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

[hnzw_rui]

Yes, and at minimum it makes me even more appreciative of my pension. The info is all on how it effects your retirement. For me, I am considered top 25% (via the pension), or pauper based on assets!

If pension is already $77,234 or higher, then your magic number for assets required is $0.

You'll note the article does show assets required for both 4% withdrawal rate ($1,930,850) and 4% withdrawal rate with SS making up the other 40% ($1,158,510).

 

[Midpack]

And my point is/was - if a writer can't come up with the significant and relevant data, then it is pointless to publish numbers down to the dollar ( $77,234), and not stress the caveats. As I said, it is just typical journalistic meaningless babble.

Did he mention pension in the article? Did he mention how this might affect the numbers? And his only comment about ' I’d like to say I was scientific about it, but I wasn’t. ' seemed to be more geared towards the human nature aspect of what % we need to obtain to feel comfortably 'above the rest'.

So can I turn it around the other way? What value do you see in these numbers? What can it say about whether I'm better off than 3/4 of the public if it is AGI alone (if that is even what it is?)? No mention of wealth, debt, age, etc. If I have a steady $100,000 coming in for the next 30 years, I might be better off than the $1M a year athlete who might only make that for 5 years. Yet, his/her AGI is higher than mine for 5 years.

There is a tendency for people to want to boil down a complex scenario into a single number. That's great when it is meaningful, but often it just makes things worse. I saw it in my career, and you can see it in product reviews. For example, is a 17" screen 'better' than an 11" screen on a laptop? Depends, is viewing more important to you than portability. One number, but it doesn't tell us anything about the suitability/applicability of that number.

You must be having a bad day, but I hope not.

• I doubt most people who have read Scott Burns over the years would lump him among (the many) financial writers who put out 'typical journalistic meaningless babble' - but suit yourself.
• There's certainly not a 'single number,' there's a whole table & article that show:
  • A short history of S&P 500
  • History of 5-yr treasury yields
  • History of a 50/50 portfolio of same
  • History of the 25% income threshold

and​

• History of the nest egg required to retire using portfolio income only (principal untouched)
• History of nest egg required to retire using a 4% WR (consuming principal)
• History of nest egg required to retire same plus Soc Sec

The last three also show the relative value of portfolio income, principal and Soc Sec.

I suspect most readers would know that a pension would change the nest egg required. And many people don't/won't have a traditional pension, for them the table/data may be a little more representative.

I respect Scott Burns and thought it was mildly interesting, thought others might as well. I gather you don't, no problem, just ignore the thread.

 

[FIREd]

Yikes, over $4M just to be able to be in the upper 25%?

I will argue though that retirees can have a $77K lifestyle for much less. Most households get their income through work. They need to save part of that $77K income for retirement and they have to pay FICA taxes. They are also likely to still be paying a mortgage and have kids at home. So a retired couple with a paid-for home, no kiddos, and a $50K income might have more disposable income than the average household making $77K. And for me disposable income is what matters.

 

[NW-Bound]

So, it takes a stash of $4,363,503 to generate a dividend income of $77,234, which is the income of the top 25% of US household.

Darn! The $77K is gross income, while I have been spending more than that, and my stash is nowhere that big (and it has been shrinking too!). Good thing I still have that modest class C RV as housing of last resort.

Tell you the truth, I have been hoping more that I will be among the top 25% longest living people (and I mean good living, not being bedridden and hooked up to tubes).

Money cannot buy health. Look what good it did for Steve Jobs and countless other people with 100's of millions.

 

[rodi]

That magic number of $4+Million assumes not touching the principal.

Fortunately, I have no problem spending down as I age.

 

[audreyh1]

Just a fairly current benchmark/metric FWIW - no claim that it's "right," accurate, etc.

If you're alarmed at the size of the "magic number," the last two columns probably apply to many more people - and pensions and other sources of income aren't included (too variable to include).

How much money do you need to be in the upper 25%? | Dallas Morning News

That's a withdrawal rate of 1.77%. No wonder you need so much! If you are going to try to live off of the yield on the S&P500 and govt bonds alone, you're stuck with a tiny withdrawal and needing a huge nest egg.

 

[audreyh1]

Interesting logic to say the least.

Scott Burn's (article's journalist and creater of the Couch Potato Portfolio) conclusion that the independently wealthy need $4,363,503.00 (50/50 stock/bonds) to join the upper 25% income bracket - actually requires you to be in the 1% of US household net worth (used two people for an early retired couple). I posted the Wealthometer link where I plugged in the required $4,363,503.00 household net worth for the required $77,234 annual (1.75% dividend only) income per Scott's article.

