Rise of the 'new rich': 1 in 5 Americans reach affluence | Hacker News Reader

Rise of the 'new rich': 1 in 5 Americans reach affluence

dallasnews.com

51 pointstokenadult98 comments

Made up largely of older professionals, working married couples and more educated singles, the new rich are those with household income of $250,000 or more at some point during their working lives. That puts them, if sometimes temporarily, in the top 2 percent of earners. Even outside periods of unusual wealth, members of this group generally hover in the $100,000-plus income range, keeping them in the top 20 percent of earners.

This range gets hit the hardest by personal income taxes, so sibling commenter's observation of income, not wealth, is astute. 20% of the population may be in the top 2% of earners in income for one or more years, but they'll be hard pressed to sustain it AND overcome taxes.

Also, I noticed that those interviewed in the article have inherently volatile earning profiles. Stock brokers, day traders, art gallery owners... And early startup employees are a part of the cohort too, with spikes one time payouts.

Right. Calling someone that makes 250k a single year of their life rich (likely from selling a house, a small business, or some stock options) is as silly as calling someone who was unemployed for one year of their life poor.

The same article could be written in reverse: "Rise of the 'new poor': 5 in 5 Americans earn $0 at some point in life"

You can generally exempt $250,000 of profit from a house, $500,000 if you're married

That strikes me as blatant financial discrimination against single people.

Well, I assume the rule is if you file jointly, or if the deed is in both names. So it's $250,000 a person up to a limit of 2.

Yup. There's balance sheet affluence and then there's income sheet affluence... two often orthogonal properties in most cases. On one extreme, is the cliché stock broker: always broke despite high income... high marginal propensity to consume (MPC) combined with income sheet affluence, which does not necessarily lead to balance sheet affluence. The other extreme is that are some folks lead thrifty lives and aren't income sheet affluent by any measure, but because of prudent investing, are easily characterized as balance sheet affluent. (Example: I know a guy that has investments exceeding 7 digits that makes 40k USD/year and spends no more on average than 2 USD/day.)

There are many, many levels of "rich." In essence, a small amount of wealth reveals how poor someone was and how poor they still are by comparison. Note: comparisons lead to insecurity and unhappiness, by definition.

It's as stupid as the rich lists, because the definition of rich is an inability to count one's net worth (due to illiquid valuation of investments and assets).

They actually get hit less hard because we don't have enough tax brackets and the tax rate at the upper brackets is way too low: http://i.imgur.com/gogxtbv.jpg

The article isn't talking about the ultra-rich making millions a year - it's talking about people making >$100k.

I'd guess that most people making >$100k per year are making less than $353k, where the taxes start decreasing. So they would, in fact be getting hit hardest by taxes, according to your graph.

For people earning over $350k yes you're right. But no sir, even by the link you posted, those in the $100-350k range are certainly hit the hardest.

First, based just on the data, you see that at these income levels, many many credits and deductions are fully phased-out. AMT becomes a real issue. Etc.

But in an anecdotal sense, my experience of people (like myself and my wife, 2 professionals living in a high CoL area) earning in this $100-350k range, this is often the product of 2 people with "normal" jobs. So most of my income is earned income. But those out in the stratosphere above $350k earn more and more of their income from capital gains and receive favorable tax treatments.

I think you're conflating ordinary income tax rates with long term capital gains tax rate, dividend tax rate, tax free muni bond yields, etc that the 7 figure wealthy and above use.

This is a obviously a study that has been designed to influence politicians on tax.

Volatile, high-profit incomes more closely matches a market based on nature or real progress. It makes sense that high-earners who do real work are doing work that is risky. What is concerning is the 'old rich' who've managed to make obscene profits by market manipulation such as regulatory capture, or removing risk from their operations and moving it to the employees.

The irony is that the 'old rich' are required to create the more real-market-representative positions artificially, and as a result a large percentage of the new rich's work goes to keep the old rich in their current positions.

i.e. the old rich (who were once the new rich) are keeping the new rich from being the new old rich. Often this is done by keeping the new rich from using strategies and tools outside the power of the old rich, thus impeding real progress. Real progress would be outside of the control of the old rich, who, let's face it, are just too old and stupid to make good returns on new things. The general populous does this best, and if the general populous is out-innovating the oligarch, then that would be socialism and socialism is scary because informed markets don't buy sugar water and red labels.

