Hi Dex,
Often the retirement decision is a high anxiety event because of portfolio performance uncertainty. If the retirement depends on a portfolio drawdown, a few bad years can do lasting damage.
There are plenty of millionaires in the USA. In very rough numbers (it changes so precision gives a false signal), the Millionaires Club is about
5% of US households. Since there are about 123 million households in the US, there are about 6.2 millionaire households. These households are not evenly distributed across the Country. Here is a recent estimate map published in the WSJ:
http://blogs.wsj.com/economics/2014/01/16/where-are-the-u-s-s-millionaires/The Southern states are at the bottom of the heap. The likelihood of a millionaires household increases with age, with education, with being married, and with multiple wage earners in a household. No great surprises. About one-third to one-half of millionaires are in households below typical retirement ages. Here is a Link that makes that claim (see chart 4):
http://taxfoundation.org/article/who-are-americas-millionairesHowever, when retiring, sometimes “A Million is Not Enough”. That’s the title of a book by financial advisor Michael K. Farr. But the real answer depends upon many individual factors that can not be adequately addressed in any book.
Many of these individual factors can be nicely addressed by exercising retirement planning tools that are accessible on the Internet. I have referenced these resources frequently on MFO, and am not reluctant to do so again. I am a fan of these tools since they help to reduce retirement planning anxiety, especially when Monte Carlo analyses capabilities are integrated into their toolkits.
One of my favorites is The Flexible Retirement Planner site. Here is the Link:
http://www.flexibleretirementplanner.com/wp/The workhorse tool on this site is its Monte Carlo simulator. Please give it multiple test runs for your specific circumstances. Exploring “what-if” scenarios will increase a user’s understanding of what is influential, what actions are positive, and what options are harmful.
A more barebones Monte Carlo simulator, with many fewer options, is available on the MoneyChimp website. Here is the Link to it:
http://www.moneychimp.com/articles/volatility/montecarlo.htmThe MoneyChimp code inputs can’t be made more simple. You get to choose your own tool. I might test both resources because both are efficient time-wise.
The bottom-line output from either simulator is the probability of success (avoiding portfolio bankruptcy). There are many actionable options to move the likelihood into an acceptable green-coded probability zone. This is a terrific planning tool, and should make a final decision just a little more comfortable and definitely more reliable.
Knowing how to become a millionaire is not a mystery; the discipline to achieve that goal is yet another matter. The ball is in your court. I wish you good planning, a good decision, and good luck.
Best Regards.
