Why a $100,000 income no longer buys the American Dream in most places

The American Dream — which for many people involves some combination of owning a home, getting married, having kids and making enough after expenses to save for retirement and spend on leisure — is becoming increasingly expensive.

“The benchmark of a six-figure salary used to be the gold standard income,” Sabrina Romanoff, a clinical psychologist, told CNBC. “It represented the tipping point of finally earning a disposable income and building savings and spending based on your wants, not just your needs.”

More than half (52%) of Americans say they would need at least $100,000 a year to feel financially comfortable, with 26% saying they would need a salary in the range of $100,000 to $149,000 per year, according to a 2023 CNBC Your Money survey conducted by SurveyMonkey.

“Unfortunately, what has happened is that wages haven’t kept up with the cost of living, by and large, for the last 50 years or so,” said Elise Gould, senior economist at Economic Policy Institute.

“It becomes increasingly hard for many families to be able to attain that sort of middle-class lifestyle, that American Dream,” Gould said.

Consumers using the popular 50-30-20 budget guideline aim to spend 50% of their income on essential expenses, with another 30% for discretionary spending and the remaining 20% for savings.

A new report from GOBankingRates used that framework to analyze how much money a family of two adults and two children would need in each state to own a home, a car and a pet. The report tallied estimated annual essential expenses for such a family and then doubled that figure.

Using that framework, GoBankingRates found that all 50 states require more than a $100,000 annual income, according to the report, with 38 states needing more than $140,000.

Economists have suggested that debt growth has become a substitution for income growth. Student loan debt reached an all-time high of $1.77 trillion in the first quarter of 2023 and Americans collectively owe $1.13 trillion on their credit cards as of the fourth quarter of 2023. This debt can have a ripple effect, especially when entire generations are starting their adulthoods with thousands of dollars in debt.

“Now people making well over six figures are still living paycheck to paycheck,” Romanoff said. “So what used to symbolize financial freedom is now keeping people stressed about making ends meet.”

Watch the video above to learn how much families in the U.S. need to make to achieve the American Dream.