People underestimate the income of the top 1%, researchers find

2 comments

1. I’m actually pissed the Fed cut rates because I have $500,000 sitting in a bank account that was getting 5% interest and now it will only get 4.5% interest.

2. One thing that confuses people is the scale difference between someone making $70k vs $700k a year. Most people think that they can buy 10x the stuff, but it actually ends up being much more than that.

   Let’s assume that a baseline “cost of living” is $50k, between rent/mortgage, utilities, food, transportation, etc. The median wage is $60k, so lets assume that to stay alive you need around $50k. Someone making $70k ends up having $20k disposable income to invest or spend. So they throw $7k into a 401k, spend $3k on a vacation and use the other $10k for miscellaneous expenses.

   The person making $700k has the same cost of living. Sure they might buy a larger house or a nicer car, but in reality they have the same needs as the person making $70k. But even if their cost of living ends up being double, that still leaves them with $600k of disposable income. They end up with 30x the spending power of someone making $70k. They can spend $10k on vacation, buy a $100k car, spend $360k a year for a $5m mansion and still have $130k (over double the average salary) left over to invest.

   And these aren’t the actual averages. The actual average salary is $63k and the salary of the 1% is almost 786k. The 1%s wealth is completely unimaginable to the normal person.