When a Million Dollars was serious wealth

[teetee]

Given that 4% is often quoted safe withdrawal rate, anyone who has $40k of income from wages, social security & pension, or whatever source, is living like a millionaire, whether they know it or not.

I think that is the reason why many consider $1m is no longer enough in several parts of the US especially for FIRE during the gap between current age and when the SS/pension kicks in.

It may be difficult to relate for people like me who spend peanuts (e.g. 6k / yr) to get by but I start to believe some live in HCOL area that 40k annual expenses figure is probably without food or transportation.

 

[purplesky]

Given that 4% is often quoted safe withdrawal rate, anyone who has $40k of income from wages, social security & pension, or whatever source, is living like a millionaire, whether they know it or not.

I think the idea is about living the millionaire lifestyle. Serious wealth is not $40k a year. But $40k is enough to live on being frugal in flyover country.

A serious money millionaire lifestyle in 2021 is first-class travel, A ski condo at Park City or maybe Breckenridge, A Tesla or maybe a Porsche, golf membership, maybe a boat, and a million dollar residence. $10k bicycle lol

It's about affording luxury without touching your huge army of dollars that delivers high income to live a serious money lifestyle.

No happiness guaranteed! With stuff you don't really need.

Obviously the millionaire next door used delayed gratification and great income to achieve serious wealth and doesn't want or need the lifestyle mentioned above.

This multi-millionaire might live in Littleton Colorado or Salt Lake City Utah and you would never know they have millions of dollars of net worth.
But a luxury life is expensive and connecting the dots is not hard.

 

[athena53]

Given that 4% is often quoted safe withdrawal rate, anyone who has $40k of income from wages, social security & pension, or whatever source, is living like a millionaire, whether they know it or not.

I've trued mentioning that to my friends who have public pensions- that a $40K/year annuity would likely cost $1 million at age 65 so a public pension amount would make someone a millionaire.

They really don't like that because, you know, millionaires are evil people who accumulated their wealthy by lying, cheating and exploiting the masses.

 

[purplesky]

I've trued mentioning that to my friends who have public pensions- that a $40K/year annuity would likely cost $1 million at age 65 so a public pension amount would make someone a millionaire.

They really don't like that because, you know, millionaires are evil people who accumulated their wealthy by lying, cheating and exploiting the masses.

There is evidence of wall street Financial engineering which involved lying and cheating and exploiting pension funds. It’s crazy to think about how much wealth Has been created on Wall Street thanks to all the public pension funds.

So did your public worker friends contribute out of their paychecks directly into their pension fund during their working career?

I know several teachers and they contribute to their pension fund.

 

[athena53]

So did your public worker friends contribute out of their paychecks directly into their pension fund during their working career?

I know several teachers and they contribute to their pension fund.

It almost doesn't matter- if their employers contributed, it probably meant they were getting less in their paychecks. Either way it was part of their pay put aside for their retirement and is likely to be a million-dollar asset even if it's not sitting in a brokerage account with their name on it.

And yes, some awful things are going on/have been going on with pension funds. I really feel for the retirees who end up getting their pensions slashed AFTER retirement. One of my neighbors had that happen twice- they had to sell their house.

 

[Koolau]

It almost doesn't matter- if their employers contributed, it probably meant they were getting less in their paychecks. Either way it was part of their pay put aside for their retirement and is likely to be a million-dollar asset even if it's not sitting in a brokerage account with their name on it.

And yes, some awful things are going on/have been going on with pension funds. I really feel for the retirees who end up getting their pensions slashed AFTER retirement. One of my neighbors had that happen twice- they had to sell their house.

No expert here but have not heard of public pensions defaulting without a backup. Is that common? Are the public pensions not a part of the PBGC (or an equivalent)? That would be a bummer.

 

[Koolau]

I think that is the reason why many consider $1m is no longer enough in several parts of the US especially for FIRE during the gap between current age and when the SS/pension kicks in.

It may be difficult to relate for people like me who spend peanuts (e.g. 6k / yr) to get by but I start to believe some live in HCOL area that 40k annual expenses figure is probably without food or transportation.

I don't recall your intro, but am somewhat amazed if I'm reading this correctly. You "exist" (all in) on $6K/year? I think that might be the record here though It's been a long time since we've had a thread on that topic. Just curious so no reason to respond to my curiosity (nosiness!)

 

[Dash man]

Being able to give away more (to charity, family) than I ever made in salary, without it affecting my lifestyle, gives me a great deal of gratification in retirement. The generous market gains have made it possible and I don’t know if I’ll be able to keep it up, but it feels good.

 

[Koolau]

Being able to give away more (to charity, family) than I ever made in salary, without it affecting my lifestyle, gives me a great deal of gratification in retirement. The generous market gains have made it possible and I don’t know if I’ll be able to keep it up, but it feels good.