Wealthometer: USA

Yep - I figured something like that. Ironic.

 

[Midpack]

Interesting logic to say the least.

Scott Burn's (article's journalist and creater of the Couch Potato Portfolio) conclusion that the independently wealthy need $4,363,503.00 (50/50 stock/bonds) to join the upper 25% income bracket - actually requires you to be in the 1% of US household net worth (used two people for an early retired couple). I posted the Wealthometer link where I plugged in the required $4,363,503.00 household net worth for the required $77,234 annual (1.75% dividend only) income per Scott's article.

Wealthometer: USA

Yep - I figured something like that. Ironic.

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?

 

[NW-Bound]

What if we forward this article to members of Congress, showing them that even a stash of $4.4M generates only a meager $77K gross income, which is hardly rich?

The point is to tell them that most ERs do not even have a stash this big; so it means that we should be entitled to lots of goodies, e.g. free healthcare, and subsidies of all kinds.

Oh, what if they tell us "Go back to work"?

 

[Mulligan]

If pension is already $77,234 or higher, then your magic number for assets required is $0.



You'll note the article does show assets required for both 4% withdrawal rate ($1,930,850) and 4% withdrawal rate with SS making up the other 40% ($1,158,510).

Either of the cited numbers would put me to shame. If my pension was taken from me, then back to the coal mines I would go!


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[Walt34]

At least my brother Bob is having that problem just like me. Having seen what the 8th grade Bob could put away while staying skinny as a rail, it's hard to believe he could ever have to diet.

That's what I told my sisters, who have had trouble keeping weight off since shortly after high school. Now it's caught up to me starting in early 60's. I'm not overweight but I catch any gains early because I get on a scale every day. No longer can I eat all the ice cream I want to....

 

[hnzw_rui]

Either of the cited numbers would put me to shame. If my pension was taken from me, then back to the coal mines I would go!

Lol, first thing my aunt told me when we migrated to the US was get a government job. She actually suggested I go into law enforcement. I followed the advice on the government job, not so much on the law enforcement part. Pension will pave the way for ER at 55 even if I hadn't started seriously saving until now (at 30).

 

[daylatedollarshort]

Lol, first thing my aunt told me when we migrated to the US was get a government job. She actually suggested I go into law enforcement. I followed the advice on the government job, not so much on the law enforcement part. Pension will pave the way for ER at 55 even if I hadn't started seriously saving until now (at 30).

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. Though we did luck out and have some jobs over the years with pensions, even if they weren't the top of the line kind.

 

[daylatedollarshort]

That's a withdrawal rate of 1.77%. No wonder you need so much! If you are going to try to live off of the yield on the S&P500 and govt bonds alone, you're stuck with a tiny withdrawal and needing a huge nest egg.

Low overhead and other income sources might also factor in, like saving on expenses that do not lower quality of life (cutting the cable channel, energy efficient house, low flow toilets and shower heads, price shopping insurance).

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.

 

[Walt34]

I wish someone had shown me the net present value of a government pension when I was 21.

Same here. I did get a government job with a COLA'd pension, but it was with a county, not federal govt. It would have been much better with a CSRS pension. Still, we're relatively well off compared to lots of people so no complaints. Next year when SS starts we'll even be in the top 25% of income mentioned in the other thread.

I wanted to do law enforcement and a U.S. Border Patrol guy was at the college one day and I talked to him a bit. I thought about it, but since it wasn't really what I considered LE at the time I didn't apply.

Dummy. My new next door neighbor is a Border Patrol agent, I think he's an instructor at the new academy nearby. I mentioned that I'd had an airplane once in my 20's. He said that back in the '70's they were hurting for pilots and would have paid for my flight instruction and put me in an airplane right out of initial training if I expressed an interest. That would have been an absolute Dream Job for me at the time! And it probably would have paid better too.

Ahh, to know then what I know now....

 

[W2R]

Wow, I guess I was lucky. Nobody took me aside and told me specifically about pensions, but gosh, since my parents were 40 when I was born I ended up hanging around old people a lot. All their friends were old people, and we kids were supposed to be seen and not heard. That meant a lot of sitting there listening to boring conversations of ancient people when I really would have rather been playing. I think I knew how desirable a pension was as part of a compensation package, from the time I was about 6 years old. I'm serious! But I suppose that if I hadn't heard that over and over in the "boring" conversations of older people, I wouldn't have known it.

