What a $5 Million Retirement Looks Like

[Midpack]

Obviously not for everyone, but maybe a small % of readers would be interested. All the cases have chosen where to splurge while remaining very LBYM in many respects. Many themes common with this crowd, LBYM, substantial savings while working, index funds, etc. at any net worth…

Though they are less concerned about outliving their money than many retirees we’ve profiled, they aren’t all living in luxury. Some haven’t bought new clothes in years. Others continue to work part-time.

They splurge on world travel but, like most older Americans, worry about their health and their families.

And money alone also doesn’t answer the other question retirees wrestle with: How to find purpose and meaning in this chapter of life?

https://www.msn.com/en-us/money/ret...-retirement-looks-like-in-america/ar-AA1f8fzg

 

[Ronstar]

Thanks for posting. The cases have spending to levels that I would expect for people with their means. Not over the top, but certainly not bare bones.

 

[street]

It was a great article of real people and how they live with wealth. Thanks for sharing that it was a very nice read.

 

[COcheesehead]

Yes, the common spending themes are evident. Interesting though, some have mortgages that they do not intend to pay off early and social security will be delayed until full retirement age - a couple things counter to what is usually posted on here.

 

[MuirWannabe]

Enjoyed the article. I relate to the first guy somewhat. They do sound like they could be members of this forum.

 

[Qs Laptop]

Interesting read. Thanks for the link.

 

[Flyfish1]

I'm surprised a $5M nest egg is the top 0.1% of households.

 

[copyright1997reloaded]

Interesting read, but I wish more detail were provided. As discussed here, having defined benefit pension(s) vs. only self-funded (401K's, etc.) makes a difference in terms of comfortable annual spend ability.

I guess quite a few here would be in a somewhat similar category, that is able to comfortably spend $150K-$250K/year.

I myself spend more (adjusted for inflation) than before I first "retired" (2009) (back to work part time a year later and full time sort of 2014 onward), although my spending pattern is different than many in the article (not big on international vacations/world travel).

 

[GenXguy]

Is that $5M for two people living together? A single person? How much is taxable? What about location? Is home paid for? So many variables determine how retirement can be. I haven't clicked the link.

 

[Lewis Clark]

I'm surprised a $5M nest egg is the top 0.1% of households.

The article counts the $5 million in retirement accounts only (IRA, 401k, etc) not the total nest egg.

 

[Midpack]

The article counts the $5 million in retirement accounts only (IRA, 401k, etc) not the total nest egg.

You may be right and I can see why you'd think that based on the opening and some other references, not entirely sure that's true.

- His portfolio is 95% stocks, mostly index funds, with a few individual equities such as Apple (yes, could be in IRA).
- The couple now has $4.2 million, half in retirement accounts and half in taxable accounts.
- These days, Bob, 80, and his wife, Pat Frey, 75, have socked away about $6.1 million, almost half of which is invested in individual retirement accounts (other half?).

 

[Unpaintedhuffhines]

The article counts the $5 million in retirement accounts only (IRA, 401k, etc) not the total nest egg.

It sort of implies that the $5M is in retirement accounts only: "Few Americans manage to save anywhere near that sum in their 401(k)s and individual retirement accounts. A $5M retirement nest egg..." I took that as their total investment assets, since they talk about how much each group has "socked away." If it were strictly retirement accounts, my question would be "how much more do they have in non-retirement accounts?" I count all assets in my "retirement nest egg" since A. I am retired, and B. It's all just different money buckets, so it's all funding our retirement.

Still, a very interesting article. Thank you for sharing!

 

[CRLLS]

The article counts the $5 million in retirement accounts only (IRA, 401k, etc) not the total nest egg.

I agree it might be just 401K accounts. It was from a study by Employee Benefit Research Institute. How they have direct access to IRAs and taxable account values, I don't know. They do mention at least one couple who have about 50/50 in pre-tax and taxable assets (my words). Perhaps they just interviewed or surveyed a sampling of larger 401K holders. Kind of hard to tell.

