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What Does It Take to Be in the Top 1% Of Household Income in Your State? Thumbnail

What Does It Take to Be in the Top 1% Of Household Income in Your State?

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.   

About Bill

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.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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