The Surprisingly High Cost of Being a Middle-Class American

Geoff Williams
Sat, September 16, 2023 

Unless you’re extremely rich or poor, you probably think of yourself as being part of the “middle class.” As you’re probably aware, “middle class” is an income level that describes people whose annual income is directly in the middle 50% of all income. If you’re middle class, you are not considered to be rich or poor. However, when it comes to middle-class income, how much money is that, exactly? We analyze below but if you’re part of the middle class then you could likely benefit from working with a financial advisor in order to maximize your potential wealth growth.

Why Is It Important to Know If You Have a Middle-Class Income?

You could argue that it isn’t all that important. Knowing you have a middle-class income won’t make you richer or poorer or change anything about your income. It isn’t as if it will help you save more money.

That said, understanding that your income is less than a middle-class income could theoretically push you to try and earn more money. Or knowing that your income is above the middle class may make you feel more grateful for what you have. It certainly can’t hurt to know where you and your income stand in the country, compared to everyone else.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

What is Middle-Class Income in the U.S.?

The middle class has been eroding for some time now. According to recent research from the Pew Research Center, a respected nonpartisan American think tank based out of the District of Columbia, in 1971, middle-class Americans made up 61% of the population; in 2021, it was 50%. During that time, both lower-income and upper-income families grew as a group.

So what is considered middle-class income? That can be tricky to define, in part due to the size and location of a family. After all, a household making $100,000 a year is going to feel more squeezed if there are two parents and six children in the family than if there are two adults and two kids. Likewise, your community’s cost of living plays a large role in whether a family feels as if they are middle class. A hundred thousand a year will go a lot farther in a small town than in a big city.

The Pew Research Center describes the middle class as an individual who generates between two-thirds and doubles the median U.S. household income, which was $65,000 in 2021, according to the most recent numbers from the U.S. Census Bureau. Using those numbers, a middle-class income would be any household that makes approximately $43,350 to $130,000.

Put another way, if you’re making less than $43,350 in your household, you are probably considered a low-income family. If you’re making between $43,350 and $130,000, you’re considered middle class. If you’re earning $130,000 and above, you’re likely considered upper class.

That’s a simplistic way of looking at it, however, since a family making $130,000 might not be living quite like a middle-class family if one adult is the breadwinner and there are many mouths to feed. Still, if it helps visualize how much a middle-class family earns, according to the Bureau of Labor Statistics, for the third quarter of 2022, the median weekly salary was $1,068.

Middle-Class Income Doesn’t Matter as Much as Tax Brackets

If you realize that your income is squarely in the middle class, it’s interesting information to have, but as noted, that knowledge obviously doesn’t directly affect your finances. What does impact your finances are federal tax brackets and there are seven of them.

The lowest tax bracket is 10%. The highest tax bracket is 37%. If you’re in the middle class, you’re probably in the 22%, 24% or possibly 32% tax brackets. That may sound as if you’re paying 22%, 24% or 32% of your income toward taxes, but you’re actually not.

The first part of your income will be taxed at 10% and then more money will be taxed at 12% and so on until you reach your tax bracket. As your income goes up, the money within the tax bracket is taxed at the corresponding rate. This type of system of taxing, where you pay more, the more money you earn, is known as a progressive tax system. Some states, meanwhile, tax their residents differently. Some states have a progressive tax system and some have a flat tax rate.

The Bottom Line

Being “middle class” is almost more of a mindset than anything else as it refers to your annual income. Politicians and the media often talk about middle-class values, but it isn’t as if anybody gets a certificate if they enter or exit the middle class. “Middle class” is really simply a label that describes one’s financial situation, rather than a label that changes one’s finances and it doesn’t make any household better than the other, whether they are part of the lower class, middle class or upper class. Just remember that your net worth, which you can always grow, should never be confused with your self-worth.