Are You Rich? This Income-Rank Quiz Might Change How You See Yourself | Hacker News Reader

Are You Rich? This Income-Rank Quiz Might Change How You See Yourself

nytimes.com

42 pointsdankohn194 comments

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> In your view, being “rich” means having an income in the ... > Don’t know/none of these

Wealth.

Or unearned income. Which approximately no-one actually thinks about when they say "income".

Basically the whole thing is pointless due to that.

Wealth and income are very highly correlated especially when you also take into account age.

I would even argue consumption is the best measure to use.

even that have been gamed, when CEOs make their company pay for a lot of their stuff, or people have a non-profit owning their mention.

I see that sort of thing come up a lot, but is there, like, a blow-by-blow guide out there for how they get to that position without running afoul of the law? Is it something you can only do with expensive tax lawyers and money to throw around for a bunch of temporary maneuvers, or is it something your average freelancer/consultant with an LLC can pull off?

the fix cost is too high for non wealthy people to do it, you need a few thousands of dollars in layers, accounting, various registrations, etc.

The IRS has very strict rules on what counts as compensation. The idea that CEOs are significantly circumventing them is mostly wrong.

Bollocks.

Half of the families in London sitting on hundreds of thousands in net worth earned around median in their primes.

The same is likely true in SF and elsewhere.

London and San Francisco are not typical cases though. Most people earning median income, but living elsewhere, did not participate in a housing market with such dramatic price increases.

(As a side note, it's now impossible for people earning median income to participate in those markets, due to the expense).

EDIT: That said, I do think that income is over-emphasized in categorizing people as rich or not. A person who lucked into a house that went up in value might not feel rich, but they definitely are richer than the person that has to borrow a million more dollars to live in the house next door.

And even for people who have most of their net worth tied up in appreciated housing have high incomes when you count imputed rent.

Which, if you are not counting, you are just being silly.

And those people now have high incomes due to the return on capital they can get from their net worth.

Addressed in my OP.

The man on the clapham omnibus will not tell you that a person who owns a house and works in the supermarket has a high income.

They might say that they're rich though. Because wealth is the thing that makes you rich.

Yup, exactly. To me, 'rich' means having the wealth to live off of the interest (where 'wealth' is defined rather expansively to include things like disability, Social Security & pension benefits as well as simple capital).

Very true. If a person has $1M wealth, it's $40K interest in his pocket forever, assuming he invests wisely and follows the 4% drawdown rule.

If you have a job that makes $100K over 10 years, it would be about $20K in taxes, $40K in expenses, and (max) $40K in savings.

At the end of 10 years, you'll have half a million, and the person with wealth will still have his million. He'll also possibly have spent the last 10 years starting a business, improving his education, or earning a salary on top of his wealth.

You will both be 10 years older and closer to the end of prime earning years. Of the two of you, you will still need your earning years, because interest on your $500K is only $20K/yr, but he will not.

Wealth is far different from income.

And yet all these newspapers owned by hugely wealthy individuals keep conflating the two! Weird isn't it?

It's almost like there's an incentive for the media landscape to muddy the waters between well paid execs and the person who owns the company.

Their journalists are clearly not rich though ?

It's just that most people aren't very smart, including most journalists. It's a not a grand conspiracy to protect billionaires. They pick on Jeff Bezos plenty.

>...If a person has $1M wealth, it's $40K interest in his pocket forever, assuming he invests wisely and follows the 4% drawdown rule.

You are overstating the results of the Trinity Study:

>...The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living. The withdrawals may exceed the income earned by the portfolio, and the total value of the portfolio may well shrink during periods when the stock market performs poorly. It is assumed that the portfolio needs to last thirty years. The withdrawal regime is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period.

https://en.wikipedia.org/wiki/Trinity_study

Nothing in the study indicated that its "in his pocket forever" - just that historically, withdrawal rates of 4% were able to last 30 years before the assets were totally depleted. (Also the wikipedia article has a number of criticisms of the study.)

