What is a High Earner bracket

[Mr.BB]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

[retiredjg]

Some things are obvious and some are not.

Someone in the 10%, 12%, and 22% would not be a "high earner" by most standards (although they may be very comfortable). People in the 35% and 37% brackets are high earners. People in the 24% and 32% tax brackets are...in the middle?

This is how I see it, but I didn't write any of those articles or books.

[B3GINN3R]

You putting those percentages at single or married or what?

[Samosa22]

You putting those percentages at single or married or what?

I am not sure why it matters.

[Mr.BB]

You putting those percentages at single or married or what?

I am not sure why it matters.

Let's just say for couples.

[retiredjg]

You putting those percentages at single or married or what?

It does not matter. The dollars that define the brackets are different for single and married filing jointly. It is roughly double for a couple up until somewhere in the 35% bracket. After that, it is something less than double, but a high income either way.

[prd1982]

People in the 24% and 32% tax brackets are...in the middle?

We need to be careful here. I agree with your "definitions", since we are talking about brackets. But the median household income in 2019 was approximately $70,000. Since the 22% bracket for households goes to $171K, people in that bracket can be earning well above the median.

[Dink2018]

Two ways as I see it.

1: which tax bracket are you in, the higher the "higher the earner"
2: how much gets spent vs earned ( this is really where high earnings matters)

[UpperNwGuy]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

Why are you asking this question? Are you trying to decide whether to invest in tax-exempt municipal bonds? Other? You’ll get better answers if you explain why you’re asking.

[Mr.BB]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

Why are you asking this question? Are you trying to decide whether to invest in tax-exempt municipal bonds? Other? You’ll get better answers if you explain why you’re asking.

I always see the term, but I wanted to see if there was a definitive term or category that applies. For instance, if I compare the average family income in the U.S. then maybe $120,00 a year classifies me as a high earner. Or is there more than one way to really apply this term. If a family earns $120,000 a year but only spends $35,000 are they more or less a high earner then a family that makes $200,000 a year but spends $150,000.

[Trader Joe]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

I would say $1,000,000 earnings/salary/bonus per year qualifies as a high earner. Spouse/partner annual earnings (homemaker, working or not) are irrelevant to this amount.

Anything less is not a high earner.

[SCb&b]

One higher than the one you are in

[PharmerBrown]

The more I make the higher I define it. It has nothing to do with a tax bracket though. Wouldn't want to become a high earner by stopping my 401(k) and HSA contributions.

[wordsmith11]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

I would say $1,000,000 earnings/salary/bonus per year qualifies as a high earner. Spouse/partner annual earnings (homemaker, working or not) are irrelevant to this amount.

Anything less is not a high earner.

That is....waaaayyyy out of the bounds of reality.

[chenzi]

My spouse and I have total combined income around ($1-1.2m) for last couple of years. After a 40% tax and other expenses, we live a reasonably comfortable life in a high-cost location but do not consider ourselves high earners or anything like that.
We invest a lot - max 401Ks for both, max after-tax contributions, max HSAs, around 40K$ together for both kids in 529s per year now, Real estate syndicate investments via funds, some private equity investments (Bain Capital)

[qwertyjazz]

It is context dependent. There are numbers related to tax brackets. There is a number related to kind of alternate investment one can make. There are numbers where hiring special tax and estate planning make sense. There are numbers where buying certain kind of consumption goods (watches houses plane etc makes sense. So no single definition

[Katietsu]

Not each reference to a high earner will be referring to the same level of income. Therefore, I agree with the post breaking it into three categories: 22% tax bracket or less-No; 24-32%-Maybe; and 35% and up-Probably.

Without going into details, I can think of references to high earner that would kick in at $120k and others that would not be relevant until someone was approaching 7 figures a year.

[stocknoob4111]

I consider a high earner someone who can afford the median home in the area at 2X income instead of the 3X used by the middle class... so with median home prices in the major metros around 700k-1M, I would say a range of around 350k-500k household annual income would constitute high earning.

