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A million bucks not being what it used to be, becoming a millionaire is not quite as self-denying as you are saying if you have an upper middle income. Put away $50,000 every year for your 20 peak earning years and that $1 million, at zero interest. Unfortunately you won't be able to retire on it; at a 4% withdrawal rate that's only $40,000 a year, plus Social Security. It takes invested assets of at least $3 million to replace a large percentage of, say, a $200,000 income ($120,000 from the assets and $60,000 from Social Security).
With my math as a single guy, for that $200K AGI, I pay about $50K in income taxes, $10K in payroll taxes, and salt away $60K towards retirement. My net is $80K. My Social Security check projects to be $41K deferring until age 70 and that's inflation-protected. I don't need to replace $160,000. I need to replace $40,000 and do what I can to avoid paying taxes on that money.
Just being a millionare is not really the right question. Someone can live on Ramin till they are 50 and live a sub par quality of life and make a million. Usually when someone refers to a "millionare" they are referring to someone that had the skills to make good money without extreme delayed gradification.
whats the point of becoming a millionare late in life if you had to never really live in order to get there. People will justify it buy saying things like "entitled generation" or "instant gradification". But where is the line? I mean putting things off for a year to save is one thing, putting off your entire life to have a million bucks when you are 50 is a completely other thing. Sometimes I want a coffee because I am busy and don't have time to make it but that would be "instant gradification".
The real issue is everyone wants a fortune for anything so it has put an incredible burden on people because if you don't literally do everything yourself and try to leverage even a little bit of time you end up paying through the nose for it. That is why US and western Europe societys will eventually collapse. Also companies and business have made doing a lot of things yourself literally illegal, you have to have permits, licencing and bonding just to put an addition on YOUR OWN HOME even if you know what your doing. You have to have a licence to work on YOUR OWN PLANE which they purposely make onerous to get. States require licenced surveyors to subdivide your own land and they charge accordingly know you cant do it yourself. If you want to put in a well and septic you have to get permission and someone certified has to put it in even if its YOUR OWN LAND.
If you want to do anything other than live in your apartment and go to your 15$/hr job your going to find out how much of a fleece things are.
A million bucks not being what it used to be, becoming a millionaire is not quite as self-denying as you are saying if you have an upper middle income. Put away $50,000 every year for your 20 peak earning years and that $1 million, at zero interest. Unfortunately you won't be able to retire on it; at a 4% withdrawal rate that's only $40,000 a year, plus Social Security. It takes invested assets of at least $3 million to replace a large percentage of, say, a $200,000 income ($120,000 from the assets and $60,000 from Social Security).
This information is largely pointless and meaningless.
You need to get down to specifics. Here we go, if you save x% of your income after 35 years a reasonable assumption is that you can withdraw 8 - 5 x% in retirement.
So if you save 10% then you can withdraw between 80-50%
Now how many people spend >50K in retirement? Its less than 10%
How many spend over 100K in retirement, its probably less than 1%
So all those high earners aren't spending a significant amount of their pre tax income. Spending drops about 50% from age 65 to 85
Unfortunately you won't be able to retire on it; at a 4% withdrawal rate that's only $40,000 a year, plus Social Security.
As others have pointed out, there are many people who could retire on that today.
Average social security for a retired worker is about $16k, so you're talking about a single person living on $56k annually which is higher than the median household income in the US.
With my math as a single guy, for that $200K AGI, I pay about $50K in income taxes, $10K in payroll taxes, and salt away $60K towards retirement. My net is $80K. My Social Security check projects to be $41K deferring until age 70 and that's inflation-protected. I don't need to replace $160,000. I need to replace $40,000 and do what I can to avoid paying taxes on that money.
Then you should be all set. It's rare to find someone who actually does the math and then makes a realistic plan and executes it.
This information is largely pointless and meaningless.
Gee, thanks. I never said the info was complete. If you want to pay my commercial consulting rates, I'll produce something of value to you.
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You need to get down to specifics. Here we go, if you save x% of your income after 35 years a reasonable assumption is that you can withdraw 8 - 5 x% in retirement.
So if you save 10% then you can withdraw between 80-50%
Pardon me for saying so, but this is gibberish. What does 8 - 5 x% mean? 80-50% of what? Do you mean 50-80%?
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Now how many people spend >50K in retirement? Its less than 10%
I could look up the data, but every time I go to a nice restaurant, I see a lot of white hair. People spending $200 a couple, or more, on dinner. Every time I go to a luxury hotel, white hair. Golf resort, same thing. Somebody has a lot of money and is spending it. Being old and poor sucks.
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How many spend over 100K in retirement, its probably less than 1%
With 7% of all U.S. households having a net worth of $1 million or more, I think your estimate is way low.
