
Rise of the 'new rich': 1 in 5 Americans reach affluence - tokenadult
http://www.dallasnews.com/business/business-headlines/20131209-rise-of-the-new-rich-1-in-5-americans-reach-affluence.ece
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hkmurakami
_Made up largely of older professionals, working married couples and more
educated singles, the new rich are those with household income of $250,000 or
more at some point during their working lives. That puts them, if sometimes
temporarily, in the top 2 percent of earners. Even outside periods of unusual
wealth, members of this group generally hover in the $100,000-plus income
range, keeping them in the top 20 percent of earners._

This range gets hit the hardest by personal income taxes, so sibling
commenter's observation of income, not wealth, is astute. 20% of the
population may be in the top 2% of earners in income for one or more years,
but they'll be hard pressed to sustain it AND overcome taxes.

Also, I noticed that those interviewed in the article have inherently volatile
earning profiles. Stock brokers, day traders, art gallery owners... And early
startup employees are a part of the cohort too, with spikes one time payouts.

~~~
clarkm
This is why basing tax brackets on yearly income has always struck me as
flawed. Imagine you're an author that spends a couple years writing a book.
For the first three years you make no money, but the forth you make a million.
You'll be taxed at a much higher rate than if you had made a consistent 250k a
year.

This might be a simplistic model, and the outcome may be avoidable by
sufficient tax planning, but I'm sure some entrepreneurs have lost money this
way.

~~~
icambron
The worst category for this is star professional athletes. They make huge
amounts of money their first few years, but then they retire at age 30 and
spend the rest of their lives earning far less.

In the author's case, you could imagine a fix; the author could somehow
amortize the income over previous years and pay all the money at the
appropriate rate. (Though I can imagine a number of fraud- and incentive-
related issues there.) But you can't really do that with the pro athletes
because a) you don't know when they'll actually stop making money and b) in
the future they may not actually have it.

~~~
hkmurakami
I remember ichiro's last contract with the mariners was going to be paid out
over 25 years or something. The guy makes a ton from commercials in japan, but
maybe this is actually a decent move?

Edit: on second thought since star athletes are getting paid in the millions,
prorating it over 20 years won't change _that_ much in the grand scheme of
things. Maybe something like 400k*20% each year before they hit the max
bracket anyways.

~~~
icambron
Interesting. From Wikipedia:

> The Associated Press reported that Ichiro's contract extension defers $25
> million of the $90 million at 5.5% interest until after his retirement, with
> payments through 2032

If he retires at the end of next year, he'll make that money over 18 years. If
he made it all at once, today, he'd pay about 9.8 million of that 25 in taxes
(just punching things into a naive tax calculator; I'm sure his accountants
would improve things. OTOH, it's also slightly low because it puts him in a
lower tax bracket for the first 400K, which he doesn't get because of the
other income he has). Ignoring the interest for a moment, splitting 25 million
over 18 years he pays a total of 8.9 million. So he saves a million dollars
doing it this way. Not bad.

With the interest, he'd get paid more; it looks like 1.8 million per year for
18 years, so 32.4 million instead of 25. That's a bit of a raw deal if he has
to pay that as regular income tax, since if he got the money now and put it in
the market, it would perform about as well, but would get taxed at a capital
gains rate.

All in all, I suspect this is a compromise with the Mariners to alleviate cash
flow and luxury tax pressure more than it's a shrewd tax move.

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LukeWalsh
It's hard for me to take seriously an article that uses yearly salary to
measure wealth. Beyond the fact that money is an extremely poor indicator of
wealth due to cost variance across the country, simplifying someone's liquid
assets into a direct relationship with yearly income is absurd.

~~~
pjscott
It's actually worse than that: the article measures wealth by the maximum
salary that someone is paid in any year of their life. So, if you made over
$250,000 for one year back in 1999, and are now jobless, you're considered
part of the New Wealthy.

------
narrator
Looks like someone is busy setting up the narrative for raising taxes on "the
rich" who earn more than 100k. This is how it starts. A whole bunch of
"studies" come out, then the talking heads roll it out 24/7 on the news media
and then Obama makes a speech and a bunch of people pound the table and ta
da... brand new taxes for you "rich" people making 100k a year.

