Making $70,000 But Still ‘Poor’? You’re Not Alone
In today’s economy there are plenty of “high-earning poor,” and the number keeps growing. Here’s how to avoid becoming one of them.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

The unemployment rate has been on the decline in recent months, reaching the lowest it has been since 2007 (opens in new tab). But these numbers can be deceiving. Yes, more people are working, and fewer individuals who had lost jobs are accepting unemployment compensation, but that doesn’t tell the entire story. Behind the glowing news headlines lies the ugly fact that middle-class Americans (opens in new tab), after you adjust for inflation, are earning no more today than they did nearly 40 years ago.
They aren’t getting ahead; they are just getting by.
There are plenty of people who have successful businesses and some who get nice yearly raises and promotions, but they still fall into the category of what I call the “high-earning poor.” On the surface, they may not look broke. They may even appear prosperous. But if you looked at their balance sheets, you would see they are living paycheck to paycheck. They have a nice income, but they are asset poor. And it is all a matter of money management.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Making $70,000 but still ‘poor’
These individuals have no emergency fund whatsoever. A financial emergency would sink their ship in a hurry. They have no retirement savings to speak of because it takes all they earn just to maintain their lifestyle. Many people consider $70,000 to be at the high-end of the salary range in America today. But with an average house in an average neighborhood with two cars, two kids and a mortgage, that is a tough number on which to get by, much less salt money away for your golden years.
Would it surprise you to learn that I know people who are earning double and triple $70,000 per year who still live from paycheck to paycheck, and are saddled with burdensome debt? Well,it’s true.
There are a couple of reasons for this. One is that the traditional 401(k) plans that were introduced back in the 1980s have become the pillar of most people’s savings. That’s great, but the problem is that, after putting money into these retirement plans, people don’t have any left over. They can’t touch these accounts (without penalty) until they reach age 59½. And they don’t have much left over for savings or emergencies.
Emergency Fund 101
The emergency account should be flush for when we get into a pinch. It should be the reserve we use to keep us from tapping our savings or going into debt, which is worse. A good rule of thumb is to have at least six months’ income (but preferably nine) for the unexpected during your working years. A car breaks down. The roof needs replacing. An illness or accident interrupts your flow of income. It is just basic financial planning to have such a fund.
The emergency fund needs to be liquid. If you can put the money to work for you, well and good, but you need to be able to write a check or visit an ATM and obtain cash in an instant.
Sadly, we should expect the number of high-earning poor Americans to grow. The findings of a Schwartz Center for Economic Policy Analysis survey were reported in this Forbes article (opens in new tab): “The Retirement Crisis: Why 68% Of Americans Aren't Saving In An Employer-Sponsored Plan.” The headline says it all. What are they thinking? That Social Security will be enough to carry them through? For the youngest of the bunch, there is no guarantee Social Security will pay out the full amount of benefits to which you’ve contributed. As it stands currently, the benefits the younger generations might expect are likely to be a much-diminished version of what they are today.
The article pointed out that almost half of working Americans are not offered retirement plans by their employers. Yet an alarming number are offered a plan and simply decline to participate – even if the employer is providing matching funds. If your employer is offering matching funds, that is free money! Jump on it. Needless to say, with all those Americans simply not saving for retirement, the number of high-earning poor will only increase in the future.
An obsessive pursuit of a paycheck
There are other factors as well, including poor financial choices, such as living above your means, which lead to more high-earning poor Americans. Another factor is too many of us chase the paycheck. As we climb the ladder of success, we tend to hang our identity and our financial security on our position or title at work, or maybe to our relationship with a corporation that pays us each week for our services and the value we bring to the company. At the end of the day, we wouldn’t be interested in any of those things if they didn’t pay us. Society tells us the more we earn, the better off we will be. The more you make, the wealthier you are. Baseball is not the great American pastime; chasing the paycheck is.
