Reuters Money

Secrets of wealthy whiz kids: How to make a million by 21

Earlier this month, Reuters Money featured a story with advice on how to get on the road to Millionaire Row. But what if you’re in a hurry, like so many multi-tasking teens of the 21st Century? What if your goal is to make that million by the time you turn 21? Can it be done?

The answer is yes, if you take the fast lane as an entrepreneur on steroids — something common to the four millionaires we polled for this follow-up. Three made it to the seven-digit milestone by 21; the fourth reached it when he turned 24. Here, those wealthy whiz kids past and present share the secrets that contributed to the fortunes they made.

Jon Koon, 27

Position: Owner and designer of the Private Stock denim line, marketing guru and manufacturer of auto accessories.

How he made it: A licensing and fashion marvel, Koon made his first million at 16 as a pioneer in car tuning, where vehicles are modified with special parts to enhance appearance and performance.

Top tips for millionaire hopefuls: Get a business plan. Koon saved $5,000 to start his first company, but the business plan helped him get substantial backing. “Investment is always tied to a clear opportunity for profit and that exact stream of profitability needs to be identified from the beginning,” he says.

Should rich people pay more for Medicare?

Should affluent seniors pay more for Medicare than everyone else? How about Social Security? Should we cut benefits for wealthy Americans?

Ideas for “means testing” these critical retirement programs are front and center as deficit reduction talks move back into high gear in Washington. Many Republicans are arguing that Social Security benefits should be cut for wealthy Americans — an idea also backed by the bi-partisan Simpson-Bowles deficit report. Meanwhile, President Obama proposed higher Medicare premiums for high-income seniors this week as part of the deficit plan he submitted to the Congressional Super Committee.

But what does means testing really mean, and what does it mean to seniors on Social Security and Medicare? In this post, let’s consider means testing for Medicare; a follow-up post on implications for Social Security can be found here.

Traditionally, “means testing” has meant measuring financial adequacy to determine eligibility for welfare – that is, it tests for inadequacy, not abundance. Politicians tossing around the term now really mean reducing benefits or jacking up contributions for rich people. That may sound like a minor distinction, but it’s important if you consider that Social Security and Medicare aren’t welfare programs, but entitlements available to seniors up and down society’s spectrum of wealth.

Lacking the stigmatization welfare carries, both programs enjoy such broad public support. A survey released today shows that voters oppose cutting Social Security and Medicare to reduce the deficit by a 50 point margin, and that opposition to cuts is strong across party lines. The poll was sponsored by National Committee to Preserve Social Security & Medicare, an advocacy group — but conducted by a bi-partisan team of Democratic and Republican pollsters.

Medicare already features significant means testing for the wealthy. In fact, President Obama’s new proposal would only expand higher premiums for wealthy seniors first enacted under the Medicare Modernization Act of 2003. That law established higher Medicare Part B (doctor visits and outpatient services) premiums for individuals with $85,000 or more in annual income, and joint filers with income over $170,000.

4 more ways the wealthy make money on fun

In June, Reuters Wealth reported on how the wealthy make money from their hobbies, in areas from rock-star guitars to rocks from Mars. This month, we examine four more instances where passion can yield payoff for those with means.

To make a healthy profit from a hobby, experts stress starting with a genuine love of the collectible. Noted art collector Alfred Barnes wasn’t thinking of the bottom line when he bought his first Picasso for less than $100. To borrow from the art world adage, he knew what he liked — and had a hunch the rest of us might catch on someday. How did he turn that initial purchase into the world-class collection now held by the Barnes Foundation, and how can you pull off a similar feat? Here’s how it works:

Art by emerging artists How it works: The rich have always adored fine art, but the trick is to find tomorrow’s Picassos and Van Goghs before everyone else.

The bottom line: Works by promising unknowns might sell for a few hundred dollars. If you’re wealthy and influential, you can boost an artist’s reputation by purchasing multiple works and mounting public exhibits — increasing your collection’s value.

Quotable: “Emerging artists may take decades to catch on, so often the best thing to do is to buy with your passion,” says Grant Rawdin, president of Wescott Financial, a Philadelphia-based wealth management firm. “But you have to be very careful in terms of [an artwork’s] authenticity.”

Kickstart it: Art schools, galleries and collectives in major cities are great places to spy new talent, as are online sites such as Deitch Projects and the street-art portal Wooster Collective.

Fun Fact: Albert Barnes, who made his fortune in the medical field, bought his first Van Gogh and Picasso paintings in 1912. Once dismissed as eccentric by the art establishment, Barnes is regarded today as a visionary. His collection, now in the hands of the Barnes Foundation, is worth an estimated $25 billion.