This article originally appeared on Arrest Your Debt and has been republished with permission.
When discussing salaries, you often hear about six-figure salaries. For many, six figures feel like that mythical and legendary wall that few can get past. For others, it's the minimum salary needed to live comfortably due to the high cost of living in their area.
This article is going to touch upon several topics when it comes to six figures:
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Clearly define what it means to make a six-figure salary.
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Illustrate what a six-figure lifestyle really looks like.
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Explore how common a six-figure annual income really is.
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Cover the common traits of people who earn six figures in annual compensation.
Lastly, we'll explore a few different ways to start earning six figures if you haven't quite hit that threshold yet.
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What Does a Six-Figure Salary Really Look Like?
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How Many People in the United States Are Making Six Figures a Year?
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How Does Education Affect Earning Six-Figures?
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What Professions Make Six Figures without a Four Year Degree?
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Making Six Figures from Your Investment Strategy
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What Are the Best Ways to Start Earning Six Figures?
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Don't Forget about Uncle Sam and 2021 Tax Brackets
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How Common Will a Six-Figure Salary Be in the Future?
If we take the minimum amount that fits the definition, an gross annual salary of $100,000, and break it down into a standard workweek of 40 hours a week over 52 weeks, for a total of 2,080 working hours in a year and a six-figure salary equals:
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Hourly Income = $48.08 per hour
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Weekly Income = $1,923.08
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Bi-Weekly Income = $3,846.15
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Semi-Monthly Income = $4,166.67
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Monthly Income = $8,333.33
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Quarterly Income = $25,000.00
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Semi-Annual Income = $50,000.00
= an annual salary of $100,000.00
The percentage of Americans that are making $100,000 in the US might actually surprise you. While many might see it as a wall that few get past, it's surprisingly common these days compared to being a millionaire.
At first glance, 5.4% of the US population makes a six-figure income every year. However, this number is a bit skewed. It takes into consideration the entire population. This means it includes infants, students, and spouses who choose to stay at home instead of work. When you factor out these demographics and focus only on full-time workers, around 9% of all earners in the US make at least six figures.
This means that almost 1 out of 10 full-time workers in the United States make at least $100,000 per year. Of course, this number increases when it comes to geographic location, profession, experience, and education level.
When it comes to making a six-figure salary, education tends to play a big part. While there are plenty of exceptions of people who earn $100,000 or more per year without a college degree, having a higher education opens more opportunities for a six-figure salary.
The fields of study that lead to a six-figure median salary tend to be in the STEM fields, or Science, Technology, Engineering, and Mathematics. This is expected since all of these fields are much easier for employees to figure out the exact financial value these positions bring to their respective companies.
While there are examples of people making six-figures in other fields like humanities, the arts, or other non-STEM fields, the overwhelming majority lies in STEM majors.
Engineers in several skilled trades tend to be the most common type of six-figure workers:
Several others are all at the top when it comes to an annual income of over $100,000.
The following are fields of study like economics, applied mathematics, computer science, industrial management, pharmaceuticals, and medical degrees of all types.
Surprisingly, degrees in business weren't, on average, as high of earners as the other fields of study listed above, even though this field is common for people who go into it for the money. The exception to this is if you filter out the people with business degrees that go into business for themselves instead of working for another company.
While a four-year degree certainly helps if you're looking at things from a statistics point of view, what about high-earning professions that don't require a college degree? For many of these, some training or education is required for a specific job. However, many of the training requires much less time involved, and the employee pays for most of the certification requirements.
Avoiding the student loan debt that comes with a four-year degree can greatly impact the ability to meet your financial goals and build wealth.
Topping the list are air traffic controllers. The high level of responsibility and focus required to do this job effectively pays very well. Air traffic controllers have a median income of around $125,000 per year and go up drastically with years of experience.
Being an air traffic controller requires only an associate degree that can be completed within two years or less. It also requires several years of intense, on the job training.
Being a real estate broker might be one of the most common ways to earn a six-figure salary without the need for a college degree. Your salary will be highly dependent on commissions, so being great at sales will make a big difference in your success.
Being a commercial airline pilot pays a six-figure salary, and it technically only requires a pilot license. While having a four-year degree can make it easier to land a job, it isn't required.
Commonly overlooked but an essential career, a funeral director's average salary is in the six-figure range. This important profession is good for someone who can show compassion to families going through a difficult tragedy in their lives.
