$120,000 a year is how much an hour? Let’s calculate and discuss how much money this equals a comparable hourly wage. Furthermore, we’ll explore how much $120K is after taxes and how to live on this amount.
While some jobs pay an annual salary, other employers choose to pay workers by the hour. Inevitably many salaried workers who get paid a yearly salary wonder what their salary would equate to if they were to get paid by the hour.
$120K a year is a respectable amount of money, but is it enough to live on after taxes, or would you be better off with an hourly wage job instead? Let’s break down that $120,000 a year salary and figure out what it calculates to per hour.
When equating an annual salary of $120K to an hourly wage, it is first essential to determine how many working hours are in a year.
A traditional work schedule in the U.S. is approximately 8 hours per day, working five days per week. This total brings us to a total of 40 hours per week.
Technically there are 52 weeks per year, so an annual salary of $120,000 / 52 weeks per year = $2,307.69 per week. $2,307.69 a week / 40-hour work week = $57.69 per hour.
As a straightforward calculation, a salary of $120K a year is $57.69 an hour.
$120,000 per year / 12 months per year = $10,000.00 in gross wages
$120,000 per year / 52 weeks per year = $2,307.69 in gross wages
$120,000 per year / 26 bi-weekly payroll periods = $4,615.38 in gross wages
$120,000 per year / 260 work days per year = $461.54 in gross wages per day.
But this number assumes you are trying to compare the work days of a salaried employee to an hourly worker’s wages. This is why dividing the salary by 260 work days and not 365 days in a year is logical. In most cases, an employer is not paying you for time not spent working on the weekends.
However, we’ll explore these variables in our next section if we want a more complete (and complex) explanation of factors such as weekends, hours, and time off.
Our basic calculations explain how much $120K per year is given basic assumptions about hours worked per week and no vacation time. Still, in reality, these variables should be taken into account for a complete calculation of how much you will earn an hour.
In actuality, most salaried workers do not work a straight 40-hour-a-week schedule, as salaried workers are often required to oversee projects and responsibilities that sometimes require extended hours, taking work home, working remotely, working on the weekends, taking phone calls, or checking emails outside of traditional work hours.
I spent over 15 years of my career working in finance, and it was not unheard of for young, money-hungry ambitious professionals to work as many as 80 or even 100 hours per week, especially in roles such as investment banking and consulting. New doctors perform residencies, often working extended and overnight shifts that could add up to 60+ hours per week. Many professionals in various fields, including big technology companies, accounting, business and financial operations, computer and mathematical operations, architecture and engineering, sales roles, legal, tax, health practitioners, and other professional jobs, are required to work weekly hours equal to 50-80 hours per week.
According to the U.S. Bureau of Labor Statistics, several salaried professions work fewer hours than 40 hours per week, including specific roles such as art dealers, bed-and-breakfast inn operators, and entertainment and media occupations, such as radio producers. Some of these jobs are salaried and work as little as 30 works per week based on historical data.
Based on this reality, we should reconsider how much $120,000 a year is based on how many hours you may be working. Our previous calculations show that $120,000 a year is $2,307.69 per week.
- 30 hours a week: $76.92 an hour
- 40 hours a week: $57.69 an hour
- 50 hours a week: $46.15 an hour
- 60 hours a week: $38.46 an hour
- 70 hours a week: $32.97 an hour
- 80 hours a week: $28.85 an hour
- 90 hours a week: $25.64 an hour
- 100 hours a week: $23.08 an hour
As we can see from our updated schedule, $120K per year can vary significantly depending on how many hours per week you work. For example, assuming most salaried workers would fall into the range of 40 to 60 hours per week of work, $120,000 a year works out to between $57.69 – $38.46 an hour.
The last significant consideration we should give to our model is vacation, sick leave, or paid time off. Depending on the employer, salaried workers may have different proceeds for the allowed number of sick days, personal days, or vacation days they are allowed to take off. Many companies lump all of these days out of the office or workplace as “paid time off.”
Employers who work by the hour are generally not granted paid vacation days unless the employer has a generous policy, but this is not required or protected under most state laws. Employers are usually free to create their own benefit policies for hourly workers, but usually, holidays and vacations fall under “time not worked.” Of course, each state has slight variations in benefits policies for hourly workers.
Nevertheless, most salaried workers have contracts and company policies which outline the vacation policy, often offering between two to four weeks per year, with more than 20 days often considered generous in the U.S. Most salaried employees also are given off federal holidays, which there are currently ten days off.
