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

Key points to remember

  • Aaron Judge is in the highest tax bracket, paying 37% for federal taxes and 10.3% for New York State taxes. For him, tax considerations are very important. For every additional 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 the same way as a CD ladder. Bonds pay a specific amount of interest over a specific term and offer attractive tax advantages for people in high-income tax brackets.
  • Here are six key areas of personal finance that are just 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 went on to break the American League record for home runs by reaching 62, the previous record was 61 since 1961. The season did not start on a high note, as Judge turned down a deal at the start of the 2022 season that was a seven-year, $213.5 million deal ($30.5 million a year). year). That would have made him the highest-paid right fielder in all of Major League Baseball.

What would justify refusing a long-term contract with such a high salary? To put it simply, he thought he was worth more money. Now he will be a free agent, and it is rumored that he could get a contract worth over $300 million at the start of next season.

The judge’s salary was $19,000,000 this year, which equates to $306,000 for each home run this 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, could receive $2 million for souvenir baseball.

Here are some personal financial considerations for Aaron Judge and his rather hefty salary.

How to Play the Personal Finance Game Right

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

Risk management

If Aaron Judge is injured in the offseason, the likelihood of getting a $300 million contract would be in jeopardy. He will want to protect himself with personal insurance to cover this risk.

Similarly, if you are married with a house and a child, you would do well to consider a term life insurance policy. This will protect your ability to pay for your home and your child’s education in case you are unable to support them. It’s a low probability item, but it’s basic risk management. Protect your family, because Aaron Judge will protect his future contract, and his future earnings of course.

Finance management

It would be wise for Aaron Judge to have a municipal bond ladder, which works very similarly to a CD ladder. Bonds pay a specific amount of interest over a specific term and offer attractive tax advantages for people in high-income tax brackets.

With interest rates rising over the past few months, you can now find savings accounts with interest rates over 2.4% and CDs with interest rates over 3%. If you have cash, you don’t have to approach 0%, as 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 busy life on his salary alone, but instead he will earn more over his lifetime by making investments and letting his money work for him. He has what it takes to diversify his long-term wealth. It would be fair to assume that this will include stocks, bonds, real estate and private placements.

A good strategy would be to own individual mega-cap growth companies that don’t pay big dividends and could grow over time. Have a significant portion of tax-advantaged municipal bonds, income-producing real estate, and some private placements.

retirement planning

Major League Baseball players have a pension that will provide them with additional retirement income once they turn 62, but that should just be icing on the cake for the modern baseball player, let alone a megastar like Judge. With high income earners, there are sophisticated ways to plan for retirement, as they are often stripped of pre-tax benefits for common-use vehicles.

For most American retirees, it’s important to consider how you will receive your income in retirement. Will you have a pension, a 401k, income from other investments? How much will your monthly expenses be in retirement? Will your sources of income be enough to cover your expenses? If there is an expected discrepancy, you will need to fix it. You can activate three main levers: save more now, find investments that yield more or retire later.

Tax planning

Aaron Judge is in the highest tax bracket, which makes 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 $0.47 in taxes to Uncle Sam. It’s common to look for tax-efficient vehicles that don’t have standard tax rates. A few common sources are municipal bonds, individual growth stocks, and preferred stocks with preferred dividends.

Everyone needs to do strategic tax planning to work smart with their specific tax situation. Do you take advantage of pre-tax and tax-deferred choices like 401ks and IRAs? Should you have a ROTH IRA and/or consider backdoor conversions?

Estate planning

Aaron Judge is prone to estate planning issues with his level of net worth. Currently, an estate over $12.06 million would have to pay 40% property taxes. Most Americans don’t have to pay estate taxes, but they still need to have estate planning documents in place.

A common estate planning need for Americans who own homes is a living trust to avoid probate for their heirs. Additionally, a will and enduring power of attorney for health care, money, and children are regular items that are dealt with when setting up a living trust. It’s not just for the jet set anymore.

The bottom line

Aaron Judge is a very good baseball player and he will likely get a record breaking contract for the 2023 season. To play the personal finance game well, both for Aaron Judge and for you, the above six areas of focus are very important . We can’t all hit more than 60 home runs, but we can try to win with our personal finances.

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