When Is A Retiree Considered Wealthy?

[street]

I knew I shouldn't have opened this thread. It's bad enough reading posts from those with $6-8M net worth and wondering if they can retire in their mid-to-late 50s. Ugh.

I have a hard time believing that 1 in 100 households have a net worth (assets minus debts) of at least $16.7M. That's just depressing.

If I may ask why is that depressing to you?

 

[ls99]

The house I was born in and grew up. Slightly more improved now than in 1947
Compared to that era, am wealthy beyond belief.
Kind of gives clue to my attitudes.

 

[aaronc879]

I appreciate the effort he put into his video, and if he is an investment advisor, I can understand his focus on net worth, as he has an interest in getting to invest that money. But I think it would be a mistake to entirely disregard income. If a 65 year old married household had two secure pensions totaling $150k per year, they could live a pretty darned good life, even if they had minimal net worth. Especially if they also have social security coming in.

My Aunt lives better than anyone in my family ever has and she retired with a low 5-figure net worth. What she had in addition to that is what made her well off. She had a Cola'd pension worth around $100K/yr in today's dollars. Later she added in SS which she doesn't need. She now has over $100K in the bank and doesn't know how to spend all her money. She helps her Sister who would otherwise live on just $800/mo from SS. It's nice to help when you can, wish I could. I agree net worth isn't the only factor to consider. Pensions can be worth a whole lot per month.

 

[COcheesehead]

Well if this is a case then the net worth number does not mean much correct? Because the home equity is hard to realize and home owners may look wealthy on paper. Especially if someone is living in very high cost of living area where any home worth more than $1M.

The value within your home, the equity, will be realized one way or another. By you, your surviving spouse, your heirs or your charities.

 

[COcheesehead]

My Aunt lives better than anyone in my family ever has and she retired with a low 5-figure net worth. What she had in addition to that is what made her well off. She had a Cola'd pension worth around $100K/yr in today's dollars. Later she added in SS which she doesn't need. She now has over $100K in the bank and doesn't know how to spend all her money. She helps her Sister who would otherwise live on just $800/mo from SS. It's nice to help when you can, wish I could. I agree net worth isn't the only factor to consider. Pensions can be worth a whole lot per month.

My Dad had a union pension, social security, a paid for house and about $40,000 to his name in retirement. He traveled, ate out a lot and enjoyed life. The last year he was in assisted living and we had to resort to liquidating his assets. His wife needed to live in the house so that was off limits. He died with less than $5000 to his name. Cashflow is one thing, having other assets is another. Net worth matters.

 

[Alex The Great]

The value within your home, the equity, will be realized one way or another. By you, your surviving spouse, your heirs or your charities.

You forgot to add: or your county

 

[USGrant1962]

You forgot to add: or your county

And state and country depending on your inheritance/estate tax situation.

 

[COcheesehead]

You forgot to add: or your county

LOL, that thought crossed my mind too.

 

[whatnot]

We’re right at $3.2 M investable assets. This sure isn’t what I think of as wealthy.

We are in this same situation and I had the same exact thought last night when I read the article.
We do not feel wealthy. We drive 9 and 6 year old vehicles. We do take 1 European vacation and 1-2 small long weekend trips a year. But, not 1st class air, more like Comfort +. Hotels are in the 3* category.
No complaints we live in a nice house in a nice neighborhood. But definitely feel middle class or maybe upper middle class.

 

[oldtimer]

I guess I'll believe the numbers (percentile rankings) but I just don't feel wealthy. Never had any jet's, yachts, mansions, etc. Just a 2000sq ft home sitting on a little land with a few vehicles.

Same here. We have not yet reached the level of "Lifestyles of the Rich and Famous".

 

[COcheesehead]

All the comments about not feeling rich at $3.2m makes me wonder if some are out of touch. My sister has $300k and feels like a millionaire. Seriously, you have $3.2m, but you don’t have a jet or fly first class? That’s the line in the sand? I have more than $3.2m, but feel incredibly fortunate that I can do what I want, give what I want and wake up everyday without a worry about money.

 

[Gumby]

To be fair, if we employ the 4% standard, a $3.2 million nest egg can generate only $128k per year. Around here, at least, that's fairly middle class. As of 2021, median household income for a household headed by a 45-64 year old in Connecticut is $104,155. https://www.incomebyzipcode.com/connecticut

 

[GenXguy]

All the comments about not feeling rich at $3.2m makes me wonder if some are out of touch. My sister has $300k and feels like a millionaire. Seriously, you have $3.2m, but you don’t have a jet or fly first class? That’s the line in the sand? I have more than $3.2m, but feel incredibly fortunate that I can do what I want, give what I want and wake up everyday without a worry about money.

No kidding, but I think some of those comments refer to a total household income with multiple people living in the house.

 

[thatguy]

I appreciate the effort he put into his video, and if he is an investment advisor, I can understand his focus on net worth, as he has an interest in getting to invest that money. But I think it would be a mistake to entirely disregard income. If a 65 year old married household had two secure pensions totaling $150k per year, they could live a pretty darned good life, even if they had minimal net worth. Especially if they also have social security coming in.

Our pensions are not 1/3rd of that $150k but we're at 90%. Adding in home equity does not change my level
It 2 years when we add in DWs SS our pensions and both SS won't be $150k

 

[COcheesehead]

To be fair, if we employ the 4% standard, a $3.2 million nest egg can generate only $128k per year. Around here, at least, that's fairly middle class. As of 2021, median household income for a household headed by a 45-64 year old in Connecticut is $104,155. https://www.incomebyzipcode.com/connecticut

HCOL will skew things. In others parts, $128k is nice income.

