Crossing into 7 figures

[GMueller]

This group seems to have a fair number of members who have made the transition from a 6 figure to a 7 figure portfolio. I'm curious -- what were your thoughts when that day finally arrived. Were you even aware of it? If so, what was your reaction when you realized that you had reached what is, for many, a significant financial milestone? I'm also curious whether you started with a goal of reaching a 7 figure portfolio, then once you had reached it, proceeded to raise the bar a little (for cushion). If so, how much did you raise the bar, and what made you finally say, "enough is enough"? Put another way, whatever your initial saving goal, once you reached it, how did you resist the temption of seeking "just a little more" security?

[Rich_by_the_Bay]

Quote:

Originally Posted by GMueller This group seems to have a fair number of members who have made the transition from a 6 figure to a 7 figure portfolio. I'm curious -- what were your thoughts when that day finally arrived. Were you even aware of it?

On the jaded side, they included, "boy, a million bucks is not all that much compared to alot of people I know," and, "yeah, a million today, but it could be back to 900K in 2 days depending on the market."

On the other side, "Finally, all that saving has paid off," or "well, maybe I actually will be able to cut back before 65."

Really, though, my thoughts were not that momentous. Maybe because crossing that threshhold does not occur in a single moment, but rather is a bit of a see saw over a few months until you are well over the usual stock market gyrations. Bottom line: it felt good if a bit anticlimactic.

[youbet]

"Round number syndrome" does not make for meaningful goals.* So, it meant nothing to me.

Savings goals for ER will be dynamic.* The RE environment has changed significantly over the decades I've been saving in terms of lifestyle necessities, desires and costs.* Just look at health care!* You fine tune as you learn and get close, especially if you're in a career where there is little hope of returning to work once you depart.

If you locked in some absolute goal early in life and haven't tweaked it as you've gone along in response to experience and changing conditions, you may not be making an optimum timing decision for RE for yourself.

[donheff]

I always planned to wait until age 56 to retire - 30 year Fed pension. My wife and I hit 7 figures well before that so it wasn't a milestone we could take action on. And like Rich said with market see sawing and a mix of accounts it was unclear when we actually reached it. Bottom line, it never really stood out.

Then with the irrational exuberance of 98 and 99 we inevitably started wondering what our net worth would be in 5 or six years with continued double digit growth rates -- that had a perverse effect on expectations. Luckily we had run a number of monte carlo simulators and read warnings to avoid anticipating real growth over 4%, so for retirement planning purposes we always assumed things would not look so rosy. Interestingly, the paper loss of hundreds of thousands in 2000-2002 didn't cause us to bat an eye. That is one of the values of a group like this for young dreamers -- you will constantly be reminded to anticipate a reversion to historical means.

Speaking of this group -- how long has this board been in existence? I would really have appreciated having this group to consult back in the day.

[retire@40]

I guess the feeling of crossing 5, 6, or 7 figures could be similar, depending on how hard you worked to get to those points.

If I add ALL my net assets, I am at the 7 figure mark, but I don't include items that have a remote chance of being liquidated or tapped into for cash withdrawals, so I'm not that excited yet.

I don't know the exact day that I made any of the 5, 6, or 7 figure transitions because even when that day happened, I wasn't sure if it would be a permanent low watermark.

So, I'm happy when I touch on the high watermark points, but there's a little guy on my shoulder that tells me it could be gone tomorrow and you won't see that high watermark for a long time, so don't get too excited.

[REWahoo]

Quote:

Originally Posted by donheff Speaking of this group -- how long has this board been in existence? I would really have appreciated having this group to consult back in the day.

http://early-retirement.org/#intro

[grumpy]

For many years I have maintained a large multisheet Excel file that tracks all of my investments. I faithfully update it once a week. There is a summary sheet that shows the grand total. I printed that summary sheet and stuck it in a file folder in a drawer when it first showed $500K (3/3/00) and when it first showed $1M (10/7/04). It is interesting to note that my allocation to equities has remained almost exactly the same (75.2% in '00, 75.9% in '04, and 75.5% last week). I was already FIRE'd at the point it crossed $1M for the first time so it didn't have any great impact other than giving me a sense of satisfaction that the plans and projections that I had done were on track. Even with the costs of buying and furnishing our new house and taking a couple of expensive cruises the portfolio remains in 7 figures. As I have 5 years worth of planned withdrawals parked in a MM fund, if the market pulls back and the total drops below $1M I'll probably just stop updating the spreadsheet for a while. I haven't set any new goals for the portfolio in terms of reaching some particular round number.

Grumpy

[MJ]

Quote:

Originally Posted by grumpy For many years I have maintained a large multisheet Excel file that tracks all of my investments. I faithfully update it once a week. There is a summary sheet that shows the grand total. I printed that summary sheet and stuck it in a file folder in a drawer when it first showed $500K (3/3/00) and when it first showed $1M (10/7/04). It is interesting to note that my allocation to equities has remained almost exactly the same (75.2% in '00, 75.9% in '04, and 75.5% last week). I was already FIRE'd at the point it crossed $1M for the first time so it didn't have any great impact other than giving me a sense of satisfaction that the plans and projections that I had done were on track. Even with the costs of buying and furnishing our new house and taking a couple of expensive cruises the portfolio remains in 7 figures. As I have 5 years worth of planned withdrawals parked in a MM fund, if the market pulls back and the total drops below $1M I'll probably just stop updating the spreadsheet for a while. I haven't set any new goals for the portfolio in terms of reaching some particular round number. Grumpy

I too began keeping track of my finances using multisheet excel file. I remember and recorded the 1st time I became a millionaire in Feb 00. My excitement later died when my tech stocks began plummeting. It took me over 5 more years of frugal saving to return to that number. For a single guy, it is a nice goal to achieve.

