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Is 150k A Good Salary?

To a typical physician, a $ 150,000-a-year salary is nothing special. But to many Americans that salary can be challenging to attain.

$150,000 is over double the median income in the United States, which is $70,784 in 2021.

Yet a recent survey shows that the average American feels they’d need over $200K a year to be financially comfortable. Another study shows that 16% of workers who bring in an annual salary of over $100,000 struggle to pay monthly bills. 

In the current economic climate, can one still consider $150,000 to be a “good salary?” And if not, is that proof that the era of the American middle class coming to an end?

Read on to find out.

 

Key Takeaways

  • A $150,000 salary is above average but varies in value depending on individual circumstances.
  • Geographic location, debt, and lifestyle play a significant role in determining if $150,000 is a good salary for a household.
  • Lifestyle inflation prevents many high-earning Americans from saving money and building wealth.

 

What makes a $150,000 salary good?

According to 2021 U.S. Census Bureau data, 80 percent of American households earn less than $150,000 annually, while only about 8 percent earn between $150,000 and $200,000.

The national average U.S. household income in 2021 was $102,316, while the median income was $70,784.

When we look at the numbers, it makes sense to consider a $150,000 salary a good salary. But as mentioned above, the definition of “good salary” is relative.

To determine if $150,000 is good enough for you, you’d need to consider the following factors:

 

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Geographic Location and Cost of Living

One important thing to consider when determining whether a $150,000 salary is good enough is your geographic location and cost of living.

The cost of living greatly varies across the country, with metropolitan areas generally being more expensive. Living comfortably on $150,000 per year might be easier in a small town in the Midwest than in a large city like New York or San Francisco.

The table below uses the cost of living index to measure variation in the cost of living in different states. The baseline is the average national expenses and each state is compared relative to that national average.

The average national cost of living is rated as a value of 100. States with a cost of living index under 100 are less expensive to live in than the national average, whereas states with a cost of living index greater than 100 are more expensive to live in than the national average.

To perform this analysis, three key data sources are used. The median annual salary is derived from the U.S. Census Bureau, the national average annual expenditure is derived from the National Bureau of Labor Statistics, and the cost of living index is derived from the Economic Research and Information Center. Using all these metrics table 1.1 below shows the expected expenses and savings in each state.

Table 1.1 Impact of Cost of Living On Savings

For example, living in a state like Florida, which is very close to the national average in terms of cost of living compared to a state like California, can result in additional savings of nearly $30,000 each year due to the difference in cost of living.

When looking at the cost of living, remember to consider factors such as state income tax rates, as these can greatly influence the amount of disposable income available for savings.

 

Profession

Another key consideration is your profession. For example, to a typical physician or among corporate executives, a $150,000 salary might be just average, while it could be a significant achievement for others.

Job benefits and perks can also influence the overall value of a $150,000 salary. Some positions may offer comprehensive health insurance, retirement plans, or stock options that boost the total compensation package. These additional benefits might make a $150,000 salary even more attractive compared to similar-paying roles without such perks source.

There’s also a work-life balance to consider when evaluating whether a $150,000 salary is deemed an attractive option. Some high-income professionals might work long hours and lead demanding lives, leading them to question whether the income is worth the stress and the potential impact on their health and overall well-being.

 

Education and Experience

The level of education you have achieved can also play a role in whether a $150,000 salary is considered good. For those with advanced degrees and specialized skills, this income might be more common or even expected. Conversely, those with less education or experience in fields that do not require advanced degrees may find $150,000 to be an exceptional salary.

Further, a $150,000 salary may be an excellent income for an entry-level employee or someone with only a few years of experience. However, for more experienced professionals, this salary might be similar to what they were already earning. In more senior roles, people may expect their income to increase beyond this level as they progress in their careers.

 

Lifestyle

A $150,000 annual income can provide a decent lifestyle and contribute to building wealth. However, it is crucial to maintain realistic expectations and consider the associated expenses with this income.

Netting around $8,500 per month in after-tax income in most states, those with this salary can save a considerable portion of their income, depending on expenses and lifestyle choices.

Owning a home, supporting a family, and having outstanding student loans can all impact how far a $150,000 salary will stretch. Prioritizing essential expenses, such as mortgage payments, utilities, and healthcare, may play a role in determining whether a $150,000 salary is considered “good” for your specific situation.

 

$150,000 Salary Sufficient for a Single Person?

Based on data from the National Bureau of Labor Statistics, $150,000 is enough for a single person living in the United States. Now, you can use Nairatips to easily calculate your salary.

The average salary of a single-person household in the United States is approximately $45,000. Only 10% of single-person households earned greater than $100,000, and only 19% earned greater than $70,000.

So, if $150,000 is triple the average salary of a single person, does that mean it’s enough?

Let’s take a closer look.

The table below shows the expected expenses and earnings of two single-person households. One has the national average expenses. The other shows the average expenses of a household that earns $165,000 of annual income.

 

 

In both scenarios, we can see that a $150,000 salary is sufficient to support a single person.

The table shows that, at the national average expense level, a single household earning $150,000K would save approximately $60,000. That is thirty times what someone earning a $45,000 annual salary with average expenses would save, which is $2,300 per year.