This is why basing tax brackets on yearly income has always struck me as flawed. Imagine you're an author that spends a couple years writing a book. For the first three years you make no money, but the forth you make a million. You'll be taxed at a much higher rate than if you had made a consistent 250k a year.

This might be a simplistic model, and the outcome may be avoidable by sufficient tax planning, but I'm sure some entrepreneurs have lost money this way.

Employ rolling averages above historical inflation?

> For the first three years you make no money, but the forth you make a million. You'll be taxed at a much higher rate than if you had made a consistent 250k a year.

Ancient History Item: Before the tax reform act in 1987, you had the ability to do income averaging across tax years to address this situation. It was reformed away.

You can still average your taxes across the years if you're a contractor, by paying taxes in advance - with a simple accounting trick that nobody seems to be aware of:

1. In the first year, suppose you and a corporation (you own this corporation outright) makes no income.

2. In the first year, you make a loan to your corporation ($50k for instance)

3. In the first year, you also pay yourself a salary of $50k. You pay taxes on this "income". Yes, you're paying taxes on money you didn't really truly actually earn yet.

4. In the second year, suppose your corporation makes $100k of income. Your corporation repays your $50k loan. The loan repayment is tax-free, and the remaining $50k then becomes your salary for the year.

If you do not actually have $50k to perform steps 1-2, you do it repeatedly with small bank transfers until you've accumulated enough "loan" and enough "salary".

You then effectively pay two years of $50k income, instead of one year of $0 income and one year of $100k income.

The worst category for this is star professional athletes. They make huge amounts of money their first few years, but then they retire at age 30 and spend the rest of their lives earning far less.

In the author's case, you could imagine a fix; the author could somehow amortize the income over previous years and pay all the money at the appropriate rate. (Though I can imagine a number of fraud- and incentive-related issues there.) But you can't really do that with the pro athletes because a) you don't know when they'll actually stop making money and b) in the future they may not actually have it.

I remember ichiro's last contract with the mariners was going to be paid out over 25 years or something. The guy makes a ton from commercials in japan, but maybe this is actually a decent move?

Edit: on second thought since star athletes are getting paid in the millions, prorating it over 20 years won't change that much in the grand scheme of things. Maybe something like 400k*20% each year before they hit the max bracket anyways.

Interesting. From Wikipedia:

> The Associated Press reported that Ichiro's contract extension defers $25 million of the $90 million at 5.5% interest until after his retirement, with payments through 2032

If he retires at the end of next year, he'll make that money over 18 years. If he made it all at once, today, he'd pay about 9.8 million of that 25 in taxes (just punching things into a naive tax calculator; I'm sure his accountants would improve things. OTOH, it's also slightly low because it puts him in a lower tax bracket for the first 400K, which he doesn't get because of the other income he has). Ignoring the interest for a moment, splitting 25 million over 18 years he pays a total of 8.9 million. So he saves a million dollars doing it this way. Not bad.

With the interest, he'd get paid more; it looks like 1.8 million per year for 18 years, so 32.4 million instead of 25. That's a bit of a raw deal if he has to pay that as regular income tax, since if he got the money now and put it in the market, it would perform about as well, but would get taxed at a capital gains rate.

All in all, I suspect this is a compromise with the Mariners to alleviate cash flow and luxury tax pressure more than it's a shrewd tax move.

Even worse are pehaps pop-stars. Rappers in particular strike me as very prone to this. Its hard to create hit<album<multi platnum and then repeat. But if you don't repeat, you just average. And if you get rich quick, the tax hit is big. And the denominator grows by all those years you don't have breakout success...

Fortunately, they continue to earn royalties. You can certainly quibble about whether latest-hit-centric music culture makes that big enough to offset the upfront tax hit, and even whether they get a reasonable share of that residual revenue, but it's something.

This is a good point, as for atheletes this option is less open to them. And in something like the NFL the career is much shorted that MLB. Only a very few will make concession revenues or have game royalties. Maybe some will become coaches or TV personalities, but that is likely a small number.

I've been getting around this lately...

While I'm working, I contribute the max I can to retirement savings (RSP, 401k, whatever it's called in your country) so I reduce my taxable income by that amount.

