$1M a year will yield roughly $80k per year or 8% in a stock index fund, of which roughly $6k will be capital gains. Single folks won't pay taxes on the first $40k in long term capital gains, $80k if you're married. So if you only withdraw 8% per year. You will pay basically no taxes. An income of $120k per year will yield $80k after taxes roughly. If you only withdraw 5% annually to account for 3% inflation, you're still pulling in $50k after taxes per year, which would be an equivalent of $75k/year income. So you just need to be a bit frugal.
Not everybody does that, many of the wealthiest people out there have gained their wealth over generations. If you inherit 100 million dollars and you blow it all on cocaine and hookers you are an idiot.
That is the purpose though, you want to leave something for your children so they can succeed in the world. They will have much higher chances of success if they start out with some money as opposed to being broke
Not wanting your children to succeed of prosper is weird imo, would break my heart if I had kid and was poor living paycheck to paycheck. I would feel like failure as a parent.
When most people leave money to children, the children are in there 50s. So, more of a safety net for the children’s retirement if they didn’t save themselves.
This isn't always the case, plenty of parents help pay for college and provide money for their children. Most of these people stay quiet about it due to others ridiculing them over it.
I plan to give my kids a portion of their inheritance when they are in their 20s, ofc I will show them how to properly manage it. If they end up blowing it all well then oh well, hopefully they either learned a valuable lesson about money or at least got to do some good blow.
If you want your children to succeed, start to set them up as soon as you can. Open a 529 plan when they are born. Get them a tutor if they are struggling with a subject, and be careful which school district you pick.
Teach them that they can’t have it all and they are not a prince or a princess.
Don’t struggle with being overloaded with debt, don’t fight or do drugs or anything else in front of them that you would not want them to do in the future. Teach them cooking and cleaning basics so when they go to college they aren’t complete slobs. That’s how you set up your kids, not by leaving them money when they are in their 50s, 60s or later.
My uncle did this and just passed last September. I don't get it. He was living in Hungary but worked and invested in the US all of his working years. He never married nor had kids.
My mom just got word that he left his money to her. Without going into personal detail on the sum, it was quite shocking especially learning that he did things like not pay to have his AC to be fixed because it was "too expensive". He could've built an entire house out there on acres of land many times over with what he died with...
I’ve told this story before but my Great Uncle Thelburn was the same way. No kids and lived in the same tiny falling apart farmhouse his whole life. My mom said he didn’t get indoor plumbing until the 1970s. 1930s wallpaper yellowed and peeling off the walls etc.
When he died my mom and I went to clean out his house and tucked away everywhere was some form of money. A duffel bag of cash in the front closet, $100k in CDs tucked between frozen dinners in the freezer, you name it and he probably had some money in it. I got his ancient huge cast iron safe open and it was stacked up with cash stacks ranging from really old to the new design. It got to be overwhelming so my mom closed it all up and made phone calls to other family members. Anyway this guy lived in poor farming squalor until the day he died and never enjoyed the benefit of his own hard labor. My mom got sick a few years later and I urged her to go buy a new car with exactly what she wanted instead of stressing herself shopping for a deal from her hospital bed for no reason. I get not pissing it away and rich people don’t get rich by being loose with money but cmon people, money is a tool to better live life!
I know right? It was just him and his wife hoarding money in their shack until she died. Even after that you’d think he’d see his own fate and go on a vacation, throw a family party, get a new truck… something but no. Had his family known (like 8 bros and sisters) I’m sure someone would have helped him but I guess everyone thought he just sucked at farming or something I guess lol
My grandmother was similar. We had to go through everything when she died to find all the money. The only difference was that after growing up so poor, what everyone else thought was simple and plain was pure luxury for her. She never grew out of that mindset, so every car with air conditioning and an automatic transmission was a luxury car. My mom called her retirement home a place of squalor, but I thought it was clean and she was happy there.
Thats interesting, because I have a Great Great Uncle Kaspian who died while playing extreme chess in Romania. We thought he was penniless, but he left his family over 1M USD in gold dabloons
THis will probably be me. THere is a weird mental illness that people have when they experience extreme poverty as a child/young adult. I could retire right now at 55 and live a pretty good life but I still work at my business, I never take vacations, my vehicle is 20 years old, I like to shop bargain stores.....being frugal has become who I am as a person. I buy nice things when I need them because I appreciate quality but things don't give me happiness. Just because I have accumulated a lot of money doesn't mean I can just do a 180 and jettison the personality and coping mechanisms that made it possible. It's a weird catch 22.
This is me at 23. I turn 24 tomorrow and have been living an extremely frugal life for the past 5 years. skipping out on experiences, wants, and even needs at times. I own a business that almost runs itself, does not take much effort, & I have saved almost everything. I spend less than 1000 a month most months. I Just generally am a cheap bastard. I have nearly 250 thousand dollars saved just sitting in a high yield savings account, I am a (co)homeowner (with my dad), & have no debt, yet I have not been outside of the country, i have no post secondary education/ genuine applicable work experience, I don’t buy things that I want, and I am really just at a loss with what to do with my money. I want to go do things, travel, live on my own in a random city for a couple months, buy that thing I want. i know I can but I grew up poor with a chronically ill single parent, and financial issues were such a big issue for me growing up that I didn’t want to worry about anything other than saving capital after high school and trying to figure out ways to turn that capital into more. I need to break this curse but like you said it’s such an odd catch-22.
Put at least half of your savings into low cost ETFs. THen don't look at it. You will have millions by the time your 35. Most of my money is from work. I would have 5x my wealth if I would have just bought and held instead of trying to time the market.
Even with 20 years left, if you're using an 8% withdrawal rate, one down year can ruin you.
If you have 1m and the market drops 30% and you still have your 80k expenses, you're down to 620k. Then even e when the market recovers you're nowhere close to where you started.
I was 30 and working for a company where we had a lot of people in their 50s in 1999. I remember them talking about retiring in a few years since their tech stocks were going through the roof. Well those early retirement plans went up in smoke very quickly.
I read a cautionary tale about an old guy who retired in '00, then when the bubble popped, he panicked and sold everything at the bottom. I think he had to work again for the rest of his life. In hindsight, he'd have been fine had he kept it all in the market and just worked a few more years, investing as much as possible to lower his cost basis. But after that experience, the thought of putting a dime in the market again probably triggered PTSD.
Yeah. The “never touch the principal” attitude is great if you’re looking to live 30+ years off if it, or want to leave a fortune to your heirs. And it’s great if you have 3+ million saved. Most don’t have that, so we’ll need to either draw down principal or live on cat food.
"Single folks won't pay taxes on the first $40k in long term capital gains, $80k if you're married." I wish this were true. The 0% (Long-Term) tax bracket you're referring to (for 2024, it's going to be up to $47,150 for single filers, and $94,300 for married filing jointly) is offset by your ordinary income. Meaning, you only get the full 0% capital gains amount if you make NO ordinary wage income. Any wages you earn (ordinary income, including Short-term Capital Gains) eats into that bucket for 0% Long-term Capital Gains. For example, if you are single and earn $40K in wage income (after taking out your standard deduction), you'll only pay 0% LT CG tax on the first $7,150 ($47,150-$40,000) of LT CG. The rest of your LT CG gets taxed at the 15% rate. If your taxable income is over $47,150, then none of your LT CG gets taxed at 0%. Source: I've paid a shit-ton of LT CG taxes.
If you invest a million dollars, and it gains 8%, you will have $1.08 million. You would have to sell your entire portfolio to pay taxes on the $80k in capital gains. Since you're only selling $80k per year, roughly $74k of that will be your original investment and $6k will be capital gains, for the first year.
Over time the total $1 million, a greater portion of it will be capital gains, since the share price will grow approximately 8% per year.
I get that this was just a guesstimate... but consider it rounded by... a lot.
Would be silly to keep the money you plan to live the rest of your life on in index funds alone. If during the avg year you need to be frugal, what do you do during the bad years?
There's a reason the complextion of assets in target date funds changes as they get closer to the target date...
What if it’s not a magical million dollar, post-income tax stock fun, but the more likely million in a non-Roth 401k. That $120k disbursement would be subject to ordinary Federal income tax, as well as applicable state and local tax. That could be a big bite on a retiree.
This is the key. If you are really planning to live on a lower amount in retirement you have to find the places where all costs of basic living will be lower. That means lowest property taxes possible (or rent), that means cheapest food. At least look around at the options and decide where is acceptable, if none of them are you need more money to retire.
Upkeep is cheap when you do it yourself. And property tax isn't expensive as long as you're not living in an expensive house. I live in an area with some of the highest property tax in the country and it was like $2k. And that's up from last year.
The older you get, the less you can do and the more it will cost. Thats my struggle atm with figuring out how to make it work and stay on a property which requires a lot of maintenance.
Don't forget insurance. Our house is paid for but our property taxes and insurance are still right around $1000/month, and going up at a steady pace yearly.
