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Financial Samurai

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Ranking The Best Passive Income Investments

Updated: 05/18/2022 by Financial Samurai 446 Comments

If you’re looking to achieve financial freedom before a traditional retirement age (60+), you must build passive income. This post will highlight the best passive income investments in our current low interest rate environment.

Passive income is the holy grail of personal finance. If you have enough passive income to cover your desired lifestyle, then you are free at last! You can say and do whatever you want. Too many people fail to live their truth due to a lack of passive income.

However, the only way to generate useable passive income is by building a taxable investment portfolio, which includes investing in real estate, alternative investments, and more.

Maxing out your 401(k), IRA, and Roth IRA are great moves. Unfortunately, they can’t generate passive income to live on until after you turn 59.5, in most cases. When it comes to achieving financial freedom, the hope is that we achieve it as soon as possible given our time is limited.



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The First Million Might Be The Easiest: How To Become A Millionaire By Age 30

Updated: 04/21/2022 by Financial Samurai 331 Comments

Want to learn how to become a millionaire by 30? Here’s my story on how I reached a million dollar net worth in my late-20s. It involved a lot of luck, a lot of effort, and a lot of risk. But I believe all Financial Samurai readers will eventually become millionaires.

Now that I’m in my mid-40s, in retrospect, I should have taken even more risk. Taking more calculated risk is a key theme if you want to become a millionaire at a relatively young age. Move to where you have the most career opportunity. The second key theme to become a millionaire by age 30 is to own appreciating assets that work hard for you.

Thanks to inflation, it takes at least $3 million to live the lifestyle of a real millionaire today. If you own assets like real estate, stocks, and businesses, inflation will start working for you. Don’t make life harder than it already is!

How To Become A Millionaire By Age 30: Financial Upbringing

Growing up in a middle class household made me strong. My parents always drove beaters and frowned upon ordering anything other than water when we went out to eat.

I knew my parents were not rich because their incomes were in the public domain as foreign service officers. As a result, I made a conscious choice in high school not to attend one of the two private colleges that had accepted me. Instead, I went to William & Mary, which cost $2,890 – $3,200 a year in tuition from 1995-1999. I needed to save money.

We were by no means poor. We just pulled up to parties in a paint-less 1976 Nissan Datsun alongside Audis, Mercedes, and BMWs for the four years we lived in Kuala Lumpur, Malaysia between 1986-1990. It was very mortifying as a kid.

I knew nothing of expensive shoes because I had none. My wealthier friend gave me his old Air Jordans 4s that were two sizes too large. I couldn’t even afford a camera or a Nintendo game system. We led comfortable lives, but didn’t have more than we needed.

I was always curious about my wealthier friends. Many of their parents were business owners. So one day I told my father I too wanted to be a businessman.

By the time I was 13 I was hooked on every single episode of “The Lifestyles Of The Rich & Famous,” narrated by Robin Leech. A million dollar house and a $40,000 sports car. What a life! I thought to myself in the 8th grade. Might as well give it a go. That’s when I started really hitting the books.



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How Much Should I Have Saved In My 401(k) By Age?

Updated: 04/02/2022 by Financial Samurai 1,051 Comments

Are you looking for a 401(k) savings guide? This post will go through how much I think you should have in your 401(k) by age in order to have a comfortable retirement in your 60s and beyond.

The 401(k) is one of the most woefully light retirement instruments ever invented. The maximum amount you can contribute is $20,500 for 2022, up from $19,500 in 2021. A 401k is part of your three-legged retirement stool. The other two legs include your after-tax investment accounts and your side hustles.

Although the 401(k) pales in comparison to a nicely funded pension, even more disappointing than the 401k is the IRA. With the IRA retirement plan, you can only contribute $6,000 in pre-tax dollars. Further, you can only contribute if you make under $76,000 a year as an individual and $125,000 as a married couple. What about the rest of us?

Meanwhile, you have to make less than $140,000 a year as a single person or $208,000 as a married couple for the privilege of contributing the maximum $6,000 in after- tax dollars to a Roth IRA. I do not recommend doing this before maxing out your 401(k).

Give me a pension that pays 70% of my last year’s salary for the rest of my life over a 401k or IRA any time! At least with the 401(k), anybody can contribute.

2022 401(k) contribution limits for employee and employer

Average 401(k) Retirement Balances

Based on Fidelity’s 2020 study, here are the average retirement balances for the IRA, 401(k), and 403(b). Expect the balances to be 5-10% higher for 2022.

  • The average IRA balance was $111,500, a 13% increase from last quarter. It is slightly higher than the average balance of $110,400 in 2019.
  • The average 401(k) balance increased to $104,400 in Q22020, a 14% increase from Q1 but down 2% from a year ago. For 4Q2020, the average 401(k) balance rose to roughly $120,000.
  • Average 403(b) account balance increased to $91,100. This is an increase of 17% from last quarter and up 3% from a year ago.
Average Retirement Balances Q22020 - 401k savings by age

Given the stock market has continued to do very well in 2021, the average 401k savings by age is likely up another 5% – 10% this year.



