What to do after you reach 1 million?
- Thread starter Harm
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mountaintosea
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No matter whether Harm's for real or not, this has been an interesting thread. 
dmpi said:I think the OP's story is missing a few details on how he generated the first million.
If he can generate & save money so fast, he should be giving us advice, not the other way around.
Never the less, here are my suggestions for the 2nd million.
1. You’re a "rich" guy. You can afford to take more risk. Look into getting rid of all insurance except for liability insurance. You might want to spring for an umbrella policy though.
2. Look for non or low performing assets. Look around the house, sell stuff that you don't need or use. Add that money to your investments.
3. After the first Million, your income adds less and less into your net worth. You need all your investments to really perform. Don't be the day trader guy who touts 25% returns in a 25K account. You’re playing with big bucks now. Go for 10% in a 1M, and be happy when you get it.
4. As others mentioned, study the tax code. There is "gold" in those words.
Advice #3 is really good. Think about your portfolio as a whole. Advice #4, that's gotta be so difficult. I would probably have to hire a tax advisor or something.
Spanky
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The claim of reaching $1 mil seems plausible if the following conditions are true:
1. Start work at age 24 (after graduate study) in 1999.
2. Dual income of $200K in 1999 and $300K now (5% increase per year).
3. Yearly expense in $45K in 1999 and $60K now (5% increase per year).
4. Yearly contribution of $30,000 to 401K. (maxing out 401K)
5. Invest all income after tax and expenses.
6. An annualized return of 10%
1. Start work at age 24 (after graduate study) in 1999.
2. Dual income of $200K in 1999 and $300K now (5% increase per year).
3. Yearly expense in $45K in 1999 and $60K now (5% increase per year).
4. Yearly contribution of $30,000 to 401K. (maxing out 401K)
5. Invest all income after tax and expenses.
6. An annualized return of 10%
Harms:
I have no reason at all to doubt your claims or net worth. I also reside in the NW and have seen how house values have climbed. At a $150K annual salary, you and your spouse make almost 3 times the amount I did as a single person prior to my retirement 3 years ago. Plus, you also didn't get caught up in the 2000 tech bust. I can see how a high salary such as yours, combined with frugality and continued (and reasonable) investments in the equity market can easily add up to a million or more within a decade.
I'd say just keep on doing what you're doing. You must be doing something right. Congratulations and Good Luck!
Toejam
I have no reason at all to doubt your claims or net worth. I also reside in the NW and have seen how house values have climbed. At a $150K annual salary, you and your spouse make almost 3 times the amount I did as a single person prior to my retirement 3 years ago. Plus, you also didn't get caught up in the 2000 tech bust. I can see how a high salary such as yours, combined with frugality and continued (and reasonable) investments in the equity market can easily add up to a million or more within a decade.
I'd say just keep on doing what you're doing. You must be doing something right. Congratulations and Good Luck!
Toejam
DRiP Guy
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Harm said:
Interesting choice of words, Harm. "Not possible?" No, it certainly is possible.
Do you seem likely, however, to have done it based on your posting style and rather flip approach to expenses and understanding what accumulating wealth is all about?
I'm a little sorry to say it, but for me, no, I don't buy it, but I'll leave it at that since it is just a hunch and so you can not worry that I will bug you on it further.
8)
I'm flippent to expenses? I watch them. I told you my expenses are about $60000/year. That isn't so bad. I know people in the $100,000/year in expenses. I have an old cell phone and drive an 11 year old SUV.
I don't think you understand me. Is it more expensive for Bill Gates to pick up a $20 bill off the ground or leave it. The answer is picking it up. You used to probably think a penny was alot. As you grew up, a nickel, then dime. You're views changed right?
So my views started changing as I grew into more money. That said, I didn't get to where I was my spending like mad.... For instance, 3 years ago, I would have gladly saved $300 to build my own computer than buy one. This week I bought a new computer, which cost me $300 more than building it because I thought my time was better served doing something else, like reading a business book and looking for a good stock to buy. I'm starting to feel like my time is more precious...
I don't think you understand me. Is it more expensive for Bill Gates to pick up a $20 bill off the ground or leave it. The answer is picking it up. You used to probably think a penny was alot. As you grew up, a nickel, then dime. You're views changed right?
