Why so many 40-something millionaires?

[Gerbil Wheel]

Seems like a lot of the "can I retire?" threads on ER/Bogleheads-type sites read something like..."we're 40 and have $1 million in invested assets...can we/when can we retire?"

How did y'all get so rich so early?

I recall a recent statistic that most Americans don't have $20k in savings (forget the exact number, but something like that)

So it is just a predominance of 40-something millionaires asking these questions or what?

When I see those types of threads I just close them and move on...something psychological about feeling behind I guess ...but I suppose trying to keep up with the savers is better than trying to keep up with the spenders...

 

[aaronc879]

3 ways: Own their own business, very large income(attorney, investment banker...), inheritence.

Don't look at it in terms of total $ amount. Look at it in terms of # of years worth of expenses. Two people could each have $1MM in savings with one of them having enough for 10 years while the other has enough for infinite years.

 

[sspribyl]

We are 40 somethings looking to retire, but we don't actually make that much money, we just don't spend it. We look for free things for fun, fishing, camping, window shopping. We buy a lot of used items rather than new, had the same cars for over 10 years, use coupons for EVERYTHING, saved as much as we could in 401k's. Every vacation is just about free via frequent flier miles and starwood points. We spend $40 a week to go out for dinner, and cook from home, always take lunches. But the biggest thing we do is manage our taxes through investment properties and side businesses.

 

[Alan]

How did y'all get so rich so early?

Who, me?

The year I was 40, I passed the $100k/yr mark and was dreaming of $1MM in savings.

And I still made ER at 55. It's as much about how much you need as how much you have.

 

[Tigger]

- Received real estate from parents whose health was declining. Sold it at historically high prices.
- Never married, no divorce, no kids.
- No debts.
- High salary.
- LBYM

 

[scrabbler1]

- No kids.

- No debts.

- Company stock grew by 3,000%.

- LBYM.

I was at $590k at the end of the quarter (2Q 2003) in which I turned 40. By 2Q 2007 I was $971k. I was 44 and still working, albeit only 12 hours per week. I ERed in late 2008 as my portfolio was dropping somewhat. I hit the $1M mark briefly in April 2010 before that sudden and weird downturn in May when we had that "flash crash." Got over $1M that September and never looked back.

 

[2B]

$1 million dollars isn't all it used to be. When I first got out of college I calculated that if I could ever get $200,000 I could retire. With quality stocks paying 8% dividends and 10 year bonds paying 6%, a balanced portfolio would have been safely more than my current salary (~$12,000) and I wasn't coming close to spending that.

I probably had $1 MM when I was a 40-something but inflation had managed to make ER a stretch at that tender age. I'm now a 50-something with more money but the prospect of medical care, passive returns and potential inflation continue to muddy the waters.

At a certain point you have to say it's time. I'm confident I have "enough." What I like about keeping on keeping on is I make a profane amount of money with no stress. DW is otherwise occupied caring for her father which prevents any significant changes I would want to do if I truly retire.

 

[Gumby]

Seems like a lot of the "can I retire?" threads on ER/Bogleheads-type sites read something like..."we're 40 and have $1 million in invested assets...can we/when can we retire?"

How did y'all get so rich so early?

Get a job out of college or grad school making $60k per year today. Save 27% of your initial salary in a 401k (i.e. $16,500 - the max allowed this year). Every year, increase your contributions to match the maximum allowed (assume that the max goes up by 4% per year). Invest at a rate of 7.2%. In 20 years, when you are probably between 42 and 45 years old, you'll have over $1 million in your 401k.

 

[clifp]

I got there from stock options. I earned my stock options but the fact they were worth something was pretty much just pure luck. Which is why I say I earned my lottery tickets.

However, my retirement accounts also hit a $1 million by the time I was 40. I made more than 7.2% by adopting an aggressive investment strategy when I was young but mostly cause exactly what Gumby suggested maxed out my retirement savings.

 

[obgyn65]

1. enjoying a good salary;
2. living below my means;
3. no kids;
4. no debt;
5. never married.

