It’s easy to assume what life might look like for the top 1% of earners in the U.S.—the exclusive tag might conjure images of big houses, luxury cars and exotic vacations.
The average American household needs to bring in $652,657 a year to be classed among the top 1% of earners across the country, according to research published Thursday by financial advisors SmartAsset.
The report analyzed 2020 IRS data to identify America’s highest earners.
But what it really takes to join the 1%—in terms of earnings at least—comes down to your zip code, the findings revealed.
Connecticut is the state with the wealthiest top earners, according to SmartAsset, where reaching the top 1% means having an annual income of at least $952,902.
It's followed by Massachusetts, which has a threshold of $903,401, and California, where the state's very highest earners earn upward of $844,266 a year. New Jersey came in fourth on the list—ahead of its neighbor New York—with a bar of $817,346.
Next on the list was the state of Washington, followed by New York, where households have to rake in $776,662 a year to reach the wealthiest 1%—despite it being America's second-most expensive state to live in.
“It’s easier to get into the 1% in New York than it ever has been,” Jaclyn DeJohn, SmartAsset’s managing editor of economic analysis, told Bloomberg on Thursday.
The report also highlighted that Southern states generally had lower wealth thresholds than their coastal counterparts.
The easiest state in which to reach the wealthiest 1% is West Virginia, the findings showed, where an annual income of $367,582 would be enough to make the cut. It was followed by Mississippi, where households need to earn $381,919 a year, and New Mexico, where the top 1% make at least $411,395 a year.
What does it take to feel rich?
The top 1% of earners is a group that's becoming increasingly powerful. According to a 2022 report from the Congressional Budget Office (CBO) the richest 1% owns more than a third of all U.S. wealth, while the top 10% holds 72% of America's total wealth.
It's a share that's increased over time, CBO data shows. In 1989, the richest 10% of Americans controlled $24.3 trillion in assets. By 2019, that control had increased to cover assets worth $82.4 trillion.
While joining the 1% club remains an elusive goal for many, the threshold for feeling "rich" in the U.S. varies wildly between individuals.
According to a survey from Bankrate published earlier this month, Americans felt they’d need to earn about $483,000 a year to feel wealthy.
Approximately a third of the 2,521 adults questioned said they'd need an annual income of $500,000, and 21% said they’d need to earn at least $1 million a year to consider themselves rich.
The study also found that the expectation of what it takes to achieve financial freedom gets higher the more a person earns. For example, people who earned $50,000 or less said they'd need to earn $406,000 to feel rich, whereas Americans who earned $100,000 or more said they'd need to earn at least six times their salary to feel wealthy.
“For some, being wealthy might be seen as having the ability to buy things they don’t need,” said Mark Hamrick, a senior economic analyst at Bankrate. “If someone attains wealth along the way, more power to them. That doesn’t necessarily equate to being happier, of course. But it makes many things easier to navigate.”
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As an enthusiast deeply versed in economic analysis and financial trends, I can confidently delve into the intricate details of the article you've provided. My expertise is grounded in a comprehensive understanding of income distribution, wealth accumulation, and the dynamics that shape financial landscapes.
The article discusses the criteria for being among the top 1% of earners in the United States, shedding light on the fact that the average American household needs an annual income of $652,657 to achieve this status. However, the true threshold varies significantly based on geographical location, specifically tied to zip codes.
States like Connecticut, Massachusetts, and California have higher income requirements, with Connecticut leading the pack at $952,902. Conversely, Southern states generally have lower thresholds, with West Virginia being the easiest state to enter the wealthiest 1%, requiring an annual income of $367,582.
The piece also touches on the increasing influence of the top 1%, citing a 2022 report from the Congressional Budget Office (CBO) that reveals the richest 1% owning over a third of all U.S. wealth. The top 10% control a staggering 72% of the country's total wealth, showcasing a trend of growing wealth concentration over the years.
Moreover, the article delves into perceptions of wealth and financial freedom, citing a Bankrate survey. Interestingly, it notes that Americans, on average, feel they would need an annual income of $483,000 to consider themselves wealthy. This perception varies widely, with some individuals indicating the need for at least $1 million per year to achieve that sense of affluence.
The study also highlights how expectations of financial freedom escalate with income levels. Those earning less than $50,000 annually believe they would need around $406,000 to feel rich, while those earning $100,000 or more express a need for at least six times their salary to attain a similar sense of wealth.
In essence, the article paints a nuanced picture of wealth distribution, regional disparities, and the subjective nature of feeling rich in the diverse economic landscape of the United States. If you have any specific questions or if there's a particular aspect you'd like to explore further, feel free to let me know.