So my views started changing as I grew into more money. That said, I didn't get to where I was my spending like mad.... For instance, 3 years ago, I would have gladly saved $300 to build my own computer than buy one. This week I bought a new computer, which cost me $300 more than building it because I thought my time was better served doing something else, like reading a business book and looking for a good stock to buy. I'm starting to feel like my time is more precious...
Spanky
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If the salary is $150,000 and the expenses are $60,000 now, the annualized return from 1999 to now would have to be about 35% to reach $700K. That's a great return.
SteveR
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Wow, tough crowd here today.
Is it possible to get to $700k in investment equity in 10 years? Yes, and without major realestate holdings or owning your own business. The key is two good salaries, low expenses, saving a bunch and a decent market return. Some of folks on this board have done better in as much time.
Some of us started deep in the hole with debt and other expenses and managed to dig our way out to some pretty nice nest eggs. I choose to give the guy the benefit of the doubt. If his is full of it then he will fit right in here.
Is it possible to get to $700k in investment equity in 10 years? Yes, and without major realestate holdings or owning your own business. The key is two good salaries, low expenses, saving a bunch and a decent market return. Some of folks on this board have done better in as much time.
Some of us started deep in the hole with debt and other expenses and managed to dig our way out to some pretty nice nest eggs. I choose to give the guy the benefit of the doubt. If his is full of it then he will fit right in here.
wabmester
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Harm, your basic question is whether you're on track to amass $2.5M by age 50, right?
No problemo. Even if you stopped contributing, you'd only need an average return of 7.5% to grow your $700K to $2.5M in 18 years.
Since you'll probably continue to save much of your income, you'll be retired well before 50 even with a very conservative allocation.
No problemo. Even if you stopped contributing, you'd only need an average return of 7.5% to grow your $700K to $2.5M in 18 years.
Since you'll probably continue to save much of your income, you'll be retired well before 50 even with a very conservative allocation.
Harm, if you got to $1M this way then you can get to $2M in pretty much the same way. Don't mess with it.
Consider this cautionary tale that my FIL used to share with me every couple of months during my first two years of ER:
In the early days of radio a new announcer, fresh on the job, was assigned to broadcast the time of day live at the top of the hour. The eager but inexperienced employee was required to be standing by in the studio at least 10 minutes before he went on the air. When all was in readiness he kicked back his chair, put his feet on the desk, and read the newspaper.
While the announcer was "standing by", an elderly janitor slowly wheeled his water bucket in the door and slouched toward the far corner of the large room with his mop in his wrinkled hands. The announcer alertly looked at the clock, brought down his feet, leaned forward, keyed the microphone, and smoothly informed his audience "This is CBS. The time is now ten o'clock." He then shut off the microphone, kicked back again, and resumed reading his newspaper.
The janitor watched this performance in silence, contemplated his mop, and then asked "Is that your job?"
The announcer looked over at him, smiled, and said "Yep."
The janitor replied "Don't f*** up."
If you only want to enjoy life then it's probably not worth sweating the $300 not saved on a PC. But if you want to get to $2M, not just enjoy life, then continue the habits that got you to your first million.
BTW spouse and I still pick up pennies on our evening walks. Today we found fifteen cents... I thought I was being lured into a trap.
And you can beat that mortgage rate with PenFed CDs, let alone investing in the stock market for the next 15 years. If you could swap that 15-year mortgage for a 30-year loan at the same rate then you'd be in hog heaven. But there's nothing wrong with keeping the current loan and putting more savings into the market.
Consider this cautionary tale that my FIL used to share with me every couple of months during my first two years of ER:
In the early days of radio a new announcer, fresh on the job, was assigned to broadcast the time of day live at the top of the hour. The eager but inexperienced employee was required to be standing by in the studio at least 10 minutes before he went on the air. When all was in readiness he kicked back his chair, put his feet on the desk, and read the newspaper.
While the announcer was "standing by", an elderly janitor slowly wheeled his water bucket in the door and slouched toward the far corner of the large room with his mop in his wrinkled hands. The announcer alertly looked at the clock, brought down his feet, leaned forward, keyed the microphone, and smoothly informed his audience "This is CBS. The time is now ten o'clock." He then shut off the microphone, kicked back again, and resumed reading his newspaper.
