“Pay yourself first.” Treat your savings like a mandatory bill and pay yourself at least one hour a day of your income. – David Bach, author of the Automatic Millionaire
“Don’t go to Starbucks today for a coffee… Invest $5 a day for 40 years @10% and you’ll have $948,611 in savings in your retirement account. The fact is that investing works when you work it.” – David Bach
I know that skipping the latte is a part of the latte factor philosophy, but sometimes I just need a cappuccino!
Therefore, I found other things to cut back on in order to find more ways to save and invest that money.
It seemed better to indulge and splurge on the things I really wanted and then cut mercilessly the things I don’t like.
This meant paying off debt.
I rather cut out shots at the bar at happy hour on Taco Tuesdays than not having my coffee or tea fix!
I mean everything is good in moderation, right?
You should be able to sip coffee and buy stocks.
My niece (Tiana) even bought me a juice shot at Trader Joe’s recently. She said, “shots on T”. She also likes to say Tiana runs on Dunkin. She loves her coffee. And she occasionally likes juice shots too.
Some were pretty pricey. I guess I can just eat the fruit and drink water to save on that. Who needs $5.99 juice shots? That should still count as saving on unnecessary drink spending. I mean a drinks a drink, right?
Lately, I have noticed that everything is behind a paywall. So I started cutting out or avoiding subscriptions.
Most movies and shows end up on Prime or Netflix anyway. I will catch it eventually.
Sacrificing present pleasure for future security is how the game of financial independence is played.
However, I can recollect hearing many stories of financial mismanagement. It’s a tale as old as time.
Hollywood Child Stardom gone bust
One of my all time favorite child actors is Shirley Temple. She was wise beyond her years. An absolutely incredible talent for such a young age. She started out by taking dancing lessons and then also starting her career at age 3. By age 6, she was one of the biggest stars in Hollywood.
Shirley Temple, a beloved child star who made 29 films by age 10. Talk about a work ethic! All that just to be fired in 1941 by Fox Studios at the tender age of 11 for slumping ticket sales. Her contract was picked up by MGM, but by 1950 her Hollywood movie career was over at the young age of 22.
At the peak of her career, Shirley commanded a salary of $10,000 a week, earning her a healthy $3.2 million along with other income from merchandise.
She didn’t live a fairy-tale existence. During the years of her greatest fame, she worked punishing hours, received death threats and inappropriate advances, and retired at 22 with just $40,000 in the bank.
Ninety-seven cents of every dollar she made was gone. Due to bad investments made by her father.
Shirley Temple Black was an American actress, singer, dancer, politician, and diplomat, who was Hollywood’s number-one box-office draw as a child actress from 1934 to 1938.
Childhood Earnings: During the 1930s, she was the highest-grossing star in Hollywood, earning roughly $3.4 million. However, by the time she was 22, the vast majority of these earnings had been squandered or lost in poor investments managed by her parents.
Adult Rebound: Despite losing her childhood fortune, she rebuilt her wealth through strategic business endeavors, marriage to wealthy businessman Charles Black, and a highly successful career in international relations, serving as the U.S. ambassador to both Ghana and Czechoslovakia.
Estate & Assets: Her estate included high-value personal property, most notably a rare 9.54-carat “Fancy Deep Blue” diamond ring. The ring was purchased by her father in 1940 for about $7,200 and was auctioned off post-mortem by a private buyer for an estimated $25 to $35 million.
At the time of her death in 2014, Shirley Temple had an estimated net worth of $30 million. Her wealth was accumulated through her legendary childhood acting career, successful adult ventures, savvy real estate investments, and a prominent second career as a United States diplomat.
Her story taught me something. Never to give up.
If I wanted financial independence, I would have to work for it!
I drove my old car from college into the ground. Paying that off along with a $20,000 personal loan that cost me $333 a month, helped me get on more solid financial footing.
Paying off debts laid the groundwork for what was to come. Amassing $580,000 in investments. I am mere thousands away from $600,000.
Although I did not cut out tea and coffee, I did cut out luxury cars and personal loans from my budget. The $750 I was saving on these two line items alone far eclipsed the $50 budgeted monthly for my caffeine fix!