I agree. I (apparently) over saved for FIRE and the benefit has gone to family and favorite charities. "Luxuries" don't seem to appeal to me all that much but, compared to my parents, I would say I live a "luxurious" life (travel, HCOL location, FIRE, etc.)

 

[street]

Being able to give away more (to charity, family) than I ever made in salary, without it affecting my lifestyle, gives me a great deal of gratification in retirement. The generous market gains have made it possible and I don’t know if I’ll be able to keep it up, but it feels good.

Absolutely agree!!

 

[teetee]

I don't recall your intro, but am somewhat amazed if I'm reading this correctly. You "exist" (all in) on $6K/year? I think that might be the record here though It's been a long time since we've had a thread on that topic. Just curious so no reason to respond to my curiosity (nosiness!)

I am single with a full time job and have been living with my grandfather to care for him since COVID started.

Last year my overall income tax was 25k. By working from home with lots of company sponsored expenses for home office, I would say my true living expense is probably slightly over 8k in 2020. It is more of getting reimbursed and shut-in living style (I definitely don't want to transmit the virus to a 97 yr old relative) rather than me intentionally becoming more frugal.

My major living cost was food and car insurance. I would say it is more of situation change because of COVID and elderly relative that caused my new normal.

 

[purplesky]

It almost doesn't matter- if their employers contributed, it probably meant they were getting less in their paychecks. Either way it was part of their pay put aside for their retirement and is likely to be a million-dollar asset even if it's not sitting in a brokerage account with their name on it.

And yes, some awful things are going on/have been going on with pension funds. I really feel for the retirees who end up getting their pensions slashed AFTER retirement. One of my neighbors had that happen twice- they had to sell their house.

The pension at my mega-corp is probably equal to a $1.25 million portfolio producing a 4% payout as long as I live.
I never expected our pension to survive or still be here in 2021.

Many of my retired coworkers seem to pass away sooner than later and do not collect much of their pension.

My plan is to live long and prosper and collect as much of the $1.25 as possible. lol

 

[camfused]

My dad used to be an aircraft mechanic. Years ago, his union did a study: the average union retiree (at that time) withdrew 19 pension checks before they died. Sad. Thankfully, he had a 31 year retirement.

Yeah, I am in the retire as soon as you can and try to last as long as you can, camp.

 

[Romer]

That is similar to a study I saw 20 years ago for Engineers where I work. Not sure of the accuracy, but they had a graph is you retired at age 65 then it showed 18 months of average life expectancy. Those who retired earlier had longer lives. The thought at the time around the water cooler is those we knew that had passed shortly after retirement really had no other identity than work. That inspired me to make sure I had hobbies and other things that defined who I am.

 

[Yipper]

Agree with this completely. I make almost double what my expenses (Taxes included in that value) are and that I continue to plan on spending post retirement next January. About a third of that is taxes mostly at 24% plus 5% state, FICA and medicare. another good portion is my maxed out 401K contributions then another significant portion is what I put into savings so I can retire.

Now I get to eliminate many expenses like eating in the megacorp Cafeteria, 45 miles (roundtrip) of commuting 5 days a week and a few more misc

Since I have essentially 5 weeks of vacation every year due to my years of service my wife and I have made big expensive trips a priority to Australia, Europe in Business class etc. And I am already funding my hobbies just don't get to do them as much as I like. And just to be sure I can enjoy retirement, I planned another $20K of expenses in the "lets just go do stuff" category. so my planned expenses to achieve a better lifestyle are still almost half of my income

Back to the original topic. I always thought $1M was a lot of money and it is. Raising kids and putting them college it took me until 53 (kids then gone) to have a net worth of $1M, 56 $2M and 59 $3M. This does include property for the classic definition. Got to love compounding earnings. If I wanted to work a couple more years I would be at $4M and the path I was on was to work 2 more years. THEN I did the numbers I figured out I could have retired last January and maintained the same lifestyle for the next 45+ years so I decided that increasing wealth wasn't important once you had enough to meet all your goals. Living life was more important once that happened. The main reason I am waiting until 1st week of January 2022 is Health Care and I also want to make a good transition to the person I hired to replace me. I have a lot vested in this company and this current project which I have taken from a powerpoint design to building an actual spacecraft and want it to succeed after I am gone.

If you are trying to guess the 4% calculation for me (I know someone is ) I also have a pension which makes it easier for me or I likely would have worked another few years

On the flip side. My older relatives now gone never had even $500K, some $200K and lived happily but frugally for a long time. Money isnt the end all for retirement happiness. It just makes it easier

I *love* this post. Spot on. "Money isn't the end all for retirement happiness. It just makes it easier".

