$100,000 income: No big deal anymore (Article)

[saugus]

One hundred thousand dollars. Since the 1980s, the magical "six-figure" salary has been a benchmark for financial success. Not too long ago, that income often meant two nice cars in the garage of a large house, fun family vacations and plenty of money left over to save for retirement and college tuition.

But times have changed. Not only has standard inflation steadily eroded the real value of a $100,000 income, but the cost, of housing, health insurance and college tuition have risen dramatically in recent years. Consider the rising costs of food, energy and the necessities of a middle class life, and that six-figure luxury quickly turns to six-figure mediocrity.

Less than 20 percent of American households even break the six figures. But many who earn incomes near the mark find that their prized incomes don't take them as far as the hype. Many say that while breaking the $100,000 annual income mark may still be an impressive milestone, it doesn't exactly roll out the red carpet.

Costs eat away at benchmark

According to the U.S. Census Bureau, only 6.03 percent of individual over 18 and only 19.9 percent of households had incomes of $100,000 or more in 2010. In fact, the median annual household income for 2010 was $50,046, just more than half of the six-figure benchmark. The overwhelming majority of Americans still look up to a $100,000 income, but the expectations of what comes with that income are rapidly slumping.
“Without a doubt, the housing situation is the biggest thing that eats into our income.” -- Brian Neale, investment manager

According to Labor Department statistics, the average inflation rate for 2011 was the worst since 2008, with consumer prices rising 3.1 percent, compared to an average of 1.6 percent in 2010. Much of this was fueled by energy costs (up 15.2 percent for the year) and food costs (up 3.7 percent for the year). Just to keep up with standard inflation, a $100,000 salary in 1990 would have to be $172,103.29 in 2011.

"What would have cost you $100,000 in 1976 would cost you $381,000 today. That's just the inflation, and there are so many other things that have grown very expensive," says Mari Adam, Certified Financial Planner and president of Adam Financial Associates in Boca Raton, Fla.

Adam points to health care as a major expense that has grown almost twice the rate of inflation. The Kaiser Family Foundation, which tracks the costs of health insurance, found in 2011 that insurance costs had increased by a whopping 134 percent since 2000. The total cost of health insurance now averages $5,429 per year for individuals and $15,079 for families. Adam says college costs have also grown tremendously in recent years. According to the College Board's annual "Trends in College Pricing" report from last year, published tuitions at four-year public universities are up 42 percent in five years, the largest increase of any five-year period since the 2007-09 school year.

"These are things that everyone spent money on 30 years ago, but the percentage of what was going out of their paycheck is a lot higher now. More of the income is being taken away to pay for a lot of these things," says Adam.

The cost of housing has also played a major role in diminishing the power of a six-figure income. In many parts of the country housing prices have outpaced wage growth for almost a decade. The Housing Affordability Index, which compares the cost of housing against median family income, dropped considerably between 2000 and 2007. In 2000, the median family income was $50,732, and the median home price was $139,000. While median income grew to $60,831 in 2011, median home prices skyrocketed to $229,299 in 2007 before leveling off at $166,200 in 2011. In those 11 years, median home prices had risen 19.6 percent while median incomes had risen 16.6 percent.

Money doesn't go far

Neale, 33, says he surpassed the $100,000 mark last year but says that between mortgage payments, the high price of heating fuel, gas, food and everyday items in life, his salary doesn't go as far as he thought it would. Neale is married with three children and says that his extracurricular real estate and investment activities help them buy the extras in life.

"Now that I've made (a $100,000 salary), it's not all it's cracked up to be. We make sacrifices. It's not like I tell my kids we're going to have to eat peanut butter and jelly every night. We live well, but I wouldn't consider it anything extravagant," says Neale.

Many now consider $250,000 the new $100,000 income. Adam says that level of income is typically required to provide what many have before expected of a six-figure salary. Adam also points to other expenses that are not necessities but are considered part of a middle class lifestyle -- things like cellphones, high-speed internet access, vacations, karate lessons, iPods, laptops and digital cameras.

"What you might think people deserve for a person that has a reasonable income is excessively high. Add in all the other expenses, and there just isn't anything left and that's part of the reason why a $100,000 income isn't going that far," says Adam.

Geography and lifestyle factors

With the cost of housing typically the largest expense for a family, location is one of the most important factors in dictating the power of a $100,000 income. While that level may not go far on the coasts, it may still provide a fairly comfortable lifestyle in much of Middle America. Jeff Eschman of Brazos Financial Advisors in Houston, says that in much of that state $100,000 income earners can enjoy very comfortable lifestyles.

