Many of us identify as middle class. It provides us with an identity that is respectable, and implies that we are “normal.”
After all, if you are middle class, you aren’t stuck with some of the stigmas that can come with being poor, and you are painted with the elitist brush for being rich. The middle-class is a comfortable place to be for many of us.
It also helps, too, that middle-class identity is probably deeply ingrained in your psyche.
Many of the children of Baby Boomers (I’m one) grew up in the middle class, espousing “middle-class values.”
My experience was one of being poor until I was about 12 since my parents got married relatively young and started having kids.
Then, once my dad finished school and began making more money, we moved into a middle-class neighborhood, able to afford the necessities of life, and some of the luxuries.
The middle-class mentality, for many in my generation, is based on similar experiences: Remembering the poor life as our parents initially struggled, but enjoying greater comfort as they began earning more.
But, the middle class is more than just your own mindset. It also includes numbers.
Many of those who have a middle-class mentality might not actually be considered middle class when it gets right down to income.
How is a Middle Class Income Defined?
It’s actually harder to define a middle-class income that you might expect.
Here are four different ways (and there are probably more points of view) to look at your income in terms of whether or not it’s middle class:
- Economic Percentile: Rather than just looking at arbitrary cutoffs, some economists consider middle class according to percentile. If you are in the top 20% of income earners, you are considered to have an upper-class income or be rich. Those whose incomes fall in the bottom 20% are considered poor. Everyone else (the middle 60%) is middle class.
- Income Range: There are some economists who say that anyone who makes between $25,000 and $100,000 a year is middle class. That might be surprising to some, though.
- Median Income: Others take a look at the median annual income, and then go $20,000 to either side. In 2010, the Census Bureau reports that the median income in the United States was $49,445, so if you go a little lower or higher, you get a middle-class range of between about $30,000 and $70,000 a year.
- Tax Policies: Of course, if you look at tax policies, the middle class grows substantially. For many tax policies, the cutoff often discussed is $250,000 (even though the fiscal cliff deal used $400,000 as the point for higher taxes), suggesting that some think that you can be considered to have a middle-class income as long as you make less than $250,000 a year. For other taxes like the Alternative Minimum Tax the original income cutoff was never indexed to inflation and is now hitting families in the middle class.
Another Take
Others sub-divide what’s considered middle class to provide a more nuanced picture.
Many of those who make less than $75,000 a year consider someone who makes more than $100,000 a year “rich” — and definitely outside the middle class.
However, if you make $150,000 a year, you might not feel “rich.” Instead, you might still feel part of the average American middle class.
As a result, the term “upper middle class” is often used to describe those who make between $100,000 and $250,000 a year.
Pinpointing what constitutes a middle class income is further complicated by the fact that location plays a role in your spending power.
With my income, I’m considered fairly well-off in my relatively small semi-rural community. There’s a low cost of living, and my money goes further.
However, if I were to move to a larger city, like Seattle, my money wouldn’t go as far. And if I moved to a place like New York City, I’d almost be poor.
In many ways, “rich,” “poor,” and “middle class” are relative. Additionally, there is a strong psychological element.
Pinpointing whether or not you actually have a middle-class income involves the complex interaction between what you actually make, and how you feel about what you make.
Pat says
very informative for someone who doesn’t understand all that tax stuff. E’re having it done professionally.
Vaz B says
Are you talking about gross income (before tax) or net income (after tax) for this analysis?
Jeff Rose says
Hi Vaz – Gross. Net has too many variables, and depends on the individuals tax situation.
melanie Norvell says
Great article! Took many areas into consideration, which allowed a bigger picture than just the number portion.
Michael M. says
*not boasting
I have very little debt, house ,cars, etc . Are all paid for (student debt/loans). I live in a good area, have a good income (above $35000 but below $55000, a year), raising 3 kids on my own (no assistance) and it’s a struggle more often than not. So the numbers are off in my opinion, sorry.
Gordon says
What about a middle class range for retired persons. After all we are not forced to provide for children, most of our major purchases are done, aren’t faced with college expenses, etc. Only thing expensive on our horizon is health care. Can anyone come up with a formula for us?
Jeff Rose says
Hi Gordon – No one precisely how to measure middle class. It’s really subjective. For the most part, you’re middle class if you think you are!!! But really, if you are comfortable with your income, have some savings, live in an acceptable neighborhood, and have the basic trappings of middle class life, you’re middle class. I’ve seen dozens of formulas trying to pin down what it is, and they’re most a best guess.
Lance says
$100,000 only makes up 21% of households in US
$250,000 only makes up 1.5% of households in US
If you make over $100,000 you are definately not middle class, the median income in US is $53,500 so if you are doubling up on that how on earth can you think you are middle class and if you make 5 times as much and are in the top 2% you are rich.
bruce springsteen says
$100k is nowhere near the top 20% and $250k is not the top 1% the top 1% is in reality $200 million and up. millionaires are barely out of the middle class.
Jeff Rose says
Hi “Bruce” – You’re right about $100k being nowhere near the top 20%. According to this article, it’s actually in the top 10%! OK, more like $105k, but close enough. That would definitely qualify as upper middle class, though in large metro areas that would be a stretch.
Bruce says
Is 50K taxable income middle class. If so, how come I must make $1500.00 in order to put $1000.00 into savings?
Pretired Nick says
It’s definitely true that here nearly everyone thinks of themselves as “middle class” despite massive financial disparities. Which of course is why politicians use the term so frequently. Poverty level folks on up to the very rich consider themselves middle class. Even though within that range the top looks down on the bottom as “poor” and the bottom looks at the top as “rich”. In many ways, the term “middle class” has lots its meaning.
Beverly says
$25,000 – $100,000 a year a middle class? Quite surprising. If this is the benchmark, then I can say that I am so poor as I don’t even make $10,000 a year. But I know, it all depends on your location.
Michael says
I think the last part was spot on, where we live has everything to do with how far our income goes. I took a huge pay cut to move from DC to the midwest, yet I feel like my money does so much more here.
Timothy Mobley says
I agree that it is all relative. $100K in Louisiana is very different from $100K in NYC. To me, it is also about the quality of life and the opportunity cost of earning an income.
Mike@WeOnlyDoThisOnce says
I think you would find G.B. Shaw’s “Pygmalion” very interesting – wonderful play about the same topic you are addressing.
Savvy Financial Latina says
We are middle class due to our income, but I don’t want to behave like most middle class families who are keeping up with the Joneses.
krantcents says
If middle class is more of a mindset (beside the numbers) is upper class a mindset too? I grew up in an upper class environment with prep school, neighborhood and very successful people. My parents did well and I tended to emulate my environment. Although I do not earn a great deal of money anymore, my values are still upper class.