Personal Finance 

What is the Average Middle Class?

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I’m a sucker for statistics, probably why I enjoy looking at numbers like the average retirement savings or the average tax refund, but I never gave the term “middle class” much thought until recently.

Fortunately for us, U.S. News & World Report has compiled some statistics on what the “average” is for a lot of money related statistics, like income, hours worked, etc.

Let’s take a look…

Average Income

For a two parent, four person household, the average income is between $51,000 to $123,000. The median is $81,000. That’s higher than I would’ve expected as the “typical” household has a sole breadwinner and one homemaker (it turns out 76% of two-parent families have both parents working). The case for this arrangement is pretty clear for anyone who has looked at the cost of daycare!

The range of this metric, $51k to $123k, really illustrates how meaningless it is without additional information. $123k in a low cost of living area is not the same as in a higher cost of living area. Unless it’s normalized for cost of living, it’s really difficult to find value in it.

That being said, would you consider someone earning $123,000 to be “middle class?” That’s $10,000 a month, pre-tax.

Other Average Statistics

Here are some other “middle class stats:”

  • Average home is worth $231,000 with $17,600 in payments a year. That comes out to $1466.67 a month in housing costs.
  • The average home is around 2,300 square feet.
  • On cars, the typical family spends $12,400 a year on two cars.
  • That median income family puts away around $2,600 per year for retirement.
  • $14,200 a year on clothes, food, utilities, entertainment, and other living expenses.
  • 18% of income goes towards some form of debt – auto loans, mortgage, credit cards, etc.

Finally, average net worth is around $84,000 according to the Federal Reserve (in 2007 the figure was $120,300).

What do you think of the statistics? Did any surprise you? Would you consider income of $123,000 to be middle class?

{ 78 comments, please add your thoughts now! }

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78 Responses to “What is the Average Middle Class?”

  1. So what if you earn $123,001 or more. Does that make you upper class? 🙂

    James, please hand me my monocle.

  2. JamesV says:

    I think it’s sad that so many families think they “have to be” 2-income homes. I sure hope that most of these 2-income families can pay all their bills/savings on 1-income, and the 2nd income is just a slush fund. If not, I guarantee one of the spouses will lose their job in the next 5 years if they haven’t already, and then what do you do? All Bargaineering readers should feel led to live on only 1-income in general. Downsize in whatever means you have to. My wife and I have 2 kids and have been a 1-income family for the past 9 years. We don’t take fancy vacations, but everything we have is paid for except our home. And the comment about $123,000 income being middle-class. This is definitely the upper 1% of the middle-class. This would be living wealthy in my books pending on METRO area you live in or if you have more than 4 kids+. These are just my opinions, and I’ll look forward to hearing more comments. -JamesV.

    • cubiclegeoff says:

      It’s not that so many families “think they have to be 2-income homes”, it’s that many families have no choice. I wish I could be a one-income family, but with child care costs and the nonexistant growth in incomes over the past decades, it’s just no feasible. This is especially true in high-income areas. And $123,000 in many cities is definitely middle class. Not so much in the rural areas and much of the south and mid-west, but the west coast and mid-Atlantic to New England, this is true.

    • Cole Brodine says:

      My wife and I are a 2-income family. We both have really good jobs. We don’t really “need” my wife’s income, but we use it to pay down our debts more quickly, put more money in savings and retirement for ourselves, and fund college savings accounts for our two children. Her income is helping us build more of a buffer.

      If my wife lost her job, we would have to stop contributing the amount we do now to our retirements, and our kids would be out of luck on getting any more money in their college savings. We wouldn’t be able to do all the home improvement projects that we like, and we wouldn’t be able to go to all the places that we like to go to. We would, however, be just fine.

      If I lost my job, we would be in much more dire straights after our savings ran out, until I could find something else. Even if all I could find was a minimum wage job, we would be fine. Once again, we’re doing minimum payments on the house with no college funds, but we won’t be starving.

      If we can get our house paid off before either of us lose our jobs, then we’ll be sitting pretty.

      Although I don’t spend my money too liberally, I disagree that one of us will be losing our job in the next 5 years. We both have jobs that I would consider very stable. Other employees in our workplaces AVERAGE 20 years of service. I can’t think of the last time somebody was terminated to “downsize”. (Obviously people are terminated for performance and personnel issues)

      • CJ says:

        You say you don’t “need” your wife’s income….but you made a very good case for the “need” for the income.

