the other hand, sees $774,000 as a sufficient net worth to be financially comfortable and a net worth of $2.2 million to be wealthy, according to Schwab.

How to Become Rich

If you’d like to reach millionaire status or join the ranks of the rich, you’ll need a strategy for achieving that goal. Short of winning the lottery or inheriting a fortune, becoming rich takes some effort. Just how much effort can depend on where you’re starting from.

Here are some of the most impactful steps you can take to become rich.

  • Earn more:Increasing your income means you’ll have more money to save, invest and pay down debt, all of which can help to boost your net worth. There are different ways to increase income, including negotiating a pay raise, pursuing higher-paying roles, taking on a part-time or second job and starting a profitable business or side hustle.

  • Budget:Budgeting is one of the simplest ways to take control of your money and become rich. When you budget, you’re deciding how to allocate the income that you have each month. That makes it easier to work toward your goals of saving and increasing your net worth.

  • Reduce debt:Your net worth is calculated based on how much you owe versus what you have in assets. Paying down debt can help you get on the path to becoming rich if you’re able to free up more money for saving and investing. If your debt is expensive due to high-interest rates, consolidating or refinancing it or using a 0% APR balance transfer could make it easier to pay down what you owe.

  • Invest:Investing and saving money are both important but they’re entirely different. When you save money, you’re typically putting it into a savings or CD account at your bank where it can earn a little interest. When you invest, you’re putting your money into the market where it has the potential to earn much higher returns. If you’re not investing yet, the easiest way to get started is to contribute to your retirement plan at work. You might have a 401(k), for example, which you can contribute to from your paychecks automatically. As an added bonus, your employer might match some of what you put in, which is free money for you. In addition to a workplace retirement plan, you can also begin building wealth through an Individual Retirement Account (IRA) or a taxable brokerage account.

  • Get professional advice:Talking to a financial advisor can help you formulate a plan for saving and investing in order to build wealth. Your advisor can also guide you through the basics of making a budget and creating a workable debt payoff plan.

The Bottom Line

You Need This Much Money to Be Rich in America, Data Reveals (3)

In terms of what income is considered rich, there’s no single number to go by. How you define being rich for yourself can depend on the amount of money you need to feel financially comfortable and how you use the income and assets that you have. To one person it means not worrying about money while to others it just means having enough money in retirement to not impact their lifestyle. Once you define what rich means to you then you can build a financial plan to help you reach that goal.

Financial Planning Tips

  • Consider talking to your financial advisor about the best ways to approach financial planning if becoming rich or wealthy is one of your goals. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matchesyou with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Earning a higher income can mean paying more in taxes. So while you might be rich from an income perspective, you could be handing back a large chunk of your earnings to the IRS. You can use SmartAsset’s free income tax calculator to estimate what you might owe.

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The post What Income Level Is Considered Rich? appeared first on SmartAsset Blog.

You Need This Much Money to Be Rich in America, Data Reveals (2024)

FAQs

You Need This Much Money to Be Rich in America, Data Reveals? ›

If you're going by the IRS standard, then you'd need to make approximately $45,000 a month to be rich. On the other hand, if you're aiming for the top 1% as measured by the EPI, you'd need a monthly income of $68,277. To reach that level of income, you'll likely need to have something more than the typical 9-to-5 job.

How much money do you need to be rich in America? ›

According to Schwab's 2023 Modern Wealth Survey, its seventh annual, Americans said it takes an average net worth of $2.2 million to qualify a person as being wealthy.

How much wealth do you need to join the richest 1% around the world? ›

In the U.S., it may take you $5.81 million to be in the top 1%, but it takes a minimum net worth of $30 million to be considered among the ultra-high net worth crowd. As of the end of 2023, this ultra-high net worth population is on the rise, reaching 626,000 globally, up from just over 600,000 a year earlier.

How much wealth does the 1% own in America? ›

For example, the top 1 percent of households hold 30.6 percent of the total wealth, according to the Federal Reserve. But just the top 0.1 percent own 14 percent of the total wealth, giving them a stunning average of more than $1.52 billion per household.

What is the wealth data in the US? ›

Americans held roughly $137.6 trillion in wealth in 2022, according to the Federal Reserve. For the top 20%, that equaled about $97.9 trillion. The middle class combined held $35.7 trillion. And the bottom quintile had $4.1 trillion in total wealth.

How many people have $3,000,000 in savings in usa? ›

1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More.

What income is middle class? ›

Key Findings. In a large U.S. city, a middle-class income averages between $52,000 and $155,000. The median household income across all 345 cities is $77,345, making middle-class income limits fall between $51,558 and $154,590.

What salary is considered rich for a single person? ›

Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.

What is considered wealthy in 2024? ›

You need more money than ever to enter the ranks of the top 1% of the richest Americans. To join the club of the wealthiest citizens in the U.S., you'll need at least $5.8 million, up about 15% up from $5.1 million one year ago, according to global real estate company Knight Frank's 2024 Wealth Report.

What is considered wealthy? ›

According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy​​​​. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia​​.

What is considered upper class in America? ›

The American upper class can be broken down into two groups: people of substantial means with a history of family wealth going back a century or more (called "old money") and families who have acquired their wealth more recently (e.g. fewer than 100 years), sometimes referred to as "Nouveau riche".

What is the upper middle class income? ›

Many have graduate degrees with educational attainment serving as the main distinguishing feature of this class. Household incomes commonly exceed $100,000, with some smaller one-income earners household having incomes in the high 5-figure range. "The upper middle class has grown...and its composition has changed.

Who owns most of the wealth in USA? ›

The top 1% holds $38.7 trillion in wealth. That's more than the combined wealth of America's middle class, a group many economists define as the middle 60% of households by income. Those households hold about 26% of all wealth. Low-income Americans, representing the bottom 20% by income, own about 3% of the wealth.

What percentile is a $3 million net worth? ›

The 95th percentile is considered wealthy, with $3.2 million household net worth, so even more spending power, which means estate planning and possibly more than one home.

What percentage of U.S. population has $2 million dollars? ›

Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.

Does net worth include home? ›

Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.

Is $100 000 a year rich? ›

A $100,000 salary is considered good in most parts of the country, and can cover typical expenses, pay down debt, build savings, and allow for entertainment and hobbies. According to the U.S. Census, only 15.3% of American households make more than $100,000 annually.

What is legally considered rich? ›

Here's a look at what it takes to be considered wealthy by city in 2022, as ranked by net worth thresholds: San Francisco: $5.1 million. Southern California (includes Los Angeles and San Diego): $3.9 million. New York City: $3.4 million.

How many people have $2000000 in savings? ›

Among the 47 million households headed by someone age 60 or older, 7% had household investable assets of at least $2 million, Drinkwater said. Only 6% of the 89 million households in the U.S. headed by someone 40 to 85 years old has that amount, Drinkwater said.

Is it true that 90 of millionaires make over $100 000 a year? ›

Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”

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