It takes $650,000 a year to reach America’s top 1% (2024)
It’s easy to assume what life might look like for the top 1% of earners in the U.S.—the exclusive tag might conjure images of big houses, luxury cars and exotic vacations.
The average American household needs to bring in $652,657 a year to be classed among the top 1% of earners across the country, according to research published Thursday by financial advisors SmartAsset.
The report analyzed 2020 IRS data to identify America’s highest earners.
But what it really takes to join the 1%—in terms of earnings at least—comes down to your zip code, the findings revealed.
Connecticut is the state with the wealthiest top earners, according to SmartAsset, where reaching the top 1% means having an annual income of at least $952,902.
It's followed by Massachusetts, which has a threshold of $903,401, and California, where the state's very highest earners earn upward of $844,266 a year. New Jersey came in fourth on the list—ahead of its neighbor New York—with a bar of $817,346.
Next on the list was the state of Washington, followed by New York, where households have to rake in $776,662 a year to reach the wealthiest 1%—despite it being America's second-most expensive state to live in.
“It’s easier to get into the 1% in New York than it ever has been,” Jaclyn DeJohn, SmartAsset’s managing editor of economic analysis, told Bloomberg on Thursday.
The report also highlighted that Southern states generally had lower wealth thresholds than their coastal counterparts.
The easiest state in which to reach the wealthiest 1% is West Virginia, the findings showed, where an annual income of $367,582 would be enough to make the cut. It was followed by Mississippi, where households need to earn $381,919 a year, and New Mexico, where the top 1% make at least $411,395 a year.
What does it take to feel rich?
The top 1% of earners is a group that's becoming increasingly powerful. According to a 2022 report from the Congressional Budget Office (CBO) the richest 1% owns more than a third of all U.S. wealth, while the top 10% holds 72% of America's total wealth.
It's a share that's increased over time, CBO data shows. In 1989, the richest 10% of Americans controlled $24.3 trillion in assets. By 2019, that control had increased to cover assets worth $82.4 trillion.
While joining the 1% club remains an elusive goal for many, the threshold for feeling "rich" in the U.S. varies wildly between individuals.
Approximately a third of the 2,521 adults questioned said they'd need an annual income of $500,000, and 21% said they’d need to earn at least $1 million a year to consider themselves rich.
The study also found that the expectation of what it takes to achieve financial freedom gets higher the more a person earns. For example, people who earned $50,000 or less said they'd need to earn $406,000 to feel rich, whereas Americans who earned $100,000 or more said they'd need to earn at least six times their salary to feel wealthy.
“For some, being wealthy might be seen as having the ability to buy things they don’t need,” said Mark Hamrick, a senior economic analyst at Bankrate. “If someone attains wealth along the way, more power to them. That doesn’t necessarily equate to being happier, of course. But it makes many things easier to navigate.”
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To crack the 1% — the small class of American households that hold over a third of the total wealth in the country — you need to earn more than $650,000 this year. That's according to a SmartAsset analysis that calculated the income required to reach that elite club of high-earners based on IRS tax filings.
You now need a net worth of at least $5.8 million in order to be part of that small but elite group, according to the upcoming 2024 wealth report from Knight Frank. That is a notable 12% increase from the $5.1 million needed just one year ago.
Fortune reported that an American needs an estimated net worth of $5.8 million to enter the top 1%. You would also need to have an average annual income of $819,324. Notably, the U.S. is ranked fourth globally in terms of assets needed to reach the top 1% of the population.
In 2023, households earning at least $844,266 per year are considered among California's top 1%. On average, these high earners are taxed at a rate of 26.95%.
The wealth of the top 1% hit a record $44.6 trillion at the end of the fourth quarter, as an end-of-year stock rally lifted their portfolios, according to new data from the Federal Reserve.
To make it into the richest 1 percent globally, all you need is an income of around $34,000, according to World Bank economist Branko Milanovic. The average family in the United States has more than three times the income of those living in poverty in America, and nearly 50 times that of the world's poorest.
Charles Schwab's 2023 Modern Wealth Survey provides insights into this topic, revealing that the average American equates being wealthy with a net worth of approximately $2.2 million.
In the U.S., it may take you $5.81 million to be in the top 1%, but it takes a minimum net worth of $30 million to be considered among the ultra-high net worth crowd. As of the end of 2023, this ultra-high net worth population is on the rise, reaching 626,000 globally, up from just over 600,000 a year earlier.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year.
According to IRS standards, a monthly income of approximately $45,000 qualifies someone as wealthy. However, if you're aiming for the top 1% as measured by the Economic Policy Institute (EPI), you'd need to earn about $68,277 monthly.
In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.
Earning more than $100,000 per year would put you well ahead of the median American household, which brings in $74,784 as of 2021. Assuming you're an individual without dependents, that salary would qualify you as upper class, according to three different definitions (Brookings, Urban Institute and Pew Research).
According to the latest data from the Internal Revenue Service (IRS), a relatively small fraction of the population falls into this high-earning bracket. The IRS reports that for the most recent tax year with available data, less than 1% of all tax filers reported an adjusted gross income (AGI) exceeding $500,000.
Entering the top 1% of earners requires an average annual income of $819,324. In the highest echelon — the top 0.1% — the average income is $3.3 million.
The top 1 percent of taxpayers paid more than $1 trillion in income taxes while the bottom 90 percent paid $531 billion. The share of income taxes paid by the top 1 percent increased from 33.2 percent in 2001 to 45.8 percent in 2021.
And if you're looking to go even higher than the top 5%, Forbes found that to be one of the top 1% of earners in the U.S., you need to bring in an annual salary of at least $597,815, so start saving up!
How many people in the U.S. make over $1 million per year? Best I can find is about 0.2% of taxpayers make $1,000,000+ in a given year. Many don't make it consistently.
Introduction: My name is Lidia Grady, I am a thankful, fine, glamorous, lucky, lively, pleasant, shiny person who loves writing and wants to share my knowledge and understanding with you.
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