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So all those high earners aren't spending a significant amount of their pre tax income. Spending drops about 50% from age 65 to 85
Spending peaks around age 50
That seems right. But if you are earning $300K and your spending *slowly* drops to $150K, you need a lot of capital unless you are planning to croak a few years into retirement, which is not a good strategy :-)
I know lots of millionaires, because that's not that much money anymore. But I only know one super-rich person (that would be in the multi-millions or more now). He actually gave me advice and said that he got all his money by working really hard - to the point of obsession - about something he was passionate about, with money not actually being the goal at all. He's kind of a genius, though, and has limitless energy, so I don't thin he's someone who can be emulated by us ordinary folks.
This information is largely pointless and meaningless.
You need to get down to specifics. Here we go, if you save x% of your income after 35 years a reasonable assumption is that you can withdraw 8 - 5 x% in retirement.
So if you save 10% then you can withdraw between 80-50%
Now how many people spend >50K in retirement? Its less than 10%
How many spend over 100K in retirement, its probably less than 1%
So all those high earners aren't spending a significant amount of their pre tax income. Spending drops about 50% from age 65 to 85
Spending peaks around age 50
it isn't the fact of how many spend x-amount . it is the fact even if they wanted to they couldn't .
just because folks live within a certain income range does not mean they are happy with that lifestyle nor does it take in to consideration the cost of living in the area they do live .
i can tell you here in nyc the median income is about 58-60k but that will not buy a middle class lifestyle like it would in phoenix or houston . it would take 2x that median income for the same middle class lifestyle here so never confuse median incomes with middle class lifestyle's .
talking median income vs spending if you have the dough may mean very little .
spending drops by 50% starting at 65 ? not unless you sit home it doesn't or don't have comprehensive medical insurance to go along with medicare .
actually according to both ty bernkke's study and also the sun life study spending remains strong if you have the money right up until mid 70's as folks go places , do things and buy things . in fact the biggest age group for buying expensive cars is the 70's ,.
between our being home every day and insurance costs our budget in early retirement is higher then when we were working . so far it is panning out to be exactly that way as every day is a new adventure as we try to find things to occupy all this time and time can cost money . .
i all depends on what you want out of your retirement , there are zero general statements about spending and lifestyle in the early years . those who have more tend to spend more .
in fact it was believed we spend smile shaped but with soaring healthcare costs this is found to no longer be the case . soaring healthcare costs both in the beginning of retirement compared to having employer subsidized insurance or pretax insurance is huge .
i paid 600 a month for my wife and i working, pretax . .
we now pay 1100 a month with her on medicare and a supplement and me on an aca plan in after tax dollars . that does not include our LTC policy either . so healthcare costs are disproving any of the old thinking .
Last edited by mathjak107; 12-01-2015 at 05:04 AM..
Do you know any self-made millionaires? And if so, what are the most consistent traits that you see among them? We're talking about people who were able to go from being a member of the middle class community, to becoming a millionaire. Do you find that there's any general commonalities among people who were able to achieve millionaire status?
I'll go back to this question from the OP.
Here are the qualities I have observed:
1. Intelligence. Many intelligent people are not millionaires. However, most millionaires are intelligent people.
2. Ambition. You have to want to get to the point where you are wealthy.
3. Luck. Plays a critical role whether people can admit it or not. Investing from 1990 to 2000, yielded a far greater return than investing from 2000 to 2008 did. Many people don't make it to the ranks of the wealthy because of poor health or circumstances in life that hold them back more than an average person is held back. By the same token, those who reached their adult years in the midst of a crisis like the Great Depression of the 1930's had a far more challenging life than those born during the early Babyboom Years.
4. Mentorship. Many, if not most, who make it to the point of being truly wealthy had someone they could count on to advise them in terms of both a career and investments. Its hard to do it all by yourself.
About a year ago, I calculated my wife and I are now millionaires based on our net worth. Big deal. I think people have it all wrong. The goal in life should not be to be a millionaire. The goal should be to live as well as possible. If one can live like a millionaire and not be a millionaire that's fine. My love for nice vacations abroad, new automobiles, and more than one home undoubtedly has held down our net worth. Yet, I wouldn't trade any of it for more dollars in the bank.
Life shouldn't be about maximizing dollars in the bank. It should be about maximizing personal satisfaction. I have never understood people who give up the joys and comfort of a family because it enables them to save more. Nor, do I understand those whose only criteria for a job is how much money it pays. One should seek a career that provides personal satisfaction and one you can work with some degree of happiness for at least thirty years. Challenges in the work place and outside it should be treated as opportunities for personal growth--rather than something to be avoided.
whats the point of becoming a millionare late in life if you had to never really live in order to get there. People will justify it buy saying things like "entitled generation" or "instant gradification". But where is the line? I mean putting things off for a year to save is one thing, putting off your entire life to have a million bucks when you are 50 is a completely other thing. Sometimes I want a coffee because I am busy and don't have time to make it but that would be "instant gradification".
Someone always says something like this. The percentage of people out there who are like this are so rare they are not even worth considering.
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