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What is a Moderate Income?
Old 11-05-2006, 03:34 AM   #1
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What is a Moderate Income?

What is considered a moderate income these days? I've heard a lot of folks talking about "moderate incomes" but no one has defined it. Does a moderate income mean you are in the middle class? If not, what income level is considered middle class?

Thanks.
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Re: What is a Moderate Income?
Old 11-05-2006, 04:56 AM   #2
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Re: What is a Moderate Income?

Interesting to google this question. It would seem that a job paying $30,000-$50,000 is considered middle class and those above this to $80,000 are higher middle class (by some). I have to assume that, to believe this, I must also believe that both earners make that much. Those numbers may hold in the rural south and mid-east but they hardly can be true in New England and the West Coast.

Which is the point. It depends. In my view, if you can afford to purchase a house without bankrupting your life, you have at least a moderate income in your area. In the DC suburbs $50,000/year would be a difficult income level to support a house purchase.

I guess I would compute this by computing the house payments for the average house in my area plus two newer used car payments plus minimal cost-of-living. Then I would look at any money left over after taxes. If you have savings after this, you are at least a moderate wage earner.
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Re: What is a Moderate Income?
Old 11-05-2006, 06:33 AM   #3
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Re: What is a Moderate Income?

Quote:
Originally Posted by Tadpole
Interesting to google this question. It would seem that a job paying $30,000-$50,000 is considered middle class and those above this to $80,000 are higher middle class (by some). I have to assume that, to believe this, I must also believe that both earners make that much. Those numbers may hold in the rural south and mid-east but they hardly can be true in New England and the West Coast.

Which is the point. It depends. In my view, if you can afford to purchase a house without bankrupting your life, you have at least a moderate income in your area. In the DC suburbs $50,000/year would be a difficult income level to support a house purchase.

I guess I would compute this by computing the house payments for the average house in my area plus two newer used car payments plus minimal cost-of-living. Then I would look at any money left over after taxes. If you have savings after this, you are at least a moderate wage earner.
Totally agree. In the northeast where I live a family income of 100k is needed to afford the purchase of a decent home and to maintain a decent standard of living. Anything over is upper middle class. A sincle person on the other hand can live comfortably with a 50K-60K. With this income level a savings rate of 15% to 20% is achievable.

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Re: What is a Moderate Income?
Old 11-05-2006, 07:16 AM   #4
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Re: What is a Moderate Income?

>>In the northeast where I live a family income of 100k is needed to afford the purchase of a decent home and to maintain a decent standard of living


There is a huge difference between having a 100K income and needing to purchase a home (or recently purchasing one at these inflated prices), versus someone that perhaps bought a house ten plus years ago and either has paid it off already or locked in a nice low mortgage payment on the pre-runup cost of the property.

For the later group, 100K is a nice fat salary that will give you plenty to work with. The other group will struggle on that same salary. $500K house, with a $3k/month payment, another $1K/month for property taxes and insurance...that 100K is already cut in half even before you've probably paid another 20-25% in state and federal taxes.

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Re: What is a Moderate Income?
Old 11-05-2006, 07:25 AM   #5
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Re: What is a Moderate Income?

I think a moderate income is income above the median for famlies in your county, but not more than 25% of the median income.

The IRS usually has this info for free, but I see they are now charging $10 for this on their web site for more recent years.

http://www.irs.gov/taxstats/indtaxst...=96947,00.html
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Re: What is a Moderate Income?
Old 11-05-2006, 08:14 AM   #6
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Re: What is a Moderate Income?

The median income for 2005 was ~$40,000 per individual adult and ~$50,000 per household. Upper middle class household income was ~$75,000 - $125,000. Above that--rich. And of course there are levels of "rich"! Obviously, net worth has some effect.

2004 NET WORTH BY AGE GROUP (rounded, in thousands)
Median NW-----Top 25%---Top 10%
20s-- $8---------$36---------$120
30s-- $44--------$128--------$318
40s-- $118------$338--------$720
50s-- $182------$564--------$1,188
60s-- $209------$647--------$1,430k

Most upper middle class Americans and many rich Americans like to define themselves as middle class. I've read several theories about this phenomenon--my favorites are fear of no longer feeling like one of the gang and fear of having to pay more taxes.
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Re: What is a Moderate Income?
Old 11-05-2006, 08:25 AM   #7
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Re: What is a Moderate Income?

