Once coveted six-figure salaries are struggling to keep up with today’s cost of living, with more than half of people who are making six-figures still living paycheck-to-paycheck, reflected in a new study.
As rampant inflation pervades the economy, with it sitting at 6% in February, the study done by the financial advice company, SmartAsset, acknowledges that even high-earners are struggling to build wealth, especially in pricier cities. In December 2022, 51% of people who earn more than $100,000 reported living paycheck to paycheck, which is 7% more than the previous year, according to a survey from financial insight and advising companies PYMNTS and Lending Club.
In SmartAsset’s new study, researchers calculated income tax on $100,000—taking it into account at the federal, state and local level—to find earners’ real take-home pay in 76 of the largest cities around the U.S. Using 2022 data on cost of living prices in these cities from the Council for Community and Economic Research, SmartAsset analyzed how much purchasing power earners truly have. Cost of living indexes include average prices of housing, groceries, utilities, transportation and other goods and services.
The study found the worst places to live for people who earn $100,000. After taxes and adjusted for cost of living, $100,000 amounts to just $35,791 in New York, New York, $36,026 in Honolulu, Hawaii, $36,445 in San Francisco, California, $44,307 in Washington D.C. and $44,623 in Long Beach and Los Angeles, California.
Using the same metrics, the best cities to live in for people who earn $100,000 are Memphis, Tennessee, El Paso, Texas and Oklahoma City, Oklahoma. In Memphis, thanks to its cost of living, which is 14% lower than the national average, $100,000 is worth $86,444. Seven cities where six figures goes the furthest were in Texas, credited to low costs of living combined with no state income tax.
In the U.S. 18% of individuals earn more than $100,000, according to Zippia, a career advising company, and like the cost of living, income varies greatly between cities and states.
Zippia’s data also shows that 56% of Americans believe that earning $100,000 per year would make them rich, but Zippia notes that a $100,000 salary is generally considered upper-middle class today, rather than rich, and can even be lower-middle class in some cities. The median U.S. salary in 2022 was $44,225, according to Zippia, which raises major concerns if Americans earning more than double that amount are struggling.
SmartAsset shares some advice for six-figure earners, such as suggesting that they max out their retirement accounts. Contributing the highest possible amount to retirement accounts can help reduce a contributor’s tax bill for that year, potentially even dropping them into a lower tax bracket. They also recommend reviewing a city’s track record on its cost of living before moving there, along with consulting a professional financial adviser to be as tax efficient as possible.
FAQs
The High Costs of Education and Housing Also Play a Role
Antonio Tovar, a wealth planner at Avidan Wealth Solutions, notes that two major wealth-building tools — higher education and housing — are now more costly than ever before, making it harder for even upper-income earners to make ends meet.
What causes people to live paycheck to paycheck? ›
Meanwhile, 57% of Millennials say a lack of budgeting and financial planning is the primary reason they're living paycheck to paycheck. The second most common reason among this generation is high monthly bills, with about 50% of respondents selecting this answer.
What percent of people who make $100,000 live paycheck to paycheck? ›
According to PYMNTS Intelligence, 62% of U.S. consumers now live paycheck to paycheck, and that includes 48% of consumers earning more than $100,000 annually.
Do high income earners live paycheck to paycheck? ›
Sizable portions of high earners live paycheck to paycheck.
The increase in consumers living this financial lifestyle is evident across income brackets. The share of consumers living this financial lifestyle and annually earning more than $100,000 has increased from last January, currently standing at 48%.
How rare is a 100k salary? ›
According to the U.S. Census, only 15.3% of American households make more than $100,000 annually. A $100,000 salary can yield a monthly income of $8,333.33, a biweekly paycheck of $3,846.15, a weekly income of $1,923.08, and a daily income of $384.62 based on 260 working days per year.
Do 70% of Americans live paycheck to paycheck? ›
According to a recent GOBankingRates survey, over 70% of Americans are living paycheck to paycheck at least some of the time, while nearly 50% of Americans are living paycheck to paycheck all of the time.
Can you live off $1000 a month after bills? ›
Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.
Is everyone struggling financially? ›
69% of Americans say their cost of living has gotten worse between November 2020 and October 2023, according to a separate report. 42% say their short-term savings have gotten worse; 34% say their investments (including retirement savings) have gotten worse and 18% say their careers have gotten worse.
Why is living paycheck to paycheck bad? ›
Those who live paycheck to paycheck will nearly be out of money between paychecks and unable to pay for basic living expenses if they fail to receive their next paycheck. “A person is living paycheck to paycheck when their paycheck is used to cover their necessary expenses with no money left over,” explains Dr.
What paycheck is considered rich? ›
In 2017, a salary of about $378,000 would land you in the 5% club. By 2022, the salary it takes to stay at that level is more than $544,000.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
How many Americans have no savings? ›
As of May 2023, more than 1 in 5 Americans have no emergency savings. Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding.
Is living paycheck to paycheck poor? ›
People living paycheck to paycheck are sometimes referred to as the working poor. Living paycheck to paycheck can occur at all different income levels. The working poor are often low-wage earners with limited skills but can include those with advanced degrees and skills.
How common is a 200k salary? ›
A $200,000 household income is more than most people earn across the U.S. In fact, just 12% of U.S. households earn $200,000 or more annually, according to Census Bureau data.
Is 200k a good salary for a single person? ›
If you had an income of $200,000, that would put you in the top 12% of household incomes or the top 5% of individual incomes in 2022. Though I prefer household income over individual income, no matter how you cut it, $200k a year puts you on the higher end of the income spectrum.
What percent of people that make 6 figures live paycheck to paycheck? ›
In December 2022, 51% of people who earn more than $100,000 reported living paycheck to paycheck, which is 7% more than the previous year, according to a survey from financial insight and advising companies PYMNTS and Lending Club.
How many people making 6 figures live paycheck to paycheck? ›
Of those earning more than six figures, 49% reported living paycheck to paycheck, a jump from last year's 42%.
How many people making six figures live paycheck to paycheck? ›
In April, 49% of individuals making over $100,000 per year were living paycheck to paycheck. Although inflation has been slowing, Americans are still feeling its effects. According to a recent study from PYMTS and LendingClub, 61% of consumers were living paycheck to paycheck in April 2023.
Is a 6 figure salary good anymore? ›
Consider whether it makes sense to move to a new city or to the suburbs. A six-figure salary is no longer a guarantee of financial success — and it hasn't been for a while. With the cost of living in America rising still further, it's time to be strategic about the money you bring in.
