We've got the poor, the middle class, the upper class, and the rich. This article looks at the definition of upper class based on income and several other factors.
When you think of the words “upper class,” what do you imagine? I often conjure some passengers sitting on a British Airways flight. They are literally sitting in a section of the plane called Upper Class. Weird.
Let's be frank. Upper class has a somewhat arrogant tone to it. I don't know anybody in America who uses the term upper class when speaking. I don't know any socially normal person who calls himself upper class either. Perhaps it's a European thing.
In America, we use the term “mass affluent” or “aspirational class” instead of upper class. Or we just say middle class. Nobody in America would ever publicly say they are upper class unless they want to get beat over the head. Instead, people would much prefer to say they are middle class.
Middle Class Is The Best Class, Not The Upper Class
The best class is the middle class because you can blend in. Nobody attacks the middle class for making too much money or being a burden on society. The majority is the middle class, which also provides comfort in numbers.
As a middle class citizen, you also don't get taxed as much. You generally also get more government support. The middle class earns somewhere between +/- 25% of the median household income in your city. Nationwide, the median household income is roughly $65,000. Therefore, the middle class earns somewhere between $48,000 – $81,000 a year.
We can consider the poor as anybody earning somewhere around the Federal Poverty Limit per household size. I say anything up to FPL +25% is considered poor. If you are poor, I hope you subscribe to Financial Samurai and other sites to help you get out of poverty.
Now that we've defined poor and middle class, let's look at the definition of upper class.
Definition Of Upper Class Based On Income
In a 2018 report, the Pew Research Center found that upper class Americans grew their income faster between 2010 and 2016 ($172,152 to $187,872) versus middle-income Americans ($74,015 to $78,442).
The report states, “the wealth gaps between upper-income families and lower- and middle-income families in 2016 were at the highest levels recorded.”
This is obviously true since we've had a massive bull market since 2009. It is especially true the upper class has gotten even wealthier post pandemic. Upper-income families likely worked at faster-growing, more profitable companies that pay higher salaries.
Further, people who have been regularly investing since 2009 have seen their wealth soar. The S&P 500 and real estate are both up tremendously.
Those who hoarded cash or simply spent all their money did not see their wealth grow nearly as much. Only recently, has median household income reached new highs. It went nowhere between 2000 – 2016. In 2021, the median household income is roughly $68,000.
An upper class income is usually considered at least 50% higher than the median household income. Therefore, an upper class income in America is $100,000 and higher.
However, an upper class income also depends on where you live. In San Francisco, earning up to $115,000 for a family of four qualifies you for subsidized housing!
Income By Household Needed To Be Upper Class
According to the Pew Research Center, below is the income by household necessary to be upper class. The greater your household size, the greater the income needed.
- $78,281 for a household of one
- $110,706 for a household of two
- $135,586 for a household of three
- $156,561 for a household of four
- $175,041 for a household of five
In other words, to be upper class, you need to make at least $75,000, the threshold where researchers discovered in 2012 making more does not necessarily increase happiness. Adjusting for inflation, that threshold is closer to $100,000 today.
To play it safe, to be considered upper class, your household should make at least a six-figure household income. Inflation really has a sneaky way of catching up to all of us. I believe most Americans can make a six-figure income at almost any age.
Of course, making six-figures in Des Moines is going to go a lot farther than making six figures in New York City. I've written extensively about how households may need to make $300,000 to live a middle-class lifestyle in big cities today.
Therefore, it's up to you to adjust your household income figure accordingly. If you can make a similar amount of income and relocate to a lower cost area of the country, then this is something to consider as well.
Upper Class Is Relative To The Median
Everything is relative when it comes to finances. Pew defines the upper class as adults whose annual household income is more than double the national median. In 2022, the national median household income is around $75,000, up from $68,000 in 2021.
Therefore, as a whole, the typical upper-class household in the new decade has a median household income of over $130,000. $130,000 is a good household income amount. However, it's not a high enough income to be considered rich.