How did y'all get so rich so early?

 

[Animorph]

Probably lots of people with $1M in their 40's are realizing they may be able to retire early. Probably not too many in their 50's with $10k saved are looking to retire early. And anyone who's 65 isn't retiring early. So it's a somewhat self-selected group.

As Gumby pointed out, a lot of professionals like engineers (who seem to be well represented here) can LBYM and retire early simply be saving what they earn, no luck involved. Though I'll admit to less LBYM (I targeted retirement at 62), and more stock options in achieving FIRE.

 

[LOL!]

It was easy.

Just work 20 years from age 20 to age 40 (or 22 to 42 if you want). Be married to someone else who works. Save/invest one entire salary. Participate in the great bull market. Have kids if you want, but they don't go to private school.

One probably needed to save about $20K a year to get to a million in 20 years, but you had to start early even at a time that 401(k) contributions were limited to $4K a year.

And then the second million was even easier. And don't forget that the stock market has doubled in the last 16 months, so the 3rd and 4th million are gonna be easier still.

Things that were NOT necessary:
1. Inheritance.
2. Not marrying and not having kids.
3. Didn't need high income.
4. Didn't need to be self-employed business owner.

 

[Nords]

How did y'all get so rich so early?
So it is just a predominance of 40-something millionaires asking these questions or what?

Well, the only people asking the questions are the ones who think they're close to the answers. The people with a net worth of $20K aren't even thinking about next year, let alone retirement.

In our case: dual-military couple, plenty of sea duty, some bonus pay, no time to spend money. "Easy". Looks pretty good from this side of the retirement date, anyway.

 

[Lawrence of Suburbia]

A million isn't very much these days. I've got a low-pay, dead-end job, and I need two million to even feel near ready to retire (cost of health insurance, etc.) I don't have near a million yet , but if I did, I'd only think I had a good down payment towards retirement....

 

[SteveR]

Many millionaires on the board and elsewhere got there in different ways. Like others have said: high salary, stock options, low expenses, and inheritance.

At around age 40 just after my divorce, my exwife left me with nearly $80,000 in various credit card and other debts, alimony, child support for one child (I was raising the other one myself) so I had to provide a household for him while trying to manage a high stress long hour job with next to nothing in after-everything payments, no savings, 0$, small house with a borrowed downpayment and PMI on the mortgage. Etc.

After taking every dime I could muster up I paid off the debt in about 2 years. That was the worst time in my financial life. After that, I started saving for ME and buying savings bonds for my son's education (pre 529 plan). Once I had and emergency account and about 3 months of critical living expenses in a MM account I started directing money into my 401k and dipped my toe in the stock market.

I hit some home runs and struck out several times but learned along the way. When I remarried my new wife's financial ideas were similar to mine so that also helped. So after 10 years of child support and 7 years of alimony I was free of all extra payments. I took those amounts and plowed them back into the market. I also had a few pretty puny stock options that mostly drowned before they paid a dime. I would rather of had the cash up front so I could invest it where I wanted it and would have come out way ahead.

We are now reversing the investments to a degree...rebalancing and converting some to more liquid forms for living expenses before we start the 401k IRAs at 70.5.

We have lived well in the past 15 years and have saved well. We are now reversing the ship and living on what we saved...it is a bit of a mind altering experience and is taking some getting used to.

This and related forums will be filled with high net worth individuals mostly because it takes money to retire and especially early. It should not be too surprising to find multimillionaires here from all walks of life. Over-achievers tend to flock together.

 

[DesiGirl]

Just shy of 40, We are barely $ Millionaires (Living in India now). I worked for 10 years, Hubby has been working for 17 years. Started at salary for $1500 per annum each in India. US starting salary for $40-50K each. Best year family income was $225K (For 1-2 years). Average family income would be $80-90K p.a. all these years.

