What Income is Considered Rich?


When President Obama was in office he considered single people making over $200,000 to be rich.

You might recall that the President specifically called for raising taxes on singles making over $200,000 and couples making $250,000 every year he was in office.

Here is why I think that he was unable to pass any tax increases – I think it’s because most people don’t agree with him that $200,000 for singles and $250,000 for couples is rich.

At the end of 2012, Congress compromised and agreed on raising income taxes for those making $400,000/$450,000 and above.

It’s still confusing as to the math Congress employs. Why in the world doesn’t $400,000 + $400,000 doesn’t equal $800,000 for a married couple to pay more taxes?

Perhaps, like in so many other things, the federal government is stuck in the 1950s and believes that there should always be one spouse staying at home raising the family.

We can focus on two aspects of monetary wealth – Income and Capital.

There are those that have a lot of income, but have only a little amount of capital. This occurs because they could be starting off in their careers or maybe they haven’t saved and invested an appropriate amount.

On the other end there are those with a boatload of capital but little income. These are individuals that may have inherited their wealth and no skills for generating income.

These capital heavy people may have invested skillfully over the years in solid companies. They may have been frugal and disciplined in their savings. Many different kinds of people sit in the capital heavy category. Here is an example of a low income level being rich.

What you want though, is to be in both the high income and capital heavy categories.

That is my goal in life and my goal for all of you reading this post. In this post I’ll focus on the income category. We’ll look at what to work towards just in case we don’t have that trust fund from mommy and daddy.

So How Much income Does It Take To Be “Rich”

We are going to look at various income levels per person for populations living in coastal cities such as San Francisco, New York City, Los Angeles, Boston, and Washington DC and see if we can’t suss out an answer.

If we focus on the more expensive parts of United States it should more or less translate into living in other expensive countries in the world such as Paris, Hong Kong, London or Tokyo.

The cool thing is if we base your income on these high cost of living locales and then move to an area where it’s cheaper you will be that much wealthier

Income Levels Examined


If you make $50k you aren’t rich but rather lower middle class.

You will have $28k to live with after contributing $22,000 to your tax-exempt 401K and IRA (you are doing that right?)

If we postulate an effective tax rate of about 15% that gives you about $24,000 net after the tax man. Now $24,000 – about $2,000 a month – is certainly enough to live a frugal lifestyle however, hopefully your partner makes at least $20,000 a year to be comfortable with a family.


Not rich yet – were solidly middle class.

You will have $82k to live on after contributing $18,000 to your tax-exempt 401k. That will come to ~$61,500 net income based on a 25% total effective tax rate.

Bear in mind that there is no more $5,000 tax-exempt IRA contribution because you make over $68,000. For some reason the federal government doesn’t want you to save money if you make over $68,000 – go figure. However there is always the backdoor Roth.

Take steps to save 20% of your after tax income if you can to equal roughly $12,400 a year.

This will leave you ~$40k to spend as you like and slightly more wiggle room for luxuries.


You are getting there you are now upper middle class!

You will have ~$177k after retirement contributions and ~ $125k in after tax income. If you boost your after tax savings rate to roughly 30%, you will then have about $87,500 left.

Most likely you will reach the $200k mark you are probably in your 30s or older with a mortgage and kids to consider.

If you send your kids to kindergarten/daycare that can cost you $15k-$20k a year. For a reasonable home you are probably looking at an additional $30k-$40k in shelter costs.

That leaves you will somewhere in between $20k-$40k for food, travel, groceries, gifts, lessons etc.


Now you firmly upper middle class.

You have $332k gross income after retirement contributions, and about $250kin after tax income.

IF you have a 30% after-tax savings rate, this will give you ~$175k to spend.

If your family has grown you may seek a bigger home. In San Francisco an average 3 bedroom, 2.5 bath will cost somewhere in the range of $1,300,000 to $1,700,000 in a good neighborhood. And I’m not not talking anything super fancy maybe 1,800-2,800 square feet.

The mortgage at a rate of 3.5% on $1.1 million will cost around $60,000 a year and an additional $15,000 a year in property taxes. The reason I selected the $1.1 million is because it’s the maximum level for mortgage interest deductibility.

This means that you’re left with about $100k, or $8,333 a month in after tax income for school for two, travel, food and so forth.

This is a good place to be and if you are thrifty, it’s entirely possible save more than $75,000 a year in after tax money in addition to the $18,000 401K contribution.

An income of $500,000+/year is considered rich

Yeah, you’re rich now.

After maxing out your retirement contributions, you have $482k in gross income. You should have about $300kin after tax income – based off an effective rate of 35%, which includes 10% state.

Incredible to realize but you are paying around $183,000 in taxes alone. The government isn’t done bleeding you yet though – they still want more.