 

[dunkelblau]

From the article, "A $5 million retirement nest egg puts you in the top 0.1% of households, according to an Employee Benefit Research Institute analysis of retirement accounts using the 2019 Survey of Consumer Finances." I'd imagine that maybe ~0.1% of all individual retirement accounts are >$5M, but I believe the Fed's SCF aggregates accounts by household, so the percentage should be higher? The case studies in the article itself apparently targeted a total investment portfolio of $5M, and this should be about ~3% of retired US households.

I see a common thread in their spending rates of ~3%/yr; the surgeon might be higher, but his large per diem income makes up for that. These successful retirees contrast against an old NYT story about ER over-reach that was triggered by an abrupt unexpected windfall:
Family’s Fall From Affluence Is Swift and Hard
That last line suggests to me the lesson wasn't learned.

 

[EarlyandLate]

If I had guaranteed annual income of $130k to $150k like a couple on the examples in the article, I wouldn't care if I only had 10 bucks in savings. I could live very well on that income while also paying for the appropriate insurance to maintain comfort until the end.

 

[explanade]

Did they all seem to have high equity AA?

 

[Drake3287]

Yep, this article reflects our situation almost to a tee. Still living in the same house we bought 30 years ago (paid off) and no one knows our financial situation, even our adult kids.

Although I sleep better at night knowing our finances will never be a concern, we still live the same life style as we always have. We do spurge on vacations and a few material items here and there though. After a lifetime of saving it's hard to all of a sudden go on a spending spree for the rest of our lives.

 

[Koolau]

A cautionary tale that has played out many times before. You hear about bankrupt lotto winners and inheritors of immense wealth. A large sum seems like it should last forever, but it really doesn't when you have few constraints on spending said wealth.

 

[COcheesehead]

A cautionary tale that has played out many times before. You hear about bankrupt lotto winners and inheritors of immense wealth. A large sum seems like it should last forever, but it really doesn't when you have few constraints on spending said wealth.

The major constraint for most folks who didn’t have money just fall into their lap is the mentality that got them the large sum in the first place and one of the reasons why our pile continues to grow, though I am trying to loosen the purse strings a bit.

 

[Gumby]

... These successful retirees contrast against an old NYT story about ER over-reach that was triggered by an abrupt unexpected windfall:
Family’s Fall From Affluence Is Swift and Hard
That last line suggests to me the lesson wasn't learned.

Well, that guy obviously never listened to Billy Rose:

"Never invest in anything that eats or needs painting."

 

[EastWest Gal]

Except for the first person described, there wasn’t much detail on the investments.

Most had some in retirement funds and regular brokerage accounts.

I was a bit taken aback at the surgeon making $300K working part time per diem in “retirement” when our health care expenses are nearly unaffordable in the U.S. That really bothered me.

 

[Markola]

Did they all seem to have high equity AA?

That’s what I was thinking, too. Stocks and stock index funds seemed to predominate over balanced AAs. One bought Home Depot at $3.

 

[COcheesehead]

Allocations are purely a guess.

 

[NW-Bound]

It sort of implies that the $5M is in retirement accounts only...

I count all assets in my "retirement nest egg" since A. I am retired, and B. It's all just different money buckets, so it's all funding our retirement.

+1 To me, the only difference between my taxable/Roth/IRA/401k/Treasury Direct accounts is the tax liability on them. They are all retirement accounts.

... These successful retirees contrast against an old NYT story about ER over-reach that was triggered by an abrupt unexpected windfall:
Family’s Fall From Affluence Is Swift and Hard
That last line suggests to me the lesson wasn't learned.

I found the story of the failed couple interesting, because I would never do what they did with their $10M windfall. They were spending as if they had $50M.

When you built up the asset yourself like the retirees in the OP article, obviously you would know how to manage it. If it fell into your lap, you would not appreciate the work that went into making that fortune. And this couple learned the lesson the hard way, when the wife now made $12K/year after squandering $176K on just one horse. They really thought money would continue to fall from the sky.

 

[TheWizard]

In that NYT article from 2010, it would have been interesting to see how that couple dealt with money in the years preceding the $10M inheritance. I'm guessing they didn't save much, didn't LBYM then either.

There's a mindset, a mentality to dealing with money.
Some people look at their entire stash as available for spending. People with wisdom know better than to look at their wealth that way...