How much does it cost to live the American Dream?
Lynette Khalfani Cox, CEO of the Money Coach shares how the high cost of living is impacting families in the US.
NEW YORK - What does it mean to be considered "rich"?
The definition of "rich" can vary dramatically depending on where you live. Cost of living, tax structures and local economies all play a role in how much income is needed to be considered wealthy.
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A recent study by GOBankingRates, a platform focused on personal finance, examined the income thresholds required to be considered wealthy in every state.
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"To get an idea of what it looks like to be rich in America, GOBankingRates used IRS data to conduct a study of the top incomes as they break down by state," the website said. "It lays out what income level is needed to place you in the top 20% and the top 5% of incomes within your state."
1. New Jersey
- The minimum you need to make to be in the top 20%: $180,558
- Average adjusted gross income of the top 20%: $319,140
- The minimum you need to make to be in the top 5%: $562,886
5. Connecticut
- The minimum you need to make to be in the top 20%: $169,183
- Average adjusted gross income of the top 20%: $319,533
- The minimum you need to make to be in the top 5%: $602,707
9. New York
- The minimum you need to make to be in the top 20%: $158,336
- Average adjusted gross income of the top 20%: $302,676
- The minimum you need to make to be in the top 5%: $574,063
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The highs and lows of wealth in America
New Jersey stands out with the highest threshold for the top 20% of earners. An individual in New Jersey must make at least $180,558 annually to be considered in this upper tier. This reflects the state's high cost of living and affluent communities, particularly those near New York City.
On the other end of the spectrum, Mississippi requires the least income to be among the top 20%, with $101,447 needed annually. Mississippi's lower cost of living and economic structure contribute to a lower threshold for being considered rich than other states.
So what's the cutoff for being considered wealthy?
According to the personal finance site SmartAsset, the definition of wealth can vary widely. For example, individuals with $1 million in liquid assets are generally classified as having a high net worth. To be considered very high net worth, one might need assets ranging from $5 million to $10 million, while an ultra-high net worth status could require $30 million or more. These figures underscore the subjective nature of financial classifications across different thresholds of wealth.
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The amount you need to earn to be considered wealthy also varies depending on the metrics used. According to IRS standards, a monthly income of approximately $45,000 qualifies someone as wealthy. However, if you're aiming for the top 1% as measured by the Economic Policy Institute (EPI), you'd need to earn about $68,277 monthly.
According to data from the Census Bureau, the median household income in the U.S. is approximately $71,000. To reach the top 20% of earners, an individual would need to earn nearly double this amount, averaging around $130,545 per year.
The threshold for being in the top 5% of earners highlights even more stark contrasts. For example, in Connecticut, you'd need to make $602,707 to be in this elite group, the highest among all states. This is due to Connecticut's concentration of high-income jobs and proximity to New York's financial industries.
Moreover, how one is considered wealthy can vary significantly from state to state, reflecting the diverse economic landscapes and cost of living. For instance, while an income of around $101,447 places you in the top 20% in Mississippi, you would need almost $180,558 to achieve the same status in New Jersey. These disparities illustrate that the financial benchmark for wealth is deeply influenced by regional economic conditions.
To see the full list, click HERE.
Austin Williams, with the FOX Digital Team, helped contribute to this report.