The janitor watched this performance in silence, contemplated his mop, and then asked "Is that your job?"
The announcer looked over at him, smiled, and said "Yep."
The janitor replied "Don't f*** up."
If you only want to enjoy life then it's probably not worth sweating the $300 not saved on a PC. But if you want to get to $2M, not just enjoy life, then continue the habits that got you to your first million.
BTW spouse and I still pick up pennies on our evening walks. Today we found fifteen cents... I thought I was being lured into a trap.
And you can beat that mortgage rate with PenFed CDs, let alone investing in the stock market for the next 15 years. If you could swap that 15-year mortgage for a 30-year loan at the same rate then you'd be in hog heaven. But there's nothing wrong with keeping the current loan and putting more savings into the market.
Peaceful_Warrior said:
Very true.
And I can relate to Harm being paranoid, the more we accumulate the more paranoid we get. We never had anything to lose before, but now there is a light at the end of the tunnel and it's very tempting. It would really, really suck to have it go *poof* and have to work 15 years pass expected FIRE date.
Harm said:
If anything would make me call this BS it's this. Your portfoilo swings $8k in a day? What is it invested in?
CyclingInvestor
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neeps said:
1.2% daily swings are not all that uncommon in an all-stock portfolio. I have seen
plenty of 2% swings. In early 2004 I had a 17% drop in 5 weeks. You just have to
have confidence in your investment style.
DRiP Guy
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Harm said:
Uh, what part of "...I'll leave it at that...." did not get through?
The stage is yours, monsieur!
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Go to the record store and buy the Barenaked Ladies album with the song "If I Had a Million Dollars". Listen to it and do that. Don't forget the monkey.
ladelfina
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Harm.. Hi! I'm at the threshold, too, in that right now our net worth is right around where it needs to be. And we have near-zero earned income now.
So basically, our future = the future of our investments. Scary.. but also looking back over the long run not as scary as it might seem at first glance.
I have no idea why so many people seem to think you're pulling our chain.
The money just grows.. that's the beauty of it.
Just looking at my Roth account.. I rolled it over from a SAR-SEP in 1998. The 1998 value was $63k. I made $2k contributions 1998-2002 and $3k contributions in 2003 and 2004. Rolled over $15k in 2005. So that's a total of $94k in-- almost 1/4 of which just last year.
The current value is $233k.
Pretty easy to multiple the end result x4 and work back out how it could be done over eight years even starting with way less but given 10x or 20x the intervening contribution values...
I never had a high income and couldn't save nearly as much as the Harm family from earnings. The key is getting the pot to start out with, though. And as Nords said, if it ain't broke don't fix it. Just keep chugging along.
As for the change in perception.. I don't have it since I was neither A.) so frugal that I would build a computer (or a chair, or knit a sweater) from scratch in order to save $$.. nor B.) the kind of person who could easily find a way to spend $100k/year.
When I really wanted a 'luxury' I just went out and I bought it without qualms.
It's just that there are very few luxuries that I really want.
So basically, our future = the future of our investments. Scary.. but also looking back over the long run not as scary as it might seem at first glance.
I have no idea why so many people seem to think you're pulling our chain.
The money just grows.. that's the beauty of it.
Just looking at my Roth account.. I rolled it over from a SAR-SEP in 1998. The 1998 value was $63k. I made $2k contributions 1998-2002 and $3k contributions in 2003 and 2004. Rolled over $15k in 2005. So that's a total of $94k in-- almost 1/4 of which just last year.
The current value is $233k.
Pretty easy to multiple the end result x4 and work back out how it could be done over eight years even starting with way less but given 10x or 20x the intervening contribution values...
I never had a high income and couldn't save nearly as much as the Harm family from earnings. The key is getting the pot to start out with, though. And as Nords said, if it ain't broke don't fix it. Just keep chugging along.
As for the change in perception.. I don't have it since I was neither A.) so frugal that I would build a computer (or a chair, or knit a sweater) from scratch in order to save $$.. nor B.) the kind of person who could easily find a way to spend $100k/year.
When I really wanted a 'luxury' I just went out and I bought it without qualms.
It's just that there are very few luxuries that I really want.