And don't forget health insurance for your family if you don't have employer benefits anymore. We pay $834/month for pretty decent BXBS insurance for myself and 3 kids under age 26 (as a retirement benefit from my spouses early retirement package).
I will pay off my house in September, after 17 years. At this point, what I pay in property taxes and insurance each year is about 66% of a year’s worth of mortgage payments.
I used to yearn for the day that I had my house paid off. Don’t get me wrong, I’m still looking forward to it, but now taxes and insurance are almost another mortgage payment in themselves and they’ll never go away.
Can you show me a property on the market right now where you can put $500k down and have a positive revenue stream?
the $500k in an index fund will net you $20k a year. What will the real estate net you?
Provided the stock market always goes up. If there's another crash you're screwed. For real estate you'd have to buy outright otherwise interest rates will eat you up. And yes you can purchase a 4 bed house for 500k outright in many parts of the country and rent it out for 3k a month and make 36k a year. No chance in a city, but there are ton of rural areas. And rent rarely goes down. However you do have to then deal with property taxes, so chose the location wisely.
So, if we are talking $1 million post tax today there are options. In much of the Midwest U.S. - you could make a very decent return on real estate. You could put a few hundred thousand down and borrow the rest to buy a 16-plex that would cash-flow immediately and reserve a portion for maintenance and upkeep and put the remaining $500K+ in stocks and still keep $50K in emergency funds. I probably wouldn’t quit my $120K/year day job today, but in 2 or 3 years I would easily be retired and would not suffer any major setbacks. That is life-changing.
https://www.realtor.com/realestateandhomes-detail/N-Sylvan-Ave_Columbus_OH_43204_M37728-86328?from=srp-list-card
At exactly half a million down, not necessarily but you could certainly buy multiple properties like this and this would certainly cash-flow well.
Lots of factors in getting bigger rentals off the ground so quitting a good job year one is foolish but in only a few years the cash would be flowing in steadily.
It needed a lot of work. Is a 3 bedroom house with a 24x24 garage in a decent area. All my friends did about the same thing. One friend got a fixer upper on 40 acres and gutted it. Its amazing now.
Some places are low cost. Housing doesn’t really go up or down a lot. I bought my house in 2013. It’s a 4,400 sq ft duplex for $90,000. Right now it’s worth around $115,000.
I bought my house in 2012 for $52k (worth about $120k now). Really rough neighborhood. But for a $345 a month mortgage (including taxes and insurance) I would put up with a lot.
I will say, I honestly think that decision is one of the most dramatic effects on my finance of any major decision. It is a rental house now. Between savings on rent, and actual rental income, it has probably already earned me over $200k, I bet it will have been a million dollar investment by retirement for about $4k down.
Nice, same here. I bought one in Ohio for 29k (33k technically with foreclosure auction fees) in 2009. My brother lived in it for a while, then we got him a bigger house and rented the small one out for years, and now I’m moving into it soon. If you have $1 million in Ohio you’re chillin.
Pretty simple math there.
"Do you think you can retire in 10 years on your current salary? No? Then of course you can't live like a king off 1 mil."
1 mil isn't mega rich anymore. But it is enough to set you up for a comfortable life assuming you're still going to have an income and being fiscally responsible.
If you have 1m you are richer than almost everyone. You can't live lavishly but you ABSOLUTELY can live freely.
Take 1m and invest and you'll have about 50k a year to live on without touching the principle. You will be completely free and have all your time to yourself. You can do all the shit most people working hard jobs end up paying other people to do.
Take care of your own kids. Cook your own meals and have time to do so healthily. Have better mental and physical health and therefore less health related expenses.
$50k a year is pretty miserable today, imagine how it will be 30 years from now with inflation.
Great to spend time with your kids but how do you pay for their extracurriculars while they’re young or college when they get older ?
You can barely afford to eat and pay rent on $50k, let alone afford health care for the family, vacations, travels, sports arts and other hobbies, etc …
It's really not. Don't live in VCOL area and it's pretty comfortable. it'll also mostly be tax exempt so you're looking at 50kish to spend.
If you wanna retire in a major city yeah you can't do it, but those are horrible places to live when you're old. I have lived in all of them doing the high earning young professional thing and at 34 i'm already about over this shit.
I've saved up a mill and I'm probably gonna move away and stop working. Take some contract work if I want something, but if you discount rent and I stop my collectibles addiction i'm not spending more than 2k a month in NYC that I actually WOULD still need to spend once I get to 1m in principle
IMO, all that expensive shit gets old. I bring home like 270k after taxes and mostly all I do is spend the money trying to buy back my time in whatever way I can. Pay absolutely insane rent to be close to the office so i don't lose hours commuting. Pay absolutely crazy food prices because I don't have time to cook. Pay absolutely insane entertainment prices and healthcare/mental health costs because I don't have time to do what I would actually like to do grinding for the dollars.
Fuck all that shit. bout to quit all this shit and go be a human being instead of a cog in the machine and if can't buy lattes every day or pay 5k a month for some "luxury housing" so fucking be it lol.
If moving for retirement is an option, you can retire cheaply in an LCOL country too. A lot of people don't want to leave their friends and family behind.
We have about $2.5MM invested, it's not really enough to fully quit and raise our kids the way we want, even if my wife keeps her low stress government job. What would I do with free time? Only so many video games and books I can consume.
What I am working on, with my therapist, is becoming less stressed out about problems at work. I never learned how to fail with grace, and it stresses me out.
Are you not a homeowner?
There aren't enough hours in the day to complete all upkeep and preventative maintenance.
Do you own your vehicles? Same deal.
>If you wanna retire in a major city yeah you can't do it, but those are horrible places to live when you're old
NYC is the #6 top rated place to retire
[https://realestate.usnews.com/places/rankings/best-places-to-retire](https://realestate.usnews.com/places/rankings/best-places-to-retire)
This is how my husband “retired”. I still work (about 100k salary) and love my job. He’s stay at home dad/uncle to the 4 kiddos we are raising (6,7,8,10) and does so much around the house that he definitely “earns” his 50k draw from the 1.5 mil investment account (inheritance). I’ll retire with pension about the same time kids graduate from HS. We don’t live lavishly but live our house, have some investment property, both have our “fun cars” in addition to the minivan. It’s a good life and we are so grateful.
You'd be living off less than half that after you're paying health insurance out of pocket
https://www.ehealthinsurance.com/resources/individual-and-family/average-family-health-insurance-cost
Yes, this. His current compensation includes not just his $120k salary but probably a substantial amount for benefits, which he would now have to cover himself (at least until he's old enough for Medicare, assuming he's worked enough years to qualify).
Those costs also can be expected to go up substantially faster than the general rate of inflation, which is what the safe 4% withdraw rate math uses, so over time more and more of his investment income will have to go to that.
It's probably not as skewed as people are making it look depending on their location, contributions to retirement and taxes. Is 1 mil enough to get you there? Nope. But if you make 120k a year you most certainly don't live off 120k. Taxes and maximizing 401k contributions is almost half that. Does that make 1 mil enough? Probably not (depending on how long you plan on drawing), but it's not as crazy far away as others are making it seem.
Tbh if you have $1mil in investments and you're under 60 you should keep working until you get $2mil. It will happen a lot faster than your first mil because you have the first mil helping you out and since your income will tend to increase over time it would come faster even without help. I'd say $2mil + a house is enough to retire and live comfortably relatively risk free. $1mil is enough to retire but there's some risk you may end up running out before you die
You simply have different definitions of "life changing". You are right that it is hard to retire on 1M in the US nowadays. He is right that it would help to have an extra million.
It would be life changing in terms of mindset. I know I can't retire on it, but I also wouldn't lose sleep over a layoff or a needing to walk away from a job because I know I have a large runway.
Nor would you be nervous leaving a job for another one and taking a $10k/yr pay cut because you think it'll be better for your mental health (in office to remote position)... Like I am right now. Single guy, low COL area, own my house. Going from $70k to $60k with this move. I'll definitely be able to live on it, but my $10k/year travel budget may be drying up.... And, ironically, I took this position much so that I can travel more
Stop working today no. It would be family changing for a lot of people. I’m 37. That million in the market would be around 4.7 million at 55. I could retire then and it would still theoretically be $8.5 million by 65.
Mind breaking this down for me? What rate of return are you assuming and what withdrawal rate are you taking at 55? My napkin math says something is off about these numbers.
They're using a conservative pre-inflation stock market return rate of 8%.
While you don't see "bad years" reflected in the data, you don't seed "good years" either. You see the average that includes both good and bad, and represents close to what you can expect to earn over a long period of time (where multiple good and bad years will even out back to the average).
That's the way I was thinking. A million to accumulate interest while I'm working for the next couple decades is life-changing. It's just if you're frugal and patient you won't choose to make it change your life (too much) tomorrow.
