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The best way to give people a sense
of where they stand is to lay out some data. Every
three years the Federal Reserve Board conducts
a national survey that tracks the financial health
of American households. The Fed slices and dices
this stuff with the vigor of an Iron Chef; the
result is a rich, if dry, array of offerings on
household net worth, pension and income levels,
plus other demographic side dishes.
Whenever I slip these tidbits into
cocktail party chatter, people are surprised to
realize how little money it takes to win a gold
star from the Fed. If you and yours are bringing
in $40,000 a year, you're doing better than half
the households in America. Or, as a Washington
think tank recently pointed out: If you're a teacher
married to a policeman, your combined household
income puts you in the top 25 percent of all households
in the nation.
Below you'll find the average income picture sliced into income levels. Think of this chart as a parking ramp. If your household income is $170,000, you're among the nation's top 10 percent wage earners and get to park on the top floor. Anything in six figures means you're in the top 20 percent and get to park on the floor right below.
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Annual income parking ramp |
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| Level VI (90 to 100) |
$170,000 |
| Level V (80 to 89.9) |
$99,000 |
| Level IV (60 to 79.9) |
$65,000 |
| Level III (40 to 59.9) |
$40,000 |
| Level II (20 to 39.9) |
$24,000 |
| Level I (less than 20) |
$10,000 |
| Source: Before-Tax Family Income, 2001 Federal Reserve Board Survey |
So does making $170,000 a year make a person rich? Last year a plurality of respondents (29 percent) in a survey by The New York Times said that "rich" was making between $100,000 and $200,000 a year. Unfortunately, the survey didn't break out how many people in that salary range considered themselves rich. If the people I talk to are any indication, very few do.
Of course, income is only one part of the equation defining where you stand. Net worth is more telling. Net worth, as every financially precocious schoolchild knows, is the sum of one's assets -- home equity, investments, savings accounts, retirement funds, cars, furnishings and such things as jewelry, furs, wine collection, old baseball cards -- minus all outstanding liabilities such as mortgage balance, revolving and credit card debt, college loans and so on. Across all households, the national median net worth is $86,000. Half of your fellow citizens have more than that, half less. As you see, there's a massive disparity between the haves and have-nots.
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Net worth parking ramp
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| Level VI (90 to 100) |
$833,600 |
| Level V (80 to 89.9) |
$263,100 |
| Level IV (60 to 79.9) |
$141,500 |
| Level III (40 to 59.9) |
$62,500 |
| Level II (20 to 39.9) |
$37,200 |
| Level I (less than 20) |
$7,900 |
| Source: Family
Net Worth, 2001 Federal Reserve Board Survey |
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