What exactly are HENRYs—High Earners Who Aren’t Rich Yet?
High earners who aren’t rich yet (HENRYs) are people who have a good chance of becoming wealthy in the future and have a lot of money to spend. Shawn Tully coined the term “high earners, not rich yet (HENRYs)” in a 2003 Fortune Magazine article to describe a group of families who earn between $250,000 and $500,000 but don’t have much left over after paying taxes, paying for school, housing, and family costs—not to mention saving for a comfortable retirement.1 The original article discussed the alternative minimum tax (AMT) and how hard it affects this group of people. Since then, products and services have been marketed to a younger demographic using the term.
Understanding Rich People Who Aren’t Rich Yet
During the 2008 U.S. presidential campaign, the HENRYs segment of the population sparked a lot of discussion. The Democratic Party frequently referred to households with incomes exceeding $250,000 as the “rich” and “wealthiest Americans.”2 However, one issue with this classification is that it fails to distinguish between the costs of living in various regions of the United States. For instance, $250,000 may go a long way in Houston, but it would not provide anything comparable to a lavish lifestyle in New York City.3 These high earners are expected to have much of the same lifestyle as their wealthier compatriots, but they do so by
Due to the range of salaries associated with their fields, many professionals, such as lawyers, doctors, dentists, and so on, have the potential to be HENRYs. The HENRYs are referred to as the “working rich” because a significant portion of their anticipated future wealth is based on a six-figure income rather than income-generating assets. A HENRY’s earnings are spent more on expenses than on investments that build wealth, giving them the impression that they are more like the 1% of Americans who are wealthy than they are.
HENRYs as the most important market for luxury marketing.
Although the election of 2008 has come and gone, the term “HENRYs” has remained as a useful way to identify a group of people who are on their way to wealth but aren’t quite there yet. Marketers see a lot of potential in the transitional period when a future wealthy person is still adjusting to a rapid rise in disposable income.
The transition is viewed as the ideal opportunity for a luxury brand or service to integrate itself into the lifestyle of Henry and begin cultivating long-term customer loyalty. Even if the products or services are marked down slightly, there is a deeper market there because there are more HENRYs than ultra-wealthy people in the world.
Luxury brands like watchmaker Tag Heuer and retailer Louis Vuitton, which used to cater to society’s elite, have developed new marketing strategies targeting HENRYs.
Marketers believe that HENRYs are more likely to be aspirational buyers, which means that they are beginning to purchase the accouterments of the lifestyle they one day hope to be able to fully afford.4 This segment’s incomes make up about 40% of household spending, which makes a good business case for companies to market to They use publicizing based on Henry’s guiding principle: distinctiveness and identity As a result, Louis Vuitton, Tag Heuer, and other luxury brands incorporate social media advertising and the use of social media influencers into their marketing strategies.
They also use well-known celebrities and athletes to position their brand, promote its appeal, and communicate a message about status.5 Many HENRYs appreciate luxury goods for status and frequently use social media to flaunt their consumption of these items.4
Strategies for HENRYs’ investments
The HENRYs make a lot of money but only have a small amount of savings and investments. They can move from being “not right yet” to being “wealthy” by improving their spending habits, increasing their savings, diversifying their investments, and taking advantage of tax credits and deductions.
Tax Benefits.
The Henrys typically pay the highest income taxes due to their high earnings. Henrys ought to investigate tax credits and deductions that can lessen their taxable income; More money for investing means less money for taxes.
Contributing to a retirement account, such as an individual retirement account (IRA), is one way to alleviate the burden. Contributions to traditional IRAs are tax-deductible in 2024, up to a maximum of $7,000 for individuals under 50 and $8,000 for those over 50. Alternatively, contributions to a 401(k) also reduce taxable income as long as they are made to a traditional 401(k).
In 2023, this limit was $6,500 (or $7,500 with the catch-up contribution).6 Since these contributions are made before taxes, unlike those to an IRA, the employer’s taxable income is reduced. For instance, if a HENRY earns $200,000 per year and makes $15,000 per year in 401(k) contributions, his reported taxable income will be $185,000. A decrease in taxes and an increase in savings and investments both benefit the HENRY family.
In 2024, a 401(k)’s maximum contribution is $23,000, with a $7,500 qualifying catch-up contribution for people 50 and older. With a $7,500 qualifying catch-up contribution, this limit will be $22,500 in 2023.6 Debt Reduction
The accumulation of debt is one obstacle that prevents the HENRYs from realizing their full wealth potential. Education expenses, mortgages, auto loans, and credit card debt account for the majority of the burden. Earnings can be eroded by high debt, limiting the amount that can be invested and saved.
Henrys can limit their use of credit cards and pay more than the minimum amount due to reduce their credit card debt. If you pay more than the minimum amount due, both the balance and the amount of interest will be paid off sooner.
The HENRYs’ overall debt can be reduced and further debt can be avoided by limiting or eliminating their use of credit cards.
The same results can be achieved by applying this strategy to additional debt, freeing up income for investments and savings. Paying more than the required amount on student loans, for instance, can quickly reduce debt and interest. In addition, with a lower interest rate and lower payment, consolidating student loans can lower the monthly obligation and save money.
Investment diversification.
Getting rid of debt may be the first step toward wealth, but investing is how wealth is built. The HENRYs will have more money left over after paying off their debt. Due to their investment options and tax advantages, retirement savings accounts are popular investment vehicles.
The HENRY can, for instance, take advantage of employer match, a variety of investment options, and pre-taxed invested funds in 401(k) plans, all of which reduce the amount of taxable income that must be reported.
Real estate investments can bring in profits that help people build wealth. The HENRY may be able to pursue real estate investments to generate income streams if personal rent or mortgage payments are not excessive; that money can be put back into other ways to grow.
In a similar vein, the HENRY has the option of investing in real estate investment trusts (REITs) for growth and to steer clear of the obligations that come with owning and managing investment real estate properties.
A professional wealth or investment advisor can help HENRYs select investments that meet their risk tolerance and investment objectives. They can go from being a wealthy prospect to a tycoon by coming up with and sticking to a plan.
Who Meets the HENRY Standard?
There are no universal criteria for being a HENRY, but most analysts will classify people as HENRYs if they earn between $250,000 and $500,000 and have little savings.1 How Do I Become a HENRY?
To become a Henry, you must put your career first in order to land a high-paying job. A HENRY will have just started investing, and they won’t necessarily have saved a lot of money. As a result, if you want to become a HENRY, you should concentrate more on your job, your career, and changes to your working income.
Who Are Henry Millennials?
A millennial “HENRY” is someone in their early 30s who earns a salary in the six figures, just like a traditional “HENRY.” Even though they have a lot of money, these people may have trouble making ends meet or paying their current bills, especially if they live in an area with high living costs.
The Conclusion
The term “High Earners, Not Rich Yet” (HENRYs) refers to people who have high incomes—typically between $250,000 and $500,000—but do not have sufficient savings or investments to be considered wealthy. The majority of HENRY’s income is consumed by housing, educational expenses, and consumer spending. Because there isn’t much left for retirement and investments, it’s hard to be wealthy.
HENRYs have a number of options for improving their financial situation, including working with a professional wealth advisor, reducing debt, increasing contributions to retirement and investment accounts, and lowering tax obligations. They can quickly observe the scale shifting from “not rich yet” to “high society.”
