Why so many 40-something millionaires?

[ziggy29]

I'm 45 and through fairly aggressive investing and hefty contributions to retirement plans since I was in my early 20s, I'm getting fairly close to that. Not there yet, but hopefully by the time I'm 50.

And as has been said, a million ain't what it used to be. It's maybe $30K a year with a fairly conservative withdrawal strategy on a 50/50 or 60/40 asset allocation, but not really "living the high life" as many people associate with being a "millionaire."

 

[FIREd]

Reached the first mil in my mid-30s (started working post graduate school at age 27). Income in the 6-figures pretty much from day one, nice pay raises along the way, a smidgen of stock options, living on the frugal side in a low COL area, decent market returns over the past 10 years, no debt beside a smallish mortgage.

 

[FUEGO]

I'll add another echo to the room. I married wisely, saved smartly, invested prudently in low cost tax efficient manners. Focused on the long term. On track to hit the magic $1 million mark well before age 40. And without an all-star income (combined, we cracked six figures a few years ago). I have a couple of kids, but figure they don't really cost that much, and may even save me money.

 

[FinanceDude]

I have a couple of kids, but figure they don't really cost that much, and may even save me money.

Uh..........no...........unless you never let them do sports, take dance lessons, etc.........

 

[Amethyst]

I'd agree that it's a stretch to say young-uns save you money (How do you manage that, Fuego? Rent 'em out to empty nesters? )

Amethyst

Uh..........no...........unless you never let them do sports, take dance lessons, etc.........

 

[FUEGO]

Uh..........no...........unless you never let them do sports, take dance lessons, etc.........

I made that statement very tongue in cheek of course!

But let's just say that different parents have different opinions of what constitutes "things they have to pay for".

And for those things that you do pay for, there are the $50 versions and the $500 versions (dance classes, sports teams, summer camps, swimming lessons/pool memberships).

We get close to $2000 in tax savings per kid. That goes a long way toward our kid expenses. I have never split out kid-related expenses separately from our other household expenses (is it even possible?), but the kid related tax savings represent about 17% of our basic expenses. And a majority of our expenses are fixed (ie wouldn't change significantly due to changes in household size).

And due to some social welfare programs being tied to household size, sometimes having more kids qualifies you for certain programs you otherwise wouldn't qualify for. Not currently benefiting us, but this will probably work to our financial advantage during FIRE or semi-FIRE or if DW or I cuts back hours etc.

Beyond that, there are changes in lifestyle I have noticed since we had kids. Less dining out for a number of reasons. Less free time to need to fill with expensive pastimes. Many kid-oriented activities are free or cheap Off the cuff: playing outside, playing with friends, parent groups, school activities, museums, zoos, fireworks displays, riding bikes, playing at playground/parks, hiking, nature walks, libraries, reading, learning, internet games, watching tv/movies, swimming. And that was just this past weekend!

Philosophically, I think some of the best things you can do for your kids don't cost anything other than your time and attention.

Take note our kids are still young (both will be in elementary school this fall), and so I could be in for a very rude awakening (and I have budgeted for this to a certain degree). But we also live in a moderate income area ("gentrifying area") so our kids don't see lots of spoiled rich kids surrounding them all day (another benefit of living in a moderate cost neighborhood and going to schools with a high proportion of low income students).

 

[FinanceDude]

Beyond that, there are changes in lifestyle I have noticed since we had kids. Less dining out for a number of reasons. Less free time to need to fill with expensive pastimes. Many kid-oriented activities are free or cheap Off the cuff: playing outside, playing with friends, parent groups, school activities, museums, zoos, fireworks displays, riding bikes, playing at playground/parks, hiking, nature walks, libraries, reading, learning, internet games, watching tv/movies, swimming. And that was just this past weekend!

Its just beginning......

Philosophically, I think some of the best things you can do for your kids don't cost anything other than your time and attention.

I agree, and we do the same.

Take note our kids are still young (both will be in elementary school this fall), and so I could be in for a very rude awakening (and I have budgeted for this to a certain degree). But we also live in a moderate income area ("gentrifying area") so our kids don't see lots of spoiled rich kids surrounding them all day (another benefit of living in a moderate cost neighborhood and going to schools with a high proportion of low income students).

My kids are middle and elementary school, and it started getting more expensive when they turned out to be good in sports, and wanted to play them..........YMMV..........

 

[FUEGO]

My kids are middle and elementary school, and it started getting more expensive when they turned out to be good in sports, and wanted to play them..........YMMV..........

So far I think we are safe from that "concern" (if sports ability is inherited or adopted from parents). Of course we also haven't pushed them much in that direction either. For better or worse, we are very apathetic to organized sports in our house. Not that there is anything wrong with watching them or playing them, we just don't spend hardly any time doing either of those activities.