You can replicate the Trinity study in javascript nowadays. If you want to experiment for yourself, Google for firecalc. 4% is just fine as a rule of thumb, or for the purposes of this post.

Your main point that "Wealth is far different from income." is very true, but I am not sure why you are doubling down on over-stating the results of the Trinity study.

>...4% is just fine as a rule of thumb, or for the purposes of this post.

Let's see.

Your claim was that "If a person has $1M wealth, it's $40K interest in his pocket forever, assuming he invests wisely and follows the 4% drawdown rule."

Going to your suggested website and entering the numbers for 30 years gives a 5% change of bring broke by the end:

>...For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.0%.

That's not what most people think of when they hear they will be able to spend 4% forever.

Using a larger number just increases the failure rate. Someone retiring early and trying to last 50 years gives an estimated failure rate of almost 22%:

>...For our purposes, failure means the portfolio was depleted before the end of the 50 years. FIRECalc found that 21 cycles failed, for a success rate of 78.8%.

Nothing in the Trinity study indicated that its "in his pocket forever" - just that historically, withdrawal rates of 4% were able to last 30 years before the assets were totally depleted

A 95% chance that your portfolio was not depleted (and in fact almost doubled on average to $1.86M in inflation-adjusted dollars). I'd call that pretty conservative.

If you want absolute guarantees, life just doesn't have them. Not even if you bury your money in the ground.

Completely agree.

Sure a young person making $200k+ in the Bay Area is “rich” but it’s not even comparable to people who have inherited massive amounts of wealth or have become rich through ownership in a rapidly growing company (which also isn’t income, but capital gains). You can’t even afford a 2k sqft home in a nice (accessible, safe, decent schools) area on that income - doesn’t feel rich to me.

This kind of logic is what keeps the upper-middle class of the US paying high taxes but shields the truly rich, I mean filthy stinking ungodly rich, from paying their fair share. Because they don’t acquire their massive wealth via income, but through inheritance and capital gains

Which is why, in my opinion, a federal sales tax would be far better at capturing value from the wealthy (than an income tax) without penalizing people trying to earn and reinvest their earnings.

Sales tax is non-progressive.

It's progressive in the sense that rich people generally buy more (and more expensive) things.

> You can’t even afford a 2k sqft home in a nice (accessible, safe, decent schools) area

I think a lot of people conflate "nice" with "one of the richest/best" in the Bay Area, conflating middle class with upper class.

With 200k, you can afford around a million dollar home. There is a lot of places in the bay area where you can afford a house in that range.

You picked on nice but ignored accessible. Look at where employers are parking their offices, next to million dollar trailer park spots.

Capital gains are income (when realized). Specifically, they're unearned income, as opposed to earned income (W2 employment, 1099 contracting, etc). Unearned income also includes interest and dividend payments.

This is by far my biggest pet peeve with media and finance...

Income != Wealth/Assets

And the two are used interchangeably all of the time, which gets misused. And it happens right here on HN "omg Uber is worth $160B, how can they not pay developers more?!"...

This tool is important because it makes clear one of the biggest problems in America: the rich refuse to believe they are rich.

In Europe, top income tax rates kick in at far lower incomes often just 2-3X the median income. The additional tax revenues generated here are used to fund things like national health care. Similar programs will never be possible in the US unless more Americans come to the realization that they are, in fact, rich and deserved to be taxed as such.

As an American, if I didn't have to worry about healthcare expenses for me and my family, then I would place my idea of rich at a much lower threshold. But because there is no safety net, everyone has to accumulate that much more to have security and peace of mind.

I definitely agree that path dependency issues are deeply connected to this problem.

Welcome to America where the rich believe they're middle class, and the poor believe they're middle class too.

With around $130k/year in Switzerland, I am not rich, by any margin.

Also, being rich is not about beating 99% people in monetary income. Being rich is about being able to live without toiling.

You know what realization I've come to? That an _actual_ rich person can light 10 years of my quite substantial salary on fire and not be affected in any way whatsoever.

The tool is next to useless because it conflates income with wealth and, worse, it doesn't distinguish between income earned from work (e.g. salary) and income earned from assets (e.g. rents, equities).

