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Depending on your age, where you live, and your lifestyle it could be a lot of money or it could help make your life better. I live in a 1.3M house that's 35 years old. One could buy a brand new condo with a 1M but forget a house.
A million is a nice start for a 25 year old who graduated but even better for a 65 year old retired person with a government pension.
Some introverts on CD could never spend a million. They have such minimalistic lifestyles it would barely make a dent.
There are a lot of places in America where, after taxes, your million dollar jackpot won't even buy you a middle class 3 bedroom house.
Not that I'd turn down a free million dollars, but it just isn't all that much spending power any more.
Dude. Even with all the taxes taken off, ~$1 million to me right now would be:
-Paying off my entire student loan debt--10s of thousands
-Buying a small modest house--not a mobile home, a house in cash(considering the area I'm in, it won't be cheap)
-Get dental and other health work done, which ain't cheap
-Can actually put a bunch of $$ in my IRA, maybe even mutual funds, etc.
-Have enough left over where I would officially retire in my late 30s.
Dude. Even with all the taxes taken off, ~$1 million to me right now would be:
-Paying off my entire student loan debt--10s of thousands
-Buying a small modest house--not a mobile home, a house in cash(considering the area I'm in, it won't be cheap)
-Get dental and other health work done, which ain't cheap
-Can actually put a bunch of $$ in my IRA, maybe even mutual funds, etc.
-Have enough left over where I would officially retire in my late 30s.
Originally Posted by oregonwoodsmoke View Post
There are a lot of places in America where, after taxes, your million dollar jackpot won't even buy you a middle class 3 bedroom house.
Not that I'd turn down a free million dollars, but it just isn't all that much spending power any more.
I would not say a lot of places in the United States are like that at all. Some places yes, but lots, no. After taxes, $1 million dollars is probably about $600K if taken in lump sum.
The median home price in the United States is about $281K which is outrageous, but nothing like the super insanely expensive metros. $600K after taxes is easily enough to buy the median home in the United States even as bad as the median price is.
Yes there are Metro Areas where it would not be enough like Los Angeles, San Diego, Seattle, Washington DC, Boston, NYC, and especially San Francisco Bay Area. Those areas are so super and dramatically more expensive than 95% of the United States by a multiple of at least 3X. I would not consider those lots as almost all other major metros in United States are not near that expensive.
$1 million after tax would not buy the median priced 3 bedroom middle class home in those areas really only, but would in pretty much any other area easily and even areas that would be close like Denver and Portland it would, but would not have much left over.
I would not say a lot of places in the United States are like that at all. Some places yes, but lots, no. After taxes, $1 million dollars is probably about $600K if taken in lump sum.
The median home price in the United States is about $281K which is outrageous, but nothing like the super insanely expensive metros. $600K after taxes is easily enough to buy the median home in the United States even as bad as the median price is.
Yes there are Metro Areas where it would not be enough like Los Angeles, San Diego, Seattle, Washington DC, Boston, NYC, and especially San Francisco Bay Area. Those areas are so super and dramatically more expensive than 95% of the United States by a multiple of at least 3X. I would not consider those lots as almost all other major metros in United States are not near that expensive.
$1 million after tax would not buy the median priced 3 bedroom middle class home in those areas really only, but would in pretty much any other area easily and even areas that would be close like Denver and Portland it would, but would not have much left over.
I think it’s also overstated that someone would need to pay the cash for a house upfront.
Having 600k after tax gives you a base to draw down on and the cash flow from investing all or part of it. You could borrow the funds for a house. If it’s in an expensive market, you own a better house in a nicer market that has appreciation you can capture. You could easily just use 20 to 30k of draw to live in a far better house than today and then use the money for other things. There’s little incentive to pour all the money into a residential property with interest rates so low.
Those who suggest that you have to just take the money and plow it into a house and oh now all you have is a 3 bedroom median house are missing the ability to use leverage. More money provides more options. Now you have the nicer house and most of your money. Suddenly, you’re capturing a higher end of appreciation you couldn’t, and you’re investing above the 3% or lower interest rate.
Having more money puts you in situations to take steps you wouldn’t have been in without it. Those steps lead to being in still yet another place. It kickstarts the process like jet fuel.