Rich_by_the_Bay
Moderator Emeritus
Nords said:
Real or not, sounds like the OP is looking for validation to get more aggressive and risk tolerant with his holdings, as if crossing the $1mm threshold changes the basics of investment. Maybe a little selective heeding of the advice.
I'm with Nords. He's all but FI if he stays patient, disciplined, diversified. Almost nothing can change that other than adrenalin toxicity, and it sounds like that has already set in a little.
Harm, if you absolutely must get greedy gutsy with your hard-saved nest egg, at least carve out a portion of it, say $200k, and consider that to be play money. Put it all in the next Great American Company or Hedgefund Du Jour which only you and a few close associates know about, and best of luck to you. At least you'll have the other half million left over.
And if you do happen to earn tens of millions, you'll wake up and realize that $2-3mm gets you about 99.99% of all the happiness you're ever gonna see anyway.
REWahoo! said:Better dance with who brung you.
Excellent comment, very well said
The next million will come faster, if for no other reason, you have 1 million already earning you money (unless it is in a checking account
).It looks like you are doing something right, why change?
Gumby said:
Awesome song!
Don't think that you now need to take large risks to advance your portfolio. What you have been doing has been working so just keep doing it.
As for Harm being full of it (which I don't think he is), even if he is, it is a great question and an interesting thread.
FIRE'd@51
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Harm,
Congratulations to you on your successes up to this point. You are in a wonderful position at the young age of 32. As you know, over the past 80 years, the S&P 500 has returned 7% per year after inflation. With a 6% real return, your money in today's dollars doubles every 12 years. So in all likelihood, you are looking at something like $4 million in today's dollars when you are 56, even if you never contribute another dime to your nest egg. At a 4% SWR, this would provide 160K of income in today's dollars. So long as you are not withdrawing from this nest egg (i.e. you keep working), you don't need to worry about pulling money out of your portfolio in a down market, as we RE's do.
You mentioned you were a TA in graduate school. From this I infer you probably have a graduate degree, maybe even a PhD. With an income of 150K at age 32 , you obviously have talent. You are just entering your prime earning years. My guess is that your career is the source of the "great wealth" you mention. I would focus on this and put your investments on "automatic pilot" in a Vanguard equity index fund.
As your income grows, you might want to consider buying the most expensive home you can afford in a "prestige" location. Homes in nice towns with good schools have been very good investments over the long term. People don't lose money over the long term buying homes in places like Greenwich, CT, Scarsdale, NY, or Lake Forest, IL. These are "safe" leveraged investments that will provide you and your family with a nice lifestyle while you are working. They will hold, or increase, their value relative to other real estate.
In summary, I am suggesting not taking big risks with your accumulated nest egg as it will provide a nice fallback position for you 20 years from now. Take the "risk" in your career going for the brass ring. Good luck.
Congratulations to you on your successes up to this point. You are in a wonderful position at the young age of 32. As you know, over the past 80 years, the S&P 500 has returned 7% per year after inflation. With a 6% real return, your money in today's dollars doubles every 12 years. So in all likelihood, you are looking at something like $4 million in today's dollars when you are 56, even if you never contribute another dime to your nest egg. At a 4% SWR, this would provide 160K of income in today's dollars. So long as you are not withdrawing from this nest egg (i.e. you keep working), you don't need to worry about pulling money out of your portfolio in a down market, as we RE's do.
You mentioned you were a TA in graduate school. From this I infer you probably have a graduate degree, maybe even a PhD. With an income of 150K at age 32 , you obviously have talent. You are just entering your prime earning years. My guess is that your career is the source of the "great wealth" you mention. I would focus on this and put your investments on "automatic pilot" in a Vanguard equity index fund.
As your income grows, you might want to consider buying the most expensive home you can afford in a "prestige" location. Homes in nice towns with good schools have been very good investments over the long term. People don't lose money over the long term buying homes in places like Greenwich, CT, Scarsdale, NY, or Lake Forest, IL. These are "safe" leveraged investments that will provide you and your family with a nice lifestyle while you are working. They will hold, or increase, their value relative to other real estate.
In summary, I am suggesting not taking big risks with your accumulated nest egg as it will provide a nice fallback position for you 20 years from now. Take the "risk" in your career going for the brass ring. Good luck.
