How Much Money Do You Need To Be In The Upper 25%

[W2R]

Im not falling for it W2R.... You bought an asset, not junk, and that house is still on your asset ledger you look at monthly and admire! .... Maybe I should be looking to buy in a more upscale neighborhood. Tomorrow is "fall cleanup day" so I put out all my accumulated junk to get rid of.... The trash man wont even have to lift a finger....Its all gone already 30 minutes after I put it to the curb.

It's all junk, once we head for those Pearly Gates (or whatever awaits us).

I think of it as a place to live, and hope to stay here for the duration. That's why the sudden up-tick of home values in my neighborhood right after I bought it, isn't something I think about too much. I am in a more upscale neighborhood, and love it. Even better, Frank is a great next door neighbor. My new neighborhood is also very walkable, or will be, once I get these doggone cataracts removed and once my broken toe is completely healed. The toe is almost finished healing. The idea is that if I can manage to walk more, I'll live longer and be healthier. Or so they say.

If I have to move for some unknown reason, anything I'll get out of it is gravy as far as I'm concerned.

Good idea to get rid of all your accumulated junk! If you do decide to move, you'll be so glad you did.

 

[Mulligan]

It's all junk, once we head for those Pearly Gates (or whatever awaits us).

I think of it as a place to live, and hope to stay here for the duration. That's why the sudden up-tick of home values in my neighborhood right after I bought it, isn't something I think about too much. I am in a more upscale neighborhood, and love it. Even better, Frank is a great next door neighbor. My new neighborhood is also very walkable, or will be, once I get these doggone cataracts removed and once my broken toe is completely healed. The toe is almost finished healing. The idea is that if I can manage to walk more, I'll live longer and be healthier. Or so they say.

If I have to move for some unknown reason, anything I'll get out of it is gravy as far as I'm concerned.

Good idea to get rid of all your accumulated junk! If you do decide to move, you'll be so glad you did.

I know one persons trash is another persons treasure, but still it kind of sad people need this stuff. I had more valuable stuff 15 foot away in my garage that was wide open, but they wouldnt consider stealing any of it. Maybe they are being resourceful and making some money on it. The things were in good shape....I decided to put a small air hockey table out there a few hours ago before I left to visit GF. When I just came back, it was gone too. Practically a bedroom full of stuff put out on end of my driveway and completely gone before sundown!


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[ERD50]

Originally Posted by Midpack View Post
Let's just drop it.

A very fine course of action endorsed by your moderators.

Agree. - ERD50

 

[hnzw_rui]

I wish someone had shown me the net present value of a government pension when I was 21. I think when looking at job offers I was often comparing apples to oranges without understanding the true value of those kinds of pensions.

Well at least you gave it some cognitive thought, Hnzw....

I actually got into government a bit later (23) as I had to wait a few years for a civil service exam to open for either an entry level job or something in my field. I was recently reviewing retirement plan documents and apparently, if I had gone into law enforcement as my aunt recommended (they're constantly hiring police), I could have retired with full pension at age 45. Still, I don't regret my choice. I don't think I'm cut out to be police. The nicest thing about pensions is you can start at an entry level job paying $35K per year (making 6-10% contributions of just $2-3.5K) and if you eventually promote to $100+K, pension is calculated based on the $100K.

I think at least some retired couples could live a $75K+ fulltime working couple lifestyle for less, with having 80+ hours plus commute time freed up for more DIY and price shopping, and expense reviews, like renegotiating the cable bill and comparing cell phone plans. We've saved a lot on food alone just by having more time to shop and cook.

One big savings - moving to a LCOL area. According to bankrate, $75K in LA Metro, CA is equivalent to $50K in Orlando Metro, FL. Much easier to relocate when you're not tied to a job. Of course, if mortgage is already paid off, that frees up a lot of money for spending.

What value do you see in these numbers?

Maybe not for those who frequent this forum but for the average person, I think it paints a pretty realistic picture for how much you need to accumulate to in order to retire. I reckon there are plenty of folks earning $75K or higher who have no idea how large their nest egg needs to be to support the lifestyle they're accustomed to (and perhaps even fund all those vacations they plan to go on). The chart shows how much is needed if you retire in 2015 (as well as some historical data) for 3 different scenarios:
* not touching the principal
* at 4% withdrawal rate
* at 4% withdrawal rate with SS covering 40% of income

For most folks, the recommendation is probably true: "Keep your day job."

I came to this realization when I got a new lease on life (but have big surgery scars to remind myself daily of what I went through), and even sat down and figured out our SS benefits.

Spend, spend, spend...