Imagine starting a monopoly game where everyone gets their 1,500 but one person starts with 1500 and randomly has 4500 extra from a lottery winning. They’ll win and buy up the map barring strategic and financial incompetence.
600k is a net worth amount that can take people decades to build (assuming they ever get there).
Last edited by Thatsright19; 06-05-2021 at 01:07 PM..
I think it’s also overstated that someone would need to pay the cash for a house upfront.
Having 600k after tax gives you a base to draw down on and the cash flow from investing all or part of it. You could borrow the funds for a house. If it’s in an expensive market, you own a better house in a nicer market that has appreciation you can capture. You could easily just use 20 to 30k of draw to live in a far better house than today and then use the money for other things. There’s little incentive to pour all the money into a residential property with interest rates so low.
Those who suggest that you have to just take the money and plow it into a house and oh now all you have is a 3 bedroom median house are missing the ability to use leverage. More money provides more options. Now you have the nicer house and most of your money. Suddenly, you’re capturing a higher end of appreciation you couldn’t, and you’re investing above the 3% or lower interest rate.
Having more money puts you in situations to take steps you wouldn’t have been in without it. Those steps lead to being in still yet another place. It kickstarts the process like jet fuel.
Imagine starting a monopoly game where everyone gets their 1,500 but one person starts with 1500 and randomly has 4500 extra from a lottery winning. They’ll win and buy up the map barring strategic and financial incompetence.
600k is a net worth amount that can take people decades to build (assuming they ever get there).
To me though, having a mortgage is not an option as I despise any form of debt. I do not care how low interest rates are, I hate debt and want to own my home 100% equity period for me to be happy. Having a paid for home at a young age is essential to happiness fort me. SO it always makes sense to put all money into a house for peace of mind to feel like you really own it as free and clear as can be minus property taxes of course.
To me though, having a mortgage is not an option as I despise any form of debt. I do not care how low interest rates are, I hate debt and want to own my home 100% equity period for me to be happy. Having a paid for home at a young age is essential to happiness fort me. SO it always makes sense to put all money into a house for peace of mind to feel like you really own it as free and clear as can be minus property taxes of course.
And that’s fine. However, that is a personal decision loaded with bias, not born out of cold financial calculation.
A person who buys a 600k house, and saves 30 years of interest expense at probably 3% is very unlikely to beat someone that invested 600k elsewhere. I would have less peace of mind knowing I was suboptimally using leverage.
Opportunity cost matters. Locking in the “safe” option that “feels good” often entirely ignores opportunity cost and is actually far riskier to someone’s long term financial condition.
To me though, having a mortgage is not an option as I despise any form of debt. I do not care how low interest rates are, I hate debt and want to own my home 100% equity period for me to be happy. Having a paid for home at a young age is essential to happiness fort me. SO it always makes sense to put all money into a house for peace of mind to feel like you really own it as free and clear as can be minus property taxes of course.
I agree with THATSRIGHT.
a mortgage is a tool…it can be used to grow far greater wealth for many then trying to do it all with just the bits and pieces they can save .
Whether to pay cash or take a mortgage is a personal choice but in no way is not taking a mortgage inherently a better choice just because it isnt debt.
A home is a one way funnel …Money goes in but it can’t come out again except with costly loans .
There is nothing more comforting to me then a pool of liquid cash you can access with a click of a button at any time on liquid available assets ..
Today to get a heloc loan if you need money ad it is tied up in your house , it requires the same income and credit requirements as a mortgage…that can be a problem for a retiree suddenly cash strapped
Last edited by mathjak107; 06-05-2021 at 02:54 PM..
There is nothing more comforting to me then a pool of liquid cash you can access with a click of a button at any time on liquid available assets ..
Today to get a heloc loan if you need money and it is tied up in your house , it requires the same income and credit requirements as a mortgage…that can be a problem for a retiree suddenly cash strapped
Banks can be stupid. A year after I retired (DH was already retired), we downsized. We had investments equal to about 10X the value of the house we wanted to buy. We wanted to put down 40%, so loan-to-value was not an issue. I swear they fixated on my $900/month pension and DH's SS and ignored the assets and the income from the assets. We ended up having to put down 60%. I know there are asset-based loans but we didn't know that at the time. No regrets- I have a very manageable mortgage with a 3% fixed rate.
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