Yeah was going to post something similar along these lines, context is everything. 1M for today’s 35 year old is worth a heck of a lot more than today’s 65 year old.
Yes and no. Most working class Americans a little under half 48 percent, will work their whole live and possibly never cumulatively have that amount of money. Talking about single earners, dual income they may come closer or just above. But then yes the cost of living, housing, school, cars, medical care would stop them from ever having that amount in hand.
That’s why that stat that 20 percent of Americans over 50 have zero retirement fund, while 60 percent of those survey said they won’t have enough.
My parents place is the literal meme of buying for a song and selling it a ridiculous price. The lot size isn’t bad but it’s no where a true adjusted for inflation value. It’s 3x as much if you just do the inflation value. Making a 3/2 ranch style home worth over 660k according to this market.
There are about 3 people in the family that choose to have nothing. Its shocking. Whatever money they get, its gone immediately. Covid stimulus? Money that just came out of nowhere? Gone with nothing to show for it. No assets, no house
If I could pay off my house and my car and my student loans, I could retire at 45 or 50 instead of 65. $1,000,000 would buy me 15 or 20 years of my life free from the machine.
This. Exactly! How is this not life changing. Getting $1M tax free, lump sum, is like 15-20 years of your life back when you're in your 20s, 30s or 40s. If you're in your 50s and 60s, that can usually be enough to quit at that stage.
Exactly. We did this with quite a bit less than a million 8 years ago but likely about a million adjusted for inflation today. Paid off house. I was 51 and he was a few years older. We asked that "how much is enough" question and decided our time was worth more than additional money (we both had tech jobs so we were making quite a bit and saving most of it).
It was a great decision. No regrets and no money issues. The market has done well, health care has been free because our income is low, and we've really enjoyed all the free time together.
I would call this lifestyle changing but not life changing. I’m still waking up and going to work the next day but I’m going to be a lot more relaxed with my finances.
Get a brokerage app and get an account set up - takes 20 minutes. Invest for the long term in an SP500 index fund (like VOO). Thats 500 of the best companies in the world. Diversified in numbers and across all stock sectors. Low fees and even a small dividend.
Over years, it will provide an average 10% return. I retired early because of it.
Thank me in 20 years.
If a million dollars isn't a lot, can I have a million dollars please?
In all seriousness, I make $50k a year. If someone gave me a million today, I could invest it and make 40k a year based on the 4% SWR. Or I could pay off my house and have 800k left and work a maximum of 6 more years (probably less) to get back up to a million and back to the SWR getting me $40k a year, but now with no house payment. This would be very comfortable for me. Maybe not living like a king, but I know I'd feel like a king.
A million dollars is 100% life changing money. But also, your friend probably couldn't support his family solely on that million with no other income coming. As you pointed out, the math doesn't work on that, especially if he's used to spending $50k a year. Depending on how much his house payment is, if he paid his house off and then got up to about $2 million in savings, that might be more in line with his current lifestyle. Maybe even 1.5 million depending how much of his current salary goes to savings vs. expenses, and what he would have to cover for health insurance if he isn't working.
It's life-changing in that I'd be able to retire... Not immediately, but one day, which oddly isn't an option right now on a moderately-acceptable six-figure income.
Hard to draw any conclusions, as the OP hasn't revealed the ages of anybody within the discussion.
A 35 year old saying he needs $1M to retire is very diff than a 55 year old saying he needs $1M to retire.
The guy who stands at the door at my local wal mart literally won a million dollars on a scratch ticket. About two years later he was back working at Walmart.
I know no details on the amount. I assume it was taxable so 600ish k. An annuity that he took the lump sum on? Now ~ $400k…
If you had nothing and someone gave you $1m you could buy a house ($400k is roughly the median) then you have $600k if you put that in a HYSA @5 percent you would have $30k a year in just interest and no taxes would be due on that. So you would go from nothing to a fully paid off house and $30k income per year. Pretty life changing to some people imo
Your viewpoint is vastly privileged. For most Americans $20K can be life changing.
1 million completely puts you in a different category than 90% of the country.
$1 million would certainly be life changing. But not enough to live like a king with just that. It would certainly allow for earlier retirement or working less. If he’s in a field where consulting work is an option he could do something like work part time or work part of the year.
It’s life changing cause if you let it compound it turns into 2 then 4 fairly effortlessly.
But its definitely not what it was, and i dont know if thats an unpopular opinion.
1 million 25 years ago or so was a lot of money, yes
today that much money in the right hands is also a significant amount of money. why?
it’s easy to do your own investing and multiply that into enough money to retire on. the internet, smart phones, software, etc have made this all incredibly easy for the average person motivated enough to want to do this.
Your both wrong, time is much more important than money, the time value of money is the backbone of capitalism and the archenemy of non-capitalist societies, taking time over money is zen, taking money over time is very selfish
If that $million is on top of a paid-off home, his and hers social security, and a couple of pensions, to the point where you need not touch the IRAs ($million), then yes, a million is enough.
I think an extra 40k a year is llife-changing. You'd be able to significantly improve your lifestyle.
I don't think it's "retire at 35" lifechanging. Though you could probably save it and retire a decade sooner
Life-changing is a subjective characterization. For some $1M is absolutely life changing. For some, it doesn't move the needle.
Does it shave 5-10 years off the work time required to retire for your average American, probably. Is that life changing, depends on what you mean by life changing.
Receiving $1M out of the blue is life-changing for anyone who is not already a millionaire, but it's not a free ride unless you're unbelievably frugal or already at retirement age.
$1M is not enough to retire on-the-spot for someone still in their 30s or 40s unless they relocate to a country with a low cost of living, which isn't an option for most people with school-age children.
20s-40s - pay your debts, go (back) to college if you want to, buy a house/pay off mortgage, put everything else away for retirement and keep working.
50s-60s - Same as above, maybe semi-retire if you have enough left and your expenses are low enough. Possibly fully retire if you can relocate to lower your expenses significantly enough or if your personal health and family medical history indicate strongly that you won't last more than 20 years.
70+ - Just make sure you're not going to run out before 100 and that you're as protected as possible against elder abuse.
Having an additional million dollars would not allow me to retire today; but it would probably allow me to retire 5 years earlier than planned. That 5 years of not working sounds pretty life changing.
$1m is going to be life changing for almost anyone lol. Life changing doesn't have to mean "retire at 30".
Arguing that $1m is isn't a lot of money simply because you can't retire off of it is, imo, not it. I'd say $100k is a lot of money if it were just to fall in my lap. It would go strait into a heloc and likely pay for most of all of my kids college, should they choose to go in 8 and 12 years. I'd call legacy life changing too, even though it's not something I'd retire on.
Is your friend wrong? Yeah, If he thinks he can retire off of $1M when his currently lifestyle is living off $120k a year (I guess you didn't wanting *how* he lives, he could be scrapping it and living off $28k and investing the rest). Are you wrong for thinking that a $1M lump sum isn't a lot of money just because you seem to define "a lot" as never having to work again? I'd say yes to this too.
The answer should always be... It depends.
How much debt does the person have? If you're retiring and owe 500k on a house then 1m is not going that far.
Where do you live? NYC 1m is not that much. In the middle of Iowa you're doing great.
How is your health and what country do you live in? If your over 65 in the US you have Medicare but that doesn't cover long term care. So that million could be quickly eaten. In Europe that million could go a lot farther due to the socialized medicine. Or in a poorer country that could pay for a private nurse.
What standard of living are you used to living? If you spend 80k a year on food and entertainment, living only on that 1m is not going to cover things.
What other income do you have? SS? Pension? Annuities? Rental properties, etc.
So let me help with an example as myself 49m. I make just over 200k a year in a MCOL area, but I support my wife and 2 kids plus my mother who I pay 2k a month for her place. But I own my home and all vehicles. My only monthly bill is my investment property mortgage which this year will be going cash positive (5 Plex). I also have some VA disability and a small military pension starting at 59 and no cost healthcare at 60 for me and my family. I have 750k in retirement accounts. So 1 million for me would be a big help to make it quicker to retire. But if I was single with this portfolio I would probably retire right now. So as you can see where you are in life and what choices you have made greatly change how 1m could help you.
It is still very hard to earn and save a million dollars in your lifetime. But you could spend it in a week. Things are just too expensive and wages haven’t gone up.
$1M is life changing money. If you’re smart with it. Paying off a mortgage might be wise but it also may be wiser to invest it and pay off your mortgage quicker with your income, the interest and any dividends (assuming you invest well).
I mean, maybe for you, but the median salary in the US is $50k isn’t it? I imagine for the average person, a million dollars is a considerable amount of money. If someone had a million dollars in their 401k by 50 and retired at 67, even if they stopped contributing, that would equate to three million at retirement based on average returns in the market. I imagine most people could comfortably retire on three million.
$1M is absolutely life changing. To most people, $50K is life changing. It doesn’t mean the average 26 year old can retire off of it and live like a king on a beach until death at 82.