[Trader Joe]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

I would say $1,000,000 earnings/salary/bonus per year qualifies as a high earner. Spouse/partner annual earnings (homemaker, working or not) are irrelevant to this amount.

Anything less is not a high earner.

That is....waaaayyyy out of the bounds of reality.

You are incorrect. There is a whole world of high earners as I have described out there.

Not rare in the slightest.

[oldfort]

Clearly, there's no consensus on what a high earner is. The first cutoff I would make is MAGI > $206,000 for MFJ. This is the point where you no longer can make Roth IRA contributions directly, not talking about backdoor or mega backdoor Roths. It roughly corresponds to a level of income where you would be full pay or close to it at colleges which meet full need. On average, I would expect most families below this income to have more tax-advantaged space than they have savings in a year. A cutoff in wealth are those who expect to be subject to the federal estate tax.

[Candor]

My spouse and I have total combined income around ($1-1.2m) for last couple of years. After a 40% tax and other expenses, we live a reasonably comfortable life in a high-cost location but do not consider ourselves high earners or anything like that.
We invest a lot - max 401Ks for both, max after-tax contributions, max HSAs, around 40K$ together for both kids in 529s per year now, Real estate syndicate investments via funds, some private equity investments (Bain Capital)

This is so far removed from reality it's laughable.

[retiredjg]

People in the 24% and 32% tax brackets are...in the middle?

We need to be careful here. I agree with your "definitions", since we are talking about brackets. But the median household income in 2019 was approximately $70,000. Since the 22% bracket for households goes to $171K, people in that bracket can be earning well above the median.

I agree.

My "definition" above refers to the brackets I think the authors of the books/articles are talking about.

People 3 brackets down are more fortunate than most, but I don't think the books and articles are thinking of them as "high earners".

[oldfort]

My spouse and I have total combined income around ($1-1.2m) for last couple of years. After a 40% tax and other expenses, we live a reasonably comfortable life in a high-cost location but do not consider ourselves high earners or anything like that.
We invest a lot - max 401Ks for both, max after-tax contributions, max HSAs, around 40K$ together for both kids in 529s per year now, Real estate syndicate investments via funds, some private equity investments (Bain Capital)

There's a level of wealth which allows access to investments like private equity not available to typical retail investors. Part of this has to do with SEC regs and safe harbors on accredited/sophisticated investors and qualified purchasers. Part of it relates to the high minimums for those investments.

[fortunefavored]

When higher capital gains (20%) and NIIT started kicking in, that is when I started paying attention. So I'll go with $250-450K.

Personally I'd call that "ridiculously rich" but Bogleheads are way on the extreme ends (as you can see in this thread where two people already said $1M is merely comfortable!)

[oldfort]

Why are you asking this question? Are you trying to decide whether to invest in tax-exempt municipal bonds? Other? You’ll get better answers if you explain why you’re asking.

As this thread illustrates, there's some weird class issues in the US where people in the highest tax bracket like to think of themselves as middle class. The OP would get better answers if there was some specific reason for asking the question: ex. muni bonds mentioned above.

[jharkin]

Why are you asking this question? Are you trying to decide whether to invest in tax-exempt municipal bonds? Other? You’ll get better answers if you explain why you’re asking.

As this thread illustrates, there's some weird class issues in the US where people in the highest tax bracket like to think of themselves as middle class. The OP would get better answers if there was some specific reason for asking the question: ex. muni bonds mentioned above.

This happens every time these questions come up here. This forum is a bubble, full of million dollar income folks who surround their social circles with other million dollar types, never realizing that they make up a tiny <1%of the US population... ( and something likeless than 0.01% if you look worldwide)

Meanwhile, Out in the real world only 20% of households even earn over 100k, far fewer individuals do. The average person on the street probably sees anyone in the 22% bracket or above as doing very, very well...

