I spent 5 years interviewing 225 millionaires. Here are the 4 types of rich people and their top habits

In 2004, I set out to conduct a five-year “Rich Habits” study to explore how the world’s wealthiest people think about their money. Each of the 225 millionaires I interviewed fell into one of four categories:

  1. Saver-Investors: No matter what their day job is, they make saving and investing part of their daily routine. They are constantly thinking about smart ways to grow their wealth.
  2. Company Climbers: Climbers work for a large company and devote all of their time and energy to climbing the corporate ladder until they land a senior executive position — with an extremely high salary.
  3. Virtuosos: They are among the best at what they do, and they’re paid a high premium for their knowledge and expertise. Formal education, such as advanced degrees (e.g., in law or medicine), is usually a requirement.
  4. Dreamers: The individuals in this group are all in pursuit of a dream, such starting their own business, becoming a successful actor, musician or best-selling author. Dreamers love what they do for a living, and their passion shows up in their bank accounts.

The Saver-Investor route requires the least amount of risk — at least compared to pursuing an entrepreneurial dream or artistic passion. But 88% of the millionaires I interviewed said that saving in particular was critical to their long-term financial success. 

It took the average millionaire in my study between 12 to 32 years to accumulate a net worth of anywhere from $3 million to $7 million.

Below are their three most common habits that anyone can adopt:

1. They automated, and saved 20% of net pay.

Every Saver-Investor in my study consistently saved 20% or more of their net pay, each paycheck. 

Many accomplished this by automating the withdrawal of a fixed percentage of their net pay. Typically, 10% went into employer-sponsored retirement accounts and the other 10% was automatically directed into a separate savings account.

Once a month, the Saver-Investors would then transfer their accumulated 10% monthly savings into an investment account, such as a brokerage account.

Even if 20% is too steep at the moment, saving a smaller percentage consistently can still help you meet your financial goals for the future.

2. They regularly invested a portion of their savings.

Because Saver-Investors consistently invested their savings, their money compounded over time. When they started, this compound interest was not very significant. But after 10 years, they began to accumulate significant wealth. Towards the final years of their working lives, the Saver-Investors’ wealth grew to an average of $3.3 million.  

The millionaires who pursued a dream and started a business (a.k.a. the Dreamer-Entrepreneurs) did not have the ability to invest their savings, particularly in the early stages of pursuing their dreams. Whatever savings they did have were used as working capital in order to fund their dream.

Interestingly, however, once most of these Dreamer-Entrepreneur achieved success in the form of available cash flow, they immediately pivoted and began to invest their earnings.

3. They were extremely frugal.

8 shows coming to Netflix, Hulu and Disney+ in August

We’re turning the calendar from July to August which means the blockbuster season for movies is coming to a close. But on TV, things are just heating up.

From the “Game of Thrones” prequel to the newest Marvel installment, there’s a lot of highly-anticipated content coming to streaming services this month.

So to help you cut through the noise, we’re highlighting a few of the most notable new releases across top streamers like Hulu, HBO Max, Disney+ and more.

‘Industry’ Season 2 (Aug. 1, HBO)

HBO’s surprise 2020 hit is back for its long-awaited second season which promises even more drama in the cutthroat world of investment banking.

The Sandman (Aug. 5, Netflix)

‘A League of Their Own’ (Aug. 12, Prime Video)

Thirty years after the release of the original classic film, Amazon has adapted “A League of Their Own” into an eight-episode series. Set in in the 1940s, the series follows a group of women setting out to form an all-female baseball team while male players were serving in World War 2.

‘Never Have I Ever’ Season 3 (Aug. 12, Netflix)

Mindy Kaling’s popular high school comedy returns for its third season and will follow protagonist Devi Vishwakumar as she navigates her first relationship.

‘She-Hulk: Attorney at Law’ (Aug. 17, Disney+)

The latest show in Marvel’s growing TV library stars Tatiana Maslany as Jennifer Walters, cousin of Bruce Banner, AKA The Hulk. The nine-episode series will be a courtroom comedy following Walters’ juggling her work as a lawyer with her newly-acquired superpowers.

‘House of the Dragon’ (Aug. 21, HBO)

A little over three years after “Game of Thrones” aired its final episode, HBO is back with a prequel series that it hopes will tap into the popularity that made the original the biggest show on TV. “House of the Dragon” is set 300 years before the events of the original show, and chronicles the downfall of House Targaryen. If the recently-released trailer is any indication, there will be no shortage of dragons.

