Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
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:
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):
However, 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:
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:
The 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.
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:
The Millionaire Club numbers are hard to assemble. Different agencies use different methods. Therefore, the final quoted numbers vary. They should be interpreted as informed estimates.
In the referenced article, the WSJ credited the Phoenix Marketing International corporation as its source. Their exact method is proprietary. It includes investment and work related income sources, but does not include primary home residence.
The main thrust of my post was to get you to use the Monte Carlo tools to explore portfolio adjustments that might give you a chance to reach your goals. You might need to be more or less aggressive depending on your present status. Other Millionaires and their approaches are a sideshow.
>> That means 1 in every 20 households in the U.S. has more than $1 million in investable assets. Those figures don’t include the value of real estate.
>> That means 1 in every 20 households in the U.S. has more than $1 million in investable assets. Those figures don’t include the value of real estate.
I go back and forth on this issue. 5% investable assets sounds high. Then again I think about the distribution by age and inflation. The early baby boomers 45 to 64 could have accumulated a lot of money.
"The study, from market research and consulting firm Spectrem Group, found that there are now 10.1 million households in the U.S. with $1 million or more in investable assets, excluding the value of their primary residence."
This more recent study by another research firm yields an even higher percentage in the USA Millionaires Club. The Spectrem's number is 8.2 %.
After doing the requisite research, your "feelings" on the matter are not relevant. The facts command the day. As J.M. Keynes observed "when the facts change, I change my mind. What do you do, Sir?"
In this instance the facts have not even changed; They've been confirmed. I suggest you toss your feelings on this subject in the junk heap. I'm puzzled by your reluctance to do so. The data demonstrates just how successful pre-retirees have been in assembling their million dollar savings. More power to them!
Staying with the baby boomers group only.........I find that at least 5% of this group could have "investible monies" worth +$1 million. I would lean towards a higher number. I can only reference this from the viewpoint of Michigan and the auto industry; as well as all of the ancillary supporting business. In particular, from the early 1970's through the mid-90's, the big 3 auto companies had hugh payrolls, as well as the many of the outside vendors supplying product to these companies. Many union "blue collar" jobs found high wages, superior benefits and many households had both adults working at auto factories. These folks were making a lot of money on an annual basis for many years for their household. Add the 1,000's of skilled trade jobs that were part of this and at a much higher wage. There were also many small business formations for a variety of tool and die works for all sorts of piece parts. Knowing personally that the debt ratio for most of these folks was very poor; as they spent a lot of this money, too; but that a guess of 5% of this overall group was prudent with their spending habits could find "investible" monies to be ready available. I recall a WSJ or Baron's article from 1976 ?, from which I pulled data for a report that noted at the time a list of per capita income by states. New York was first, Alaska was second and Michigan was third. There were so many people employed at high wage/low skill jobs to offer this per capita rate of income. I am sure similar scenarios of wage happened in other industrial areas of the U.S. during this period. IMO, I consider at least 5% of the baby boomer group (non-professional) to have at least $1 million of invested monies. This of course, does not include value of primary homes or similar related areas.
Too late at night, to search for a document.
My uneducated, no data observation, just from being there, summary.
You know, one million dollars is more an emotional number than a high number now days. I wonder how many workers are employed in jobs paying more than $100K/year and maxing some sort of 401K plan? If lots of boomers have amassed a million under the limitations to contributions imposed in the 20th century, the new crop will amass several million (markets willing).
Each year there will be more millionaires and each year a million will be less. We were measuring wealth in millions in the 50s, shouldn't we measure In 10 millions today. Someone can give it a name - tillions or something.
By being a long term resident in one of the Northeastern states, you have increased your likelihood of becoming a millionaire. The distribution of millionaires within the USA is very uneven.
It’s interesting that many references credit the Phoenix Marketing International (PMI) firm as their primary data source. PMI refreshes their data regularly, but it changes slowly over time.
Massachusetts is an expensive cost-of-living residence state. However, it is not home for the highest percentage of millionaires. That honor goes to Maryland at a 7.7% level. Massachusetts is in the seventh State position with 6.7% millionaires per household. To put that in context, Mississippi holds the bottom position with 4.6%. Here is a Link to an interactive map that presents 2013 household millionaire data:
Just place your cursor over your State of interest to get the percentage.
That’s informative and fun, but the ultimate goal is to join the millionaire cohort. Most “how to” articles and books provide short, simple lists on how to climb this mountain. All these lists include securing multiple incomes, saving relentlessly, and investing those savings wisely (heavy on stocks) advice. Much more easily said than done.
The wealth distribution data provides useful guidelines for individuals. The millionaire distribution just discussed is one component of the proffered guidelines. It is far better for wealth accumulation to live in the Northeast than in our Southern States.
Numerous surveys and countless government studies provide other factors that contribute to wealth accumulation. Not surprisingly, age, education, and race are primary players. Here is a Link to a recent St. Louis Fed report titled “The Demographics of Wealth”:
This Fed report is a 24 page, 2015 document that is a worthwhile read. Its graphs are especially illuminating since they present trends over time. Please access it.
Being old, being white, having an advanced degree, and living in the Northeast States all increase the likelihood of achieving the Millionaire Club.
On a less serious note, you might enjoy a USA map that identifies “What Does Each State have More Of than Any Other?”. Here is a Link to this relaxing divergence:
Well a million isn't what it used to be. Year = 2015 1965 = $7,549,365.08 1975 = $4,420,167.29 1985 = $2,210,083.64
So pick a year and then ask the question what percentage of the population has the equivalent amount now. That would tell us more insight into what is going on.
