90% Are Below The Poverty Line?

Michael Green from Simplify wrote a brutal article dissecting the financial plight of the "middle class" that pretty much blows up the dollar assumptions underlying the poverty line and the disincentive to move up financially from poor to middle class. Really, the lower end of middle class. Brutal may not be a strong enough word.

I will try to do the article justice but need to acknowledge that I've been lucky but also somewhat insulated. I live semi-rurally and I work from home. 

Green starts with an early definition of the poverty line from 1963 that pegged three times food costs based on food taking up about 1/3 of the family budget back then. Housing and healthcare costs have grown at rates far exceeding inflation and because both partners need to work, the element of expensive child daycare now needs to be added to the mix. There are also "hedonic adjustments" with the example given of landlines versus smartphones. Green figures that a landline adjusted for inflation should cost $58 month but life now pretty much requires a smartphone that he pegs at $200/mo. Yes we benefit from the utility of smartphones but the choice to have them has been taken away, he argues. This is true for things like 2FA or how parents interact with their kids' schools. 

Below the poverty line, people get help for housing, food, healthcare and daycare. As income goes up, people lose eligibility for these programs so while their salary may have gone up, their out of pocket for these things also goes up and as Green lays out, people may actually be worse off by a small income bump that is more than offset by even larger increases in those expenses. 

We recently looked at the health insurance subsidy from healthcare.gov for 2026. At $84,000/yr of income, the 2026 subsidy is over $2000/month. At $85,000 of income, no subsidy (per the calculator I found online). That example is exactly the thing that Green is talking about. "Every dollar you earn climbing from $40,000 to $100,000 triggers benefit losses that exceed your income gains. You are literally poorer for working harder."

He works through a long process to determine that the real poverty line for a family of four is $140,000. Copilot says $155,000 and up is top 10% or earners and that 12-15% of households make $140,000 or more. 

This was Part 1 of a series. The tease for Part 2 "the wealth you’re counting on—the retirement accounts, the home equity, the 'nest egg' that’s supposed to make this all worthwhile—is just as fake as the poverty line." Oh boy. 

We'll see what he means by that but whatever we're each counting on, that's all we've got and we've got to make that work. Green didn't seem to offer a solution in Part 1, I am not being critical, I don't have a societal solution either. But many of us can work from the bottom up to prevent/solve our own problem. 

Our retirement account becomes an income stream. Social Security, even if it gets reduced, is an income stream. These income streams can be somewhat quantified. Are your income streams going to be enough? Home equity becomes optionality for downsizing financially which may not be as easy as it used to be but there are places where it is possible. Tucson housing is relatively inexpensive for example. 

We've been talking forever about adding additional income streams if the big two (portfolio and Social Security) aren't enough. A big reason I place so much importance on creating income streams is because we have control over how much effort we put into cultivating income streams. I've talked about a long runway to monetizing a hobby. Here's an article from the WSJ of someone who did exactly that. Now 70, he retired ten years ago from a tech job and his hobby (my word, not his) was adventure racing. The article is about how he created a paying job for himself as an adventure racing official (like a course martial). He also threw in that it is motivation for him to stay fit.

Regardless of where Green goes in Part 2 (and beyond?), we are living our lives here, now. It is in our interests and up to us to try to get the outcomes we want. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.