‘The Patient’ (Aug. 30, FX, Hulu)

From the creators of the critically acclaimed series “The Americans”, “The Patient” stars Steve Carrell as a therapist who is being held prisoner by a serial killer (played by “Star Wars” star Domhnall Gleeson) who wants to curb his murderous urges.

‘Andor’ (Aug. 31, Disney+)

Third-largest U.S. lottery jackpot ever

One lucky lottery ticket-buyer in Illinois may soon be a billionaire, following Friday night’s $1.337 billion Mega Millions lottery drawing.

According to lottery officials, the winning numbers — 13, 36, 45, 57 and 67 and a gold Mega Ball of 14 — match a single ticket sold at a Speedway gas station in Des Plaines, Illinois, roughly 17 miles northwest of Chicago. The winner has yet to claim the prize, Harold Mays, director of the Illinois Department of the Lottery, said at a news conference on Saturday.

“We don’t know whether or not they even know that they won a prize,” Mays said. “So, I encourage everybody to check your ticket.”

The jackpot ranks as the third-highest lottery prize in American history, and its winner — who likely paid around $2 for the ticket — stands to either gain $780.5 million as a cash lump sum or receive payments in an annuity over the next 30 years.

If the winner chooses the more popular lump sum option, which “Shark Tank” investor Kevin O’Leary recommends, he or she will have to account for a mandatory 24% federal tax withholding. The winner will likely also owe state income tax: If the winner lives in Illinois, the winnings will be considered taxable income at the state’s 4.95% rate, and they may owe even more if they live in a state with a higher income tax rate.

That means the winner should expect to owe a minimum of almost $226 million in taxes, lowering the take-home amount to roughly $554.5 million — still a potentially life-changing sum of money.

In a statement on Saturday, Mega Millions also noted that 26 tickets earned second-tier prizes worth either $2 million or $1 million apiece, and a total of 14,391,740 tickets won some amount of money across nine different prize tiers Friday night.

If you’re one of the lucky winners — especially if you’re the mystery individual who hit the jackpot — experts say you should immediately take steps to protect your ticket and privacy.

“Privacy is key,” Emily Irwin, senior director of advice at Wells Fargo Wealth & Investment Management, told CNBC on Friday. “That provides safety to both you and your family from scammers or other individuals who can start to prey on you.”

You should then hire a team of professionals to assist you, including an experienced attorney, a financial advisor, a tax advisor and an insurance expert, as CNBC recently noted.

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Don’t miss: The 10 best places to win the $1.34 billion Mega Millions jackpot

Manchin touts inflation reduction bill, says ‘I’m not getting involved’ in upcoming elections

Sen. Joe Manchin in the U.S. Capitol on Tuesday, June 14, 2022. Sen. Joe Manchin, D-W.Va., and his staff told Democratic leadership on Thursday that he’s not willing to support major climate and tax provisions in a sweeping Biden agenda bill, according to a Democrat briefed on the conversations.

Tom Williams | Cq-roll Call, Inc. | Getty Images

Senator Joe Manchin, D-W.V., made the morning talk show rounds on Sunday to talk about the Inflation Reduction Act of 2022, a revival of President Joe Biden’s Build Back Better economic bill that collapsed earlier this year.

The inflation bill, which Democrats are attempting to pass through reconciliation, aims to reform the tax code, cut health-care costs and fight climate change. It will invest more than $400 billion over a decade by closing tax loopholes, mostly on the largest and richest American corporations. It would also reduce the deficit by $300 billion in the same decade-long timeframe.

“This is all about fighting inflation,” Manchin told Jonathan Karl on Sunday’s “This Week” on ABC.

Manchin insisted that the bill isn’t a spending bill, but instead is focusing on investing money.

“We’ve taken $3.5 trillion of spending down to $400 billion of investing without raising any taxes whatsoever, we closed some loopholes, didn’t raise any taxes,” he added.

He further explained the closing of tax loopholes, which will raise taxes on certain American companies. Any tax increase could jeopardize full Democratic support of the legislation, which it needs to pass through reconciliation – Senator Kyrsten Sinema, D-A.Z., may not support this provision.

“The only thing we have done is basically say that every corporation of a billion dollars of value or greater in America should pay at least 15% of minimum corporate tax,” he said on NBC’s “Meet the Press.”

