The term HENRY (High Earners Not Rich Yet) refers to individuals who have the potential to become wealthy in the future because of their income. These individuals or families earn between $250,000 and $500,000 per year and are between 25 and 45 years of age (Gen Z, Millennials, and Gen X). Despite their income, after paying their living costs, taxes, and other expenditures, HENRYs have little left over to save and invest for their retirement. HENRYs are a demographic that politicians consider being ‘rich,’ referring to them as the wealthiest Americans during the 2008 elections. However, there’s more to the HENRY story.
The past 100 years have seen changes in how people plan for their financial futures and how they live. Borders no longer restrict people from living in one country; their profession often takes them to parts of the world they never anticipated. Today, it’s not uncommon for a family to live part-time in one country or become citizens of another country to work or have a business there. Living globally is a lifestyle that many high net worth families, and others, are choosing. Financial planning and living globally what are the risks?
The U.S. doesn’t formally recognize dual citizenship but has not taken any stand against it either politically or legally. U.S. law doesn’t mention dual nationality or require a person to choose one nationality or another. However, a U.S. citizen may ‘naturalize’ in a foreign state without losing their U.S. citizenship. Not all countries are this liberal, creating financial planning complexities for U.S. citizens that choose to live abroad. Additionally, many foreign governments don’t recognize trusts that were formed outside of its borders on assets located inside its borders.
For high net worth families, protecting assets across multiple borders needs to be well planned out and consider the ‘laws of the land’ the individual occupies at the time of their death. Therefore, setting up trusts within each country of citizenship is imperative if the assets are within that country’s borders.
A secondary issue is the taxation of beneficiaries regardless of where they live. Since the financial crisis, many countries now participate in a global Common Reporting Standard and Exchange of Information agreement. The goal of this agreement is to determine and clarify the personal financial information they must share regarding assets, income, and taxable amounts across international borders. The agreement helps prevent tax evasion by individuals who choose to live globally, as a means of avoiding paying taxes.
While working or owning a business located in another country may not be the only reason for living globally, for many, retiring to another country to stretch retirement assets is.
There’s a tremendous amount of change occurring globally- economic uncertainty, political unrest, rising tax rates, gender equality, and changing views of marriage. These reasons are why financial planning is essential to protect your assets and those you intend to leave to beneficiaries. Before deciding to live globally, or if you already are, consult legal professionals in the countries you plan to reside in, even if for only part of each year.
With the expansion of wealth, planning for divorce, same-sex marriages, gender fluidity, and extended families through new marriages while living globally intensifies financial planning. The world will continue to evolve. Investors must keep themselves informed of laws that enhance or create financial planning problems for them or their heirs.
If you are considering living or working globally, I encourage you to meet with me to discuss your investments before relocating.
In addition Safe Haven Wealth Management specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
A growing trend in global debt markets, Green Lending, continues to grow among American debt investors. Green Lending ties sustainability initiatives into loan products designed to entice and reward debtors who meet sustainability goals. The debtor’s sustainability goals are performance-based and include such things as lowering electricity and water usage, reducing landfill garbage, increasing recyclable raw materials in production, and initiatives to reduce their carbon emissions. Meeting these performance goals rewards the debtor with a reduction in the spread of their loan’s interest.
Over the past ten thousand years, the Earth’s climate has remained stable. Today, we know through science and research that climate change is happening. Many scientific organizations are studying the impact of climate change. While simultaneously economists are examining the socioeconomic implications in various regions of the world. Climate change is undoubtedly impacting finance and the economy in many areas. How much it will continue to reshape the global economy is unknown, but the financial sector is already shifting capital towards tackling climate change in many parts of the world.
Being debt-free is possible for everyone, regardless of income. Learning to manage our debt and spending habits and then focus on saving can be life-changing and positively affect your net worth. Net worth calculates by subtracting your liabilities (debt owed) from your assets (not financed). Net worth is calculated for both individuals and companies and is an accurate determination of how much someone, or something, is worth. In this article, we discuss how you can create a debt reduction plan for 2020.
Consistent growth in net worth is an indicator of good financial health. If liabilities grow faster than assets, or the value of assets drop, it indicates poor financial health and likely a negative net worth.
Many people decide to ‘semi-retire’ early and start taking their Social Security Retirement benefit at the earliest age possible. It’s appealing to be able to work part-time or where you have an interest. You may start a small business while making an income and receive Social Security retirement benefits. While early retirement and a part-time job may be of interest to you, it can affect your Social Security Retirement benefits if you aren’t full retirement age. Take the social security earnings test to learn more about your social security benefits.
With 2020 barely started, preparation for tax season is underway for many investors. Now in the second year of filing taxes under the Tax Cuts and Jobs Act of 2017 (TCJA), focusing your attention on deductions, you can use versus those that were eliminated will necessitate that you plan. The idea of TCJA was to increase the number of Americans who choose the standard deduction rather than itemizing. Here are a few standardized 2019 deductions you don’t want to miss:
Effective January 1, 2020, the SECURE Act, a progressive change to retirement savings plans, is now law. The last legislation to retirement savings happened when Congress allowed for the automatic enrollment of employees. Also the addition of Target Date funds to retirement plans in 2006.
While the new law intends to provide additional opportunities for Americans to save for retirement, other changes will affect both estate and retirement planning in these critical areas:
Many people refer to their retirement savings as a “retirement nest egg,” but in theory, it should be made up of many sources of retirement income-many eggs. Even if Social Security and a company retirement plan were their only retirement savings sources, likely they haven’t thought about their withdrawal strategy. It’s not as simple as just drawing down retirement income from one or two sources without a plan. Have the following been considered?