6 Key Areas of Personal Finance for High Earners Like Home Run King Aaron Judge

The central theses

  • Aaron Judge is in the top tax bracket, paying 37% for federal taxes and 10.3% for New York State taxes. Tax considerations are very important to him. For every extra dollar he earns in 2022, he will have to pay $0.47 in taxes.
  • It would be wise for Aaron Judge to have a municipal bond ladder, these work similarly to a CD ladder. The bonds pay a specified amount of interest over a specified period of time and offer attractive tax benefits for high-income earners.
  • Here are six key areas of personal finance that are as relevant to Aaron Judge as they are to you and your family.

Aaron Judge signed a one-year, $19 million contract to play baseball for the New York Yankees in 2022. He then broke the American League record for home runs by hitting 62, the previous record being 61 since 1961. The season didn’t start on a high note, as Judge signed a seven-year contract to start the 2022 season $213.5 million ($30.5 million per year). This would have made him the highest paid right fielder in all of Major League Baseball.

What would justify turning down a long-term contract with such a high salary? To put it simply, he thought he was worth more money. Now he’ll be a free agent, and it’s rumored he could land a $300 million contract early next season.

The judge’s salary that year was $19,000,000, which equates to $306,000 for each home run that year.

Breaking the home run record is a historic event in our national pastime. It has been reported that Cory Youmans, the fan who caught the 62nd home run ball, could get $2 million for the souvenir baseball.

Here are some personal finance considerations for Aaron Judge and his rather high salary.

How to play the personal finance game well

Here are six key areas of personal finance that are as relevant to Aaron Judge as they are to you and your family.

risk management

If Aaron Judge gets injured in the offseason, the odds of getting a $300m contract would be jeopardized. He will want to cover himself with personal insurance to cover this risk.

Similarly, if you have a home and a child, you are well advised to consider term life insurance. This ensures your ability to pay for your home and your child’s upbringing if you are unable to provide for them. It’s a low probability item, but it’s basic risk management. Protect your family as Aaron Judge protects his future contract and of course future earnings.

cash management

It would be wise for Aaron Judge to have a municipal bond ladder that works very similarly to one CD ladder. The bonds pay a specified amount of interest over a specified period of time and offer attractive tax benefits for high-income earners.

With the rise in interest rates over the past few months, you can now find savings accounts paying interest over 2.4% and CDs paying interest over 3%. If you have cash on hand, you don’t have to get close to 0% like we’ve seen for many years.

investment management

A $19 million salary is a lot of money for anyone, including Aaron Judge. He could live a very fulfilling life on his salary alone, but instead he will earn more throughout his life by investing and making his money work for him. He has enough to do to diversify his wealth over the long term. It would be fair to assume that this will include some stocks, bonds, real estate and private placements.

A good strategy would be to own a few mega-cap single growth companies that don’t pay big dividends and could grow over time. With a significant exposure to tax-advantaged municipal bonds, income-generating real estate and some private placements.

retirement planning

While Major League Baseball players have a pension that provides additional retirement income once they turn 62, that should be just icing on the cake for the modern baller, let alone a megastar like Judge. There are sophisticated ways for high earners to plan for retirement, as they often don’t get pre-tax credits for frequently used vehicles.

It is important for most American retirees to consider how they will receive their income when they retire. Do you have a pension, 401,000, income from other investments? What will your monthly expenses be in retirement? Are your sources of income sufficient to cover your expenses? If there is a projected gap, you need to address it. There are three main levers you can pull: save more now, find investments that earn more, or retire later.

tax planning

Aaron Judge is in the top tax bracket, making tax considerations very important. He will likely pay 37% of his income in federal taxes and 10.3% in New York state taxes. For every additional $1 he earns in 2022, he will have to pay Uncle Sam $0.47 in taxes. It’s common to look for tax-advantaged vehicles that don’t have standard income tax rates. Some common sources are municipal bonds, individual growth stocks, and preferred stocks with preferred dividends.

Everyone needs to carry out strategic tax planning in order to deal intelligently with their specific tax situation. Do you take advantage of tax-advantaged options like 401ks and pre-tax IRAs? Should You Have a ROTH IRA and/or Consider Backdoor Conversions?

estate planning

Aaron Judge faces estate planning issues because of his wealth. Currently, an estate of $12.06 million would have to pay 40% in estate taxes. Most Americans don’t have estate tax liability, but they still need to obtain some estate planning documents.

Common estate planning for Americans who own a home is a living trust to avoid probate for their heirs. Also, a will and a permanent power of attorney over health matters, money, and children are regular things that are dealt with when entering into a living trust. This is no longer just for the jet set.

The final result

Aaron Judge plays baseball very well and is likely to land a record-breaking contract for the 2023 season. In order to play the personal finance game well, for both Aaron Judge and you, the above six focus areas are very important. We can’t all hit 60+ home runs, but we can try to win with our personal finances.

For the rest of us, Q.ai is here to take the guesswork out of investing. If you are looking for institutional ideas without having to constantly monitor the markets, consider working with Q.ai.

Our artificial intelligence scans the markets for the best investments for all types of risk tolerance and economic situations. Then it practically bundles them investment kits that make investing easy.

Given the current market volatility, many users are activating Portfolio Protection to protect profits and reduce losses no matter what industry you invest in.

Download Q.ai today for access to AI-supported investment strategies. If you deposit $100, we’ll add another $100 to your account.

Leave a Reply

Your email address will not be published. Required fields are marked *