To be considered "rich" in America, according to a recent poll from data firm YouGov, most people think you need to earn $100,000 or more a year. But to be a part of the top 5% of earners in some states, like California, you need to make a lot more than that.
That's according to financial website GOBankingRates, which used "data from the U.S. Census Bureau's 2017 American Community Survey and the Economic Policy Institute's income inequality report to determine the average income for each state" and Washington, D.C.
"You might be surprised to learn," the report says, "that there's a vast discrepancy between the 5-percenters in one state as compared with some others."
Here's what the data shows for the Golden State:
- Average top 5% income: $447,207
- Lower limit of top 5%: $250,000
"To be rich in California means you've really hit the big time," says GOBankingRates. "California is one of the seven states in the country — eight if you include Washington, D.C. — in which you'll need at least $250,000 to reach the top 5%."
The others include notoriously pricey states such as Connecticut, New Jersey and New York.
"But that's still chump change compared to California's 1-percenters," the study adds, "who earn close to $1.7 million on average." The minimum annual income needed to crack the state's top 1% is $514,694, according to the Economic Policy Institute. Nationally, it's $421,926.
"Unfortunately," in California, GOBankingRates says, "a lot of that may be eaten up by taxes." Indeed, the Golden State is among the most heavily taxed in the country. According to an analysis from financial site WalletHub, California is the 11th highest-taxed state, falling just short of New Jersey, Connecticut, Illinois and Iowa.
California residents pay nearly 9.5% of their personal income in taxes. That includes 2.7% in property taxes, 3.6% in income taxes and 3.1% in sales and excise taxes.
But taxes are just the beginning. Real-estate costs in California are among the highest in the United States.
The national median home value there is nearly $550,000, according to real-estate site Zillow, and median rent is $2,750. On a national scale, by comparison, median homes values are $226,300 and median rent is $1,650. Home values in California have gone up more than 3 percent in the last year and are predicted to rise another 3 percent within the next year, too.
A full 43% of California voters, and 61% of those aged 18 to 34, feel they can't afford to live in the state, according to a Quinnipiac University poll. And in a poll that aimed to "pinpoint what's causing the worst financial fears and stress among Americans," Californians said their top financial stressor was the general cost of living.
But while location certainly plays a role in how much money is needed to be considered rich, wealth is also a mindset, the YouGov report notes. And context matters.
"Although people become less likely to consider themselves poor the more money they make," the report notes, "they don't really become much more likely to consider themselves rich."
Of those earning between $40,000 and $60,000 a year, 7% consider themselves "rich." But when it comes to high-earners, those making $90,000 to $150,000 a year, just 9% consider themselves "rich" and 5% actually classify themselves as "poor."
"The higher your income," the report concludes, "the higher you set the bar."
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