 

[Montecfo]

Well if this is a case then the net worth number does not mean much correct? Because the home equity is hard to realize and home owners may look wealthy on paper. Especially if someone is living in very high cost of living area where any home worth more than $1M.

Well, this is why we have more than one measure. But even illiquid assets are part of net worth, by definition.

And illiquid or not, $1M of home equity is better than $100k.

Truth be told, home equity can be accessed via a standby HELOC, which I recommend.

 

[Sunset]

To be fair, if we employ the 4% standard, a $3.2 million nest egg can generate only $128k per year. Around here, at least, that's fairly middle class. As of 2021, median household income for a household headed by a 45-64 year old in Connecticut is $104,155. https://www.incomebyzipcode.com/connecticut

And since $3.2 M at 4% generates $128K per year, it seems to me that a cola pension of $150K is worth more, and makes a person wealthy even if they don't have any money

 

[Andre1969]

I've mentioned this little story before, but there's an episode of "Newhart", where the spoiled maid Stephanie goes home to see her wealthy parents, and bring her boyfriend, the yuppie/social climber Michael Harris. Michael is just blown over by everything he sees as the Vanderkellen estate, and like every other word out of his mouth is "WOW!"

The father, who I think was played by Jose Ferrer, said something along the lines of "Sometimes you forget to appreciate all the things you have, until you see them through the eyes of someone who is agog."

And, I think there's some truth to that. As your financial standing improves throughout life, you simply get used to it. And while a $3.2M net worth, for example, might not be normal across the general population, it will probably feel "normal" to YOU! And I don't think it means you're out of touch, necessarily. For instance, I realize, even at my relatively paltry ~$2.4M (plus home equity...I'm one of those that doesn't take it into account) puts me into a fairly lucky group. For instance, the next time the car breaks down, instead of whining about it and fixing it, I could afford to go pay cash for a new one. Most people probably can't do that. If I lost my job tomorrow, I'd be okay, and most likely would not look for another, and use that as an excuse to finally retire. Again, most people can't do that, either. If I really wanted to, I could upgrade this aging iPhone 7S with the latest model, and then replace THAT one with whatever comes out next. Oh, wait, that one's not a good example...I know plenty of less well-off people who do that, and it's one of the things that keeps them poor!

To me, being out of touch would be asking someone with an older car that just broke down..."Why don't you just get a new one?" Or, if their neighborhood is going south, "Why don't you just move?" and so on. Stuff like that. Basically, thinking that if you can do it, why can't others? I think most of us, in the lower millionaire range, are probably in pretty good touch with the way things are. We realize that it's not the norm for most of the world. But, we've just gotten used to it, so it's normal to US.

 

[street]

I never consider us being wealth or having any more dollars than the people we know. In fact, I believe most people are millionaires and are the same as we are financially. I know that might not be true but that is how I see people around me. People I know and don't know.

I never compare what we have with what others have. I (we) live like we did the first day of marriage and never even think about being wealthy or having more then we need because I believe others are the same.

Wealth is different for everyone and how they see themselves and compare to others.

I'm far from wealthy financially but I consider myself very wealthy because of family, health and all the blessing life has given us.

 

[Koolau]

And since $3.2 M at 4% generates $128K per year, it seems to me that a cola pension of $150K is worth more, and makes a person wealthy even if they don't have any money

I see your point, but then when you die, that $150K/year goes to zero while the 3.2 M is still there. The "wealth" of the 3.2 M goes onto someone else, it's true, but it still is there. It doesn't "evaporate." Keep in mind that, at any time - if you're a bit adventurous, you can go to 6% withdrawal of the $3.2 M and suddenly, you have $192,000 per year to live on. If, like me, you plan to die in 23 years, that's not a particularly foolhardy way to go. YMMV

 

[perez99]

To be fair, if we employ the 4% standard, a $3.2 million nest egg can generate only $128k per year. Around here, at least, that's fairly middle class.

To me this is the key. Wealth needs to be translated into something we can spend in order to impact day to day standard of living. Its certainly confortable, but may not be enough to really feel wealthy.

 

[Gumby]

I see your point, but then when you die, that $150K/year goes to zero while the 3.2 M is still there. The "wealth" of the 3.2 M goes onto someone else, it's true, but it still is there. It doesn't "evaporate." ...

I don't know about anyone else, but aside from ensuring the young wife is properly protected for her life, I don't care one whit about who might get my money after I die or how much they might get. So it wouldn't matter to me if it did evaporate.

 

[Koolau]

I don't know about anyone else, but aside from ensuring the young wife is properly protected for her life, I don't care one whit about who might get my money after I die or how much they might get. So it wouldn't matter to me if it did evaporate.

Again, I see your point, though many of us (in addition to taking care of our dear spouse) wish to have our money out live us toward some "greater purpose." We have charities that will live on long after we are gone. Naturally, YMMV.

 

[Koolau]

I just had a thought (dangerous, I know.)

The way to decide the "value" of $150K/year, ending at death vs $3.2 M is exactly that.

Which would you rather have??

 

[ShokWaveRider]

I just had a thought (dangerous, I know.)

The way to decide the "value" of $150K/year, ending at death vs $3.2 M is exactly that.

Which would you rather have??

Depends how old you are. For instance. Let us say you are 70 and will live to 90 (20 years). VERY optimistic in our case.

Currently a couple gets $4k from SS and $1k from other small pensions per month. That is $60k. So one needs to get $110 from investable resources plus drawing on their nest egg.

$110k x 20 - $2.2m NOT including the return of say a very conservative 3% on the Nest Egg. I would rather have the $3.2m. $3.2m / 20 = $160k not including SS and all the other stuff one may or may not receive.

We do not have $3.2m in investable assets alone but have way more in Net Worth. So I am comfortable and happy with that.