40% of people making 500K/year are living paycheck to paycheck

[Anonymous]

Someone making a 500K income and who also feels as though they are living "paycheck to paycheck" is terrible with money and somehow managing to live above their means. Too much house, too much in cars, too many toys, too much eating out - fine dining, hiring everything done, blowing too much on vacations, designer everything. And, yes, way too much in taxes.

Hopefully they are saving, too, because when that large income grinds to a screeching stop in retirement they are going to be hating life. Their spendthrift ways will be over.

We made a fraction of that income and have managed to retire comfortably with a paid off house and cars because we were good savers from an early age and paid consumer debt off monthly and helped our kids to graduate from college debt free.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:People in that $400K range are in a tougher spot than it looks. On paper, it seems like a big jump from $250K–$300K, but the math doesn’t play out that way. A $250K–$300K household might take home around $180K–$210K after taxes. A $400K household might net about $240K–$260K. So the gap after taxes is already much smaller than people expect.

Now layer in retirement. The Social Security Administration replaces a meaningful portion of income for mid-level earners, but much less for higher earners. At $250K–$300K, you might only need to save $20K–$40K a year. At $400K, that jumps to $60K–$90K+ because you have to self-fund most of your retirement.

Once you subtract that, the numbers start to converge. A $250K–$300K household could have around $150K–$180K to spend. A $400K household, saving what they need to, could end up in a very similar range, roughly $150K–$170K. That’s the surprising part. You’re earning a lot more, but not necessarily living on a lot more.

The result is a compressed outcome. The system takes more in taxes on the way up, and at the same time expects higher earners to save significantly more because they get less relative support later. So a large portion of that additional income is effectively locked away.

That’s why it can feel like a tough tradeoff. You push into that “entry rich” range, but the real, usable income doesn’t scale the way people assume.

And here’s the part people really don’t see coming.

Lower and mid-income households still get credits and tax advantages that phase out as income rises. Once you’re in the $300K+ range, most of these are gone.

Examples of what phases out:

Child Tax Credit: up to $2K per child
0% capital gains bracket (vs 15–20% for higher earners)
Premium tax credits (health insurance subsidies, can be thousands/year)
Student loan interest deduction
Saver’s Credit for retirement contributions

Now look at the math:
$275K household (2 kids)
Take-home after taxes: ~$195K
Child tax credits: +$4K
Lower capital gains taxes / other breaks: +$3K–$5K
Savings needed: ~$25K
Spendable: ~$175K–$180K

$400K household (2 kids)
Take-home after taxes: ~$250K
Credits: $0 (phased out)
Higher capital gains taxes
Savings needed: ~$70K–$90K
Spendable: ~$160K–$180K
The wild part

After taxes, lost credits, and required savings:
A $275K household can end up with the same or even slightly more usable money than a $400K household.

That’s the real compression. Higher income looks much bigger on paper, but a lot of it disappears through taxes, lost benefits, and the need to self-fund retirement.

This is the problem of our budensome tax system unitl you can break out to the 1m+ you really are just the same as 250-300k

Forgive me if I'm asking a dumb question but:

When you say that the higher income household has to save more in order to "self-fund more of their retirement," you are making the assumption that they "need" more for retirement, right?

The 400k household gets the social security too. Say they get the max possible benefit because they made above the limit (around $185k) for 35 years. I think it's around 5k a month. Now say the 275k household gets the same (less likely they will have made above the limit for 35 years but for arguments sake). Why would the 400k household "need" to save more than the 275k household for retirement?

Are you assuming the 400k household has to save more in order to maintain their higher standard of living than the 275k household? If so, that's not a need. That's just wanting a nicer retirement, and actually having enough income to afford it. I'm sure the 275k household would also like a nicer retirement, but they have less money and therefore cannot possibly save as much as the 400k household.

This is not a *hardship* for the 400k household. It is a privilege. You can't save or invest when you never had to begin with.

The $400k household is likely to have a larger house and a bigger property tax bill. Likely around $15k in Fairfax County, which is 1/4 of the social security income.

A house in Fairfax county generating 15k annually in property taxes is worth 1.3 million. The 400k household is presumably capable of paying down their mortgage prior to retirement, and will then have $1m+ in assets that can be sold towards a very comfortable retirement. The 250k household can't afford a house that expensive and therefore will retire with less in property assets.