If you up your savings to 35% and put away another $105k this will leave you with $195k.

Remember to subtract $70k for annual mortgage/property tax and you then have $125k. On top of that subtract another $40k in tuition for two.

This gives you ~ $7/month that is available for travel, food, entertainment, goods and gifts.

Not bad, and remember you are also sitting pretty at $122k a year in savings.

Passive Income/No Longer Have To Work

Congratulations you made it!

If you are one of the lucky people that has managed to figure out the passive income game and you have covered your desired daily living expenses – then take a moment to celebrate you have true financial freedom!

How Do You Get Rich?

You Need To Depend On Yourself

To earn a high level of income you have to make a choice and a fierce commitment.

You should further our education and develop a skill-set that brings in more income. You have to stay at work longer, work harder.

For instance, if you work just an extra two hours a day that is over 600 more hours of progress a year. A bet you can get way ahead on just a small sacrifice of two extra hours a day.

Think long term for short term sacrifice.


One of the essential keys to learning how to become wealthy is to learn from someone who is already wealthy. You don’t learn from so called gurus who tell you how to get wealthy without being wealthy.

Those “gurus” are snake oil salesmen are charlatans – some do it very well, which is why they are wealthy.

What you want is to find a mentor and do everything possible to ingratiate yourself into their circle.

It’s amazing but instead of being greedy successful people want to give back.

Stop Negative Beliefs

Look you can either believe in yourself and be positive or beat yourself up and lay mired in negativity

No one can do this for you – only you.

You must take action and get things done and there is no shame in asking for help.

Staying positive and moving forward is what will separate you from the 99% of other people that just dream about things.

Keep The Day Job

You know its pretty straight forward to get a job that makes six figures and allows you to save millions of dollars – over time of course.

When you are impulse and chase after this or that latest and greatest scheme to make the big bucks that is when you end up doing really stupid stuff and tanking your financial goals.

If you are prudent, save and invest even 10% of your income over 30 years there is a very good chance you will have all the money you will ever need.

Work For Yourself

What’s the old saying – every dog has its day?

Every once and a while you can score big. Take Twitter for example.

Twitter was an overtly silly idea that ended up completely changing the way we communicate.

Airbnb is another idea that disrupted and entrenched hospitality industry helped lower costs.

It’s a good idea to own your brand online by starting a website. This in and of itself can be a way to get unique opportunities and maybe even create a passive income stream.

Equalizing Wealth For Different Areas

As I mentioned earlier depending on your geographic location there will be some of you that can live on much less than the amounts I outline above.

You may also choose to send your kids to public school if they are good enough in your area. If this is more like your situation, can take a 30%-50% discount to the above numbers.

I’m also only considering income levels for a single earner. If you have a partner who earns even just a paltry $30,000 per year it can go a long way to helping out the family.

I like to advocate the maximization of your income. This leads to maximizing your capital base, and THAT leads to doing we really want sooner and never having to worry about money again!

The foundation of personal finance is methodically saving money.

The rich get rich – or richer- by moving their savings into assets that have the potential to increase in value.

The key as I mentioned above is taking action! If you do this in a smart and disciplined way you will watch your net worth grow beyond your wildest dreams.

Getting Rich – Income And Capital.

We looked at the various income levels and outlined what is considered rich and what is not.

If you make a plan, stick to it and minimize mistakes you will be able to build wealth beyond your imaginings.

It’s a good idea to consolidate your wealth management into one place.  And you don’t need a “financial advisor”. You can sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances.

You can use Personal Capital to track your spending, manage your net worth and manage investment portfolio fees.

They have a retirement planning calculator that pulls your real data – after you link it – to give you a snapshot of your financial future using Monte Carlo simulation algorithms.

Good luck, I know you can do it!



  1. I feel rich, I retired early and do highly paid side gigs for fun and for money I don’t need. Yet my net worth, while substantially higher than most early retired, is less than one years compensation for my former CEO who used to berate me for sport. And that guy doubtless doesn’t think he has enough yet. It is all a matter of perspective.

    • I was hoping someone was going to comment with something like this. I completely agree. As a medical student who grew up delivering papers at twelve I am shocked to hear what some people think in regards to their future salaries. I also find it crazy that 25% of NBA players end up broke. Shaq did a good segment about how he blew through his first million in a day and didn’t realize he had to pay taxes, his manager, etc. Luckily he had a good mentor and later went on to get an MBA after the league.

  2. Hey Sean- Great Post here. I like how you highlighted the different locations. I live in NYC and to be rich it seems as if you need to make well over 500K just to be at the bottom of the barrel in the “rich” category. Informative post.

Leave a Reply