As with any expenditures, we would make an evaluation of what an activity costs and what benefits it would bring, and whether there are similar activities or parallel service delivery options that provide a better value proposition.

We are lucky to have a great local parks and rec program (that our miniscule property taxes support), and there are so many programs, classes, camps, and athletic options available to youths and adults for almost nothing. Like my oldest daughter's summer camp that costs $20 a week.

 

[bbbamI]

(snip)Seems like a lot of the "can I retire?" threads on ER/Bogleheads-type sites read something like..."we're 40 and have $1 million in invested assets...can we/when can we retire?"

When I see those types of threads I just close them and move on...something psychological about feeling behind I guess ...but I suppose trying to keep up with the savers is better than trying to keep up with the spenders...

There are several ways folks can be successful at a young age as many forum members have pointed out on this thread.

But there's another reason...this is the internet and you are discussing topics with a group of strangers. Tread carefully.

 

[LOL!]

Its just beginning......

I agree, and we do the same.

My kids are middle and elementary school, and it started getting more expensive when they turned out to be good in sports, and wanted to play them..........YMMV..........

Yep, our mileage did vary. Our kids did music lessons, art lessons, sports, and more sports. AAU sports, private coaches, traveling teams, sports camps, tech camps, sailing camps, debate camps, whatever. It turns out that in our area they are so prevalent that it does not cost that much.

Also a summer vacation to grandma's can tack on a camp the week before, so one can go to a place like Coach K's Duke Basketball camp without the travel costs because you were going to RTP anyways.

And then your kid gets a shoe contract, so at least the shoes are free.

In all this spending on kids, most of the parents were trying to keep the costs down, but some were profligate. Do you really need to play in that tournament in Hawaii? Well, only if you go to Hawaii each year anyways. If you aren't sending your kids to private school, then you might have some money for these things.

 

[Rustward]

There are several ways folks can be successful at a young age as many forum members have pointed out on this thread.

But there's another reason...this is the internet and you are discussing topics with a group of strangers. Tread carefully.

+1

 

[haha]

In certain cities many young people have quite a bit more than $1mm, from stock options in tech companies.

Ha

 

[MrEd]

Two Million+

A million isn't very much these days.

A couple of comments posted on the thread along these lines.

According to the Federal Reserve ~6% of the population are millionaires excluding home value. That means ~94% are not.

Now that is a significant meaningful number.

A yield of 5% in the bond market means that you make 50,000$ before getting out of bed every year.

I made my money through equity investing. Lucky-maybe? Smart-maybe?

But lucky or smart it is the same result.

 

[DoraM]

Not there yet, but could have been if I had discovered this site about 15 years ago.

We are 40 and 41 with about 700K invested and now saving around 90K additional each year. Should hit 1M by 45, which will be a bit late by this board's standards, but we bought a lot of stupid stuff in our late 20s early 30s. Now LBYM extreme (no cable or cell phone!).

 

[W2R]

I'm not 40... I'm almost older than Methuselah (I'm 63) and in real life, I look my age and more. Sometimes I even feel my age and more.

I wasn't a millionaire in my 40's. Guess I am a little behind the curve on this one. Do I care? Nahhh..... I'm having too much fun.

 

[traineeinvestor]

I/we got lucky:

A combination of living at home, scholarships and part time jobs saw me graduate from university with no debt and a very small positive net worth.

Moving to Hong Kong early in my career and benefitting from moderate tax rates combined with a LBYM lifestyle resulted in good financial progress from my mid twenties to early thirties.

Things accelerated in my early thirties when my income increased significantly - I moved from making a good income to making a very high income. Living costs also went up a lot, but not nearly as fast as my income.

We started investing in Hong Kong property with leverage around the time of the SARS epidemic (which was the low point). Even if prices were to drop by 20% or more from current levels, it would still be a good move.

I changed jobs in early 2009 and received a meaningful lump sum payment from my old employer. Almost all of that payment (+ what I was saving from the new job) went into the stock market in the first half of 2009. Not quite the bottom, but close enough.

Lots of expensive and cringe-worthy mistakes along the way, but the things that went right for us were much more significant than the things that went wrong.

 

[Nords]

I'd agree that it's a stretch to say young-uns save you money (How do you manage that, Fuego? Rent 'em out to empty nesters? )

In addition to everything Fuego already mentioned, think of the DINK entertainment alternatives that parents miss out on:
- frequent golfing or SCUBA diving or other cash-heavy hobbies
- bar-hopping or dining out whenever you feel like it
- weekend trips to anywhere/everywhere
- serial home remodeling & landscaping

Agreed, all of these activities can be done with kids, or none of them can be done because you're LBYM, but "no kids" opens up all sorts of spending opportunities.

