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

[Anonymous]

Anonymous wrote:We make 500 K but the outgoing cash is due to our own decisions. We have two kids going to college and we're paying 100% plus their lodging. That alone is huge. And of course the taxes are a bit more than $120,000 a year for Federa, state, county, and city.

So you are very wealthy, upper class.

[Anonymous]

Anyone who is regularly contributing to a 401(k), much less maxing it out, is NOT living paycheck to paycheck.

[Anonymous]

Anonymous wrote:Anyone who is regularly contributing to a 401(k), much less maxing it out, is NOT living paycheck to paycheck.

I agree with maxing it out, but I think a fair number of lower-middle class people contribute enough to get the full match because it feels to painful to leave the money on the table. They’re probably a lot more likely to take a loan against their 401k or cash it out with penalties when they change jobs.

[Anonymous]

Anonymous wrote:We make 500 K but the outgoing cash is due to our own decisions. We have two kids going to college and we're paying 100% plus their lodging. That alone is huge. And of course the taxes are a bit more than $120,000 a year for Federa, state, county, and city.

I'm confused. You make $500K a year and act like its huge to pay for college? You should have saved since birth and easily saved $200+ for each child. We make half what you do and will full pay for college and grad school but have asked the kids to choose more reasonably priced schools. Your other lifestyle choices are the problem as this was something you should have planned for.

[Anonymous]

Anonymous wrote:As a postmenopausal woman, I would shed a tear for these struggling families but I can't spare the moisture.

+1 from another postmenopausal woman

[Anonymous]

It feels tight to us but our spend is higher than I ever anticipated. Travel sports, takeout, 2 teenage girls in Bethesda, etc etc. We have no car paymnets and our Mortgage is only 3K. We max out retirement and contribute to 529's so I don't consider us paycheck to paycheck though.

[Anonymous]

Anonymous wrote:

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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.

They don’t have to have a larger house. We sold our regular size house six years ago and moved to a hybrid style town. Huge houses on one side and three deckers and rental homes on the commercial side.

We have a $650,000 income from my husband’s job. We rent a place that amounts to about 6% of our income. The kids public schools are good. We go on middle class vacations, do normal activities and even with a high tax bracket we don’t live even close to paycheck to paycheck.

We are very lucky the grandparents set the kids up with their own 7 figure trust funds and we have a good retirement plan. But we are comfortable in our middle class lifestyle and not having to worry about money because of the way we choose to live.

And I’m with the people who are shocked at how many posters don’t understand the meaning of living from paycheck to paycheck.

You have no clue what a real middle class lifestyle even is. Be real.

+1 Our HHI right now is about $180K, but it used to be $300K. Our PITI is ~$2500, $4mil saved, house is worth $1.1mil.

We drive regular cars (Subaru, Toyota), don't own much jewelry or name brand anything, BUT we do take international vacations every couple of years, AND we have always maxed out our retirement. We also never worry about paying for expensive repairs on the house. I don't consider us middle class just because we don't have fancy things. The fact that we have $4mil, can take international vacations, pay for $$ OOS college, and home repairs without batting an eye = NOT middle class.

[Anonymous]

Anonymous wrote:It feels tight to us but our spend is higher than I ever anticipated. Travel sports, takeout, 2 teenage girls in Bethesda, etc etc. We have no car paymnets and our Mortgage is only 3K. We max out retirement and contribute to 529's so I don't consider us paycheck to paycheck though.

Travel sports is a luxury. That's a lifestyle choice you made.

I also have a teen girl, and I know that they can be more expensive, which is why DD (and DS) has a job.

I live in Rockville.

[Anonymous]

Donald Trump has been bankrupt 6 times. Of course some rich people are bad with money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Did you look at the chart?

It says only 16% making $200-$300 live that way and only 25% making $100-$200.

How about this…the people making $500k can live like those making $300k…and then they will saving like 50%.

The most difficult spot to live is that 300k-500k spot, as those are not really rich, and you've lost all the subsidies and tax breaks from the government.

There are not government subsidies or financial aid for people making $250K either, so I’d rather be making $500K.

[Anonymous]

Anonymous wrote:Donald Trump has been bankrupt 6 times. Of course some rich people are bad with money.

Oh FFS I can’t believe people still believe this BS. His “bankruptcies” were strategic bookkeeping to avoid paying money he owed. One of them he conveniently went “bankrupt” right after Ivana filed for divorce. He was highly leveraged but was never actually remotely broke not even once.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Donald Trump has been bankrupt 6 times. Of course some rich people are bad with money.

Oh FFS I can’t believe people still believe this BS. His “bankruptcies” were strategic bookkeeping to avoid paying money he owed. One of them he conveniently went “bankrupt” right after Ivana filed for divorce. He was highly leveraged but was never actually remotely broke not even once.

He has always been corrupt but his attempts at starting businesses that hadn’t been started by his father failed miserably. Not one success. Trump University was a scam, Casino was a loser, airline was a loser, plus others.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We make 500 K but the outgoing cash is due to our own decisions. We have two kids going to college and we're paying 100% plus their lodging. That alone is huge. And of course the taxes are a bit more than $120,000 a year for Federa, state, county, and city.

So you are very wealthy, upper class.

Rolling on floor laughing. You poor thing.