Bad news for those who’ve always dreamed of making $100,000 a year: It isn’t that much money anymore.
“If you want to live like the people you see on MTV, you need to make a lot more than $100,000,’ said Bill Coleman of Salary.com, an online service that tracks compensation issues.
A decade ago, a $100,000 paycheck may have meant a large house in the suburbs or a snazzy place in the city with a mountain view. It may have meant an imported car, a country club membership, a boat or vacation home, with the kids in private school. Today, it’s barely enough to give people a view of the fine things they are missing in life.
To truly be a player, one needs at least twice that much, particularly in metropolitan areas with pricey real estate.
“$200,000 is the new $100,000,’ said Coleman, whose anecdotal socioeconomic research may burst the bubble of people who still have to go to work every day for considerably less.
It’s true that more people are earning six-figure salaries than ever before, but it is still a small class.
In 2003, less than 7 percent of individual tax returns reported an adjusted gross income of more than $100,000, but less than $200,000, according to data from the Internal Revenue Service. And less than 2 percent reported an adjusted gross income of more than $200,000.
Colorado’s population, on average, is more affluent than the U.S. population. Census data from 2003 shows that 16.77 percent of Colorado households have incomes of $100,000 or more. Many of them achieved this with two wage earners.
“It’s never enough,’ said Highlands Ranch financial planner Pat Kummer.
Her clients have an average income level of about $85,000. They live in large houses, often lease $50,000 cars, and sometimes buy vacation properties.
“They are not deciding whether to buy brand-name or generic food,’ Kummer said. “They are trying to decide whether to play golf or go skiing.’
But to sustain their lifestyles, many of the people Kummer sees have piled up debt and don’t put away enough dough for retirement. People come to her all the time who’ve just taken out a new 30-year-loan on their home and then want to start a retirement plan.
“People do not think it’s necessary to pay off their house during their lifetimes,’ she said. “Their concept of debt is that, ‘If I can afford the monthly payment, I don’t care about the debt.’ It’s that attitude that has me scared.’
It’s easy to spot a BMW on I-25 or a manicured cluster of million-dollar homes. Television culture glorifies the rich with shows like “The Apprentice’ and “Who Wants to Be a Millionaire.’
The collapse of dot-coms still hasn’t stunted our expectations about what’s possible. The reality is that the median household income in the United States is still under $44,000. That means half of all Americans make less than that.
In January and February, Gallup polled Americans for “the most important financial problem facing your family today.’
Those making between $50,000 and $75,000 reported essentially the same concerns as those making between $75,000 and $100,000. The concerns were health-care costs, higher education expenses, lack of money, low wages, debts and retirement savings.
“A $100,000 salary doesn’t solve the problem you thought it was going to solve,’ Coleman said. “It just buys you more things, but not quite as many things as your neighbor.’
In the end, there may be no such thing as feeling rich. The more money you make, the more money you spend.
“The joke around my office is that if you make $200,000 you spend $300,000,’ Kummer said. “And if you make $50,000, you spend $40,000. People are so much better off if they learn to stick to the program, whatever that program might be.’
There’s also the trade-off between time and money.
A Salary.com survey of 4,600 individual employees across industries found that – given a choice – about 39 percent of those responding would “choose more time off instead of a $5,000 raise.’
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Reach him at 303-820-1967 or alewis@denverpost.com.
