Poll: What is your definition of wealthy as defined by Annual Withdrawal Rate?

[Franklin]

just read my signature tag line.

 

[Physics Guy]

I don't get it either. "Wealthy" is not generally a behaviour-based term, which OP's example tries to make it.

I sort of understand where the OP is coming from. It can be interesting to discuss the interplay of net worth, spending, and feelings of relative wealth (used because the OP did and for lack of a better term). On the other hand I think making wealthy a behavior based term is a very bad idea. Wealthy has connotations of excess. Money enough to cover needs, wants, and even every whim. Wealthy has implications of having too much.

In both online and in person discussions I've run into the idea that someone who has 600,000, a pension, and lifestyle spending well below their income is morally wrong because they have so much more than the average person. It is partially a selfish desire as that description isn't too far from my own situation but I would keep to think that there is a moral difference between a person in that situation and someone who has $50 million.

 

[Theophrastus Bombastus]

For me, it was quite amazing when I found that I didn't need or want to withdraw and spend a full 3.5% each year. Most years I withdraw between 0.5%-1.5% instead, and leave the rest in my nest egg. Because of that, my nest egg keeps growing.

Each year, I decide to spend more than in previous years and I do; but since the nest egg keeps growing each year, it's still a small percentage. It's as though I got over a "hump" and now all is golden.

So, I think my definition of wealthy as defined by Annual Withdrawal Rate, is when I can't possibly spend more than 1.5%. At that point it seems that I will always have more than enough.

Thank you for your response. I have been retired nearly a decade. Due to life circumstances changing, I have become more of an introspective minimalist, realizing a lot of 'wants' are not 'needs.' In fact, many of those 'wants' aren't even desirable anymore. As a result, this has drastically changed my long held 'planned for' AWR. It has also improved my overall quality of life and health. I do not do without, spend as I wish and my net worth keeps rising every year. I could spend a multiple of what I am spending without concern, yet I have no desire to squander the hard earned money saved and invested over decades. It is, as you said, like getting over an invisible hump.

 

[Exchme]

I sort of understand where the OP is coming from. It can be interesting to discuss the interplay of net worth, spending, and feelings of relative wealth (used because the OP did and for lack of a better term). On the other hand I think making wealthy a behavior based term is a very bad idea. Wealthy has connotations of excess. Money enough to cover needs, wants, and even every whim. Wealthy has implications of having too much.

In both online and in person discussions I've run into the idea that someone who has 600,000, a pension, and lifestyle spending well below their income is morally wrong because they have so much more than the average person. It is partially a selfish desire as that description isn't too far from my own situation but I would keep to think that there is a moral difference between a person in that situation and someone who has $50 million.

Some scary people you hang out with. The immorality is for such people to think they can sit in judgment and it's a sign of societal decay not to scorn and deride them and make them slink back under the rock they slithered out from.

 

[COcheesehead]

This thread should be restarted. The question changed, a poll was added…. It won’t make sense anymore for continuity.

 

[Physics Guy]

The new topic / question is one that has always bothered me. As a very soon to be early retiree I don't have SS or a pension. But I do have income in the form of various capital gains, dividends, and so forth outside of retirement accounts.

Should I think in terms of this highly variable income? Is there some reason that this type calculation makes more sense than an approach based on a more or less fixed number (initial ratio adjusted for inflation)?

 

[rodi]

The new topic / question is one that has always bothered me. As a very soon to be early retiree I don't have SS or a pension. But I do have income in the form of various capital gains, dividends, and so forth outside of retirement accounts.

Should I think in terms of this highly variable income? Is there some reason that this type calculation makes more sense than an approach based on a more or less fixed number (initial ratio adjusted for inflation)?

There are a lot of different retirement withdrawal strategies. Some have a fixed withdrawal rate based on initial, some withdraw a percentage of current nest egg, some are variable based on a variety of factors. If you took a poll here you'd find very few members doing the rigid percentage withdrawal based on initial nest egg size adjusted for inflation. If only because of market gains and nest egg growth.

 

[NW-Bound]

I don't know how to define "wealthy", but my WR for the last 12 months is less than 1%.

I cannot guarantee that it will stay that low. I may want to get a toy, or go on a world cruise, and will need to fund it. I just don't know when that will happen.

 

[Gumby]

I can afford to buy what I want, when I want. It just so happens that my wants are few. Am I wealthy? I have no idea.

 

[Out-to-Lunch]

Not sure exactly what my comment was triggered by, but this discussion puts me in mind of the aphorism (that is accurate, I believe, for me):

You can have anything you want, but you cannot have everything that you want.

 

[Keim]

I love this board. I have gotten so much from it. But, occasionally when we start defining wealth y'alls bubble show. The average American has about 50k saved by age 50. Professional investors call a person with $1m in liquid investable assets a High Net Worth individual.

Some of the amounts listed up thread are... Wow.

 

[chris2008]

Knowing that nobody can fire me.