Several jobs pay six-figures due to the hard, physical requirements and the danger involved. These are things like working on oil platforms, powerline repairers, power plant operators, or even nuclear reactor operators.
Many of these jobs require a little vocational school and extensive training while on the job.
Depending on your location, even positions like a police officer or a firefighter can make a six-figure income. This will vary when it comes to states and cities, and it is also heavily dependent on how many years of service you have accumulated.
A salary isn't the only way to make six-figures per year. Some people who don't quite make that kind of money from their full-time job still manage to live on six-figures every year after retirement.
To do this, they need to live frugally and then save and invest as much of their income as they can. Through the strategic use of a company's 401k matching and other pre-tax retirement savings, your money can begin to snowball. Compounding interest can really make a huge difference, too, as long as you continue contributing regularly and never touch your retirement money while you're still working.
Commonly, the amount people can expect to make from interest on their retirement investments every year is around 5-8%. To make $100,000 per year just on the interest without spending the base investment, you need about 2 million dollars in a retirement fund. Keep in mind that this isn't all put in by you, but your retirement grows over the years.
The earlier you begin investing in your retirement fund, the better. Also, even if you aren't making $100,000 per year in your salary, the more money you make and the higher percent you manage to save for retirement, the quicker your retirement fund will grow.
There are several online calculators and other tools to help you figure out how to reach this goal. You simply add your current retirement savings, the number of years you have left for retirement, and your retirement goal. It will then tell you how much you need to be contributing every month to hit that goal.
For more information, check out my free retirement calculator to see how you're doing.
At the very least, you should be maximizing your 401k contribution and taking advantage of employer matching programs. If you aren't maximizing the amount that your employer will match, you are essentially throwing away free money.
The trick is not to live like you're making $100,000 per year so that you can save and invest properly. Upon retirement, you can spend $100,000 a year by living off the interest you make without ever spending a dollar of your $2 million nest egg.
Reading through this article, you have probably already figured out several ideas on how to work your way to making a six-figure income. To be clear, let's outline the most important things first.
If making a median salary of $100,000 per year is your goal, then it is important to take stock of your strengths and weaknesses, as well as your experience. If you're young and in college or about to attend college, it is most beneficial for you to choose a STEM field with a high-paying career path similar to those mentioned above.
Do your best to avoid student loans if at all possible.
If college isn't your thing or you are significantly older and fear the cost of an education may not be worth it to go back to school, you should start researching one of the non-college career paths listed. Find a vocation that interests you and start working towards completing the technical school or other requirements.
If you have a career already and you aren't making six-figures yet, but you know it is possible in your field, then you need to be doing everything you can to increase your value to your employer. You need to remember that it is always easier to get a raise by switching companies every few years than getting recurring promotions at your current company.
Studies have repeatedly shown that most of the time, a competitor is willing to pay more to get an experienced worker from another company than they're willing to give large raises to their current employees or promote from within. If you're young, in your 20s, then, every few years, it may be a successful strategy to pursue a higher paying position in your industry with another company.
You can choose a final company to stay with for the remainder of your career once you're comfortable with your salary and the ranking of the position you hold within the company. This is usually the fastest route to a six-figure income.
Keep in mind, the more money you make, the more you will pay in taxes. The Internal Revenue Service recently announced the 2021 income tax bracket structure:
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37% for individuals making over $523,600 or $628,300 married filing jointly
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35% for individuals making over $209,425 or $418,850 married filing jointly
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32% for individuals making over $164,925 or $329,850 married filing jointly
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24% for individuals making over $86,375 or $172,750 married filing jointly
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22% for individuals making over $40,525 or $81,050 married filing jointly
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12% for individuals making over $9,950 or $19,900 married filing jointly
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10% for individuals making less than $9,950 or $19,900 married filing jointly
Because of economic growth, a rising cost of living, inflation, and competitive pay for the most in-demand positions, a six-figure salary will become more and more common. In as little as 20 years, $100,000 per year will likely be the median salary in most larger, more expensive US cities.
Soon after that, people will likely start talking about a seven-figure salary like they currently talk about a six-figure salary. People see this salary as a mythical wall that is incredibly hard to hit, but over time, more and more people will begin making a seven-figure salary.
In the end, it's really all about how much you make in relation to the lifestyle that you live.