“That’s not a tax increase it’s closing a loophole,” he said.

Manchin also noted that a deal between Senate Majority Leader Chuck Schumer, D- N.Y., and he was struck in private to avoid drama.

“We’ve been negotiating off and on very quietly because I didn’t know if it would ever come to fruition,” he said. “I didn’t want to go through the drama that eight months ago we went through for so long.”

Manchin added that he’s struck an agreement with Democratic leaders to support the bill in exchange for taking on permitting reform later.

“If I don’t fulfill my commitment promise that I will vote and support this bill with all my heart, there are consequences, and there are consequences on both sides,” he said on “Meet the Press.”

Manchin also noted that the bill will especially target energy prices in the U.S. by upping production and using clean energy effectively.

“Inflation is the greatest challenge we have in our country right now,” he said on CNN’s “State of the Union.” “If you want to get gasoline prices down, produce more and produce it in America.”

Manchin dodges election talk

During his Sunday interviews, Manchin repeatedly evaded answering questions about who he supports in upcoming elections – the 2022 midterms and the 2024 presidential election.

“I’m not getting involved in any election right now,” he said on “State of the Union.”

He reiterated that he would work with anyone that voters elect and specifically wouldn’t answer if he wants Democrats to keep control of Congress come November.

“Whatever the voters choose,” he said on “Meet the Press.” “Whoever you send me that’s your representative and I respect them.”

When specifically asked if he’d support Biden in reelection, he focused on Biden’s current presidency.

“Whoever is my president, that’s my president, and Joe Biden is my president right now,” he said on “This Week.”

Rising inflation larger threat than potential recession

Neel Kashkari, Minneapolis Federal Reserve

Brendan McDermid | Reuters

If you’re debating whether or not the U.S. is in a recession, you’re asking the wrong question, according to a top Federal Reserve official.

“Whether we are technically in a recession or not doesn’t change my analysis,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS’ “Face the Nation” on Sunday. “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us to the upside. Wages continue to grow.”

Last month, U.S. inflation jumped to a four-decade record high, rising 9.1% from a year ago. At the same time, the labor market remained strong: Nonfarm payrolls increased by 372,000 last month, alongside a low national unemployment rate of 3.6%.

On Thursday, new Labor Department data showed signs of a job market cooldown, with initial jobless claims hitting their highest level since mid-November. Still, Kashkari said, the labor market is “very, very strong.”

“Typically, recessions demonstrate high job losses, high unemployment, those are terrible for American families. And we’re not seeing anything like that,” he said.

The problem, Kashkari said, is that even in a strong job market, inflation is outpacing wage growth — giving many Americans a functional “wage cut” as living costs increase nationwide. Solving that problem by reducing inflation is the Federal Reserve’s top goal right now, he added.

“Whether we are technically in a recession or not doesn’t change the fact that the Federal Reserve has its own work to do, and we are committed to doing it,” Kashkari said.

The Bureau of Economic Analysis reported on Thursday that the country’s gross domestic product shrunk for the second straight quarter, often a warning sign accompanying economic recessions. For Kashkari, that may actually be a good thing: An economic slowdown could help reduce inflation to the point where it no longer outpaces wage growth.

“We definitely want to see some slowing [of economic growth],” he said. “We don’t want to see the economy overheating. We would love it if we could transition to a sustainable economy without tipping the economy into recession.”

Doing so poses a significant challenge for the Fed. Kashkari acknowledged that economic slowdowns tend to be very difficult to control, “especially if it’s the central bank that’s inducing the slowdown.”

Still, he said, the bank will do whatever is necessary to tame inflation.

“We’re going to do everything we can to avoid a recession, but we are committed to bringing inflation down, and we are going to do what we need to do,” Kashkari said. “We are a long way away from achieving an economy that is back at 2% inflation. And that’s where we need to get to.”

What eco-conscious ETF investors may need to know

Venturing into sustainable funds is a growing trend for eco-conscious investors.

There are now more than 550 ESG funds, which allocate according to environmental, social and governance issues, according to Morningstar.

“We’re seeing an evolution of sustainable products right now,” said Jon Hale, global head of sustainability at Morningstar, in an interview Monday on CNBC’s “ETF Edge.”

Investors poured an annual record of $69.2 billion into ESG funds last year. Despite the continued high level of demand for the funds, Hale said that the preferences of what investors want to see from an ESG fund are “inchoate.”