I won’t stop until I hit my target of $1 million. I am more than halfway there.
Let me reward myself by taking a sip of my coffee.
About the author
Miriam started Greenbacks Magnet in 2016 to keep a scorecard of her goal of $1M in investable assets. Armed with a Master in Management (MiM) and a calculator, she teaches readers how to achieve financial independence while also helping them learn how to smell the roses along the way. The palpable response she got from sharing her personal finance goal in a public speaking course at Georgetown University encouraged her to share her story and teach finance on her website. She invests in AI companies as artificial intelligence is the new iPhone of the moment as she likes to invest in companies that are disruptive.
Mr. Jain stated he did not feel financially secure at all while living in a high cost city like Seattle.
I kid you not. You can see the headline of the article below.
This dude is in the top 10 percent of income in America.
This article reads like an episode of Billions or Fleishman Is in Trouble.
Fleishman Is in Trouble is a 2022 limited series streaming on Hulu starring Jesse Eisenberg as Toby Fleishman. Adapted from Taffy Brodesser-Akner’s bestselling novel, the show follows a newly separated New York doctor whose sudden sexual popularity and parenting skills are tested when his ex-wife (Claire Danes) mysteriously drops off their kids and disappears.
Fun Fact: I actually wrote a blog post called My So-Called Finances as a salute to the incredible talent of actress Claire Danes. See my post here My So-Called Finances
Fleishman delivers this line in response to someone questioning their lifestyle:
“Excuse me, I make almost $300,000 a year. I am a rich man in every single culture except the 40 stupid square blocks that you insist we live within.”
New York City is the overall most expensive city in New York, with Manhattan boasting some of the highest real estate and living costs in the world.
The ranking from GoBankingRates found 13 municipalities with populations over 2,500 where residents spend at least $10,000 on monthly necessities alone.
The study looked at 2025 average home values, as well as mortgage payments and costs of groceries, utilities, health care and transportation.
Manhattan is on of those places where expenses can easily top $10,000 per month.
This showwas primarily filmed in and around New York City, with extensive location shooting throughout Manhattan, Brooklyn, Queens, and the Bronx.
The breakdown below highlights the exact, localized centers of wealth depending on what type of location you are looking for:
1. New York City
As a whole, NYC requires the highest cost of living and housing in the state. Manhattan leads the pack, with hyper-luxury areas commanding astronomical figures.
Most Expensive Neighborhood: Hudson Yards is recognized as the most expensive neighborhood in NYC, with a median sale price of roughly $5.95 million. TriBeCa is a close second, routinely seeing median sale prices around $4.15 million.
Rental Costs: The average rent in Manhattan fluctuates between $5,200 and $5,600, though ultra-luxury pockets like Sutton Place can see median rents soar well beyond $8,000 per month.
Scarsdale (Westchester County): Tops the list for incorporated New York cities due to its extraordinarily high cost of living, premier school systems, and massive estate home values.
Sands Point (Long Island): Located on Long Island’s Gold Coast, this area boasts average home values approaching $3 million, with massive monthly mortgages and high property taxes.
Rye & East Hills: Both of these locales rank alongside Scarsdale as some of the most expensive non-NYC cities in the state, driven by proximity to the city and waterfront luxury.
For more context, Manhattan has a land area of approximately (22.66) square miles, and an additional (11.2) square miles of water, bringing its total area to roughly (33.8) square miles.
According to CNBC, to be in the top 10% of households in the United States, you need an annual income of at least $251,036 or a net worth (total assets minus debts) of approximately $1.6 million to $1.8 million.
Nationwide thresholds for the top 10% vary depending on whether you are measuring annual income or overall wealth:
By Location: The exact number changes significantly depending on where you live. For example, in California, you generally need to make over $311,000 to be in the top tier, while in states like Mississippi, the top 10% threshold is closer to $200,900.
Individual Earners: For single filers without combined household incomes, breaking into the top 10% starts around $135,000 to $170,000, depending on age and location.
Net Worth (Total Assets & Investments)
National Threshold: A household requires a net worth of roughly $1.8 million to be in the top 10%.