Comfortably living on DH's pension till my p. will start in 2 years.
Having saved more than enough to pay for extras.

 

[daylatedollarshort]

Pensions and SS cover most of our annual expenses so our withdrawal rate is close to zero, though it would be higher if we had a big expense year like a new car or multiple house projects.

In our HCOL area we aren't poor but aren't wealthy compared to many of our friends and neighbors. In the economically depressed factory town I grew up in, we would be considered pretty well off. I feel like we are comfortable. After growing up in a paycheck to paycheck household where every car repair or broken water heater was an existential financial crisis, it feels good to not have to worry about those kinds of expenses.

 

[Bryan Barnfellow]

I think my wife and I have some degree of "wealth" when measured comparatively. But objectively we don't feel wealthy. Living in Switzerland robs one of that feeling quite quickly anyway!

-BB

 

[Badger]

I can afford to buy what I want, when I want. It just so happens that my wants are few. Am I wealthy? I have no idea.

+1 Material wants are few but if it were possible I would trade for fewer medical issues.

I have also been living at the beach for the past 50 yrs. I have not always made good choices but enough that it worked out. I guess I was lucky.


Cheers!

 

[mrfeh]

I disagree with the premise. Withdrawal rate has no relationship to wealth.

 

[marko]

Our family has been wintering in Fort Lauderdale since the 50's; wealth?! It is the land of $50MM homes and $100MM yachts for miles and miles. (not us but it's all nice to look at)

But I've always maintained that a third of what you see here is real wealth, a third is one sleepless night away from bankruptcy and a third are outright thieves with absolutely no intention of paying for any of it. Over the years I've seen it first-hand here.

I think wealth is more a mindset than a number or a W/D rate. Generational wealth perhaps captures it.

Or more like many here where the bills get paid and the money comes in regardless; a level of insulation.

Wealth sits in a First Class seat because it never entered his mind to sit anywhere else; "rich" sits there on miles.

 

[levindb]

...are you wealthy if you are living off of SSA benefits and pensions?
...are you wealthy if you spend less than other people?
...are you wealthy if you are living off of your reverse mortgage?
...are you wealthy if you are living with your parents?
...are you wealthy if you are living with your children?

Sorry, I am not sure I can equate wealth and withdrawal rate...even if I squint real hard, I just cannot see it.

 

[pb4uski]

WADR, this is a silly poll.

If someone has $100m and withdraws $1.5m/year for spending then their WR is 1.5% and the are wealthy.

If someone has NO retirement savings and lives on SS and/or pensions then their WR is 0% and they are wealthy too.

Is the person with no retirement savings wealthier since their WR is lower? Silliness.

 

[athena53]

But I've always maintained that a third of what you see here is real wealth, a third is one sleepless night away from bankruptcy and a third are outright thieves with absolutely no intention of paying for any of it. Over the years I've seen it first-hand here.

Yep. My Ex put on a really good facade (not at the level you describe, although he did own a $7,000 Jaeger-le-Coultre watch), didn't have a dime saved and his credit cards were all maxed out. He scoffed at the banks wanting him to pay what he owed. They were, eventually- out of his share of the equity in the house when we divorced. He died penniless.

I'm the opposite- my assets keep growing despite lavish spending on travel, charity and my grandchildren's 529 accounts- but if you saw me in Costco on a random day you'd never know it.

My definition of wealthy, which I read somewhere, is that your grandchildren won't have to work for a living. I won't get there and that's OK.

 

[Bigdawg]

Marko,

I love this ...

Or more like many here where the bills get paid and the money comes in regardless; a level of insulation.

Wealth sits in a First Class seat because it never entered his mind to sit anywhere else; "rich" sits there on miles.

We usaully book economy, upgrade to either economy plus or business/first with miles/points. So (sorta) rich? Definately not wealthy.

Our pensions (military) pay all the bills; a level of insulation? Yes

 

[HawkeyeNFO]

An individual with an investable net worth of $50 million, but an opulent lifestyle (including taxes) that costs $5 million per year is NOT wealthy IMHO - assuming no other sources of income, except the net worth - as the AWR is 10%.

I call BS. That person is quite wealthy. And foolish.

 

[Gumby]

Looking at the poll results so far, we appear to be a rather parsimonious crowd. Sorry, Robbie.

 

[MarieIG]

Based upon OP's premise: 1% or less.

 

[explanade]

But what is that WR covering?

If it's housing, food, health care and a few other necessities, is it wealthy?

Or a person could have a low WR but still have a considerable discretionary budget. Or really not worry about a budget at all for necessities.

Most of the people here can choose their WR. I think also most people did simulations and are satisfied that they can cover most of the things they'd want to spend on while their assets will last through the rest of their lives.

I've seen very little indications that a lot of people on ER wish they could withdraw more or that they're just getting by and missing out on some things because they didn't have enough.

Especially after the market returns of the last 10 years.