Are you upper middle class? (2024)

About half of Americans are defined as being in the middle class.

But, surely, they don’t all share the same lifestyle. For that reason, we’ll divide the middle class into lower, middle, and upper middle classes.

Given the “raw” average wage in 2022 was $61,220.07, according to the Social Security Administration, the question becomes: How much do you need to earn to be included in the upper-middle-income tier?

SSA data shows that half of wage earners had net compensation less than or equal to the median wage of $40,847.18 in 2022.

What is upper-middle-class income?

Defining a social class by income can be problematic. How do you measure income? Can you adjust for household size? What about taxes and wealth transfers? One common way to classify the upper middle class is based on income.

The upper middle class is often defined as the top 15% to 20% of earners. According to the Social Security Administration’s 2022 wage data, the average upper-middle-class income was roughly between $80,000 and $100,000.

How much income puts you in the top 1%, 5%, 10%?

Here’s how much income you’d need to earn to be among the highest earners in the U.S. in 2022. The data cited below is from the Social Security Administration.

Top 1% income

To be in the top 1% based on income, you must earn at least $350,000 in 2022.

Top 5% income

To be in the top 5% based on income, you must earn at least $170,000 in 2022.

Top 10% income

To be in the top 10% based on income, you must earn at least $120,000 in 2022.

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How much income puts you in the top 15%, 20%, 50%?

What does it take to be in the upper middle class based on income? If you defined the upper middle class as the top 15% of earners, in 2022, you’d have needed to earn close to six figures to be in this class group based on income.

Here’s how much income you’d need to earn to be among the top 15% to 20%. Also included is the ballpark figure for being in the top 50%.

Top 15% income

To be in the top 15% based on income, you must earn at least $95,000 in 2022.

Top 20% income

To be in the top 20% based on income, you would have needed to earn at least $80,000 in 2022

Top 50% income

To be in the top 50% based on income, you must earn at least $40,000 in 2022.

2022 average annual wages

Upper middle class vs. upper class

While most Americans fall into the middle class, this socioeconomic sphere has been shrinking over the past 50 years, according to the Pew Research Center.

About 50% of Americans are in the middle class today, compared to 61% in 1971. And yet the overall population continues to grow. So where are these middle-income earners going?

Mostly into the upper-income tier, the Pew Research Center found. More than 1 in 5 Americans were upper income in 2022, compared to only 14% in 1971.

In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.

Upper middle class

“Upper middle class is generally viewed as a group of educated professionals towards the top of the middle,” said Steve Azoury, a chartered financial consultant and owner of Azoury Financial. These individuals often have bachelor’s or post-graduate degrees.

They typically do not inherit their wealth but rather accumulate it through hard work, according to Cynthia Pruemm, an investment advisor and founder and CEO of SIS Financial Group.

Upper class

Upper-class individuals are more likely to have inherited at least some of their wealth. According to a 2022 Bank of America study, only about 1 in 4 people with more than $3 million in investable assets are self-made.

“Upper-class households typically have an even greater level of assets and have a primary source of income that consists of capital gains rather than salaries or wages,” Azoury said.

These individuals are more likely to have attended prestigious schools, have access to elite social networks and, in turn, have connections to people in powerful positions, which enables them to be more influential in politics than the middle class.

Life isn’t all sunshine and roses for these socioeconomic elites, however. They still experience stress, although their stressors are more likely to be from social pressures rather than stress from day-to-day finances.

Average net worth for the upper middle class

Net worth, or the value of your assets minus your liabilities, is another way to measure social status and class. Net worth can be an even better gauge of financial stability than income because of how unpredictable earnings can be. For instance, you may get a sudden windfall or lose your job because of a global pandemic.

Like income, net worth varies by age and location.

People in their 60s tend to have the highest net worth after several decades of accumulating assets during their working years. In contrast, people under 35 tend to have much lower net worth, according to data from the U.S. Census Bureau. Similarly, the average net worth in Mississippi is $205,400, compared to more than $1.1 million in Hawaii.

In other words, the true average net worth for the upper middle class depends on the age demographic and where they’re located.

How to join the upper middle class

Comparison is said to be the thief of joy, but sometimes, it’s the inspiration for change. If you aspire to be in the upper middle class, there are steps you can take to help yourself level up financially.

Maximize your 401(k) contributions

Money put into a 401(k) can be contributed pretax, meaning you don’t have to pay taxes before it goes into the account. And once inside your 401(k), it grows tax-deferred, so you won’t owe taxes again until you withdraw in retirement.

If your employer offers a match, you should contribute at least enough to get the full match, essentially “free money.” If you want to join the upper middle class, consider contributing even more. The IRS has raised 401(k) contribution limits from $22,500 in 2023 to $23,000 in 2024. Individuals over 50 also qualify for a catch-up contribution of $7,500 in 2023 and 2024.

If you’ve heard the term “401(k) millionaire,”, you may have an idea of how powerful saving in a 401(k) can be. And the earlier you start, the greater your chances of reaching millionaire status, thanks to the effect of longer-term compounding.

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Deploy proper asset allocation

Saving money is a great way to increase wealth, but it’s only the beginning. To truly maximize your assets, you need to deploy proper asset allocation. This means not leaving all of your savings in a checking account where it earns less than 1% or in a single large-cap stock fund.

Looking at historical trends, different asset classes perform better than others in certain markets. A lack of diversification could lead to missing out on gains or larger losses.

If you are truly diversified, some of your investments will go down while others are up. This ensures you’re not at risk of a complete portfolio collapse.

You should also adjust your asset allocation over time. As you get closer to retirement, “you want to be less and less aggressive because you have less time to make up for any market losses,” Pruemm said.

Learn about wealth management

Investing in a wealth management service can be worthwhile if you need more time or inclination to manage your assets.

A wealth manager helps high-net-worth individuals and families with their financial needs, from investing to tax and estate planning. Unlike financial advisors, who typically focus on investment services, a wealth manager addresses all your money questions and will even coordinate with other experts when the situation requires it.

Expect to pay extra for this additional oversight, however. Wealth managers may charge 3% or more of the assets you keep with them, whereas a financial advisor will usually charge no more than 2%.

Spend within your budget

You can’t save what you spend, so the first step to joining the upper class is to keep your spending within reason.

“Having a detailed budget can allow an individual to understand the different areas in which they are spending money,” Azoury said. “It’s important to look at recurring monthly expenses, while factoring in once-a-year payments along with unexpended expenses.”

Consider establishing a budget that lets you maximize your 401(k) contributions while also covering essential expenses. Any income you have left over can be used for fun expenditures, like a vacation or a new iPhone.

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