Quote:
Originally Posted by astromeria
Most upper middle class Americans and many rich Americans like to define themselves as middle class. I've read several theories about this phenomenon--my favorites are fear of no longer feeling like one of the gang and fear of having to pay more taxes.
I think it is more complicated. Many people who are clearly rich from an "averages" point of view (e.g. upper 10% of households) still find themselves living fairly frugal lives to put the kids through college and save for retirement. DW and I clearly fall in the upper levels but we don't "feel" rich based on the life we lead. We are constantly amazed at the vast number of baronial colonial houses in DC and the surrounding suburbs. It "feels" like there must be a huge number of people with a lot more money. Same thing applies when traveling -- where do the people in all these high end luxury joints come from?

I suspect the answer is that a handful are in the super-rich category and many others are living at or above their means. A lot of the later probably don't feel as rich as they appear.
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Re: What is a Moderate Income?
Old 11-05-2006, 08:37 AM   #8
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Re: What is a Moderate Income?

This reminds me of a line from Jane Austen's Persuasion: A baronet must be seen as living like a baronet! It also reminds me of the different levels of the wealthy class ddpicted in Austen's Pride and Prejudice. Elizabeth Bennet sees herself as Darcy's equal because their fathers are/were both genetlemen (men who didn't need to work for a living, but lived off inherited wealth and/or rents). But the difference in their level of richness was huge and, at first, upsetting to Darcy. And Elizabeth's mother's brother was engaged in trade (he was a lawyer) and lived in an unfashionable area in London--oh, the horror

Anyone above the 25% points in net worth on that chart is rich IMO, just a question of how rich. Do they, like Darcy, live in a huge mansion with many servants, a large estate with rent-paying tenants, enjoy sumptuous feasts, international travel, and the lastest chic fashions and luxe fabrics. Or, like Elizabeth, do they live in a large house but no mansion on a small estate with just a couple of servants, no rents, occasional domestic travel, and "country fashions." Elizabeth's family was rich to all except the super-rich.

EDIT I was gong to add that perhaps the level of richness determines financial security, but in the 18th century, like today, even the very wealthy could become impoverished by poor investments or debt.
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Re: What is a Moderate Income?
Old 11-05-2006, 09:27 AM   #9
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Re: What is a Moderate Income?

Quote:
Originally Posted by astromeria
EDIT I was gong to add that perhaps the level of richness determines financial security, but in the 18th century, like today, even the very wealthy could become impoverished by poor investments or debt.
Or Democrats -- I couldn't help bringing in the political theme so popular now. It is amazing how both political parties use people's perceptions of wealth and "class" to push their goal of getting our votes. Since no one sees themselves as "rich" even if they are in the top 10% of net worth and income, we are all happy to be upset that the tax benefit only went to the "rich". Since we are "middle class," we love the "middle class" tax break we did get. In reality, the working "poor" only pay SS and Medicare now. Of course, SS is the most regressive tax we have but there isn't any political push to "reform" that.

As for wealth in general, I agree that perception is reality for most of us. Many that have high consumption have a high debt to show for it. Most of us would consider these people "weathy" based on their lifestyle. Those of us in the upper 10% of net worth generally got there by living below our means and not consuming to our full abilities. Here we think of ourselves as "middle class."

I'll also agree that wealth can be very fleeting. Being heavily in the market on 9/11 cost me a lot of net worth over the next few months. I'm still heavily in the market so the next fiasco could cost me even more and it may never come back from another hit. The US and British stock markets are two of the few stock markets that have not been driven to "zero" due to war or revolution in the last century.
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Re: What is a Moderate Income?
Old 11-05-2006, 09:36 AM   #10
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Re: What is a Moderate Income?

In the area I live, a moderate income as defined by the IRS would maybe get you an apartment rental at best. Houses in a decent community on Long Island (say a 40 year old high ranch or colonial on a quarter acre) requiring some updating will cost you about $500k, give or take. If you put 20% down, that's a $400k mortgage, which is about $2,300/mth. Add taxes and insurance and you're at $3k per month. Now you have to add utilities (water, cable, electric, oil/gas, phone) plus food, car insurance for 2 cars, gas and a general fund for home/car maintenance and that's probably another $2k/mth.

So you need $5k/mth (or $60k/year after taxes) to live without struggling in a major way. To me that's moderate, not rich or upper middle class. Assuming a 2-earner household, and also assume you're maxing out your 401ks at work (no reason why everyone shouldn't be doing this), you'd have to make at least $120k+ ($90k after 401k contribs) gross to meet this style of "moderate living".