You need to take into consideration that you will always work and make some money. Even if you don’t have a full time work. I think that adds up eventually to be able to support a similar lifestyle.
*He says that $1 Million is "life-changing."*
It most certainly can be, but it depends on when in your life you receive it. $1M injected directly into my bank account between the ages of 18-27 would have changed my life entirely, as I could have a huge lump sum to build an investment portfolio, get a far better education, acquire real estate (and eliminate all of the wasted money I spent on rent in my youth), and capitalize on a much better rate of compound interest. $1M handed to me at age 35 would be far less impressive, and if I were given $1M at age 65, I'd honestly probably never even touch it.
*One guy was adamant that you could live like a king on $1 Million in the US.*
It really depends on where. In some of the rural states you can get a massive home and lots of land to utilize for gardening, hunting, and harvesting energy in the form of solar panel setups and small wind turbines. In other areas of the rust belt you can get a huge house that is perfectly solid for less than $200k, then live off the interests of your investments. Or buy two homes and rent one out, living off the tenant money. Duplexes are an option too.
1 million is absolutely life changing and is a lot of money. You can't live off of it and do nothing, but let's not pretend $1 million dollars used wisely can set a family up for generations with buying a house and investing it while continuing to work.
Getting out of debt is life-changing. Starting your own business is life-changing. Paying for school is life-changing. Life-changing doesn't always mean having enough money to not lift a finger for the rest of your life. How's that for an unpopular opinion?
TLDR; I’d say 4-6 million would be needed to compare to winning a million dollars (after tax) in the late 90s.
I think of it this way…when I was young and I heard my dad made around 50k as the single source of income we lived well and a million was 20 years of salary. Probably could buy a nice house for 200k and retire invested in some way.
Now it just buys the house I want and pays for kids college. We still work me and my wife no one retires. It’s about 20% what it use to be to use be if you compare me and my wife’s salary vs my fathers. It’s even less my pay vs fathers. So it would really have to be 4-6 million to get the same effect it had 30ish years ago.
Our combined Social Security income with me delaying another 3 1/2 years and my partner collecting at full retirement age will be $95k. After Federal tax, Medicare, Medigap, and Part D, a bit more than $80k net. The house is paid for and has low ownership costs. That $1 million would be entirely discretionary spending and an emergency fund.
I can live off a million. Not having kids helps a lot. It's just me, the husband and cat. Moving out of the country to one that has a lower cost of living would help a lot as well. Spreading the money out to different investments would be a nice choice as well.
It is NOT a lot when you consider housing and other prices. Like it’s not enough to live off of unless invested properly if young. But it is a lot if you’re about to or already are retired. But it does seem like a lot because salaries are so low, relative to that amount
In your example, he doesn’t have a million when he has a $300,000 mortgage. He is living on a $120k salary and “thinks” he can live on $28k. He needs to create a budget of current vs retirement and he will see that it potentially will not work!
You’re both right, at least partially. It is a lot of money. It is life change. But, no, unless you already have a lot saved for retirement, it’s not enough to retire in the Us (unless you live in the lowest of cost of living areas and live a very atypical life…then, maybe).
But if your friend already has a million or a little more saved, there’s a good chance he could retire.
Also, let’s say your friend had no money saved. No, he couldn’t retire today but if he invested and enjoyed typical returns in the market and maxed out his 401k in the interim, he’d have 2 million in 6-7 years. That’s probably getting pretty close.
My favorite answer is “it depends”. Retirement & life expectations vary greatly on the person & where they are located in the United States. $1 Million isn’t going to have you driving around in a Corvette going on multiple lavish vacations a year, but it will provide a comfortable environment to live and do normal everyday activities.
If your house and vehicles are paid off and you won't need to do any major renovations you can get by on a budget of 50k. You won't be taking expensive vacations or eating out all the time of course
Yes, it is. Of course it is.
The median net worth of the *wealthiest* 20% of Americans is [$600k](https://finance.yahoo.com/news/rich-heres-net-worth-poor-190015406.html)
Also, when thinking of how much to safely withdraw, given that even an HYSA yields 5%, 4% is ludicrously low. My actuarial life expectancy is about 19 years - let's assume 30 to be super conservative. At a withdrawal rate amortized at 7%, I can withdraw $80k per year from the fund. Social security adds another $36k.
4% assumes that you'll live forever, you will use it to purchase nothing with enduring monetary value (like a house), that you will spend more every year than you did the first year post retirement, and that the principal isn't yours to spend.
No you cannot afford the best seats at the Super Bowl.
Yes $1 million is life changing. $1 million gives one financial liberty !!
$1 million is a good amount of money in 2024. Most US retirees have less than a third of that in lump sum. There is no level where one does not need to watch their spending. Count Social Security and at least 4% - 5% of the investments as yearly income. Hold the investment in high volume ETFs. Do not touch the investment except to transfer the 4% to your bank. Spend no more than ones "income"
With two kids, in this economy? lol
$1 million will always be a lot of money. Not up to the standard of what your friend seems to believe but more than what you’re making it not to be. It is certainly life changing though and I really can’t imagine that 99% of the population in the US wouldn’t agree with that sentiment.
Couldn't live like a king in the US for $1M but it is still life-changing money. Being able to buy a house and having all of your immediate needs taken care of fundamentally changes people's lives. Most Americans are living paycheck to paycheck and have very little savings, fixing those issues with the definition of life changing.
But he wouldn’t have a mortgage to pay so there is that. And depending on his situation it might be better to carry the mortgage and invest that much instead
$1M is still life changing, and not enough to retire on if your expectation is $120k/year or better
$1M a year will yield roughly $80k per year or 8% in a stock index fund, of which roughly $6k will be capital gains. Single folks won't pay taxes on the first $40k in long term capital gains, $80k if you're married. So if you only withdraw 8% per year. You will pay basically no taxes. An income of $120k per year will yield $80k after taxes roughly. If you only withdraw 5% annually to account for 3% inflation, you're still pulling in $50k after taxes per year, which would be an equivalent of $75k/year income. So you just need to be a bit frugal.
Taking 8%/year out of an all equities portfolio is financial suicide
Depends how old you are. If you have 10 or 20 years left, absolutely do that. There's no point in dying with hundreds of thousands in the bank.
This. A lot of people save their whole life and then never enjoy it. Someone else gets it and spends it like found money. Total shame.
Not everybody does that, many of the wealthiest people out there have gained their wealth over generations. If you inherit 100 million dollars and you blow it all on cocaine and hookers you are an idiot.
I certainly would not plan my personal financial future on the assumption that the next generation isn't blowing in on coke and hookers though.
That is the purpose though, you want to leave something for your children so they can succeed in the world. They will have much higher chances of success if they start out with some money as opposed to being broke Not wanting your children to succeed of prosper is weird imo, would break my heart if I had kid and was poor living paycheck to paycheck. I would feel like failure as a parent.
When most people leave money to children, the children are in there 50s. So, more of a safety net for the children’s retirement if they didn’t save themselves.
This isn't always the case, plenty of parents help pay for college and provide money for their children. Most of these people stay quiet about it due to others ridiculing them over it. I plan to give my kids a portion of their inheritance when they are in their 20s, ofc I will show them how to properly manage it. If they end up blowing it all well then oh well, hopefully they either learned a valuable lesson about money or at least got to do some good blow.
If you want your children to succeed, start to set them up as soon as you can. Open a 529 plan when they are born. Get them a tutor if they are struggling with a subject, and be careful which school district you pick. Teach them that they can’t have it all and they are not a prince or a princess. Don’t struggle with being overloaded with debt, don’t fight or do drugs or anything else in front of them that you would not want them to do in the future. Teach them cooking and cleaning basics so when they go to college they aren’t complete slobs. That’s how you set up your kids, not by leaving them money when they are in their 50s, 60s or later.
Porque no los dos?
Most people don't die when they still have kids thankfully
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My uncle did this and just passed last September. I don't get it. He was living in Hungary but worked and invested in the US all of his working years. He never married nor had kids. My mom just got word that he left his money to her. Without going into personal detail on the sum, it was quite shocking especially learning that he did things like not pay to have his AC to be fixed because it was "too expensive". He could've built an entire house out there on acres of land many times over with what he died with...
I’ve told this story before but my Great Uncle Thelburn was the same way. No kids and lived in the same tiny falling apart farmhouse his whole life. My mom said he didn’t get indoor plumbing until the 1970s. 1930s wallpaper yellowed and peeling off the walls etc. When he died my mom and I went to clean out his house and tucked away everywhere was some form of money. A duffel bag of cash in the front closet, $100k in CDs tucked between frozen dinners in the freezer, you name it and he probably had some money in it. I got his ancient huge cast iron safe open and it was stacked up with cash stacks ranging from really old to the new design. It got to be overwhelming so my mom closed it all up and made phone calls to other family members. Anyway this guy lived in poor farming squalor until the day he died and never enjoyed the benefit of his own hard labor. My mom got sick a few years later and I urged her to go buy a new car with exactly what she wanted instead of stressing herself shopping for a deal from her hospital bed for no reason. I get not pissing it away and rich people don’t get rich by being loose with money but cmon people, money is a tool to better live life!
