Many Americans aspire to join the ranks of the rich, but the income threshold to be considered rich depends a lot on where you live.
It also takes a lot more income to join the top 5% of workers than it did just a few years ago, according to new research from GoBankingRates.com, which examined state income data for the five-year period from 2017 to 2022. This latest year represents the most recent household income data from the US Census Bureau.
The easiest place to get to the top of the heap is West Virginia, where an annual income of $329,620 will qualify you as one of its top earners. But you'll need to earn more than double that, at $719,253, to join the top 5% in Washington DC.
Americans' fortunes have improved in recent years, in part because of the federal government's pandemic stimulus efforts that doled out billions in aid to businesses and taxpayers, said Andrew Murray, senior content researcher at data from GoBankingRates. At the same time, the nation's highest-earning households are earning a larger share of income, fueling rising income inequality, census data show.
“Covid relief policies strengthened the economy, leading to higher prices for stocks, real estate and savings,” Murray told CBS MoneyWatch. “These conditions were particularly favorable for the wealthiest Americans, who experienced dramatic increases in income, especially given that many businesses posted record profits.”
Of course, income is not the same as wealth, which has also been done has grown since the pandemic. But earning a higher salary can help families build their assets, allowing them to buy homes, invest in their children's education and take other steps to consolidate their wealth.
The outsized growth in the incomes of the nation's highest-earning families before and after the pandemic may be one of the biggest stories in the American economy, Murray said.
“While the bottom 20 percent of workers saw dramatic increases in wages, their overall share of the nation's wealth declined as the rich got much richer,” he said.
After West Virginia, Mississippi had the second-lowest threshold to join its highest-earning households at $333,597, according to GoBankingRates.
Meanwhile, joining the top 5 percent of workers requires much more in many eastern states, with Connecticut's threshold at $656,438 and New York's at $621,301, the study found.
“It comes down to the cost of living,” Murray said. “People in New York or DC make higher wages than people in states with a lower cost of living, like Arkansas or Louisiana.”
Between 2017 and 2022, Idaho, Nevada and Washington saw the biggest jumps in the amount needed to be considered among their states' top earners, according to GoBankingRates. Idahoans need an additional $115,769 in annual income, while Nevadans need an additional $129,469. Washingtonians must earn an additional $166,144 to join the 5%.
The reason is because of changes in the economies of Idaho, Nevada and Washington over the past few years, Murray said. Washington, for example, saw resident incomes rise 44% between 2017 and 2022, which Murray says is “likely due to Seattle's growing reputation as a post-Covid tech hub.”
In Idaho, thousands moved to Boise during the pandemic, taking their telecommuting wages with them, he said.
“In the case of Nevada, which ranked second in the entire study, gambling was legalized and made more easily accessible from 2017 to 2022,” Murray said. “This led to huge increases in profits for Las Vegas-based companies.”