 

[athena53]

No expert here but have not heard of public pensions defaulting without a backup. Is that common? Are the public pensions not a part of the PBGC (or an equivalent)? That would be a bummer.

The defaults and "haircuts" I've heard of have been public plans- the city of Detroit, for example, and my neighbor who was in a railroad retirement plan.

PBGC does cover private plans up to pretty generous levels, but the Infrastructure Act included a bailout of the Multi-Employer Plan program for PBGC. YRC's HQ is in my neck of the woods and they participated in a Multi-Employer, plans, many of them other trucking companies. Many of the trucking firms have gone belly-up but their retirees live on and the remaining viable firms, including YRC, don't have the $$ to fund the whole shortfall.

 

[Koolau]

I am single with a full time job and have been living with my grandfather to care for him since COVID started.

Last year my overall income tax was 25k. By working from home with lots of company sponsored expenses for home office, I would say my true living expense is probably slightly over 8k in 2020. It is more of getting reimbursed and shut-in living style (I definitely don't want to transmit the virus to a 97 yr old relative) rather than me intentionally becoming more frugal.

My major living cost was food and car insurance. I would say it is more of situation change because of COVID and elderly relative that caused my new normal.

Thanks for the update. Blessings on you for taking care of your grandfather!

 

[Koolau]

The defaults and "haircuts" I've heard of have been public plans- the city of Detroit, for example, and my neighbor who was in a railroad retirement plan.

PBGC does cover private plans up to pretty generous levels, but the Infrastructure Act included a bailout of the Multi-Employer Plan program for PBGC. YRC's HQ is in my neck of the woods and they participated in a Multi-Employer, plans, many of them other trucking companies. Many of the trucking firms have gone belly-up but their retirees live on and the remaining viable firms, including YRC, don't have the $$ to fund the whole shortfall.

Thanks for the update. I do feel sorry for folks who worked a life-time and trusted that they would receive a pension, only to be left high and dry. My Megacorp's pension always published a yearly "status report" (for want of a better term.) It always showed that we were reasonably well funded. Of course, the company could have made up for any short fall in any case. It made planning a lot easier. YMMV

 

[jayanu]

If you don't have a superyacht with a helipad on it, you're not really that impressive any more.

I agree.
I know someone who has no kids and has $14 million and he loves his money - He thinks he is smart and rich and does not want to donate any money. Did not even convert to Roth and has 3.4Million capital gain (high tax if he sells it), and keeps $1M in cash, pays $25K in fees for IRA management but he decides what to buy/sell.

I feel sorry for him.

 

[Out-to-Lunch]

I agree.
I know someone who has no kids and has $14 million and he loves his money - He thinks he is smart and rich and does not want to donate any money. Did not even convert to Roth and has 3.4Million capital gain (high tax if he sells it), and keeps $1M in cash, pays $25K in fees for IRA management but he decides what to buy/sell.

I feel sorry for him.

“The sparrow is sorry for the peacock at the burden of its tail.”

― Rabindranath Tagore

 

[lucky penny]

“The sparrow is sorry for the peacock at the burden of its tail.”

― Rabindranath Tagore

Love this. Thanks!

 

[jayanu]

“The sparrow is sorry for the peacock at the burden of its tail.”

― Rabindranath Tagore

That would be true if I did not have similar assets, then I will be a sparrow!

 

[ncbill]

I agree.
I know someone who has no kids and has $14 million and he loves his money - He thinks he is smart and rich and does not want to donate any money. Did not even convert to Roth and has 3.4Million capital gain (high tax if he sells it), and keeps $1M in cash, pays $25K in fees for IRA management but he decides what to buy/sell.

I feel sorry for him.

If I had $14 million I would hope I'd be smart enough not to let the people around me know...

 

[jayanu]

If I had $14 million I would hope I'd be smart enough not to let the people around me know...

Funny thing. He wanted my advice. But in the end, he did not take any of it anyway. He is happy with his old ways and I am happy that I showed an alternative to save money and avoid higher taxes. After all, it is his money and his life. I am happy that Govt will get the money will go for the public good (wisely or unwisely!)

 

[RetiredHappy]

I agree.
I know someone who has no kids and has $14 million and he loves his money - He thinks he is smart and rich and does not want to donate any money. Did not even convert to Roth and has 3.4Million capital gain (high tax if he sells it), and keeps $1M in cash, pays $25K in fees for IRA management but he decides what to buy/sell.

I feel sorry for him.

He has money and can do with whatever he wants to do. He is happy in his world, nothing to feel sorry for him about. He does not need to convert to ROTH since he can afford to pay taxes on his IRA at the top IRS bracket. No need for him to plan on tax reduction/avoidance.