[Mike Scott]

The following has a pretty good summary of 2019 numbers for US. They have what seems to me to be a reasonable definition of middle class as between half median to 2X median (with median about 63K). Note that 500K puts you in the top 1% for household income in the US.
https://dqydj.com/2019-average-median-t ... rcentiles/

[FiveK]

I always see the term, but I wanted to see if there was a definitive term or category that applies.

What would you do differently if you decide you are a "high earner" vs. "not a high earner"?

[Mr.BB]

I always see the term, but I wanted to see if there was a definitive term or category that applies.

What would you do differently if you decide you are a "high earner" vs. "not a high earner"?

I didn't think we arehigh earners; though we have a fairly high savings rate which I think can help us save more as if we were in a higher earnings bracket and spending more. and it helps in achieving our goals. I like learning, and I didn't know how to quantify the term I would read about.

[GuyInFL]

IRS defines Highly Compensated Employee as about 130K.
https://www.irs.gov/retirement-plans/pl ... efinitions

Received compensation from the business of more than $130,00 if the preceding year is 2020 or 2021,

Obviously its a subjectve question.

[FiveK]

...we have a fairly high savings rate which I think can help us save more as if we were in a higher earnings bracket and spending more.

Well done! Keep up the good work!

[pasadena]

IRS defines Highly Compensated Employee as about 130K.
https://www.irs.gov/retirement-plans/pl ... efinitions

Received compensation from the business of more than $130,00 if the preceding year is 2020 or 2021,

Obviously its a subjectve question.

That is what I was thinking.

As we can see in this thread, it's highly subjective, and when asked, people tend to believe they're not in these categories (ask around you, what people think "rich" means. 99% of the time, they will give you a criteria that they don't quite meet). Reminds me of a coworker whining about how "the middle class people like us" are always left to hang when politicians come up with something (something about losing some tax advantage on his multiple rental homes). I had to remind him that we while we were not high flyers, we were definitely not what people normally call "middle class".

So the IRS definition of a HCE for safe harbor limits seems to be a good starting point.

[2tall4economy]

It completely depends on what the writer, or politician, is trying to convince you of.

[geerhardusvos]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

Totally depends on the location and person. We make $200,000 a year and I don’t feel rich at all, but we have plenty because we are savers. In the area I live, making well over half a million $ as a household is normal. Making a million/year is common here. Move to the middle of the country and outside of the Metropolitan areas, and what I make is the same as the highest paid VPs out there. If you are in the top tax bracket, something over a few hundred thousand a year, you probably live comfortably. We know business owners making multiple millions. But I would say in all honesty that 1 million a year is the new $100K income that was talked about in the 90s. Look at the top positions at Fortune 500 companies, and that is high earning. You are not a high income earner unless you can afford private schools for all your kids and live in the best neighborhoods without batting an eye. That would require at least 1 million a year where I live. In another area it’s a lot lower than that.

[firebirdparts]

What is the definition and/or tax bracket of a high earner?

The 401k rules define "highly compensated" as $130,000.

Roth 401k phase out is around $200,000.

These are just some boring ideas. I suppose if you made $200,000 and lived in Monte Carlo, you might feel poor. I don't know.

[michaeljc70]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

I wouldn't be taking advice from an article or book that is that vague. Some might think that "high earner" is the top 1%, 5%, 10%, 20%, 30%....some might adjust for COL.....some might adjust for household size. Some think anyone that makes more than they do is a high earner.

[z3r0c00l]

Why are you asking this question? Are you trying to decide whether to invest in tax-exempt municipal bonds? Other? You’ll get better answers if you explain why you’re asking.

As this thread illustrates, there's some weird class issues in the US where people in the highest tax bracket like to think of themselves as middle class. The OP would get better answers if there was some specific reason for asking the question: ex. muni bonds mentioned above.

This happens every time these questions come up here. This forum is a bubble, full of million dollar income folks who surround their social circles with other million dollar types, never realizing that they make up a tiny <1%of the US population... ( and something likeless than 0.01% if you look worldwide)

Meanwhile, Out in the real world only 20% of households even earn over 100k, far fewer individuals do. The average person on the street probably sees anyone in the 22% bracket or above as doing very, very well...

