Friday, March 21, 2014
The composition of family income, which is the dry powder that makes funding an investment portfolio possible, differs significant from the middle class to the upper class. In 2010, the most recent year data was available from the nation's central bank, it showed some interesting characteristics.
A family in the 50th-74.9th percentile distribution of household income generated money as follows:
- 76.3% wages
- 0.4% interest or dividends
- 4.8% Business, farm, self-employment income
- 0.1% capital gains
- 15.9% Social Security or retirement plans
- 2.5% transfers of societal benefits
Meanwhile, a family in the 90th-100th percentile distribution of household income generated its money as follows:
- 55.8%% wages
- 8.7% interest or dividends
- 23.9% Business, farm, self-employment income
- 2.3% capital gains
- 7.8% Social Security or retirement plans
- 1.5% transfers of societal benefits
That means the richer families - those making a median income of $238,000 per year - are generating vastly higher proportions of annual household income from combination of dividends,interest income, capital gains, and small business profits. The rich are much less likely to sell their time for a paycheck and, instead, own equity in a firm of some sort.