“They’re not exactly incoherent,” he said, “but putting the onus back on asset managers to say, ‘here’s generally what we want, now you have to figure out the specifics of it.'”

ESG funds promote a variety of causes and initiatives. Some aim to bolster gender or racial equality, while others invest in green energy technology.

“Sustainability is complex,” Hale said. “Because it is an investment product, it needs to have competitive returns.”

To better ensure earnest performance, the ESG funds operate to include the best company in every sector, including oil and tobacco companies. As a result, environmentally friendly companies can be excluded because competitors score better on certain metrics.

Hale gave the example of Tesla, which was excluded from the S&P 500 ESG Index (SPXESUP).

“There’s all kinds of ESG issues that come into play when you’re evaluating a company,” he said. “And evaluating the potential ESG risks to that company and its stock performance.”

In the case of SPXESUP, Hale said that it was Tesla’s overall risk compared with other auto companies that excluded it.  

“But that same index isn’t really considering impact,” Hale said. “I think we need to go to a point where we’re combining [impact and risk], and there’s a more overarching analysis.”

If a stock like Tesla would be included in a portfolio because of its impact, Hale said that there’s an argument to be made for engagement — for investors to come to the table and ask a company’s plans to get to net zero, and changes in the business.

“It’s the same thing about oil companies,” Hale said. “ESG funds can make the choice. They’re not all fossil fuel-free, they don’t exclude all oil and gas companies.”

Most ESG funds will include oil companies. Occidental (OXY), for example, frequently shows up because it scores highest on certain metrics. 

“Over the last five years during this tremendous boom in ESG, generally speaking they have outperformed traditional investments.” Hale said.

Sustainable funds outperformed their peers last year, but by a narrower margin than in previous years. Slightly more than half of ESGs landed in the top half of their Morningstar category, with equity funds leading the way.

Productivity and focus must improve

Google CEO Sundar Pichai speaks on stage during the annual Google I/O developers conference in Mountain View, California, May 8, 2018.

Stephen Lam | Reuters

Google is launching a new effort called “Simplicity Sprint” in an effort to improve efficiency and improve employee focus during an uncertain economic environment.

The Alphabet company had its regular all-hands last Wednesday, and the tone was somewhat urgent as employees expressed concern over layoffs and CEO Sundar Pichai asked employees for input, according to attendees and related internal documentation viewed by CNBC. Google’s productivity as a company isn’t where it needs to be even with the headcount it has, Google’s CEO Sundar Pichai told employees in the meeting.

“I wanted to give some additional context following our earnings results, and ask for your help as well,” Pichai opened, referring to the company’s Q2 earnings report on Tuesday. “It’s clear we are facing a challenging macro environment with more uncertainty ahead.”

He added, “There are real concerns that our productivity as a whole is not where it needs to be for the headcount we have.” He asked employees to help “create a culture that is more mission-focused, more focused on our products, more customer focused. We should think about how we can minimize distractions and really raise the bar on both product excellence and productivity.”

It comes after the company reported its second consecutive quarter of weaker-than-expected earnings and revenue on Tuesday. Revenue growth slowed to 13% in the quarter from 62% a year earlier, when the company was benefiting from the post-pandemic reopening and consumer spending was on the rise. CFO Ruth Porat said she expected some of the challenges to continue in the near-term but the company doesn’t give formal guidance.

It also comes after Pichai recently announced that it would slow the pace of hiring and investments through 2023, asking employees to work “with greater urgency” and “more hunger” than shown “on sunnier days.”

‘Simplicity Sprint’

“I would love to get all your help,” Pichai said in Wednesday’s all-hands meeting, speaking to its more than 170,000 full-time employees.

To that end, Pichai introduced a “Simplicity Sprint” initiative to crowdsource ideas for quicker product development. “Sprint” is a term often used in software development and by tech startups to denote short, focused pushes toward a common goal.

Pichai said the company is opening the floor for employees to share their ideas through August 15th through an internal survey that asks if management can reach out if they have follow-up questions.

It’s an attempt for the company to “get better results faster,” Pichai said during the meeting. The survey, which was viewed by CNBC, shows it may also be used to cut back in certain areas.

Questions in the survey include “What would help you work with greater clarity and efficiency to serve our users and customers? Where should we remove speed bumps to get to better results faster? How do we eliminate waste and stay entrepreneurial and focused as we grow?”

