The Typical Rich Family is A Cop Married to A Nurse

Ryan Avent recently expressed surprise at the fact that a married couple each earning $75,000 were in the top 5% of the US income distribution.

To get into the top 5%, you need to earn less than $150,000. To me, it’s something of a wake-up-call to realise that a couple who make $75,000 each are in the top 5% of American households. I’m curious whether this is surprising to others, too? Would you, like me, have guessed the thresholds were higher? Does this change what you think about who is “rich” in America today?

In Boston, cops make about $110,000.  I’m sure some of them are married to nurses making around $80,000, putting them well up into the top 5 percent.  I don’t regard this sort of family as rich, but many people I talk to insist the top 5% are rich.  If so, there are far more rich families that are a cop/nurse, or accountant/teacher, or engineer/secretary, then there are Donald Trumps.

Why do people find it surprising that so few families make more than $150,000?  I think I know, because I used to be surprised myself.  Then I realized my mistake.  I was assuming “families” were people like me, a middle age guy with a working wife and kids.  But then I realized a “family” is any adult household.  My first 8 years as an adult I was living on my own, supporting myself with part time work will going to college and grad school.  Definitely bottom quintile.  I was probably technically “poor,” but not poor in a sociological sense.  I was a proto-upper middle class guy.  Then I spent one year in the second quintile, before shooting into the third quintile, where I stayed for a number of years.  Then I got married, then I got lots of raises and promotions, and presto, I’m rich.  (Although my neighbors would laugh, they look down on us plebs living in two-family houses.)

I’ll retire at 62, and live another 15 or 20 years if I’m lucky.  During that stretch my “income” will drop sharply, although I am not quite sure how sharply.  Probably at 70 it will bump up as I’m forced to take money from my 401k.

I think most people have this vague idea in their mind that if everyone was exactly like Scott Sumner, we’d have a fairly equal income distribution.  Not so, it would be less unequal than today, but still highly unequal, as different versions of me would be at different stages of their (my?) life.

People are surprised that only 5% of families make more than $150,000, because they forget that even most upper-middle class people spend the vast majority of their time (between 18 and 80) making much less than $150,000.

• Become A Funded Futures Trader