Is there such a thing as “wealth creation secrets” at the top 1%?
I read an interesting article about the wealth distribution in the US. It’s not just where the wealth is at but more about how at the top 1% level of wealth the rules are different than for you and me.
The top 1% of the wealth in the US are those households that have at least $1.2M in net worth and earn $300k per year or more. This kind of income will include doctors, lawyers, corporate executives and successful small business owners…no surprises there.
However there is a big jump when you look at the top half of the top 1%…
In this group now all of a sudden you get the people that have $5M or more in net worth. What’s curious is that people in this group are likely to be in the financial services or banking industry or somehow associated to those industries…hmmm. No wealth creation secrets there.
Where it gets interesting is that at this level of “richness” there comes influence…political influence. These are the people that can lobby in Washington, have lunches with senators, make sizable contributions to political campaigns, and so on.
At the risk of going political on you let me change direction a bit…
The one thing that caught my attention was that the bottom half of the top 1% (lawyers, doctors, execs., etc.) make a lot of income through salary therefore they pay a lot of taxes. On the other hand the upper half relies less in salary and most of their net worth comes from stock options, capital gains from stocks and real estate and private business sales.
The catch is that these forms of net worth are taxed at a much lower rate than salary income. Therefore the upper half of the 1%, even though they make and have more money, might actually be in a lower tax bracket than the bottom half of the 1%.
Once you get past your initial frustration from considering this, and being the “glass half full” type of guy that I am, let’s think about what we can learn from this.
Wealth creation “secrets”?
I don’t think so…it’s more about making money in ways that are not a “job”.
One of the lessons here is to consider how you can get into these same wealth creation “secrets” that pay less taxes and focus on building your wealth instead of your income.
Real estate is of course an obvious choice. No, you might not get to own the Chrysler Building in Manhattan but even owning simple single family homes can provide some of the same benefits for building wealth.
Also, starting your own business (see this post on Building Personal Wealth), even while keeping your job can provide you with an income that could be taxed less than your salary and in many cases can be more secure. Plus, a business grows, so what you start today can be worth a lot more in the future.
On top of that both real estate and a business, can provide a financial backup when (not if) the time comes (maybe due to the actions of the top 0.5%) for your job to disappear…
More wealth creation secrets