 

[Mulligan]

Lol, first thing my aunt told me when we migrated to the US was get a government job. She actually suggested I go into law enforcement. I followed the advice on the government job, not so much on the law enforcement part. Pension will pave the way for ER at 55 even if I hadn't started seriously saving until now (at 30).

Well at least you gave it some cognitive thought, Hnzw.... I just stumbled into mine as it wasn't the reason I got into my field. In my youthful days I would often think how much more take home pay I would have if they didn't take all that money out of my check to fund my pension. After about age 35 or so, I woke up....


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[Mulligan]

Wow, I guess I was lucky. Nobody took me aside and told me specifically about pensions, but gosh, since my parents were 40 when I was born I ended up hanging around old people a lot. All their friends were old people, and we kids were supposed to be seen and not heard. That meant a lot of sitting there listening to boring conversations of ancient people when I really would have rather been playing. I think I knew how desirable a pension was as part of a compensation package, from the time I was about 6 years old. I'm serious! But I suppose that if I hadn't heard that over and over in the "boring" conversations of older people, I wouldn't have known it.

I did everything backwards....When I should have been saving I didn't... And now when I don't need to, I save better than I ever have. Im afraid it is going to get worse as I get older. ....I have developed a nasty habit of enjoying saving money more than I do spending it!


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[W2R]

I did everything backwards....When I should have been saving I didn't... And now when I don't need to, I save better than I ever have. Im afraid it is going to get worse as I get older. ....I have developed a nasty habit of enjoying saving money more than I do spending it!

It's fun to watch your nestegg grow, isn't it! Besides, maybe someday something big will come up that you want to spend it on. For me recently it was so nice to be able to afford my Dream House, even though I suppose I would have been OK back at the old house too. All my life I wanted a house like this, and now I have one.

 

[Mulligan]

It's fun to watch your nestegg grow, isn't it! Besides, maybe someday something big will come up that you want to spend it on. For me recently it was so nice to be able to afford my Dream House, even though I suppose I would have been OK back at the old house too. All my life I wanted a house like this, and now I have one.

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.


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[NW-Bound]

... now when I don't need to, I save better than I ever have. Im afraid it is going to get worse as I get older. ....I have developed a nasty habit of enjoying saving money more than I do spending it!

I would not worry about this yet.

I have a few years on you, and I am spending more than I thought I would.

It's what happened when you realized that you might have fewer years left than money. 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...

 

[ERD50]

You must be having a bad day, but I hope not.

I doubt most people who have read Scott Burns over the years would lump him among (the many) financial writers who put out 'typical journalistic meaningless babble' - but suit yourself. ....

Congrats! Two logical fallacies in the first two sentences. First, an ad-hominem attack on me (my day is going just fine, thank you!), then an 'appeal to authority' regarding Mr Burns.

I know Scott Burns is well respected, but I still am of the opinion (and there is factual info to back it up), that this article is pointless babble.

I respect Scott Burns and thought it was mildly interesting, thought others might as well. I gather you don't, no problem, just ignore the thread.

That's fine. I ignore plenty of threads that I have no interest in. But I am interested in 'spin'/distortions and how data is presented, so I was (and am) interested in pointing out how pointless these numbers are.

Again - What value do you see in these numbers?

-ERD50

 

[Midpack]

Congrats! Two logical fallacies in the first two sentences. First, an ad-hominem attack on me (my day is going just fine, thank you!), then an 'appeal to authority' regarding Mr Burns.

I know Scott Burns is well respected, but I still am of the opinion (and there is factual info to back it up), that this article is pointless babble.

That's fine. I ignore plenty of threads that I have no interest in. But I am interested in 'spin'/distortions and how data is presented, so I was (and am) interested in pointing out how pointless these numbers are.

Again - What value do you see in these numbers?

I answered in that same post. Let's just drop it, you didn't like the article, got it...

 

[Gumby]

Let's just drop it.

A very fine course of action endorsed by your moderators.

 

[Mulligan]

I would not worry about this yet.

I have a few years on you, and I am spending more than I thought I would.

It's what happened when you realized that you might have fewer years left than money. 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...

I definitely need to remember this as anything can happen as you certainly know from experience. Im not able to throw caution into the wind yet and buy a nice mountain home. But heck, if you ever put it on VRBO I can force myself to rent it for a week!


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