Typically, some employees report taking less than their total days due to work or job pressures that don’t offer incentives or support employees who take all their allotted days off. However, it is common practice that employees who do not take all their vacation time are paid out at least partially on unused vacation days or can roll over some days to the next year.
Based on paid vacation trends, salaried workers should receive an extra boost to their hourly wages because they are actually compensated for hours outside the workplace. So, because we are including new vacation assumptions in our hourly wage calculations, it is essential to once against revise our salary numbers to determine how much $120,000 a year is an hour once we consider vacation time.
Let’s simplify things by first adding the vacation variable to our standard 40-hour workweek schedule. Our previous recap produced the result that $120K a year came out to $2,307.69 per week, but this assumption considered that a work week included 52 weeks per year, or put another way, no vacation days.
However, because salaried employees, at a minimum, are given ten federal holidays off per year by most employers, salaried employees who take no additional vacation are still being compensated for their time off during these federal holidays. We’ll include the federal holidays in our vacation calculations, setting the minimum vacation time to 1 week off. Now let’s consider the weekly wages under various vacation allocations.
- No vacation, working 52 weeks per year: $57.69 an hour
- 1 week of vacation, working 51 weeks per year: $58.82 an hour
- 2 weeks of vacation, working 50 weeks per year: $60.00 an hour
- 3 weeks of vacation, working 49 weeks per year: $61.22 an hour
- 4 weeks of vacation, working 48 weeks per year: $62.50 an hour
- 5 weeks of vacation, working 47 weeks per year: $63.83 an hour
- 6 weeks of vacation, working 46 weeks per year: $65.22 an hour
- 7 weeks of vacation, working 45 weeks per year: $66.67 an hour
As we can see from our new model, which includes vacation time, $120K per year can vary based on how much vacation time you take per year. We assume here that the salaried worker is only working 40 hours per week and that the employee would fall into the range of 10 to 31 days (including the ten federal holidays off) per year (around three weeks off). Given our new working days assumption, $120,000 a year equals $61.22 an hour if working 40 hours per week.
After discussing the variations in hours per week and vacation time, let’s combine these two variables to determine how much $120000 per year might work for your individual circumstance.
As we can see, a more demanding job that requires 80 hours per week with only two weeks of vacation (4 elected days off plus ten federal holidays) a year would work out to $30.00 per hour, while a 40-hour-per-week job with four weeks of vacation will improve your hourly rates to $62.50. This range compares to our initial calculation of $57.69 per hour, assuming no vacation and a 40-hour work week.
[Warning: The following section contains income tax math and may cause sleepiness.]
Under our basic assumptions of no vacation time and a 40-hour-a-week job, we concluded that we would make $57.69 per hour. So how much does this $120,000 per year salary equal per hour after you pay taxes?
To answer this question, you first need to understand the U.S. taxation system, which is a progressive tax system, meaning your first dollar and 120,000th dollar are taxed at different marginal tax rates.
The Internal Revenue Service (IRS) sets and updates income tax rates and income brackets each year, which are adjusted due to legislative changes and inflation data. Furthermore, tax brackets are determined based on your filing status- whether you are single, married filing joints, married filing separately, or the head of household.
In addition to federal income tax, social security tax and hospital insurance tax, also known as medicare tax, will also be taken from your paycheck. These income taxes are commonly referred to as FICA taxes or payroll taxes, which are paid double, once by you and once by your employer.
Your share of the payroll tax breaks down as follows. Your share of the social security tax is 6.2%, and your medicare tax is 1.45%. On a $120,000 salary, you will owe $7,440 for social security tax and $1,740 for medicare tax, totaling about $9,180 in payroll taxes. Your federal taxes on $120,000 will be about $19,528, assuming you are filing as a single taxpayer.
Your taxes will be less, and your hourly wage will be slightly higher under the more favorable married or head of household filing status.
Therefore your total federal taxes owed will equal approximately $28,708, resulting in about $91,292 in net income. Of course, state taxes will also be owed, with some states such as New York, California, and Hawaii charging tiered rates that go as high as 12% for high-income earners. Other states such as Alaska, Nevada, Wyoming, Florida, New Hampshire, Texas, Tennesse, Washington, and Sound Dakota have zero state income tax.
Assuming you don’t have any additional state income tax, your $120,000 per year will net $91,292 a year after taxes in take-home pay. This equals $43.89 in hourly pay net of taxes, assuming a 40-hour work week and no vacation time for the salaried employee.
