What Income Will Be Considered Poverty Level In 5 Years?
Guessing the future poverty line is like trying to hit a moving target. There are a lot of economic factors at play, like inflation, how much wages grow, what the government decides to do in response to economic changes and how well the economy is doing overall. But where will the poverty line be in five years?
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The Poverty Line In 5 Years
There’s no surefire way to determine it, but there are ways to make an educated guess. You can look back at what’s happened before, like how the Census Bureau adjusts the federal poverty level every year for inflation, which can give clues about what might happen in the future.
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Financial experts working for the Congressional Budget Office predict what’s likely to happen to the economy. But it’s important to remember that there are no crystal balls, and even the most educated finance guru can’t predict everything.
What’s Meant by the Poverty Level?
The poverty level is a metric that determines the minimum amount of money most people will spend to cover essential needs in a specific place and time. Here are a few important things to know about the poverty level:
The Official Measure
The Department of Health and Human Services sets the federal poverty line. It measures how much money a family needs for basics like food, clothes, shelter, transportation and basic utilities.
The FPL Is More of a Threshold Than a Single Line
The FPL isn’t a one-size-fits-all number. It has different thresholds depending on the size and makeup of your family, such as the number of adults and children in your household. A family is tagged as “in poverty” if its before-tax income is below the current FPL for a family of its size.
How the Poverty Line Is Used
The main purpose of the FPL is to help measure poverty rates and determine who may be eligible for help from certain government programs. If you’re below the FPL, you probably aren’t able to cover the essentials you need just to get by.
It’s an Imperfect System
Another important thing to know about the FPL is that it doesn’t consider that it costs more to live in some places than others. Living in an urban area typically costs much more than living in the country, but the FPL doesn’t consider that.
Factors Affecting the Poverty Line
Inflation increases prices, so if average earnings stay the same while the cost of living rises, the poverty threshold likely reflects that. Government choices like minimum wage levels, social safety nets and tax laws can also move the poverty rates around quite a bit.
Where the Poverty Line Will Be in 5 Years: Best Guesses
You can look at historical information to guess what might happen next. Over the past decade, the U.S. FPL has slowly climbed more than 2% yearly. We can also listen to what the experts are saying. The CBO shares economic projections and its latest guess is that the U.S. poverty level may increase by as much as 10% to 15% over the next five years.
There are a lot of moving parts and uncertain variables at play here. Per the current best guesses, the average household income will be just over $92,000 per year (it’s around $74,000 per year now). This year’s poverty line for a family of four is just over $31,000.
If the rate of change stays consistent for these numbers, anyone who earns less than $38,500 per year (or 42% of that projected $92,000 salary) is likely to be at, or below, the federal poverty level.
Worried About Being Below the Poverty Line in 5 Years? Steps You Can Take
If you’re worried about being near or below the poverty line in five years, these suggestions can help you prepare to deal with those conditions:
Consider a career change: Take opportunities to learn or train for high-demand, marketable skills. Do some homework on industries and employers offering better wages and upward mobility.
Cut down on expenses: Thoroughly examine your budget and discover ways to save. A budget plan can be helpful.
Seek government assistance: Look into programs like food stamps, heating assistance and rental aid. They could help ease some of your financial pressure.
Seek financial counsel: Some nonprofit organizations in your area may provide free or low-cost financial advice to help you manage your money better.
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