U.S. millionaires say $7 million not enough to be rich

[Mulligan]

I would imagine both "rich" and "poor" people would agree with Henry Ford's famous reponse to the question of "How much is enough?" His answer of course was "just a little bit more". Seems to fit me no matter how much or little I have made over the years.

 

[fritz]

Two observations.

The first is that if "rich" (however defined) is relative to people you know, where you live and what you aspire to, you can feel richer simply by moving to an area where the cost of living is lower, socialising only with people who are poorer and lowering your aspirations.

Second, given the volume of "bash the rich" talk in the media (including comments on internet sites), concerns over rising inflation and economic uncertainty, it is little wonder that those who I call the marginal rich (most of the lesser HNWIs or low single digit millionaires) are feeling a bit paranoid about the impact of increased taxes on their incomes and properties, inflation on their expenses and economic adversity on their businesses, investments and jobs. The marginal rich may be rich by most measures and compared to most people, but, unless they are more frugal than most, they are not rich enough to be assured of maintaining their wealth (and, by implication, their standard of living) in the future.

IMHO, it is both reasonable and rational not to feel rich until you have enough to be confident that your assets are sufficient to maintain your desired standard of living indefinitely against all (or at least most) forseable forms of adversity. Given the amount of income (or SWR) you can expect from a portfolio of US$1MM, it's very understandable that many people with net worth of around that number would not feel rich.

Pulling out your category of the marginally rich (under $5M investable assets) eliminates roughly 70% of all U.S. HNWIs. Leaving 30% of all HNWIs in the "rich" category might be an acceptable breakpoint for the upper <1% of all US individuals, but would guess the rest (+99%) of the U.S. population would consider $1M+ investable assets as still pretty much "rich".

 

[jdw_fire]

No, it isn't $250k Don. I'm surprised at how many folks misunderstand this. It's $200k. The $250k applies to the combined income of a married couple filing jointly. In that case, if they each make the same amount, it's $125k each. At least that's how the proposal is being presented by the administration.

You do seem the have the "marginal tax rate" concept OK. Yep, it's only the income over $200k that would be taxed at the top rate. My amazement is that there is no proposal for a higher marginal rate at a higher level than $200k. Say a bump up at $1 mil and another at $10 mil. It seems odd to want to put a dentist making say, $225k, in the same marginal tax bracket as Mr Gates. I just don't get it........ Why is the administration so concerned that the truly wealthy (Gates, Buffet, etc.) don't pay at a higher rate than say Mr and Mrs donheff?

I'm not necessarily against having some new tax brackets that involve both new rates and levels of income. I just think the current proposal is quite dumb. It's too protective of the Super-Rich (who are super politically connected!).

currently the tax brackets for a single filer are (per Tax Brackets (Federal Income Tax Rates) 2000 through 2010 and 2011)

0 - 8375 10%
8375 - 34000 15%
34000 - 82400 25%
82400 - 171850 28%
171850 - 373650 33%
373650 and above 35%

based on the above a single filer earning just over $200k would not be in the highest tax bracket

my understanding of what Obama wanted to do re taxes was allow the Bush tax cuts expire for tax payers with incomes over $200K/yr for a single filer (and over $250k/yr for married filing jointly). that would actually raise part of the next to highest tax bracket thus creating an additional tax bracket. it would also raise the highest tax bracket

 

[Spanky]

I would imagine both "rich" and "poor" people would agree with Henry Ford's famous reponse to the question of "How much is enough?" His answer of course was "just a little bit more". Seems to fit me no matter how much or little I have made over the years.

In other words, you will never be rich enough compared to other people worth even more.

 

[sheehs1]

Well.....after reading this thread...I now feel poor

 

[Ronnieboy]

All I know is that if I had $7 or $7.5 mill, I would be retired right about.....yesterday.

 

[Independent]

Actually people seem to be smarter than I would have thought when asked this question. I always consider the $1M (after tax) to be 1955 or so since it seems to have been what people then considered rich. So according to the westegg calculator: "What cost $1000000 in 1955 would cost $7922698.13 in 2009. " People's feeling that 7.5M was "rich" is not that far off for a feeling when compared to the same "feeling" in 1955.