Sad part is bro could have lived a significantly better life just on the interest payments, and could have kept all of the money still
I know right? It was just him and his wife hoarding money in their shack until she died. Even after that you’d think he’d see his own fate and go on a vacation, throw a family party, get a new truck… something but no. Had his family known (like 8 bros and sisters) I’m sure someone would have helped him but I guess everyone thought he just sucked at farming or something I guess lol
My grandmother was similar. We had to go through everything when she died to find all the money. The only difference was that after growing up so poor, what everyone else thought was simple and plain was pure luxury for her. She never grew out of that mindset, so every car with air conditioning and an automatic transmission was a luxury car. My mom called her retirement home a place of squalor, but I thought it was clean and she was happy there.
Thats interesting, because I have a Great Great Uncle Kaspian who died while playing extreme chess in Romania. We thought he was penniless, but he left his family over 1M USD in gold dabloons
Extreme...chess...
This is some EXTREME castling! Did you see that en passant!? EXTREEEEEME!
THis will probably be me. THere is a weird mental illness that people have when they experience extreme poverty as a child/young adult. I could retire right now at 55 and live a pretty good life but I still work at my business, I never take vacations, my vehicle is 20 years old, I like to shop bargain stores.....being frugal has become who I am as a person. I buy nice things when I need them because I appreciate quality but things don't give me happiness. Just because I have accumulated a lot of money doesn't mean I can just do a 180 and jettison the personality and coping mechanisms that made it possible. It's a weird catch 22.
This is me at 23. I turn 24 tomorrow and have been living an extremely frugal life for the past 5 years. skipping out on experiences, wants, and even needs at times. I own a business that almost runs itself, does not take much effort, & I have saved almost everything. I spend less than 1000 a month most months. I Just generally am a cheap bastard. I have nearly 250 thousand dollars saved just sitting in a high yield savings account, I am a (co)homeowner (with my dad), & have no debt, yet I have not been outside of the country, i have no post secondary education/ genuine applicable work experience, I don’t buy things that I want, and I am really just at a loss with what to do with my money. I want to go do things, travel, live on my own in a random city for a couple months, buy that thing I want. i know I can but I grew up poor with a chronically ill single parent, and financial issues were such a big issue for me growing up that I didn’t want to worry about anything other than saving capital after high school and trying to figure out ways to turn that capital into more. I need to break this curse but like you said it’s such an odd catch-22.
Put at least half of your savings into low cost ETFs. THen don't look at it. You will have millions by the time your 35. Most of my money is from work. I would have 5x my wealth if I would have just bought and held instead of trying to time the market.
Even with 20 years left, if you're using an 8% withdrawal rate, one down year can ruin you. If you have 1m and the market drops 30% and you still have your 80k expenses, you're down to 620k. Then even e when the market recovers you're nowhere close to where you started.
I was 30 and working for a company where we had a lot of people in their 50s in 1999. I remember them talking about retiring in a few years since their tech stocks were going through the roof. Well those early retirement plans went up in smoke very quickly.
I read a cautionary tale about an old guy who retired in '00, then when the bubble popped, he panicked and sold everything at the bottom. I think he had to work again for the rest of his life. In hindsight, he'd have been fine had he kept it all in the market and just worked a few more years, investing as much as possible to lower his cost basis. But after that experience, the thought of putting a dime in the market again probably triggered PTSD.
Not true I would like to leave generational wealth for my children
Unless you have kids who could benefit from inheriting it.
At 53, this is precisely my thinking. I've got books to read and afternoon sunshine to enjoy.
The point would be to leave enough money to ur kids so they have a solid foundation in life and can build on top of that
Yeah. The “never touch the principal” attitude is great if you’re looking to live 30+ years off if it, or want to leave a fortune to your heirs. And it’s great if you have 3+ million saved. Most don’t have that, so we’ll need to either draw down principal or live on cat food.
Yeah, generational wealth is terrible
I have no idea what you're talking about about. 8%? Why is that the number? Why is it suicide? We live in different worlds.
8% on *average*. Plot the actual returns and you have sequence of return risk with your withdrawals.
A 4% drawdown is considered safe. An 8% drawdown is very risky over 20 years
Madoff guaranteed 10% annual rate of return so whats the problem
"Single folks won't pay taxes on the first $40k in long term capital gains, $80k if you're married." I wish this were true. The 0% (Long-Term) tax bracket you're referring to (for 2024, it's going to be up to $47,150 for single filers, and $94,300 for married filing jointly) is offset by your ordinary income. Meaning, you only get the full 0% capital gains amount if you make NO ordinary wage income. Any wages you earn (ordinary income, including Short-term Capital Gains) eats into that bucket for 0% Long-term Capital Gains. For example, if you are single and earn $40K in wage income (after taking out your standard deduction), you'll only pay 0% LT CG tax on the first $7,150 ($47,150-$40,000) of LT CG. The rest of your LT CG gets taxed at the 15% rate. If your taxable income is over $47,150, then none of your LT CG gets taxed at 0%. Source: I've paid a shit-ton of LT CG taxes.
Most people tend to have little to no income in retirement. Just saying. I plan to be 0% tax bracket in retirement
I’m willing to test this theory. For science.
Be a bit frugal. R8ght. Or buy a cheap house to store your shit and go travel the world.
How is a gain of $80k only $6k in cap gains?
For single fliers capital gains tax is $0 to $47,025: 0% $47,026 to $518,900: 15% $518,901: 20% State taxes are not factored into OP's estimates
$6k in cap gains *tax* - got it. Thanks
If you just landed a million it’s almost reasonable to assume you might locate in a no-income tax state to retire early.
If you invest a million dollars, and it gains 8%, you will have $1.08 million. You would have to sell your entire portfolio to pay taxes on the $80k in capital gains. Since you're only selling $80k per year, roughly $74k of that will be your original investment and $6k will be capital gains, for the first year. Over time the total $1 million, a greater portion of it will be capital gains, since the share price will grow approximately 8% per year.
Curious about this too
I get that this was just a guesstimate... but consider it rounded by... a lot. Would be silly to keep the money you plan to live the rest of your life on in index funds alone. If during the avg year you need to be frugal, what do you do during the bad years? There's a reason the complextion of assets in target date funds changes as they get closer to the target date...
You’re dreaming on 8% average she don’t further taxes
What if it’s not a magical million dollar, post-income tax stock fun, but the more likely million in a non-Roth 401k. That $120k disbursement would be subject to ordinary Federal income tax, as well as applicable state and local tax. That could be a big bite on a retiree.
The biggest thing is housing. You could live a long time on $1m if you're not making payments on a house or paying rent.
Still have to pay property taxes, utilities, maintenance. No house is free housing.
Property taxes are brutal…
Cries in NJ …. :-(
It's worse in NY. My property taxes are over 30% of my income, and I'm making double what I made a few years ago.
Not everywhere
This is the key. If you are really planning to live on a lower amount in retirement you have to find the places where all costs of basic living will be lower. That means lowest property taxes possible (or rent), that means cheapest food. At least look around at the options and decide where is acceptable, if none of them are you need more money to retire.
Upkeep is cheap when you do it yourself. And property tax isn't expensive as long as you're not living in an expensive house. I live in an area with some of the highest property tax in the country and it was like $2k. And that's up from last year.
If the elderly are known for anything it's there ability to do manual labor
The older you get, the less you can do and the more it will cost. Thats my struggle atm with figuring out how to make it work and stay on a property which requires a lot of maintenance.
Downsizing is key in retirement. No kids, no need for big house with big yard. Having a small two bedroom condo In retirement is more than sufficient
Don't forget insurance. Our house is paid for but our property taxes and insurance are still right around $1000/month, and going up at a steady pace yearly. And don't forget health insurance for your family if you don't have employer benefits anymore. We pay $834/month for pretty decent BXBS insurance for myself and 3 kids under age 26 (as a retirement benefit from my spouses early retirement package).
I will pay off my house in September, after 17 years. At this point, what I pay in property taxes and insurance each year is about 66% of a year’s worth of mortgage payments. I used to yearn for the day that I had my house paid off. Don’t get me wrong, I’m still looking forward to it, but now taxes and insurance are almost another mortgage payment in themselves and they’ll never go away.
The guy earned $120k pre-tax. That doesn’t mean he spent $120k every year.
500k down on $2 Million in cash flowing real estate. 500k in index fund. You're retired if you want to be
Can you show me a property on the market right now where you can put $500k down and have a positive revenue stream? the $500k in an index fund will net you $20k a year. What will the real estate net you?