By Age: Net worth expectations shift heavily depending on your stage of life. While the threshold is around $1.6 million across all ages, that figure climbs closer to $3 million for households in their 60s
Even though Washington has no state income tax, which helps him save about 10% more of his take-home salary, he still feels it’s not enough to support his family of four.
Mr. Jain is a senior product manager at Amazon. He moved from one high cost state, California, to another one; Seattle, where the median home price is $850,000.
He is feeling the squeeze because of being in a single-income household with a wife, a child, and another kid on the way, which makes things feel tight with the rising costs of healthcare, childcare, and living expenses.
The problem with using a high income as a signal of success or failure in life is it often comes with consequences. This is especially true once kids enter the picture. The goalpost keeps moving. The barometer for success gets higher.
They say if you want to lessen the pool of highly qualified applicants or increase your options of better candidates such as those applying to Yale or Harvard, then just keep increasing the selection criteria for more exclusivity.
In the 1960s, less than 30% of all married households were dual-income families. That number has now more than doubled to more like 60%.
There are reasons for this change. Having children is more expensive than it used to be. The cost of education is higher. The cost of childcare is higher. The cost of housing is higher. The cost of transportation is higher.
Everything is more expensive.
And this gentleman believes $300,000 just isn’t enough to make it out here.
So what gives?
How did we get here?
Let’s break down his income and expenses shall we.
His monthly take-home pay is about $12,000 after taxes and 401(k) contributions.
Considering that the average annual wage in the U.S. is approximately ($64,505) to ($66,622) for individual workers, I would say $300,000 should be more than adequate to take care of a family. However, living in high cost states can definitely hold your wallet hostage with how quickly the monthly bills add up!
Housing is a big ticket line item with a high fixed expense
Mr. Jain lives 30 miles north of downtown Seattle in a four-bedroom single-family home. The area he lives in has a strong school district, and many people moved here during the remote-work boom. He bought his home in 2023. His mortgage is about $5,000 a month, including taxes and insurance.
This would estimate that he has a home with a $600,000 mortgage.
On a $12,000 take-home of salary, this is a huge chunk of his income at about 41 percent.
Utilities total about $800 a month. That includes about $300 for electricity and water, which also covers charging his Tesla at home; $125 for sewer; $20 for gas; $130 for trash; $70 for internet; and $100 for phone.
Just housing and utilities take up 50 percent of his take-home pay!
He pays $750 per month for a family health insurance plan.
Debt is pretty significant as well for this guy.
He has around $20,000 in personal debt from expenses and travel last year. He also is carrying mortgage debt from his home and an investment property. In addition, he has a Tesla with a car payment, but he has fully paid off a Range Rover.
Groceries is another big bill for this family. Their Costco bill alone is around $1,500 a month, including groceries, household items, decor, toys, and more. Outside of Costco, they spend another $400 to $500 monthly on additional groceries.
Hiring help also costs a pretty penny.
They hire nannies on an as-needed basis, which costs about $100 to $250 per day, depending on the hours. In a single-income household since his wife isn’t working right now, childcare expenses feel significant regardless of income. Between childcare, healthcare, and the general cost of living, expenses add up quickly.
No kidding!
I paid my taxes, got my car repaired, and went to the salon and spent about $5,000 in one week!
I mean, it’s hard out here for a pimp, trying to get this money for the rent! And rent is always due on the first!
Transportation costs add up quick too
He does have a Range Rover that is fully paid off, though he still spend about $100 a month on gas. There is a $630 monthly payment on his Tesla. And when he travels outside the Seattle area he spends an additional $50 to $100 on public charging.Car insurance is about $260 a month total for both their vehicles.
Big Savings Goals
Mr. Jain has a goal to retire around 50
Within the next 10 years, he stated he should be able to add another $1 million to his assets. He contributes about $2,000 a month to his 401(k) and about another $2,000 a month in cash. In total, he saves roughly $50,000 a year.
That is massive! He is saving $100,000 every two years!
Being a financial independence blogger, seeing that level of saving just warms my heart. Being financial independent (FI) gives you options in life and allows you to walk away from bad jobs and stressful situations. I am all for being FI.
I started my million-dollar financial freedom journey back in 2012.
I’ve gone from $25,000 to about $600,000.