But if you think chasing a paycheck is going to make you wealthy, you are dead wrong. Here’s why: Pay raises are never in big lump sums; they are in nickels and dimes. Typically, you just don’t go from a $35,000-a-year job to a $65,000-a-year job. You don’t usually go from a $65,000-per-year job to a $150,000-per-year job. It just doesn’t happen that way for most people.
I work with a lot of small-business owners. It is not uncommon for them to have a dead year, a flat year, a year when they are barely making payroll. Then the following year, they may be able to pay themselves $1.5 million, and they come to my office and say, “What should I do with this?” But for those who work for a corporation, or small business they may get a small bump in their pay here and there with small promotions. Usually, the increase comes with a small promotion or a new job title, or both. When this happens, their lifestyle gets a bump as well. What usually follows these raises in pay is an expansion of the recipient’s lifestyle.
It always seems to follow that when people earn more, they feel obliged to spend more on the way they live. There is a sense of entitlement. Lord knows, they tell themselves, I’ve earned it. I have worked hard for it, and now I’m going to enjoy it.
3 steps toward wealth
So, if the paycheck won’t make you rich, what will?
- Living below your means
- Aggressively saving
- Disciplined investing
A simple formula to be sure – but one that can help ensure that you do not join the growing ranks of the high-earning poor.
Kevin Derby contributed to this article.
Chris Heerlein, author of "Money Won't Buy Happiness - But Time to Find It," is an Investment Adviser Representative and partner at REAP Financial LLC (opens in new tab).
-
-
A Retirement Income Distribution Plan Is as Critical as Saving
Designing a strategy to efficiently use your retirement savings is a critical step on your retirement planning journey to maximize your income and ensure a long-lasting retirement.
By Bradley Rosen • Published
-
The Markets Were Miserable Last Year, But That’s Great News
It’s all about perspective. Hopefully, you learned that your financial plan can withstand market downturns. If not, now you know you need to make adjustments.
By Andrew Rosen, CFP®, CEP • Published
-
A Retirement Income Distribution Plan Is as Critical as Saving
Designing a strategy to efficiently use your retirement savings is a critical step on your retirement planning journey to maximize your income and ensure a long-lasting retirement.
By Bradley Rosen • Published
-
The Markets Were Miserable Last Year, But That’s Great News
It’s all about perspective. Hopefully, you learned that your financial plan can withstand market downturns. If not, now you know you need to make adjustments.
By Andrew Rosen, CFP®, CEP • Published
-
Five Ways to Diversify Your Portfolio During a Recession
Investing successfully during a recession is tough. However, you can protect and grow your portfolio with various diversification strategies.
By Justin Grossbard • Published
-
Curious About a QLAC? SECURE 2.0 Act Gives This Annuity a Boost
New legislation raises the amount you can transfer from your rollover IRA to a qualifying longevity annuity contract (QLAC), reducing RMDs and increasing guaranteed lifetime income.
By Jerry Golden, Investment Adviser Representative • Published
-
Need an Estate Planning Checkup? Now Is the Perfect Time
An appointment with your estate planning attorney can address any holes that have developed and ensure everything is in place.
By Jack R. Hales Jr., J.D. • Published
-
How to Create Retirement Income That’s Driven by Cash Flow
Using a combination of dividends and structured notes in your retirement portfolio can offer liquidity, income and risk mitigation.
By Kyle Hammerschmidt, Investment Adviser • Published
-
Gaining More Certainty in Your Retirement Income Plan
Relying on market performance to close the gap in your retirement income could let you down, but a CD ladder and fixed annuities could provide some certainty.
By Cole Czajkoski, Investment Adviser Representative • Published
-
Considering a 1031 Exchange? The Rules You Need to Know
Taxes are an inevitable part of investing in real estate. You can, however, defer or avoid paying capital gains taxes by following some simple rules of a 1031 exchange. Yes, you read that correctly!
By Daniel Goodwin • Published