I have a economics degree. I spent years studying how markets work, how incentives shape behavior, how resources flow through an economy. And the thing I keep coming back to — the thing that motivated building this entire site — is a concept economists call the K-shaped economy.
It describes what's been happening to American households over the past few decades, and especially since the pandemic. The economy isn't growing in one direction for everyone. It's splitting into two branches — like the letter K — with one group rising and the other falling, often despite working just as hard.
The two branches of the K
Imagine two people. Both work 40 hours a week. Both are doing their best. Both care about their families and their futures.
Person A has a salaried job with benefits. Their employer offers a 401(k) with a match. They own or are buying their home, which is going up in value. Their retirement account is invested in the stock market, which has historically returned about 10% per year. Every year, their net worth grows — not because they're doing anything special, but because the systems they're plugged into are designed to compound their advantages over time.
Person B earns hourly wages or gig income. No employer retirement match. No home equity building. Their savings sit in a checking account, losing value to inflation every year. They're on Medi-Cal — a program they depend on and are grateful for, but a program that punishes them for earning more. Every time their income rises, they risk losing benefits worth more than the raise.
"The difference between the two branches isn't effort or character. It's access — to systems that compound advantages, and information about how those systems work."
The compounding gap
Here's what makes the K so powerful — and so hard to escape once you're on the lower branch. The upper branch doesn't just stay ahead. It accelerates. Compound interest means that money already invested grows faster than new money saved. Home equity builds automatically as the market rises. The 401(k) match is essentially free money for people who have access to it.
Meanwhile, money sitting in a checking account loses 3% of its purchasing power every year to inflation. The lower branch doesn't just stay flat — it gradually falls, in real terms, even when nothing "bad" happens.
The benefits cliff is where the K splits
From a supply-and-demand perspective, the benefits cliff is a price signal — and it's sending the wrong message. When earning more triggers a loss of benefits greater than the gain, the rational economic response is exactly what we see: people avoid the raises. They turn down extra hours. They stay in jobs that pay less.
This isn't laziness or lack of ambition. It's people responding rationally to the incentive structure in front of them. Economists call these perverse incentives — incentives that produce the opposite of their intended effect. The system is designed to help people, but it's structured in a way that punishes the behavior it's supposed to reward.
Information asymmetry keeps people on the lower branch
One of the core concepts in economics is information asymmetry — when one party in a transaction knows something the other doesn't. The MAGI strategy described on this site is a perfect example. The information — that retirement contributions reduce MAGI and can protect benefits — exists. It's in the tax code. It's legal. But it flows naturally to people who already have financial advisors, accountants, and access to professional guidance. The people who need it most are the least likely to have been told.
The stock market doesn't check your income
Here's the part that gives me the most hope: the wealth-building mechanisms that drive the upper branch of the K are not, in fact, restricted to people who already have money. The stock market compounds returns the same way for a 00 account as it does for a 00,000 account. An index fund doesn't care who owns it.
The barrier isn't the market itself. The barrier is knowing the door is open — and knowing how to walk through it without triggering a loss of the benefits your family depends on right now. That's the exact problem this site exists to solve.
What this means for you
If you're reading this on benefits, the goal isn't to feel angry about the system — though that's a reasonable response. The goal is to use what the system offers while building something the system can't take away. A Traditional IRA contribution does both: it keeps you under the MAGI threshold today, and it plants money in the stock market that starts compounding for your future.
That's how you start moving from the lower branch of the K to something that at least begins to close the gap.
Find your path up the K
Use the calculator to see exactly how a retirement contribution changes your MAGI — and starts building the wealth that compounds over time.
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