When you think of the top 1% of American earners, the first people who might come to mind are likely well-known investors and entrepreneurs like Warren Buffett and Bill Gates.
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These billionaires make so much money they hardly know what to do with it. Even if they gave away $20 a second, they’d be at it for 578 days.
And that’s just to get rid of the first $1 billion.
But it might surprise you to learn that those ultra-wealthy Americans make up just 0.001% of the population. You only really need a fraction of their wealth to fall into the top 10%, 5% or even 1% of American earners.
The top 10%
Landing in the top 10% is a fairly attainable goal for upwardly mobile Americans. A study by the Economic Policy Institute (EPI) found that the average earnings of those in the top 10% were roughly $173,000 in 2020.
As the lastest available data reflects the household’s top wage earner, you’re looking at quite a jump from Americans in the first 90%, who according to the EPI earned an average of $40,000 in 2020.
There’s also a significant jump between the bottom and the top of 10% earners. Those in the bottom half made about $133,500 in 2020, where those in the top half pulled in $223,000.
There is another side to this, though. Studies also show that while it may take less to fall into a top percent bracket, wage gaps overall are only getting worse, especially as they fail to keep up with inflation — making advancing your family’s status less attainable for middle-class hopefuls these days.
From the top 5% to the top 1%
Salaries start to jump significantly the closer you get to the top 1%. You’ll start to see dramatic shifts in the top 5%, where the EPI found the average earners significantly increased to $343,000 in 2020, up from $324,000 the year before.
While that’s certainly a lot, there’s a growing trend of even more cash flowing to — flooding even — those at the top of the heap.
What about, say, the top 1%?
Their wages jumped an astounding 20% between 2009 and 2019, and they pulled down $824,000 in 2020, up 7% from the previous year. That well beat out inflation over the same period, which clocked in at 1.4%.
Bear in mind that cost-of-living numbers mean the top 5% and 1% pan out differently depending on where you hang your silk hat. According to a 2022 study by SmartAsset, the top 1% in Connecticut makes about $896,490, whereas in Tennessee you’d only need around half that much ($492,583).
While the income of the top 1% varies, Forbes reported in 2022 that the bracket's minimum net worth is much higher — a cool $11.1 million.
Read more: Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead.
Where does this leave the average American?
Pew Research Center statistics show that for middle class Americans, average incomes jumped from $74,000 in 2010 to about $78,500 in 2016. Today, that figure sits at $90,000.
And sadly, that larger number doesn’t have as much buying power as the 2010 figure did at the time.
Because here’s the kicker: While salaries may have headed up, so has inflation. So even if you’re an American making the average wage, it’s quite likely you’re feeling the pressure to pinch pennies.
There’s one metric, though, where top percentages of another sort are attainable for all: that is, how your income stacks up against job satisfaction and happiness at home.
Sure, it won’t necessarily buy you a yacht (or even a rowboat). But finding a way to balance the two is likely a more direct path to "true" wealth.
Get expert financial advice
Setting yourself up for a comfortable retirement is nerve-racking — no matter how much you make. That's especially true with inflation still hot and potential recession peeking around the corner.
One solution to help you sleep better: Find a financial adviser who can help navigate your finances and make sure your assets are safeguarded.
Researching and calling multiple financial planners can be a time-consuming hassle, but there are ways you can easily browse vetted advisers that fit your needs. Booking a consultation is free and only takes a few minutes.
If you're unsure how to safeguard your savings during a recession, it’s better to find answers sooner than later, while time is still on your side.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
As a financial analyst with extensive experience in wealth distribution, income stratification, and economic trends, I have closely studied the subject matter covered in the article you've provided. I'll offer insights into various concepts and terms mentioned:
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Top Percentiles of American Earners:
- The article delineates income brackets among American earners, focusing on the top 10%, 5%, and 1%. It elucidates the substantial income disparities between these segments and the average earnings in these groups, highlighting the drastic differences in earnings and wealth distribution.
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Economic Policy Institute (EPI) Data:
- The Economic Policy Institute's research findings on income distribution serve as a crucial reference in delineating average earnings across different percentiles. Specifically, it mentions the average income figures for various top percentiles and the considerable disparity between the top earners and the rest of the population.
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Income Disparity and Wage Gaps:
- The article addresses the widening wage gap, particularly emphasizing the challenge faced by the middle-class in attaining upward mobility. It outlines the difficulty in maintaining pace with inflation and the disproportionate income growth among different income brackets.
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Regional Disparities in Income:
- Highlighting the geographical variance in income distribution, the article references studies showing differences in income thresholds required to be in the top 1% in various states, such as Connecticut versus Tennessee. This highlights the influence of location on income disparities.
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Net Worth Comparison:
- Forbes' reported minimum net worth requirement for individuals belonging to the top 1% of earners, set at $11.1 million, offers insights into wealth accumulation as a measure beyond just annual income.
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Inflation's Impact on Purchasing Power:
- The article touches upon how inflation affects the purchasing power of individuals despite apparent increases in average incomes. It explains how the rise in nominal incomes doesn't necessarily translate into a corresponding increase in real purchasing power.
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Financial Advice and Recessions:
- Towards the end, the article suggests seeking financial advice, especially in times of economic uncertainty such as potential recessions. It highlights the importance of financial planning, asset safeguarding, and the potential value of consulting financial advisers.
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Job Satisfaction and Happiness:
- Finally, the article introduces the concept of "true" wealth, not solely measured by income or wealth but by factors such as job satisfaction and happiness at home. It emphasizes the importance of achieving a balance between financial success and personal fulfillment.
In summary, the article provides a comprehensive overview of income disparities, regional variations in income thresholds, the impact of inflation on purchasing power, the significance of net worth, and the broader concept of wealth encompassing factors beyond monetary aspects. It also suggests seeking financial advice to navigate economic uncertainties.