For people too young to remember there was this TV show in the 50s where a billionaire gave $1M tax free to a person he chose. It was not a reality show, just entertainment. But people back then "felt" this was the definition of "rich".

I remember the show, and I sometimes do the same math that you do. In those days (I was pretty young) I figured that $1 million generated $25-30k in interest from a bank account, and that was a "very high" income.

 

[ziggy29]

In many parts of the country a 3-4% WR off a million dollars would have you living well below the median household income. For example, in San Jose, the median household income is about $80k.

And $80K is nothing compared to real estate prices there (he says as a former San Jose homeowner)...

 

[Independent]

I find it easy to understand why $1 million is "not rich" but $7.5 million is rich.

Using 4%, the $1 million converts into $40k of annual income. That's slightly below the median for a single worker, and well below the median for a couple.

But the same 4% converts $7.5 million into $300k annually. That's in the top 2% of all taxpayers.

 

[ziggy29]

I find it easy to understand why $1 million is "not rich" but $7.5 million is rich.

Using 4%, the $1 million converts into $40k of annual income. That's slightly below the median for a single worker, and well below the median for a couple.

But the same 4% converts $7.5 million into $300k annually. That's in the top 2% of all taxpayers.

Or put another way, if we needed $50K per year for living expenses (probably ballpark for our lifestyle), with $1M we'd need a 5% withdrawal, whereas with a $7.5 million nest egg we'd only need a withdrawal rate of 0.67%. Heck, we could make it 1%, increase it to $75K and upgrade our lifestyle above that which we find acceptable.

 

[photoguy]

But the same 4% converts $7.5 million into $300k annually. That's in the top 2% of all taxpayers.

I certainly wouldn't complain about that .

For comparison, in San Jose / San Francisco anywhere from 11-15% of households are over $200k annually. This was the most comparable figure I could find.

 

[donheff]

I remember the show, and I sometimes do the same math that you do. In those days (I was pretty young) I figured that $1 million generated $25-30k in interest from a bank account, and that was a "very high" income.

Back in the sixties the mantra for big earners was "make your age." Thus a 40 year old making $40K was a stellar success. What is the equivalent for a 40 YO today, $200K?

 

[Gone4Good]

You need to define "rich" before you debate a number.

Top 10%, or top 5% ought to do it. Being better off than every tenth person, or every 20th person should qualify you as "rich" in any sensible conversation. Even at top 1%, you're still very far short of having $7MM in the bank.

It's insane how blown out of proportion the idea of "rich" has become. It's likely due to the vast income inequality that even those in the top 1%, or one-half of 1%, don't feel rich because they see people with still far larger incomes and wealth.

 

[brewer12345]

I like G4G's definition. Top 5% definately qualifies as wealthy in my book, especially in a phenominally wealthy country like the US.

 

[W2R]

Who knows what "rich" means. Obviously a personal thing. Why does it matter? As long as you have enough for your lifestyle? Seems to me that the term "rich" has taken on a negative connotation anyway. I much prefer the terms well off, comfortable, set, or even better just plain "lucky".

I agree.

Along these lines, many of us become creatures of habit as we grow older. Where a 40-year-old used to a middle class lifestyle might dream of [-]throwing around money right and left[/-] spending twice as much or more, that isn't always the case for those of us in our 60's.

If someone spends $30K/year and has absolutely everything he/she desires, does it matter whether or not he/she has $2M or $7M tucked away? Either way, he/she is rich, IMO. To me, being "rich" has more to do with desires than with the size of one's nestegg.

 

[MasterBlaster]

I agree.

Along these lines, many of us become creatures of habit as we grow older. Where a 40-year-old used to a middle class lifestyle might dream of [-]throwing around money right and left[/-] spending twice as much or more, that isn't always the case for those of us in our 60's.

If someone spends $30K/year and has absolutely everything he/she desires, does it matter whether or not he/she has $2M or $7M tucked away? Either way, he/she is rich, IMO. To me, being "rich" has more to do with desires than with the size of one's nestegg.

I saw a poll once done across all income classes. They asked "How much more would be the minimum needed to live The Good Life".

The answer, surprisingly enough, was that each person believed that they needed about 40% more minimum to live well. And that was for pretty much all of the groups regardless of income.

Hedonic treadmill defined.