I am just 3.5 years away from $1 million in investable assets. I estimate that I would have this amount in my 401k in about 1200 days based on what I am investing and earning in interest and dividends.
Getting back to the story, he stated that he would feel more comfortable earning between $400,000 and $450,000. That would make him feel more financially secure.
That statement above is what caused the uproar online as many people feel that earning $300,000 should be more than enough to meet your basic needs and living expenses and then some.
However, after adding up all his after-tax expenses, I estimate he is spending approximately $11,400 per month. That leaves very little left over from his $12,000 net pay.
The real reason he feels that $300,000 is not enough is because his fixed expenses are so high.
Although he is saving a ton of money before and after-tax, with his mortgage and utilities gobbling up 50 percent of his take-home pay, makes a huge dent in his wallet!
Just paying off the $630 car payment for the Tesla would free up some cashflow right there that he could put in an emergency fund.
He is still trying to also add money to his kids 529 plans for college.
That’s another bill!
However, he is basically maxing out his 401k with the $2,000 he puts in there every month, which is $24,000 a year. Therefore, he is not being frivolous with his earnings.
If he started maxing out his 401k at age 30, then within 17 years, he would have over $1 million saved for retirement with a 10 percent return.
In my POV, he is doing very well.
I personally do not want high fixed expenses, as I prefer to increase my savings rate every year.
The lower the expenses, the higher the savings rate.
The more you earn, the more you are taxed.
Therefore, you should aim to save more as your investments grow tax-free. Additionally, in a Roth IRA your money grows tax-free and is withdrawn tax-free which is the double advantage of this savings vehicle.
So if you are one of the chosen few lucky enough to get your hands on $300,000, then max out your 401k and Roth IRA.
Your future self will thank you.
About the Author
Miriam started Greenbacks Magnet in 2016 to keep a scorecard of her goal of $1M in investable assets. Armed with a Master in Management (MiM) and a calculator, she teaches readers how to achieve financial independence while also helping them learn how to smell the roses along the way. The palpable response she got from sharing her personal finance goal in a public speaking course at Georgetown University encouraged her to share her story and teach finance on her website. She invests in AI companies as artificial intelligence is the new iPhone of the moment as she likes to invest in companies that are disruptive.
I remember reading an article where Dave Ramsey said the top two ways that most people become millionaires in the $1M to $5M dollar range; 1) a paid off home and 2) maxing out retirement accounts.
I already knew that paying off a home is always a way to help yourself become financially secure. But how many folks are really maxing out retirement accounts? Not as many as you would think. I did some research and found that although many people polled say they want to be a millionaire one day, not many actually reach it to that goalpost. Employee Benefit Research Institute (EBRI for short) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts. The numbers below were posted by the Motley Fool from EBRI’s retirement savings data.
These are the amounts in Americans’ retirement accounts:
$0 to $9,999: 58.4% of Americans $10,000 to $99,999: 20.5% $100,000 to $499,999: 13.9% $500,000 to $999,999: 4% $1 million to $4.99 million: 3.1% $5 million or more: 0.1%
You will notice that almost 80% of Americans have less than $100,000.
You may have also noticed on my post Her First $400K that I showed you a tweet from rapper Drake saying the first $100K is the hardest.
No sh*t!!!
That means only the top 20% have made it past the first hurdle of $100k.
The next 14% have reached just shy of half a million dollars.
Not too shabby.
Then the percentage just sink like an anchor.
Only 4% get beyond $500K. And just a mere 3.1% got to the holy grail of $1 million in retirement savings.
And don’t even look at the numbers for $5M, that is a paltry one percent.
Not too surprising that the 1% take the top prize.
Only the top 3% make it to the millionaire promise land.
No wonder so many folks are playing the lottery.
It can take 20-30 years of investing to make it to $1M and the possibly another 7 or so to get to $2M. That’s 40 years! A lifetime.
However, do not be discouraged.
Any obstacle can be overcome with a well-thought out plan.
Making your primary target to get to $100,000 can reap you rewards for a lifetime. Starting here can help you achieve the next goal. Whatever you do decide to do make sure you make your plan as specific as possible.
Write it down.
And no matter what, don’t stop until you reach your goal.