Aside from that, it has other flaws. For example, I'd classify myself as "rich" by the (flawed) measure of household income used by the survey--but because I overestimated the percentile range my household income is in the survey result indicated I thought I wasn't rich.

But it doesn't really. I come out as rich on the scale as me and my partner earn over > 270K together, but we wake up at 5:30 work in the morning and get back to our 1 bedroom apartment at 5:30 at night, where we make dinner and go to bed at 9pm. We try to save every penny we can. We have healthy retirement accounts, but we still don't have enough job or financial security to buy a house (we live in Boston). So yes, in many ways we are rich and certainly we are better off than many.

But, compare that to my mom who is almost 70 and about to retire. She has 3 million + in assets including passive income > 150K a year (before a pension and social security) with hardly any expenses. We both come out rich, but we are lightyears apart. She lives in complete comfort as she watches her California home go from 1.2 million to 1.6 million in value in the last few years, in some years hardly paying any taxes due to "depreciation".

And if we want a welfare state as robust as the one in Europe you can't just have people like your mom pay for it. There aren't enough like her.

You've got to pay in to. Like they do in Europe.

Your choice.

You're in the top 5% for your area but you can't afford a house? Most of the home owners in your area make less than you.

There's definitely something you're not telling us.

If you think that "rich" is about income and not wealth, you're probably not rich.

Yup. Rich is when money's just there. Like water on tap. Maybe you'd think twice about running a hose out in the street and turning it on for a week straight, or filling an olympic swimming pool. But if you want a glass to drink, to rinse off a dish, to wash your hands, to run a bath, whatever, all you do is turn a knob and there it is. You don't even think about it.

This is a great analogy.

My sister married into a wealthy family and they have so much money and assets it's no longer a concern for them. They literally stopped thinking about money as an issue as you described.

The dichotomy for people earning high incomes, but viewing themselves as "average", stems from the fact that you need to be in the top 5% of income if you want to live a stereotypical 50's style "middle class" life in a high-cost of living area: a (modest) single family home, a car, 2 kids, health care, children's college paid for, saving for retirement, etc.

All of the above were easily had back then on the median income. Everyone lower than you on the income curve is cutting in places you can't see (retirement accounts). If you observe conspicuous consumption by peers making less, they're going deep into debt to make it happen.

The only thing not 1950's about our middle class ideals: your spouse probably works to make ends meet.

According the to the linked site, the top 5% income in the Silicon Valley area, probably the highest cost of living area in the US, is over $500k.

Yes, all of the things you mention are getting more expensive, and median incomes would certainly be difficult (median for the same area is $133k). But, top 5%? At that income level, you can have all of the things you mention and still retire very comfortably by 40.

> the top 5% income in the Silicon Valley area, probably the highest cost of living area in the US, is over $500k

That's household income, aged 35-64 (prime earning years). For the same age, top 5% individual income is $332k. Top 5% individual income for ages 18-34 is $179k.

Most couples earning $500k at ages 35-64 weren't likely earning that much earlier in their career, so it's hard to say retiring "very comfortably" by 40 would be the case.

We also have much more shit to spend our money on. Phones, computers, streaming services, ride sharing, food delivery, shit delivered right to your door in 2 hours by Bezos & co, &c.

Young people live like there is no tomorrow and then complain they can't save money, yeah dude if you take an uber every 2 days, get food delivered every day, get your daily $12 frappudingus from starbucks, spend 250 a months on various subscription services and want to follow your favorite instagram influencer during his vacation you'll have a hard time saving money.

If you're healthy and working in a first world country (US excluded) you should be able to live comfortably. Don't have kids before 25, don't have kids without having a plan, don't buy a fucking iphone on credit, no, you don't _need_ that 65" TV.