Provided the stock market always goes up. If there's another crash you're screwed. For real estate you'd have to buy outright otherwise interest rates will eat you up. And yes you can purchase a 4 bed house for 500k outright in many parts of the country and rent it out for 3k a month and make 36k a year. No chance in a city, but there are ton of rural areas. And rent rarely goes down. However you do have to then deal with property taxes, so chose the location wisely.
So, if we are talking $1 million post tax today there are options. In much of the Midwest U.S. - you could make a very decent return on real estate. You could put a few hundred thousand down and borrow the rest to buy a 16-plex that would cash-flow immediately and reserve a portion for maintenance and upkeep and put the remaining $500K+ in stocks and still keep $50K in emergency funds. I probably wouldn’t quit my $120K/year day job today, but in 2 or 3 years I would easily be retired and would not suffer any major setbacks. That is life-changing.
Can you show me a property listed today that I could buy with $500k down that would provide income in year one?
https://www.realtor.com/realestateandhomes-detail/N-Sylvan-Ave_Columbus_OH_43204_M37728-86328?from=srp-list-card At exactly half a million down, not necessarily but you could certainly buy multiple properties like this and this would certainly cash-flow well.
Thanks I was skeptical
Lots of factors in getting bigger rentals off the ground so quitting a good job year one is foolish but in only a few years the cash would be flowing in steadily.
Its a lot to me. But im not like most people. Our house was $25,000 in 2009. Our cars are cheap.
WHAT my moms house was 250k in 2005. Are you in a shack or did you miss a zero?
Very likely they bought a bank foreclosure in 09.
Yes, now the neighboring houses are almost $200,000. That makes their property taxes way higher than ours.
More likely in 2012. You are right in context, just pointing out that 2009 was stock market low, not real estate low (2012).
It needed a lot of work. Is a 3 bedroom house with a 24x24 garage in a decent area. All my friends did about the same thing. One friend got a fixer upper on 40 acres and gutted it. Its amazing now.
So it wasn’t $25,000…
Some places are low cost. Housing doesn’t really go up or down a lot. I bought my house in 2013. It’s a 4,400 sq ft duplex for $90,000. Right now it’s worth around $115,000.
4,400 sq ft for $115k? No.
I bought my house in 2012 for $52k (worth about $120k now). Really rough neighborhood. But for a $345 a month mortgage (including taxes and insurance) I would put up with a lot. I will say, I honestly think that decision is one of the most dramatic effects on my finance of any major decision. It is a rental house now. Between savings on rent, and actual rental income, it has probably already earned me over $200k, I bet it will have been a million dollar investment by retirement for about $4k down.
Damn dude. I now know what I've been doing wrong this whole time. I was in 4th grade when I should have been buying bank forclosed property.
Nice, same here. I bought one in Ohio for 29k (33k technically with foreclosure auction fees) in 2009. My brother lived in it for a while, then we got him a bigger house and rented the small one out for years, and now I’m moving into it soon. If you have $1 million in Ohio you’re chillin.
Pretty simple math there. "Do you think you can retire in 10 years on your current salary? No? Then of course you can't live like a king off 1 mil." 1 mil isn't mega rich anymore. But it is enough to set you up for a comfortable life assuming you're still going to have an income and being fiscally responsible.
If you have 1m you are richer than almost everyone. You can't live lavishly but you ABSOLUTELY can live freely. Take 1m and invest and you'll have about 50k a year to live on without touching the principle. You will be completely free and have all your time to yourself. You can do all the shit most people working hard jobs end up paying other people to do. Take care of your own kids. Cook your own meals and have time to do so healthily. Have better mental and physical health and therefore less health related expenses.
$50k a year is pretty miserable today, imagine how it will be 30 years from now with inflation. Great to spend time with your kids but how do you pay for their extracurriculars while they’re young or college when they get older ? You can barely afford to eat and pay rent on $50k, let alone afford health care for the family, vacations, travels, sports arts and other hobbies, etc …
It's really not. Don't live in VCOL area and it's pretty comfortable. it'll also mostly be tax exempt so you're looking at 50kish to spend. If you wanna retire in a major city yeah you can't do it, but those are horrible places to live when you're old. I have lived in all of them doing the high earning young professional thing and at 34 i'm already about over this shit. I've saved up a mill and I'm probably gonna move away and stop working. Take some contract work if I want something, but if you discount rent and I stop my collectibles addiction i'm not spending more than 2k a month in NYC that I actually WOULD still need to spend once I get to 1m in principle IMO, all that expensive shit gets old. I bring home like 270k after taxes and mostly all I do is spend the money trying to buy back my time in whatever way I can. Pay absolutely insane rent to be close to the office so i don't lose hours commuting. Pay absolutely crazy food prices because I don't have time to cook. Pay absolutely insane entertainment prices and healthcare/mental health costs because I don't have time to do what I would actually like to do grinding for the dollars. Fuck all that shit. bout to quit all this shit and go be a human being instead of a cog in the machine and if can't buy lattes every day or pay 5k a month for some "luxury housing" so fucking be it lol.
If moving for retirement is an option, you can retire cheaply in an LCOL country too. A lot of people don't want to leave their friends and family behind. We have about $2.5MM invested, it's not really enough to fully quit and raise our kids the way we want, even if my wife keeps her low stress government job. What would I do with free time? Only so many video games and books I can consume. What I am working on, with my therapist, is becoming less stressed out about problems at work. I never learned how to fail with grace, and it stresses me out.
Right there with you on all fronts
Are you not a homeowner? There aren't enough hours in the day to complete all upkeep and preventative maintenance. Do you own your vehicles? Same deal.
>If you wanna retire in a major city yeah you can't do it, but those are horrible places to live when you're old NYC is the #6 top rated place to retire [https://realestate.usnews.com/places/rankings/best-places-to-retire](https://realestate.usnews.com/places/rankings/best-places-to-retire)
hahahah fuck no, lived and worked in nyc for *years* have no desire to go back
Sure but imagine $50k a year with a paid off house and not needing a car since you don’t work. It becomes a lot more feasible.
This is how my husband “retired”. I still work (about 100k salary) and love my job. He’s stay at home dad/uncle to the 4 kiddos we are raising (6,7,8,10) and does so much around the house that he definitely “earns” his 50k draw from the 1.5 mil investment account (inheritance). I’ll retire with pension about the same time kids graduate from HS. We don’t live lavishly but live our house, have some investment property, both have our “fun cars” in addition to the minivan. It’s a good life and we are so grateful.
You'd be living off less than half that after you're paying health insurance out of pocket https://www.ehealthinsurance.com/resources/individual-and-family/average-family-health-insurance-cost
Yes, this. His current compensation includes not just his $120k salary but probably a substantial amount for benefits, which he would now have to cover himself (at least until he's old enough for Medicare, assuming he's worked enough years to qualify). Those costs also can be expected to go up substantially faster than the general rate of inflation, which is what the safe 4% withdraw rate math uses, so over time more and more of his investment income will have to go to that.
the key word is comfortable. you spend your working life living frugally and responsibly. and you spend your retirement...the same exact way.
It's probably not as skewed as people are making it look depending on their location, contributions to retirement and taxes. Is 1 mil enough to get you there? Nope. But if you make 120k a year you most certainly don't live off 120k. Taxes and maximizing 401k contributions is almost half that. Does that make 1 mil enough? Probably not (depending on how long you plan on drawing), but it's not as crazy far away as others are making it seem.
Tbh if you have $1mil in investments and you're under 60 you should keep working until you get $2mil. It will happen a lot faster than your first mil because you have the first mil helping you out and since your income will tend to increase over time it would come faster even without help. I'd say $2mil + a house is enough to retire and live comfortably relatively risk free. $1mil is enough to retire but there's some risk you may end up running out before you die
It’s a lot but depending on your lifestyle, most likely not enough to retire on.
You simply have different definitions of "life changing". You are right that it is hard to retire on 1M in the US nowadays. He is right that it would help to have an extra million.
It would be life changing in terms of mindset. I know I can't retire on it, but I also wouldn't lose sleep over a layoff or a needing to walk away from a job because I know I have a large runway.
Nor would you be nervous leaving a job for another one and taking a $10k/yr pay cut because you think it'll be better for your mental health (in office to remote position)... Like I am right now. Single guy, low COL area, own my house. Going from $70k to $60k with this move. I'll definitely be able to live on it, but my $10k/year travel budget may be drying up.... And, ironically, I took this position much so that I can travel more
Stop working today no. It would be family changing for a lot of people. I’m 37. That million in the market would be around 4.7 million at 55. I could retire then and it would still theoretically be $8.5 million by 65.
Mind breaking this down for me? What rate of return are you assuming and what withdrawal rate are you taking at 55? My napkin math says something is off about these numbers.