“Thomas Edison’s last words were “It’s very beautiful over there“. I don’t know where there is, but I believe it’s somewhere, and I hope it’s beautiful.” ― John Green, Looking for Alaska
It made me take pause and reflect on the journey I had been on to get to that number.
The sleepless nights wondering how I was going to pay the bills and how I would afford to pay for retirement was over. Even with a return of investment of less than the stock market average of 10 percent over the last 30 years, I would still hit the $1 million nest egg milestone before I retire. So it made me think, what would I do with $1 million dollars of investments?
With that type of money, if you wanted to, you could buy a house with cash depending on where you want to live. This includes places inside and outside of the United States.
The cheapest places to buy a house in the U.S. include states like Iowa, West Virginia, and Mississippi, as well as cities like Scranton, PA, Weirton, WV, and El Paso, TX. This year, West Virginia has the cheapest homes in the country, with an average house price of $146,578. Several countries also offer affordable options for buying a house outside the US, including Colombia, The Philippines, Italy, Nicaragua, and Mexico.
Even if staying in the U.S. is what you want, you do have options on where you live and what you do in retirement.
That is enough scratch to start a business, travel the world, start a charitable foundation for college scholarships or to help donate to meals on wheels. The possibilities are almost endless.
I may not be able to give away billions, but I sure could start a college scholarship fund for underprivileged kids with $10,000 starting capital for $500 each one towards books or other education related expenses. Maybe I could do something for medical students and start a scholarship that pays for med school application fees or supplies.
The point is that you have options. Many options. Especially, if you have a paid off home and no debt.
I remember Dave Ramsey saying that most people acquired their first million by consistently investing in their 401k’s and paying off their primary residence. In addition, the people they did a study on became millionaires from five professions: teaching, law, management, accountant, and engineering. So if your in one of those five fields, then you got a real good shot kid of being a becoming a millionaire.
Just taking stock of myself, I did pay off the personal and auto loans. Then redirected that money to my savings and investments. The auto loan was $450 and the personal loan was $333. The goal is to get to a savings rate of 50 percent . I then want to direct my attention to paying off my mortgage and having no home payment. That allows me to be in the driver’s seat of my future time after punching the clock.
So what would I do with all that free time and one million dollar nest egg? I think I will start a second career. What would I do if money was no object. Maybe voiceover acting. I was told once I had a great voice for radio! I was also once a background actor for a Hollywood movie. I could expand my creative pursuits outside of blogging.
I could teach personal finance and home economics at the local library.
I could backpack through Europe.
To be specific, I could buy a first-class ticket to London, stay at the Ritz Carlton or Savoy and have high tea while also taking in the sites of places in the Ian Fleming novels and have my martini shaken not stirred. I could visit the home towns of Jane Austen and Charles Dickens.
Maybe I will go to visit the fictional town of Stars Hollow from the show Gilmore Girls.
In the book “The Count of Monte Cristo,” Edmond Dantès (the Count of Monte Cristo) lives in several locations. He lives in Rome and Auteuil, outside of Paris. The author of the book, Alexandre Dumas, also built a mansion called Château de Monte-Cristo in the French countryside, which was a real place. Maybe, I’ll go for a looksee.
“What is the point of being alive if you don’t at least try to do something remarkable?” ― John Green, An Abundance of Katherines
The point is to have goals and have some fun. Go on adventures. Dream big. Hard work should be rewarded. It can take decades to build a million-dollar portfolio. Live a little. The most successful retirements are the ones of which people retire to something.
To quote the author John Green, “The way I figure it, everyone gets a miracle. Like, I will probably never be struck by lightening, or win a Nobel Prize, or become the dictator of a small nation in the Pacific Islands.” However, I can fly to Paris on a Monday, have high tea in London on Wednesday, and stay at the Palace in New York City like Serena van der Woodsen in Gossip Girl.
My miracle may not have been to live next door to Margo Roth Spiegelman like the protagonist in the book Paper Towns in which the quote is borrowed from, but I still can create my own miracle. The gift of free time and financial freedom. A life that is well-lived and leisure that is earned.
So with all that said, the question you are to ask yourself, “what would you do with a million in retirement?”
Would you sail around the world?
Would you visit the Louvre in Paris, see the pyramids in Egypt?