~~~
untog
The average income is $60k. $100k IS rich, even if it doesn't feel like it in
Silicon Valley.

~~~
blisterpeanuts
It sure doesn't feel rich to me :(

At the end of the month, after taxes and FICA and health insurance and
Medicare and retirement are withheld, and after paying for housing, food,
transportation, insurance, utilities, sundry expenses, and student loans--
there's not a whole lot of that $100K/12 left!

Raising taxes on $100K would be almost intolerable. I could probably part with
a couple thousand more a year, but it would be difficult, and I have very
little faith that they'll invest my money wisely....

~~~
mrcarlosrendon
Well just imagine how poor you would feel with just the median household
income of 50k (2011 US Census) or worse and you were the bottom 20% making
<=25k.

~~~
ars_technician
People with the median income don't live in silicon valley. 50k goes further
in the midwest than 100k in SF.

~~~
Crito
Median household income in SF in 2011 was $72,947. That is a good deal more
than 50k, but far less than 100k.

Now imagine the household isn't one 20-something person, but two adults,
closer to middle-aged, with a kid or two. 2.3 people per household in 2011 in
SF.

[http://quickfacts.census.gov/qfd/states/06/06075.html](http://quickfacts.census.gov/qfd/states/06/06075.html)

~~~
ars_technician
>Median household income in SF in 2011 was $72,947.

You just proved my point.

------
rayiner
These are just the fattest cows in the herd. Being able to afford "luxury"
versions of mass-manufactured crap isn't wealth. Wealth requires means a
measure of financial independence and security. Dual-income professional
couples who manage to get into the $100-250k range don't really have these,
although they're in a better position than the rest of the middle class.
Between student loans, school expenses, childcare expenses, saving for
college, saving for retirement, etc, they can afford some toys but that's
about it. Comparing them to the wealthy and saying they wield power in the
economy is utterly ridiculous.

Also, does anyone understand the chart? Does it mean that 76% of 60 year olds
will make > $100k at some point?

~~~
chongli
Who says they have to have kids? Earn a combined $250k a year, live frugally
and invest the money early. Build a huge retirement nest egg in a decade! Then
go travel the world and enjoy life.

What gets expensive is if you get caught up in the _keeping up with the
Joneses_ mentality. Why do people want to live in a suburban sprawl nursery
and spend all their life raising kids?

~~~
rayiner
The question isn't whether you can live comfortably on $250k/year. Obviously
you can. But that doesn't make you wealthy.

Trading off having kids to be able to afford travel and luxury goods is prole.
People who are actually wealthy don't have to make compromises like that.

~~~
Crito
I am sure somebody who has kids and can afford to travel would tell you that
what they have is not truly wealth because the _truly_ wealthy don't have to
make reservations, they can all schedule last minute and fly first class to
another hemisphere on a moments notice. Planning and budgeting for your
travelling retirement is for peasants!

Some of _those_ people may even have the audacity to tell you they even they
are not wealthy, because the those who are _actually_ wealthy don't need to
fly in the same planes as the poors.

It seems like nobody ever stops looking up.

~~~
rayiner
Having to compromise a biological imperative in order to be able to afford a
particular sort of lifestyle, and not being able to book first class tickets
at the last moment is difference in kind, not a difference in degree.

~~~
Crito
People with less money than you who have kids will still be able to travel.
They will just travel less frequently (sometimes _much_ less frequently), they
will travel to less exotic locations, they will book further in advanced, and
they will travel and stay in less luxury. A week in Duluth, instead of a
summer in France.

This is a difference in degree. It is a difference in degree until you reach
the _real_ difference in kind, far closer to the median household income /
poverty line. The people who have no hope for a retirement, who plan on
working until their aging bodies force them to stop.