Thanks for the condescending remark but in some places it's demonstrably more difficult for young people. I've been worried about the fact that property values near the T in boston have literally doubled over the past 8 years and I'm being left behind as prices bubble out of control, meanwhile adding a bedroom for a future child is going to be another $1000 a month in rent, but okay let's talk about that hulu subscription and the one time I got GrubHub this month

Yeah, Netflix ain't the problem. Even $100 in coffee budget a month ain't the problem, as long as that's not one of several $100/mo unnecessary budget items. Health care, housing somewhere with non-shit schools, child care (when young, or after school care, or summer care), those are the biggies. Food not up in that category but high, even if you spend quite a bit of time cooking yourself and rarely dine out. Utilities next. Clothing somewhere under that unless you just have to buy all your kids' clothes new, and maybe by the time you're that far down the spending ladder you've found an item that's rivaled by "frivolous" spending. Phone bill's probably down around here somewhere, too.

Oh boy, I spend zero on entertainment or other unnecessary stuff so my spending dropped perhaps 5%/mo. Great. I'm only miserable and hate life is all, but great.

Hence you should plan _before_ having a kid. Invest 2k a year for 10 years and you'll have 25k+ to handle child care (or taking time off to actually take care of the little human you brought in this world). As for child care, health care, retirement and school I'm genuinely sorry for you but you're paying the price of america's vision of capitalism.

> Even $100 in coffee budget a month ain't the problem

$100 a month invested over 30 or 40 years is quite the money for most people.

> I'm only miserable and hate life is all, but great.

Listening to you two we're miserable anyway, at least now you have some money. But seriously, how did people live before the 80s without all these form of entertainment and useless gadgets ?

> But seriously, how did people live before the 80s without all these form of entertainment and useless gadgets ?

They spent $100/mo (inflation adjusted) on bowling lane fees, drinks at the bowling alley, team shirts, bowling shoes, et c, instead of Internet service plus a streaming service or three. Or something similar. Our modern distractions aren't exactly crazy-expensive. They're insanely cheap, really. We can have a big-ass flatscreen—at least one—for the cost of one little color TV they'd have in a 1970s house, and they would have one, with rare exceptions.

> As for child care, health care, retirement and school I'm genuinely sorry for you but you're paying the price of america's vision of capitalism.

Heh, no kidding. It's a pretty crappy deal.

> I've been worried about the fact that property values near the T in boston have literally doubled over the past 8 years and I'm being left behind as prices bubble out of control, meanwhile adding a bedroom for a future child is going to be another $1000 a month in rent

I mean if you live in one of the biggest city of your country, want a kid and a big flat next to metro station yeah you're going to have a hard time. But that's true for any era and any city. You can't cut a pie in 8 slices and share it with 10 000 people.

Why not scale down, move a bit out of the city, have some nature for your kid, get a small EV, and save money ?

You might also want to vote for people who don't allow their own city to be bought by foreign investors. The same thing is happening in paris and london, real estate isn't for people to live in anymore, it's pure financial assets for the rich. https://realestate.boston.com/buying/2019/07/29/foreigner-bu...

> But that's true for any era and any city.

In particular my issue is that prices have quite literally doubled since 2012 or so. That hasn't been true for any era of any city, as you claim. The inflation of real estate is enormous, 1920s units with 2 bedrooms that have been trading around for 200-400k from the 90s until the recession have now ballooned up to 800+k.

Similarly, inner suburbs with transit connection are one by one ballooning out of control on prices as well. Somerville is now land of million dollar condos, Watertown and Waltham have gone wild, and so on. The starter

> Why not scale down, move a bit out of the city, have some nature for your kid, get a small EV, and save money ?

There's no way I'm ever taking a driving commute to downtown Boston, which is simultaneously expensive and stressful, but I am considering (when the time comes) moving to a town where I can take a train ride back in.

> You might also want to vote for people who don't allow their own city to be bought by foreign investors. The same thing is happening in paris and london, real estate isn't for people to live in anymore, it's pure financial assets for the rich.

Another notable one is zoning laws, in particular legalizing missing middle housing for the huge swathes of homes zoned for single family only (outside Boston proper anyways). I've written to my state reps about it.