Precisely. What's a hot day? I wouldn't hold out for a 1% hottest day to say "boy it is hot out." Top 5-10% more like it. 10% of households earn more than 118K in this country. I'd say that is a reasonable starting point for high income. One could argue a higher number, but one can't even pretend 1 million a year isn't high income without getting laughed out of the room.

Those who propose that high earner starts around a million, meaning kids in private schools and living in a mansion, might be confusing the term "high earner" with "wealthy." I think those are two very different thresholds.

[Afty]

I don’t think that trying to apply labels like “rich” or “high earner” is meaningful or helpful. They’re purely subjective and have so much baggage that go along with them.

If OP is asking whether certain retirement or investment strategies apply to them, I think we could give a better answer with more specifics about the particular strategies OP has questions about.

[oldfort]

In the area I live, making well over half a million $ as a household is normal. Making a million/year is common here.

There is effectively no major city in the country where earning over half a million a year is normal, not even in NYC or Manhattan. I suppose the statement might be true if you try to cabin the area narrowly: I earn the median of those who live in Central Park South.

https://slate.com/business/2014/01/new- ... think.html

[ralph124cf]

We should make a distinction between "high earnings", which is normally defined as W-2 income from wages and salary, and "high income", which also includes income from investments, rents, royalties, patents etc.

Individuals earning $1M are rare, $1M incomes are much less rare.

Ralph

[White Coat Investor]

What is the definition and/or tax bracket of a high earner? Single or as a couple? I read articles and books where they talk about being a high earner and how you should approach various investment and retirement issues if you are in this category, but I don't know how to categorize it.

I have a business whose target audience is "high-earning professionals." I generally think of those folks as mostly having incomes of $200-500K, but some have incomes in the $100-200K range and some have incomes in the $500-1M range. Obviously people who make more than $1M are "high earners" and obviously $100K isn't what it used to be thanks to inflation. I wouldn't consider someone earning $75K a year to be a high earner, but I'm not going to fight for one specific definition. If you need one, why not use the one Social Security uses? I think the 2021 SS wage limit is $142K or so. Seems as good a definition as any.

[Mr.BB]

Thanks for all the feedback. Interesting all the various definitions and interpretations.

[AerialWombat]

For enforcement purposes, the IRS defines a "high earner" as anybody making over $100,000:

https://www.irs.gov/newsroom/irs-increa ... ax-returns

[geerhardusvos]

In the area I live, making well over half a million $ as a household is normal. Making a million/year is common here.

There is effectively no major city in the country where earning over half a million a year is normal, not even in NYC or Manhattan. I suppose the statement might be true if you try to cabin the area narrowly: I earn the median of those who live in Central Park South.

https://slate.com/business/2014/01/new- ... think.html

San Francisco, Bay Area, Seattle, Portland, Austin, Boulder, etc. all have tens of thousands of people making well over $500k/year... Most ER docs alone make that much all over the country, let along business owners and tech employees... My uncle is an electrician and his employees make $140k/year and he makes millions per year. He knows many other business owners making what he makes. Landscapers, plumbers, you name it... They're killing it right now on the coasts. Even Michigan has residential construction contractors making $500k no problem.

$180k is mean income for my zip code, and that's stale, old data...

[stocknoob4111]

IRS defines Highly Compensated Employee as about 130K.

In San Francisco, 117k/yr is officially considered "low income": https://www.cnbc.com/2018/06/28/familie ... cisco.html

All depends I guess on where you live

[oldfort]

In the area I live, making well over half a million $ as a household is normal. Making a million/year is common here.