Above, we calculated our $120,000 salary net of taxes and determined that our basic hourly wage went from $57.69 an hour (pre-tax) to about $43.89 an hour (after-tax). But are these numbers reflective of our actual take-home wages for showing up to work and doing your job?
Real hourly wages include additional costs that are related to the job itself. Such expenses include costs that you would not incur if you were not working. Reasonable work expenses include transportation to and from work, necessary professional work clothes, laundering or dry-cleaning costs associated with work outfits, and social-related expenses related to work, such as going out with colleagues for lunch or drinks on occasion.
Hypothetical non-refunded work expenses may look like the following:
- $100 per month for a train commuter pass.
- $500 for new work clothes/suits per year ($42 per month)
- $40 per month for dry cleaning of work clothes
- $30 per month for social events/interactions with co-workers
These relatively small expenses can add up over time, and in this case, adds up to about $2,500 per year, or $1.22 per hour for a 40-hour-per-week employee. Make sure you consider any other big expenses or even a low cost and deduct them from your hourly wage to deduce your real hourly wage.
Living off $120,000 per year may be tight or a good salary, depending on the cost of living in your geographic region or city and whether or not you are supporting multiple people, such as a spouse, family, or other dependents. A single person making $120,000 on a first job can live comfortably with this amount of income. However, the cost of living in an expensive city such as New York, San Francisco, or Miami may make this amount too little to support rent or the cost of living in such high-cost areas.
Living successfully off $120K income per year will require an intelligent monthly budget. A good portion of your take-home pay will need to go towards housing and living costs and, ideally, save money for retirement and your future with most of the remaining money.
As a wealth management expert, I recommend you contribute a minimum of 10% of your wages to a retirement plan. Many salaried employees will have access to a companies sponsored retirement plan, such as a 401(k). If your company does not offer such a retirement plan, you can still set up your own Individual Retirement Account (IRA) and make a tax-advantaged contribution.
At a $120,000 annual salary, I suggest contributing to a Roth 401(k) or Roth IRA, especially if you plan to earn higher wages in the future.
However, as you are now mid-level marginal tax bracket, you may want to consider investing in a Traditional 401(k) or Traditional IRA to save taxes immediately instead of forgoing the savings at retirement. A Traditional retirement account will be even more favorable if you live in a state or city with high State and Local Income Tax rates (SALT).
Traditional retirement accounts may also make more sense if you believe you will stay at the current tax rate through the rest of your working years and end up with a lower federal tax rate during retirement.
It is good practice to put at least 10% of your wages into a retirement plan and always aim to take full advantage of company matching opportunities on 401(k) contributions. If you can’t achieve 10%, start as high as you can afford, and aim to make lifestyle changes to be able to reach that milestone. Aim to achieve a minimum of 10%, ideally contributing 15% or more once you can manage it.
A potential sample budget follows to give you some guidance as to how you may budget and allocate your annual pay over various needs and expenses.
$120,000 annual income is $10,000.00, paid monthly. More likely, you will receive a biweekly paycheck of half that amount, but we’ll work up the budget on a monthly basis.
- Retirement 15%: $1500
- Taxes (24%): $2392
- Housing 19%: $1900
- Health Insurance 6%: $600
- Food 9%: $900
- Saving 7%: $700
- Utilities 4%: $400
- Transportation 5%: $500
- Personal Spending/Recreation 8%: $800
- Misc. 3%: $308
These numbers are rough guidelines. Of course, your individual circumstances might require prioritizing certain expenses over others. Additionally, if you have accumulated high-interest-rate debt, you may need to allocate some of your savings, miscellaneous cash, or money earmarked for retirement savings to pay down significant debt.
Alternatively, you can allocate some of your miscellaneous cash towards building your net worth by saving money or investing in a brokerage account.
According to the U.S. Department of Labor, the federal minimum wage has been stuck at $7.25 per hour since 2009, although many states have enacted their own minimum wages at significantly higher rates. Some areas, such as California and Washington DC, have set their state’s minimum wage rates above $15.50.
After calculating $120K per year as approximately $57.69 per hour, we can show that this salary is clearly above the federal minimum wages and also above all state minimum wages. It seems reasonable to state that $120,000 a year is a good salary as far as being well above minimum standards.
How does this amount compare to how much the average person works and makes?
The average annual income in 2021 was $97,962, and the median income was $69,717, suggesting there are fewer high-income earning individuals putting the average significantly above the median household income.
