fbpx

Is Your Income in the Top 1% in Your State?

Here’s how much you need to earn to be in the top 1% of income earning families in your state.

Since 1979, the average inflation-adjusted income of the top 1% crowd has grown by 200.5%, according to research from the Economic Policy Institute. Has your income kept pace? Read on to see how much you need to earn to be in the top 1% in your state, and the one thing that could be more important than a high income to your future financial security.

Digging into the data

Between 2009 and 2013, the top 1% of income-earning Americans captured at least half of all income growth in 24 states, and as a result, it’s gotten more difficult to reach that top-income-earner status.

Nationally, a family’s income has to be at least $389,436 to qualify as being in the top 1%; however, your annual earnings need to be significantly higher than that to achieve this status in 12 states.

For instance, a family’s income needs to eclipse $659,979 in Connecticut to reach the top 1%, due in large part to the state being home to many high-paying insurance and hedge-fund jobs. If you live in Connecticut’s Bridgeport-Stamford-Norwalk area, then your income would have to be above the $1 million mark to be in the top 1%. Perhaps unsurprisingly, the average income of Connecticut’s top 1% income earners is a nation-leading $2.4 million.

Achieving 1% status is also tough in New Jersey, New York and Massachusetts. In New Jersey and New York, your family income needs to be north of $547,737 and $517,557, respectively. In Massachusetts, you need to be pulling in $539,055 to call yourself part of the 1%.

The following table shows you how much your family’s income needs to be in each of the 50 states to be in the top 1%.

 

 

Getting to financial security

If you don’t earn a 1%-worthy income, a disciplined savings strategy can still allow you to retire with an envy-inspiring nest egg.

Many workers can participate in tax-advantaged retirement savings plans offered by their employers. Yet, large numbers of Americans are failing to make the most of these powerful tools. According to Transamerica, the average worker is contributing only 8% of their income to retirement savings plans every year, and just 12% of participants are maxing out their contribution to these plans annually. Further, Vanguard reports that nearly one-third of participants are saving 4% or less of their income in 401(k) or 403(b) plans.

In 2017, up to $18,000 of earned income can be set aside in a 401(k) plan or 403(b) plan, and if you’re over 50, that figure increases to $24,000. Given those contribution statistics and these plan limits, most Americans aren’t coming anywhere close to saving as much as they could be.

Similarly, many Americans aren’t making the most of IRAs, either. Additional dollars can be invested pre-tax in a traditional IRAs, or after-tax in a Roth IRA, depending on your income. People under 50 can contribute up to $5,500 of income to either a traditional IRA or Roth IRA, and people over 50 can contribute $6,500 to either of those plans in 2017.

Workers who are self-employed could be under-saving too. Self-employed individuals can invest pre-tax earnings in retirement plans, including solo 401(k) plans and SEP IRAs.

In 2017, individuals can save the lesser of 100% of their earnings or $18,000 ($24,000 if over 50) in a solo 401(k) as an employee, plus they can contribute an additional 25% as an employer as profit-sharing, up to a combined maximum of $54,000. Solo 401(k) plans allow for the $6,000 catch-up contribution too, if you’re over 50.

If you’re moonlighting, you can max out your retirement plan at work and set up a SEP IRA to save your self-employment income. You can contribute lessor of 25% of your compensation, or $54,000 to a SEP IRA in 2017.

Obviously, there are a lot of savings opportunities available that can be used to amass wealth, however, one word of caution. Calculating the contribution amounts across multiple retirement plans can get complex, so sit down with your tax professional to discuss your options before making your contributions.

Tying it together

A high income provides short-term financial security, but long-term financial security depends a lot on how much money you’re saving every year. Ultimately, the percentage of your income that you save every year can be a much better indicator of your future financial independence than your income in any one given year.

In order to get to the point where you’re saving the maximum allowed, it can help to take small steps. If you can’t hit your maximum immediately, increase your contribution rate by 1% to 2% per year until you hit the limit. This strategy won’t get you to financial freedom as quickly as maxing out contributions immediately, but it can help you avoid busting your budget.

Also, don’t forget about the importance of saving sooner, rather than later. Due to compound interest, saving more money earlier in your career can have a big impact on your retirement savings; especially if that money is being invested in assets that can appreciate, such as stocks. For example, a person contributing 20% of their family’s $75,000 in income from age 30 to age 65 could end up with a nest egg valued at $1.67 million, assuming a hypothetical 6% annual return.

The $15,834 Social Security bonus you could be missing
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.  Simply click here to discover how to learn more about these strategies. 

 

The Motley Fool has a disclosure policy.

 

You May Also Like

Pride Week Festival Begins With Tribute to Pulse Nightclub Survivor

Miami Beach Pride’s week-long festivities will commence with a special tribute to the LGBTQ+ community honoring the victims of the tragic shooting at Pulse Nightclub in Orlando. A ceremonial “flip

Surfside luxury condo sees notable sales

Arte at Surfside is making waves. There’s, of course, the news that Ivanka Trump and Jared Kushner are renting at the 16-resident luxury condominium. And there’s the December penthouse sale

Up in the Air: A Discussion

In a dynamic region where residents are typically on the move, everyone is wondering about the health of the airline industry and the safety of airports and airplanes. Everyone is

South Florida Yachting Legend Passes

Robert “Bob” Roscioli, an icon in the South Florida marine industry, has passed away. Many recognize the name Roscioli from the widely-successful and world-renowned Roscioli Yachting Center, a full service

Other Posts

Four key steps

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][vc_column_text] What a crazy time we are all experiencing. Right now, getting back to basics is most important. It is not and

Pandemic adds to worries about hurricane season

An above-normal 2020 Atlantic hurricane season is expected, according to forecasters with NOAA’s Climate Prediction Center, a division of the National Weather Service. The outlook predicts a 60% chance of

The difference between leading and managing

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][vc_column_text] Leadership and management are often misunderstood as one in the same. They are not. Certainly, a good leader should be able

Flattening the housing curve in a pandemic

By Josh Migdal In the classic film Groundhog Day (and yes, it is a classic), Bill Murray’s character wakes up over and over again in Punxsutawney, Pennsylvania, reliving the same

Drew Limsky

Drew Limsky

Editor-in-Chief

BIOGRAPHY

Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.