Welcome to the ‘upper-middle-class trap’: why $300,000 a year doesn’t feel like winning anymore

The chief operating officer of Ritholtz Wealth Management has spent the better part of a year building the case in pieces on his blog, Of Dollars and Data—first arguing private school isn’t worth the cost despite its price tag, then that premium travel experiences have grown crowded while remaining expensive in “The Death of the Amex Lounge.” He previously talked to Fortune about his book, The Wealth Ladder, and his growing belief “something weird’s going on” with the upper-middle class in the U.S. economy.

In an April essay, he pulled the threads together and gave the phenomenon a name: the “upper-middle-class trap,” in which people earning roughly $200,000 to $400,000 a year are working more and relaxing less to buy products and services of declining quality.

His evidence includes new single-family homes shrinking in average size by 12% between 2014 and 2024, even as the price per square foot surged 74%, according to LendingTree data. A home near a public elementary school with a top GreatSchools rating costs 78.6% more than a comparable home in the surrounding county. Homebuyers who win bidding wars end up worse off: One study found their purchases produced 6.9% lower annualized returns than homes bought without competition. In higher education, the number of college applicants has jumped 78% since 2015 even as acceptance rates at elite schools have collapsed, driving tuition and private-school costs up roughly twice as fast as overall inflation.

The mechanism Maggiulli describes is a “financial arms race”: Every individual decision is rational, but collectively the competition for the same scarce positional goods lowers everyone’s quality of life while draining their bank accounts.

One accelerant, he argues, is nearly impossible to opt out of. Citing Brookings Institution data from November 2025, he notes AI usage rises from 9% among earners below $30,000 to 34% among those earning $100,000 or more. High earners, worried AI threatens their careers, are forced to adopt it just to defend their position—a “Red Queen” dynamic in which everyone runs faster just to stay in place.

“If AI doubled everyone’s productivity overnight,” he writes, “suddenly someone with half your skill would be able to compete with you just by using AI.”

His prescribed exit is blunt: Stop competing for positional goods that don’t materially improve your life. Send your kids to good public schools, fly economy, buy a smaller, affordable house. His test for any big purchase: “Am I buying this to improve my quality of life, or merely because other people are buying it?”

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 average American with a bachelor’s degree earns about $2.8 million over a career—less than half of what’s required to achieve that. Two college-educated earners are functionally a prerequisite for “living the dream.” Homeownership remains the most commonly cited obstacle: 58% of respondents named high home prices as their top barrier, followed by rising living costs (51%) and elevated mortgage rates (47%)—the exact positional-goods squeeze Maggiulli describes.

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.

“It is simply inaccurate to characterize the ‘shrinking’ middle class as reflecting diminished economic security rather than material progress,” Rose and Winship wrote.

Winship, in a statement to Fortune, previously acknowledged the limits of an income-only lens: Two people with identical lifetime earnings can end up with very different wealth if one saves and the other spends—a concession of a key Maggiulli argument. AEI is reportedly preparing a follow-up using wealth data, and preliminary results show a similar pattern: The middle class shrinks mainly because the upper-middle class booms.

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%.

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 Consuer 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.”

Chris Bradley, a senior partner at McKinsey and director of the McKinsey Global Institute, previously told Fortune Americans have 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.

Bradley has been wrestling with a starker version of this same anxiety on his own LinkedIn, where in May he broke from his usual optimism to concede that “the young’uns are probably right” to have lost faith in generational progress. Citing Australian polling that found only one in five believe the next generation will be better off than the last, he wrote that a 30-year-old today “has experienced less growth, hardly any productivity improvement, much more expensive housing, a bigger tax bill, and a much bigger government” than his own cohort did at the same age—concluding, “real hope needs to be earned.”

“Structurally, it feels like quality is getting worse even as prices are rising,” Maggiulli told Fortune, citing general trends in travel, education, and housing, in particular. He added his thinking has evolved from a feeling something weird is happening in the economy more firmly toward an upper-middle class trap, and he agreed with Fortune‘s question that it is similar to Yale Law professor Daniel Markovits’ Meritocracy Trap, which argued as far back as 2019 that upper middle class status in the 21st-century was less than the sum of its parts.

“I enjoyed Markovits’ Meritocracy Trap because it highlights how it can be tough to get ahead in the upper middle class,” Maggiulli said, “as compared to the upper class, who can buy their way into things.”

Even the optimistic AEI numbers cut both ways: The combined income share of the upper-middle class and the wealthy rose from 28% of all family income in 1979 to 68% by 2024, and the top 1%’s share doubled from 5% to 9%—likely an undercount, Winship conceded, since the wealthiest Americans are underrepresented in Census data. Separate tax-data research by Gerald Auten and David Splinter puts the true top 1% income share closer to 17%.

The upshot, in Winship’s own words: “broad prosperity, unequally shared.”

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.