Therefore $120K per year is above the median wage and above the average salary currently reported by the U.S. Department of Labor. On the other hand, the current federal poverty level in the U.S. is $14,580 annual income per year for an individual, making $120,000 significantly above the poverty level. If you don’t have any dependents or a family to support, $120,000 may be a good salary and could help you build up a reasonable net worth.
Are you wondering what jobs make $120K a year? According to the U.S. Bureau of Labor Statistics, here are some average hourly earnings for all employees in various industries in 2023 so you can compare your salary to what the average person makes in other industries. The wage numbers below represent the average annual salary, not the median salary.
Industry: [annual salary] (how much an hour)
- Leisure and Hospitality: $43,326 ($20.83 per hour)
- Retail Trade: $49,525 ($23.81 per hour)
- Private Education and Health Services: $67,870 ($32.63 per hour)
- Transportation and Warehousing: $59,072 ($28.40 per hour)
- Manufacturing: $65,770 ($31.62 per hour)
- Construction: $74,381 ($35.76 per hour)
- Mining and Lodging: $76,690 ($36.87 per hour)
- Professional and Business Services: $82,701 ($39.76 per hour)
- Wholesale Trade: $75,213 ($36.16 per hour)
- Financial Activities: $88,712 ($42.65 per hour)
- Information: $99,944 ($48.05 per hour)
- Utilities: $101,587 ($48.84 per hour)
A salaried job is a form of employment where you get paid a flat amount of money over the course of a year. Salaried jobs often pay wages twice per month (semi-monthly) or, in rarer cases, monthly or weekly.
Salaried workers may or may not be expected to work a set number of hours per day or week but usually are not directly evaluated and paid on the number of hours they work.
- You don’t have to track your hours by punching in or out on a time card or tracker.
- Generally, more prominent positions are salaried, suggesting a higher level of prominence or status within the company.
- You know exactly how much you will be paid each time you collect a paycheck.
- Depending on your company’s paid time off or vacation procedures, you can take time off for sick leave or vacation and still collect your regular paycheck.
- Generally, annually salaried positions include better benefits packages such as health insurance, retirement savings plans, health savings accounts, flex savings accounts and plans, dental and vision plans, and public transportation discount plans. Some companies even offer additional perks such as fitness centers, meals, or car services under special circumstances.
- Many salaried positions still include the ability to qualify for annual or more frequent bonuses, depending on the role and the industry.
- Your overall performance is harder to measure, and performance results often require more complex efforts than just hours of work.
- There is no such thing as overtime, and if the job demands greater performance, you must work additional hours with no extra income.
- Depending on the roles, salaried employees are more likely to be considered on-call and expected to check in with their emails and projects outside of traditional office hours.
- Greater responsibility and duties of a salaried job create inconsistent work schedules or work hours. Sometimes you may have to work late, work on the weekends, travel or fly for work, or take work home with you.
- After September 14, 2019, the U.S. Department of Labor made a new rule change to make over one million employees eligible for overtime pay. The major overhaul increased the thresholds for wages required for employees to be able to be classified as exempt from overtime pay. Under the new rule, any individual making less than $35,568 per year, or $684 per week, is eligible for overtime pay.
- Hourly workers usually have less responsibility and are not responsible for productivity or projects outside of on-the-clock working hours.
- Hourly workers can qualify for overtime wages, which is an increased hourly wage if they work over 40 hours per week.
- Hourly workers have more predictability in their work schedule and usually do not have to take work home, show up early, travel for work, or answer work calls or emails outside their clocked-in hours.
- Many hourly jobs are union jobs, which provide employee protections and benefits through collective bargaining.
- Pay tends to be lower than salaried workers, and potential bonuses often are significantly reduced.
- Shift schedule hours can fluctuate weekly or monthly.
- Many hourly jobs are union jobs, which can require additional costs and fees.
- Salaried workers are often performing functional jobs, and negotiating independently with management for higher wages is often more challenging.
Growing Your Net Worth With a $120,000 per Year Income
In order to grow your net worth, you must save money and learn to invest, so you can allow your money to compound over time and grow wealth over the long run. After you have built up your emergency fund and saved money in a bank account, you should focus on learning how to invest to make the most of your $120K per year salary.
Investing is a key technique to understand in order to help you make passive income from your investments and grow your future net worth. $120,000 per year or your hourly rate equivalent take-home pay will only take you so far. Real wealth and more money are built by learning to make your money work for you over time.
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.