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Honestly, I find that a bit startling (or appalling or jealousy-inducing) ... I mean, seriously, for most people who grew up poor or working-class, inheriting a million dollars just for being born into a particular family would be life-changing. Seriously life-changing. So when people act like it's no big deal ... I just kind of shake my head. "Oh, I have an extra million dollars in my account, but I don't even notice it." (And I apologize if it seems like I'm picking on you -- that is not my intention at all -- but your statement is just bizarre to me.)
The way to make sure that an inheritance remains significant over the long run is often to try to treat it like it's not there in the short run, lest money that could be helping to breed more baby dollars or euros or allow for major long term lifestyle changes ends up getting spent on something that neither lasts nor offers up a significant improvement in quality of life.
I was curious the average cost of housing in your area and read the median is 274K. I understand why a million in your opinion can go much further compared to someone living in Seattle.
Having no kids myself a million is definitely worth a lot more to me than to my peers who have a few. There is a lot of disconnect about people's lifestyle and different COL in cities. I can't help think the majority here who think a million is a lot are childless and don't know the associated costs of raising kids. Or they are much older and haven't realized how more expensive everything has gotten.
New Hampshire is often considered a low-cost alternative (with a soul-sucking commute) for people who work in the Boston metro but can't afford to live closer to the city. Around Boston, $274k is a steal, and in the better parts of the city itself, it's what you pay for a deeded parking spot. There's several zip codes with a median home or condo price that's 7 figures.
So, you are very much correct that COL affects how one perceives a million dollars.
... I mean, seriously, for most people who grew up poor or working-class, inheriting a million dollars just for being born into a particular family would be life-changing. Seriously life-changing. So when people act like it's no big deal ... I just kind of shake my head. "Oh, I have an extra million dollars in my account, but I don't even notice it."
It's the difference between treating that extra million dollars as a source of income, vs. just adding it to one's account. If a person has say only $250K in her account at Fidelity, and she inherits $1M, her account quintuples, yes? But if she just puts the million into said account, not touching it for subsequent decades, then her life hasn't materially changed for the better. In fact arguably it's changed for the worse, because now with a bigger portfolio, she has a larger dividend-stream, which adds to her annual taxes. Her out-of-pocket expenses, in the form of quarterly estimated payments to the IRS, actually rise!
So it's incorrect to say that an extra million dollars is only impalpable for the already-wealthy! Wealthy or not, if you spend that million on a yacht, a vacation-house, a sports-car and a luxury round-the-world trip, yeah, it affects your life substantially, even if you're already a billionaire. But if you just add it to your stash, via electronic-transfer and an e-mail confirmation, then materially nothing changes, whether you live in a trailer or a mansion.
Quote:
Originally Posted by karen_in_nh_2012
I took a COVID-related retirement incentive so will continue to be paid my regular salary for the next year and half, which is apparently very generous (and for which I'm very grateful), but I am still "losing" close to a million dollars in income and retirement contributions that I would have gotten had I been able to stay for another 8 years, ...
Congratulations on your retirement! That said, you're absolutely right about the opportunity cost. That is the bane of early retirement, even if one is already fabulously wealthy. Our labor is worth something. If we shunt aside that worth, then it feels like a loss, even if we already have plenty, or have compelling alternative things to do with our time. So to be more precise, I kindly offer both congratulations and commiseration.
I
OK again, you can think that, but my point was that that makes no sense. Mid-six-figures, when six figures literally means $100,000 to $999,999, should not possibly mean $150,000. Again, that makes no sense.
Sorry, but when people are so illogical with numbers, it makes me a bit cranky.
I was in agreement with you(with two typos with/wouldnt but it shouldn’t have been hard to figure out) maybe you are cranky
So it's incorrect to say that an extra million dollars is only impalpable for the already-wealthy! Wealthy or not, if you spend that million on a yacht, a vacation-house, a sports-car and a luxury round-the-world trip, yeah, it affects your life substantially, even if you're already a billionaire. But if you just add it to your stash, via electronic-transfer and an e-mail confirmation, then materially nothing changes, whether you live in a trailer or a mansion.
Outlook on life can significantly change with a really fat balance in bank or investment account, leading to better health when one considers how many years of non-employment could be covered, there can be a new ability to take a job based on interest in its projects rather than whether it gets you the highest possible paycheck, the ability to jump on an opportunity you really want and feel strongly about.
Money doesn't directly buy happiness over a certain level- something like a $80K HHI is where you see significant diminishing returns. But money can buy you additional life options that will let you get better marginal happiness returns if you know how to best target said spending inn investing for future spending availability.
Honestly, I find that a bit startling (or appalling or jealousy-inducing) ... I mean, seriously, for most people who grew up poor or working-class, inheriting a million dollars just for being born into a particular family would be life-changing. Seriously life-changing. So when people act like it's no big deal ... I just kind of shake my head. "Oh, I have an extra million dollars in my account, but I don't even notice it." (And I apologize if it seems like I'm picking on you -- that is not my intention at all -- but your statement is just bizarre to me.)
Heck, I grew up solidly middle class (maybe the lower end of upper middle class depending on how people want to define it), and I still think $1M is a life changing amount. No, it doesn't buy a luxury lifestyle for the rest of your life, but it certainly can give you a ton of new options for the rest of your life if you do it even halfway right.
Just taking the dividends from an S&P 500 index fund generates an income of 14K a year, and those dividends tend to grow over time. An extra 14K a year in income that you don't have to work for is life changing for a lot of people, even if the $1M isn't enough for them to quit their jobs.