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How To Better Manage Your 401(k) For Retirement Success

Updated: 03/22/2022 by Financial Samurai 50 Comments

Are you looking to learn how to better manage your 401(k) for retirement success? You’re in the right place. At 34, I managed to grow my 401(k) to over $500,000 during my relatively short 13-year career working in finance. Today, my 401(k) is now worth over $1,000,000 after I rolled it over to an IRA.

My 401(k) is seen as gravy for when I reach 60 because I’ve been focused on building my taxable investment portfolios for passive investment income. If your passive investment income can cover your desired living expenses, you’re golden. Treat your 401(k) as a “nice to have” retirement vehicle you do not depend on.

Early Retirement And Your 401(k)

Early retirement is fantastic. There’s only one problem. Most early retirees no longer contribute to their 401k’s unless they start a business. If you start a business, preferably an online one due to the global pandemic, you can begin contributing to a Solo 401k.

However, most people can’t be bothered. If you can’t contribute to a 401(k), then you also lose out on employer 401k matching and profit sharing. I just took a look at my final year’s employer 401(k) profit sharing plus match and it came out to $27,000. There’s much more to your job than just your salary!

My 401(k) now makes up a minority portion of my stock investments. The reason why Is because I’ve been focused on building up my taxable accounts. It is your taxable accounts that will generate enough passive income to live off if you retire early.

That said, I still believe the 401(k) is one of the most retirement vehicles we have today. It is one of the legs in the new three-legged stool for retirement. Here’s how to better manage your 401(k) for retirement success.



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The Average Net Worth For The Above Average Person

Updated: 05/03/2022 by Financial Samurai 985 Comments

When it comes to your finances, everything is relative. To get ahead, you must outperform the average. If everybody is up 20% in their investments, have you really gotten richer? You have not. This post will discuss the average net worth for the above average person. Our goal is to outperform the average.

You’ve got one life to live. You can have the average net worth in America, which is pretty low. Or, you can shoot to have an average net worth for the above average person. Let’s all shoot to be above average with our one and only lives! This is, after all, Financial Samurai.

If we all earn $1 million dollars a year and have $5 million in the bank at the age of 40, none of us are very wealthy. With this level of wealth, all our living costs (housing, food, transportation, vacations) will be priced at levels that squeeze us to the very end.

As such, we must first get an idea of what the real average net worth is in our respective countries, and then figure out the average net worth for the above average person!

Average Net Worth By Age In America

According to the latest Federal Reserve’s Triennial Consumer Finance Survey available, the average net worth for the following ages are:

Under 35: $76,200

35-44: $288,700

45-54: $727,500

55-64: $1,167,400

65-74: $1,066,000

75+: $1,067,000

Not bad. But these average net worth numbers are skewed by the super rich who have generated an enormous amount of wealth since the financial crisis.

Although the average net worth for all Americans is roughly $692,100, the median net worth is a more pedestrian $97,300 as of 2021. Meanwhile, the median age for Americans is around 36.

Let’s look at the average net worth for above average people. It’s much more rewarding to shoot for stretch goals and achieve the.



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The Rise Of Stealth Wealth: Ways To Stay Invisible From Society If You Have Money

Updated: 05/03/2022 by Financial Samurai 309 Comments

Becoming wealthy has never been easier in America. Both stocks and real estate have performed phenomenally well since 2009. However, feeling comfortable as a wealthy person on the other hand, has never been tougher. The pandemic has created a K-shaped recovery where the investor class has widened the gap between the working class. This widening gap is why I’m a big proponent of practicing Stealth Wealth.

Most recently, the investor class crushed it in 2020 and 2021, with the S&P 500 doing extremely well. The housing market is also booming and will likely continue to do well for years. If you are an owner of real estate, stocks, and other appreciating assets, you are getting richer by the month.

Meanwhile, millions of people lost their jobs or were long-term underemployed. To be open about your income and wealth gains would be completely foolish when so many people are hurting. Instead, if you are rich, it’s much better to convince people you are middle class. This way, when the revolution comes, you will be spared.

Further, just look at how the government taxes your money. The government taxes you based on income and much less so on wealth. Taxes are likely going up under Joe Biden as well. Therefore, stealth wealth is paramount.



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How Much Money Do The Top Income Earners Make?

Updated: 01/07/2022 by Financial Samurai 1,333 Comments

Ever wonder how much money do the top income earners make? Once you know how much the top income earners make, then you can better shoot to be a top income earner yourself. After all, everything is relative when it comes to money.

Americans are rich by world standards. With a median household income of roughly $70,000, America consistently ranks in the Top 20 richest countries in the world. Many of the world’s top income earners live right here in our great country.

Other rich countries that have a higher GDP per capita than America include Liechtenstein ($139K), Qatar, Monaco, Macau, Luxembourg, Bermuda, Singapore, Isle of Man, Brunei, Ireland, Norway, Falkland Islands, UAB, S. Maarten, Kuwait, and Gibraltar. Countries with similar GDP per capita to America include Hong Kong, Switzerland, and Saudi Arabia.

