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Old 10-13-2010, 02:15 PM   #21
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You fit into this category in the article...


While $1 million was once a sign that you had arrived, plenty of people with up to $10 million nowadays don't think of themselves as rich. Many actually consider themselves "middle class," according to survey work by the authors of a new book, The Middle-Class Millionaire. That's increasingly true as the $10 million crowd finds a new intruder in its gated communities: the weakening economy
Could be. I'm certainly not Rich - he's a recently semi-retired Doctor and lives in Tampa. We're well off and live below our means. FWIW.
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The Answer is $7.5MM to Feel Rich
Old 10-13-2010, 02:21 PM   #22
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The Answer is $7.5MM to Feel Rich

Fidelity investments has done surveys of high net worth investors for the last 3 years. From the last survey, for someone to "feel" rich you would need at least $7.5MM in investable assets.

Below that you feel well off but not rich.

MILLIONAIRES TAKE BOLD ACTION TO REASSESS AND REBUILD THEIR WEALTH, ACCORDING TO FIDELITY STUDY | With Video
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Old 10-13-2010, 02:31 PM   #23
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Fidelity investments has done surveys of high net worth investors for the last 3 years. From the last survey, for someone to "feel" rich you would need at least $7.5MM in investable assets.

Below that you feel well off but not rich.
That's probably why I feel well off then. I feel much better now that I know why.
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Old 10-13-2010, 03:41 PM   #24
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Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil?
Not to sound sarcastic, but if you have that much but are still asking this question, then I doubt that would be enough for you.
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Old 10-13-2010, 04:10 PM   #25
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Sorry up front for this comment... but I gotta say it: I am sure whoever you inherited the money from would be turning flips if they knew you pissed away that money playing the horses!


You left out a number of important details that may factor into FIRE. Assuming you want to FIRE.

IMO - (Assuming you want to Fire)... If you use traditional approaches and act conservatively with investments (MPT and Asset Allocation), you should be able to replace your income with your current assets. But those other details need to be identified and analyzed.

Read up on prior posts for FIRE planning and read some books.

The fact that you were doing the margin thing says something about your investment decisions and probably lack of understanding in the risk/reward area. Educate yourself further to better understand risk/reward... which also means some soul searching! Invest in things you understand. Balance risk and reward.


What is your goal?? Do you want bigger numbers on an account statement to admire or a reliable income stream to maintain a certain lifestyle for the rest of your life?
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Old 10-13-2010, 05:45 PM   #26
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Not to sound sarcastic, but if you have that much but are still asking this question, then I doubt that would be enough for you.
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Old 10-13-2010, 06:48 PM   #27
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Fidelity investments has done surveys of high net worth investors for the last 3 years. From the last survey, for someone to "feel" rich you would need at least $7.5MM in investable assets.

Below that you feel well off but not rich.

MILLIONAIRES TAKE BOLD ACTION TO REASSESS AND REBUILD THEIR WEALTH, ACCORDING TO FIDELITY STUDY | With Video
That is a number that makes sense to me (figure net worth of $10 million with house(s), art, etc included). Like I said, the $25 million in Barrons was simply nuts.
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Old 10-13-2010, 07:26 PM   #28
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2.4 million at 4% is $96,000 but you still have kids to put through college and a $600,000 house usually comes with high expenses . You are okay and if you have pensions you are in great shape but not filthy rich . Take one really nice trip and then get back to day to day living .
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Old 10-14-2010, 12:04 AM   #29
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Sorry if this is addressed elsewhere. I looked and didn't see it.

I'm 50, wife is 48, 1st of 2 sons is heading to college next year. 2nd son has another 3 years in high school.

Putting things together for fafsa and CSS financial need forms, I'm realizing a) we're not going to be getting financial aid b) we have a fair amount of money, thanks to inheritances mostly - house worth 600K is paid for, 401Ks and IRAs are about $200K and brokerage accounts (with Charles Schwalb / self managed) of about $2.2 mill. And me playing with margin, wound up losing something like 1 mill in the market with the market collapse (margin calls forced me to sell. Those things bounced back and I would have held on as I did in cash accounts....I am done with margin for sure!)

I remember years ago the WSJ ran an article about different levels of 'rich' - beer & Pretzels, wine and steak, etc.

Nowadays, how much do you need / should you have for certain ages? Wife and I make $110K between us. We live modestly - I have a 5 year old nissan sentra, etc.