We're nowhere near FI so dad's near brush with death at the ripe old age of 60 (and resulting $80K medical bill that we're still waiting for reimbursement on) has actually put me in save, save, save mode. Part of the cash we used was supposed to be for house down payment and this event has made me greatly appreciate the value of having liquidity. And health insurance. Never going overseas again without getting travel insurance with primary medical.

 

[Desire2Retire]

I'm not sure how the Wealthometer link, based on the FRB: Survey of Consumer Finances which includes households of all ages, would pertain to families of retirement age. That database includes a lot of folks from ages 21 (or whatever the lower age threshold is) through retirement age who have understandably not yet amassed a net worth adequate to retire. Wouldn't % of retirement age households net worth be a better measure?

What is retirement age?

I find The New Wealth Scoreboard to be a useful metric if you want to see how you "measure up" to everyone else. It's broken down by age group.

In terms of wealth (not income), the table says the median net worth of the top 25% of households is $32k to $712k (depending on age). I think it's interesting that you could be in the top 25% in terms of wealth, but say your net worth is entirely in your portfolio, and is worth $712k, and you allow yourself a generous 5% withdrawal rate, you're looking at about $35k/year, which is less than the overall median household income (somewhere around $50k/year IIRC). In other words, top 25% in terms of wealth does not equal top 25% in terms of income.

This also happens to be put together by Scott Burns, based on Survey of Consumer Finances data.

 

[NW-Bound]

What is retirement age?

I find The New Wealth Scoreboard to be a useful metric if you want to see how you "measure up" to everyone else. It's broken down by age group...

For the age group of 60-69, the top 10% has a median networth of $1955K. If that is per person, then a 10% couple has $4M. I would have thought that with $4M, a couple would have a higher standing than that.

If you grab 10 random geezer couples on the street, 1 out of 10 has $4M. Lots of money floating around.

 

[Amethyst]

The poor fellow - did he bump into things and bang his head on door lintels?

Heck, I only grew 7 inches between 12 and 15, and it felt like my arms and legs didn't quite know where they ended. I was always banging into stuff until I got used to being my new size.

And yeah, I remember being about 13, discovering a pan of cookies my sister had baked, "trying one," and the next thing I knew, they were all gone...and I still wanted dinner.

Amethyst

My brother grew 13" in 8th grade, back in the mid-1950's.

Gosh, it must be amazing to be able to eat like that.

 

[Desire2Retire]

For the age group of 60-69, the top 10% has a median networth of $1955K. If that is per person, then a 10% couple has $4M. I would have thought that with $4M, a couple would have a higher standing than that.

If you grab 10 random geezer couples on the street, 1 out of 10 has $4M. Lots of money floating around.

Immediately above the table it says, "These figures show the median net worth (assets less debts) of households in each group." (Emphasis mine.) So think that suggests 1 in 10 random geezer couples has about $2mm.

 

[hnzw_rui]

For the age group of 60-69, the top 10% has a median networth of $1955K. If that is per person, then a 10% couple has $4M. I would have thought that with $4M, a couple would have a higher standing than that.

If you grab 10 random geezer couples on the street, 1 out of 10 has $4M. Lots of money floating around.

Note, I believe the net worth includes home equity and assets such as cars, too so not just money.

 

[NW-Bound]

Immediately above the table it says, "These figures show the median net worth (assets less debts) of households in each group." (Emphasis mine.) So think that suggests 1 in 10 random geezer couples has about $2mm.

OK, households, not individuals. I feel much better now, thanks.

I was about to say that from now on whenever I go to Costco or Walmart I would not look at fellow geezers the same, because you never know the kind of money they have.

Note, I believe the net worth includes home equity and assets such as cars, too so not just money.

So, if 1 in 10 geezer couples has a $1M home and $3M stash, that's still a lot of multimillionaire geezers. No?

 

[tfudtuckerpucker]

The chart is a bit confusing to me. The figure of $1.9M is a "median", not a threshold. Half of the households in each group have less than that amount, and half more. So if I understand, it says "half of the households that are in the top 10% have more than $1.9M, and half have less". Am I reading this correctly?

 

[NW-Bound]

Yes, it's a median figure, not a threshold.

But, chances are that your 1-in-10 couple may also be in the 1-in-20 group. Now, the top 5% has a more respectable median figure of $3.8M.

The number goes up very quickly at the top, it's almost exponential.


What's more interesting is that older geezers start to lose their money after the age group of 60-69. What happens? They spent it all, lost it to the market, gave to their kids or what?

 

[Danmar]

I guess the desire to measure ourselves against others lasts well into retirement. Natural I guess?

 

[Mulligan]

OK, households, not individuals. I feel much better now, thanks.

I was about to say that from now on whenever I go to Costco or Walmart I would not look at fellow geezers the same, because you never know the kind of money they have.



So, if 1 in 10 geezer couples has a $1M home and $3M stash, that's still a lot of multimillionaire geezers. No?