My personal income is in the top 5% of where I live but since my wife is a stay-at-home mother we are in the top 15% for household income. Granted next year when I move up an age bracket we move down to the top 15% for individual income and 25-30% for household income.

Given that we very much have a 1950s lifestyle, modest single-family home ($348k, 4 bedrooms/2 bathrooms as I work from home, on a half acre with no restrictions), 2 kids, health-care, and saving for retirement. We are down to 1 car as we recently moved across the country but since I work from home we are seeing if one car will work; it would if there we more sidewalks but ditches seem to take up that space.

I feel like being rich is a combination of income and like assets/net worth. Like I know people who make 6 figures+ and live pay check to pay check because they have a lot of expenses.

I wouldn't consider myself rich if a health issue can knock my family off course. Which basically means if you can't live off the labor of others, i.e. you own capital that generates cash flow.

If you have a high income you can more easily solve this problem with insurance than accumulating a huge amount of capital.

He's talking about not being able to work anymore.

Yes, I know. That is what disability insurance is for.

Cost of family health insurance is $20k to $25k per year, plus a $13k out of pocket maximum, so annual healthcare costs with insurance can be $40k pre-tax easily. Not including any travel, hotel stays, spouse having to take time off work to take care of you, etc.

If you were living off the labor of others, wouldn't a health issue be able to knock those laborers' families off course?

Yes, but that is out of my control. I don't see any other option than taxpayer funded healthcare to solve that issue, but I have to play the game by the rules that exist now.

Also there's a huge difference in housing costs within a metro area based on when you arrived. Due to rent control and low construction rates.

So a 15 year renter will be locked into low rent rates and have significantly more disposable income at the same salary. Their low rent is a huge asset that isn't traditionally valued.

In California there are also limits on property tax increases. A theoretical person in SF who bought a house in 2005 now has very valuable property and low property tax rates, along with the high salary you'd expect from a SF HN reader.

This didn't change how I see myself at all.

For me it shows that a BS and MS at a state university, plus more than 10 years of experience working in aerospace, will get you to about 60th percentile in the Northeast US.

I should have got a god damn finance degree...

There's 'no trouble paying a mortgage' money and then there's "oh that's one of Bill or Jeff's 'toy' companies" kind of money

FYI this site employs 3 sophisticated ad networks and several other deep tracking scripts.

No reason to expect that the information you fill in here on your actual income, etc doesn't wind up in an leaky ad profile.

The sites that aggregate these data and sell them for marketing think I'm all of the following:

- An unmarried male in my 20s with three dogs

- A married male in my 50s with two mortgages and high credit card utilization

- A high-school dropout and smoker with bad credit and a spotty work history

- An affluent divorced male with two children and a boat among my assets

Their incompetence and lack of care has been more effective at anonymizing me than I ever could be.

Well according to this I'm not rich, but I'm getting close. I'm disappointed it doesn't include property ownership because that might put me up there over the magical rich line.

There's similar calculators you can use to calculate net worth rankings instead of income based ones.

https://personalfinancedata.com/networth-percentile-calculat... https://dqydj.com/financial-calculators-investment-calculato...

I feel like age shouldn't factor in, only location. Granted expenses will be different based on age, but they don't seem to be using expenses to determine "rich-ness" at all.

Age is strongly correlated to income. People with experience generally get paid more. It's not particularly useful for a 25 year-old to compare themselves to a 55 year-old.

I wish they were smaller though. I'm 21, I'm grouped in with people over a decade who are in a completely different stage of life than myself.

Well sure, when talking about experience. But not wealth. A millionaire living in my city is objectively wealthy regardless of age. I'm not "wealthy" by any means. Despite that, my income is top 1% for my age-group. However the median income for my peers is also barely above minimum wage, so thats not a terribly helpful metric. Knowing I'm in the top 11% regardless of age is far more helpful in understanding how I fit into my local community.

Speaking of feeling rich or not, Anyone ever follow this guy’s blog?

https://www.mrmoneymustache.com/all-the-posts-since-the-begi...

https://www.mrmoneymustache.com/category/mmm-classics/

Like “hacking hedonic adaptation to get the most out of your money”

And so on.