In the years I'm not working (don't want to, travel, etc.), I take money out of those retirement savings. If I take out less than the tax-free threshold ($10k/yr in Canada) I pay no tax on that money. If I take out more, it will be less than I earned in my working years, so I'll be in a lower tax bracket anyway.

In this way I'm averaging out the taxes I pay over many years, and it takes out the spikes and dips from working/not-working years.

The only downside to this is that once you've taken money out, you can't get that money back again onto your yearly contribution cap, so when I'm old and grey, my retirement savings likely won't be as high as they otherwise would be (but I don't believe in that anyway, so for me, it's not valid)

In the U.S., lots of tax advantaged accounts have withdrawal penalties.

(I guess the notable exception is that contributions to a Roth IRA can be withdrawn with no penalty. Earnings would all face the penalty)

>In the U.S., lots of tax advantaged accounts have withdrawal penalties.

What's the penalty?

Lots of people think that of tax-free retirement savings (and people keep warning me of it) but in fact, the only penalty I've ever heard of is you must pay tax on that money along with other income.. so if you do it in a regular earning year, you pay lots of income tax. Do it in a year when you earn nothing else, and you pay none or very little. That's not a penalty

Generally, 10% extra tax.

10% extra than what?

Let's say I don't earn any other income in a year and pull out $5k. What's my tax rate?

Let's say I pull out exactly the tax-free threshold. What's my tax rate?

(I ask for the clarification because here in Canada, they withhold a very large amount of whatever you take out.. because they are assuming you have other income. It all comes back at tax time though, based on whatever other income you do have. So I ask because I'm wondering if they force the 10% on you, or if they just withhold it and you can get it back at tax time)

It is an additional 10% tax above whatever other taxes you would owe on that money. I'm not an expert, it isn't obscure, you're better off searching if you still don't believe me. Try "401k early withdrawal penalty".

A quick google shows it's 10% more tax than you would have paid, when included with your other income.

If this withdrawal is your only income, and you keep the withdrawal below the tax-free limit (looks to be $9k), you won't pay any tax, and thus won't pay the 10% penalty either.

The 10% is figured based on the amount of the distribution, not AGI.

(For 2012, it's reported on line 58 of the 1040...)

I'm not American, I need you to explain that please.

AGI is income subject to income taxes.

Distribution means the money taken from the 401k

1040 is the main federal tax form in the U.S.

Line 58 is in the 'Other taxes' section of the form, where the amounts are figured using some basis other than the AGI. It also is where you would look in the 1040 instructions to see how the penalty is calculated.

This is why you have wealthy families doing weird year end selling of investments. Lock in capital losses to reduce tax exposure, sell holdings this year rather than next year for one reason or another, etc

> sibling commenter's observation of income, not wealth, is astute

In the U.S., at least, income and wealth are highly correlated, so there isn't a huge distinction to be made. There are indeed some wealthy people with low income, and high-income people with low wealth, but it isn't the norm. See table 5 (pg. 36) in this whitepaper, which shows both net worth by income percentile, and income by net worth percentile: http://www.federalreserve.gov/pubs/feds/2009/200913/200913pa...

Example numbers: the top 1% of 2007 income-earners held 26% of U.S. wealth, and the top 1% of households by net worth in 2006 earned 16% of the year's income. Meanwhile, the bottom 50% of income-earners held only 14% of U.S. wealth, and the bottom 50% by net worth earned only 22% of U.S. income. The general trend holds in the in-between categories as well: the 95-99th percentile of incomes hold about twice as much wealth as the 90-95th percentile, etc.

So the relationship is not perfect, but taking the groups in aggregate, higher-income-earners control considerably more wealth than lower-income-earners. Some of the later figures in the document explicitly plot some ratios.

Progressive taxation also has relatively little impact here. If you converted the income tax to an implied wealth tax (i.e. take tax paid in a year divided by wealth held at that time), U.S. income taxes are in aggregate roughly equivalent to a flat tax on wealth.

I hear you, but you have to discount that for income derived from investments and the wealth and count only wages earned.

It's hard for me to take seriously an article that uses yearly salary to measure wealth. Beyond the fact that money is an extremely poor indicator of wealth due to cost variance across the country, simplifying someone's liquid assets into a direct relationship with yearly income is absurd.

