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Perhaps surprisingly, data support the notion that incomes have more than kept pace with the blistering pace of inflation over the past three years. In fact, wage gains purportedly exceeded the rate of inflation, but many workers don’t feel that way.
In 2022, median household income was $74,580 in 2022, a 2.3% drop from the prior year, according to the Census Bureau. Even with the wage gains supposedly experienced since 2023, lost purchasing power can never be reclaimed and that’s likely one reason so many Americans feel as though they need to earn more money and what they need is a figure that’s hard to reach.
Obviously, economics is a data-driven field and that’s likely why so many economists can’t comprehend that although data suggest wages have grown faster than inflation, many workers don’t feel that way. Their “personal economies” are trumping broader economic data.
With that in mind, the findings in a new Bankrate survey should be acknowledged by advisors. Long story short, many folks think they need to earn $186,000 annually to be comfortable.
$186,000 Hard to Come By
Everyone should have aspirations and goals, particularly when it comes to financial and workplace success. However, some workers are cognizant of the fact that getting to the salary range in which they can live comfortably is easier said than done.
“Just 6 percent of the Americans who have an idea of what they’d need to earn to feel secure say they are already earning that annual income, according to Bankrate’s annual Financial Freedom Survey. About 2 in 5 (37 percent) say it’s likely that they’ll one day earn that income, while 31 percent indicate it’s unlikely and 18 percent think their income will never get to that level in their lifetime,” notes Bankrate.
Consider the following: In 2022, just 9.2% of participants in the U.S. workforce commanded income of $150,000 to $199,000. As recently as a decade ago, annual income of $186,000 would’ve made someone a “three percenter.”
Advisors can ameliorate this scenario by helping clients realize financial comfort and confidence are attainable with the right advice and strategies. That is to say financial comfort isn’t solely dependent on income and salary.
“Shockingly, most Americans aspire to get to a place where they’re living comfortably or unburdened by financial worries — not to live in a state of financial opulence. These days, financial success looks like living comfortably, being financially prepared for the future and not worrying about money, according to a previous Bankrate poll,” adds the research firm.
Exchange ‘Rich’ for Comfort
The Bankrate survey also indicates that in order to be feel rich, respondents believe they need to earn $520,000 per year. An admirable goal, but difficult to reach when considering the oft-mentioned 1% is $400,000 and above.
It’s not the place of an advisor to tell a client to push for a raise or find a new job, but advisors can help with reshaping views of wealth and comfort while developing strategies to get clients to those states of being. To be sure, that’s a win.
“Americans have differing perceptions of how much money it takes to feel financially comfortable and rich, likely driven by lifestyle choices, savings habits and overall feelings of financial security. But desire is different than potential, and every American may have a different career wage projection depending on their specific industry,” concludes Bankrate.
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