There is effectively no major city in the country where earning over half a million a year is normal, not even in NYC or Manhattan. I suppose the statement might be true if you try to cabin the area narrowly: I earn the median of those who live in Central Park South.

https://slate.com/business/2014/01/new- ... think.html

San Francisco, Bay Area, Seattle, Portland, Austin, Boulder, etc. all have tens of thousands of people making well over $500k/year... Most ER docs alone make that much all over the country, let along business owners and tech employees... My uncle is an electrician and his employees make $140k/year and he makes millions per year. He knows many other business owners making what he makes. Landscapers, plumbers, you name it... They're killing it right now on the coasts. Even Michigan has residential construction contractors making $500k no problem.

$180k is mean income for my zip code, and that's stale, old data...

The median household income for Boulder is $78,642. The median household income for Seattle is $102,500. The median household income in Austin is $67,462. The median household income in Portland is $65,740. Anyone who lives is Boulder, Seattle, Austin, or Portland and makes $500k/year isn't remotely close to normal for their city. You can look at micro-data with zip codes. 42 buildings in NYC have their own zip code and come up with the median income for billionaire row residents or something.

[geerhardusvos]

In the area I live, making well over half a million $ as a household is normal. Making a million/year is common here.

There is effectively no major city in the country where earning over half a million a year is normal, not even in NYC or Manhattan. I suppose the statement might be true if you try to cabin the area narrowly: I earn the median of those who live in Central Park South.

https://slate.com/business/2014/01/new- ... think.html

San Francisco, Bay Area, Seattle, Portland, Austin, Boulder, etc. all have tens of thousands of people making well over $500k/year... Most ER docs alone make that much all over the country, let along business owners and tech employees... My uncle is an electrician and his employees make $140k/year and he makes millions per year. He knows many other business owners making what he makes. Landscapers, plumbers, you name it... They're killing it right now on the coasts. Even Michigan has residential construction contractors making $500k no problem.

$180k is mean income for my zip code, and that's stale, old data...

People who live in a bubble have a distorted view of reality. The median household income for Boulder is $78,642. The median household income for Seattle is $102,500. The median household income in Austin is $67,462. The median household income in Portland is $65,740. Anyone who lives is Boulder, Seattle, Austin, or Portland and makes $500k/year isn't remotely close to normal for their city. You can look at micro-data with zip codes. 42 buildings in NYC have their own zip code and come up with the median income for billionaire row residents or some such nonsense.

Many people in my family didn’t go to college. My brother has a high school degree and works at a normal construction company as a carpenter and makes $150K per year without overtime. It’s not a bubble. It’s a reality in expensive metropolitan areas. Cheapest house on my street is $1.2 million. There are plenty of cities ZIP Codes like this... you can receive low income subsidies for medical expenses and other things if you make less than $120,000 a year where I live...

Again, this thread is about high earners, and you’re bringing up the median incomes? High earners make some thing like 300 to 500% of the published median incomes, right? otherwise, they aren’t that high or notable...

There are literally millions of people in this country in the 35% and 37% fed tax brackets... they are called high earners...

[Starfish]

https://sanfrancisco.cbslocal.com/2016/ ... alto-plan/

$250K Per Year Salary Could Qualify For Subsidized Housing Under New Palo Alto Proposal

[White Coat Investor]

Most ER docs alone make that much all over the country, let along business owners and tech employees...

No they don't. Average last year was either $357K or $375K depending on what survey you believe. Now there absolutely are ER docs making $500K+, but most of them aren't.

[ShadowCat]

I think that these are just rules of thumb and you need to look at specific tax brackets in the context of specific tax situations.

For example, when I was a physician in residency and fellowship (finished just last year), I was consistently in the 22% federal tax bracket and aggressively saved in a Roth 403b. This year I will be comfortably in the 35% federal tax bracket and thus have switched to full traditional 403b contributions. This would be an example of an actionable way of dealing with a specific change in tax brackets.

I don't think it's useful to say that a particular tax bracket makes you a high earner or another makes you a low earner. What you are going to do with the information is more important. The articles and books you see referring to "high earners" are just giving generic advice that functions on a gradient.