The request also comes as the company tries to ease tensions between employees and executives after an annual “Googlegeist” survey showed staffers gave the company particularly poor marks on pay, promotions and execution.

Highlighting a 7% dip in views about Google’s execution, executive Prabhakar Raghavan at the time wrote “that means we need to bring more attention to busting bureaucracy.” Raghavan is among the most important and influential execs at the company, overseeing search, ads, mapping, and other areas.

In May, the company announced it would overhaul its performance evaluation process that will result in increased salaries while hoping to reduce the bureaucracy around compensation and raises.

‘Some anxiety’

In Wednesday’s all-hands meeting, executives addressed employees concern about potential layoffs. One of the top-rated questions was “In light of Sundar’s statement that sharpening Google’s focus ‘means consolidating where investments overlap and streamlining processes,’ should we expect layoffs?”

Pichai handed the question off to Google’s chief people officer, Fiona Cicconi.

While Cicconi said the company is still hiring and doesn’t have plans for layoffs right now, she didn’t rule it out.

“We’re asking teams to be more focused and efficient and we’re working out what that means as a company as well. Even though we can’t be sure of the economy in the future, we’re not currently looking to reduce Google’s overall workforce.”

She also said, “I really get that there is some anxiety around this based on what we’re hearing from other companies and what they’re doing and as Sundar mentioned, we’re still hiring for critical roles,” Cicconi said. She asked employees to remember that it’s still the biggest hiring year in the company’s history.

In the second quarter, Alphabet said its headcount rose 21% to 174,014 full-time employees from 144,056 the year prior. However, the company said last month it will slow the pace of hiring and investments through 2023, and CEO Sundar Pichai told employees in a memo, “we’re not immune to economic headwinds.”

Pichai noted the broader economic headwinds multiple times. “If you’re looking to what’s happening externally — I’m sure you’re all reading the news— the people in businesses who uses Google products are facing their own challenges right now.”

Ford CEO Farley outlined plans for automaker’s electric vehicle shift

Electric vehicle batteries are in short supply, and costs for materials such as nickel and cobalt are surging. Yet legacy automaker Ford Motor says it plans to be profitably building millions of EVs a year in just four years.

This week, the Detroit automaker gave investors a little more clarity about how it plans to reach that goal and transform its business built on gas-guzzling cars.

As electric vehicles account for a growing share of the global car market, Ford in March announced it would reorganize its business and separate its internal-combustion engine and electric vehicle efforts. By 2026, it said it expects to build more than 2 million electric vehicles annually — about a third of its total global production — while expanding its operating profit margin.

Wall Street analysts were generally positive about the plan, but some expressed skepticism about the lack of specifics around how the company plans to overcome the supply challenges in the market. Morgan Stanley’s Adam Jonas called it a “stretch” goal and said he lacked confidence in Ford’s ability to secure enough raw materials and tooling to manufacture batteries to even come close to its projection.

Ford addressed some of those concerns in another presentation on July 21, when it told investors that it has secured enough batteries to get to its near-term target: 600,000 EVs per year by the end of 2023. As of now, it said, it has secured about 70% of what it needs to hit its 2026 goal.

Ford promised to share more about how it plans to hit its goals during its annual capital markets day next year. But during its second-quarter earnings call last week, CEO Jim Farley gave some more hints about the automaker’s strategy.

A chance to simplify

Fitting dealers into the future

Ford is at a disadvantage to companies like Tesla and EV startups that sell directly to consumers, without dealers acting as middlemen.

The company isn’t planning to eliminate its franchised dealers, which enjoy strong legal protections in many U.S. states that effectively forbid Ford from selling directly to its customers as Tesla does. But Farley said that Ford sees a path to reducing that cost disadvantage — which he estimates at around $2,000 per vehicle — by keeping dealers’ inventories very low and by shifting the way Ford markets its products.

One key to that effort: Ford plans to let customers order its EVs online rather than buying a vehicle from a dealer’s inventory.

As Farley sees it, dealers will have only a few new vehicles on their lots, just enough to offer test drives to customers before they order. Customers will be able to order from the dealership or online “in their bunny slippers,” Farley said, with the dealer making the delivery and providing service after the sale.

