Earning as a Middle Class in the US: An In-Depth Analysis
The Fluidity of the Middle Class
The definition of middle class in the United States is not fixed and varies greatly depending on location and lifestyle. It is often based on a combination of factors, including location, family size, and personal savings. For instance, making $50,000 in rural Alabama can provide a decent standard of living, while the same income in a bustling city like Los Angeles would struggle to meet basic needs. Hence, the middle class in the US ranges from $50,000 to $150,000 per year depending upon local economic conditions and personal circumstances.
General Definition and Context
According to various online sources, a household with an annual income of around $100,000 or less with a family of 3 or 4 is typically considered in the middle class. However, a single individual earning $100,000 might be considered upper-middle class. These definitions vary widely based on financial stability, but generally, a family earning between $30,000 and $120,000 has been cited as a benchmark for the middle class.
Income Context and Living Standards
Considering the national median income of around $59,039 in 2017, the middle class is usually defined as 50-200% of that amount. This suggests that someone making $30,000 would be at the lower end of the middle class definition, while $118,078 would be in the upper echelons.
What Constitutes ‘Middle Class’
The term middle class is often associated with a stable financial position, adequate savings, and the ability to withstand financial shocks. Some definitions go beyond just income levels and include a positive net worth and sufficient savings to cover costs such as medical emergencies or job loss. Traditional definitions of the middle class involve families with net assets, allowing them to maintain their lifestyle and support their future generations. The US Federal Reserve report indicates that half of the families in the country have no savings for retirement or emergencies, and the median savings for those who do is only around $200,000.
For the middle class to be defined in a more robust way, one must be not only at a certain income level but also have enough assets to ensure long-term financial stability. The Federal Reserve’s study of ALICE (Asset Limited, Income Constrained, Employed) in the US highlights the precarious financial situation of many families, further emphasizing the importance of savings and investment.
Financial Stability and Retirement Planning
A middle class family should have at least enough savings to last for 9 months without further income. This provides a buffer against financial uncertainties like job loss or medical emergencies. The reality is that many families are unprepared for such events, with nearly half having no savings at all, and those with savings often have insufficient funds to cover significant expenses.
Retirement planning is also a critical component of the middle class. Families should aim to contribute at least 10% of their annual income to a retirement plan that ensures a path to 20 years of retirement income at 70% of their working income, with an age of retirement not exceeding 65. This is a significant challenge, given that many Americans are in the labor class even if they have advanced degrees and professional-level skills.
Some financial experts suggest that to meet the criteria for middle class, if one has investment skills, they would need about $1,000,000 for each 15 years they expect to live. This underscores the importance of financial literacy, planning, and long-term strategy.
Conclusion
In conclusion, the definition of the middle class in the United States is complex and multifaceted. It cannot be solely defined by income levels, but should include financial stability, savings, and a positive net worth. The current economic context in the US suggests that a significant portion of families are in a financially precarious position, requiring robust financial planning and investment skills to achieve middle-class status.