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Looking at income alone is misleading. To be in the top 1% of income you only need to make about $500k per year. But to be in the top 1% of net worth, you need
by burlesona 6y ago
Looking at income alone is misleading. To be in the top 1% of income you only need to make about $500k per year. But to be in the top 1% of net worth, you need to have almost $12M.
Just to make the math simple, supposing you made $500k/year and saved every penny that’s 24 years of savings before you crack the top 1% in net worth. Of course in reality you don’t save every penny, and you may have a lot of student loans to pay off, and some of your savings is surely investments that compound so it’s impossible to say how long this would take in practice, but it’s still fair to say at least a decade if not multiple decades.
This is why I think it’s misleading to say that FAANG engineers are all 1%ers. There’s a huge difference in someone who just cracked $500k in income for the first time at age 35 and someone who has been earning that foe their career and has more than $10M net worth at the end of their career. Even more difference with someone who started off with a $5M starter fund from mom and dad.
- neogodless 6y agoWealth of $4.4 million USD seems to get you to top 1% globally[0]. If you earn $500k and put $300k into a total market index fund that earns you 7% net growth per year over 10 years, after 10 years, your wealth will have grown to $4.4 million[1]. (If you use the $200k the article uses for top 5%, assuming all income could somehow be invested, it'll take a bit over 13 years.) [0] https://www.businessinsider.com/net-worth-to-be-in-1-percent-top-richest-wealth-2021-2 https://www.businessinsider.com/net-worth-to-be-in-1-percent... [1] https://www.bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx https://www.bankrate.com/calculators/savings/compound-saving...
- bumby 6y agoIs this extending the OP example that you have no living expenses? The effective tax rate from what I could quickly find ranges from 32% (Texas) to 43% (NYC). In the latter, your take home isn’t enough to cover $300k/yr and in the former you’re left with $35k/yr. Maybe doable in the latter case but not the most likely lifestyle for someone making over 10x the median salary.
- tjs8rj 6y agoMaybe this is pedantic to some but I despise the inequality comparisons with pure savings. Sure, if you stuffed your post-tax $500k into a savings account it’d take 2 and half decades to be in the 1%. More realistically, if you simply invested each month with a historical return of 7%, you’d get there 10 years faster. It just serves to be disingenuous about inequality. Zuck didn’t stuff a big paycheck into a savings account, because he wouldn’t be that rich either if he had. Level the hypothetical playing field so comparisons are actually reasonable.
- fractionalhare 6y agoI would agree with you, but the article itself is examining percentiles of income, not net worth. > But evasion peaks among the richest 5 percent, who have an income of at least $200,000 and who, as a cohort, capture more than one-third of total national earnings. Taxpayers in this group hide more than 20 percent of their income from tax collectors.