Vacations are nothing exotic although I'd like those. so saying I need to replace what I make isn't realistic - I'm not spending like I'd like if I knew I didn't have to worry about money - not gold plated silverware, just not having to debate spending for this or that - just want to loosen the purse strings.

any advice?
I am curious as to how much of your portolio can be attributed to your stroke of good fortune (i.e. inheritance) vs. savings/investments on your part. No offense, but it appears to me that someone who would play with margin account and lose a million before realising it's time to stop, isn't the type of person who would have the needed financial discipline to accumulate a sizable nest egg in the first place.


Without proper financial discipline, or at least a self-awareness of one's (in)ability to invest properly, no amount of money is enough. I can personally cite two examples of people who came into substantial fortune and lost it.


I have a cousin who inherited $10 million a few years back, and rather than being happy and content, decided to go into an investment with a partner, hoping to really make it big, despite the fact that he had never displayed any financial acumen or even common sense, and knew nothing of the line of business he was getting into. He lost everything in 2 years.


Another cousin, who inherited $7 million from his father about 20 years ago, decided to get into buying/developing properties, even though he knew nothing of the business. Needless to say he ended up with a fraction of his money. He had always been profligate so the result really wasn't a surprise. At least his father had the foresight to leave the bulk of the money to his sibling, so that he couldn't blow it all.

As Dirty Harry puts it, a man's gotta know his limitations. Sadly for my two cousins, they didn't. Here's hoping you do better.
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Old 10-14-2010, 09:36 AM   #30
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Without proper financial discipline, or at least a self-awareness of one's (in)ability to invest properly, no amount of money is enough. I can personally cite two examples of people who came into substantial fortune and lost it.
This so reminded me of a serious conversation I had with a Ferrari dealer who remarked when I said how great it must be to sell Ferraris for a living:

"You know how to make $3 million selling Ferraris?" he said.

"How?" I asked innocently.

"Start with $10 million," he responded with a straight face.
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Old 10-14-2010, 09:54 AM   #31
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Originally Posted by CoopersBeach View Post
I am curious as to how much of your portolio can be attributed to your stroke of good fortune (i.e. inheritance) vs. savings/investments on your part. No offense, but it appears to me that someone who would play with margin account and lose a million before realising it's time to stop, isn't the type of person who would have the needed financial discipline to accumulate a sizable nest egg in the first place.


Without proper financial discipline, or at least a self-awareness of one's (in)ability to invest properly, no amount of money is enough. I can personally cite two examples of people who came into substantial fortune and lost it.


I have a cousin who inherited $10 million a few years back, and rather than being happy and content, decided to go into an investment with a partner, hoping to really make it big, despite the fact that he had never displayed any financial acumen or even common sense, and knew nothing of the line of business he was getting into. He lost everything in 2 years.


Another cousin, who inherited $7 million from his father about 20 years ago, decided to get into buying/developing properties, even though he knew nothing of the business. Needless to say he ended up with a fraction of his money. He had always been profligate so the result really wasn't a surprise. At least his father had the foresight to leave the bulk of the money to his sibling, so that he couldn't blow it all.

As Dirty Harry puts it, a man's gotta know his limitations. Sadly for my two cousins, they didn't. Here's hoping you do better.
Great stories. These are top drawer flameouts. On a lesser scale, I know a divorced woman who inherited $2million, and who had very little in the way of career proficiency. Twelve years later she is down to where she is working in a call center, and battling for overtime. She didn't even blow it with flamboyant ventures or lifestyle, just really poor choices of financial advisors.

Ha
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What's my number?
Old 10-15-2010, 12:59 AM   #32
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What's my number?

Short answer:
dizzy's "what's my number" test (tm). Take your current salary, multiply by 3, add a 0. If you have that much or more in investments, FIRE AWAY!

Long answer:
Your "number" is a function of 2 factors: expenses and SWR, i.e:

MyNumber = MyRetirementExpenses * (1/SWR).

SWR is a function of life expectancy, desire to leave a legacy, and the expected real return sequence of your portfolio. Of course none of these terms can be known with certainty, but assuming you follow all the good boglehead advice here, conventional wisdom seems to be that SWR = 4% @ age 65, and SWR = 3% @ age 45. This means MyNumber = MyRetirementExpenses*25 at age 65 and MyNumber = MyRetirementExpenses*33 @ age 45.