"I don't see many families who are at the $100,000 income level currently making a lot of sacrifices. Families at that income level should be able to afford a very nice lifestyle in this area," says Eschman.
“There is still only a small percentage of people making this income. It points out that for your average person in your average job, this is becoming an increasingly hard country to live in.” -- Mari Adam, certified financial planner

In cities like San Francisco; Manhattan, N.Y.; Los Angeles; San Jose, Calif.; and Washington, D.C., the cost of housing alone can take a major bite out of a $100,000 income.

[Related: How Couples Sabotage Their Finances]

The Council for Community and Economic Research's Cost of Living Index, which compares typical family and individual expenses across hundreds of cities shows that. According to the Index, for 2012 Q1, a typical family earning $100,000 per year would need to earn around $228,300 in New York City and $166,500 in San Francisco to maintain that same lifestyle

In low-cost areas, Eschman says that people at that income level tend to run into financial problems when their lifestyle outpaces their income. While this is a problem for many Americans in all income levels, top figure earners are not immune from it. Adam says she has even seen people with incomes of up to $300,000 having trouble covering their expenses.

Choice is yours

Bryce Danley, a Certified Financial Planner and advanced financial adviser with Ameriprise Financial, says the real power of any income is all about perspective and choices. He says buying too much house, spending too much on automobiles and having too much debt is commonplace with families in the $100,000 income level and largely responsible for the six-figure pinch. In one example Danley uses a household that earns $100,000 a year, owns a $375,000 home, leases 2 vehicles for $450 each per month and pays $250 per month on credit cards. After that household pays the mortgage, car notes, debt and takes out social security and federal income taxes, it has spent 75 percent of its income.

"This is a very typical situation for someone in that income range. And we wonder why average Americans don't save any money -- it's because of the decisions they made in housing, cars and debt," says Danley.

While the real power of a $100,000 income has been drastically diminished, it highlights that the burden of increasing costs on those making less is even more profound. Danley says that regardless of income level, Americans' penchant for debt, consumerism and outspending themselves is what ultimately causes financial disappointment or stress.

"There is still only a small percentage of people making this income. It points out that for your average person in your average job, this is becoming an increasingly hard country to live in," says Adam.

http://finance.yahoo.com/news/inflat...070038493.html

[kaos336]

I make just over $100,000.00/yr and I agree 100% with this article. I'm not struggling, but I'm not as well off as most people who know what I make think I am. Between taxes, insurance, and my mortgage a lot of it is gone quick.

[saugus]

I make just over $100,000.00/yr and I agree 100% with this article. I'm not struggling, but I'm not as well off as most people who know what I make think I am. Between taxes, insurance, and my mortgage a lot of it is gone quick.

Can I ask you were you live?

[quickcummer]

[chevy72blu]

100k for a single person? You're doing very well.

100k (combined) for a family and you are arent struggling, but you arent well off either.

[saugus]

100K is a goal of mine and I will probably never get there in my life.

feels terrible

[pointbreaker]

$100,000 is only £60,000 and the average house price here is £226,000. The average price of a detached house is £317,000.

Welcome to Britain.

[saugus]

$100,000 is only £60,000 and the average house price here is £180,000

ok... $300K near boston gets you an absolute dump/old house. thats 3x 100K.

[iron_monster]

But that's just household income, not if each parent earns 100k. A household earning 50k is like having two parents that work for a little above minimum wage

A household income of 100k is like two teachers

[SuperShamou]

100K aint chit anymore really... anyone working management with teh federal government in Canada is making that or more.


100K/yr is the new 50K/yr.

ive been working since like '95 or so, money is less than half as valuable (gas is well over twice the price same for food/housing)

[forevercapone]

I make just under $65k after being out of college for 1 year, for a single person that is plenty

[Vuze]

I believe the average income in my country(Netherlands) is around €20.000,- a year. That's like 35.000 dollar.

[bzman]

Median income in US is like $35k

Youre doing better than that then you are above 50% of population.

I also read somewhere that at 75k your marginal happiness goes down for eveyr cent earned after that

[ragingcrayon]

im over 100k (slightly) and im poor (srs)

brb mortgage, brb commuting cost, brb insurance for me and my son, brb car payment, brb cable, brb cell phone, brb gas and electric, brb netflix, brb water, brb poland springs bill, brb brb brb

sure I could do without some of these "luxury" items... but I wouldnt be able to bust my ass at work for 11 hours a day to come home to not having these things

[adevil]

100k for a single person? You're doing very well.

100k (combined) for a family and you are arent struggling, but you arent well off either.

I'm a single guy in Germany and I'm making ~75k Euros (~$ 94k, but my employer pays for half of my health insurance plan). Although I don't have to worry about money, I'm far from ballin. I would say you are doing very well if you earn 150k+ Euros. I definitely wouldn't like to support a family with just my income.

