Are You a HENRY? Why High Earning is not the Same as Wealth
Published on May 9, 2017
Matthew Carr, the Emerging Trends Strategist for The Oxford Club, recently wrote an article about those who are “high earners but not rich yet.” He referred to them as HENRYs, a term that appeared in Forbes over 10 years ago to describe the one-percenters who don’t feel rich, because they aren’t.
HENRY households comprise professionals and entrepreneurs, high-level people with household incomes between $250,000 and $500,000 per year. In spite of their generous income—or because of it—they are likely to send children to private schools, spend lavishly on expensive cars and big homes, pay high income taxes and real estate taxes all which leads them to struggle financially.
Hard to believe for many Americans, but it’s true.
These HENRYs have worked hard (Carr says they are “the strivers”) who made their way to the top of the income ladder but have discovered they still don’t have enough (whatever “enough” is for them). The hard realization for this class of Americans is that income does not equal wealth. In fact, Americans in all income brackets need to understand this, because money does not always flow in but it sure flows out easily!
Fail to plan, plan to fail
Regardless of income level, it is so very important for everyone to prepare for leaner times and to certainly prepare for retirement, when work income has stopped and it’s all about relying on savings and some Social Security benefits. Failing to plan is planning to fail, and that goes for everything from a family reunion to retirement savings.
Here’s are some scary statistics cited by the author:
- 36 percent of Americans haven’t started saving for retirement.
- More than 25 percent of Americans between the ages of 50 and 64 aren’t saving for retirement.
- 26 percent have less than $1,000 saved.
- 42 percent have less than $10,000.
- Only 17 percent of Americans have emergency funds to cover three to five months.
If not now, when? And, if you are lucky enough to be earning high income, how do you avoid becoming a HENRY?
Plan, save, self-direct
1 – Save early and often. Pay yourself first by opening a savings account or an IRA for long-term savings that will grow over time.
2 – Start investing now. There’s no “when I make more” or “when I am ready.” Plan now to start investing to grow your retirement savings. And, if you understand alternative assets, you can open a self-directed IRA and include a broad array of nontraditional investments to help build a more diverse retirement portfolio. Many self-directed investors—who want to make their own investment decisions and wish to include non-publicly traded assets within their plans—are already investing in real estate, precious metals, commodities, unsecured and secured loans, private placements and more, outside of their existing retirement plans. Why not make these investments within a tax-advantaged retirement account instead?
3 – Have a goal and stick to it. Judging from the statistics noted above, Americans lack discipline when it comes to saving in general and certainly when it comes to saving for retirement in particular. If you are self-directing your retirement plan, research those alternative assets that will help you meet your retirement goals and make sense for your specific financial situation.
4 – Make catch-up contributions. If you are 50 years old and up, you can add catch-up contributions to your retirement plan (read more about contribution limits and catch-ups here).
5 – Download a Next Generation Trust Services starter kit from our Client Forms page and open your self-directed retirement plan!
As always, our helpful professionals are available to answer your questions about self-direction as a retirement wealth-building strategy. Contact Next Generation Trust Services at Info@NextGenerationTrust.com or (888) 857-8058 and we’ll get you the answers you need.