WSJ Article: Never Mind the 1%. Mini-Millionaires Are Where Wealth Is Growing Fastest

[Closet_Gamer]

Inflation is the long run enemy of nominal asset value, so $1M sure isn't what it used to be but it is still a great accomplishment.

$40k/yr + SS is a very solid retirement income. Not a Fat FIRE but still the basis for a pleasant, secure retirement.

$1M during your working years is a fantastic running start to much more. That same $1M provides A LOT of protection against life's uncertainties.

I use a Net Worth definition that is sure to make people crazy:

I include my home but also burden the balance sheet with an estimate of the future tax cost of getting the money out of retirement accounts. I have a large fraction of my assets in a NQDC retirement plan which will be taxed heavily as pays out and can't be accessed any other way that paying those taxes.

I also accrue for significant expenses coming in the next 6 months.

Finally, I do not include the in-the-money value of my megacorp vested but un-exercised stock options. (This was to help the discipline of cashing out options rather than building up a concentration, which is serving me very well right now as I'm close to exiting and our stock has gotten crushed. I have friends who used the "hold for the life of the option" approach that are staring in horror at their option account. Plus they are suddenly facing lay offs, at which point the options disappear, wiping out the "it will come back" aspect of holding onto the options.)

I think of it as my "Scrooge McDuck" net worth: if I wanted to turn it all into $1 bills and roll around it, roughly how many $1 would I have?

As I have zero debt, my simple Assets - Liabilities net worth is much higher.

 

[Car-Guy]

I have made these two points for a long time:
1. Being a millionaire ain't what it used to be.

+1 Having a million investable with zero debt to retire on "was" the gold standard when I was working. These days, I'd say it's more like 2m investable with zero debt. Of course it "depends" on your age and spend rates but I think most folks retiring at ~65 should be "comfortable" with that. I mean for the "typical couple" retiring at 65 with 2m and zero debt, could simply invest in a fixed income investment @5% and generate $100,000 a year. Add SS to that and you have ~130 to ~150k per year. (pretax) Not uber wealthy (my POV) but you should be pretty comfortable and you'd still be considered to be well into the top 10% of NW families in the US. Of course YMMV

Um, I take exception to your statement. I'm a "millionaire" by any definition you choose (liquid portfolio, exclude home, include home, etc.), so have no reason to split hairs here other than I just don't agree with your logic. Suppose you have +$1M of home equity in your primary residence. Why wouldn't you count that. You can borrow against it, you can use a reverse mortgage, you could rent it out and go live someplace cheaper, or you could just sell it, buy a cheaper home and pocket the difference. There is no one size fits all. Definition of NW is Assets minus Liabilities. Who's to say that real assets should not be counted or don't matter. That just sounds completely arbitrary and one dimensional.

+1 Of course a house is an asset in your NW calculation. You can always sell it and downsize, rent or live in a tent.


This has been discussed a bazillion times on this forum. Maybe we need a new icon/simile.

 

[Time2]

I'm one that did include my home in net worth for many years. I did a net worth statement regularly, then I moved states and got out of the habit for about 17 years! When I started net worth statements again in 2011, I did not include my home and don't expect I ever will. Just doesn't seem right, as you have to live somewhere.

I will admit I have Heloc that I borrowed on for 9 months to facilitate a child's home purchase. It had a 0.99% 6 month teaser rate!

 

[COcheesehead]

I use two ways of looking at our wealth.
Net worth in its classic sense, assets - liabilities.
FIRE pool which is the assets I use to fund retirement. Basically our brokerage account which includes our IRAs, Roth and taxable accounts.
In our net worth is some real estate and house equity which may not be tapped near term, but it will be used at some point whether we flip it into an assisted living situation, another home with live in help, who knows. But it has value and should be accounted for.
When we start taking SS, it will just be a deduct from our expenses.

 

[Andre1969]

+1 Having a million investable with zero debt to retire on "was" the gold standard when I was working. These days, I'd say it's more like 2m investable with zero debt. Of course it "depends" on your age and spend rates but I think most folks retiring at ~65 should be "comfortable" with that. I mean for the "typical couple" retiring at 65 with 2m and zero debt, could simply invest in a fixed income investment @5% and generate $100,000 a year. Add SS to that and you have ~130 to ~150k per year. (pretax) Not uber wealthy but you should be pretty comfortable. Of course YMMV

When I started getting serious about investing for the future and retirement, I figured that if I had $1M, and a mortgage free house, I'd be set for life. That was back around 1999-2000, when I would've been around 29-30.

Adjusting for inflation, that would mean around $1.79-1.85M, plus a paid off house in today's dollars.

