Monday, October 27, 2008

HENRYs

The media has coined a term for folks who earn good money but bear the brunt of taxes and have no real wealth - HENRYs (High Earners, Not Rich Yet). I think the "Not Rich Yet" is too optimistic - earning power does not equal wealth and likely won't for most people. Rich means you have assets, not just income. The HENRYs in the article above (like Husband and me) have no real assets other than retirement accounts, 529 Plans and a house mostly mortgaged. The Really Rich can shield their income from taxes through tax shelters and asset allocations.

Working at a Big Firm means I do make a good salary. But I also need to save for retirement (since there will be no social security or medicaid when I'm a senior citizen), kids schooling, nanny/day care. It means that we have to be very careful about spending - and we have to constantly assess whether we have enough money to pay taxes. My friends think that a good salary means I should be paying more in taxes but why do we also lose all deductions? Thanks to AMT (Alternative Minimum Tax) and phase out for deductions in the standard tax returns I don't get much benefit (or any really) for children, home ownership, student loans. It makes sense if you pay a flat percentage of your income and get rid of all deductions for everyone. So the government doesn't subsidize children or home ownership (look at the trouble that subsidization caused in the market!) and everyone pays a fair portion. I'm not saying I have the answers to our fiscal deficit but I do hate that the first thing certain of our candidates want to do is raise taxes to pay for social programs.

No wonder working at Big Firm often results in "golden handcuffs". I may have bought a house I could afford at another less-paying job but I don't think we could afford the tax bill if I did leave.

Everyone has a tough time with finances and I know my husband and I do well for ourselves (I won't say we're lucky since we work hard - but we are blessed) but it is hard to be worrying so much about finances on top of everything else. It makes the breastfeeding seem like a distant worry (although BF is cheaper (free!) than formula).

Okay - just wanted to post something OTHER than babies for once. Husband also has a finance post he'll be adding soon.

5 comments:

Nancy said...

Man. Guess I'm lucky I'm married to a Post-Doc LOL No where near a "HENRY" ;)

10 lbs of awesome in a 5 lb bag said...

I'm on board with just about everything you said there, as I'm in the same boat as you.

The only point with which I disagree is your comment: "I do hate that the first thing certain of our candidates want to do is raise taxes to pay for social programs."

Keep in mind how much we're spending on the military, Social Security, and Medicaid:

http://www.federalbudget.com/

http://en.wikipedia.org/wiki/Image:Fy2009spendingbycategory2.png

http://www.nationalpriorities.org/FY2008%20total%20outlays%20as%20proposed

http://mgmt339.wordpress.com/2007/04/12/us-federal-budget/

http://services.alphaworks.ibm.com/manyeyes/view/SpewYEsOtha6E2-0f91aE2-

http://www.warresisters.org/pages/piechart.htm

Those things add up to over 60% of the budget, and, earmarks, if Obama was correct (I'd be happy to be corrected) were "only" $18 billion. That's about a month and a half of the Iraq war, which I understand costs us $10 billion per month. Believe me, I'm all for saving $18 billion, if it's going to pork and other nonsense. Even if we cut all that out, we still have a lot of spending going on that won't really be touched. I'd even support killing NASA and pulling our troops out of Europe and Japan, but that still wouldn't get us very far.

I'm hoping that any tax increase on the amount earned over $250,000 (remember, you pay varying rates for each chunk of your income - 15% for the first level, and on up) will go to paying down the deficit and will allow us to stop massive deficit spending. (http://www.bigmattress.com/mt-archives/greenberg21.jpg ; http://10lbsofawesome.blogspot.com/2008/06/increases-in-national-debt-broken-down.html).

In the past several administrations, a Democratic administration has led to lower deficits. The Republicans have spent more and taxed less. It's like me cutting back to part time at work and then maxing out my credit cards by buying everything under the sun. Sure, I'd like to live that way...but how long could I pull that off?

LauraC said...

Thanks for the very interesting read. Jon and I always struggle to understand how everyone else afford kids bc we certainly make enough. It just all goes right back out the door to 401Ks, 529s, life insurance policies, day care, etc.

a crapshack in nova said...

I read the article. We're not HENRYs, just middle class schlubs. :-P

I honestly have a hard time feeling sorry for the 2.3% of the population that makes up this group. Sure this economy sucks. And taxes suck. Paying for childcare sucks. Saving for retirement sucks (especially when you could just cry to watch your 401k balance go down the toilet along with the NYSE).

But the fact of the matter is that there are a lot more people who are working just as hard as the HENRYs and getting by with a lot less. The people in that article sounded like a bunch of entitled brats. JMHO.

A. said...

Is this a counter to my fruit fly post? You worried it's too convincing? ;-)