* No Inheritence
* Stock optins but not more than $200K
* No major luck in Stock Market or Real estate
* LBYM - saved 40-70% of Gross (Even on 1 income)
* 2 kids
* Same car for 10 years in US, Home-made lunches & dinners mostly, 5-7 year old basic clothing, No drinking/gambling/expensive hobbies other than vacations
* Worked our butts off at job to get all the raises & promos we could.

So HARD WORK & LBYM it is (with decent bit of luck thrown in)

Basically content with Life. Millionaire or not Happy to be who we are, where we are and the person we are living with.

-DesiGirl

 

[Ozziedreamer]

Well, I know of at least two millionaires (ie > $1 million in investable assets) in their early 40's, in my circle of friends / acquaintances.

1. Male who did a Computer Science / Economics combined degree. Went on to become a management consultant for a large firm after uni - basically goes into businesses and does strategic/operational reviews, including how to increase profits/sales, who needs to be fired, that sort of thing. Did this for a few years, before realising he could do this for himself and not have to work for a salary, ie keep all the money. Has worked in London, now back in Oz. Married, two kids, wife does not work, large home with pool in a leay suburb. Continues to be a successful management consultant with his own firm (you know, the type that you give him your watch and he tells you the time - just kidding, he is obviously very good at what he does)
2. Male, engineer, has worked for twenty years since leaving uni. Always for the same firm. Not a huge income, but reasonable - he is not an Engineering Manager or Director, just an engineer. Never married, no kids, definitely a LBYM - maybe taken to excess. His firm provides a car and all car expenses. Still lives at home with his parents. Limited social life.

 

[fancy free]

Owned our own business, made a very high income for a few years, lived far below our means, kept those habits of saving and living frugally even as our income varied over the years. No debt except the mortgage.

We hit $1M net worth in early 30s, retired early 40s.

We tell our own kids the key isn't how much you make, it's how much you save —*and start *early*.

I feel a nice kinship with the people who've replied in this list. We wear clothes for a long time, drive cars for 20 years, take cheap camping vacations, and really enjoy life.

 

[JDARNELL]

1. LBYM- Used budget as a guideline
2. Good paying job and continue to improve skills. (Who Moved my Cheese?)
3. When we got married lived off one income
4. Began to look for alternative income sources (online teach, online sales, etc)
5. Rental Property (not over leveraged, used low rates to pay down fast, restructured for more positive cash flow)
6. 2 Kids (one was real sick and we spent a lot of time in the hospital)
7. Drive cars for as long as you can.
8. Try not to get into situations where you become very inelastic to purchases because you have to have it now.
9. Now add in Military retirement. (in our case) I am still trying to figure out the MC vs MB of doing a military career. I would love to see a utility function of what we learned at the 4 yr, 6, yr, 10 yr points, etc. I suspect there is a huge diminishing returns in later years. I can tell you this for sure. DON'T DO IT FOR THE MONEY. You will be miserable.

No doubt military retirements and TRICARE really help create a nice foundation. There were times when being active duty actually costs us more due to missed opportunities, additional costs, family wear and tear etc.

10. Attitude- This is a big one for us. Be happy for others success, learn from their success, and figure out how you can leverage their success. For the most part is successful people are happy to share how they got where they are. Just like with my sons now. If I surround them with motivated kids they push each other and do better. If I let them blow in the wind they just hang out. You can't always pick the situations you are going to be in no matter how hard you try, but you can pick your attitude you bring.

11. Be yourself.

I think the members on this board already are doing pretty well as they have the thought process and desire to reach their goals.

JDARNELL

 

[Ozziedreamer]

Sorry, make that three millionaires in their 40s I know personally. Forgot about the following, but there are extenuating circumstances, which makes him atypical.

Third one is a male, married, four kids, wife doesnt work. He owns a number of rental properties and shops. Sold a separate grocery/take away business. Left school at 18, did not attend university. Works for himself. Parents won the lottery about twenty years ago (at that time, I think about $1M or so). This was how his family was able to get into the business and buy properties, from that start. Father now deceased, so transfer of wealth has and continues to occur.