If I was to pay off the mortgage, that would leave me at around $2.1M, plus the paid off house, so I'm actually ahead of that goal of 1999-2000. But, now that I'm at that level, it just doesn't feel like any great shakes. I'm afraid I've fallen victim to hedonistic creep, or whatever you want to call it. Still, if I wanted to retire right now, I'm confident that I'd make it. I might whine when the stock market dips, but in the long run, I'm sure I'd be fine.

But, it just doesn't feel as extravagant as I fantasized about it being, back in in 1999-2000. I think in addition to the hedonistic creep, I'm also older and wiser. Back when I started getting serious about retiring, I had yet to experience the full brunt of that 2000-2002 period, not to mention the Great Recession, the 2010 and 2011 dips in its aftermath, that flat spot (for me at least) from around mid 2014 to November 2016, the drop off at the end of 2018, the Covid crash in early 2020, and now this 2022-2023 mess.

 

[COcheesehead]

If you have $2 million. You have outpaced 90% plus in the US and 99% plus worldwide.
My Dad died with $40,000 to his name, but had a union pension and social security. He spent his final years writing checks to charities.
We all need to step back sometimes and realize how fortunate we all are.

 

[ychuck46]

My Dad died with $40,000 to his name, but had a union pension and social security. He spent his final years writing checks to charities.

You raise a good point regarding net worth. When do we stop adding things to our NW determination? Some here want to include home equity (although no one knows their true equity until they sell their home, so that is quite iffy compared to liquid financial assets), while others like myself prefer not to. Some feel that the future value of things like pensions and SS should be added, while others like myself prefer not to. Where do we draw the line? If you continue to add up all the potential sources of NW including home equity and future streams of payments then there are many more millionaires in this country than one might think.

 

[COcheesehead]

You raise a good point regarding net worth. When do we stop adding things to our NW determination? Some here want to include home equity (although no one knows their true equity until they sell their home, so that is quite iffy compared to liquid financial assets), while others like myself prefer not to. Some feel that the future value of things like pensions and SS should be added, while others like myself prefer not to. Where do we draw the line? If you continue to add up all the potential sources of NW including home equity and future streams of payments then there are many more millionaires in this country than many might think.

There is no line to draw. We each need to do what we feel is best. As you point out though, people are likely way better off than they imagine because of financial gymnastics that we play. Hence the example of my Dad. Poor in the eyes of some. Rich in the eyes of others.

 

[kingkarmann]

I'm thankful beyond words to be able to participate in a group like this.
I'm not college educated. I worked my ass of from the time I could earn money.
My first marriage was shotgun three days after my 18th birthday.
Worked hard long hours to support my family for 48 years. My wise grandmother always reminding me to sock something, no mater how little away for the future.

I tend to reflect more on this part of the article. It keeps me grounded.

"Make no mistake, there is still poverty and economic struggle in the U.S. Many families have little or no wealth, and limited prospect of accumulating any."

 

[ychuck46]

There is no line to draw. We each need to do what we feel is best. As you point out though, people are likely way better off than they imagine because of financial gymnastics that we play. Hence the example of my Dad. Poor in the eyes of some. Rich in the eyes of others.

I agree with each of us doing what we feel is best. But when it comes to determining a set % of something, like how many millionaires there are in a country, if everyone is using their own criteria how does one ever arrive at a reasonable or somewhat accurate #? I suppose we can do down a rathole of Alice in Wonderland proportions if we all wanted to, so maybe your point is valid after all. And I would say your Dad is in the middle of how I define people in this country:

1. The Have Lots
2. The Have Some
3. The Have Little/None

He should be fine and I wish him and you well.

 

[ychuck46]

I'm thankful beyond words to be able to participate in a group like this.

Here, here. I find this blog site to be one of the better on the Web for thoughtful and rationale discussions of financial topics. Like yourself, I am thankful for it as well.

 

[dheb]

Didn't read the article or do any research, but my gut says a big part of that increase is probably the result of the real estate market.

Those whose NW is comprised largely of the equity in their home would see the largest percentage change.

Yet when I sold the home I'd owned for many years in 2022, I just about broke even on it. Not everyone makes huge gains.

 

[Car-Guy]

When I started getting serious about investing for the future and retirement, I figured that if I had $1M, and a mortgage free house, I'd be set for life. That was back around 1999-2000, when I would've been around 29-30.

Adjusting for inflation, that would mean around $1.79-1.85M, plus a paid off house in today's dollars.

If I was to pay off the mortgage, that would leave me at around $2.1M, plus the paid off house, so I'm actually ahead of that goal of 1999-2000. But, now that I'm at that level, it just doesn't feel like any great shakes. I'm afraid I've fallen victim to hedonistic creep, or whatever you want to call it. Still, if I wanted to retire right now, I'm confident that I'd make it. I might whine when the stock market dips, but in the long run, I'm sure I'd be fine.

