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Old 08-28-2021, 11:20 AM   #61
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Originally Posted by willing2try View Post
Inflation in the 70s was rampant. The value of $1M in 1980 is only $3.3M today.
I would take official inflation numbers with a large grain of salt. I can't think of anything from 1980 that is only 3.3 times more expensive than today (other than maybe TVs and electronics).

In the SF Bay Area, housing about 15X, college about 20X, medical about 20X, utilities about 10X, even golf is about 10X.
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Old 08-28-2021, 11:29 AM   #62
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I can't lay my hands on my (mainland) copy of the book right now. I was thinking NW included home equity. YMMV
Ok Thanks.
I thought so too, because I think he said something like most millionaires own a home and have a substantial home equity.
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Old 08-28-2021, 11:46 AM   #63
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When the 'Millionaire Next Door was Written" in 1996 - was he talking about $1 Million Dollars Overall Net Worth (including the House, less mortgage), or was he talking about $1 Million only in Investments and Liquid Assets ??

Because that translates today to around $1.7 Million. So, if being a Millionaire then in 1996 was Net Worth (include the house) - then if you have a $400,000 home with no debt or mortgage, your liquid investment would need to be around $1.3 Million.
The authors consider $1 million (the difference between a person’s assets and liabilities) as the wealth threshold. In other words, millionaire is defined by the authors as Net Worth (including the home equity).

That said, I believe much of the authors' emphasis was more on the concept of wealth accumulation (saving and spending) than solely the acquisition of the eponymous number, as explained further by this cut and paste from Wikipedia:

UAWs versus PAWs[edit]
Under Accumulator of Wealth (UAW) is a name coined by the authors used to represent individuals who have a low net wealth compared to their income. A doctor earning $250,000 per year could be considered an "Under Accumulator of Wealth" if their net worth is low relative to lifetime earnings.[1] Take for example a 50-year-old doctor earning $250,000. According to the authors' formula he should be saving 10% yearly and should have about $1.25 million in net worth (50*250,000*10%). If their net worth is lower, they are an "Under Accumulator". The UAW style is based more on consumption of income rather than on the method of saving income.

A Prodigious Accumulator of Wealth (PAW) is the reciprocal of the more common UAW, accumulating usually well over one tenth of the product of the individual’s age and their realized pretax income.

The authors define an Average Accumulator of Wealth (AAW) as having a net worth equal to one-tenth their age multiplied by their current annual income from all sources. E.g., a 50-year-old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An "Under Accumulator of Wealth (UAW)" would have half that amount, and a "Prodigious Accumulator of Wealth (PAW)" would have two times. This metric has been criticized since,[citation needed] for example, a 20-year-old making $50k a year should have a net worth of $100k to be considered an "average accumulator of wealth". That makes little sense since it would take a new graduate years of strong savings and investments to accumulate that amount. Critics[who?] further argue that formula fails to take into account compounding interest; younger people up to age 45 or so will generally have much less as a percentage of income than older wealth accumulators due to compounded growth.

Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, clothing, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high-net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
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Old 08-28-2021, 11:55 AM   #64
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How long until someone can reissue the book and un-ironically title it, The Billionaire Next Door, or at the very least (for 2021) The Deca-Millionaire Next Door? Ten years? Twenty years? I personally know the two legitimate billionaires in my area (have been to lunch with both), and they are very down to earth. You wouldn't recognize their extreme level of wealth by merely meeting them.

Admittedly reaching the Billion Dollar threshold (the three comma club) is not a level many of us will ever experience, but unless the many "How am I doing so far" posts I have read on this website are BS, Deca-Millionnaire is certainly within reach for some percentage of the participants on this forum.
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Old 08-28-2021, 01:05 PM   #65
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If you are old enough for SS then that is probably true. If you retire then have a bear market right away then you could be in trouble. If you retired in 2010 you could have a 7% WR and still increase your net worth.
Yes, I actually have a hard time wrapping my head around the thought that 4% WR is a worst case scenario and actually takes into account both the great depression of 1929 and the stagflation of the 1970's. In reality my personal WR rate has been below 3% as I have such a hard time psychologically ramping that up.
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Old 08-28-2021, 01:44 PM   #66
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Yes, I actually have a hard time wrapping my head around the thought that 4% WR is a worst case scenario and actually takes into account both the great depression of 1929 and the stagflation of the 1970's. In reality my personal WR rate has been below 3% as I have such a hard time psychologically ramping that up.
We're retired 8 years now and have kept our expenses like the little less than the 3% you mentioned. Last year I decided to BTD and took out 8%, bought a 65k vehicle, and we still are living from last years withdrawal. DW is planning an Icelandic cruise for next year to help spend it. In 5 years I start SS. Our budget for 2014, first full year of retirement, would be covered by our SS.
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Old 08-28-2021, 02:54 PM   #67
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3% works for a long (50 year) retirement even if you have to pay for a full decade of LTC out-of-pocket:

https://earlyretirementnow.com/2021/...eries-part-47/
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Old 08-28-2021, 02:57 PM   #68
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The authors consider $1 million (the difference between a person’s assets and liabilities) as the wealth threshold. In other words, millionaire is defined by the authors as Net Worth (including the home equity).