If at birth, you had the mental capacity to choose where you’d like to live for most of your life, living in a top 20 richest country will more than likely help you become a top income earner as well.

Even if you end up being the most mediocre producer, you are still miles ahead of much of the world. Too bad many of us can’t pick where we want to grow up and earn a living. As such, it’s nice to understand how we compare against the rest of the world to give us some perspective.

Let’s take a look at what the top income earners make in America. Once you know the income figures, you can then strategize on how to get there.



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Explaining Why The Median 401(k) Retirement Balance By Age Is Dangerously Low

Updated: 02/09/2022 by Financial Samurai 189 Comments

The median 401(k) retirement balance is low. With such low median 401(k) retirement balances, it may be harder for a large swatch of Americans to retire comfortably. This post interviews various people with low 401(k) balances who explain why their 401(k) balances are so low.

You likely won’t be able to live off your 401(k) alone in retirement. However, you should be able to combine your 401(k) with alternative savings, other passive investments, and Social Security to live a financially free life when the time comes to withdraw at the age of 59.5. Most Americans don’t have pensions.

The reality is that the median account balance in the U.S. is only around $72,000 for 55-64 year olds in 2021 according to Vanguard, one of the largest 401k managers. The average 401k balance for 55-64 year olds is roughly $178,000.

But the average is screwed up to due the super wealthy. Even with $178,000 in your 401k at retirement age, you aren’t going to be living it up for the next 20 – 30 years without alternative sources of income.

Average and Median 401k Balance By Age Group - Vanguard
Source: Vanguard balances

According to data from Fidelity, here’s the average 401k breakdown by age in 2021:

  • Ages 20 – 29: $9,900
  • Ages 30 – 39: $38,400
  • Ages 40 – 49: $91,000
  • Ages 50 – 59: $152,700
  • Ages 60 – 69: $167,700
  • Ages 70 – 79: $160,200

Given the median age of Americans is 35.3 according to the US Census Bureau, the median 401(k) balance per person should be closer to $150,000 – $500,000 according to my 401(k) retirement savings guide instead of these pitifully low levels.

In this article, I’d like to share some stories on what happened to all the missing savings because we all know we should be maxing out our 401k every year for as long as we work. 



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How To Retire Early And Never Have To Work Again

Updated: 02/01/2022 by Financial Samurai 328 Comments

There’s nothing better than being free to do whatever you want. However, unless you’re born with a multi-million dollar trust fund, you’ll unfortunately have to work for your freedom. This article will discuss how you can retire early and never have to work again.

You can follow my savings guide to increase your chances of a wonderful retirement by 50-65. But, what if you want to retire earlier? Say at the age of 40, 45, or 50?

You’re in luck. I have a very simple, yet effective plan for you on how to retire early. This is something I’ve been following since I graduated from college in 1999.

In 2012, I was able to finally leave my day job in finance at age 34. I haven’t returned since. The catalysts for my early retirement were: 1) negotiate a severance that paid for six years worth of normal living expenses, 2) having enough passive income to cover my living expenses, and 3) having something to retire to.

As I look back upon my time as an early retiree, there really isn’t much I would change. Having all the freedom in the world is priceless. You will not regret all the work it takes to achieve financial freedom. But you may regret looking back on your life and wishing you didn’t try harder or take more risks.

What’s important is recognizing your inner frugality, your Herculean discipline, the government’s generosity, and your enormous hustle. There’s nothing better than taking action with your finances and seeing results!



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Scraping By On $500,000 A Year: Why It’s So Hard To Escape The Rat Race

Updated: 05/03/2022 by Financial Samurai 659 Comments

Can you imagine scraping by on $500,000 a year? Well, believe it. Thousands of households living in expensive cities are running on this never-ending treadmill. It’s only when you can lock down expenses, save and invest aggressively, will you ever escape the rat race.

They’ve got big mortgages, private school tuition to pay, and fancy cars to drive. No matter how much they make, these households tend to spend all their income and not save as much as they should. Now with inflation running at above 7.5%, important costs are simply going up further.

I’ve highlighted in a previous article how living off $200,000 a year in an expensive city is really just an average lifestyle. In this article, I’ll discuss how one couple is living paycheck to paycheck while making a combined $500,000 a year. They are a real couple who shared with me their financial details to anonymously share with you. Judging others, after all, is an American pastime!

$500,000 a year or higher is a level which I think is considered rich. Anybody who thinks otherwise has no concept of financial reality. Even the government agrees after compromising by raising the income level for when the highest marginal tax bracket kicks in to ~$400,000 from $200,000 back in 2013.

But starting in 2018, things got even more painful for the upper middle class. The SALT tax cap capped mortgage interest deduction and limited property tax deduction to $10,000.

And now, Joe Biden is looking at raising taxes for households making over $400,000! Can you imagine working 60+ hours a week, never seeing your family, and still paying more in taxes?

No wonder why more high-income households are looking to retire early and enjoy the YOLO Economy to the maximum. Life is short and this pandemic has really motivated so many to live it up, finally.



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