It's actually worse than that: the article measures wealth by the maximum salary that someone is paid in any year of their life. So, if you made over $250,000 for one year back in 1999, and are now jobless, you're considered part of the New Wealthy.

Looks like someone is busy setting up the narrative for raising taxes on "the rich" who earn more than 100k. This is how it starts. A whole bunch of "studies" come out, then the talking heads roll it out 24/7 on the news media and then Obama makes a speech and a bunch of people pound the table and ta da... brand new taxes for you "rich" people making 100k a year.

The average income is $60k. $100k IS rich, even if it doesn't feel like it in Silicon Valley.

And, to be clear, that's the average household income, not the average personal income.

This is an attempt to recruit middle-income earners into the "wealth" camp, embiggening the "base" to vote against "taxes on the rich". While the bill before Congress will be targeting the top 0.1%, the Republicans will have mobilized a very disciplined 20% of the public to encourage their Congress critters to vote against it.

It sure doesn't feel rich to me :(

At the end of the month, after taxes and FICA and health insurance and Medicare and retirement are withheld, and after paying for housing, food, transportation, insurance, utilities, sundry expenses, and student loans--there's not a whole lot of that $100K/12 left!

Raising taxes on $100K would be almost intolerable. I could probably part with a couple thousand more a year, but it would be difficult, and I have very little faith that they'll invest my money wisely....

Well just imagine how poor you would feel with just the median household income of 50k (2011 US Census) or worse and you were the bottom 20% making <=25k.

People with the median income don't live in silicon valley. 50k goes further in the midwest than 100k in SF.

Median household income in SF in 2011 was $72,947. That is a good deal more than 50k, but far less than 100k.

Now imagine the household isn't one 20-something person, but two adults, closer to middle-aged, with a kid or two. 2.3 people per household in 2011 in SF.

http://quickfacts.census.gov/qfd/states/06/06075.html

>Median household income in SF in 2011 was $72,947.

You just proved my point.

I lived in SF on 30k in 2010-2011. It's entirely doable. (Although the fact that it's doable is no excuse for the miserable salary I was paid. I worked in publishing, which everyone with a literature degree wants to break into, and thus, the entry-level pay is notoriously bad.)

Well just imagine how poor you would feel with just the median household income of 50k (2011 US Census) or worse and you were the bottom 20% making <=25k.

What's your point?

Sounds like you're basically saying, I'm lucky to be making this much. Of course, I know that. Yes, I'm extremely fortunate, compared to someone making $25K or less.

I'm also lucky compared to a paraplegic or a quadriplegic person, or someone dying of cancer. So what?

My point is, $100K doesn't go as far as one would think, when supporting a family and living in a big city on the East Coast. It barely meets expenses, and designating this level of income as "wealthy" or "rich" is a ridiculously dated notion.

> It barely meets expenses

Then cut your expenses; don't live beyond your means. Isn't that the advice that's always being given to poor people? $100k puts you in the top quintile of the US population. It's definitely wealthy.

It definitely is not wealthy.

When you're a little older, and raising a family, you'll learn that $100K is just the average amount that reasonably affluent households are earning, typically based on two incomes, and it doesn't go very far. Sure, it's better than trying to raise 3 children on one $20K income with an absentee deadbeat dad not in the picture, but that's really comparing apples and oranges. We're talking about the definition of "rich" and "wealthy" here, which is really a different thing from affluent-versus-working-poor. If 90% of American households were earning $100K, that would be fantastic. But it's not the same thing as being rich.

> It definitely is not wealthy.

> reasonably affluent households

> it's not the same thing as being rich.

Now you're just playing with semantics. "Wealthy", "affluent", and "rich" are all synonyms with subtly different connotations.

Statistically, if your family is making $100k/year, you have access to more money than the vast majority of American families.

> but that's really comparing apples and oranges

Yes, exactly! It's comparing wealthy people to not-wealthy people.

I get that the money doesn't buy as much as you might hope it would; it doesn't feel "rich" because you imagine "rich" to include luxurious vacations and a huge house or what-have-you. And it doesn't seem "rich" because you measure yourself against even-wealthier people in your social and professional orbit--and you discount not-rich families as "oranges" that are not comparable to your own "apples".

But in terms of raw numbers--not feelings--you're pretty well-off.

