The Upper Middle Class….Just isn’t what it used to be…

If you are lucky enough to be earning $100,000 annually or over you are technically in the Upper Middle Class in the United States.   That number puts you at double the average annual income in our country, which may sound great on paper, but when it comes to financial stability it just is not enough.

Several pundits have discussed the new wealth effect in our country as it pertains to the middle class and what it means to be in the upper middle class.   As an example, making $100,000 a year will most likely allow you to pay your bills. But after taxes and basic living most people who are considered in the Upper Middle Class have little to no financial stability.   They can certainly afford their current life, but they cannot afford ancillary or emergency expenses. Further, while most Americans realize they will need to send their children to college, the majority have little to no money saved for a four year degree. When it comes to their children attending graduate school the numbers decline even greater.

When it comes to retirement most in the “technical” Upper Middle Class have very little set aside as well.   This is a growing problem in our country that shows no signs of change, unless reform is enacted that changes the structure of how we utilize income.   Most in the Upper Middle Class say that they do not feel like they are in better financial shape than others or that they are living in a higher life style. This is even though they are making a six-figure income.   Why is that you may ask?

What most in these classes are seeing is a change in the way the economics in today’s world work.   Prices have risen year over year on goods and services but wages have not.   As a matter of fact, The Ribotsky Institute has reported on wage stagnation for many years now.   There is actually an inverse relationship between the two numbers that is directly responsible for the wealth effect of the super rich.   In today’s world the extremely wealthy are capable of growing their wealth significantly while those in the Upper Middle Class cannot.

The cost of certain things has gone up exponentially.  Take the cost of college as previously mentioned which has gone up ten fold over the past twenty to forty years.   Add that to the out of control cost of health care or related expenses and someone who is technically in the middle class doesn’t feel as if they are in the middle class at all. While they may be better off than most, they are still struggling to some extent financially.

One of the major issues we have in our society is that we have transformed into a consumption economy. Gone are the days of only buying things when they were needed. Now we buy things as a form of status and for a lot of people items or purchases are addicting.   In a society of instant gratification we are faced with trying to teach younger generations the value of money and when to make purchases.

Unfortunately the disparity in income from the Upper Middle Class to the Upper Class is large. As the world economy has changed so to have the barriers of the socioeconomic classes.  Due to these economic changes the definitions of what defines middle class has to change as well. Let’s face it, living on $100,000 hardly classifies as Upper Middle Class anymore.   This was a determination of income and socioeconomic level that was first enacted in the 1960s.

Several wealth experts suggest that the real Upper Middle Cass in today’s world are people who make a million dollars annually.   Which unfortunately makes some logical sense since we are in 2017 and even one million dollars isn’t a lot of money anymore.   When the average college tuition in the United States costs approximately $33,000, that means to send one child for that four-year degree it will cost $132,000. That is without any ancillary costs or other related costs associated with your child going to that university.     So if you are like most Americans who have on average of two or more children, it will cost you $264,000 to send those two children to similar universities.   One certainly cannot do that on $100,000 annually.   So it is quite ridiculous that $100,000 is defined as Upper Middle Class in today’s world.   If we want to narrow wealth inequality then we have to develop policies that assist families making six figure incomes or below with additional assistance to be able to make more or to have access to additional programs with which to further their financial future.     We are not suggesting more liberal based entitlement programs. But our economic policies must assist our citizens with capital formation that will allow would be entrepreneurs the ability to borrow capital or get decent financing to build their own businesses.

That is how we spur the economy even more while classifying the actual middle class as middle class.

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