What does it mean to be “middle-class” for your generation? While we might have a general idea of what that means, it’s much more difficult to put numbers on it. Inflation makes the middle class a moving target, but that is just one piece of this complicated puzzle.
Even agreeing on what income levels make someone middle-class is not easy. For our purposes, the chosen standard is the OECD definition, which is anyone making between 75% and 200% of the median income.
But the web of complexity doesn’t stop there. Generational differences also apply, both in terms of how we think about the middle class and also levels of debt. Imagine two people have the same income near the low end of the middle class, but one has significantly more debt. In that case, the heavily indebted person may not be middle-class because much of their income goes toward debt repayments.
As you can see, it’s complicated. And because each generation has different levels of income and debt, the idea of “middle class” may not be quite what we expect.
The range of incomes needed to be middle class follows a pattern that is to be expected. It begins low for younger generations, increasing until Gen X, at which point it begins to decline. To find these numbers, we used Census Bureau data and multiplied the median by 75% and 200%, as defined by the OECD. Below, we real numbers for each generation.
Gen Z (18-24)
75% of median income: $34,944.00
200% of median income: $93,184.00
75% of median income: $57,036.88
200% of median income: $152,098.33
Gen X (41-56)
75% of median income: $62,739.50
200% of median income: $167,305.33
75% of median income: $48,552.00
200% of median income: $129,472.00
75% of median income: $29,262.00
200% of median income: $78,032.00
In general, these numbers follow a pattern we might expect. Younger generations that are just starting their careers earn less; those numbers increase until Gen X, who have the highest levels of income. Boomers earn less, and the silent generation, who are mostly retired, have the lowest income range.
Annual Income Needed to Be Middle Class
The numbers above give us a sense of the range of incomes needed for each generation to be considered middle class. In theory, the 75% number represents the lower bound and the 200% number represents the upper bound.
However, one thing this fails to account for is debt repayment. One thing every generation has in common is that someone making 75% of the median annual income may fall out of the middle class if they carry the typical amount of debt for their generation.
Why is this the case? Because financial planners recommend spending no more than 36% of your annual income on debt repayment. Thus, our research found that someone making 75% of the median income for their generation would spend more than 36% of their income on debt repayment, assuming they carry typical levels of debt.
Here is the income needed to be considered middle class within each generation, accounting for 36% of income spent on debt repayment:
Gen Z: $64,454.33
Gen X: $80,718.33
As you can see, each of these numbers is higher than the corresponding 75% threshold above. Thus, someone in the 75% range who hopes to be middle income must either reduce their debt repayments or increase their income–or both.
Also, note that some generations have different levels of debt which affects the income needed compared to the median numbers. For example, baby boomers and Gen X carry similar levels of debt, which results in a very similar income needed to be middle class.
But compare that to the 75% and 200% thresholds for baby boomers and Gen X. On the low end (75% level), boomers make about $14,000 dollars less than Gen X. And on the high end (200% level), Gen X makes almost $38,000 more than boomers per year.
Also of note: our data assumes the silent generation has no student loan debt. Among the other generations, the lowest student loan payment is for Gen Z, paying $480 per month or $5,760 per year. Thus, not having a student loan payment significantly reduces the amount the silent generation needs to be middle class.
Middle Class Isn’t Always What it Seems
What does “middle class” mean to you? We tend to think simply about how much a person or family makes as defining the middle class. But the real picture is not so simple. After all, the OECD uses a range to define the middle class; in the case of Gen X, the difference between the high end and the low end is more than $100,000.
In addition, levels of debt affect whether someone is considered middle class. Those who are weighed down by significant levels of debt may not earn this distinction. In addition, this particular analysis has not accounted for regional differences in the cost of living.
Hence, what “middle class” means is not nearly as simple as one might assume it would be. There are many nuances to this discussion, and only when we look at the full picture can we begin to see whether someone is in the middle class, or perhaps misses the cut.
More From GOBankingRates
Methodology: For this piece, GOBankingRates applied (1) Pew Research’s generational parameters; and (2) the OECD’s definition of “middle class” as making 75% to 200% of the national median income. GOBankingRates determined middle class income range by (3) analyzing the Census Bureau’s 2021 Current Population Survey median wage data for Heads of Household and multiplied the incomes by 0.75 for lowest threshold and by 2 for upper threshold. GOBankingRates found average monthly mortgage payments by applying data sourced from the National Association of Realtors’ 2021 Home Buyers and Sellers Generational Trends report for average home prices to a 30-year fixed mortgage at a 3.42% interest rate (not accounting for individual variables such as down payment, taxes, PMI, and insurance). GOBankingRates further utilized data from (5) the Education Data Initiative and a Fidelity survey of 60,000 users of their online financial tools to determine average student loan payments; (6) Experian and Rate Genius studies on generational auto loan debt to determine monthly car payments; and (7) Experian’s Consumer Debt Study of total credit card debt, multiplied by 1% (the minimum monthly payment required by most major credit cards) to determine monthly credit card payments. GOBankingRates then found the annual income for each generation to be considered middle class by calculating debt payments as a maximum 36% of income, the upper threshold recommended by financial advisors. All data compiled on Nov. 3, 2021.
This article originally appeared on GOBankingRates.com: How Much You Need To Be ‘Middle Class’ For Your Generation