Some of the general attitude-toward-spending stuff is fine. His specific advice is sometimes iffy, and any anecdotes/figures about his personal situation should be taken with a huge grain of salt. Essentially treat the voice of the blog as a character the writer's creating (as one of his jobs...) and you'll be approaching it with the right frame of mind.

For the South Bay, the top 5% household income is apparently $523k.

But this dumb website doesn’t even allow entering a household income that’s higher than $400k.

So if you think 1% or 5% is the threshold for being rich, then nobody who fills in this survey will ever be declared rich.

Edit: turns out you can enter your income in the field right above the slider. But that’s not obvious at all IMO.

You might want to note in the title that this quiz is only applicable for residents in the US.

> No, you’re not rich.

Thanks for confirming.

First, I suggest doing this in private/incognito mode.

Second, the "survey" misses the most important distinction: investment income vs earned income. Or, more directly: wealth.

A family making (say) $300k from only wages is in a VERY different situation than the same family making that income from investments.

This Global Rich List does this for the global distribution and offers it for income, and more importantly, wealth (http://www.globalrichlist.com/wealth)

Yet another visceral example of why you shouldn't try to control the scroll with javascript.

For the Boston-Cambridge-Newton area they have this:

Top 5% More than $374,000

So 1 in 20 people in this area bring in more than 374K a year? That is sort of mind-blowing. I thought I was doing fairly well, but now I feel like I'm missing out on something...

that's not how percentiles work. also, you'd need to know whether that value they use is the lower bound on the top 5% and how that compares to the top 5% for the general population

That's exactly how they work...?

And it's stated explicitly that it's a lower bound ("More than").

no it is not. in any case it's referring to household incomes and only between people who are 35 to 64. so again, no, 1/20 people are not making that much. again, percentiles do not work in a fashion where you can take one group (35 to 64) and apply it to the entire population.

i repeat, that's not how percentiles work.

That's exactly how they work: if the top 5% of people in some cohort earn $X or more, then that means 1 in 20 people in that cohort earn $X or more.

OP may have confused one cohort (households) for another (individuals), but that's irrelevant to how percentiles work.

What you're saying is true but is irrelevant to my point. With the original post the claim was that 1/20 in Boston make more than 374k because the top 5% of people between 35 and 64 make more than 374k.

Again this is not true and is not how percentiles work. What's so difficult to understand?

If you have 98 people in Boston who are 18 who make $1 and 1 who is 40 who makes $374K and another who is 36 who makes $10K what does this mean? It means 50% of people in Boston between 35 and 64 make more than 10K, but not that half of the people in Boston in general make that much, as the original post suggested. The original poster was claiming he or she was not doing well because of the data NYT presented, but percentiles cannot be extrapolated from one group to another. As you've said it's only useful for a specific cohort in which it's measured. In my hypothetical example the person making 10k would be in the top 2% despite being in the lower 50% for income in their cohort.

Your reading of the original comment gives zero charity to their comment. While they did not specify for that cohort, I think even a plain reading would intuit that's what they had in mind.

You're technically right.

Clearly the misconception isn't "that's not how percentiles work" it's "that's a percentile of only a subset of the population". I don't know why you keep repeating yourself. It is exactly how percentiles work in that subset.

And that's higher than the Bay Area's 5%.

I think the difference is that Boston has a lot of highly paid professionals (doctors, white-shoe lawyers, consultants, finance) who can earn much more than most people do in tech and other professions.

$374K/yr is the household income 95th percentile aged 35-64 figure for Boston-Cambridge-Newton.

$239K/yr is the individual income 95th percentile aged 35-64 figure for that area.

Is this broken? My only choice after completing the questions is "[Click here to skip the exercise altogether and see the answer for a New York area household earning $150,000 a year.] "

Same! What the heck!

This tool doesn't even work in the San Francisco area! The top income they let you select is "$400k+", but you need an income of $498,000 to be top 5% here.

I can't get this page to load / render correctly worth a damn. Even with my ad blocker off. Lame.

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