In general, I'm sympathetic to the claim that SF/SV is too expensive, particularly with respect to housing, and this represents a legitimate drain on the economy, and that better public policy would go a long way towards fixing that.

With that out of the way, though:

> after paying for housing, food, transportation, insurance, utilities, sundry expenses, and student loans--there's not a whole lot of that $100K/12 left!

That says, "after I spend all my money, I don't have any money left!" Is it really that there isn't enough money or is that your cost base is too high? Millionaires can go broke too, but it isn't because they're not rich.

That is of course "the rub" as they say. 45 degrees doesn't feel cold to someone in Minnesota, but it feels down right frigid to a resident of San Francisco.

So you take the entire US, and you pull these numbers out, and then you call one income "rich" and another income "poor" and if you're not displaced in location you don't feel it as that. The truly poor know who they are, and the truly rich know who they are, and the middle folks rarely do.

In Las Vegas where a new house is $150,000 and gas and food 10% - 15% less expensive, making $100,000 a year might feel pretty darn comfortable. Certainly you'd have some left over to save for a rainy day. But if you're spending $40K/year just on rent, another $20K/year on food and gas, well it doesn't feel like you have a lot of extra.

So the median income is a lot higher (http://quickfacts.census.gov/qfd/states/06/06075.html) and that skews the feeling of rich / not rich.

Its unclear though which is cause and which is effect (if there even is a relationship). Did we start paying people more to work in California so the prices of everything went up? (the Mining Town paradox) Or did the rising prices force us to pay people more?

Why isn't there some adjustment to tax rates for regional cost of living differences?

> At the end of the month, after taxes and FICA and health insurance and Medicare and retirement are withheld, and after paying for housing, food, transportation, insurance, utilities, sundry expenses, and student loans--there's not a whole lot of that $100K/12 left!

You're an ignorant idiot.

Hundreds of millions of your countrymen would give anything to be able to pay for the things you're paying for, and you have money left over!

Open your eyes man, millions of people are struggling to survive around you.

You summed up everything that's wrong in one little post.

You're an ignorant idiot.

You're obviously a liberal. Keep your hands off my money, redistributionist!

I agree. This is a joke. $250,000 a year is not rich (unless you've been saving for years - houses don't count until you pay off the mortgage) and $100,000 is easily achievable in a two income household even in the Southern US.

This is a better list (of liquid assets though and not income):

$1.6m – $3.2 million The comfortably poor

$5m – $6.5m The comfortably off

$8.2m – $24.6m The comfortably wealthy

$26.2m – $64m The lesser rich

$65.6m – $121.5m The comfortably rich

$123.1m – $162.5m The rich

$164.2m – $326.8m The seriously rich

$328.4m – $655.2m The truly rich

$656.8m – $1.64bn The filthy rich

Over $1.6bn The super rich

How did you determine this list? Just curious.

Looks like "someone" doesn't understand income inequality trends very well. Increases in inequality have been especially pronounced at the top end of the distribution, well above the $100k threshhold. Long story short, the income distribution has such a steep curve now that we can implement much more redistributive social policy without raising taxes on people making $100k or even $250k/year. I'm sure that more has been written about this since then, but Matt Yglesias made the case really well in an old blog post entitled "Mobilizing the Lower Upper Class":

"[W]hile I have no sympathy with the idea that making the lower upper class return to Clinton-era tax rates is too hard on them, I think you could have some sympathy with the idea that your person earning $250,000 shouldn’t pay the same marginal rate as much as someone making $1.25 million or $6.25 million. Why not add additional marginal brackets?" ( http://thinkprogress.org/yglesias/2009/03/10/192079/mobilizi... )

I found this post via an old bookmark to some insightful commentary on it by Nate Silver: http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-b...

The problem is, while these "new rich"--the "petty bourgeoisie," as Marx called them--are all too eager to declare themselves "not rich" for tax purposes, they are just as eager to see themselves as being like the rich. They see themselves as the truly productive class, the ones who really keep the economy going. It's ultimately for ideological reasons, moreso than pragmatic ones, that they end up opposed to redistribution (even in the face of increasingly sickening, 1920s-esque levels of inequality).