No one is making you live in a big, expensive house.

Regardless, the $4000k household will need to save more for retirement to maintain their standard of living if they don't move. My point is that a $400k household would need to save more because social security maxes out.

[Anonymous]

my brother is a single person in california making around 330k and while he pays a ton in taxes, comparatively, he puts away a lot, like 150k a year.

He bought a house for 350k about 15 years ago, now worth 1.2m and paid off. His tax rate on the house has stayed low because prop 19.

He has solar and pays low utilities. drives an electric car. Free charging at his work, along with free gym.

he has tons of things to do in the nearby area that are cheap or free (san diego) . Food is fresh and healthy and cheaper.

I guess the moral of the story is to buy a house before 2010 and dont have kids .

[Anonymous]

Anonymous wrote:Someone making a 500K income and who also feels as though they are living "paycheck to paycheck" is terrible with money and somehow managing to live above their means. Too much house, too much in cars, too many toys, too much eating out - fine dining, hiring everything done, blowing too much on vacations, designer everything. And, yes, way too much in taxes.

Hopefully they are saving, too, because when that large income grinds to a screeching stop in retirement they are going to be hating life. Their spendthrift ways will be over.

We made a fraction of that income and have managed to retire comfortably with a paid off house and cars because we were good savers from an early age and paid consumer debt off monthly and helped our kids to graduate from college debt free.

This is exactly right. If someone feels squeezed and is living "paycheck to paycheck" in a $500k income, they are either saving a significant portion of their income (which is NOT the devinition of livign paycheck to paycheck), or are living way above their means (which is their own damn fault).

I am so sick of these stories/claim/whining. And I say that as someone who makes $500k. All these people need to grow up.

[Anonymous]

Anonymous wrote:my brother is a single person in california making around 330k and while he pays a ton in taxes, comparatively, he puts away a lot, like 150k a year.

He bought a house for 350k about 15 years ago, now worth 1.2m and paid off. His tax rate on the house has stayed low because prop 19.

He has solar and pays low utilities. drives an electric car. Free charging at his work, along with free gym.

he has tons of things to do in the nearby area that are cheap or free (san diego) . Food is fresh and healthy and cheaper.

I guess the moral of the story is to buy a house before 2010 and dont have kids .

My coworker and her husband are 31. She is a teacher and he is an engineer. They have a cute SFH in Leesburg and are expecting their second child.

[Anonymous]

I think most people living paycheck to paycheck, whether they make $50K/year or $500K/year have bad money habits.

There may be a definitional problem here (as has been debated for the last 10 pages), but Michael Jackson had a spending problem (lots of other problems too).

We have a lot less sympathy for someone making $500K/ year that spends everything they earn but it is possible to do.

I “could” drive a luxury car, always fly first class, and eat dinner out 5 nights a week and I probably would spend a lot more if my money.

Instead, we have a moderately nice newish car, I do not fly first class, and we have good retirement savings and can send our kids to private college. Our dining out budget is enough for 3 dinners out a month where we like to go. We have two sets of seasons tickets to local sports teams. We drop 12-15K on international vacations every so often.

Everyone makes choices with their resources. There are certainly people that are better with their money and earn more than us. And there are people that are worse. What we are not doing is living paycheck to paycheck. I have two friends/family members that are that make less than me. One would do that no matter how much money she made and one would do much better (and is on her way there now, just transitioning).

We are all just baffled at the ideas that 40% of Households with the enough wherewithal to make 500K/year are THAT BAD with money.

[Anonymous]

Anonymous wrote:my brother is a single person in california making around 330k and while he pays a ton in taxes, comparatively, he puts away a lot, like 150k a year.

He bought a house for 350k about 15 years ago, now worth 1.2m and paid off. His tax rate on the house has stayed low because prop 19.

He has solar and pays low utilities. drives an electric car. Free charging at his work, along with free gym.

he has tons of things to do in the nearby area that are cheap or free (san diego) . Food is fresh and healthy and cheaper.

I guess the moral of the story is to buy a house before 2010 and dont have kids .

And don't get married? 😉

[Anonymous]

Anonymous wrote:

Anonymous wrote:$500k from one earner is MUCH different from 2 earners.

how so???