But, it just doesn't feel as extravagant as I fantasized about it being, back in in 1999-2000. I think in addition to the hedonistic creep, I'm also older and wiser. Back when I started getting serious about retiring, I had yet to experience the full brunt of that 2000-2002 period, not to mention the Great Recession, the 2010 and 2011 dips in its aftermath, that flat spot (for me at least) from around mid 2014 to November 2016, the drop off at the end of 2018, the Covid crash in early 2020, and now this 2022-2023 mess.

I can understand that. At your age of ~53 I might feel that way too. But I think for folks over 65, if they only have 2m investable and SS coming in and no debt, I think they should feel pretty good about their financial futures. Might even say they are in the won the game camp as is often mentioned around here.

I don't know, I'm over 70, no debt and well over 2m investable so maybe I have a myopic POV.

 

[COcheesehead]

I agree with each of us doing what we feel is best. But when it comes to determining a set % of something, like how many millionaires there are in a country, if everyone is using their own criteria how does one ever arrive at a reasonable or somewhat accurate #? I suppose we can do down a rathole of Alice in Wonderland proportions if we all wanted to, so maybe your point is valid after all. And I would say your Dad is in the middle of how I define people in this country:

1. The Have Lots
2. The Have Some
3. The Have Little/None

He should be fine and I wish him and you well.

I look at the footnotes when I read wealth stats. The devil is always in the details. All I know is we have more than we need and it was earned with lots of sweat, worry and forgoing over time.

 

[Andre1969]

Isn't there some rough rule of thumb, that if you want to include the value of a pension, SS, or whatever, you take the yearly payment, and multiply by 25? Or, something like that?

 

[Car-Guy]

^^^^
Yep, been hearing variations of that one for years.

Example:

Basically, the Rule of 25x says that at retirement, you should have 25 times your planned annual spending saved

Still, the devil is in the detail with such a broad brush financial statement.

 

[Time2]

If you have $2 million. You have outpaced 90% plus in the US and 99% plus worldwide.

My wife and I find ourselves in that position, plus.
Having earned a combined income of $1.75M from 1981 to 2018, I'm still in awe that we saved and invested ourselves to such a net worth, as I'm certainly have no great investment knowledge. Just Mutual Funds, for most of it. I think I probably lost more in single stocks than I made.

We all need to step back sometimes and realize how fortunate we all are.

Yes, very thankful to be so fortunate. Full of gratitude.

 

[Chuckanut]

Here's an interestin old show from the 1960's. A fabulously wealthy zillionaire picks people to recieve a gift of $1,000,000. This was back when 10K a year was an excellent salary. Some people are helped by the money and others just race faster down the road to disaster.

Note who played the young idealistic doctor. He coined one of his favorite lines "I'm a doctor, not a blankety-blank-blank!"

A selfish career woman thinks her million will allow her to marry a dedicated young doctor whose attention she has cynically accepted and whose work she has disrespected.

 

[REWahoo]

Here's an interestin old show from the 1960's. A fabulously wealthy zillionaire picks people to recieve a gift of $1,000,000.

In today's dollars that would be roughly $11 million.

 

[shafer9]

Bingo.

 

[ychuck46]

All I know is we have more than we need and it was earned with lots of sweat, worry and forgoing over time.

I would guess that the way you folks find yourself today, and how you accumulated your wealth, is very similar to the majority of the people on this forum. Might be why it is so interesting to many of us. We are all very blessed to have had a good/decent work ethic, the wherewithal to largely live below our means and save, and yes, some lucky breaks here and there along the way.

 

[Car-Guy]

Here's an interestin old show from the 1960's. A fabulously wealthy zillionaire picks people to recieve a gift of $1,000,000. This was back when 10K a year was an excellent salary. Some people are helped by the money and others just race faster down the road to disaster.

Note who played the young idealistic doctor. He coined one of his favorite lines "I'm a doctor, not a blankety-blank-blank!"

Yep, the Millionaire. I've got the entire series on DVD. (Good luck finding a good copy now) Some pretty good stories but that's when a million was serious money.

 

[Koolau]

Yet when I sold the home I'd owned for many years in 2022, I just about broke even on it. Not everyone makes huge gains.

We actually lost money on our last mainland house. '98 to '07, nominal house price was flat but we had put a small fortune into the house (AC, windows, roof, rehab, etc.) Probably lost $35K or more. BUT, amortized over 9 years, it was cheaper than we could have rented it AND we bought it to get the kids into a great school system. A bargain though YMMV.

 

[mickeyd]

Good read. Michael and Ben batted this article around this week in their pod cast. I feel good about a lifetime of investing and coming out on top.

 

[Gumby]

Isn't there some rough rule of thumb, that if you want to include the value of a pension, SS, or whatever, you take the yearly payment, and multiply by 25? Or, something like that?

That works if it is a COLA'd pension, because the 4% withdrawal rate calculated by Bengen and the Trinity Study is COLAd. If it is not COLAd, I would use a smaller multiplier.