Recently, my dentist and dental hygienist tried to strike up a conversation with me after a routine cleaning. My dentist was just so dismayed that unemployment benefits were still being extended when the recession had "ended" years ago (which is true only in terms of GDP growth, not in terms of the effects on employment and income). But in response, the hygienist--who probably makes one-third what the dentist does, for doing three times the work--upped the ante, approvingly quoting her fiance's suggestion that "the unemployed shouldn't be able to vote until they find a job." Of course, the dentist was delighted by this proposal!

The point is, progressives have plenty to offer the petty bourgeoisie: more customers for their small businesses, via boosting aggregate demand; a better educated and healthier workforce "below" them, via treating education and health care as public goods--but what we could never offer is the feeling of saintly victimhood they get from libertarianism. Not only do they nurture this spirituality in themselves, they evangelize it to every promising young worker (e.g., the hygienist) who might someday join the fold.

thank you. it's Sun Tzu ~saying 'first know the lines of battle'. map resource control per capita as 1000 people on a football field. there are like 3 people who control 110 yards and the other 997 in the remaining endzone. on the goal line are people worth tens or hundreds of millions, convinced that they wouldn't be squished like a bug if they dared to step on to the field

Not sure I agree that this is a narrative for raising taxes... if being "rich" is so transitory, it's harder to vilify "the rich" as some permanent class deserving of limitless soaking.

These are just the fattest cows in the herd. Being able to afford "luxury" versions of mass-manufactured crap isn't wealth. Wealth requires means a measure of financial independence and security. Dual-income professional couples who manage to get into the $100-250k range don't really have these, although they're in a better position than the rest of the middle class. Between student loans, school expenses, childcare expenses, saving for college, saving for retirement, etc, they can afford some toys but that's about it. Comparing them to the wealthy and saying they wield power in the economy is utterly ridiculous.

Also, does anyone understand the chart? Does it mean that 76% of 60 year olds will make > $100k at some point?

The typical student loans for people graduating today is only 30k USD. Now that will be much higher for some people, particularly lots of people on the higher end of the income scale (doctors, surgeons, etc), but if we are talking about the 30-60+ age bracket then their school debt straight out of school will likely be lower than you could expect for the same school/program today.

What I am getting at is that I doubt student loans are a significant consideration for most people in the age ranges the article is talking about (from what I understand they are for doctors).

Also, most young people in the SF/tech scene sort of deal are likely looking at the typical school debt (~30k), but are looking at the low range of these salaries (100k+) starting at a much younger age. I know people that are obliterating their student loans with the starting bonuses from their first jobs out of college. (That's what I did, albeit several years ago, and only 5 years worth of tuition.)

These sort of scenarios won't get you "country-club rich", but will certainly get you into the elusive "traditional middle-class security" range. The kind of wealthy where you can tell your kid they can go to any college accepts them, can take your whole family on 1-2 week long holidays every year as a tradition, buy your kids a shitty car when they turn 16, etc. It is this sort of wealth that can prove troublesome politically. People in this range are relatively isolated from true hardship; they don't have to worry about making rent or worry about how to feed their family. They are much more susceptible to pseudo-concerns like "is my corporate chain coffee fair trade" and "what if I become properly rich, then get taxed a lot?".

Remember that HN is an echo chamber. While we can talk about 250k and pretend like it is normal, the median household income is in the general neighborhood of 50k. Most Americans will never see this sort of income. For most Americans, 250k is wealth.

I think we have the tendency to define "wealth" as "something that is beyond our grasp". The more money you have, the more money it takes to become "wealthy".

Who says they have to have kids? Earn a combined $250k a year, live frugally and invest the money early. Build a huge retirement nest egg in a decade! Then go travel the world and enjoy life.

What gets expensive is if you get caught up in the keeping up with the Joneses mentality. Why do people want to live in a suburban sprawl nursery and spend all their life raising kids?

The question isn't whether you can live comfortably on $250k/year. Obviously you can. But that doesn't make you wealthy.

Trading off having kids to be able to afford travel and luxury goods is prole. People who are actually wealthy don't have to make compromises like that.

I am sure somebody who has kids and can afford to travel would tell you that what they have is not truly wealth because the truly wealthy don't have to make reservations, they can all schedule last minute and fly first class to another hemisphere on a moments notice. Planning and budgeting for your travelling retirement is for peasants!