I am sure those who travel whenever they please would assert that a retirement
consisting of planning out the next trip months in advance is a difference in
kind. It _is_ a different sort of lifestyle if you are honest, but it is best
described as difference in degree.

Everyone thinks that the difference between what they want and what they have
is the _important_ difference. If you had it, the bar would move; you wouldn't
be satisfied.

~~~
rayiner
I agree that traveling more or less is a difference in degree not kind. But
'chongli suggested forgoing having kids so you can save money and travel.
That's a difference in kind, and it's a prole sort of thing to do. At least
assuming you'd otherwise have kids if you had more money.

~~~
Crito
Well, yeah. chongli's suggestion _is_ a difference in kind, not degree, but I
think his suggestion is a bit extreme. I don't think many people decide to not
have kids just so that they can travel more. Plenty of people probably claim
that, but I don't think many people who _actually_ want kids would decide not
to have kids just because of their retirement plans. There is probably a
deeper fundamental lack of a desire for kids hidden in there somewhere.

Anyway, I think it is also worth considering how the price of having kids
changes as you go up and down the income scale. Most parents will naturally be
inclined to provide the best childhood for their kid that they can. For most
people, this probably means making sure their kids have good nutrition, do
well in school, etc. Parents with more money available to them might start
considering additional expenses though, like private tutors, private schools,
larger college funds, trust funds, etc. People with more money will probably
spend more money on their kids, so that 50k extra (after taxes) income every
year doesn't necessarily mean 50k more money for yourself. If your income
increases, you'll probably spend more on your kids. (of course this won't make
more income a wash, since certainly some of that extra income will be spent on
yourself).

------
ilaksh
$200k for a household is not affluent. Its just two people with good jobs.

The way the economy is, that often doesn't last. Then you have one person with
a good job, and you better hope you saved. But you can easily eat up all of
that previous income with things like urban housing which can be very
expensive, an extra car, or a child's college tuition.

So anyway suggesting this situation occurring at some point for someone today
is 'affluence' is not very realistic.

Maybe a few decades ago with less inflation those numbers would indicate
'affluence'.

~~~
encoderer
> $200k for a household is not affluent. Its just two people with good jobs.

Yes, and 2 earners with good jobs makes one affluent :)

Affluence is one of those words, it all matters of perspective. But I try to
use the test of "would an average guy on the street" consider a HHI of $200k
affluent. I think yes, they would.

Remember, that income level puts a couple in the 96th percentile.

~~~
natrius
It's illustrative of the wealth divide in our society that engineers think
96th percentile wages are middle class.

~~~
upquark
Or, it's illustrative that what used to be truly middle class lifestyle can
now be afforded only by people in top income percentiles, whereas the median
income probably implies a lifestyle pretty close to poverty.

~~~
kenrikm
This, Exactly This.

Also, cost of living needs to be applied to these numbers, 100k in the Bay
Area is 65k in Florida is 45k in Georgia.

~~~
natrius
You refer to the costs of living on the coasts as just the cost of living.
Most of America can't make salaries to get by in the Bay Area, so they live
elsewhere. That makes living in the Bay Area a luxury good.

Affluence is about how much you can afford relative to the rest of your
society. If you're only comparing yourself to San Franciscans and New Yorkers,
doesn't that mean you don't consider the flyover Americans your peers? As if
there were some large divide in wealth in this country?

------
sokoloff
I'd like to see how many households are earning over $250K total where that
household has less than $100K in net wealth.

I guess it's a majority (over 50%) but even with that, I fear that I'm
underestimating. Real affluence is wealth-based (and living within means), not
just income based.

