Money moves for high earners that your CPA may not mention

0:00 I had a guy reach out to me recently. He's a W2 employee making over $300,000 per year and he wanted to shelter about $200,000 in taxes before year end. And do you know what his CPA told him? Max out your 401k and HSA. That's it. That was the entire strategy from his accountant. Now look, that advice isn't wrong. It's just wildly incomplete when you're in that tax bracket. We ended up finding over $70,000 in year one tax savings using strategies his CPA never even mentioned. And this happens constantly. If you're making 100, 200, $300,000 or more per year, you've probably seen those financial priority lists floating around online like build an emergency fund, max out your 401k, pay off your debt. And again, that advice is fine. It's just designed for the average person and offer someone in your situation. So today, I'm going to walk you through the actual priority list, the one that accounts for the fact that you're in a high tax bracket and that you have options that most people don't, and that the generic advice just doesn't cut it anymore. Here's what we're going to cover. First is the foundational stuff that you need to have in place. And then we're going to talk about the retirement account strategy that most high earners mess up. Then after that, a tax optimization layer that your CPA probably isn't bringing up. And then finally, we're going to go over the wealth acceleration moves that separate people who just earn wealth from people who actually build lasting wealth. That last part is where it gets interesting. If you're new here, my name is Preston. I work with high income earners, typically W2 employees and business owners, that are in the 100 to $400,000 plus range. The strategies I'm going to share today aren't just theoretical. These are the same frameworks that we use when building wealth plans. I've seen firsthand what

1:17 happens when someone finally implements this stuff correctly. We have clients that see anywhere from 30,000 to $130,000 in first year value from tax savings, cash flow improvements, and wealth buildinging combined. So, let's get into it. All right, let's start with the foundation. And yes, this includes the basics, but I want to reframe how you think about them. First is liquidity. You need cash reserves. The general rule is 3 to 6 months of expenses. But here's the thing. When you're earning $250,000 or more, your lifestyle expenses are probably higher. Nicer home, higher insurance premiums, maybe have private school tuition. If something happens to your income, you can't just flip a switch and cut back to $4,000 per month. So for high earners, I typically recommend closer to 6 months, sometimes more depending on your job stability in your industry. Now, where you keep this matters as well. If you got $50,000 or $80,000 sitting in a regular savings account earning.1% in interest, you're leaving money on the table. A high savings account or treasury ETF can give you somewhere between 4 and 5% right now. So on $50,000, that's an extra $2,000 per year for basically doing nothing. Obviously, this isn't going to make you rich, but it's also not nothing. The point here isn't to obsess over your emergency fund. is just to get it set up properly so you can move on to the stuff that actually moves the needle. All right, let's talk about retirement accounts next. This is where I see hireers make mistakes constantly. The standard advice is contribute to your 401k, get your employer match, maybe max it out. And again, that's fine, but it's surface level. First, let's talk about the employer match. If your company offers a 401k match, then just take it. If they match 3 or 4% of your salary, you

2:35 contribute at least that amount. It's just free money. It's not complicated. But here's where it gets more interesting. If you're at a larger company, especially in tech, finance, or certain professional service firms, you might have access to something called a mega backdoor Roth. This lets you contribute way beyond the normal $23,500 annual limit, potentially up to $69,000 or $70,000 per year, including your match. As an example, I worked with an Amazon employee making $345,000 per year. They were only contributing to the standard 401k limit, but once we set up the mega backdoor contribution, they were able to put away an additional $45,000 per year into Roth accounts, and that money now grows taxfree forever. Here's how it works. You contribute after tax dollars into a separate bucket in your 401k, then convert those to Roth either inside the plan or by rolling them to a Roth IRA. And since you already pay taxes on the contributions, there's no additional tax on the conversion. Now, not every company offers this, but a lot of the bigger ones do, like Amazon, Google, Microsoft, and also Meta. If you work at a Fortune 500 company, it's worth checking with your HR or plan administrator to see if it's available. We also have the HSA angle. If you're in a high deductible health plan, you have access to an HSA, which is arguably the most tax efficient account that exists. Contributions are taxdeductible. Growth is taxree and withdrawals for qualified medical expenses are taxree. So you get the triple tax advantage. Now here's a move that most people miss. You don't have to use your HSA for medical expenses right now. You can pay out of pocket today, let the HSA grow for 20 or 30 years and then reimburse yourself later for the expenses that you already paid. As long

3:52 as you keep the receipts, that withdrawal is still taxfree even decades later. It's one of the most powerful long-term plays out there. All right, this is where we get into territory that most CPAs don't bring up proactively. I totally get it. A lot of CPAs are focused on compliance. They're making sure that your return is accurate and filed on time. They're not necessarily looking for ways to reduce your tax burden. But when you're earning $300,000 or more, taxes become one of your single biggest expenses. We're talking 80,000 to 100,000, sometimes even more every single year going to federal and state taxes. So optimizing here isn't optional. It's essential. Entity structure matters. If you have any self-employment income, consulting income, or even side business income, how you structure things legally could dramatically change your tax situation. Let me give you a real example. I worked with a consultant making $175,000 in 1099 income. And as a sole proprietor, he was paying over $26,000 per year in just self-employment tax. That's on top of income tax. But by electing escorp status and paying himself a reasonable salary of around $95,000, he was able to take the remaining $80,000 as distributions. And those distributions aren't subject to self-employment tax.

