Article - 35% of Millionaires won't be able to retire

[cyber888]

I guess everyone is really scared of inflation now.

https://www.investopedia.com/million...edium=referral

[Gumby]

To quote one of our most illustrious members, "Numbers is hard"

Quote:

A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,...

[audreyh1]

If they’ve bought a huge house like in that picture they probably have no savings at all anyway.

[W2R]

From the article,

Quote:

“A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,” David Goodsell, executive director of the Natixis Center for Investor Insight, told CNBC. “This is usually quite a bit less than these individuals are likely used to living on.”

So, these retiree wannabes with not a penny more than $1,000,000 just plain forgot to LBYM when they were dreaming about retirement?

I am pretty sure that just about all of our forum members are more frugal than that.

[COcheesehead]

Quote:

Originally Posted by Gumby To quote one of our most illustrious members, "Numbers is hard"

I laughed at that one too.

[RxMan]

They literally had an article just a couple of days ago stating people might be saving too much for retirement.

[Jerry1]

Just amazing how all those people who have little to no nest egg end up retiring. At some point you have to learn to LBYM. Also, it’s not like one million, which yields $40K, is all there is. No mention of SS, which if you are a millionaire will likely be around $30K or better. There are folks on this board that retired on that. My budget is only a bit higher at $100K and that’s due to DW working and now getting SS. But I guess they think they can still live on the spend thrift budget they have while they’re working. You either need to LBYM while working or prepare to LBYM in retirement.

[Andre1969]

Yep, inflation can be an ugly thing. When I first started getting serious about planning for retirement, oh around 2000, I figured I'd be happy with $1M and a paid off house. Inflation-adjusted, of course.

Well, today, that would mean roughly $1.73M, and a paid off house.

In early 2020, I briefly flirted with the $2M mark, and even though I had a pretty hefty mortgage, was really starting to think about retiring on my 50th birthday, in April. Of course, by the time April rolled around, I wasn't anywhere near $2M anymore.

Now, adjusting for inflation, I'd need to be around $2.3M, just to be at that same level.

These inflation numbers may be off a bit; I just plugged them into an online inflation calculator. But, all I know, is that I'm enough below $2.3M now, especially considering additional investments I've made over the past 2+ years, so I'm worse off now, than I was at the beginning of 2020.

Then, throw on the fact that just about everything is a lot more expensive these days. The only thing that went down was my mortgage payment, because I refinanced in September of 2020. But with the way property taxes and insurance are going up, it won't be long before that cancels out the mortgage savings.

I mean, I know I'm doing okay, by most metrics, I guess. But I guess I figured that, being (barely) a multimillionaire would just feel, well, more prosperous!

[F.I.R.E User]

$40k is comfortable in small town in USA.

[aaronc879]

Quote:

Originally Posted by F.I.R.E User $40k is comfortable in small town in USA.

I have never spent that much in a year in my life. I will spend $12,XXX this year and I could have spent less. $40K/yr would be livin' large by my standards.

[F.I.R.E User]

Quote:

Originally Posted by aaronc879 I have never spent that much in a year in my life. I will spend $12,XXX this year and I could have spent less. $40K/yr would be livin' large by my standards.

What part of town?

[aaronc879]

Quote:

Originally Posted by F.I.R.E User What part of town?

I live in a small town in Wisconsin. Paid off house, single, no kids or pets.

[F.I.R.E User]

Quote:

Originally Posted by aaronc879 I live in a small town in Wisconsin. Paid off house, single, no kids or pets.

What about travel costs?

[aaronc879]

Quote:

Originally Posted by F.I.R.E User What about travel costs?

I don't travel often. I went to Florida early in the year and spent $800. Otherwise I haven't gone more than around 100 miles from home all year. My travel costs are not high at all.

[Souschef]

Well, in February something put a big wrench in our spending. DW found a new apartment complex right on the beach 3 miles from where she grew up.
The rent is $5K per month. The view is priceless.
I am 84, and she is 78, and we get $80K a year between SS and pensions, so we can afford it.
We lived in a +55 MHP, and it is like a ghost town. Here other than the ocean, we see cyclists, joggers, dog walkers, and all sorts of folks.

[youbet]

Quote:

Originally Posted by W2R From the article, So, these retiree wannabes with not a penny more than $1,000,000 just plain forgot to LBYM when they were dreaming about retirement? I am pretty sure that just about all of our forum members are more frugal than that.

Perhaps I misunderstand what you're saying....... but I'm under the impression than most of our members have budgets in excess of $40k in retirement.

[athena53]

Quote:

Originally Posted by youbet Perhaps I misunderstand what you're saying....... but I'm under the impression than most of our members have budgets in excess of $40k in retirement.

Most, yes, but there seem to be quite a few like aaronc who are happy to hang out in a modest house in a LCOL area, drive an older car, don't want to travel, etc.

I was curious about this part:

"While not everyone needs public assistance in retirement, 38% said they won't be able to retire without it."

How do they define "public assistance"? I make a distinction between SS and Medicare A, which is financed through payroll taxes, and needs-based programs such as Medicaid LTC, Section 8 housing, food stamps, etc. (The concern was that the need to pay off public debt might cause "social programs" to be cut back.)

[Samsung4321]

Quote:

Originally Posted by Gumby To quote one of our most illustrious members, "Numbers is hard"

Real rate of return required over 25 years, 4% withdrawal, present value 1, draw down to future value 0:

= RATE((92 - 67), 4%, -1, 0) [ negative = in / into fund ]
= 0%

Which is same as 1 / 25 = 4%.


Nominal rate of return required:

= (1 + 7%) * (1 + RATE((92 - 67), 4%, -1, 0)) - 1
= 7%

Which is same as inflation rate.


Future value = present value nominal rate of return required:

= (1 + 7%) * (1 + RATE((92 - 67), 4%, -1, 1)) - 1
= 11.3%

[TheWizard]

Quote:

Originally Posted by aaronc879 I have never spent that much in a year in my life. I will spend $12,XXX this year and I could have spent less. $40K/yr would be livin' large by my standards.

So you probably didn't buy a new F-150 or have your house reroofed this year, I'm guessing?
Or do a lot of international travel?

[Car-Guy]

Quote:

Originally Posted by F.I.R.E User $40k is comfortable in small town in USA.

I live in small town USA and I get over 40k in SS. I'd sure hate to have to live on that. I think I could pay my basic utility bills, buy food and pay my taxes and the minimums on home/auto/health insurance but I don't think life would be very "comfortable" after that. Of course, YMMV