That said, I believe much of the authors' emphasis was more on the concept of wealth accumulation (saving and spending) than solely the acquisition of the eponymous number, as explained further by this cut and paste from Wikipedia:

UAWs versus PAWs[edit]
Under Accumulator of Wealth (UAW) is a name coined by the authors used to represent individuals who have a low net wealth compared to their income. A doctor earning $250,000 per year could be considered an "Under Accumulator of Wealth" if their net worth is low relative to lifetime earnings.[1] Take for example a 50-year-old doctor earning $250,000. According to the authors' formula he should be saving 10% yearly and should have about $1.25 million in net worth (50*250,000*10%). If their net worth is lower, they are an "Under Accumulator". The UAW style is based more on consumption of income rather than on the method of saving income.

A Prodigious Accumulator of Wealth (PAW) is the reciprocal of the more common UAW, accumulating usually well over one tenth of the product of the individual’s age and their realized pretax income.

The authors define an Average Accumulator of Wealth (AAW) as having a net worth equal to one-tenth their age multiplied by their current annual income from all sources. E.g., a 50-year-old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An "Under Accumulator of Wealth (UAW)" would have half that amount, and a "Prodigious Accumulator of Wealth (PAW)" would have two times. This metric has been criticized since,[citation needed] for example, a 20-year-old making $50k a year should have a net worth of $100k to be considered an "average accumulator of wealth". That makes little sense since it would take a new graduate years of strong savings and investments to accumulate that amount. Critics[who?] further argue that formula fails to take into account compounding interest; younger people up to age 45 or so will generally have much less as a percentage of income than older wealth accumulators due to compounded growth.

Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, clothing, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high-net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth).

https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
Don't forget many of the MND discussed got that way from owning a privately-held business.

So even with a modest salary their business alone was probably valued at over a million, even back then in 1996.
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Old 08-28-2021, 04:27 PM   #69
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It seems 1 million dollars in 2021 is just a foundation. A sigh of relief.
It's only 30 to 40k of annual income but it's enough to survive on in a low cost area.

I like the Costco and REI test. If you can shop at Costco and REI and not worry at all about what you are spending you will need a minimum of 3 million dollars.

Yes 120k of annual income isn't serious wealth but moving forward that 3 million dollars should grow quickly to serious wealth using a 4% withdrawal rate.

This is assuming the tax payer funded stock market casino continues to deliver crazy returns. The amount of new 401k millionaires is going to be crazy.

Housing inflation alone is the real buzz kill if you only have 1 million dollars . lol.
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Old 08-29-2021, 04:59 AM   #70
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True, but there is still a ring to the phrase "a million dollars". It may no longer be worth what it was in past decades, but it still ain't chump change!
Looks like median income in the US in 2019 was $32k or so. (I'm guessing that's for an individual, all ages).

If you say to the average person "$1 million dollars" its 30x what they earn in a year...so yeah, still a lot of money.
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Old 08-29-2021, 05:15 AM   #71
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Originally Posted by ncbill View Post
3% works for a long (50 year) retirement even if you have to pay for a full decade of LTC out-of-pocket:

https://earlyretirementnow.com/2021/...eries-part-47/
There is a lot of great information in that article.

One million is sill serious money. To most that is a number that is a dream.

As far as a WR of 4% I wouldn't know how I personally would want to spend that much money. It wouldn't make me any happier and would cause more stress with owning more stuff. Lol
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Old 08-29-2021, 08:49 AM   #72
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Check out this depressing, yet self-serving to the investment advisors who created it, definition of whether you are a millionaire.

According to 2020 data from Phoenix Marketing International, a firm that tracks the affluent market, 6.71% of U.S. households (or 8,386,508 out of 125,018,808 total U.S. households) have investable assets of $1 million or more.

Note well that to be considered a millionaire by the standards of wealth research, a household must have investable assets of $1 million or more, excluding the value of real estate, employer-sponsored retirement plans and business partnerships, among other select assets.

https://www.kiplinger.com/slideshow/...ire/index.html

According to this definition, the only assets that count towards millionaire status are the ones a financial advisor can charge you a fee to manage. So tough luck to you wannabe millionaires with your paid for home, 7-figure 401k/Sep/Roth, paid for rentals properties, and successful business.
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Old 08-29-2021, 08:55 AM   #73
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Curses! and I thought we were doing ok. oh wait - household - whew. WE are a millionaire.
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Old 08-29-2021, 09:05 AM   #74
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Originally Posted by CSdot View Post
Check out this depressing, yet self-serving to the investment advisors who created it, definition of whether you are a millionaire.