A 500k single earner household has a husband who expects his wife to cook, clean, and bounce on it on command.

[Anonymous]

Anonymous wrote:Paycheck to paycheck with 2 million in their retirement, fully funded 529s, a two year emergency fund and a house with $500k in equity. Yup, their retirement contributions are draining their paychecks. Paycheck to paycheck. [/quote
Sounds like a dream. I would absolutely love this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've seen enough of those "we make $500k but money feels tight" articles to know that most people don't actually know what paycheck to paycheck means

In this case they mean after maxing out all their retirement accounts and setting aside automated brokerage investments, paying private school tuition, paying the mortgage on heir huge house, and setting aside cash for their next big vacation and reno, they feel like they don't have enough left over to spring for guac.

Exactly, we make like 800k and still shop at Aldies because we need to save so much and pay for private college tuition, etc. It's not a glamorous life, everything thinks it is.

Same here.
We make 2.6M and live paycheck to paycheck. We still shop at the dollar store. It’s not a glamorous life. Our yacht and our two vacation homes are expensive to maintain.

Unless you mortgaged a yacht and two vacation properties because you were desperate to have them you could sell one of them, almost like having money in the bank.

If they are all mortgaged that’s typical of people overextending themselves.

[Anonymous]

Anonymous wrote:I think most people living paycheck to paycheck, whether they make $50K/year or $500K/year have bad money habits.

There may be a definitional problem here (as has been debated for the last 10 pages), but Michael Jackson had a spending problem (lots of other problems too).

We have a lot less sympathy for someone making $500K/ year that spends everything they earn but it is possible to do.

I “could” drive a luxury car, always fly first class, and eat dinner out 5 nights a week and I probably would spend a lot more if my money.

Instead, we have a moderately nice newish car, I do not fly first class, and we have good retirement savings and can send our kids to private college. Our dining out budget is enough for 3 dinners out a month where we like to go. We have two sets of seasons tickets to local sports teams. We drop 12-15K on international vacations every so often.

Everyone makes choices with their resources. There are certainly people that are better with their money and earn more than us. And there are people that are worse. What we are not doing is living paycheck to paycheck. I have two friends/family members that are that make less than me. One would do that no matter how much money she made and one would do much better (and is on her way there now, just transitioning).

We are all just baffled at the ideas that 40% of Households with the enough wherewithal to make 500K/year are THAT BAD with money.

This!!! Everyone chooses how to spend their $$$. We lived more moderately, despite having a high income. That means our retirement is fully funded, our kids were able to pick any college (and also have grad school paid for). We now have plenty and have switched to us flying business/first most of the time, and traveling whenever and wherever we want. But the ability to do that is because we lived more moderately previously. We saved so in our 50+ we can spend what we want and enjoy life.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:$500k from one earner is MUCH different from 2 earners.

how so???

A 500k single earner household has a husband who expects his wife to cook, clean, and bounce on it on command.

Really just the third one, which I don’t mind since my husband is attractive and kind. We pay for house cleaners and sometimes I cook and sometimes I don’t. I’m not complaining. We also never had a nanny and only minimal church preschool which wasn’t expensive.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think most people living paycheck to paycheck, whether they make $50K/year or $500K/year have bad money habits.

There may be a definitional problem here (as has been debated for the last 10 pages), but Michael Jackson had a spending problem (lots of other problems too).

We have a lot less sympathy for someone making $500K/ year that spends everything they earn but it is possible to do.

I “could” drive a luxury car, always fly first class, and eat dinner out 5 nights a week and I probably would spend a lot more if my money.

Instead, we have a moderately nice newish car, I do not fly first class, and we have good retirement savings and can send our kids to private college. Our dining out budget is enough for 3 dinners out a month where we like to go. We have two sets of seasons tickets to local sports teams. We drop 12-15K on international vacations every so often.

Everyone makes choices with their resources. There are certainly people that are better with their money and earn more than us. And there are people that are worse. What we are not doing is living paycheck to paycheck. I have two friends/family members that are that make less than me. One would do that no matter how much money she made and one would do much better (and is on her way there now, just transitioning).

We are all just baffled at the ideas that 40% of Households with the enough wherewithal to make 500K/year are THAT BAD with money.