        1 in 4 workers lose their jobs to disability. Maybe you could look at Dave Ramsey’s website

      • Stacey says:

        Don’t ever think you cannot get downsized. I thought my job was very stable. I am a female and I had a very good position as an Operations Director for nearly 14 years making more than most men do. My termination had nothing to do with personnel or performance issues. It came down to money. The job I had was one for two people – they figured that out but also figured out that they could pay two people a lot less than what they were paying me in this desperate economy. Never say never.

    • Scott says:

      Living on the lower of the 2 is a good idea & what we do…
      Too many of our friends / family are struggling for this reason.

  3. jim says:

    What they are calling a ‘typical’ or ‘average’ family is kind of specific it seems. I think they’re just looking at married couples with 2 or more kids.

    “The average home is around 2,300 square feet.”

    That is the number for NEW homes.

    New homes tend to be larger than older homes. Most people don’t live in brand new homes. THe median home in the US is 1769 sq ft in size.

  4. I am surprised at how small the amount is put up for retirement compared to the median income amount.

  5. cubiclegeoff says:

    I generally think these statistics are useless. They try to group a very diverse country into a few numbers, which doesn’t provide much usable information. Break this down by metro region, then maybe it would be insightful.

    I do think the retirement contributions are unfortunately low.

    • cdiver says:

      Agreed. Hard to make any comparison with so many unknown variables.

    • CJ says:

      Actually, stats must be interpreted by those who understand them…if you do not understand statistics, then yes, they are useless.
      The problem is most reporters and writers do not understand stats and then write articles based on what they do not understand.

      I’ve known master level and Phd level professionals who do not understand the difference between mean, median, and mode. This is stuff my daughter was taught in 4th grade!

  6. AbeFroman says:

    …in Los Angeles. Yes. $123,001 would fall right in the middle of Middle Class. In fact that might be at the lower end of the spectrum actually.

  7. Anthony says:

    My and my wife’s income puts us at the upper portion of the “middle class.” Which is where I expect us to be.

    Our expenses, on the other hand, are in the lower middle class.

    Both of which are good things. We earn more, spend less, and save more than the averge middle class.

    We’re off to a good start, I think! 🙂

  8. DIY Investor says:

    Add me to the list of those surprised at the small amount put away for retirement. People will spend 20 years in retirement needing to generate a paycheck. Putting away $2,600/year isn’t getting it!

  9. Ryan says:

    I was surprised more with net worth. That just might be because I’m fresh out of college and I’m worthless. But how is net worth really calculated? You can’t really include your home because you’d have to sell it to get the money, and that’s not guranteed to happen at the value of the house. Same goes for retirement. If you have to take it out immediately, you’ll get hit with early withdrawal fees.

    I guess I just don’t think net worth tells much about anything and shouldn’t be used to gage anyone.

    • CK says:

      I’d say the best measure of net worth is what would you have if you sold everything you own and paid all of your debts.

      • Ryan says:

        Right, but you can’t possibly calculate that number. You don’t know what you will actually get for the things you sell. Just because the house or car is worth XX, doesn’t mean someone will pay that much for it.

        • Joe says:

          You’re getting analysis paralysis. Kelly Blue Book and Zillow or other qualified assessment will provide a reasonable estimate.

          You want to track net worth over your lifetime, not weekly or even monthly. You would want to compare this net worth value to a similar survey from prior years.

        • CK says:

          You’re right, you’re not going to know exactly but you can get a pretty good estimate. You don’t have to be exact.

    • tbork84 says:

      You have a point about its worth being questionable. But its a great metric to look at if you are starting off and need some way to track your progress.

      I am also recently out of school, and having begun to work and save I use my net worth to keep track of my progress. I have plenty of time ahead of me to see how I do, but its a nice motivator as I budget and save to see that number tick up over time.

  10. billsnider says:

    You touch on a key metric, but did not expand on it. You have to normalize the data. For instance, you can buy a lot more home if you bought in the mid west instead of San Francisco. There is a huge differance between the two.

    I was in marketing when i worked. Normalized data was easy to buy and develop. We tended to use this data instead of income by itself.

    So, it may pay to expand this subject to help one judge themselves against the national average.

    As to statistics like the amount of money in retirement accounts, you have to look at this reletavive to ones age. You would expect this to correlate. Not sure if income and retirement amount correlate all that well.

    Bill Snider

  11. Don C says:

    You touched on a point about how meaningless the average income is if you don’t factor in if the high/low cost of living aea adjustments. New Yorkers make a lot more money than the average US person, but the cost to live in NY is also much higher than the national average.

