Depending on where you live, being in the top 1% can mean very different things.
In West Virginia, you need to earn about $420,000 before taxes to be in the top 1%. In contrast, California and Connecticut require seven-figure salaries.
These numbers come from a recent analysis by financial technology company SmartAsset. The report found that there is a wide range of incomes to qualify for the top 1% in each state in 2024.
The report is one of several examining the U.S. income ceiling in an era shaped by inflation and the pandemic. Median household income rose nearly 20% between 2020 and 2023 to $80,610, according to federal data.
In a separate analysis published this summer, SmartAsset and personal finance site GOBankingRates ranked states based on the pre-tax income required to qualify for each state’s top 1%.
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In these states, the top 1% are all millionaires
Here are the five wealthiest states in terms of the minimum salary needed to break into the top 1%. Here we use SmartAsset numbers, which are quite similar to the GOBankingRates numbers.
Connecticut: $1.15 million minimum income for top 1% Massachusetts: $1.11 million minimum income California: $1.04 million Washington: $990,000 New Jersey: $976,000
And the five states with the lowest incomes are also in the top 1%.
West Virginia: $420,000 minimum income for top 1% Mississippi: $441,000 minimum income New Mexico: $476,000 Kentucky: $514,000 Arkansas: $532,000
“What does it mean to be rich?”
Some of the highest income states, such as California and New York, are home to many Fortune 500 companies.
“There are lifestyle and business opportunities in all of these places,” said Jaclyn DeJong, director of economic analysis at SmartAsset.
DeJong also noted that three of the 10 states with the highest incomes have no income tax: Florida, Washington, and Wyoming.
“On average, you’re probably saving 6 to 7 percent of your income every year just from that factor alone,” she says.
How Americans decide where to live may be partially explained by income and local cost of living. The five wealthiest of the top five states all lost people to other states from 2020 to 2023 due to internal migration, according to Census statistics. The three lowest-income states, Arkansas, Kentucky, and West Virginia, increased their populations through immigration during that time. (New Mexico and Mississippi had small net losses.)
โThe question is: What does it mean to be rich?โ said Elise Gould, a senior economist at the Economic Policy Institute, a left-wing think tank. “Does it mean you have more money than other people, or does it mean your standard of living is high? Because it’s a measure of how comfortably you can live. Or is it a measure of how well you are doing compared to others?
Across the United States, you need to earn nearly $788,000 to be in the top 1% of earners, according to a report from SmartAsset. To be in the top 5%, you need to earn at least $290,000. This number is an estimate derived from 2021 IRS data for individual filers and adjusted to 2024 dollars.
Pay equality is progressing in America. From 1979 to 2022, wages for the top 1% of American earners increased by 172% after adjusting for inflation, according to the Economic Policy Institute. In the same year, wage growth for the bottom 90% of earners was an even more modest 33%.
“When you think about the top, it’s about executive compensation, especially CEO compensation,” Gould said.
According to EPI research, in 1965, CEOs were paid, on average, 21 times more than the average employee. In 2023, CEO compensation increased by 290 times.
But low-income Americans are also making more money, especially in recent years. EPI research shows that low-wage workers actually saw relatively strong wage growth from 2019 to 2023, thanks to policy measures to support them during the pandemic.
Can’t break through the top 1%? What about the top 10%?
Even if your income isn’t $400,000, let alone $1 million, you may have enough income to qualify you to be in the top 5% or 10% of your state or country as a whole.
According to a new Motley Fool analysis, here’s how much household income you’ll need to earn to be in the top income bracket in the U.S. in 2023.
Top 10%: $234,900 Top 20%: $165,300 Top 30%: $127,300
Read more: In a stunning reversal, low-wage workers saw their biggest pay increases in years during the pandemic
According to SmartAsset, the minimum income to be in the top 5% in some of the states listed above is: These numbers are based on individual income.
High income states:
Connecticut: $370,000 minimum income for top 5% Massachusetts: $393,000 California: $365,000 Washington: $377,000 New Jersey: $372,000
Low income states:
West Virginia: Top 5% minimum income is $193,000 Mississippi: $193,000 New Mexico: $215,000 Kentucky: $214,000 Arkansas: $217,000
This article has been updated to add new videos.