This!!! Everyone chooses how to spend their $$$. We lived more moderately, despite having a high income. That means our retirement is fully funded, our kids were able to pick any college (and also have grad school paid for). We now have plenty and have switched to us flying business/first most of the time, and traveling whenever and wherever we want. But the ability to do that is because we lived more moderately previously. We saved so in our 50+ we can spend what we want and enjoy life.

Some people, though not most, don’t really have a choice how to spend their money, and I say this as a person who has tried to settle a lawsuit for the better part of two years. I really don’t have a choice on that front. The same is true for people with certain exorbitant medical bills and divorce decrees, among other circumstances.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think most people living paycheck to paycheck, whether they make $50K/year or $500K/year have bad money habits.

There may be a definitional problem here (as has been debated for the last 10 pages), but Michael Jackson had a spending problem (lots of other problems too).

We have a lot less sympathy for someone making $500K/ year that spends everything they earn but it is possible to do.

I “could” drive a luxury car, always fly first class, and eat dinner out 5 nights a week and I probably would spend a lot more if my money.

Instead, we have a moderately nice newish car, I do not fly first class, and we have good retirement savings and can send our kids to private college. Our dining out budget is enough for 3 dinners out a month where we like to go. We have two sets of seasons tickets to local sports teams. We drop 12-15K on international vacations every so often.

Everyone makes choices with their resources. There are certainly people that are better with their money and earn more than us. And there are people that are worse. What we are not doing is living paycheck to paycheck. I have two friends/family members that are that make less than me. One would do that no matter how much money she made and one would do much better (and is on her way there now, just transitioning).

We are all just baffled at the ideas that 40% of Households with the enough wherewithal to make 500K/year are THAT BAD with money.

This!!! Everyone chooses how to spend their $$$. We lived more moderately, despite having a high income. That means our retirement is fully funded, our kids were able to pick any college (and also have grad school paid for). We now have plenty and have switched to us flying business/first most of the time, and traveling whenever and wherever we want. But the ability to do that is because we lived more moderately previously. We saved so in our 50+ we can spend what we want and enjoy life.

Some people, though not most, don’t really have a choice how to spend their money, and I say this as a person who has tried to settle a lawsuit for the better part of two years. I really don’t have a choice on that front. The same is true for people with certain exorbitant medical bills and divorce decrees, among other circumstances.

Those same people still choose their other expenses. They could downsize their lifestyle in other ways.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think most people living paycheck to paycheck, whether they make $50K/year or $500K/year have bad money habits.

There may be a definitional problem here (as has been debated for the last 10 pages), but Michael Jackson had a spending problem (lots of other problems too).

We have a lot less sympathy for someone making $500K/ year that spends everything they earn but it is possible to do.

I “could” drive a luxury car, always fly first class, and eat dinner out 5 nights a week and I probably would spend a lot more if my money.

Instead, we have a moderately nice newish car, I do not fly first class, and we have good retirement savings and can send our kids to private college. Our dining out budget is enough for 3 dinners out a month where we like to go. We have two sets of seasons tickets to local sports teams. We drop 12-15K on international vacations every so often.

Everyone makes choices with their resources. There are certainly people that are better with their money and earn more than us. And there are people that are worse. What we are not doing is living paycheck to paycheck. I have two friends/family members that are that make less than me. One would do that no matter how much money she made and one would do much better (and is on her way there now, just transitioning).

We are all just baffled at the ideas that 40% of Households with the enough wherewithal to make 500K/year are THAT BAD with money.

This!!! Everyone chooses how to spend their $$$. We lived more moderately, despite having a high income. That means our retirement is fully funded, our kids were able to pick any college (and also have grad school paid for). We now have plenty and have switched to us flying business/first most of the time, and traveling whenever and wherever we want. But the ability to do that is because we lived more moderately previously. We saved so in our 50+ we can spend what we want and enjoy life.

Some people, though not most, don’t really have a choice how to spend their money, and I say this as a person who has tried to settle a lawsuit for the better part of two years. I really don’t have a choice on that front. The same is true for people with certain exorbitant medical bills and divorce decrees, among other circumstances.

Absolutely, but not 40 percent of households making $500K/year. What you are describing is an outlier.