What you need to earn to be in the top 1% – The Fool Motley

When you think about 1%, you probably think of people paying millions of dollars a year, traveling from house to house on their private jets and spending tens of thousands of dollars without thinking. These people certainly exist, but they do not all earn a seven-figure income.

Economic Policy Institute (EPI) has published a study on income inequality based on reported earnings for 2017, and the results may be surprising. Although the richest 1% earns the most modest 90%, you do not need to earn millions every year to join them. And if you consider yourself relatively easy, you may already be in the top 5% or 10%.

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The magic number is $ 421,926

Currently, you must earn a minimum of $ 421,926 per year to be considered in the top 1%, according to the EPI study. But in this crowd, it only scratches. The average annual income among the richest 1% is $ 718,766 and the highest 0.1% earns an average of $ 2,756,865. In contrast, the bottom 90% earn an average of $ 36,182.

These numbers do not tell the whole story. They are based on data from the Social Security Administration (SSA), which only takes into account salaries, not investment income. It is therefore likely that many of these people earn more, even if there is no way of knowing how much.

The income threshold of 1% varies by state. In New Mexico, you only need to earn $ 255,429 to join this elite group, while Connecticut residents need a minimum of $ 700,800. You can view the statistics of each state and region and the country as a whole on the EPI website.

The richest 1% have seen their wages rise by 157.3% in the last 40 years, according to the EPI study. On the other hand, the poorest 90% have seen their wages rise by only 22.2% since 1979. The Great Recession hit all wage groups hard, but the 1% rebounded quickly, 2017 being the second year of earnings never recorded. They currently hold 13.7% of the country's wealth.

Although most of us, by definition, never reach the top 1%, it is possible to join the top 10% (or even the top 5%) for those who work in well-paying fields. You must earn $ 118,400 to join the top 10% and $ 195,070 for the top 5%. Again, these numbers do not include investment income, but they give you a base.

Strategies that you can use to increase your income

If you hope to join an elite day, you must manage your money well and look for new opportunities to increase your income. It may mean changing employer or domain, going back to school, taking continuing education courses, or starting your own business. If this is not an option, consider additional work. You can also generate revenue in a more passive way, for example by collecting royalties on creative work.

Start investing if you have not already done so. You can open a regular brokerage account or use a robot advisor if you prefer a more passive approach. But your retirement accounts are probably your best choice as they offer tax benefits.

If you are unsure of the best way to grow your wealth, consider using a paid financial advisor only. Look for one that has been certified by the National Association of Personal Financial Advisors or a similar body. And avoid advisers who earn commissions by recommending certain investment products, as this could create an interest conflict. Always ask for a copy of the fee schedule and do not be afraid to talk to more than one counselor before choosing the one you want to work with.

Even if you can not join the 1% of the best income, this does not mean that you can not increase your wealth. By using some of these strategies, you can increase your net worth. And who knows? You can even join the richest 10%.