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PERSONAL FINANCE

How much money do you need to have to be considered the top 1% in the US?

Those dreaming of joining the exclusive club of the top one-percenters in the US will have to rake in earnings surpassing well over the half million mark.

Update:
What it takes to join the top 1% in the US
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Getting into the top one percent in the United States will require earnings well in excess of half a million dollars per year. However, depending on where you live, a more “modest” income will still earn you that distinction, at least in your state.

A couple analyses of data from the IRS and Social Security Administration break down what it takes to be considered a one-percenter and how much the gulf between the have and have-nots has grown. Here’s a look at what they found.

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What it takes to be in the top 1% in the US

Using data from 2018 from the IRS and adjusting to 2021 dollars using the Bureau of Labor Statistics’ Consumer Price Index to account for inflation, SmartAsset found that to be deemed part of the top 1% of earners nationally, an American family needs an income of $597,815. However, the range across the 50 states goes from a little more than $350,000 in West Virginia to pushing close to $900,000 in Connecticut.

It should come as no surprise that you’ll find the majority of one-percenters living in states with a major metropolitan area. Eight of the ten states that have the highest threshold to enter the top 1% are located on the coast.

If you’d be satisfied to be part of the top five percent nationally, you’d only need to earn less than half as much, or $240,712 annually.

States with highest threshold to be in the top 1%

Connecticut$896,490
Massachusetts$810,256
New York$777,126
New Jersey$760,462
California$745,314

States with lowest threshold to be in the top 1%

West Virginia$350,212
Mississippi$361,462
New Mexico$384,427
Arkansas$411,633
Kentucky$412,836

The rich are getting richer

The wealth distribution in the United States has been growing over the years, increasing dramatically during the pandemic. The Economic Policy Institute (EPI) analyzed wage trends for the various income percentiles using data from the Social Security Administration and found those in the top 1% saw their wages grow by over four times what they did for the bottom 90% over four decades.

While the bottom 90% saw their wages grow by 28.2% between 1979 and 2020, the top 1% grew by 119.2%. The top 0.1% left the one-percenters in the rearview mirror, with their wage growth more than twice as high at 389.1%. According to the data analyzed by EPI you would need to earn a bit more to be in the top 1% of earners nationwide, taking home $823,763 per year. However, their data looked just at wage income and not other sources of income which the IRS calculates for your tax burden.

EPI notes that the upward distribution of wages from the bottom 90% to the top 1.0% was especially strong in the 2020 pandemic year. However, wage patterns were distorted in 2020 by two factors, low inflation and rising unemployment.

The former boosted the average real wage, but didn’t affect distribution. Employment losses occurred predominantly in low wage jobs, “so the mix of jobs shifted toward higher paying ones, artificially boosting average wages and generating faster measured wage growth especially in the bottom half.”