5 Steps You Need To Take To Make It to the Upper Class by Your 50s

Achieving upper class by your 50s is a means to both ensure midlife security and to create a financial safety net for your retirement years. It also requires more money than you might expect.

As previously reported by GOBankingRates, amassing between $1 million and $1.5 million is required to break through to the upper class by your 50s. That amount of money will place you in the top 20% of all earners in America. An important question remains, though: Just how do you earn that amount of money by your 50s?

To find the answer, GOBankingRates recently spoke with Chad D. Cummings, a financial planning and tax attorney/CPA at Cummings and Cummings Law, about the ways in which an average person could make it to the upper class by their 50s.

“Building real wealth by your 50s requires early and uncomfortable financial discipline,” Cummings said. “The middle class spends too much too early. The wealthy, by contrast, buy assets first and lifestyle second. From age 25 to 40, one must routinely save and invest at least 40% of after-tax income.”

How does one go about self-enforcing that level of financial discipline? Cummings suggested “driving a used car, living well below market rent and saying no to the vacations others post about. Anything less, and the math will not work.”

While that may sound stringent, it makes getting to $1 million a far greater possibility.

Cummings described taxes as “the silent killer of upward mobility.”

As he put it, “The tax code punishes earned income and rewards ownership. Most never learn this.”

As an example, Cummings noted that a high earner who neglects to utilize such deductions as IRC § 199A for business income, or IRC § 121 on the sale of a primary residence, risk losing “hundreds of thousands” unnecessarily to America’s complicated tax code.

“Every dollar paid in unnecessary taxes is a dollar that never compounds,” he said. “The wealthy do not pay more taxes — they learn how not to.”

What’s the single most important springboard to wealth aside from a salary? According to Cummings, it might just be equity ownership.

“No one builds true wealth on salary alone,” he said. “Owning part of a business — whether through a side company, law firm, tech startup or family partnership — is non-negotiable. By age 45, those who own nothing often stay that way. … Founding something small is often safer than hoping for something large.”

Owning some form of equity can be an incredibly reliable (not to mention lucrative) means of amassing wealth over time before hitting your 50s.

Cummings doesn’t view real estate as a home; rather, he calls a house “a tax shelter with a roof.” By that, he means real estate can be utilized to generate a massive amount of income over time.

For example, he said, “A four-unit property bought with a 3.5% FHA loan and rented to others can build $500,000 in net worth over 10 years.” That kind of profit alone puts an earner halfway to $1 million and upper-class status.

While not directly related to dollars and cents, Cummings noted that “social circles quietly predict your financial future.”

“Those who become wealthy often marry partners who share their financial values, surround themselves with people who own businesses and seek advice from mentors who are 20 years ahead.”

Surrounding yourself with the financially like-minded, who are just as dedicated to financial discipline, can help eliminate the temptations that come with a social circle of high rollers or irresponsible spenders. Financially conservative friends and loved ones can help enforce your own discipline and support your financial goals.

As Cummings put it, a responsible social circle can reach beyond the basics of financial planning.

“No spreadsheet can model the cost of staying surrounded by people who normalize financial mediocrity,” he said. “The wrong crowd quietly bankrupts potential.”