Feeling strapped on a $400,000 income? That’s the Bay Area

Marvin Chan says he doesn’t live an extravagant life. He lives in Palo Alto, but drives a 2007 Nissan Murano. Family vacations with his wife and two sons are usually camping trips.

Chan, who grew up in New York, considers himself middle class, but with an estimated household income of more than $400,000 once his wife returns to work — the startup she was at shut down last year — he’s actually upper class by common definitions.

Yet in the Bay Area, with housing prices and a cost of living far beyond the national average, it’s hard for even high-earners to feel well off.

“I know that, given our income, we would be considered wealthy in other parts of the nation,” said Chan, a software engineer at Nyansa, a Palo Alto-based networking startup. “But in the Bay Area, I think we’re just kind of middle class. We have a good salary, but we have a lot of expenses.”

There’s no single standard for determining who is middle class and who is wealthy. One of the best definitions, from Pew Research, says anyone making more than double the median household income in their area can be considered upper class. But that can be just a few dollars more than middle class, which is defined as anywhere between two-thirds and twice the median household income. And it makes no adjustments for the cost of living.

In San Jose, where median household income has grown 19 percent in the past five years, middle class is anything from $64,400 to $193,300. By definition, upper class is anything beyond $193,301 — although some financial managers say that income level is far from wealthy here.

The numbers vary widely from city to city. In the five-county Bay Area, Richmond has the lowest threshold for upper class at around $122,000 while Los Altos has the highest at about $416,600, according to 2017 data from the U.S. Census Bureau, the most recent available. Nationwide, households making more than $115,300 are considered upper class.

In Palo Alto and Cupertino, households have to make at least $300,000 to be considered upper class by Pew’s definition. In San Ramon, Pleasanton and Dublin, upper class household incomes start at roughly $276,000.

Helen Dietz, a partner and director of wealth management for Aspiriant, which has offices in Mountain View, says, “As a family, if you’re making even $200,000 to start, you’re not feeling wealthy and you’re not having many choices.” For example, at that income, you couldn’t pay for a top education for your kids, a larger home, a new car and save for retirement. You’d still have to set priorities. But it depends where you want to live, she said.

“As you go closer to $350,000 in the San Jose, Milpitas, maybe Los Gatos, Willow Glen area, you’re kind of feeling that you’re able to get a home and send your kids to school and have health care and probably not be able to save beyond your retirement accounts,” Dietz said.

But in large parts of the Peninsula, all that would require …read more

Source:: The Mercury News – Business


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