Farley estimates that the low dealer inventories and online ordering will make up roughly $1,200 to $1,300 of that $2,000 per-vehicle cost disadvantage, while ensuring that Ford’s dealers remain profitable. The plan will free dealers from having to carry costly inventories, allowing them — in theory, at least — to focus more on service and customer education. That could give Ford an edge that EV makers selling direct won’t be able to easily match.

“I think that’s a different play than the pure EV companies,” Farley said.

Federal emergency savings proposals may also boost retirement funding

Nirunya Juntoomma | Istock | Getty Images

It’s no secret that households with sufficient emergency savings are more the exception than the norm.

Two proposals in the Senate aim to change that. And, experts say, tackling the problem could lend itself to workers saving more for their golden years.

“One of the best ways to protect retirement savings is to help families more effectively weather short-term emergency savings needs,” said Angela Antonelli, executive director of Georgetown University’s Center for Retirement Initiatives.

Pandemic showed the need for savings

The Covid-19 pandemic shined a light on the many workers who were unprepared for the financial struggles that ensued from suddenly being without a job and income. While generous government aid aimed to keep families afloat as the economy righted itself, Americans now find themselves battling inflation and rising interest rates that are making both buying and borrowing more expensive.

The overall share of Americans who are either very comfortable (13%) or somewhat comfortable (29%) with their emergency savings dropped to 42% in June from 54% two years ago, according to a recent Bankrate report. 

While some companies are offering emergency savings accounts to employees, the Senate proposals come with certain parameters and are both linked to 401(k) plans.

The proposals were approved in separate committees in late June as part of that chamber’s evolving version of the so-called Secure Act 2.0. The legislation would build on the original Secure Act of 2019 by making additional changes to the U.S. retirement system in an effort to increase the ranks of savers and the amount they’re putting away for their post-working years.

The first proposal being considered would allow companies to automatically enroll their employees in emergency savings accounts, at 3% of pay, that could be accessed at least once a month. Workers would be able to save up to $2,500 in the account, and any excess contributions would automatically go to a linked 401(k) plan account at the company.

The other Senate proposal takes a different approach: It would let workers withdraw up to $1,000 from their 401(k) or individual retirement account to cover emergency expenses without having to pay the typical 10% tax penalty for early withdrawal if they are under age 59½.

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However, a separate account would be the preferable of the two so that people would be less likely to make withdrawals from their 401(k), Antonelli said.

“It helps prevent leakage from retirement savings,” she said. 

Nevertheless, for workers who have access to a 401(k) or similar workplace plan but don’t participate, having emergency funds available could spur them to enroll in their company’s retirement plan, said Leigh Phillips, president and CEO of SaverLife, a nonprofit focused on helping households build savings.

“One of the big things that prevents people participating in long-term savings is a lack of short-term liquidity for emergencies,” Phillips said.

One of the big things that prevents people participating in long-term savings is a lack of short-term liquidity for emergencies.

Leigh Phillips

President and CEO of SaverLife

In traditional 401(k) plans, where contributions are made pre-tax, the penalty for withdrawing from an account comes with a 10% tax penalty if the person is under age 59½ (unless they meet an exception allowed by the plan).

“Having money locked away that you can’t touch is alarming to some people,” Phillips said.

That concern is addressed in state-facilitated retirement programs, which generally auto-enroll workers — those without access to a workplace plan — into Roth IRAs (individuals can opt out of enrollment if they want). 

Why Roth accounts can give peace of mind

Roth accounts come with no upfront tax break for contributions as traditional IRAs do, but you generally can reclaim your contributions at any time without an early-withdrawal penalty.

The Roth structure “offers greater flexibility and more conditions that allow someone to tap those savings if they need to,” Antonelli said.

Altogether, 46 states have either implemented or considered legislation since 2012 to create retirement savings initiatives to reach workers without a plan at work. More than $476 million is collectively invested through these plans, according to Antonelli’s organization.

Amazon, Apple and Tesla have all done it. Here’s why firms split stock

Google is just one of dozens of companies recently making its stock more affordable. The tech giant’s parent company, Alphabet (GOOGL), split its two classes of shares (GOOG) by a 20-to1 ratio in July.

Amazon (AMZN) made the same 20-for-1 move in June while Tesla (TSLA) announced around the same time that it’s going with a 3-for-1 stock split. Apple (AAPL) has split its stock five times since the company went public.

Watch this video as CNBC’s Emily Lorsch explains what a stock split is and why companies do it.