 

[W2R]

Perhaps that is an invalid concept. Most people on this forum report entering a state of unending bliss within a short time after retiring, and maintaining or increasing this happiness over time.

Of course, they could be lying.

Ha

Not me! I still have that silly grin on my face.

I have only been retired 16 months, so truthfully I probably have much to learn from more experienced retirees like you, but so far I have had only one bad day. It was still better than any day at w*rk.

 

[RetiredGypsy]

Would anyone here be able to spend $200-300k a year without just going on major shopping sprees? Having that much disappear yearly from taxes or club dues or mortgages or insurance or whatever isn't a new Ferrari every year is so far out of anything that I can imagine, it seems alien.

 

[W2R]

I saw a poll once done across all income classes. They asked "How much more would be the minimum needed to live The Good Life".

The answer, surprisingly enough, was that each person believed that they needed about 40% more minimum to live well. And that was for pretty much all of the groups regardless of income.

Hedonic treadmill defined.

I am most definitely living The Good Life, and not spending the entire amount dictated by my SWR despite feeling quite free to spend it. I have everything I want (well, except for that rice cooker that is on order, and that Amazon says will arrive tomorrow! ).

Several others on the forum have also mentioned not really needing or wanting to spend all that their SWR would allow them to spend. Perhaps we are the exceptions. We are a pretty nifty bunch, really.

 

[W2R]

Would anyone here be able to spend $200-300k a year without just going on major shopping sprees? Having that much disappear yearly from taxes or club dues or mortgages or insurance or whatever isn't a new Ferrari every year is so far out of anything that I can imagine, it seems alien.

It would be interesting to see the results of a poll on that. Even better, a poll of those in accumulation phase who are LBYM'ing their hearts out, asking what they would buy if they could afford it. I suspect that most of those desired goodies are not that appealing once one has enough money to afford buying them.

 

[haha]

Not me! I still have that silly grin on my face.

I have only been retired 16 months, so truthfully I probably have much to learn from more experienced retirees like you, but so far I have had only one bad day. It was still better than any day at w*rk.

On the contrary, I would say that I should learn something from you- the secret of continual day to day bliss. Anyway, I was not talking about any individuals, just the oddity of retirement being a more powerful factor in happiness than (as reported in studies) presence or absence of serious but chronic diseases, presence or absence of spouses or SOs, more or less money, more or less sex, kids successful or troubled... -on and on. We all have seen these studies. Than can be summarized that happiness cannot be permanently racheted upward. Of course these studies might be wrong, poorly designed, or dishonest. We cannot really know. We all also read about retirees who are miserable, go back to work, get kicked out by their wives, etc-we just are not going to read about any of that here.

It sure is mystifying to me, though I also like being retired. Admittedly I am likely a bit less gung-ho than you are?

Ha

 

[Danmar]

Would anyone here be able to spend $200-300k a year without just going on major shopping sprees? Having that much disappear yearly from taxes or club dues or mortgages or insurance or whatever isn't a new Ferrari every year is so far out of anything that I can imagine, it seems alien.

We spend much more than that per year. No sprees. No Ferraris. You'd be surprised how it adds up. Alimony, travel, several homes. No debts.

 

[MasterBlaster]

I am most definitely living The Good Life, and not spending the entire amount dictated by my SWR despite feeling quite free to spend it. I have everything I want (well, except for that rice cooker that is on order, and that Amazon says will arrive tomorrow! ).

Several others on the forum have also mentioned not really needing or wanting to spend all that their SWR would allow them to spend. Perhaps we are the exceptions. We are a pretty nifty bunch, really.

I suspect that it is kind of mentally hard to go from a LBYM mindset to a spend lots and lots mindset.

 

[photoguy]

Would anyone here be able to spend $200-300k a year without just going on major shopping sprees? Having that much disappear yearly from taxes or club dues or mortgages or insurance or whatever isn't a new Ferrari every year is so far out of anything that I can imagine, it seems alien.

Daycare, mortgage, and taxes in a high cost of living area will easily eat into 200K and leave people with an average lifestyle.

 

[martyp]

My version of this poll is that I only play the CA lottery if the pot is over $10MM. Otherwise it isn't worth my dollar to take an astronomical risk.