Considering first-year rookie cops make $100k+ and average teacher salaries are $70-90k, two supposedly "average" professions, at least they're living nicely. The people paying the high taxes to support those salaries are the ones struggling if they don't have decent paying jobs themselves. I don't know how some people make it in this area, especially those working the service sector jobs.
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Re: What is a Moderate Income?
Old 11-05-2006, 09:49 AM   #11
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Re: What is a Moderate Income?

2B, can you name any rich people who have been impoverished by Democrats? I know some people who think a top income tax bracket of 39% (highest bracket under Presidnt Clinton) = "impoversihement," but I don't remember reading about any rich people begging in the street due to the tax rate. Not even when the top bracket was 70% or even 90%.
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Re: What is a Moderate Income?
Old 11-05-2006, 09:55 AM   #12
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Re: What is a Moderate Income?

There have been several people comment about how it costs a lot more to be middle class in their area. My answer to that is that it's a lifestyle choice no different than someone in Houston buying a McMansion in Memorial they can't afford on their income.

I was working in Kentucky early in my career and got socked with their 2% tax on personal assets (stocks, bonds, retirement plans, everything). This was on top of a heathy state income tax. I had a different job in another state before the end of the next year. I think Kentucky has done away with this tax because of workers refusing to live there with that tax. It was a topic of converstion where I worked and several people left over the issue. I can't imagine any "wage slave" ever amassing any wealth with the 2% "management fee" incurred by living in Kentucky.

I have declined any employment opportunities in California because of their high income taxes and overall high cost of housing. I don't wish to get hit with downsizing my lifestyle or going into debt to finance my current one. Again, it's a lifestyle choice.
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Re: What is a Moderate Income?
Old 11-05-2006, 10:00 AM   #13
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Re: What is a Moderate Income?

Quote:
Originally Posted by astromeria
2B, can you name any rich people who have been impoverished by Democrats? I know some people who think a top income tax bracket of 39% (highest bracket under Presidnt Clinton) = "impoversihement," but I don't remember reading about any rich people begging in the street due to the tax rate. Not even when the top bracket was 70% or even 90%.
It was a joke but I'm glad to see you rose to the "bait." The Repubs have probably impoverished more people than anyone in the last 50 years. When the tax rates were dramatically lowered and "tax shelters" eliminated (under Ronnie), there were many people that I knew that lost a massive amount of money. In a couple cases people were wiped out and hit with IRS "payment plans" for massive amounts of back taxes they couldn't pay.

I dislike all political parties and most politicians.
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Re: What is a Moderate Income?
Old 11-05-2006, 10:15 AM   #14
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Re: What is a Moderate Income?

I got the joke (didja see the laughing face?).

Anyhow, a Califronia or New York or Kentucky(!) paycheck may or may not compensate for the increased taxation and/or cost of living relative to other states. (Not to mention other redeeming qualities like nice neighbors, great climate, great nature areas, great cities.) We were satisfied with our deal back in the day in California; we are satisfied today in South Carolina. I'm more concerned about the cost and availability of health care these days (for everyone, not just me) than the cost of taxes. When DH retires, health care will far surpass taxes as our biggest expense. And we are richer than 90% of Americans (by net worth, not income).

This cycles back to the question of high income vs high net worth. High income + high expenditures does not equal wealth. And what does moderate income mean? One would hope that a moderate income would be enough to pay for moderate health care. But for those without employer-supplied health care, that is becoming elusive.
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Re: What is a Moderate Income?
Old 11-05-2006, 11:14 AM   #15
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Re: What is a Moderate Income?

Quote:
Originally Posted by astromeria
High income + high expenditures does not equal wealth.
I had to think about that statement. I agree that it would be tough to accumulate wealth based on high income + high expenditures unless those high expenditures included paying off an expensive home or other tangible assets such as collectibles.

I do think it is possible to live a wealthy lifestyle with a high income plus high expenditures. The example in our lives is DW's bro and his wife. A dink couple, retired highschool math teachers, they made excellent incomes after finishing their Masters degrees and lived accordingly with a beautiful home in the suburbs, condo in the city, enjoyed top notch dining, entertainment and travel. It didn't seem like they could have saved all that much, but I can't know for sure. Now retired, they continue on with the spending since their pensions are about 75% of their former income, cola'd, and apparently they did accumulate some savings in their 403(b)'s.