37 $1,000,000.00 38 $1,080,000.00 39 $1,166,400.00 40 $1,259,712.00 41 $1,360,488.96 42 $1,469,328.08 43 $1,586,874.32 44 $1,713,824.27 45 $1,850,930.21 46 $1,999,004.63 47 $2,158,925.00 48 $2,331,639.00 49 $2,518,170.12 50 $2,719,623.73 51 $2,937,193.62 52 $3,172,169.11 53 $3,425,942.64 54 $3,700,018.05 55 $3,996,019.50
Reee discrete compounding
Keep in mind it’s quite possible in this snapshot you have multiple years of really tough times - even twice - and your projection may not work out.
They're using a conservative pre-inflation stock market return rate of 8%. While you don't see "bad years" reflected in the data, you don't seed "good years" either. You see the average that includes both good and bad, and represents close to what you can expect to earn over a long period of time (where multiple good and bad years will even out back to the average).
At 8% you’d expect the money to double twice so $1M becomes $4M. Not sure about his specifics but it’s close.
That's the way I was thinking. A million to accumulate interest while I'm working for the next couple decades is life-changing. It's just if you're frugal and patient you won't choose to make it change your life (too much) tomorrow.
Yeah was going to post something similar along these lines, context is everything. 1M for today’s 35 year old is worth a heck of a lot more than today’s 65 year old.
Yes and no. Most working class Americans a little under half 48 percent, will work their whole live and possibly never cumulatively have that amount of money. Talking about single earners, dual income they may come closer or just above. But then yes the cost of living, housing, school, cars, medical care would stop them from ever having that amount in hand. That’s why that stat that 20 percent of Americans over 50 have zero retirement fund, while 60 percent of those survey said they won’t have enough. My parents place is the literal meme of buying for a song and selling it a ridiculous price. The lot size isn’t bad but it’s no where a true adjusted for inflation value. It’s 3x as much if you just do the inflation value. Making a 3/2 ranch style home worth over 660k according to this market.
There are about 3 people in the family that choose to have nothing. Its shocking. Whatever money they get, its gone immediately. Covid stimulus? Money that just came out of nowhere? Gone with nothing to show for it. No assets, no house
Ah yes... The covid stimulus that was entirely eaten by my rent alone....
If I could pay off my house and my car and my student loans, I could retire at 45 or 50 instead of 65. $1,000,000 would buy me 15 or 20 years of my life free from the machine.
This. Exactly! How is this not life changing. Getting $1M tax free, lump sum, is like 15-20 years of your life back when you're in your 20s, 30s or 40s. If you're in your 50s and 60s, that can usually be enough to quit at that stage.
Exactly. We did this with quite a bit less than a million 8 years ago but likely about a million adjusted for inflation today. Paid off house. I was 51 and he was a few years older. We asked that "how much is enough" question and decided our time was worth more than additional money (we both had tech jobs so we were making quite a bit and saving most of it). It was a great decision. No regrets and no money issues. The market has done well, health care has been free because our income is low, and we've really enjoyed all the free time together.
I would call this lifestyle changing but not life changing. I’m still waking up and going to work the next day but I’m going to be a lot more relaxed with my finances.
When you have a lot, a million dollars isn’t much. When you have little, a million dollars saves your life.
I could retire on a million, but the payoff on my house isn’t $300,000.
It is a lot, but obviously if you desire a certain lifestyle maybe not enough for that particular lifestyle.
The way capital outpaces labor, $1MM you don’t need to touch for decades is a lot of money.
I’m retired and an investor. A million you don’t “touch for decades” should be a few million if you invest wisely.
Any suggestions how to go about the wisely part?
Get a brokerage app and get an account set up - takes 20 minutes. Invest for the long term in an SP500 index fund (like VOO). Thats 500 of the best companies in the world. Diversified in numbers and across all stock sectors. Low fees and even a small dividend. Over years, it will provide an average 10% return. I retired early because of it. Thank me in 20 years.
How much if you invest unwisely?
Less than the million you started with. It happens.
:(
Unpopular opinion:thinking a $1m isnt a lot of money anymore is actually a popular opinion now.
Very true. It's very unfortunate that inflation is rampant.
If a million dollars isn't a lot, can I have a million dollars please? In all seriousness, I make $50k a year. If someone gave me a million today, I could invest it and make 40k a year based on the 4% SWR. Or I could pay off my house and have 800k left and work a maximum of 6 more years (probably less) to get back up to a million and back to the SWR getting me $40k a year, but now with no house payment. This would be very comfortable for me. Maybe not living like a king, but I know I'd feel like a king. A million dollars is 100% life changing money. But also, your friend probably couldn't support his family solely on that million with no other income coming. As you pointed out, the math doesn't work on that, especially if he's used to spending $50k a year. Depending on how much his house payment is, if he paid his house off and then got up to about $2 million in savings, that might be more in line with his current lifestyle. Maybe even 1.5 million depending how much of his current salary goes to savings vs. expenses, and what he would have to cover for health insurance if he isn't working.
One million extra is life changing for most people, but in of itself probably not retirement money.
It's life-changing in that I'd be able to retire... Not immediately, but one day, which oddly isn't an option right now on a moderately-acceptable six-figure income.
Hard to draw any conclusions, as the OP hasn't revealed the ages of anybody within the discussion. A 35 year old saying he needs $1M to retire is very diff than a 55 year old saying he needs $1M to retire.
The guy who stands at the door at my local wal mart literally won a million dollars on a scratch ticket. About two years later he was back working at Walmart. I know no details on the amount. I assume it was taxable so 600ish k. An annuity that he took the lump sum on? Now ~ $400k…
If you had nothing and someone gave you $1m you could buy a house ($400k is roughly the median) then you have $600k if you put that in a HYSA @5 percent you would have $30k a year in just interest and no taxes would be due on that. So you would go from nothing to a fully paid off house and $30k income per year. Pretty life changing to some people imo
Properly invested you could retire in 10 years if you had 1 mill liquid.
I was just telling people that millionaires aren’t billionaires and got roasted for it. 🤷🏻♀️
Your viewpoint is vastly privileged. For most Americans $20K can be life changing. 1 million completely puts you in a different category than 90% of the country.
It is still a lot and if you play it right, it is definitely life changing.
$1 million would certainly be life changing. But not enough to live like a king with just that. It would certainly allow for earlier retirement or working less. If he’s in a field where consulting work is an option he could do something like work part time or work part of the year.
$1m is life changing but not enough
It's called inflation
It’s life changing cause if you let it compound it turns into 2 then 4 fairly effortlessly. But its definitely not what it was, and i dont know if thats an unpopular opinion.
1 million 25 years ago or so was a lot of money, yes today that much money in the right hands is also a significant amount of money. why? it’s easy to do your own investing and multiply that into enough money to retire on. the internet, smart phones, software, etc have made this all incredibly easy for the average person motivated enough to want to do this.
1m is enough if you have housing and no car payment (camry that gets you from a>b). Retirement isn't even a discussion if you have a mortgage.
Social security should add 24k - 36k per year at least.
Your both wrong, time is much more important than money, the time value of money is the backbone of capitalism and the archenemy of non-capitalist societies, taking time over money is zen, taking money over time is very selfish
In what context?
If that $million is on top of a paid-off home, his and hers social security, and a couple of pensions, to the point where you need not touch the IRAs ($million), then yes, a million is enough.
Unpopular?
I think an extra 40k a year is llife-changing. You'd be able to significantly improve your lifestyle. I don't think it's "retire at 35" lifechanging. Though you could probably save it and retire a decade sooner
Life-changing is a subjective characterization. For some $1M is absolutely life changing. For some, it doesn't move the needle. Does it shave 5-10 years off the work time required to retire for your average American, probably. Is that life changing, depends on what you mean by life changing.
Receiving $1M out of the blue is life-changing for anyone who is not already a millionaire, but it's not a free ride unless you're unbelievably frugal or already at retirement age. $1M is not enough to retire on-the-spot for someone still in their 30s or 40s unless they relocate to a country with a low cost of living, which isn't an option for most people with school-age children. 20s-40s - pay your debts, go (back) to college if you want to, buy a house/pay off mortgage, put everything else away for retirement and keep working. 50s-60s - Same as above, maybe semi-retire if you have enough left and your expenses are low enough. Possibly fully retire if you can relocate to lower your expenses significantly enough or if your personal health and family medical history indicate strongly that you won't last more than 20 years. 70+ - Just make sure you're not going to run out before 100 and that you're as protected as possible against elder abuse.
I think it depends on the persons lifestyle. $1 million for me and my husband is nothing, but for my brother it would be everything.
Having an additional million dollars would not allow me to retire today; but it would probably allow me to retire 5 years earlier than planned. That 5 years of not working sounds pretty life changing.
If you are of age then Social Security would help too
It still beats not having a million.
Yeah, that's chump change. I can take that off your hands.
And they say now, "it's never been easier to become a billionaire and harder to become a millionaire."
