8 ms·

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

51 points by tokenadult 13y ago

wavefunction 13y ago
Income maybe, but not wealth.
001sky 13y ago
Fascinatingly fleeting..."for one year or more" Huge difference between annuity and perpetuity cash flows.
sokoloff 13y ago
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.
- noname123 13y ago
  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.
- velodrome 13y ago
  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/ http://www.census.gov/people/wealth/
  - sokoloff 13y ago
    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.
hkmurakami 13y ago
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.
- nostromo 13y ago
  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"
  - patmcguire 13y ago
    You can generally exempt $250,000 of profit from a house, $500,000 if you're married
    - malandrew 13y ago
      That strikes me as blatant financial discrimination against single people.
      - patmcguire 13y ago
        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.
LukeWalsh 13y ago
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.
- pjscott 13y ago
  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.
ilaksh 13y ago
$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'.
- encoderer 13y ago
  > $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.
  - natrius 13y ago
    It's illustrative of the wealth divide in our society that engineers think 96th percentile wages are middle class.
    - MisterBastahrd 13y ago
      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.
    - upquark 13y ago
      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.
rayiner 13y ago
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?
- Crito 13y ago
  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".
auctiontheory 13y ago
"Wealth" is assets, not income.
transfire 13y ago
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".
codezero 13y ago
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
- jlarocco 13y ago
  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.
narrator 13y ago
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.
- untog 13y ago
  The average income is $60k. $100k IS rich, even if it doesn't feel like it in Silicon Valley.
  - dmd 13y ago
    And, to be clear, that's the average household income, not the average personal income.
    - niels_olson 13y ago
      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.
  - deleted 13y ago
    [deleted]
  - blisterpeanuts 13y ago
    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....
thaumasiotes 13y ago
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".
commentor12 13y ago
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.
akuma73 13y ago
These are also known as HENRYs. http://www.investopedia.com/terms/h/high-earners-not-yet-rich-henrys.asp 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 :)
jennyjenjen 13y ago
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.
- Crito 13y ago
  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.
ars_technician 13y ago
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.
driverdan 13y ago
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.
samspenc 13y ago
"Now a senior vice president for a private equity firm specializing in the marijuana business..." Did anyone else notice this line in the article?

51 points by tokenadult 13y ago

wavefunction 13y ago

Income maybe, but not wealth.

001sky 13y ago

Fascinatingly fleeting..."for one year or more" Huge difference between annuity and perpetuity cash flows.

sokoloff 13y ago

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.

noname123 13y ago
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.
velodrome 13y ago
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/ http://www.census.gov/people/wealth/
- sokoloff 13y ago
  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.

hkmurakami 13y ago

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.

nostromo 13y ago
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"
- patmcguire 13y ago
  You can generally exempt $250,000 of profit from a house, $500,000 if you're married
  - malandrew 13y ago
    That strikes me as blatant financial discrimination against single people.
    - patmcguire 13y ago
      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.

LukeWalsh 13y ago

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.

pjscott 13y ago
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.

ilaksh 13y ago

$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'.

encoderer 13y ago
> $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.
- natrius 13y ago
  It's illustrative of the wealth divide in our society that engineers think 96th percentile wages are middle class.
  - MisterBastahrd 13y ago
    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.
  - upquark 13y ago
    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.

rayiner 13y ago

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?

Crito 13y ago
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".

auctiontheory 13y ago

"Wealth" is assets, not income.

transfire 13y ago

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".

codezero 13y ago

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

jlarocco 13y ago
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.

narrator 13y ago

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.

untog 13y ago
The average income is $60k. $100k IS rich, even if it doesn't feel like it in Silicon Valley.
- dmd 13y ago
  And, to be clear, that's the average household income, not the average personal income.
  - niels_olson 13y ago
    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.
- deleted 13y ago
  [deleted]
- blisterpeanuts 13y ago
  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....

thaumasiotes 13y ago

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".

commentor12 13y ago

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.

akuma73 13y ago

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

jennyjenjen 13y ago

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.

Crito 13y ago
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.

ars_technician 13y ago

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.

driverdan 13y ago

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.

samspenc 13y ago

"Now a senior vice president for a private equity firm specializing in the marijuana business..." Did anyone else notice this line in the article?