Net Worth for Baby Boomers: How To Tell Whether You’re Poor, Middle Class, Upper Middle Class or Rich

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JANUARY 21, 2024

Worst investing mistakes baby boomers can make.

Baby boomers may have had the best financial start of all the generations — coming of age when salaries kept up with the cost of living and goods and services were affordable — but that doesn’t mean they’ve stayed in the same financial class they started out in.

Everyone spends money differently, so income and assets alone may not always be a good indicator of your financial class.

Experts explain how boomers can determine where, exactly, they fall between poor, middle class, upper middle class and rich.

Income Guidelines

Income plays an important part in determining your net worth and socioeconomic class, though it’s far from the only factor. Here’s an overview of the accepted average ranges of the major socioeconomic income classes to give you a baseline. However, note that net worth includes other assets, as experts explain below:

  • Lower class: The bottom 20% of earners with household incomes not exceeding $28,007.
  • Lower middle class: Those in the 20th to 40th percentile of household income, between $28,008 and $55,000.
  • Middle class: Those in the 40th to 60th percentile of household income, ranging from $55,001 to $89,744.
  • Upper middle class: Households in the 60th to 80th percentile, with incomes between $89,745 and $149,131.
  • Upper class: The top 20% of earners, with household incomes of $149,132 or more.

How Do You Determine Net Worth?

The essential method for determining your net worth, according to Derek Mazzarella, CFP with Gateway Financial Partners, is “assets minus liabilities.”

Another way to describe this, he said, is “anything you own minus what you owe.”

What you own includes basic material objects plus things such as properties, income or retirement accounts, stocks and bonds, art, jewelry, stamp or coin collections, etc., he said. Don’t forget to get current appraisals on everything, he urged.

“Anything you’d put on your insurance you’ll want to claim as an asset,” he said.

Some areas people forget to include in their assets things like old pensions, old 401(k)s from previous jobs, inheritance, CDs, annuities and rental income from investment properties, Mazzarella said.

“Sometimes you may even have a life insurance policy that has cash value that you forgot you had,” he added.

Then, of course, you want to subtract what you owe, which can include mortgage loans, car loans, personal loans, credit card debt, money owed on a business bought or sold and back taxes, to name a few.

Financial Class May Vary By Geography

While the number you arrive at after subtracting debts from assets will give you an idea of your class, the truth is that you may be able to live more or less richly based on where you live, Mazzarella said.

“Having money in New York is different than in Alabama,” he pointed out. “Your income might not be high for the national average but you may be well ahead for your state.”

What will matter most to boomers, since most of them are either already in retirement or approaching it, he said, is whether or not you can generate income to live comfortably in retirement.

“Net worth is more about your personal time,” he said. “Can you go on vacation without stressing about it? Can you do what you want to do? As long as you’re in that realm, that’s a better way to think about it rather than comparing yourself to peers.”

How To Tell Whether You’re Poor

  • Lower class: The bottom 20% of earners with household incomes not exceeding $28,007.

Quite simply, the poor are “people that are struggling to meet basic needs, people forgoing a trip to the grocery store because they aren’t sure they have enough funds,” said Andrew Van Alstyne, CFP with Fiduciary Financial Advisors.

“That is someone in a very bad position,” he said. “The younger you are, the worse that may be, with life expectancies extending and cost of living not dropping off.”

How To Tell Whether You’re Middle or Upper Middle Class

  • Lower middle class: Those in the 20th to 40th percentile of household income, between $28,008 and $55,000.
  • Middle class: Those in the 40th to 60th percentile of household income, ranging from $55,001 to $89,744.
  • Upper middle class: Households in the 60th to 80th percentile, with incomes between $89,745 and $149,131.

The line between middle class and upper middle class can be very fine, Van Alstyne said.

These are both sets of people who go about their day-to-day lives similarly, Van Alstyne said. However, “The main difference between them is that the upper middle class are the ones that can afford hobbies, to travel and have more of the experiential components of life that many of us strive for in retirement.”

Both sets of boomers tend to have a good amount of retirement savings, but the upper middle class is more likely to be taking vacations and have a bit more discretionary income.

How To Tell Whether You’re Rich

  • Upper class: The top 20% of earners, with household incomes of $149,132 or more.

What sets the rich apart is that they aren’t worrying about whether they can afford a vacation, Van Alstyne said, they’re deciding on where to purchase a vacation home and can vacation in exotic locations for extended periods of time.

“Making ends meet and having conversations regarding weekly, monthly and annual lifestyle impacts isn’t a concern for the rich,” he said.

The rich also rarely fully retire, Van Alstyne has found.

“They’re not getting the Rolex and their final bonus check and sent out the door,” he said. “They’re keeping a board seat or they’re the owner of the company and they’re still going to put their thumb on the scale on the operation even if they’re passing it off.”

He said rich boomers are people who, in retirement, “take their foot off the gas pedal, but they’re not stopping.”

Can You Experience a Class Change?

One thing that can happen to boomers in retirement, Van Alstyne warned, is a kind of class shift based on market conditions when you start drawing down from retirement accounts. This is most likely to happen to people in the middle to upper middle classes, if the market has dipped near retirement.

For example, he said, for people who retired in 2022, which was “the first real down year” due to the COVID-19 pandemic, “if you didn’t have a proper strategy for your withdrawals, you could have had a class change just in what you had to take out in that year alone because your portfolio didn’t have time to recover.”

“You can think you’re saving the right amount,” he said, “but if it’s not in the correct bucket when you go to access it, your portfolio may not be able to recoup the losses from a down year.”

Ideally, he said, it’s important to have a large enough emergency fund set aside that isn’t tied up in other assets so you can pull money out of it to let retirement accounts recuperate some of their lost value.

Don’t Try To Keep Up With the Joneses

While it’s easy to aspire to live a rich life, Van Alstyne said, “We need to stop assuming people are rich just because of the lifestyle they’re living and just be comfortable with where you are.”

Striving for a comfortable life may be the best goal of all.


Courtesy: GOBankingRates