The key for them living a wealthy lifestyle has been long term high paying careers followed by generous, cola'd pensions rather than accumulating wealth. Most of us don't have that, thus LBYM and savings to accumulate wealth gets us to where we want to be.

I would have never felt comfortable living at or near my means in the career I was in. :P

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Re: What is a Moderate Income?
Old 11-05-2006, 12:09 PM   #16
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Re: What is a Moderate Income?

Quote:
Originally Posted by astromeria

2004 NET WORTH BY AGE GROUP (rounded, in thousands)
Median NW-----Top 25%---Top 10%
20s-- $8---------$36---------$120
30s-- $44--------$128--------$318
40s-- $118------$338--------$720
50s-- $182------$564--------$1,188
60s-- $209------$647--------$1,430k
Do these numbers include home equity? If so, it's understandable that many in the top 10% of net worth consider themeselves middle class.
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Re: What is a Moderate Income?
Old 11-05-2006, 12:26 PM   #17
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Re: What is a Moderate Income?

Quote:
Originally Posted by kjpliny

Considering first-year rookie cops make $100k+ and average teacher salaries are $70-90k, two supposedly "average" professions, at least they're living nicely. The people paying the high taxes to support those salaries are the ones struggling if they don't have decent paying jobs themselves. I don't know how some people make it in this area, especially those working the service sector jobs.

WOW, I am sure "rookie" cops and "average" teachers in my area would be overjoyed to have
incomes like these. I would think in this area (Seattle) a rookie cop might make $60K tops, and
most school districts would pay a starting teacher around $35K tops.
Of course most average teachers probably have been in their profession for maybe 10 years
or more. The district my wife works in (one of the higher paying for the area) pays about
$50K after 10 years or so.
I'd be very surprised to see most police officers making $100K even with many years of
service.

Perhaps East Coast incomes are really that much higher than here in the West, at least in
the Pacific Northwest?

I would say a moderate income here would be about $70K, and with that you would have
difficulty buying a single family home, making two car payments, saving for retirement or
college, etc.
Our average home price now is about $400K so for many (like my adult "kids")
they will struggle to ever own a home without two persons in a household working
very hard to get in and hang on.



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Re: What is a Moderate Income?
Old 11-05-2006, 12:41 PM   #18
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Re: What is a Moderate Income?

Quote:
Originally Posted by gwix98

WOW, I am sure "rookie" cops and "average" teachers in my area would be overjoyed to have
incomes like these. I would think in this area (Seattle) a rookie cop might make $60K tops, and
most school districts would pay a starting teacher around $35K tops.
Of course most average teachers probably have been in their profession for maybe 10 years
or more. The district my wife works in (one of the higher paying for the area) pays about
$50K after 10 years or so.
I'd be very surprised to see most police officers making $100K even with many years of
service.

Perhaps East Coast incomes are really that much higher than here in the West, at least in
the Pacific Northwest?

I would say a moderate income here would be about $70K, and with that you would have
difficulty buying a single family home, making two car payments, saving for retirement or
college, etc.
Our average home price now is about $400K so for many (like my adult "kids")
they will struggle to ever own a home without two persons in a household working
very hard to get in and hang on.



Starting sallaries are not that much higher in the northeast as they are in the West. Starting police officers in this area (Boston Metro) make about 50 tops with detail work. They may make a little more if they work in the inner city like Boston. Starting teachers salary is around 35K here as well.
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Re: What is a Moderate Income?
Old 11-05-2006, 12:43 PM   #19
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Re: What is a Moderate Income?

Quote:
Originally Posted by FIRE'd@51
Do these numbers include home equity? If so, it's understandable that many in the top 10% of net worth consider themeselves middle class.
Net worth by definition is all assets minus liabilities. Therefore the numbers include home equity.
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Re: What is a Moderate Income?
Old 11-05-2006, 01:08 PM   #20
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Re: What is a Moderate Income?

Quote:
Originally Posted by Corporateburnout
Net worth by definition is all assets minus liabilities. Therefore the numbers include home equity.
I would consider any household at the median to be moderate. Middle class would probably kick in at between the top 25% and top 10% for late 30s on up. Of course, specific regions would make these assessments dramatically different, e.g. average single family homes in San Diego are $700k and make a lot of moderate families house poor.
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