 

[Andre1969]

So it is just a predominance of 40-something millionaires asking these questions or what?

My guess is simply that for most people who are accumulating wealth, the 40's is simply when the $1M mark gets hit. When you're in your 20's, you're just getting out of college, usually, starting off in a low-paying job, paying off student loans, etc. Perhaps having kids, buying your first new car, first house, etc. Most people probably aren't putting much away into savings and retirement.

And for those that are, the 30's are when they finally start to make some progress, and 40's is when they finally hit the $1M mark.

At least, that's drawing from my own experience, more or less. I didn't graduate college until I was 23, bought a condo at 24, got married at 25, divorced at 26. Didn't get really serious about investing until 28. Before that, it was mainly paying down bills from the bad marriage. At that time, I had about $20K saved up. By the time I turned 30, it was up to $66K. Broke $100K when I was 33. Came close to $500K when I was 38 (topped out around $469K), but then the "great recession" hit. But, a year and a half later, I did finally top the $500K barrier.

When I turned 40, I was up to around $570K. And now, a year and a few months later, I'm hovering around $660K. So, at some point in my 40's, I'm presuming I'll break the $1M barrier.

But, as others have said, $1M ain't what it used to be. For instance, $1M in 1998, which is when I got serious about investing, would be the equivalent of $1.4M today.

As for how I got where I am? Well, I usually worked a second job in the evenings, and after the divorce, ramped that up. Also rented out my condo and moved in with my grandmother to save money. And since then, I've always had roommates, which helps alot. Oh, and the usual, live-below-your means type of stuff.

 

[Alan]

I couldn't resist, I had to go back and look. I was 40 in 1995 and only 2 years into saving for retirement. ER savings were $37k, house equity ~$90k.

It took 11 years to accumulate $1MM, including selling the house in 2004 and investing the proceeds. I also was contributing to a private pension plan so wasn't relying solely on savings to RE. When I did RE 4 years later and starting drawing the non-COLA pensions I reckoned they were worth just over $1MM.

 

[FinanceDude]

Seems that LYBM and not having kids were a constant theme in this thread. I have kids and no regrets, will be FI in about 3 years so not upset. I think ER is in the eye of the beholder as far as age.........

 

[calmloki]

I lied to myself with vigor and purpose: put low values on the places and didn't adjust those values for years. Didn't get started on buying rentals until we were in our mid thirties. Ten years into the rental foray Quicken shows us taking a $200,000 jump from $185k net worth the year before - looks like maybe we grudgingly put some value on the places. Five years later there is another revaluing shown in Quicken and we are now over the 1/2 million mark - the next year Quicken shows us over the mark, but we are into our fifties.

Looks like we willfully ignored any increase in property value for the next five years, then whoops!, another milestone is passed. That made me greedy for positive feedback and we started using the tax man's Real Market Value to set the values of our places each year so we started showing annual increases. Thanks to paying the places off really fast, saving rental income with vigor, and moving into private money lending our net worth hasn't had a down year since then, even though property values have dropped.

 

[Aiming_4_55]

For me, I reached $1M total net worth in my mid-late 30's. I define net worth by adding up cash, taxable/non-taxable investments, and real estate (primary/rental), then subtracting all liabilities. I am bouncing at the $1M mark in taxable/non-taxable investments.

It was not one silver bullet for my net worth, never did great with salary, bonus, options, investments, but a kick from real estate, about $200k. Salary over $100k only within the last few years, I'm 42 now.

I think the primary force for me was:
- graduating from university with no major loans even tho I self funded
- being gainfully employed since graduation, low salary of $22.5k in 1990
- respectable to good savings rate in taxable and non-taxable accounts
- living within a budget (yes I partied, dated, and vacationed while single)
- LBYM when I could

Other background
- Married when I was 31
- Stay at home wife with 2 young kids
- major unexpected cost of starting my family about $100k, not including lost work time/pay, no regrets.

Again, $1M is not everything as I'm glad family has good health, reasonable stress, and good times to balance what we call life.