Or maybe you would try out your Spanish language skills you learned on Babbel in Spain or Barcelona?
Or would you visit the beaches in Rio?
As for me, maybe I will visit all the places The Chipmunks went to see in the 1987 film The Chipmunk Adventure.
I could buy a Porsche 911 with cash.
I could rent out a beach house on the California coast.
I could stay at the same hotel as James Bond in Montenegro.
I could buy a season ticket to see the Yankees or the Knicks play.
I could buy a ticket to ComicCon in San Diego and go meet my favorite actors from the Marvel Comics films. (Just FYI…I got to meet Orlando Bloom aka Legolas from Lord of the Rings at a comic convention and he was an absolute gentleman!)
I could buy a front row ticket to a concert.
I could fly in to whatever city they decide to visit to get my replica Book of Shadows signed by the cast of Charmed!
Yes, I’m a comic nerd, sue me.
I even have a Betty and Veronica fridge magnet. Yes, from the Archie Comics. Maybe I’ll have a lost weekend like they did on Riverdale and dance the nite away at a club in Vegas. I might even steal Veronica Lodge’s dance moves!
I once flew in to ATL for a day just to go to Six Flags over Georgia!
I have never swam with the dolphins or run with the bulls. However, I did get to meet the iconic actor Val Kilmer and got to be in a Hollywood movie as an extra! Both were pretty cool.
I once even decided on a whim to take the train to New York on a weekday afternoon so I could sip cocktails at the Plaza Hotel.
Just know whatever it is, it will be epic!
About The Author
Miriam started Greenbacks Magnet in 2016 to keep a scorecard of her goal of $1M in investable assets. Armed with a Master in Management (MiM) and a calculator, she teaches readers how to achieve financial independence while also helping them learn how to smell the roses along the way. The palpable response she got from sharing her personal finance goal in a public speaking course at Georgetown University encouraged her to share her story and teach finance on her website. She invests in AI companies as artificial intelligence is the new iPhone of the moment as she likes to invest in companies that are disruptive.
Merriam-Webster definition: Rockstar: a famous and successful singer or performer of rock music.
Greenbacks Magnet definition: Stockstar: a successful investor of stocks and index funds.
I knew there were only six ways to get rich rich: marry money, inherit money, build a successful business, exploit a talent, get lucky i.e. win the lottery, and spend less than you make and invest your savings wisely over a long period of time. That is basically it. The rest are details.
There are many roads and paths to wealth, but all of them come down to six once you weed out all the details. Wealth has to be pursued. It will not just fall into your lap. You have to work for it. The result of hard work is success. The success is measured in dollars. Even though money is just a tool and one barometer for measuring success it is the yardstick that lets you keep tabs on how far you can come in a job done well.
But as we all know building wealth is easier said than done.
It can be as elusive as getting those Taylor Swift Eras tour concert tickets! And like her, I have a blank space and I’ll plan to write millionaire after my name. Ha!
After reading books like The Automatic Millionaire, The Simple Path to Wealth, Your Money or Your Life and a ton of celebrity autobiographies, it occurred to me that even on a modest income, you can rise out of the poverty ashes and rise like the phoenix to wealth.
You just need a plan. If you tried your hand at the first five ways to wealth and failed, you could always be working on the sixth path of saving and investing your way there simultaneously.
If I could not be a ballplayer, rapper, or business owner, I could always invest my money and be the CEO of my stock portfolio. I could be a stock CEO. I could be a stockstar. No college diploma required.
There are 5.3 million millionaires and 770 billionaires living in the United States. Millionaires make up about 2% of the U.S. adult population. Therefore, if you make it to $1 million in investable assets, you are wealthier than 98% of the U.S. population.
Statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich. Having $1 million will put you in a very exclusive club. The double comma club.
Although, the top 1% can earn as much as $955,000. Those annual earnings can seem far out of reach in a country where less than 10% of all households earn more than $200,000, according to the U.S. Census Bureau.
Working toward $1 million is still a lofty and worthy goal. Forbes reported in 2022 that the bracket’s minimum net worth is much higher — a cool $11.1 million. That would mean to be in the top 10% would be a minimum net worth of $1.1 million. This is an achievable goal. See some of my investments below.
