Being in the top one percent income level is a big stretch goal for many financial go-getters. After all, only one percent of the working population can earn a top one percent income level. This post will go through the top one percent income levels by age group.
In 2024, a top one percent income threshold is at least $650,000, this is up from $470,000+ in 2019, and $380,000 in 2015! Talk about inflation and economic growth pushing the top one percent income higher and higher. And of course, if you live in a more expensive state, it takes a higher level of income to be in the top one percent.
If you make a top one percent income, Joe Biden wants to raise your taxes. That's just the way it goes if you make ninety nine percent more than the population. If you don't own real assets or stocks, inflation is really going to be a drag on your relative wealth.
Now that we know how much money you need to make each year to get to the top, it's time to dig deeper. Let's take a look at the top one percent income level by age group. After all, nobody goes straight to the top right out of high school or college!
Instead, it's much better to measure your income level by the average income level of your peers. It is much harder to get to a top one percent income of $650,000+ at age 30 than it is at age 50.
Top One Percent Income Levels By Age Group
Hopefully everybody agrees that everything is relative in finance. If everybody makes a million dollars a year, making a million dollars a year won't be anything special anymore. $3 million is the new $1 milliondue to inflation.
Let me share a chart of the top one percent and top 0.1 percent income levels by age to highlight my point. Please do not confuse a top one percent income with a top 0.1 percent income like the media often likes to do. A top 0.1 percent income is over a million dollars a year.
For background, I've held a top one percent income for my age between 1999 – 2012 when I worked for Goldman Sachs and Credit Suisse. Then I retired at the age of 34 in 2012 with a $3 million net worth, but lost about 80% of my overall income to be free.
But over time, I've rebuilt my passive investment income to generate about $300,000 a year, which is good enough to raise a family of four in San Francisco. Today, my net worth is in the eight figure and I continue to write on Financial Samurai, the top personal finance website today with over one million visitors a month.
Let'sDiscuss The Age Groups For A Top 1% Income
Below is a chart from 2014 that shows the top one percent and top zero point one percent income. For 2023, the numbers are around 30 percent higher.
Ages 27 – 31: You are in the top one percent income level if you make roughly $170,000. You are in the top 0.1 percent if you make roughly $300,000.
Ages 32 – 36: You are in the top one percent income level if you make roughly $210,000, my ideal income for maximum happiness as an individual. You are in the top 0.1 percent if you make roughly $570,000. We are now in the ideal income zone of $200,000 – $250,000 a year per person where maximum happiness is achieved and increases no further the more you make.
Ages 37 – 41: You are in the top one percent if you make roughly $260,000. You are in the top 0.1 percent if you make roughly $820,000. I'm a little surprised that making only $260,000 at this age puts you in the top 1%. Given the median age in the US is around 34-36 and the median income for the top 1% for all income levels is around $380,000.
Top One Percent Income Entering Middle-Age
Ages 42 – 46: You are in the top one percent income level if you make roughly $320,000, a middle-class lifestyle for a family of four in an expensive city. You are in the top 0.1 percent if you make roughly $1.1M. This age group finally breaks the $1M income barrier. Nobody is going to deny someone making over $1M a year is rich.
Ages 47 – 51: You are in the top one percent income level if you make roughly $360,000. You are in the top 0.1 percent if you make roughly $1.5M. $360,000 is a level which makes the most sense as a top 1% income earner based on IRS data and multiple media reports.
Ages 52 – 58: You are in the top one percent income level if you make roughly $350,000. You are in the top 0.1 percent if you make roughly $1.4M. Finally! The income levels are going down because people are finally living life a little more and not so focused on making more and more money.
All these income figures are great if you can get it. The key is to keep and grow what you've made! Personally, I believe the best age group to be in the top one percent is in your 30s.
Top One Percent Income Learning Points
1) Big differences at the top.
The difference between the top one percent and the top 0.1% in terms of income is huge. When society ragesat the top 1%, itshould really beraging at the top 0.1% who likely pay a lower effective tax rate because they aren't W2 wage slaves, e.g. Warren Buffett.
Their income is a combination of investment income, long term stock grants, and business income. To get to a top 0.1% income, you need to make at least $1 million a year in 2020+.
Personally, I think paying at most a 24% marginal income tax rate is the ideal tax rate and income to live the best life. For 2024, that's an AGI of $383,900 for a married couple. Not bad! I'd shoot to make a 24% federal marginal income tax bracket income because the next tax bracket jumps 8% to 32%.
2) Your life stage matters.
Even if you makea top one percent income of $260,000 between the ages of 37 – 41, you probably have dependents. And if youlive in an expensive city with dependents, then you probably don'tfeel rich. You may be comfortable, but retirement probablyfeels like a long ways away.
