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If you save and invest consistently from age 20 until age 65, one million is not hard to achieve. If you miss those first ten years, it is much harder.
One hears such statements incessantly, and technically they're true. But there are two crucial caveats. First, that $1M at age 65 – 45 years in the future, for today's 20-year-old – will be worth parlously less, than presently. Even at 2.5% inflation, $1M falls to $330K. Second, those eye-watering investment accumulations assume a steady and substantial allocation to stocks. Even if the stock market of the 21st century maintains the growth in which it basked in the 20th, most people attenuate their stock-allocation later in life. This buys safety, in exchange for lower returns – precisely when returns matter most.
It is simply not true, that small but consistent savings are a surefire path to accumulation of substantial wealth.
Quote:
Originally Posted by mathjak107
...once retired the pile of money you have may mean little as a lump sum . that million dollar savings may generate no more income to live on than someones 40k pension with no savings . the only thing that matters is the after tax income it generates and the chances of your money not running out before you run out of time .
And that's the most insightful observation in this entire thread!
Assets/portfolios matter, in so much as they generate income. Persons adept at saving money, are NOT necessarily skillful at turning accumulated money into income. Consider: Person A has $500K, but perennially manages 10% annual return. The resulting $50K isn't luxurious, but it accords a modicum of comfort in most parts of the US. Person B is blessed with a whopping $5M, but keeps all of that money in a savings account generating 0.5%/year - for an income of $25K. Who has the more comfortable lifestyle?
I reiterate, that while good habits (advancing one's career to increase one's salary, curtailing expenses, systematically saving money) are essential, they are NOT sufficient - even if one does succeed in amassing a sizeable wad of cash. It is necessary to excel as an investor - especially once we do have a substantial portfolio with which to work.
I have to correct the above. I forgot that after January one they start taking SS out again and your salary goes back down to the amount prior to reaching the threshold the year before. It really wasn't a big deal because I knew it was coming and it was a regular annual drill. Plus Christmas spending was over.
The only reason it is "relatively painless" is because of the relatively few people that it is painless for! Remember thwt the new $127,200 means that ones gross has to be about $150/60k because at that level there is typically a lot of 401k, HSA, Etc deductions that reduce the SSI income. So for the 90% that weren't making say beyond $145k to take home that extra $600 the last few months because they reached $118.5k, going up to $127.2k means nothing. And for the top 5% that make over $300k/yr, they still see many months of no SSI premiums until the next January. So its only the 5% from 90-95% where they were paying off their SSI in Oct or Nov, and got to see a nice little holiday bonus that feel it. Most all years, the increase basically equalled the SSI COLA increase. Which parallels the average national wage increase. I don't know where the 7.3% increase came from...there is no way on earth the average national wage went up that much in 2016!!
To momentarily address the OP, there is a huge difference between MANAGING to retire, and retiring in COMFORT. I didn't save and live below my means, relatively frugally, to "manage" to retire. The retirement income equivalent of say 2M SAVED (either through savings or equal pension and savings) is $80k, plus a $40k SS is equal to about $135-40k equivalent working pre-retirement income. That is a comfortable retirement, IMHO. Especially with a paid off home and not living in a top 10 high COL area. A $60k retirement income can be just as comfortable as long as you Manage where you live and what you do more carefully, ie reduced choices. Possible vs comfortable are worlds apart when discussing fixed incomes, yet both are retired and both can be perfectly acceptable, depending on the individual.
I'm around a lot of older people and Certificate of Deposits is as risky as they get.
The neighbor that passed at 101 was super diligent to not have too much money in one bank... she was concerned about FDIC deposit insurance limits.
My Grandparents survived the Depression and they would rather dig a hole in the ground vs. Wall Street and nothing you could say would change that... and the same for most of their friends.
That appears to be the highest percentage jump since the program started.
1980 to 81 is the highest at just over 14%. Quite a few years are in the 8% range, but they occured during high inflation years when salaries WERE increasing 7-8%. I remember getting 8% raises and it was normal and really made little difference based in COL. BUT a 7.3% increase when inflation is under 1% and a 2% raise is normal?? WTF??
Consider: Person A has $500K, but perennially manages 10% annual return. The resulting $50K isn't luxurious, but it accords a modicum of comfort in most parts of the US. Person B is blessed with a whopping $5M, but keeps all of that money in a savings account generating 0.5%/year - for an income of $25K. Who has the more comfortable lifestyle?
If you spend $5MM over 40 years, that's $125K a year.
That guy wins!
I personally would like to spend my last dollar on the day I die.
If I knew when that day was, you bet I'd try to do it!
True. It is absolute crap for people to insist that a million or more is needed before anyone can comfortably retire. Some people are so consumed with their love for money that they can't comprehend how the rest of us enjoy retirement with less,...much, much less. I wouldn't trade lives with the richest people on earth. There is an emptiness in them that their money can't fill.
How do you know? generalizations, by definition, are usually false.
If you spend $5MM over 40 years, that's $125K a year.
That guy wins!
I personally would like to spend my last dollar on the day I die.
If I knew when that day was, you bet I'd try to do it!
My stepfather spent $7 million down to zero in about 30 years. When he died, the house was underwater on the mortgage. His brokerage account was down to a bit more than $100K which was chewed up by the lawyers. The bank ate the short sale. Thank god my mom had no ownership interest in that house or it would have put a dent in her wealth, too.
My stepfather spent $7 million down to zero in about 30 years. When he died, the house was underwater on the mortgage. His brokerage account was down to a bit more than $100K which was chewed up by the lawyers. The bank ate the short sale. Thank god my mom had no ownership interest in that house or it would have put a dent in her wealth, too.
A guy with $7 million had a mortgage????
Where did he live, in the Taj Mahal?
And I don't mean the Trump Taj Mahal, I mean the actual Taj Mahal.
why not ? if he is getting a better return elsewhere then he is better off . we can pay cash for a place we are thinking of buying but i rather take a mortgage .
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