To be rich, a household will likely have to make multiple six-figures a year. After all, the next level above Upper Class on a British Airways flight is Rich Class! No, I'm just kidding. British Airways also calls First Class, First Class.
Other Definitions Of Upper Class
It would be a shame to only define upper class based on income. We can also define upper class based on behavior, background, and status. However, people who view upper class mostly based on status are likely just snooty people just looking to protect their own status.
Besides defining upper class by income, we can also define upper class by:
- Net Worth
If you have a master's degree or higher, you may be considered upper class. Around 13% of Americans have master's degrees and only around 2% of Americans have doctorate degrees. In comparison, roughly 35% of Americans have undergraduate college degrees. All societies tend to respect scholars.
If you have a net worth 50% higher than the average American, you can be considered upper class. After all, it's not so much how much you earn but how much you keep.
If you know two or more languages fluently and have traveled to at least five countries, you may be considered upper class. Roughly 60% of Americans do not own a passport.
If you are in good shape, perhaps you can be considered upper class since 60%+ of Americans are overweight. Living longer is generally an attribute of the upper class. Although, extremely wealthy people die young as well e.g. Steve Jobs at age 56.
If you don't qualify for student loan forgiveness or need student loan forgiveness, you are probably upper class as well.
Finally, if you are a very thoughtful person who is always looking out for others, I say you should be considered upper class. The average person is too selfish or too busy to help other people. Being a kind person who also stands up against injustices is my favorite definition of being upper class.
Upper Class Is Also A State Of Mind
The definition of upper class can, therefore, be a combination of income, net worth, occupation, education, behavior and a variety of other factors. Everything is relative to the average or median.
I believe a big part of being upper class is having more freedom and happiness than the average person. At the end of the day, your goal is to have enough money to be happy. If you have enough money that's generating some passive income to allow you to take weekday siestas or do as you please, you are probably upper class.
But if you proceed to combine your elevated happiness and freedom and mistreat other people, you immediately get downgraded to low class.
I'd love to retire the definition of upper class from now on and just use the term “mass affluent.” Mass affluent sounds so much better in this uncertain world. To say or think you are upper class is a surefire way to a demotion.
Suggestions For Getting Into The Upper Class
1) Invest In Real Estate To Be Upper Class
Every mass affluent person I know invest in real estate in some form or another. With the migration to lower cost areas of the country thanks to the rise of work from home, real estate in the heartland looks attractive. You can earn higher cap rates than coastal city real estate.
Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile.
The combination of rising rents and rising real estate prices builds tremendous wealth over the long term. Meanwhile, there are more ways to invest in areas of the country where valuations are lower and net rental yields are higher thanks to crowdfunding.
Take a look at my two favorite real estate crowdfunding platforms.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. The real estate platform has over 300,000 investors and manages over $3.5 billion.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I've personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
2) Stay On Top Of Your Money Like A Hawk
Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. Remember, it's not so much how much you make, but how much you keep. Run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees.
Then make sure you run your financials through its Retirement Planner to make sure your financial future is on track. There's no rewind button on the road to financial freedom. Best get it right the first time!
Subscribe to the Financial Samurai newsletter here. The upper class love to educate themselves as much as possible about life and their finances. The more you read about building wealth, the more you will take action.
3) Read The Best Personal Finance Book To Enter The Upper Class
If you want to reach upper class levels of wealth, purchase a hardcopy of my Wall Street Journal bestseller, Buy This, Not That: How to Spend Your Way To Wealth And Freedom. BTNT is jam-packed with all my insights after spending 30 years working in, studying, and writing about personal finance.
Building wealth is only a part of the equation. Consistently making optimal decisions on some of life's biggest dilemmas is the other. My book helps you minimize regret and live a more purposeful life.
BTNT is the best personal finance book you will ever read. You can buy a copy on sale at Amazon today. The richest people in the world are always reading and always learning new things.
Upper Class Definition By Income And Net Worth is a Financial Samurai original post. I've been writing about achieving financial independence since 2009. Sign up for my free weekly newsletter here.