How To Invest Like the Super Rich Using These 3 Accounts

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Do you consider yourself wealthy, or are you financially confident enough to say you’re super rich? Feeling wealthy and actually being wealthy may be two different things, but that doesn’t mean you can’t aspire to build your bank account like any high-net-worth individuals you admire.

Of course, Americans of varying income classes have an equal amount of varying concepts as to what makes someone rich. Though financial confidence can depend on lifestyle factors to the size of your paycheck, here are a few key takeaways on what many economic analysts consider to be wealthy:

• In general, most Americans agree that an average net worth of about $2.5 million is necessary to be considered rich.
• Many economists agree that annual household incomes between $106,000 and $150,000 are generally considered to be within the upper-middle-class range, or somewhat wealthier Americans.
• How much you make, or can save, is directly correlated to where you live, your lifestyle, how many passive income streams you have and the general cost of living. Even high earners might not be able to afford much more than housing and healthcare, especially those susceptible to lifestyle creep.
• When it comes to how rich you need to be to retire comfortably, many financial experts say you may need to save around eight to 10 times your final working year’s salary, which could translate to a nest egg of roughly $1 million or more for most people.

If you are tired of not being rich, there are a few tips and tricks you can glean from the how-to-be-wealthy handbook. Here are three accounts that super-rich people use to grow their wealth — and you can, too.

Use Roth IRAs To Enjoy Tax Advantages

A Roth IRA is an attractive retirement account to consider, whether you are already rich or trying to build your net worth. When certain requirements are met, you can withdraw tax-free, keeping more of what you earn.

Keep in mind that Roth IRAs do have income limits, but that doesn’t mean wealthy people and high earners are immune to them. For example, you can transfer the funds from a backdoor Roth IRA to turn it into a traditional IRA, so it’s an account with the more expected tax benefits of this type of account.

Wealthy people tend to be tax strategists. They know that while there may be taxes involved on any growth as you transfer the accounts, this method offers the opportunity for those earning above the income limit to contribute to a Roth IRA.

Utilize Your Employer’s 401(k) to Build Wealth

A 401(k) account is one of the top ways people save up for retirement, including millionaires.

According to a Ramsey Solutions survey with over 10,000 millionaire participants, eight out of 10 millionaires invested in their company’s 401(k) plan. “That simple step was a key to their financial success,” the survey found.

Benefit From Brokerage Accounts

With a brokerage account, you can buy and sell various investments like stocks, mutual funds, bonds and more. It is a good option for people who want to retire early because there aren’t limitations on reaching a certain age or meeting specific requirements to withdraw tax-free like other investment accounts.

Retirement brokerage accounts are tax-deferred, so you don’t pay taxes on any earnings within that account. However, you may owe taxes when you withdraw the money from the account, so make sure you understand the tax implications overall. 

Nonretirement brokerage accounts, which are also referred to as taxable brokerage accounts, don’t have the same tax-deferred advantage. Simply put, investment earnings and capital gains in these accounts are taxable income to the account owner in the calendar year when the earnings happen

Millionaires use brokerage accounts for low-cost index funds. This is likely due to the fact that buying and holding index funds in a brokerage account makes it possible to keep and grow wealth over the long term, and thus more efficiently achieve your financial goals. 

Final Take To GO

With the right strategy accompanied by sound financial decisions, you can plan, save and invest in the stock market like the rich do. 

Most millionaires in the U.S. come from “families at or below middle-income level,” according to the Ramsey Solutions survey. “The overwhelming majority (79%) of millionaires in the U.S. did not receive any inheritance at all from their parents or other family members. While 1 in 5 millionaires (21%) received some inheritance, only 3% received an inheritance of $1 million or more,” the survey found.

So, if your goal is to reach millionaire status, these are three ways the rich make their money grow that average investors can implement, too.

Caitlyn Moorhead contributed to the reporting for this article.

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