4:48 So the net savings after accounting for payroll costs, about $8,000 to $10,000 per year, every single year. Now, escort doesn't make sense for everyone. Generally, you want to be making at least $60 to $80,000 in net business profit before the math works. If you go below that, administrative costs eat into the savings. But above that threshold, it's often a no-brainer. Next, let's talk about real estate. A lot of high- income earners think of real estate purely as an investment. And sure, it can be, but it's also one of the most powerful tax reduction tools that we have. I worked with someone who had a $600,000 rental property. Under normal depreciation rules, they were getting about $17,000 per year in depreciation deductions. Now, obviously that's just standard, but when we did a cost segregation study, which is basically an engineering analysis that reclassifies certain components of the property into shorter depreciation schedules, we're able to identify about $115,000 worth of components that qualified for accelerated depreciation. Stack bonus depreciation on top of that, and they were able to claim over $65,000 in depreciation in year 1 instead of $17,000. And the tax savings at their bracket was over $16,000 in the first year alone. So, we're talking a 3x return on that investment in year 1 plus ongoing benefits. If this is clicking with you and you want to go deeper on the tax optimization side specifically, I'm running a free live webinar this week where I'm going to break down the exact strategies that we use with clients making $100,000 and above. We talk about entity structuring, real estate plays, retirement account optimization, and how to think about tax planning proactively instead of just

6:04 filing your return and hoping for the best. It's live. You can ask questions and we're going to keep attendance limited so I can actually give useful answers. If you want a spot, there's a link in the description below. All right, let's keep going. Now, let's talk about debt because the conventional wisdom here is often too simplistic for high earners. The standard advice is to pay off high interest debt first. And generally, of course, if you have credit card debt at 20 or 25% interest, then you want to get rid of that. That's costing you real money and there's no investment that reliably beats a guaranteed 20% return. But what about that debt in the 5 to 7% range? Talking about car loans, maybe some student loans and mortgages. This is where it gets more nuanced. If you have a mortgage at 3 or 4% that you locked in a few years ago, paying that off early may not make sense, especially if you're itemizing deductions and getting a tax benefit off that interest. The math often favors keeping the low rate debt and deploying the capital elsewhere. Here's the framework that I follow. Anything over 8 to 10% interest, I pay it off aggressively. Anything under 5%, especially if it's taxdeductible, you can probably carry it strategically. The middle ground, 5 to 8%, depends on your situation and what other opportunities you have for that money. One thing I see a lot is people with significant home equity, they just let it sit there. If you have 400,000 or even $500,000 in equity, that's just dead capital. You might be able to access some of that through a heliloc at a reasonable rate and you can deploy into something that generates returns or creates tax benefits. I worked with someone who leveraged $450,000 in equity to acquire rental property that generated both cash flow and over $50,000 in tax deductions through cost aggregation. That's putting your equity to work instead of just

7:20 watching your house depreciate. Once your tax advantage accounts are handled and your debt situation makes sense, extra savings go into a taxable brokerage account. Now, I know there's a lot of debate about what to invest in. Individual stocks versus index funds versus alternatives. My general take is this. For most high earners, simple works. And I'm talking about lowc cost index funds like VTI or VO. held for the long term will get you where you want to go without requiring you to become a part-time stock analyst. And can you maybe beat the market with individual stock picks? Some people do, but it takes significant time, research, and a willingness to accept that you might underperform. If you don't have high conviction and the time to do proper due diligence, then the index fund approach is probably better. Now, the key with taxable accounts is tax efficiency. You're paying taxes on dividends and capital gains here, so you want to make sure that you're thoughtful about what you hold and when you sell. Tax loss harvesting, holding positions long enough to qualify for long-term capital gains rates, and being selective about dividend heavy investments all matter.

8:07 All right, let's get into the last section. And this one is not exciting, but it's important. Protecting what you built is vital. The wealthier you become, the bigger target you are for lawsuits. That's just reality. Someone rear ends you and finds out you have assets, then the lawsuit gets bigger. So, you need to think about protection. Umbrella insurance is cheap and essential for high earners. We're talking maybe $200 to $400 per year for a million dollar in coverage. Each additional million might only cost another $100 or $200. If you have significant assets, $2 million or more in umbrella coverage is reasonable. I've seen situations when someone gets sued for $2 million after a car accident, their auto insurance covers $500,000, and they're personally on the hook for the $1.5 million. An umbrella policy bridges that gap. Term life insurance makes sense if you have dependents relying on your income, not whole life. Whole life is expensive and complicated. Term is straightforward. You pay a relatively small premium, and if something happens to you during the term, your family gets a payout. For $250,000 household income, somewhere in the range of a million to $2 million in coverage for 20 or 30-year term is typically appropriate. Premiums might run you $100 to $150 per month for that coverage. Compare that to $1,500 to $2,000 per month for a whole life policy with similar death benefits. All right, so let's bring this all together. The conventional financial playbook, the one you see everywhere, it's fine for the average person. But if you're watching this this far, you're probably not average. You're in a tax bracket where the decisions you make or don't make compound significantly over time. The difference between someone who just earns a high income and someone who actually builds lasting wealth usually comes down to a few things. Being proactive about taxes instead of

9:24 reactive, using the accounts and structures available to you fully, and having a real plan instead of just winging it. I've seen clients generate anywhere from 30 to over $130,000 in first year value when they actually implement these strategies correctly. That's a combination of tax savings, cash flow improvements, and wealth buildinging acceleration, and it compounds year after year. If you want help putting together a plan for your specific situation, the webinar I mentioned earlier is a good starting point. We're going to go deeper into the tax strategies, the investment approach, all of it. Links in the description. If you found this video helpful, drop a comment below with your biggest question about wealth building as a high earner. I read all your comments and I'll answer what I can. Watch this video next at the Almighty Algorithm recommends and I'll see you in the next