Some of those people may even have the audacity to tell you they even they are not wealthy, because the those who are actually wealthy don't need to fly in the same planes as the poors.

It seems like nobody ever stops looking up.

Having to compromise a biological imperative in order to be able to afford a particular sort of lifestyle, and not being able to book first class tickets at the last moment is difference in kind, not a difference in degree.

People with less money than you who have kids will still be able to travel. They will just travel less frequently (sometimes much less frequently), they will travel to less exotic locations, they will book further in advanced, and they will travel and stay in less luxury. A week in Duluth, instead of a summer in France.

This is a difference in degree. It is a difference in degree until you reach the real difference in kind, far closer to the median household income / poverty line. The people who have no hope for a retirement, who plan on working until their aging bodies force them to stop.

I am sure those who travel whenever they please would assert that a retirement consisting of planning out the next trip months in advance is a difference in kind. It is a different sort of lifestyle if you are honest, but it is best described as difference in degree.

Everyone thinks that the difference between what they want and what they have is the important difference. If you had it, the bar would move; you wouldn't be satisfied.

I agree that traveling more or less is a difference in degree not kind. But 'chongli suggested forgoing having kids so you can save money and travel. That's a difference in kind, and it's a prole sort of thing to do. At least assuming you'd otherwise have kids if you had more money.

Well, yeah. chongli's suggestion is a difference in kind, not degree, but I think his suggestion is a bit extreme. I don't think many people decide to not have kids just so that they can travel more. Plenty of people probably claim that, but I don't think many people who actually want kids would decide not to have kids just because of their retirement plans. There is probably a deeper fundamental lack of a desire for kids hidden in there somewhere.

Anyway, I think it is also worth considering how the price of having kids changes as you go up and down the income scale. Most parents will naturally be inclined to provide the best childhood for their kid that they can. For most people, this probably means making sure their kids have good nutrition, do well in school, etc. Parents with more money available to them might start considering additional expenses though, like private tutors, private schools, larger college funds, trust funds, etc. People with more money will probably spend more money on their kids, so that 50k extra (after taxes) income every year doesn't necessarily mean 50k more money for yourself. If your income increases, you'll probably spend more on your kids. (of course this won't make more income a wash, since certainly some of that extra income will be spent on yourself).

$200k for a household is not affluent. Its just two people with good jobs.

The way the economy is, that often doesn't last. Then you have one person with a good job, and you better hope you saved. But you can easily eat up all of that previous income with things like urban housing which can be very expensive, an extra car, or a child's college tuition.

So anyway suggesting this situation occurring at some point for someone today is 'affluence' is not very realistic.

Maybe a few decades ago with less inflation those numbers would indicate 'affluence'.

> $200k for a household is not affluent. Its just two people with good jobs.

Yes, and 2 earners with good jobs makes one affluent :)

Affluence is one of those words, it all matters of perspective. But I try to use the test of "would an average guy on the street" consider a HHI of $200k affluent. I think yes, they would.

Remember, that income level puts a couple in the 96th percentile.

It's illustrative of the wealth divide in our society that engineers think 96th percentile wages are middle class.

I wonder how much of that is due to "upgrades" that don't really improve quality of life all that much. Get top tier internet access, couple that with expensive vehicles and a gaudy house, and you've got no more real saving potential than the guy four neighborhoods over who makes half your salary.

Or, it's illustrative that what used to be truly middle class lifestyle can now be afforded only by people in top income percentiles, whereas the median income probably implies a lifestyle pretty close to poverty.

This, Exactly This.

Also, cost of living needs to be applied to these numbers, 100k in the Bay Area is 65k in Florida is 45k in Georgia.

You refer to the costs of living on the coasts as just the cost of living. Most of America can't make salaries to get by in the Bay Area, so they live elsewhere. That makes living in the Bay Area a luxury good.

Affluence is about how much you can afford relative to the rest of your society. If you're only comparing yourself to San Franciscans and New Yorkers, doesn't that mean you don't consider the flyover Americans your peers? As if there were some large divide in wealth in this country?

Charles Hugh Smith does a quick calculation and comes up with an income of $111k to have what the middle class of the last generation took for granted:

http://charleshughsmith.blogspot.com/2013/12/what-does-it-ta...

