Navigating today’s financial landscape is challenging in several ways, and salary is a particular pain point for many people. Since most people keep their financial life private from others, with good reason, it can leave you wondering how your salary compares to that of others in today’s economic climate.
However, you may be surprised at the minimum salary that places you in the top 10% of U.S. earners. And if there’s one thing we can always use, it’s to feel better about how much we make. According to a study from the Economic Policy Institute, the top 10% of U.S. earners in 2020 made an average of $173,000.
Despite being in the same bracket, there was a marked difference between earners in the bottom half and those in the upper half of the top 10%. According to 2020 estimates, the income of those in the bottom half made roughly $133,500.
The Widening Wage Gap
Though landing yourself a spot in the top 10% of earners might seem more achievable after reading those numbers, it’s important to note that it’s still a lofty goal for many, depending on one’s field and location. A staggering disparity exists between the ultra-wealthy (those earning in the top 5%) and those earning an average salary of $40,000.
According to this data, there is a 3.25x salary difference between an average salary earner and someone on the cusp of a salary in the top 10%. When you consider those in the top 5%, that becomes nearly a 6x difference in pay.
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According to the EPI study, the pay gap between the top 10% and the other 90% is only continuing to increase. An analysis from the Pew Research Center revealed that a three-person household—two earners and one dependent—would have to make a combined $172,000 or more (when adjusted for inflation) to qualify as upper-class.
The middle-class bracket is defined as earning between two-thirds to double the median cost of living, which was around $70,784 in 2021, and the lower class consists of anyone earning below that bracket.
Another interesting thing to note is how each class builds its net worth. Those in the upper class grow their wealth through investments and financial assets, while those in the middle class grow their wealth through the appreciation of their homes. There are fewer options for lower-class earners to increase their financial stability.
An examination of the top 5% salary year-over-year revealed how quickly the top 1% are pulling away from the rest of the pack. According to the EPI study, the top 5% earned $343,000 in 2020, compared to $324,000 the year before. In 2020, the average income of someone in the top 1% was $824,000.
Top Earners’ Salaries Vary Widely By State
Where you live also plays an important role in the wage discussion. Your salary may put you near the top in one state, but that same salary may place you much lower down in another state due to the local cost of living, state income taxes, etc. As an example, according to SmartAsset, Connecticut’s top 1% earn $896,490, while the top 1% in Kentucky earn $412,836.
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The key takeaway here is to not get too hung up on national salary percentages and whether or not you qualify as a top earner. Instead, it’s more important to focus on your individual financial situation and challenges, especially considering the current inflation spike. Despite the notion that money isn’t the only thing that matters, it certainly plays a pivotal role in how we live our lives.