Outlook on life can significantly change with a really fat balance in bank or investment account, leading to better health when one considers how many years of non-employment could be covered, there can be a new ability to take a job based on interest in its projects rather than whether it gets you the highest possible paycheck, the ability to jump on an opportunity you really want and feel strongly about.
Yes of course, but this "outlook" is more about personality than pecuniary wherewithal. A skittish and pessimistic person can just as well say, "Oh great... now I have a extra million dollars in my portfolio. So at the next downturn I lose not just $X, but also money out of this million. And whereas I could have worked Y additional years to cover the losses, now I'd have to work an extra Z years, to cover losses on the new million."
So why, oh skittish and pessimistic person, not just put that magic million into certificates of deposit, and obviate your worries about market-losses? Because that feels pusillanimous and weak! To not have a million, and not earn a return on it, is not shame. To have the million, but to have it sit unproductively, is grossly and unforgivably shameful.
Having the money, comes with responsibility, does as having a talent comes with responsibility. The young music-prodigy who's gifted at violin, would be a doing an unconscionably gross disservice to himself and to society, by giving-up the violin. But the untalented, who practices daily but then in frustration quits, incurs no great loss, to himself or to Mankind. So to with money! To possess it, incurs an obligation to grow it.
Let me give a practical example: two brothers, Bob and Biff, both engineers making a good salary. Bob saves his money and invests in the stock market. By age 50, Bob is worth $10M. Biff, with the same earnings history, saves nothing. Both get a job-offer to work in California. Should they relocate? Suppose that both currently live in South Dakota, paying no state income tax. Well, for Biff to relocate only means a cost of getting an apartment and so on. But Bob has to worry about California state income tax on dividends and capital gains distributions on his portfolio. It's going to be much costlier for Bob to take that dream-job in California, than for Biff. Ironically, having less money in this case buys one more opportunity.
Heck, I grew up solidly middle class (maybe the lower end of upper middle class depending on how people want to define it), and I still think $1M is a life changing amount. No, it doesn't buy a luxury lifestyle for the rest of your life, but it certainly can give you a ton of new options for the rest of your life if you do it even halfway right.
Just taking the dividends from an S&P 500 index fund generates an income of 14K a year, and those dividends tend to grow over time. An extra 14K a year in income that you don't have to work for is life changing for a lot of people, even if the $1M isn't enough for them to quit their jobs.
Everything is relative ..like I said if all we had was ss and 1 million saved which generates 40k we would not have been able to retire here or we would live a stress filled life anticipating every un expected bill …
Our friends had a 55k household income and had to pack up and leave family and friends as they were miserable here trying to live on it .
Our area has a median house hold income of about 100k .
Don’t forget rent can be 22-24k a year alone …
If you own you can have 10-15k in taxes and lots of costly maintenance plus maybe a mortgage .
So 1 million is a lot of money if you can just spend it …it is not much here generating 40k a year and is no different than our average sanitation workers pension and no savings.
It is less than many here have as a household income working.
So while it’s nice to have that 40k income from a million , lifestyle wise it likely changes nothing compared to when you were working if retired on it and more than likely would be a step backwards compared to household income working.
Last edited by mathjak107; 06-28-2021 at 03:38 AM..
There’s being that conservative and then there’s blowing it like a maniac, But there’s plenty of life changing options in between.
Taking a 40k draw would be with the intention of making it last for decades with something even left over at the end of the rainbow. Let’s instead say, I took $10,000 a month draw. The rest of the money would be consistently working for you. You could draw $10,000 a month for easily 10 to 15 years most likely. Assuming we’re adults at age 20, retire at 65, that’s basically 1/4 or more of your adult working life handed to you. Of course many people don’t make close to 10k a month, so make it a 3 or 4k draw, and suddenly it’s more than 2 decades.
And sure let’s say 1 million is 600k after tax. And you only drew 5k a month, while leaving the rest invested. Or draw 2k. What ever.
It’s life changing any way you slice it in my eyes to probably about 95% or more of the population.
I also think even if I kept working exactly as a do today it would be life changing with a conservative 40k a year draw. That’s 4 world class vacations spending 10k each time 4 times every year I don’t take now. That also could’ve a beach front lake house and a boat
Last edited by Thatsright19; 06-28-2021 at 06:35 AM..
There’s being that conservative and then there’s blowing it like a maniac, But there’s plenty of life changing options in between.
Taking a 40k draw would be with the intention of making it last for decades with something even left over at the end of the rainbow. Let’s instead say, I took $10,000 a month draw. The rest of the money would be consistently working for you. You could draw $10,000 a month for easily 10 to 15 years most likely. Assuming we’re adults at age 20, retire at 65, that’s basically 1/4 or more of your adult working life handed to you. Of course many people don’t make close to 10k a month, so make it a 3 or 4k draw, and suddenly it’s more than 2 decades.
And sure let’s say 1 million is 600k after tax. And you only drew 5k a month, while leaving the rest invested. Or draw 2k. What ever.
It’s life changing any way you slice it in my eyes to probably about 95% or more of the population.
Depending on sequences there may be no money left to grow even at 40k a year .
It isn’t about average returns anymore when spending down , it is all about the sequence of gains and losses .
Every failure at 4% happened in the first 15 years …the greatest bull markets in history had to much spent down the first 15 years to save those in 1965/1966.
1907, 1929 ,1937, 1965, 1966 , all failed because the first 15 years had poor sequencing and that was at 4% inflation adjusted
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