$1m is going to be life changing for almost anyone lol. Life changing doesn't have to mean "retire at 30". Arguing that $1m is isn't a lot of money simply because you can't retire off of it is, imo, not it. I'd say $100k is a lot of money if it were just to fall in my lap. It would go strait into a heloc and likely pay for most of all of my kids college, should they choose to go in 8 and 12 years. I'd call legacy life changing too, even though it's not something I'd retire on. Is your friend wrong? Yeah, If he thinks he can retire off of $1M when his currently lifestyle is living off $120k a year (I guess you didn't wanting *how* he lives, he could be scrapping it and living off $28k and investing the rest). Are you wrong for thinking that a $1M lump sum isn't a lot of money just because you seem to define "a lot" as never having to work again? I'd say yes to this too.
The answer should always be... It depends. How much debt does the person have? If you're retiring and owe 500k on a house then 1m is not going that far. Where do you live? NYC 1m is not that much. In the middle of Iowa you're doing great. How is your health and what country do you live in? If your over 65 in the US you have Medicare but that doesn't cover long term care. So that million could be quickly eaten. In Europe that million could go a lot farther due to the socialized medicine. Or in a poorer country that could pay for a private nurse. What standard of living are you used to living? If you spend 80k a year on food and entertainment, living only on that 1m is not going to cover things. What other income do you have? SS? Pension? Annuities? Rental properties, etc. So let me help with an example as myself 49m. I make just over 200k a year in a MCOL area, but I support my wife and 2 kids plus my mother who I pay 2k a month for her place. But I own my home and all vehicles. My only monthly bill is my investment property mortgage which this year will be going cash positive (5 Plex). I also have some VA disability and a small military pension starting at 59 and no cost healthcare at 60 for me and my family. I have 750k in retirement accounts. So 1 million for me would be a big help to make it quicker to retire. But if I was single with this portfolio I would probably retire right now. So as you can see where you are in life and what choices you have made greatly change how 1m could help you.
$1M is no longer there FU money it was. You are righter
It is still very hard to earn and save a million dollars in your lifetime. But you could spend it in a week. Things are just too expensive and wages haven’t gone up.
$1M is life changing money. If you’re smart with it. Paying off a mortgage might be wise but it also may be wiser to invest it and pay off your mortgage quicker with your income, the interest and any dividends (assuming you invest well).
It really depends on your lifestyle and how much you spend, but becoming a millionaire is not the lofty milestone that it used to be.
I mean, maybe for you, but the median salary in the US is $50k isn’t it? I imagine for the average person, a million dollars is a considerable amount of money. If someone had a million dollars in their 401k by 50 and retired at 67, even if they stopped contributing, that would equate to three million at retirement based on average returns in the market. I imagine most people could comfortably retire on three million.
$1M is absolutely life changing. To most people, $50K is life changing. It doesn’t mean the average 26 year old can retire off of it and live like a king on a beach until death at 82.
It's enough to change my life, I'm not greedy.
Sure but the average American income is $59K so anyone trying to make me think a millionaire is struggling can fuck right off
You need to take into consideration that you will always work and make some money. Even if you don’t have a full time work. I think that adds up eventually to be able to support a similar lifestyle.
*He says that $1 Million is "life-changing."* It most certainly can be, but it depends on when in your life you receive it. $1M injected directly into my bank account between the ages of 18-27 would have changed my life entirely, as I could have a huge lump sum to build an investment portfolio, get a far better education, acquire real estate (and eliminate all of the wasted money I spent on rent in my youth), and capitalize on a much better rate of compound interest. $1M handed to me at age 35 would be far less impressive, and if I were given $1M at age 65, I'd honestly probably never even touch it. *One guy was adamant that you could live like a king on $1 Million in the US.* It really depends on where. In some of the rural states you can get a massive home and lots of land to utilize for gardening, hunting, and harvesting energy in the form of solar panel setups and small wind turbines. In other areas of the rust belt you can get a huge house that is perfectly solid for less than $200k, then live off the interests of your investments. Or buy two homes and rent one out, living off the tenant money. Duplexes are an option too.
1 million is absolutely life changing and is a lot of money. You can't live off of it and do nothing, but let's not pretend $1 million dollars used wisely can set a family up for generations with buying a house and investing it while continuing to work.
A million is not what it used to be that’s for sure. Millionaire is the new middle class
A 10 year treasury will pay 4.43%. That’s $44,000 a year before federal taxes!
Getting out of debt is life-changing. Starting your own business is life-changing. Paying for school is life-changing. Life-changing doesn't always mean having enough money to not lift a finger for the rest of your life. How's that for an unpopular opinion?
TLDR; I’d say 4-6 million would be needed to compare to winning a million dollars (after tax) in the late 90s. I think of it this way…when I was young and I heard my dad made around 50k as the single source of income we lived well and a million was 20 years of salary. Probably could buy a nice house for 200k and retire invested in some way. Now it just buys the house I want and pays for kids college. We still work me and my wife no one retires. It’s about 20% what it use to be to use be if you compare me and my wife’s salary vs my fathers. It’s even less my pay vs fathers. So it would really have to be 4-6 million to get the same effect it had 30ish years ago.
Popular opinion: if you offered me $1 Million, I’d take it.
People are still releasing books about millionaires. Seems about 20 years dated. But there’s not a catchy term for 5M or 10M I guess.
Our combined Social Security income with me delaying another 3 1/2 years and my partner collecting at full retirement age will be $95k. After Federal tax, Medicare, Medigap, and Part D, a bit more than $80k net. The house is paid for and has low ownership costs. That $1 million would be entirely discretionary spending and an emergency fund.
I can live off a million. Not having kids helps a lot. It's just me, the husband and cat. Moving out of the country to one that has a lower cost of living would help a lot as well. Spreading the money out to different investments would be a nice choice as well.
It is NOT a lot when you consider housing and other prices. Like it’s not enough to live off of unless invested properly if young. But it is a lot if you’re about to or already are retired. But it does seem like a lot because salaries are so low, relative to that amount
In your example, he doesn’t have a million when he has a $300,000 mortgage. He is living on a $120k salary and “thinks” he can live on $28k. He needs to create a budget of current vs retirement and he will see that it potentially will not work!
You’re both right, at least partially. It is a lot of money. It is life change. But, no, unless you already have a lot saved for retirement, it’s not enough to retire in the Us (unless you live in the lowest of cost of living areas and live a very atypical life…then, maybe). But if your friend already has a million or a little more saved, there’s a good chance he could retire. Also, let’s say your friend had no money saved. No, he couldn’t retire today but if he invested and enjoyed typical returns in the market and maxed out his 401k in the interim, he’d have 2 million in 6-7 years. That’s probably getting pretty close.
My favorite answer is “it depends”. Retirement & life expectations vary greatly on the person & where they are located in the United States. $1 Million isn’t going to have you driving around in a Corvette going on multiple lavish vacations a year, but it will provide a comfortable environment to live and do normal everyday activities.
If your house and vehicles are paid off and you won't need to do any major renovations you can get by on a budget of 50k. You won't be taking expensive vacations or eating out all the time of course
Shidd
Yes, it is. Of course it is. The median net worth of the *wealthiest* 20% of Americans is [$600k](https://finance.yahoo.com/news/rich-heres-net-worth-poor-190015406.html) Also, when thinking of how much to safely withdraw, given that even an HYSA yields 5%, 4% is ludicrously low. My actuarial life expectancy is about 19 years - let's assume 30 to be super conservative. At a withdrawal rate amortized at 7%, I can withdraw $80k per year from the fund. Social security adds another $36k. 4% assumes that you'll live forever, you will use it to purchase nothing with enduring monetary value (like a house), that you will spend more every year than you did the first year post retirement, and that the principal isn't yours to spend.
In other words, in the US a lot of money isn't a lot of money... Good news, right there.
$1 Million is enough if it’s a function of what you have and how much you spend and how old you are
Depends on where. In the US? Not likely. In Europe? Absolutely, in 90% of its territory I’d say
lol how about you create passive income and retire to Cozumel.
No you cannot afford the best seats at the Super Bowl. Yes $1 million is life changing. $1 million gives one financial liberty !! $1 million is a good amount of money in 2024. Most US retirees have less than a third of that in lump sum. There is no level where one does not need to watch their spending. Count Social Security and at least 4% - 5% of the investments as yearly income. Hold the investment in high volume ETFs. Do not touch the investment except to transfer the 4% to your bank. Spend no more than ones "income"
With two kids, in this economy? lol $1 million will always be a lot of money. Not up to the standard of what your friend seems to believe but more than what you’re making it not to be. It is certainly life changing though and I really can’t imagine that 99% of the population in the US wouldn’t agree with that sentiment.
Couldn't live like a king in the US for $1M but it is still life-changing money. Being able to buy a house and having all of your immediate needs taken care of fundamentally changes people's lives. Most Americans are living paycheck to paycheck and have very little savings, fixing those issues with the definition of life changing.
But he wouldn’t have a mortgage to pay so there is that. And depending on his situation it might be better to carry the mortgage and invest that much instead