~~~
velodrome
_I 'd like to see how many households are earning over $250K total where that
household has less than $100K in net wealth._

You might find this useful:
[http://www.census.gov/people/wealth/](http://www.census.gov/people/wealth/)

~~~
sokoloff
Thanks for the data link! That paints a far less dire picture.

If I look on Table 4 of 2011 Excel sheet, the highest quintile incomes (still
far under $250K/year median I'd presume) have a 74% chance of having a net
worth over $100K. That isn't a perfect apples-to-apples invalidation of my
premise, but it's close enough to give me comfort that I was being too
pessimistic.

------
001sky
Fascinatingly fleeting..." _for one year or more_ "

Huge difference between annuity and perpetuity cash flows.

------
commentor12
This article makes the critical mistake of implying that affluence has
anything to do with salaried income.

The people who are actually wealthy are too busy laughing to rebuke this
notion.

------
thaumasiotes
my comment from the last time this was submitted:

> Because they spend just 60 percent of their before-tax income, often setting
> the rest aside for retirement or investing, he says their capacity to spend
> more will be important to a U.S. economic recovery.

As a salaried employee at less than $100K, my tax withholding in california
was 35%. Spending 60% of your before-tax income doesn't seem to leave much
room for any "capacity to spend more".

------
auctiontheory
"Wealth" is assets, not income.

------
wavefunction
Income maybe, but not wealth.

------
akuma73
These are also known as HENRYs. [http://www.investopedia.com/terms/h/high-
earners-not-yet-ric...](http://www.investopedia.com/terms/h/high-earners-not-
yet-rich-henrys.asp)

Investment firms and luxury brands are well aware of this phenomena.

Notice that they are not-yet-rich :)

------
transfire
What I imagine this study totally glosses over is the fact that many middle
class families do make over $250,000 once in their life b/c they sell a home.
That is far from making them "rich".

------
codezero
The percentages for each group seem to include everyone in the higher groups
as well.

I'm making this assumption based on the percentages of the 60-year old graph:
76.8%, 50.9%, 32.2%, 20.6%

I guess I was thinking about this plot like a histogram which makes more sense
in a bar chart like this. Read like that, the percentages in each bucket are:
25.9%, 18.7%, 11.6%, 20.6% for the age 60 chart and 17.7%, 7.4%, 2.1%, 2% in
each range for age 30

~~~
jlarocco
I think the data's being presented in a strange way.

Since it's "people who make over $100k at least one year of their life", it
makes sense that older people would have higher numbers.

They've been working more years, and because of that they usually have higher
paying jobs due to having more experience or moving up to management
positions.

------
jennyjenjen
Kind of sickening that this misleading headline gets more attention than "1 in
5 American children live in poverty."

Now that's something to chew on.

~~~
Crito
Think of it this way: This headline is telling 1 in 5 Americans that they
should consider how badly they think they have it, then consider that there
are many people who have it _much_ worse. There are people here talking like
200k/yr/household is no big deal... meanwhile that is _four times_ the
national average. This article is an opportunity for people to stop worrying
about the luxuries they do not have, and reflect on the luxuries they _do_
have which most Americans do not get to enjoy.

Headlines about the extent of poverty do not offer much in terms of sudden
realizations. Everyone knows that there is poverty, and most people think that
there is _significant_ poverty. What most people don't seem to stop and
realize is that the poverty that many Americans experience is nothing like
their _" I can only put a few thousand into savings every month"_ problems.
This headline gives _meaning_ to your headline. The two stories compliment
each other.

------
driverdan
Other commenters have pointed out many of this article's fallacies but there's
one good thing that's being overlooked: the upper middle class is growing. The
author skews this as if it's a bad thing. Quite the opposite. There are two
stories here, one about the upper middle class growing and one that the middle
class gap is growing.

------
samspenc
"Now a senior vice president for a private equity firm specializing in the
marijuana business..."

Did anyone else notice this line in the article?

------
ars_technician
People that are actually wealthy love this kind of misinformation. If they can
get the society focused on hitting people that happen to have an upper-middle-
class income hard, it takes the heat off of people that are actually wealthy.
Screw people with incomes trying to get ahead, but keep capital gains tax low
to favor the wealthy.