According to 2020 data from Phoenix Marketing International, a firm that tracks the affluent market, 6.71% of U.S. households (or 8,386,508 out of 125,018,808 total U.S. households) have investable assets of $1 million or more.

Note well that to be considered a millionaire by the standards of wealth research, a household must have investable assets of $1 million or more, excluding the value of real estate, employer-sponsored retirement plans and business partnerships, among other select assets.

https://www.kiplinger.com/slideshow/...ire/index.html

According to this definition, the only assets that count towards millionaire status are the ones a financial advisor can charge you a fee to manage. So tough luck to you wannabe millionaires with your paid for home, 7-figure 401k/Sep/Roth, paid for rentals properties, and successful business.
I couldn't read the article. I wonder if "employer-sponsored retirement plan" isn't referring to a pension. I wouldn't think it would be a 401(k) or similar. Yes, companies set them up for empl*yees and they may contribute BUT I wouldn't think they are "sponsored" like a pension. I have no other insight on this as it's simply my opinion. Therefore, YMMV.
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Old 08-29-2021, 09:12 AM   #75
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I've noted this a few times before, but the current concept of a millionaire, especially in regard to various Millionaire Tax schemes, refers to someone with an income of $1,000,000 per year or more.
And there are a lot of them...
A millionaire is someone with a net worth of a million or more. Not sure what “current concept” means.

Lots of sources online, none credibly suggest income is the determinant. Just one https://www.thebalance.com/what-is-a-millionaire-453762
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Old 08-29-2021, 09:17 AM   #76
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The film "High Society" came out in 1956, notably featuring the song, "Who Wants To Be A Millionaire". Using an online CPI calculator, a million dollars in 1956 is roughly equivalent to $10M now. Now, $10M is obviously a good amount of money, but it hardly supports the kind of lifestyle that the song in High Society suggested that it could.

Perhaps the allure of a million dollars being greater than the reality has been the case for longer than we realize?

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Originally Posted by Closet_Gamer View Post
Looks like median income in the US in 2019 was $32k or so. (I'm guessing that's for an individual, all ages).

If you say to the average person "$1 million dollars" its 30x what they earn in a year...so yeah, still a lot of money.
Maybe a million dollars (or even 10 million dollars) can't provide one with flashy flunkies everywhere, a private landing field, a country estate, and a gigantic yacht, as in the film. However, if it can still provide the median US income for an entire retirement, it's definitely worth something.
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Old 08-29-2021, 09:27 AM   #77
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Ok, so I did more research on the 1996 Millionaire Next Door author's numbers. His benchmark of $1 Million dollars Net Worth include the House. He also said most millionaires have homes back then was no more than $300,000. Based on average inflation, that $1 Million benchmark is now around $1.778 Million in 2021.

If you assume a millionaire back then (1996) had a home worth $280,000 and $720,000 in liquid savings (totaling to $1 million); base on inflation, a home like that in 2021 will be worth $498,000, and the liquid savings would be around $1,280,000.
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Old 08-29-2021, 04:21 PM   #78
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The film "High Society" came out in 1956, notably featuring the song, "Who Wants To Be A Millionaire". Using an online CPI calculator, a million dollars in 1956 is roughly equivalent to $10M now. Now, $10M is obviously a good amount of money, but it hardly supports the kind of lifestyle that the song in High Society suggested that it could.

Perhaps the allure of a million dollars being greater than the reality has been the case for longer than we realize?



Maybe a million dollars (or even 10 million dollars) can't provide one with flashy flunkies everywhere, a private landing field, a country estate, and a gigantic yacht, as in the film. However, if it can still provide the median US income for an entire retirement, it's definitely worth something.
10 million dollars is 300 to 400k of annual income = Serious money.
1 million dollars is 30 to 40k of annual income= not serious money.
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Old 08-31-2021, 04:19 PM   #79
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Seems like not that long ago, if you put $1M into one of those "What percent net worth am I" calculators, it would put you in roughly the top 8%. But, I just tried one out, and now it's only the top 11.9%. Of course, that number is going to vary depending on the calculator you use, and I'm sure the data itself could be suspect, but it does show that time, and inflation, do march on.

What is the URL of the one you used?
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Old 08-31-2021, 04:26 PM   #80
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I like the quote of Mark Twain:
"If you have $1 more than you need you are rich;
If you have $1 less than what you need you are poor."
Some things never change....
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