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What You Need to Earn to Be in the Top 1%

By Kailey Hagen - Jul 6, 2019 at 4:00PM

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Hint: Try aiming for the top 10% instead. Or maybe move to New Mexico.

When you think of the 1%, you probably think of people banking millions of dollars per year, traveling from vacation home to vacation home on their private jets, and spending tens of thousands without thought or care. Those people certainly exist, but they don't all earn seven-figure incomes.

The Economic Policy Institute (EPI) published a study that looked at income inequality based on 2017 reported wages, and the results may be surprising. While the top 1% obviously out-earn the bottom 90% by a considerable margin, you don't need to make millions each year to join them. And if you consider yourself relatively well-to-do, you may be in the top 5% or 10% already.

Couple drinking champagne in limo

Image source: Getty Images.

The magic number is $421,926

Currently, you need to make a minimum of $421,926 per year to be considered in the top 1%, according to the EPI study. But in this crowd, that's just scraping by. The average annual income among the top 1% is $718,766, and the top 0.1% earn an average of $2,756,865. By contrast, the bottom 90% make an average of just $36,182.

These numbers don't tell the whole story. They're based on Social Security Administration (SSA) data, and the SSA only considers wages, not investment income, so it's likely that many of these top individuals earn more, though there's no way to know how much more.

The 1% income threshold 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 statistics for every state and region, and the country as a whole, on the EPI website.

The top 1% have seen their wages grow by 157.3% over the last 40 years, according to the EPI study. By contrast, the bottom 90% have only seen their wages grow by 22.2% since 1979. The Great Recession hit all wage groups hard, but the 1% have rebounded quickly, with 2017 being their second-highest-earning year ever recorded. They currently hold 13.7% of the country's wealth.

While most of us -- by definition -- will never join the top 1%, joining the top 10% (or even the top 5%) is attainable for those in well-paying fields. You need to make $118,400 to join the top 10% and $195,070 for the top 5%. Again, these figures don't include investment income, but they give you a baseline.

Strategies you can use to boost your income

If you hope to someday join the elite, you need to manage your money well and look for new opportunities to increase your income. This could mean switching employers or fields, going back to school or taking continuing-education classes, or starting your own company. If that's not an option, consider an extra job. You could also generate revenue through more-passive means like earning royalties on creative work.

Start investing if you haven't already. You could open a regular brokerage account or use a robo-adviser if you prefer a more hands-off approach. But your retirement accounts are probably your best bet because they offer tax advantages.

If you're not sure of the best way to grow your wealth, consider hiring a fee-only financial adviser. Look for one who has been certified by the National Association of Personal Financial Advisors or a similar organization. And avoid advisers who earn commissions by recommending certain investment products, as this can create a conflict of interest. Always ask for a copy of the fee schedule and don't be afraid to speak to a few different advisers before deciding which one you want to work with.

Even if you can't join the top 1% of earners, that doesn't mean you can't grow your wealth. By using some of these strategies, you can increase your net worth. And who knows? You may even join the richest 10%.

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