4 Money Habits That Help the Upper Middle Class Stay Wealthy
While it's easy to assume those in higher income brackets spend all their extra cash on fancy cars, vacations and designer clothing, the truth is that many upper-middle-class households focus on long‑term financial strategies.
Generally, a household income of roughly $150,000 to $250,000 is often considered upper middle class, although that definition can vary widely by region due to differences in cost of living. We spoke with wealth experts to get a better idea of the ways this group is putting its money to work. Here's what they had to say.
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1. Maximize Tax‑Advantaged Accounts
"While available to anyone, the upper middle class is often more able to maximize contributions to tax-advantaged accounts like Roth IRAs, 529 college savings plans or Health Savings Accounts," said financial planner Taylor Kovar. "Their higher disposable income allows them to take full advantage of these tools for long-term savings."
This, of course, can set them -- and potentially their children -- up for continued financial success in both the short and long term.
2. Start Retirement Investing Earlier
"With more resources at their disposal, the upper middle class can start investing for retirement earlier and more diversely, including in higher-risk/higher-return instruments," Kovar said. "They might also invest in private equity or hedge funds -- options not typically considered by the middle class due to the higher minimum investment requirements."
Saving earlier for retirement -- and potentially more aggressively -- can allow the upper middle class to continue their comfortable lifestyle in their golden years.
3. Professional Tax Planning
"We find that higher-income individuals [commonly] invest in professional tax planning services involving accountants and lawyers," said Matthew Silverhardt, private wealth advisor at Claire Reid Wealth Advisory. "A luxury that may be financially out of reach for the middle class, but can have [a] significant long-term impact on your wealth."
Without the right knowledge, he said, you can only get so far on your own. "While basic tax strategies remain accessible to everyone, the intricacies of certain structures may require a higher financial threshold."
Hiring high-level tax professionals likely isn't cheap, but it can clearly be a savvy move for those who can afford it.
4. Professional Money Management
"What we find as advisors is that the upper middle class often engage in sophisticated financial planning moves that may be challenging for others to replicate, or they just haven't made the commitment to the right financial planning help," Silverhardt said.
He noted making these moves can come with a serious payoff, but expert assistance is typically needed.
"The more money we earn often leads to more opportunities for it to grow exponentially," he said. "With this opportunity often comes the realization that you will need help from an experienced group of financial professionals to make it happen."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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