[dixon]

What exactly do people want (ie lifestyle wise) when they're aiming for 100k per year?

Large house, 2 cars, having several kids and buying them junk and after school lessons in various retarded things like tae kwan do, eating out and drinking out regularly, and a few subscription things that have become middle class staples (cable TV with the entire package including HBO and VOD, unlimited 3G for all smartphones and ipad, etc).

Basically everything else they want offers zero improvement in their life and adds ten of thousands in expenses. Ie one upping people with extra rooms or the perfect neighbourhood, buying a boat they don't use, buying a car that is 5x the price of a working, comfortable economic car because of social pressure, etc.

You can have virtually the same lifestyle for significantly less than that income.

[wessneijder]

6% make over $100,000 in this country? Figured it would be %20-30 based on how many on MISC report that they make

[gentao]

what a bs article. If you cant live off of 100k you have some problems and dont deserve that money

[magog704]

i could retire on that at age 35 on a 3% withdrawal rate.

[RCAK]

'First World Problems' can't even cater to this thread.

Btw whatever happened to the ol' adage of living below your means??? Is that even possible these days?

[iron_monster]

I'm a single guy in Germany and I'm making ~75k Euros (~$ 94k, but my employer pays for half of my health insurance plan). Although I don't have to worry about money, I'm far from ballin. I would say you are doing very well if you earn 150k+ Euros. I definitely wouldn't like to support a family with just my income.

Half? In America if you work you are covered fully by your workplaces HMO. All you owe are deductibles and copays

[saugus]

Median income in US is like $35k

Youre doing better than that then you are above 50% of population.

I also read somewhere that at 75k your marginal happiness goes down for eveyr cent earned after that

probably some truth to this. new goal = 75k

im over 100k (slightly) and im poor (srs)

brb mortgage, brb commuting cost, brb insurance for me and my son, brb car payment, brb cable, brb cell phone, brb gas and electric, brb netflix, brb water, brb poland springs bill, brb brb brb

sure I could do without some of these "luxury" items... but I wouldnt be able to bust my ass at work for 11 hours a day to come home to not having these things

LOLin @ your poland springs bill brah.

just drink tap brah. if you need to then filter the fukin sh.it but everyone knows bottle waterd is a fukin scam

[specone]

I make a lot less than that and I live extremely well IMO. Never worry about money and do/buy what I want whenever I want. Granted, I'm not a materialistic person at all and I have no desire for a big house/fancy car, and I'm also single

[dixon]

ok... $300K near boston gets you an absolute dump/old house. thats 3x 100K.

Don't live there then. I hate people complaining about this.

"Oh I need over a million dollars to buy a decent house in LA." - Did you ****ers ever notice 6.995 billion out of the world's 7 billion population do not live in LA, therefore you do not necessarily need to live in LA? I'm getting along fine not living in LA, in fact I probably have nearly all the same amenities and many additional benefits.

[ForeverTrying]

100k is still 2-3 times the average wage, if you cant live comfortably on that then you must be terrible with money

[Clives_Bicep]

wow...100k a year here in TN is awesome.

[ijjy]

im over 100k (slightly) and im poor (srs)

brb mortgage, brb commuting cost, brb insurance for me and my son, brb car payment, brb cable, brb cell phone, brb gas and electric, brb netflix, brb water, brb poland springs bill, brb brb brb

sure I could do without some of these "luxury" items... but I wouldnt be able to bust my ass at work for 11 hours a day to come home to not having these things

not sure if srs...


netflix?

[iron_monster]

'First World Problems' can't even cater to this thread.

Btw whatever happened to the ol' adage of living below your means??? Is that even possible these days?

Lol my parents have always done that. Literally CEOing and in mid fifties bought first house that costs over 300k. No family vacations. No fancy cars. Frugal as phuck.

[magog704]

Don't live there then. I hate idiots complaining about this.

"Oh I need over a million dollars to buy a decent house in LA." - Did you ****ers ever notice 6.995 billion out of the world's 7 billion population do not live in LA, therefore you do not necessarily need to live in LA? I'm getting along fine not living in LA, in fact I probably have nearly all the same amenities and many additional benefits.

this. people are fukkin idiots. they have no concept of what the word "need" means.

your average person is a total weak pussy bleeder.

give me 100K for 7 years, and i could literally never work another day.

[Rican240sx]

I make just over $100,000.00/yr and I agree 100% with this article. I'm not struggling, but I'm not as well off as most people who know what I make think I am. Between taxes, insurance, and my mortgage a lot of it is gone quick.

Strong This.