California Residents Earn Most Passive Income In U.S.

Mike LaFirenza

According to data from the U.S. Census Bureau, 20% of American households earn passive income either through dividends, interest, or rental properties. Among those households who do have passive income, the median amount is $4,200 per year. Passive income streams can be a large contributor to wealth creation, and higher-income households are more likely to have the means to invest in assets that provide it.

Disparities in passive income by race and ethnicity contribute to overall wealth disparities. Approximately 25% of non-Hispanic White households have passive income compared to just 7% of Hispanic households and 6% of Black households. Among those households with passive income, non-Hispanic White households tend to earn larger amounts of passive income as well—median passive income for this demographic group is $4,500. In addition to non-Hispanic Whites, Asians are also more likely than other racial groups to earn passive income.

The ability to earn passive income increases with total income, and passive income streams tend to make up a larger share of income for wealthier households. In fact, the wealthiest 10% of American households own 89% of all U.S. stocks, according to data from the Federal Reserve. Likewise, nearly 50% of the nation’s wealthiest households own residential property that is not their primary residence, compared to just 13% of all American households.

At the regional level, households on the West Coast, Northeast, and Florida tend to earn more passive income. These differences vary based on total household income and other demographic factors. California and Florida residents earn the most, with median passive income of $7,000 and $6,000 per year, respectively. Whereas California has one of the highest median total household incomes of any state, Florida is home to a larger share of retirees who tend to depend on passive income to cover their living expenses.

To determine the states whose residents, make the most passive income, researchers at ChamberOfCommerce.org analyzed earnings and income data from the U.S. Census Bureau. States were ranked by median passive income among households who earn passive income. Researchers also calculated the percentage of households with passive income, median total household income, and the poverty rate.

The analysis found that in California, 21.4% of households earn passive income from interest, dividends, and/or net rental income. The median passive income earned in California is $7,000 per year, compared to $4,200 at the national level. Among residents of all U.S. states, California residents who earn passive income earn the most each year. Here is a summary of the data for California:

  • Median passive income: $7,000
  • Percentage of households with passive income: 21.4%
  • Median total household income: $80,000
  • Poverty rate: 11.8%

For reference, here are the statistics for the entire United States:

  • Median passive income: $4,200
  • Percentage of households with passive income: 19.6%
  • Median total household income: $65,000
  • Poverty rate: 12.3%

For more information, a detailed methodology, and complete results, you can find the original report on ChamberOfCommerce.org’s website: https://www.chamberofcommerce.org/cities-whose-residents-make-the-most-passive-income/

Mike LaFirenza writes for Lattice News Wire


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