Source: Fortune
Summary
Nick Maggiulli, COO of Ritholtz Wealth Management, describes an “upper-middle-class trap” where individuals earning $200,000 to $400,000 work more and spend more on declining-quality goods. He cites data showing shrinking home sizes, rising prices, and increased competition for education and housing. A 2025 Investopedia analysis found the cost of the American Dream exceeds $5 million. A contrasting AEI report argues the upper-middle class has grown, with median income rising significantly. Maggiulli and AEI economists offer different perspectives on economic progress and wealth distribution.
Our Reading
The numbers tell one story.
Maggiulli describes a financial arms race where everyone competes for the same scarce goods.
High earners adopt AI to stay ahead, creating a Red Queen dynamic.
Investopedia’s $5 million figure highlights the cost of middle-class aspirations.
The trap is real, but so is the growth of the upper-middle class.
Author: Evan Null
The $5 million price tag
Maggiulli’s trap helps explain a number that’s been circulating for the past year. The cost of achieving the American Dream surpassed $5 million in 2025, according to a comprehensive analysis by Investopedia—the cumulative lifetime cost of eight pillars of middle-class aspiration, nearly $600,000 higher than the year before. Drawing on government data, industry statistics, and survey responses from more than 1,200 U.S. adults, the analysis broke the total into eight milestones: retirement at $1.6 million, homeownership at $957,594, new cars purchased every five years at $900,346, raising two children and paying for their college at $876,092, health care at $414,208, annual vacations at $180,621, pet ownership at $39,381, and a wedding at $38,200.
The countervailing analysis
Maggiulli’s framework has run headlong into a countervailing, income-based analysis. A January report from the American Enterprise Institute, authored by economists Stephen Rose and Scott Winship, argues the “hollowing out” narrative underlying both Maggiulli’s trap and Investopedia’s price tag is only half-true. Their data: the share of American families earning between roughly $133,000 and $400,000—their definition of the upper-middle class—tripled from 10% in 1979 to 31% in 2024. For the first time in U.S. history, more families sit above the traditional middle-class income threshold than below it. Median family income, adjusted for inflation and family size, rose 52% between 1979 and 2024.
The wealth vs. income debate
Maggiulli’s counter reframes the debate around wealth rather than income. The share of U.S. households with $1 million to $10 million in net worth more than doubled, from 7% in 1989 to 18% in 2022-23. “There’s a good portion of them that feel like they don’t have enough,” Maggiulli previously told Fortune. “They feel like they’re just getting by.” A $1 million net worth placed someone in the top 5% of Americans in the late 1990s; today, that same number puts you in the top 20%.
The psychological dimension
When reached for comment for this article, Maggiulli noted the most recent data to answer these questions was the Federal Reserve’s 2022 Survey of Consumer Finances, with 2025 data due to be released in a few months. “I believe that data will answer a lot of these questions more definitively,” he said, but his read of the data shows that both arguments appear to be true—the pie grew, along with misperceptions from social media about how that wealth feels. The dynamic is “quite psychological in nature,” he said, adding that data on collective psychology, of course, remains scarce by definition.
The signal failure
Chris Bradley, a senior partner at McKinsey and director of the McKinsey Global Institute, previously told Fortune Americans have been living through a kind of “signal failure”—a society that has grown extraordinarily wealthy by historical standards but has lost the ability to recognize that prosperity, because the “antenna” people use to judge their own success is still tuned to an old frequency while the underlying economic reality has changed. A family earning $175,000, a household income that would have felt unambiguously prosperous in any prior decade, now spends its evenings absorbing content from people who vacation in the Maldives and treat business class as a hardship, until the top 10% starts to feel like the middle.