My index funds are shown in dollar and my individual stocks are shown in shares.
Stock Portfolio
Investments
2012
2018
2020
2022/23
VTSAX
$20,000
$100,000
$158,000
$220,000
Amazon
102
Apple
20
50
100
Google
330
Over time, I have increased my exposure in individual stocks while also investing in my index funds. I also decided to open up four different retirement accounts: Traditional IRA (Rollover from a previous job), Roth IRA, 401k and Roth 401k. I was able to get both the Roth and regular 401k from my employer(s) over the years. The IRA’s are what just happened over time.
Each retirement vehicle offers different benefits. In order to have more flexibility with my money I have two of each IRA and 401k. See below for definitions and pros and cons or the Roth 401k and IRA and more her from Empower.
What is a Roth 401k? A Roth 401k is an employer-sponsored retirement plan. But unlike a traditional 401k, contributions are made with after-tax dollars.
The Roth 401k was introduced in 2006 to give Americans a new type of retirement savings vehicle to complement the popular Roth IRA, which was introduced in 1997. Roth IRAs and Roth 401ks are similar, but there are some pretty significant differences you should understand when deciding which one is right for you.
Pros and cons of a Roth 401k A big advantage that the Roth 401k has over the Roth IRA is the possibility of an employer matching your contributions up to a certain percentage. Employer matches are the closest thing there is to “free money,” so if you’re deciding between a Roth 401k vs. a Roth IRA — keep this in mind. It’s also important to note here, though, that if you receive an employer Roth 401k match, the matching funds could also go into a traditional 401k.
A con, however, is that a Roth 401k account can sometimes have fewer investment options than a Roth IRA.
Pros and cons of a Roth IRA On the flip side, Roth IRAs generally offer more investment options than Roth 401ks. With a Roth IRA, you generally have a large number of investments to choose from, including stocks, bonds, cash alternatives, and alternative investments. With a Roth 401k, you are limited to the investment options offered by your employer’s 401k plan.
However, one con of a Roth IRA is the income limit associated with this type of account. If you earn too much money, you won’t be able to contribute to this option. Roth IRAs also aren’t sponsored by an employer, which means that there is no employee contribution match.
The most distinguishing characteristic of 401(k)s, whether Roth or traditional, is the high contribution limit, allowing employees to save up to $22,500 per year in 2023. For workers over age 50, the ceiling is $30,000.
Meanwhile, annual IRA contribution limits are $6,500, while workers over 50 years old may contribute up to $7,500 per year.
A Roth 401(k) has a required minimum distribution beginning at age 73, but starting in 2024, the minimum distribution requirement will be eliminated entirely for Roth 401(k)s thanks to the SECURE Act 2.0, which was passed at the end of 2022. Previously, Roth 401(k) account holders could roll their plans into a Roth IRA and avoid the requirement entirely.
That means if you are one of the lucky ones with access to the Roth 401k, then you can essentially put money away for retirement with after-tax dollars and pay nothing on the earnings when you begin your withdrawals and no tax period in your retirement.
I knew that if I could make sure to always focus on investing a portion of my income that I could build wealth no matter what.
My definition of a stockstar is listed above. However, I have a barometer to measure my goal as well.
In order to be a Stock CEO and be one of the big boys, I looked at the compensation packages of CEOs in America. And CEOs are paid! The average salary of a Fortune 500 CEO is $15.9 million per year. The highest-paid Fortune 500 CEO is Elon Musk. In 2021, Musk saw compensation worth around $23.5 billion. He achieved this by exercising Tesla stock options given in a 2018 multiyear moonshot grant.
CEO pay has skyrocketed 1,460% since 1978.
CEOs were paid 399 times as much as a typical worker in 2021; that is up from 366-to-1 in 2020 and a big increase from 20-to-1 in 1965 and 59-to-1 in 1989.
The average CEO salary in the United States is $821,100 as of May 25, 2023, but the range typically falls between $620,600 and $1,057,900.
However, some CEOs like Warren Buffet accept a salary of $100,000. Some have gone so far as to take a salary of $1. For example, in 2010–11 Oracle’s founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation. In some cases, in lieu of a salary, the executives receive stock options. Top CEOs like Elon Musk & Mark Zuckerberg take 1 dollar salary. and know the history of a $1 salary & perks that comes with a one-dollar salary.
