What Are High Earners Not Rich Yet (HENRYs)?
Henrys are people with high discretionary income and the potential for future riches. According to a 2003 Fortune Magazine article, “HENRYs” refers to families earning between $250,000 and $500,000 who struggle to save for retirement after paying taxes, education, housing, and family expenses.
The article that coined the phrase “high earners, not rich yet (HENRYs)” emphasized the impact of the alternative minimum tax (AMT) on this group. The word now refers to a younger population for marketing purposes.
Learning about High Earners, Not Rich Yet
Henry was a heated subject throughout the 2008 U.S. presidential election. Democrats called homes above $250,000 “rich” and “wealthiest Americans.” One issue with this categorization is that it does not differentiate between the living costs of various U.S. locales.
The same $250,000 may buy a lot in Houston, but not in New York City. These top earners must sacrifice wealth to live like their wealthier colleagues.
Many professionals, such as attorneys, surgeons, and dentists, might become Henrys because of their wage range. Due to their reliance on six-figure income rather than income-generating assets, the Henrys are considered “working rich” and will not be as wealthy if they cease working. Henrys dedicate more of their earnings to expenses than wealth-building investments, making them feel more like the working class than the wealthiest 1% in America.
HENRYs: Premier Luxury Marketing Target
After the 2008 election, the term “HENRYs” remains a helpful way to describe a population on the path to prosperity, but not yet. Marketers see great possibilities in this transitional phase where a prospective affluent person adapts to rapid discretionary income growth.
The transition is a good time for luxury brands to enter the HENRYs lifestyle and build long-term loyalty. More Henrys exist than ultra-wealthy individuals, creating a larger market for discounted products or services.
Marketers see Henrys as aspirational shoppers, acquiring lifestyle items they expect to acquire. Companies should sell to this sector because their incomes account for 40% of household expenditure.
Luxury firms like Tag Heuer and Louis Vuitton, which previously targeted the elite, now design marketing tactics for Henrys. Henry’s advertising emphasizes distinctiveness and identity. They position their brand, boost its attractiveness, and convey prestige via prominent celebrities and athletes.
Henrys sometimes flaunt their fancy possessions on social media for status. Thus, Louis Vuitton, Tag Heuer, and other luxury companies employ social media advertising and influencers.
HENRYs investment strategies
Henry makes good money but has minimal assets and savings. Better spending habits, saving more, diversifying investments, and taking advantage of tax incentives and deductions can make them “not right yet” and “wealthy.”
Get tax deductions
Henrys pay the highest income taxes due to their high wages. Henry should investigate tax deductions and credits to save money for investing.
Contributing to an individual retirement account might reduce the load. Traditional IRAs offer tax-deductible donations of up to $6,000 or $7,000 for adults 50 or over in 2022. In 2023, the contribution ceiling will be $6,500 (or $7,500 with the catch-up).
SupposeContributing to a standard 401(k) lowers taxable income. These contributions, unlike IRAs, use pre-tax money, reducing the employer’s taxable income. If Henry earns $200,000 and invests $15,000 in a 401(k), his taxable income is $185,000 ($200,000 minus $15,000). Henry profits from tax cuts and more savings and investments.
In 2022, 401(k) contributions can reach $20,500, with a $6,500 catch-up for those 50 and older. The 2023 maximum is $22,500, with a $7,500 qualifying catch-up contribution.
Debt Reduction
Debt prevents Henry from becoming wealthy. Education, mortgages, vehicle loans, and credit card debt are the most significant burdens. Large debt reduces profits, restricting investment and savings.
Henry can pay more than the minimum and restrict card use to decrease credit card debt. Paying more than the minimum reduces the debt and interest faster. Reducing or eliminating credit card use can help the Henrys avoid further debt.
This technique can help swiftly reduce other debt and free up money for savings and investments. Paying more than necessary on student loans can quickly reduce debt and interest. Consolidating student loans can cut monthly payments and interest rates, saving money.
Investment Diversification
Reducing debt may be the first step to wealth, but investing builds it. Reducing debt will give Henry more investment money. Retirement savings accounts are popular due to their tax advantages and investment opportunities. 401(k)s offer employer matching, investment options, and pre-taxed invested cash, reducing Henry’s taxable income.
Real estate investments may build wealth. If monthly rent or mortgage payments are low, Henry may be able to invest in real estate to create income that can be reinvested in other growth vehicles. Henry can invest in REITs for growth and to avoid the hassles of owning and managing investment properties.
Henry can hire a wealth or investment advisor to help them choose investments that match their risk tolerance and goals. A strategy can help them become tycoons with rich prospects.
Henry, who qualifies?
Most researchers consider people with incomes between $250,000 and $500,000 and little savings as Henrys.
How can I join Henry?
Becoming a Henry requires career prioritization for high compensation. Henry will be new to investing. Thus, to become a Henry, prioritize employment, professional development, and income adjustments.
A Henry Millennial?
Like classic “HENRY, millennial HENRYs are early-30s professionals earning six figures. Many people, especially in high-cost areas, may struggle to pay expenses despite their high incomes.
Bottom Line
High Earners, Not affluent Yet Henrys are those who make $250,000 to $500,000 yet have not saved or invested enough to be affluent. Henrys spend most of their salaries on housing, education, and consumption. Retirement and investment funds are scarce, making wealth accumulation difficult.
Henry may reduce debt, increase retirement and investment account contributions, reduce taxes, and work with a wealth counselor to improve their finances. The scale quickly moves from “not rich yet” to “high society.”
High Earners, Not Rich Yet (HENRYs) Conclusion
- High earners, not rich yet (HENRYs), have $250,000 to $500,000 in earnings and the potential to become affluent.
- More of Henry’s income goes to spending than investments and savings.
- Luxury businesses like Louis Vuitton and Tag Heuer are marketing to Henrys because they’re profitable.
- Henrys are considered “working rich” since their money comes from their effort, not their riches.
- Henry may become wealthy by lowering debt, saving, and investing.