(BTW, folks advocating ultrasafe SWR like 1% or 2% are just loony. In the limit of an ultrasafe 0% real return portfolio and no legacy, 1/SWR = YearsToLive (just divide the portfolio into 1/SWR buckets and spend one bucket each year). At an SWR of 1% a portfolio will last 100 years if invested in "risk free" bonds (e.g. bonds that just keep even with inflation). I think we can safely say that 1% SWR is overkill unless you are worried about having more than 100 years in retirement...)

For the expense side, the simplest way to think of expenses is relative to your current standard of living, i.e. MyRetirementExpenses = MyCurrentSalary*MyRetirementLifeStyleFactor. There are a number of things that can be more expensive in retirement and a number of things that will be less:

More expensive (MyRetirementLifeStyleFactor > 1.0)
- health care
- travel & recreation
- hobby expense

Less expensive (MyRetirementLifeStyleFactor < 1.0)
- no need to fund retirement accounts
- kids out of school
- house paid off / downsized
- extra income from pension and/or ss
- lower tax bracket
- senior discounts (!$)

For early retirees, I'd say that there is probably significant increases and decreases, but let's say that overall MyRetirementLifeStyleFactor=1.0. (i.e. you spend a lot more on travel and health insurance, but significantly less on funding retirement, school, etc...) Also since, we're talking early retirement, say mid 40s to mid 50s, I think a SWR of 3.33% is probably workable. Therefore, we have dizzy's "what's my number" test (tm), of 30x current salary.
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Old 10-15-2010, 04:55 AM   #33
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The problem is the unknowns:
is my health care going to continue going up at 15% rate?
will SS be there in it's current form?
etc.
Thats why I would aim for <4%, maybe 3%, just in case....
TJ
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Old 10-15-2010, 07:21 AM   #34
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If I had $4 or $5 mill... I would be retired...
+1 on this. I work in the hedge fund industry, so see lots of wealth. It amazes me that so many people, with so much money do not retire early. It must be an ego thing, to keep working and try to accumulate more. If I had $5 million in the bank, I would not be coming in to work...that is for sure.
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Old 10-15-2010, 08:12 AM   #35
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+1 on this. I work in the hedge fund industry, so see lots of wealth. It amazes me that so many people, with so much money do not retire early. It must be an ego thing, to keep working and try to accumulate more. If I had $5 million in the bank, I would not be coming in to work...that is for sure.
It's not about the money once you get to a certain level. It's about being admired by your peers. They want to win "the game".
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Old 10-15-2010, 09:17 AM   #36
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Old 10-15-2010, 09:21 AM   #37
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+1 on this. I work in the hedge fund industry, so see lots of wealth. It amazes me that so many people, with so much money do not retire early. It must be an ego thing, to keep working and try to accumulate more. If I had $5 million in the bank, I would not be coming in to work...that is for sure.
I've thought the same thing. Is it possible they truly love there jobs better then home life?

My neighbour told me earlier this year when I asked about there retirement since they're both in there 60's and when it came to his wife his response was, "she really loves her job and would rather be at work then home". Say what?
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Old 10-15-2010, 10:14 AM   #38
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travel - if not a specific rule of thumb for my situation, how about in general? Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil? I remember in Barrons years ago there was a winner of something like $300 million. They went on for pages about how to best invest it. And the last paragraph said something like - just put it in treasuries and kick back! That large amount of money would spin off more than enough for most any reasonable middle class person.
It totally depends. Someone who owns their home free and clear, lives frugally and has a $50K COLA'd pension and health insurance may have "enough" even if their retirement savings is zero. Someone who has to retire *only* on their own personal investments may need millions depending on their expenses and their lifestyle.
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Old 10-15-2010, 11:39 AM   #39
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Well said, dizzy!
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Old 10-15-2010, 12:26 PM   #40
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On NPR this morning they were talking about a poll someone recently did, and only 49% of people polled had even tried to calculate what they would need for retirement, and of that 49%, 14% admitted to just guessing what they would need in the future.

Whay don't our high schools teach this stuff

And to answer your question, if you and your wife make 110K combined, I bet you would need about 3.5MM to keep living like you are used to living, and you still have to put the kids through school so that's probably another 300K needed on top of that. So to feel "rich", I would agree with others that $7.5MM is what you would need.
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