…it’s $5 million !
Check out this table showing the spread of annual income:
Income level (percentile)
|Median income (rounded)|
|Level VI (90 to 100)||$170,000|
|Level V (80 to 89.9)||$99,000|
|Level IV (60 to 79.9)||$65,000|
|Level III (40 to 59.9)||$40,000|
|Level II (20 to 39.9)||$24,000|
|Level I (less than 20)||$10,000|
Source: Before-Tax Family Income, 2001 Federal Reserve Board Survey
First, let’s see where you stand in relation to this table?
If you aren’t in the top brackets (although, many of our readers are), it might be comforting to note (according to the Bankrate article): “if you are bringing in $40,000 a year, you’re doing better than half the households in America. Or, as a Washington think tank recently pointed out: If you’re a teacher married to a policeman, your combined household income puts you in the top 25 percent of all households in the nation.”
What intersted me most, was the relatively low income that it takes to be at the absolute middle of the top 10% of all income earners in the USA … ‘only’ $170,000.
This amount seems to correlate with a New York Times survey that said the ‘rich’ were bringing in between $100,000 and $200,000 per year …
… and, if you are like most Americans – earning less than $40,000 – this sounds like a king’s ransom … but, it’s not.
You see, there’s a big difference between what you might bring in as income and what some people call sustainable retirement income .
Net worth (percentile)
|Median net worth (rounded)|
|Level VI (90 to 100)||$833,600|
|Level V (80 to 89.9)||$263,100|
|Level IV (60 to 79.9)||$141,500|
|Level III (40 to 59.9)||$62,500|
|Level II (20 to 39.9)||$37,200|
|Level I (less than 20)||$7,900|
Source: Family Net Worth, 2001 Federal Reserve Board Survey
Look at the top level, the same ‘rich’ people who earned $170,000 a year in the first table, only have a median net worth of $833,000 according to the second table.
Now, if you take this $833,000 and apply the ‘safe’ annual withdrawal rate of 4% as advocated by most misinformed financial advisors (for me, the safe withdrawal rate is more like 2.5% p.a.), it seems like these so-called ‘rich guys’ can only afford to spin off $33,000 a year.
Now, that’s less than the teacher and the fireman! So, what’s wrong?
Well, for a start there are actually very few really Rich people in this country – so few that there should be another category in BOTH of the above tables: the top 1% of the USA population by Net Worth and Annual Income.
Secondly, the so-called ‘rich guys’ earning $170,000 are just like the rest of the working population working at a JOB … Just Over Broke.
When their job stops, they stop being ‘rich’ … period.
So, where do you stand?