    It’s unfair how the current administration will say we make too much money once we reach $250k, and get taxed to no end. $250k for a family of 4 in NY is about middle class, but you can live like a king (or queen) on that same $250k is a small town in rural USA.

  12. Shirley says:

    “Would you consider income of $123,000 to be middle class?”

    Here in the Sacramento Valley I would consider it to be middle class.

  13. zapeta says:

    I can’t believe these families are only putting away $2600 a year for retirement. I contribute more than that each year and I definitely don’t make enough to be considered middle class by these definitions. I’d consider 123k a year to be upper middle class in the middle of the country where I live.

    • CK says:

      $2600 is the average, there are plenty of families putting away less (or more accurately spending themselves into a deeper hole daily.)

  14. I live in Maryland and the cost of living is fairly high. Even though $123,000 seems like a lot, it won’t take you as far as it really should. Even though many people live well above their means making 6 figures is not what it used to be.

  15. Daniel says:

    At first, I too was surprised at the low retirement savings amount. But we all have to remember that, in general, WE, as readers of online finance blogs and sites and books, are NOT average. There are a LOT more people unaware of good personal finance strategies, than there are savvy financial folk. Therefore, they bring the overall average down.

    • cubiclegeoff says:

      Very true. A lot of people put nothing away, and depending on how the data is collected, I wouldn’t be surprised if people were putting more away, just didn’t know it.

  16. jsbrendog says:

    one day i will be middle class….so does this mean I am po’ (too poor to afford the extra o and r)

  17. eric says:

    Wow. That’s waaay higher than I thought it would be.

  18. BradKP says:

    Probably a very good calculation. However, $123,000 wouldn’t be considered to be middle class. I guess we must have further classification like upper and lower middle class.

  19. I have thought for a while now that the definition of middle class is one of the greatest contributors to our current financial woes. While your post put some actual numbers on that classification, most people have a pretty difficult time defining what exactly constitutes “middle class”. But more importantly, there is a social stigma against being low or upper, so EVERYONE wants to *think* they are middle class. I think that because of that, the vast majority of people go out and buy expensive cars (I consider anything $25K+ in that category), and insist on getting cell phones and cable TV because they “deserve” it, since they fit into what they consider to be middle class.

    Nobody wants to be thought of as “lower class”, so they buy things that make them appear to be of higher means… which brings on the debt problem.

  20. CJ says:

    I live in OK where many people fall below the poverty level. My husband and I have both been in poverty situations as single parents/students then worked our way up to professional master & PhD level work. We now have a combined salary of 125k. We have a net work greater than the average listed here and we can save more now that our salaries are higher. I think 50k salary is a bit low to be considered middle class for a family of four. Also I believe the range should be more like 75-200k because a family making 50-75k with no savings can be at poverty level with one or two months of being laid off.

    Income should not dictate which class status, it is about net worth and savings ability.

  21. FJP says:

    What world are you all in? Just try to find a job making better than $25 an hour.. Two people working full time in the Seattle area would have a hard time pulling down more than 80k a year. Unless you are Upper Middle. Drive through the large poor areas where the apartment dwellers are and the lower middle classes make it on 40 or less a year and tell me that 123k isn’t a whole lot of money.

  22. DRG says:

    I believe that your stats are incorrect.

  23. duncan says:

    Given the average and/or median income levels, the home, car payments, etc. don’t leave much for discretionary purchases. This will either translate into higher debt levels … or suggest that some of the data may be a little-bit misleading or even incorrect.

  24. Adam says:

    I think these figures are driven up because of certain areas have a cost of living index at 2x or more than the national average and that families that make a LOT of money pull the average up vs. the average of 90 percentile.

    If you bar graph out the incomes it’s like half of a teardrop shape. and the top of the fat part of the teardrop is a household income of 38k or so a year, but the average is drawn higher because the point of the teardrop goes really far out to ultra high incomes.

    Same would go for net worth. I want to know what 80-90% of Americans make in income and also what their net worth is. That would be more instructive… the middle 80 percentile.

  25. Tom Elkins says:

    I find myself fitting nicely into that data set at the upper income limit.I do not consider myself wealthy or upper income. I understand that many would disagree.I have earned as little as 800 dollars per month in my adult life while married with a child.

    The conundrum is as income grows so do outlays.While that is not required human nature is to live up to your means.I applaud those who live small but think it is not realistic for most Americans.

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