Baby boomers may have had the most economical start of any generation – when they entered adulthood with wages that matched the cost of living and goods and services that were affordable – but that's not even close to when they started. Doesn't Mean You Stay in the Same Economic Class Income and assets alone aren't necessarily a good indicator of your economic class, as everyone spends money differently.
Experts explain how boomers can determine whether they are poor, middle class, upper middle class, or wealthy.
Estimated income
Although income plays an important role in determining your net worth and socio-economic class, it is not the only factor. Here we outline acceptable average ranges for major socio-economic income classes to provide a baseline. However, keep in mind that your net worth includes other assets as well, as our experts explain below.
- Lower class: The bottom 20% of earners have a household income of no more than $28,007.
- Lower middle class: People in the 20th to 40th percentile of household income, or between $28,008 and $55,000.
- Middle class: People in the 40th to 60th percentile of household income, range from $55,001 to $89,744.
- Upper middle class: Households in the 60th to 80th percentile with incomes between $89,745 and $149,131.
- Upper class: Top 20% of earners with household income of $149,132 or more.
How do you determine your net worth?
According to Derek Mazzarella, CFP at Gateway Financial Partners, the key method for determining net worth is “assets minus liabilities.” Another way to put this, he said, is “what you own minus what you owe.”
Mazzarella said that in addition to basic objects, possessions include real estate, income and retirement accounts, stocks and bonds, art, jewelry, and stamp and coin collections. Remember to get an up-to-date assessment on everything, he urged.
“Anything you insure, you're going to want to claim as an asset,” Mazzarella says.
In some areas, people forget to include things like old pensions, old 401(k)s from previous jobs, inheritances, CDs, pensions, and rental income from investment properties in their assets.
“In some cases, you may have a life insurance policy with a cash value that you forgot you had,” Mazzarella says.
Then, of course, you subtract the amount you owe, such as your mortgage, car loan, personal loan, credit card debt, business sales and unpaid taxes.
Financial class may vary by region
Mazzarella said that while your assets minus your debts give you an idea of your class, you may actually be more or less well-off depending on where you live.
“Having money in New York is different than having money in Alabama,” he pointed out. “Your income may not be high by the national average, but your state may be well above it.”
Since many baby boomers have already retired or are nearing retirement, the most important thing for baby boomers is whether they will have the income to live comfortably in retirement, he said. Stated.
“Net worth is about your time,” Mazzarella said. “Can I go on vacation without stress?” Can I do what I want? As long as you're in that realm, that's a better way to think about it than comparing yourself to your peers. ”
How to tell if you are poor
- Lower class: The bottom 20% of earners have a household income of no more than $28,007.
Very simply, the poor are people who struggle to meet their basic needs and who forego going to the grocery store because they don't know if they have enough money. said Andrew Van Alstyne, MBA and financial advisor. Fiduciary Financial Advisor.
“That's a person in a very bad position,” he said. “The younger you are, the worse the situation can be because even as life expectancy increases, the cost of living does not fall.”
How to tell if you are middle class or above middle class
- Lower middle class: People in the 20th to 40th percentile of household income, or between $28,008 and $55,000.
- Middle class: People in the 40th to 60th percentile of household income, range from $55,001 to $89,744.
- Upper middle class: Households in the 60th to 80th percentile with incomes between $89,745 and $149,131.
Van Alstyne said the line between middle class and upper middle class can be very fine.
According to Van Alstyne, these are both people who go about their daily lives in the same way. However, “the main difference between the two is that the upper middle class can afford hobbies, travel, and have more of the experience elements of life that many of us strive for in retirement.”
Both baby boomers tend to have sufficient retirement savings, but the upper middle class is more likely to take vacations and have a little more discretionary income.
How to tell if you are rich
- Upper class: Top 20% of earners with household income of $149,132 or more.
According to Van Alstyne, the characteristics of wealthy people are that they don't worry about whether they can afford to take a vacation, they decide where to buy a vacation home, and they are able to take long vacations in exotic locations. It is said that
“For rich people, it's not a worry to make ends meet or talk about how it impacts their lifestyle on a weekly, monthly, and yearly basis,” he said.
Van Alstyne said wealthy people rarely fully retire.
“They didn't get their Rolex or their final bonus check and were turned away at the door,” he said. “They either hold a board seat or they own the company, and even if they ignore it, they’re still going to put their thumb on the scale of the operation.”
He said wealthy boomers are people who, in retirement, “don't let their foot off the gas pedal stop.”
Can I experience a class change?
Van Alstyne warned that one thing that could happen to baby boomers in retirement is a sort of class shift based on market conditions when they start making withdrawals from their retirement accounts. This is most likely to happen to middle to upper middle class people if the market dips near retirement.
For example, people who retired in 2022, the year of the coronavirus pandemic and the “first real downturn,” were told, “If I didn't have a proper withdrawal strategy, I would have missed out on classes. “Maybe,” he said. You only need to change the amount you had to take out in that year alone because you didn't have time to recover your portfolio. ”
“You may think you have the right amount saved, but if you don't have the right amount in when you try to access it, your portfolio may not be able to recoup losses from a down year,” he said. ” he said.
Ideally, he says, you'll want to have a large enough emergency fund, untied to other assets, from which you can withdraw funds to regain some of the value lost in your retirement accounts. He said that is important.
don't try to keep up with the jones
It's easy to want to live a wealthy life, Van Alstyne said, but “we need to stop assuming that people are wealthy because of their lifestyle and be content with where they are.”
Striving for a comfortable life may be the best goal of all.
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