Where do the rich get most of their income?

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This is the secret to making money like the rich.


the main points

  • The top 5% of earners get more than two-thirds of their income from investments.
  • Capital gains make up a larger share of your income the higher the income ladder.
  • To build wealth, it is important to invest, stay out of debt, and monitor your spending.

Capital gains matter more than you might realize. The sources of income for those who earn millions of dollars a year are very different from those of the rest of the American population. According to information from the most recent tax returns filed with the IRS, salaries and wages make up about half (46%) of the earned income of those who earn $1 million to $1.5 million. However, salaries and wages make up 83% of the total income for those who earn $30,000 to $40,000. Here’s a closer look at where the wealthy get their money.

Main sources of income

As you might expect, the rich get a greater share of their income from investments than the poor. In fact, the top 5% of earners earn more than two-thirds of their income Investments. Rich people also have more sources of income. Here are some of the major sources of gross income for Americans:

  • Salaries and wages: W-2 Income From Your Business
  • IInvestment Income: of interest, dividends and capital gains
  • Freelance Income: Payments you receive from selling products or services
  • Annuities and annuities: Payments from eligible retirement plans
  • Commercial income: Payments from owning a stake in a private company
  • Social Security Income: Federal government retirement benefits

Top 1% earn $500,000 or more

The median real household income was $70,784 in 2021, according to the United States Census. However, there is a large disparity in income. According to the most recent tax returns available, the lowest 50% of Americans earn less than $40,000, while the top 5% of Americans make more than $200,000. 157,197,473 tax returns for 2021 have been filed. Below are the details of the represented Adjusted Gross Income (AGI) levels:

  • lower third: $25,000 or less
  • middle third: $25,000 to $75,000
  • the third place: $75,000 and above
  • Top 5%: $200,000 or more
  • Top 1%: $500,000 or more

Income sources by income level

capital gains It makes up a larger share of your income the higher the income ladder. Capital gains are the profit you make from selling an investment or property. This is the percentage that the source of income represents at this income level:

  • 3rd lowest: $25,000 or less
    • Salary and wages: 79%
    • Investment income: 4%
    • Self-employment income: 10%
    • Annuities and Annual Bonuses: 14%
    • Business income: 0%
    • Social Security Income: 50%
  • Middle third: $25,000 to $75,000
    • Salary and wages: 81%
    • Investment income: 2%
    • Self-employment income: 3%
    • Annuities and annuities: 10%
    • Business income: 0%
    • Social Security Income: 9%
  • Third place: $75,000 or more
    • Salary and wages: 48%
    • Investment income: 27%
    • Self-employment income: 2%
    • Annuities and annuities: 6%
    • Project income: 16%
    • Social Security Income: 2%
  • Top 5%: $200,000 or more
    • Salary and wages: 41%
    • Investment income: 34%
    • Self-employment income: 2%
    • Annuities and Annual Bonuses: 4%
    • Project income: 20%
    • Social Security Income: 1%
  • Top 1%: $500,000 or more
    • Salary and wages: 37%
    • Investment income: 37%
    • Self-employment income: 2%
    • Annuities and Annual Bonuses: 3%
    • Project income: 22%
    • Social Security Income: 0%

The top 5% make more money from their investments and business interests than from their salary and wages. The bottom third is heavily dependent on Social Security and their salaries and wages. The wealthy also earn money from their own business investments. For those who earn $10 million or more a year, their salaries make up only 17% of their income and their investment income makes up 67%.

How to make money like the rich

The stock market is one of the main sources of income for the wealthy. many wealthy Investing in stocks And bonds as a means of generating passive income. According to one of the largest studies of millionaires ever, millionaires have not built a net worth of $1 million or more through inheritance. Only 2% of millionaires said they belong to a high-income family. It took hard work, discipline and investing regularly Reach millionaire status.

According to the survey, eight out of 10 millionaires have invested in their company’s 401(k) plan. In addition to benefiting from a workplace retirement plan, three out of four respondents also invested in Irish Republican Army And a separate brokerage account. These simple steps were some of the key keys to their financial success.

Becoming a millionaire does not happen overnight. Only 5% achieved this milestone in less than 10 years. It took the vast majority 28 years to become one, and the average age they reached was 49. In addition, eight out of 10 millionaires did not receive a dime in inheritance. Only 31% average salary income over $100,000, and a third never made six figures in any working year. You don’t have to come from a wealthy family or earn a lot of money to become a millionaire. The millionaires in the study focused on their education, steered clear of debt, and monitored their spending. By spending less than they earn, they were able to invest and Build the foundation of their wealth.

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