It depends, where I live, $200k a year is extremely affluent. I'd be interested to see the figures for those salaries adjusted for cost of living.

I'd like to see how many households are earning over $250K total where that household has less than $100K in net wealth.

I guess it's a majority (over 50%) but even with that, I fear that I'm underestimating. Real affluence is wealth-based (and living within means), not just income based.

If you are talking about liquid net wealth, you might be right.

However, I think most people who are married and have a family will most likely have their wealth tied up in a house, 401(k)/IRA or college fund; since most of the tax incentive is geared to saving money in these relatively illiquid accounts.

So I think for most Americans earning that income bracket def. has > 100K in net worth but they are just not liquid.

I'd like to see how many households are earning over $250K total where that household has less than $100K in net wealth.

You might find this useful: http://www.census.gov/people/wealth/

Thanks for the data link! That paints a far less dire picture.

If I look on Table 4 of 2011 Excel sheet, the highest quintile incomes (still far under $250K/year median I'd presume) have a 74% chance of having a net worth over $100K. That isn't a perfect apples-to-apples invalidation of my premise, but it's close enough to give me comfort that I was being too pessimistic.

Fascinatingly fleeting..."for one year or more"

Huge difference between annuity and perpetuity cash flows.

This article makes the critical mistake of implying that affluence has anything to do with salaried income.

The people who are actually wealthy are too busy laughing to rebuke this notion.

my comment from the last time this was submitted:

> Because they spend just 60 percent of their before-tax income, often setting the rest aside for retirement or investing, he says their capacity to spend more will be important to a U.S. economic recovery.

As a salaried employee at less than $100K, my tax withholding in california was 35%. Spending 60% of your before-tax income doesn't seem to leave much room for any "capacity to spend more".

"Wealth" is assets, not income.

Income maybe, but not wealth.

These are also known as HENRYs. http://www.investopedia.com/terms/h/high-earners-not-yet-ric...

Investment firms and luxury brands are well aware of this phenomena.

Notice that they are not-yet-rich :)

What I imagine this study totally glosses over is the fact that many middle class families do make over $250,000 once in their life b/c they sell a home. That is far from making them "rich".

The percentages for each group seem to include everyone in the higher groups as well.

I'm making this assumption based on the percentages of the 60-year old graph: 76.8%, 50.9%, 32.2%, 20.6%

I guess I was thinking about this plot like a histogram which makes more sense in a bar chart like this. Read like that, the percentages in each bucket are: 25.9%, 18.7%, 11.6%, 20.6% for the age 60 chart and 17.7%, 7.4%, 2.1%, 2% in each range for age 30

I think the data's being presented in a strange way.

Since it's "people who make over $100k at least one year of their life", it makes sense that older people would have higher numbers.

They've been working more years, and because of that they usually have higher paying jobs due to having more experience or moving up to management positions.

Kind of sickening that this misleading headline gets more attention than "1 in 5 American children live in poverty."

Now that's something to chew on.

Think of it this way: This headline is telling 1 in 5 Americans that they should consider how badly they think they have it, then consider that there are many people who have it much worse. There are people here talking like 200k/yr/household is no big deal... meanwhile that is four times the national average. This article is an opportunity for people to stop worrying about the luxuries they do not have, and reflect on the luxuries they do have which most Americans do not get to enjoy.

Headlines about the extent of poverty do not offer much in terms of sudden realizations. Everyone knows that there is poverty, and most people think that there is significant poverty. What most people don't seem to stop and realize is that the poverty that many Americans experience is nothing like their "I can only put a few thousand into savings every month" problems. This headline gives meaning to your headline. The two stories compliment each other.

Other commenters have pointed out many of this article's fallacies but there's one good thing that's being overlooked: the upper middle class is growing. The author skews this as if it's a bad thing. Quite the opposite. There are two stories here, one about the upper middle class growing and one that the middle class gap is growing.

"Now a senior vice president for a private equity firm specializing in the marijuana business..."

Did anyone else notice this line in the article?

People that are actually wealthy love this kind of misinformation. If they can get the society focused on hitting people that happen to have an upper-middle-class income hard, it takes the heat off of people that are actually wealthy. Screw people with incomes trying to get ahead, but keep capital gains tax low to favor the wealthy.

Reply on news.ycombinator.com