[Andre1969]

I remember when I crossed into 5-figure territory back in late 1998, I was really excited. I had just come out of a really bad period in my life, recovering from an expensive divorce in 1996, so actually having that much money saved up seemed like something to be proud of. Especially when you figure that just 2 1/2 years before, I was about $27K in the red!

As for other goals, well I haven't hit the 7-figure set yet. However, with other goals ($100K, $200K, $300K) the anticipation of reaching them one day was actually more exciting than actually crossing the threshold. It seems like alot when you're not there yet, but once you're looking at them from the other side of the goal, it just doesn't seem like that big of a deal.

[ShokWaveRider]

I have to Empathize with Rich_In_Tampa. I am forever worried about the state of the country eroding my stash. Even though we are at 7 figures, the number seems only to creeeeeeeeeeeeeep up slowly. It seemed a lot easier to get from 5 to 6 and 6 to 7 than to get that 7 figure to increment at an acceptable pace.

Other than that Health Care seems to be the biggest challenge, and IMHO will break this countries retirees

Your thoughts.

SWR

[modlair]

Big Factor in this: What you decide your house is worth.

Anyone can cross 7 figs at any time if they self declare their house to be worth enough.

I'm with the folks who say it's an event that can last a year. You don't really know you're past 7 figs until you're WAY past 7 figs.

[d]

as i recall, i crossed each milestone at least twice * *being aware of that, it takes the fun out of it. *but, as Andre also notes, the anticipation as one approaches is perhaps more exciting than the actual crossing. and, as SWR notes, the larger the stash, the more slowly the creeeeeeeeeeeeeeep and seemingly the more difficult the next level -- perhaps as we tend not to focus so much when the $ amount is (relatively) smaller, and become much more interested when the $ amount is larger.

[rs0460a]

Quote:

Originally Posted by GMueller This group seems to have a fair number of members who have made the transition from a 6 figure to a 7 figure portfolio.*

What exactly is a "7 figure portfolio"?

You can't spend it (probably most is pre-tax).

It isn't worth much (at least not as much as the '60's show "The Millionaire" when the recipient received $1M, tax free!)

Can't include your home (it's a place to live - who's ready to turn it into cash and either rent or downsize?)

For me, 7 figures (e.g. $1M) isn't much.* Make it with a leading number of "5" (as in $5M), tax free, and "spendable" - now that's something....

- Ron

[Andre1969]

In my case, I'm not even counting the equity in my home towards my net worth. I figure I can't really spend that. And even if I sold the place, I'd still need a place to live. Which, unless I move out of the area, or decide to try life in a '74 Travco, would probably tie up any gains from the sale of the home, anyway.

[maddythebeagle]

I think it is significant as is your first 100,000.

[Papi]

Quote:

Originally Posted by rs0460a Can't include your home (it's a place to live - who's ready to turn it into cash and either rent or downsize?)

Hi Ron,

I include a portion of my home equity (not nearly all of it) when I calculate my portfolio value. *I intend to sell our house when the last kid heads off for college and buy a much smaller house. *We don't need 5 bedrooms for 2 people! *I think for this case it is appropriate to include that equity in my calculations. *To me, that portion is an investment that we will liquidate down the road. *A month ago I "probably" crossed into the 7 figures, but the last month has been punishing so it has pulled back. *I agree with a prior poster that these things tend to zig and zag as they slowly march forward (3 steps forward, 2 steps back, etc.). *As long as it has marched forward a bit in 5 years I will be happy!

[d]

Quote:

Make it with a leading number ... tax free, and "spendable" - now that's something....

agreed, but even if pretax (excluding other non-spendable assets) such milestones provide some sense of where you are, and how much further you have to go ... the old "if you can't measure it, you can't manage it".

[modlair]

This came up in another thread.

Your Home Equity Is Part Of Your Net Worth.

It is for the very obvious reason that if it burns down and the insurance company puts a check in your hand, you would not say that cash it not part of your net worth.

It does not matter if you plan to live there forever. Your plans don't always dictate reality. Reality could be smoking rubble when you come home from vacation someday.

People rent. They may rent more in the future than the past simple because it may be cheaper. If you rent, you don't take 20 yrs of rent and put it aside and say "that money is not part of my net worth". Of course it is.

Your home equity is part of the 7 figs evaluation.

[Andre1969]

Unless you're planning on taking out that whole $1M all at once, the moment you hit that milestone, I don't think taxes would be too big of a concern. It's not like winning a $1M lottery, and maybe only seeing 1/3 of that in a lump sum after taxes and such, or however much it ends up being.

Also, chances are that $1M that you've accumulated isn't total profit, so even if you did draw out the whole $1M, you wouldn't be paying taxes on $1M unless it was 100% from a 401k or traditional IRA.

if I had $1M or more saved up, and was drawing out $50K per year, I wouldn't be paying nearly as much in taxes as i would on a $50K per year salary.

[HFWR]

Do we get to count the numbers to the right of the decimal? *:P