The surprisingly high cost of being a middle-class American

By | September 17, 2023

I'm middle class

I’m middle class

Unless you are extremely rich or poor, you probably consider yourself part of the “middle class.” As you probably know, “middle class” is an income level that describes people whose annual income is directly in the middle 50% of all income. If you are middle class, you are not considered rich or poor. However, when it comes to middle class income, how much money is it exactly? We’ll break it down below, but if you’re middle class, you could probably benefit from working with a financial advisor to maximize the potential growth of your wealth.

Why is it important to know if you have a middle class income?

You could argue that it’s not that important. Knowing you have a middle-class income won’t make you richer or poorer, nor will it change anything about your income. It’s not like it will help you save more money.

That said, understanding that your income is lower than that of the middle class could theoretically push you to try to earn more. Or knowing that your income is higher than that of the middle class might make you feel more grateful for what you have. It certainly can’t hurt to know where you and your income are in the country, compared to everyone else.

If you’re ready to be matched with local advisors who can help you reach your financial goals, it begins now.

What is the income of the middle class in the United States?

I'm middle class

I’m middle class

The middle class has been eroding for some time. According to recent research by the Pew Research Center, a respected nonpartisan American think tank based in the District of Columbia, in 1971, middle-class Americans made up 61% of the population; in 2021 it was at 50%. During that time, both low-income and high-income families grew as a group.

So what is considered middle class income? It can be difficult to define, in part due to a family’s size and location. After all, a family making $100,000 a year will feel more squeezed if there are two parents and six children than if there are two adults and two children. Likewise, your community’s cost of living plays an important role in determining whether a family feels like they are middle class. A hundred thousand a year will go a lot further in a small town than in a big city.

The Pew Research Center describes the middle class as individuals who generate between two-thirds and double the median U.S. household income, which was $65,000 in 2021, according to the most recent numbers from the U.S. Census Bureau. Using these numbers, a middle-class income would be that of any family earning between $43,350 and $130,000.

In other words, if you earn less than $43,350 in your household, you are likely considered a low-income household. If you earn between $43,350 and $130,000, you are considered middle class. If you make $130,000 and above, you are probably considered upper class.

This is a simplistic way of looking at it, however, since a family earning $130,000 may not live quite like a middle-class family if one adult is the breadwinner and there are many mouths to feed. However, if it helps visualize how much a middle-class family earns, according to the Bureau of Labor Statistics, for the third quarter of 2022, the average weekly wage was $1,068.

Middle class income doesn’t matter as much as tax brackets

If you realize that your income falls squarely in the middle class, that’s interesting information to have, but as noted, that knowledge obviously doesn’t directly impact your finances. What affects your finances are federal tax brackets, and there are seven of them.

The lowest tax bracket is 10%. The highest tax bracket is 37%. If you’re middle class, you probably fall into the 22%, 24%, or maybe 32% tax brackets. It may seem like you’re paying 22%, 24%, or 32% of your income in taxes, but that’s actually not the case.

The first portion of your income will be taxed at 10%, then the next portion will be taxed at 12%, and so on until you reach your tax bracket. As your income increases, money within the tax bracket is taxed at the corresponding rate. This type of tax system, where you pay more and earn more, is known as a progressive tax system. Some states, meanwhile, tax their residents differently. Some states have a progressive tax system while others have a flat rate.

The bottom line

I'm middle class

I’m middle class

Being “middle class” is almost more of a mindset than anything as it relates to your annual income. Politicians and the media often talk about middle class values, but it’s not like anyone gets a certificate for moving into or out of the middle class. “Middle class” is really simply a label that describes one’s financial situation, rather than a label that changes one’s finances and makes no one family better than the other, whether they are lower, middle, or upper class . . Just remember that your net worth, which you can always increase, should never be confused with your self-worth.

Tips for increasing wealth

  • One of the best things you can do to increase your income for retirement is to work with a qualified financial advisor. An advisor can help advise you on your finances and prepare you for retirement. Finding a qualified financial advisor doesn’t have to be difficult. The free SmartAsset tool it matches you with up to three hand-picked financial advisors who serve your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready, find an advisor who can help you reach your financial goalsit begins now.

  • Are you looking to create wealth? You can check out this guide on how to build wealth that provides a step-by-step process that you can consider regardless of the size of your household income.

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