According to a recent study of data from the IRS and U.S. Bureau of Labor Statistics, households that earn $652,657 or more per year are in the top 1% of earners in the nation. But the income you need to earn to be a "one-percenter" varies quite a bit on a state-by-state basis. And just like living well in California probably won't cost the same as living well here in the Midwest, your idea of what it means to be "wealthy" in life could be very different than your neighbor's, or even your spouse's.
I believe that staying focused on those personal values and money goals is much more important than hitting some arbitrary number before retirement. Still, talking through these statistics can be a useful way to put your financial journey in perspective and have more purposeful conversations about money, happiness, and what's really important in life.
1. From Connecticut to West Virginia
Here are the ten states with the highest annual income thresholds for being in the top 1%, as well as the effective tax rate of those high earners:
1. Connecticut $952,902 28.40%
2. Massachusetts $903,401 27.15%
3. California $844,266 26.95%
4. New Jersey $817,346 28.01%
5. Washington $804,853 25.99%
6. New York $776,662 28.29%
7. Colorado $709,092 25.86%
8. Florida $694,987 25.82%
9. Illinois $660,810 26.35%
10. New Hampshire $659,037 26.25%
In Kansas (ranked 27), you have to earn $554,912 annually to be a one-percenter; in Missouri (38) it's $500,626. West Virginia comes in at 50, where you "only" have to earn $367,582. Overall, northern and coastal states have higher 1% floors than southern states.
2. Getting Outside and Giving Back
So now that you know what the numbers look like, you're probably wondering what these one-percenters do with all that money!
A 2021 report by Wealth-X on the hobbies and interests of folks whose net worth is at least $5 million found that Sports and Philanthropy were at the top of the list for both men and women, although women put giving back in first place. Coming in third for women was Art, which was 10th on the list for men. Education, Travel, and Wellness also ranked higher for women, whereas men prioritized spending time Outdoors, Public Speaking, and Technology.
Wealth-X also found that the wealthier folks are, the more time they invested in their hobbies and passions. The wealthy also became progressively more involved in philanthropy both as their incomes rose and as they aged. Considering that high-net-worth millennials ranked Travel, Music, Food, and Animals as their top passions, you might assume that these folks are having fun while they're young and broadening their perspectives on what matters later in life – which, of course, is not an experience that’s unique to one-percenters.
3. Your Money, Your Wealth
I can’t say for sure based on these studies, but I’d guess that one reason high earners devote more and more time and resources to their passions is because … they can! Their money affords them a degree of freedom that can be harder for folks in lower income brackets to feel while they’re busy paying the bills, raising children, and trying to find their ideal career path.
Rather than worrying about where your wealth stacks up in these lists and chasing after the Joneses, I’d encourage folks to focus on the things that matter most in their own life and how they’re using the money they do have to create more of those meaningful experiences. With hard work and proper financial planning, you don’t have to be a one-percenter to take a dream vacation, spend more time with your family, play sports you enjoy, or give back to your community.
The sooner you start thinking about and working on the connection you feel between these passions and your money, the better your chances of deepening those connections throughout your life. My team at Keen Wealth would love to talk to you about how our planning process could help you achieve your personal vision of wealth and a secure, successful retirement.
Bill Keen is a financial advisor with nearly 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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