Defining wealth isn’t a straightforward task. It’s a multifaceted concept influenced by income, personal circumstances, and crucially, the cost of living in your specific location. While there’s no single, universally accepted answer, data and surveys provide insights into the financial benchmarks Americans associate with wealth and comfort.
The Threshold of Wealth: Net Worth and Perception
Charles Schwab’s ongoing Modern Wealth Survey, a valuable resource since 2017, explores American financial habits, investments, and aspirations. Their 2024 report reveals interesting perspectives on what constitutes wealth.
According to the survey, Americans associate a comfortable life with an average net worth of approximately $778,000. However, the benchmark for being considered wealthy sits considerably higher, at around $2.5 million. This figure, a significant increase from $2.2 million in the previous two years, reflects evolving perceptions of financial security. Optimism varies across generations, with Gen Z and Millennials feeling more confident about achieving a wealthy lifestyle compared to Baby Boomers, who generally believe a higher net worth (around $2.8 million) is necessary.
Regional disparities also play a crucial role. Residents of California, with its high cost of living, perceive wealth as requiring a net worth of $3-4 million. In contrast, those living in Atlanta, Chicago, Houston, Phoenix, and Dallas generally have a lower threshold for what constitutes being wealthy, falling below the national average.
Income Levels and the American Economic Landscape
While net worth provides a snapshot of accumulated wealth, income is a key indicator of financial well-being. The U.S. Census Bureau reports the average American household income at $80,610 (2023 figures). Reaching the top 20% of income earners requires nearly double that amount, exceeding $130,500 annually.
Defining the “top 1%” is another interesting exercise. The IRS sets the benchmark at above $540,009, based on tax data. However, the Economic Policy Institute suggests a higher figure of $819,324 per year to truly be considered among the top 1% of earners.
Pew Research Center data reveals that approximately half (52%) of American adults reside in middle-income households. Of the remainder, 28% are classified as lower-income, while 19% are considered upper-income.
The Middle-Class Standard: A State-by-State Perspective
The cost of living and economic opportunities vary significantly across states, directly impacting what it takes to achieve a middle-class lifestyle. Forbes highlights the disparity in average salaries, with Massachusetts, New York, and California having significantly higher averages ($74,000-$76,000 annually) compared to Mississippi, Arkansas, and West Virginia ($45,000-$49,000).
A 2023 SmartAsset study found that northeastern salaries were 20% higher than in the south, even after accounting for the cost of living.
In states like Maryland, Washington D.C., and Massachusetts, an annual income of around $60,000 is needed to be considered middle class. Mississippi, on the other hand, has the lowest threshold, requiring an income of approximately $32,640.
Even within states, the cost of living can dramatically influence these figures. In Fremont, California, the minimum threshold to be considered middle class is around $110,000, with the upper limit reaching $310,000 due to its proximity to Silicon Valley and high-paying tech jobs.
Beyond essential expenses, financial comfort is often linked to discretionary spending. A popular financial guideline suggests a 50/20/30 budget: 50-60% for necessities (rent, food, bills), 20% for savings/debt repayment, and 20-30% for “fun” expenses (hobbies, entertainment).
Cost of Living and Wealth Calculators
The true value of wealth is inextricably linked to the cost of living. A family of four in the U.S. might spend just over $4,000 per month on expenses, excluding rent, while a single person might spend around $1,166 per month. Comparatively, the average cost of living in the U.S. is about 7% higher than in France.
Online tools can help you assess your financial standing. The Pew Research Center offers a wealth calculator for the U.S. that considers your state and determines if you fall into the American middle class. Additionally, The Washington Post provides an “Are You Rich?” calculator that benchmarks your net worth against your age, education, and income.
Ultimately, defining “What Is Considered Wealthy” is a subjective exercise, shaped by individual aspirations, lifestyle choices, and the economic realities of their location. While data and surveys provide valuable benchmarks, personal financial goals and a sense of security are the true hallmarks of financial success.
