What are High-Income Earners? Everything You Need to Know

High-income earners (HIEs) are individuals or households with an income significantly above the average for their geographic location. While there's no single universal definition, it often refers to those in the top income percentiles. In the United States, for instance, a high-income earner might be someone earning over $200,000 annually, though this can vary.

In this guide, you'll learn:

  • Who qualifies as a high-income earner?
  • The financial characteristics of high-income earners.
  • The demographics of high-income earners.
  • High-income, not rich yet (HENRYs)
  • The connection between income and wealth.

Table of Content

A text definition of high-income earners.

Key Takeaways:

  • HIEs are in the top income percentiles, but thresholds vary by location and definition.
  • They often invest more, may face higher tax rates, and come from diverse backgrounds.
  • "HENRYs" (High Earners, Not Rich Yet) earn well but may not have accumulated wealth.
  • High income doesn't always equal high wealth due to debts or expenses.

Who Qualifies as a High-Income Earner?

The threshold for high-income status varies depending on factors like location, family size, and the specific definition used. However, it generally refers to those in the top 5-10% of income earners.

In the U.S., the Internal Revenue Service (IRS) defines high-income earners as those with a total positive income (TPI) of $200,000 or more. However, other sources may use different thresholds.

Financial Characteristics of High-Income Earners

High-income earners typically share certain financial characteristics:

  • Higher disposable income: They have more money left after essential expenses like housing, food, and taxes.
  • Increased investment potential: They often invest in various assets like stocks, real estate, and retirement accounts.
  • Potential for higher tax brackets: In many countries, higher incomes mean higher tax rates.

Demographics of High-Income Earners

High-income earners come from diverse backgrounds, but some common demographic trends include:

  • Higher education levels: Many hold advanced degrees or professional certifications.
  • Specific industries: They are often concentrated in fields like technology, finance, law, and medicine.
  • Geographic distribution: HIEs may be more concentrated in urban areas or regions with a strong economic base.

High-Income, Not Rich Yet (HENRYs)

An interesting subset of HIEs is the HENRYs - High Earners, Not Rich Yet. These individuals earn substantial incomes but may not have accumulated significant wealth due to factors like high spending, debt, or recent career advancement.

Income vs. Wealth: The Difference

While high-income earners have substantial earnings, it's important to distinguish between income and wealth. Income is the money earned from work, investments, or other sources, while wealth refers to the total value of assets owned (like real estate, stocks, and savings) minus debts.

High-income doesn't always equate to high wealth. Some HIEs may have significant debt or high expenses, limiting their net worth.

This guide has offered a comprehensive overview of high-income earners. For those seeking to deepen their understanding, we recommend exploring our guide on financial planning for high-income earners which dives into strategies for managing wealth and taxes and its implications in greater depth.

High Income Earners FAQ

What is the difference between high income and wealth?

High income refers to the amount of money earned annually, while wealth encompasses the total value of assets owned (like real estate, stocks, and savings) minus debts. Someone with a high income might not have substantial wealth due to factors like high spending or debt.

How do high-income earners differ from the average person financially?

High-income earners typically have greater disposable income, allowing for more investment opportunities and potentially higher tax brackets. However, their financial situations vary widely depending on spending habits, debt levels, and asset accumulation.

Are high-income earners always wealthy?

No, not all high-income earners are wealthy. While they earn substantial incomes, some may have significant debts or high expenses, limiting their net worth. Wealth accumulation depends on various factors like savings rates, investment choices, and financial management.

What are some common characteristics of high-income earners?

High-income earners often share certain characteristics, such as higher education levels, concentration in specific industries like technology, finance, law, or medicine, and geographic concentration in urban areas or regions with strong economies. However, they come from diverse backgrounds and experiences.