During the late '90s, most families saw inflation-beating wage gains. Median household income grew at an annual rate of 2.5% between 1995 and 1999, according to the Census Bureau. As a group, higher-income Americans captured a disproportionate share of those gains--for example, the top 5% of wage earners saw their income grow at an annual rate of 3.5%. More Americans climbed into the six-figure-and-up salary range--the percentage of households earning $100,000 or more grew to 13.4% in 2000, up from 5.5% in 1980, after adjusting for inflation.
You might think that a six-figure salary is closely linked to serious wealth accumulation. Not necessarily. A lofty salary certainly helps you build wealth, but there's a surprisingly low correlation between a high income and a high net worth. At all income levels, some families have accumulated wealth while others have meager portfolios.
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INCOME -- HOW MUCH DO YOU MAKE?
Throughout the late 1990s, most Americans enjoyed inflation-beating wage growth. To see how your income compares with that of others your age and where it places you among all households, check out the figures below.
BREAKDOWN OF HOUSEHOLDS BY INCOME
Under $25,000 27%
$25,000-$49,000 27.8%
$50,000-$74,999 20%
$75,000-$99,000 11.2%
$100,000 and over 14%
MEDIAN INCOME BY AGE
Under 25 $23,077
25-34 $40,897
35-44 $54,661
45-54 $62,105
55-64 $52,678
65 and over $26,667
Source: Claritas Demographic Projections, 2001.
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One key reason for the disparity between income and net worth, according to economists, is saving and spending patterns. Many of us simply increase our spending in line with our pay raises. Or we sabotage ourselves with debt. Indeed, total household debt levels are at historic highs, according to Federal Reserve data. Even though the families that are shouldering the largest debt burdens are low-income and middle-class families, high earners are also letting debt take over more of their budgets. In 1989 debt payments averaged 8% of income for households earning more than $100,000; by 1998 that figure was 10%. In 2004, that figure jumped to 13%.