 

Lifestyle Inflation:

What’s interesting is that households that earn more tend to experience lifestyle inflation.

Using the BLS study, we compare the average household to households earning $150,000 in the table below.

 

 

Here we see that households who make $150,000 are 34% more likely to have a mortgage payment compared to the average household. They are also more likely to have more than one car.

But what’s more stunning is the increase in expenditure when it comes to key household consumptions like food, entertainment, and transportation.

It’s not all bad though. If we look again at Table 1.1, we see that even with lifestyle inflation a single person would be able to save approximately $20,000 per year after spending $93K annually.

 

Is a $150,000 Salary Sufficient for a Family of Four?

A $150,000 salary is generally considered a good income for a family of four.

Using the BLS study of household earnings from 2021-2022, we found that an average household of 4 people spends approximately $97,000 per year. With a $150,000 salary, this would be sufficient to cover all your expenses and save $15,000 annually.

 

 

For reference, only twenty-two percent of 4-person households earned between $100,000 and $150,000. And thirty-three percent earned $150,000 or greater. 

The table above also shows that a family of four, on average, can only save $619 per month. This means, that unless they have a meaningful emergency fund, they don’t have that much room for random expenses such as a flat tire or health emergencies.

While on average, $150,000 annual household income should be enough for a family of four, many still struggle to reach their financial goals.

 

Lifestyle Inflation:

Using the BLS study, we examine how a family of four can be affected by lifestyle inflation in the table below.

Here, we compare a 4-person household earning on average $84,390 to a household making $137,000 annually.

 

 

Although less significant, we see a similar pattern emerge when it comes to lifestyle inflation.

Households who make $137,000 annually are more likely to have a mortgage payment compared to a lower-income household. They are also more likely to spend more on housing and other key household consumptions like food, entertainment, and transportation.

 

Why is a $150,000 salary insufficient for many American Households?

Despite what the data shows about $150,000 is sufficient to be considered a good income, many Americans still struggle to save despite making a salary within this range.

Here’s a video by Jake Ferrin breaking down why his family lives paycheck to paycheck despite bringing in $130,000 a year.

Jake does a good job here to show how much one’s debt, geographic location, and lifestyle choices, heavily influence whether or not $150,000 would be considered a “good salary.”

 

YouTube video

 

Can I Build Wealth on $150,000 Annual Salary?

Call me optimistic, but I still believe building wealth on a $150,000 salary is achievable for many. The key to success lies in setting realistic goals and proven financial strategies.

Here are some tips on how you can do it:

Educate yourself on personal finance: It is important to understand that regardless of your income and debt, you must figure out how to manage your finances. Doctors and high-income earners are not exempt from this. Stay informed about personal finance and best practices to make well-informed financial decisions.

Track your money:  If you want to build wealth, you have to find a way to balance the numbers. List all your assets and subtract them from your liabilities to calculate your net worth. Next, track your monthly cash inflows and outflows (income and expense) to help you identify areas to cut costs and save more. These data will give you an idea of your financial position and the steps you need to take to build wealth. If you like the idea of budgeting, consider the 50-30-20 Rule to budget your monthly expenses.

Emergency fund: Build an emergency fund with at least 3-6 months of living expenses to provide a safety net during unexpected events.

Pay off debts: Prioritize paying off high-interest debts such as credit cards and personal loans. For student loans, explore options like refinancing to lower interest rates and speed up repayment.

Save for retirement: Maximize tax-advantaged retirement contributions, like 401(k)s and IRAs. This will lower your taxable income and ensure a comfortable retirement.

Invest in low-cost index funds: Invest early and consistently. Consider a common example illustrating the significance of starting to invest early. Imagine one individual invests $10,000 annually for ten years at a 10% interest rate and then lets the investment grow for another 20 years. In comparison, another individual starts investing ten years later but contributes $10,000 annually for the subsequent 20 years.

  • Early contributor (first 10 years, then stops): $1.18 million
  • Late contributor (waits 10 years, invests for 20 years): $630,000

Invest in low-cost index funds that track the overall market performance. This helps in diversifying your investment portfolio and minimizes risks.

Create additional income streams: Explore opportunities to generate passive income, such as rental properties and dividend-paying stocks. This can supplement your primary income and accelerate wealth accumulation.

 

Conclusion

In today’s economy, a $150,000 salary is a good income for many individuals. This salary is more than double the median household income in the United States which is around $70,784.

A $150,000 salary can be viewed as a sweet spot for many professionals, as it allows them to enjoy a comfortable lifestyle without the stress that can come from exceedingly high-paying positions with demanding work hours. A $150,000 salary can offer the opportunity to enjoy a comfortable lifestyle and potentially build wealth while maintaining a work-life balance.

That said, whether a $150,000 salary is a good salary or not varies depending on an individual’s location, lifestyle, and personal goals.

 

Frequently Asked Questions

 

Is An Annual Salary of $150,000 Considered Rich?

The perception of being rich is subjective; some may feel that  $150,000 annually is enough to make them feel rich, while others might view it as insufficient.