See:How To Make $200,000 A Year And Still Not Feel Rich
3) Location can be costly.
Earning$210,000 as a 35-year-old in San Francisco might really be like earning a top 0.1 percent income if you live in Topeka. This is why the federal income tax system should be adjusted for cost of living. Three zones with different tax brackets will do: low, medium, high.
Therefore, to make your dollar go farther, you may want to relocate to the heartland of America. After all, the pandemic has catalyzed the work from home trend.
It is exactly due to positive demographic shifts towards lower-cost areas of the country that I've been aggressively investing in real estate crowdfunding deals in these areas since 20017. Real estate is my favorite investment class to build wealth.
4) Education is still important.
Despite everything being free now thanks to the internet, getting an MBA from a top school will probably launch you into the top one percent fairly quickly.
The median pay packages for 29 yo MBAs in finance, consulting, and tech range anywhere from $150,000 – $175,000. Add on stock grants and you're close to $200,000, if not over.
Settle down with another MBA alumniwho makes a similar amount and now you guys have a total comp of between $300,000 – $400,000. Who you spend your life with matters.
In addition, going to the best ranked college you can for undergraduate matters as well. Today, roughly 75-100 colleges enable its graduates to earn high income and plenty of career opportunities.
Going to an Ivy League college won't guarantee that you make a top one percent income for your age. However, twenty years after graduating, the median income for Ivy League graduates is about 59% higher than the median income for non-Ivy League graduates.
5) Easier to reach the top as an entrepreneur.
As an experienced employee and entrepreneur, I believe achieving a top one percentincome of $650,000+ as an entrepreneur feels easier and probably is easier thanas an employee. Both are undoubtedly hard to do, but as an entrepreneur you don't have a visible cap. There is nobody or compensationstructure standing in your way.
You can either start your own business or invest in private growth businesses. I've chosen to do both, especially with artificial intellgience growing so much.
Invest in startups through an open venture capital fund like theFundrise Innovation Fund. This way, you've got private growth company exposure, but you're not wasting your time. The fund invests in artificial intelligence, fintech, proptech, and more. Unlike traditional venture funds that are invite only with $200,000+ minimums, you can invest in the Innovation Fund with as little as $10.
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See: Income Profiles Of Financially Free People
Everything Is Relative In Finance
Below is aggregate taxpayer data I compiled from the IRS that shows the income splits for top 1%, top 5%, top 10%, top 25%, and top 50% income earners. It's a good cross check to the data compiled byProfessors Faith Guvenen, Greg Kaplan, and Jae Song above.
My strong belief is that everybody here can make top 10 percent income (~$150,000) if youbuild multiple income streams, save aggressively, and invest wisely. If you can build a side business and stick with it for a long enough period of time while doing everything else, then a top 1% income might just be inevitable!
The older you get, the more society will allow you to “deserve” what you make and accumulate. Therefore, if you have some strange desire to tell everybody how much you really make if you are doing well at a younger age, use the above charts as a barometer to make sure you aren't clueless. Making yourself a target is a donkey move if you aren't already financially independent.
People in the top one percent income levels demonstrateafanatic habit oftracking their net worth and spending habits. They develop a 6th sense of what to do with their money. And what's great is that everybody can developgood financial habits as well. There is no monopoly on being wealthier!
Invest In Real Estate To Be A Top One Percent Income Earner
If you want to be a top one percent income earner, then you should invest in income-generating investments such as real estate. All top one percent income earners have multiple passive income streams.
Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties. Further, real estate will benefit from inflation due to rising rents and property prices.
My two favorite real estate crowdfunding platforms are:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and now manages over $3.3 billion for over 500,000 investors. For most investors, investing in a diversified private real estate fund is the way to go. Fundrise predominantly invests in residential and industrial properties in the Sunbelt, where valuations are lower and yields tend to be higher.
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. For those of you with a lot of capital, you can build your own diversified real estate portfolio.
I've personally invested $954,000 in real estate crowdfunding to diversify my net worth and earn income 100% passively. Real estate accounts for roughly $150,000 of my estimated $300,000 in annual passive income. My goal is to consistently earn a top one percent income for my age in terms of passive income (~$280,000).
Both platforms are sponsors of Financial Samurai and Financial Samurai is a six-figure investor in Fundrise funds.
Invest In Private Growth Companies
Finally, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out theInnovation Fund, which invests in the following five sectors:
- Artificial Intelligence & MachineLearning
- Modern DataInfrastructure
- Development Operations(DevOps)
- Financial Technology(FinTech)
- Real Estate & Property Technology(PropTech)
Roughly 35% of the Innovation Fund is invested inartificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.
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