Why do CEOs make $1?
The CEOs can afford to earn $1 as they make money through other ways like stocks and equity. This also helps them in avoiding taxes.
Who are the CEOs in the $1 salary club?
Some of the CEOs who take a $1 dollar salary are: Elon Musk (Tesla), Mark Zuckerberg (Meta formerly Facebook), Meg Whitman (Quibi), Larry Page Sergey Brin (Google).
Once I did my homework, I decided that I was going to be a stock CEO.
I may not be running a billion-dollar Fortune 500 company, but could manage a million-dollar stock portfolio.
Every dollar I invest would be my employee.
I would unleash these little worker bees to do their thing and help me build wealth with the power of compounding. That would be my equity pay package and golden parachute when I left work behind.
For example, Presidents / CEOs at companies that have raised Over 30M typically get between 250K and 5M+ shares. However, smaller companies that have raised Under 1M are more generous with their stock compensation as it ranges between 2 and 40%+ for Presidents / CEOs.
Therefore, I could reckon that a CEO of a small firm could get around 100K and between 10K-200K shares. Let’s say a small cap company like Ethan Allen, which has a share rice of $26.40 and a market cap of $667M, then a CEO would have between $263K and $5.28M in stock.
Therefore, if I had bewteen1K and 10K in stocks or index funds such as GOOGL at $125 a share or the VTSAX at $101 a share, I would have $100K to 1.25M in investments. This is a CEO stock equity level right there. Having 10K in shares or $100K-1M in investments means you are a stockstar.
At 550K in investable assets, you are in the top 20% in net worth. At $1.1M, you are in the top 10% of net worth individuals. Think of it like this, if you can’t be a rap star, baller, or Rockstar, you can be a financial Rockstar. Just keep investing.
Like Rihanna, said:
To be what you wish You gotta be what you are Only thing I’m missin’ Is a black guitar index fund
After reading about a couple earning half a million dollars, I could not believe they did not have anything saved for retirement. Especially considering the couple were ages 65 and 59.
You don’t just start in at the top making that kind of money. Oh no. You have to toil in the salt mines for YEARS to make that kind of dough!
All their money is tied up in their home. They have a home worth a million dollars but a stock portfolio worth $0.
That is the type conundrum that just baffles those that are way lower on the income scale.
That would mean making $500,00 for just four years, they have earned $2 million dollars and not ONE RED CENT went to their retirement accounts.
I didn’t read anything about owning any vacation or rental property, old savings bonds, having a few shares in Apple stock, nada.
This couple is burning through money faster than those kids were buying chocolate bars in Willy Wonka. And if you saw the 1971 movie, you saw what pandemonium that was.
I mean where is the money going?
There has to be some sort of financial household accountability and management. Once all the expenses are tracked, you can look for ways to cut. At this income level, I find it hard to believe they do not have a financial advisor or accountant.
This couple could save a small fortune, if they sold their home, ate out less, and sold the pricey cars.
THE STRUGGLE IS REALLY NONEXISTENT
As soon as they earn the money, its spent. We have a serious cash flow problem here. We gotta stop the bleeding. This is a sinking financial ship and we have to plug those leaks. There has to be ways to save.
The couple own a home that will be paid for in 7 years, and at this time is worth around $1.4 million. They stated, “If we sold it tomorrow, we could net $1 million in equity. Home prices are going up faster , so it would be difficult to find a home for less than $750,000 (if we were lucky).”
One word: move.
Drop the financial anchor that is your home and move on. Is this home really worth you living today with nothing?
Take the $1 million in equity and but a modest $300,000 home with cash, then pay off any other debt you owe and start maxing put your retirement accounts. Keep a minimum $100,000 cash high yield savings account and start investing the rest.
If the couple does this, they could stash away $22,500 in a 401(k) and $7,000 in a spousal IRA for 7 years and have over $300,000 with the stock market average return of 10%.
If they can max out two 401k’s, then that would be the equivalent to investing $45,000 per year. Using the same factors as above, that would net the couple a col almost half-a-million ($500k) in retirement savings.
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