According to this survey by Bankrate, the average American feels they’d need over $200K a year to be financially comfortable. So, if you like that survey, the answer is no, an $150,000 annually is not considered rich.

However, it’s important to note that this perception can vary greatly depending on a person’s background, lifestyle, and financial goals.

In terms of building substantial wealth, a  $150,000 salary might be a good starting point, but more is needed to make one rich. Financial planning, savings habits, and investment strategies play a significant role in growing wealth over time.

A considerable sum, but more is needed to achieve riches, especially in the face of increasing inflation and living costs.

 

How comfortable is life with a $150,000 salary in New York?

At a $150,000 salary, you would earn 100% more than the average salary in New York, which is approximately $75,000. But New York is also approximately 27% more expensive than the national average.

Given that the average cost of living in New York is approximately $92,000 annually, a $150,000 salary in New York will unlikely provide a luxurious lifestyle, especially in Manhattan.

Still, even though $150,000 has less purchasing power in New York than in other states, it is generally enough to cover the essentials and maybe some more depending on one’s lifestyle and financial obligations.

On average, at a $150,000 salary, a New Yorker should still be able to save an estimated $58,000 annually before taxes.

*All calculations are based on sources from Table 1.1 above.

 

What lifestyle can $150,000 provide in Florida?

A $150,000 income in Florida can provide a fairly comfortable lifestyle. It is 143% higher than the median annual salary of $62,000.

Further, the cost of living in Florida is very close to the national average, with housing prices more affordable than in many other states. With a $150,000 salary, you would be expected to save approximately $75,000 before taxes.

With all that going for Florida, a $150,000 annual income can afford a family residence in a safe neighborhood, access to good schools, and recreational activities, while still being able to save for the future.

*All calculations are based on sources from Table 1.1 above.

 

Can a family manage in DC with a $150,000 salary?

Managing in Washington, DC, with a $150,000 salary for a family can be challenging due to the relatively high cost of living.

It costs approximately 50% more than the national average to live in DC, making it the third most expensive state to live in, behind Hawaii and Massachusetts.

However, it is still possible to live a comfortable lifestyle if expenses are carefully managed. A $150,000 salary is approximately 60% more than the median annual salary in DC, which is $94,000.  And a household is expected to save $41,000 per year.

*All calculations are based on sources from Table 1.1 above.

 

How well can one live with a $150,000 income in New Jersey?

In New Jersey, a $150,000 income can provide a comfortable lifestyle,  though the cost of living can vary depending on the area.

The cost of living in New Jersey is 11% more expensive than the national average. And with a $150,000 annual salary, you are expected to save $68,000 per year.

With a $150,000 salary, you would earn 67% more than the median annual salary in New Jersey of $90,000.

*All calculations are based on sources from Table 1.1 above.

 

Is $150,000 a sufficient income in Colorado?

Colorado offers a decent quality of life with a $150,000 income. A $150,000 salary is 87% more than the median annual salary in Colorado, which is $80,000.  The cost of living in Colorado is also good, being only 5% more expensive than the national average.

With a strong purchasing power, a $150,000 annual salary, on average, should allow a household to save $73,000 per year before taxes in Colorado.

While the cost of living is slightly higher than the national average, particularly in areas like Denver and Boulder, living comfortably and enjoying various amenities with a $150,000 salary is possible.

*All calculations are based on sources from Table 1.1 above.

 

 



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10 thoughts on “Is 150k A Good Salary?”

  1. Did I miss the childcare costs factored into the family of four estimates? That’s a huge chunk of change for a family of four. I used to be able to easily take care of my family of six on my primary care salary. Now, with inflation, it has become a huge challenge. Not even thinking about saving at this point. I’m just trying to get by. My husband’s job was eliminated during covid and he has not yet gone back because childcare costs so much that is doesn’t make financial sense for him to work and us pay for childcare.

    Reply
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. I think we should ask an insurance company executive if $150K is a good salary. 4 years of college, 4 years of medical school, at least three years of post-grad training in internal medicine plus educational loans for $150K a year. You have got to be kidding, Comrade!

    Reply
  4. Singles without kids pay higher taxes. That needs to be taken into consideration
    Why is Massachusetts missing from the table of most expensive states to live but yet is mentioned as the 3rd most expensive after HI and DC.

    Reply
    • The salary you state is a poor salary for a physician . The average ICU nurse or NP is earning 120-130k. CRNA a lot more. None of these good folks did a residency with brutal night calls and sacrifices just to even get into medical schooling the way doctors have done!! So the joke is on the doctors while the others are laughing all the way to the bank.

      Reply
  5. The tables omit FICA. That’s ~$10,000/yr on a $150k salary. Also the standard deduction of $13,850 for a family of four is way low.

    Reply
      • Thanks for the feedback Jim! I am one of the writers of this post. What would have made this post excellent for you?

        Reply
        • with all due respect, I’d rather read infrequent articles written by POF and White Coat Investor themselves, without these “filler” posts written by the “content creators”. Not the same authenticity/quality/insight/relevance to target audience, to say the least. But then again, I get it- POF is busy living his active retirement life, so it’s a natural progression of the blog I guess…

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