And based on the ones I know, you will never know what they have based on what they wear or buy. Most I know spend way less than me. They didn't accumulate it by high salary jobs and certainly not by spending any of it along the way. You will pry it from their cold dead hands. And no matter how low interest rates get they will never run out of money or be a burden to society....They will just figure out how to spend less!


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[NW-Bound]

... no matter how low interest rates get they will never run out of money or be a burden to society....They will just figure out how to spend less!

Good. So, perhaps they do not need SS either. I think the gummint is watching them, and may be thinking the same.

I am a big spender, so maybe I will get some of their SS.

 

[Mulligan]

Good. So, perhaps they do not need SS either. I think the gummint is watching them, and may be thinking the same.



I am a big spender, so maybe I will get some of their SS.

Ha! What do you think they live on? It sure isnt their accumulated wealth...They worked too hard saving that up to ever spend it!


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[NW-Bound]

OK. Maybe a wealth tax will pry some of that cash loose.

 

[Mulligan]

OK. Maybe a wealth tax will pry some of that cash loose.

It is a shame I cant send about 8 people out your way to teach them how to spend some of it. None of them are related, but based on spending habits you would think they came out of the same litter. It is a shame they cant enjoy it.... The stories I can tell...sawing paper towels in half, closing bedrooms down and sleeping in living room to save heat, not buying beef anymore because of cost, ordering the cheapest coffin and complaining that is too high, creating a "flat scree tv hanging on a wall by nailing plywood to the wall and setting tube top tv on it.....I could go all day. And these are from all different people, not the same person!


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[hnzw_rui]

And based on the ones I know, you will never know what they have based on what they wear or buy.

I dunno, beater cars and shabby casual seem to be the preferred look.

It's pretty sad. One of my co-workers was evicted from his apartment and there was a time he lived in his car and took showers in the office (he's got a hoarding problem). He's also got a couple mil in AAPL.

 

[MooreBonds]

What's more interesting is that older geezers start to lose their money after the age group of 60-69. What happens? They spent it all, lost it to the market, gave to their kids or what?

For age 60-69 today, that means they were roughly 25 or so in 1980, or just starting their working careers. Not a bad time period to start investing in the (then) newfangled 401ks and IRAs, or stock market in general. Those who are older than 60-69 had been banged up by the late 60s/70s decade of investing malaise with stagflation/oil shock/etc. Perhaps you are seeing a perfect parallel example in-action of the effect of the "hapless retiree", who, instead of retiring in the worst FireCALC 30 year period starting in circa 1964, just started their careers and started saving in the worst FireCALC 30 year period?

I'm willing to bet that if you checked the FireCALC time periods, you'd find someone retiring in the early-mid 80s probably ended their 30 year period with one of the larger portfolio balances in FireCALC's inventory of results. Which might explain why those older than 60-69 have a smaller median net worth compared to those in the 60-69 bracket.

Also, many people still just start to retire in the early 60s age range. Meaning they will only be spending for a few years in their 60s. Once they are in their 70s, they keep on spending those retirement dollars living their dreams. Not to mention that some will undoubtedly start spending more on health care costs.

So combine the above factors, and it makes sense why there is a drop in average net worth by then.

 

[Independent]

Yes, it's a median figure, not a threshold.

But, chances are that your 1-in-10 couple may also be in the 1-in-20 group. Now, the top 5% has a more respectable median figure of $3.8M.

The number goes up very quickly at the top, it's almost exponential.

What's more interesting is that older geezers start to lose their money after the age group of 60-69. What happens? They spent it all, lost it to the market, gave to their kids or what?

Thanks. If I'm reading this correctly, we can also get thresholds. For the 60-69 group:
The bottom border of the top 12.5% is $712,000
The bottom border of the top 5.0% is $ 1,955,000
The bottom border of the top 2.5% is $ 3,781,000
The bottom border of the top 0.5% is $11,683,000

I tried curve fitting in Excel. It gave me a 1/x form (7127/x^n where n=.855). That gets extremely steep.

Burns suggest that high wealth people are likely to give money away as they age (children and charities). I'll also point out there are more couples in the 60-69 group than in the 80+ group. So the per-person drop off isn't quite so strong, and the single survivor may well feel she can afford to give more away.

 

[daylatedollarshort]

I am not sure I would count on most people filling out financial surveys any more truthfully than they fill out online dating profiles. Plus many wealthy households are not going to tell anyone how much they have in any survey. Are pensions and SS included in the net worth figures? They can be worth millions. How about money in the Caymen Islands?

The estate multiplier technique based on IRS data usually comes out with lower thresholds for the various percentiles of wealth. Personally I view any survey data skeptically. The true numbers could be much higher or lower.