Before we all start moaning & griping about the cost of sports and lessons and tutoring and whatever else we spend our parenting money on: think of them all as part of the college fund, and the experience as some sort of academic or physical preparation. My daughter and I spent thousands of dollars getting our taekwondo black belts, but there wouldn't have been any other way to spend so much time together in class and tournaments and in the car-- talking and mentoring. She didn't just learn how to memorize and kick & punch; she learned how to get back up after being knocked down. We spent more thousands of dollars on Kumon math tutoring (although the instructor eventually paid it back to her in salary) which led directly to a top college and years of work experience. She knows she already has the skills to never go hungry again because she's done the work alongside other adults.

Otherwise we raised her on Goodwill, garage sales, and eBay. We saved the big bucks for the important stuff...

 

[easysurfer]

Some keys:

1) LBYM

2) Invest early - let the magic of compounding work for you

3) Don't raid your 401K, IRA

4) Be careful where you walk with your hard earned money (stay away from stepping into poop)

The last one I thought of the other day as I was walking fido

 

[Meadbh]

The age at which a large number of people become millionaires depends not only on their earnings and lifestyle, but on the era and the country in which they live. For example, 40 years ago the quickest place to be a millionaire at a young age would have been Italy (in the days of the Lire)!

I hit $1m in 2005 when I was 48. I was close in 2004 and would have hit it anyhow but an inheritance put me well over the top. I am a high earner and was passably LBYM. Ironically, I have become more LBYM since then, because I could see my way to FIRE. Now I'm FI but not RE...yet.

 

[ikubak]

Hit millionaire status at 48 by doing the boring things:

LBYM
Save approximately 25% of earnings
One kid
paid off mortgage and all other debts by age 40


FI but still working

 

[WestLake]

I make a modest salary so when you are in that position you have to forget about what others think about your strange frugal lifestyle.

I bought eleven (10 single family 1 duplex) over the last 27 years on 5 to 7 year notes. Large payments but large rewards. I have done much of the painting myself. Bought in a close in neighborhood with good but largely undiscovered schools. I knew it would be discovered but it took time. Going from boho to yuppie.

Also worked in same job 25 years maxing out 401K and recently Roth.


1st million early 40s 2nd late 40s now close to 3 at 53.

 

[PaddyMac]

We made good money thru our 40s but living in So. Cal. made it hard to save much of it. Cashing out of a nice home in 2008 with lots of equity and moving to a cheaper state has helped our portfolio hit that magic number recently, but we still have a long way to go before we'd be comfortable retiring.

 

[Danmar]

When I separated from first wife at 42 I had a negative net worth with virtually no assets other then my future earnings potential. Lived an extreme LBYM lifestyle for about 5-7 years before things took off with career. Probably over $1million around age 47. Multiplied that 10 fold over following 7 years or so through equity awards at work and continuing with LBYM ,although now high spending lifestyle. retired at 56.

 

[chinaco]

People on this board are abnormal in that sense... they are not a reflection of the general population.

There have been some fundamental changes in the US over the last 30 or 40 years that has made it (more) possible for people to acquire money and personal wealth.

1. More college educated people that earn more money in their lifetime.
2. I will call it "Womens' Lib" for those of us from a different time. This societal change led to more women seeking college educations and working as professionals in the work force.... Two College educated professionals can earn a good living.
3. LBYM + 2 High Incomes + Saving and Investing Earlier in life.
4. Using a tried an true investment approach with the power of compounding.
5. Limit the use of debt (to homes and cars). Once once becomes able get out of debt completely.
6. If small windfalls (of money) happen you way through life, save and invest it instead of spending it.
7. Don't try to live like the "Jones'"... this is a variant of LBYM.
8. The advent of IRAs and 401k.... plus the increase in availability of ways to invest... (e.g., more mutual funds, ETFs, discount brokerages)... that cater to the general public.
9. Some also have pensions and/or employer contributions on top of their personal savings.... just another form of deferred compensation.
10. Good Health (that did not put a huge financial burden on the family)
11. Continuing to work until FI.

However, all of the items in the list above are things that either made it possible... many of them still required one to use them and stick with it over many years.


There are some people that got big inheritances or were lucky with stock options in the 90's and later.

 

[traineeinvestor]

People on this board are abnormal [-]in that sense... they are not a reflection of the general population[/-].

Fixed that for you.

I agree with your list. The major addition is the more widespread knowledge of good personal finance practices (nothwithstanding the Suze case studies etc).

I suppose the follow up question is whether it is getting harder to accumulate wealth or easier. The decline of DB pensions, rising college costs etc must have an impact on a sizeable portion of the population?

As an aside, the equivalent changes we are seeing in the developing world are even more dramatic - the sheer number of people around the workd who are joinging the middle class is staggering.