If I only had 1 Mil. I would not have retired at 51. A small pension with a imputed (7%) values of $200,000 at 60 and SS of 25K at 63 with an imputed value of $357,000 gave me the confidence it could be done. 1 Mil alone for a single person isn't enough - it could be done but, why constrain yourself that way if you can help it.
I think it is time we retire the 1 mil. as some sort of goal.
"The study, from market research and consulting firm Spectrem Group, found that there are now 10.1 million households in the U.S. with $1 million or more in investable assets, excluding the value of their primary residence."
Another aspect in this is the word 'household' I tend to think in terms of an individual. A 'household' could be 2 people. It could have taken 2 people to get to 1 mil. Again, if it is 2 people that 1 mil. means even less since that money needs to support two people.
Comments
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-millionaires
However, 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.htm
The 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.
Thanks
The Millionaire Club numbers are hard to assemble. Different agencies use different methods. Therefore, the final quoted numbers vary. They should be interpreted as informed estimates.
In the referenced article, the WSJ credited the Phoenix Marketing International corporation as its source. Their exact method is proprietary. It includes investment and work related income sources, but does not include primary home residence.
The main thrust of my post was to get you to use the Monte Carlo tools to explore portfolio adjustments that might give you a chance to reach your goals. You might need to be more or less aggressive depending on your present status. Other Millionaires and their approaches are a sideshow.
Best Wishes.
from the article:
>> That means 1 in every 20 households in the U.S. has more than $1 million in investable assets. Those figures don’t include the value of real estate.
This from a 2015 article by CNBC's Robert Frank:
"The study, from market research and consulting firm Spectrem Group, found that there are now 10.1 million households in the U.S. with $1 million or more in investable assets, excluding the value of their primary residence."
This more recent study by another research firm yields an even higher percentage in the USA Millionaires Club. The Spectrem's number is 8.2 %.
After doing the requisite research, your "feelings" on the matter are not relevant. The facts command the day. As J.M. Keynes observed "when the facts change, I change my mind. What do you do, Sir?"
In this instance the facts have not even changed; They've been confirmed. I suggest you toss your feelings on this subject in the junk heap. I'm puzzled by your reluctance to do so. The data demonstrates just how successful pre-retirees have been in assembling their million dollar savings. More power to them!
Best Wishes.
I can only reference this from the viewpoint of Michigan and the auto industry; as well as all of the ancillary supporting business.
In particular, from the early 1970's through the mid-90's, the big 3 auto companies had hugh payrolls, as well as the many of the outside vendors supplying product to these companies.
Many union "blue collar" jobs found high wages, superior benefits and many households had both adults working at auto factories. These folks were making a lot of money on an annual basis for many years for their household. Add the 1,000's of skilled trade jobs that were part of this and at a much higher wage. There were also many small business formations for a variety of tool and die works for all sorts of piece parts.
Knowing personally that the debt ratio for most of these folks was very poor; as they spent a lot of this money, too; but that a guess of 5% of this overall group was prudent with their spending habits could find "investible" monies to be ready available.
I recall a WSJ or Baron's article from 1976 ?, from which I pulled data for a report that noted at the time a list of per capita income by states. New York was first, Alaska was second and Michigan was third. There were so many people employed at high wage/low skill jobs to offer this per capita rate of income.
I am sure similar scenarios of wage happened in other industrial areas of the U.S. during this period.
IMO, I consider at least 5% of the baby boomer group (non-professional) to have at least $1 million of invested monies. This of course, does not include value of primary homes or similar related areas.
Too late at night, to search for a document.
My uneducated, no data observation, just from being there, summary.
Take care,
Catch
Each year there will be more millionaires and each year a million will be less. We were measuring wealth in millions in the 50s, shouldn't we measure In 10 millions today. Someone can give it a name - tillions or something.
By being a long term resident in one of the Northeastern states, you have increased your likelihood of becoming a millionaire. The distribution of millionaires within the USA is very uneven.
It’s interesting that many references credit the Phoenix Marketing International (PMI) firm as their primary data source. PMI refreshes their data regularly, but it changes slowly over time.
Massachusetts is an expensive cost-of-living residence state. However, it is not home for the highest percentage of millionaires. That honor goes to Maryland at a 7.7% level. Massachusetts is in the seventh State position with 6.7% millionaires per household. To put that in context, Mississippi holds the bottom position with 4.6%. Here is a Link to an interactive map that presents 2013 household millionaire data:
http://money.cnn.com/interactive/real-estate/millionaire-households/
Just place your cursor over your State of interest to get the percentage.
That’s informative and fun, but the ultimate goal is to join the millionaire cohort. Most “how to” articles and books provide short, simple lists on how to climb this mountain. All these lists include securing multiple incomes, saving relentlessly, and investing those savings wisely (heavy on stocks) advice. Much more easily said than done.
The wealth distribution data provides useful guidelines for individuals. The millionaire distribution just discussed is one component of the proffered guidelines. It is far better for wealth accumulation to live in the Northeast than in our Southern States.
Numerous surveys and countless government studies provide other factors that contribute to wealth accumulation. Not surprisingly, age, education, and race are primary players. Here is a Link to a recent St. Louis Fed report titled “The Demographics of Wealth”:
https://www.stlouisfed.org/~/media/Files/PDFs/HFS/essays/HFS-Essay-1-2015-Race-Ethnicity-and-Wealth.pdf
This Fed report is a 24 page, 2015 document that is a worthwhile read. Its graphs are especially illuminating since they present trends over time. Please access it.
Being old, being white, having an advanced degree, and living in the Northeast States all increase the likelihood of achieving the Millionaire Club.
On a less serious note, you might enjoy a USA map that identifies “What Does Each State have More Of than Any Other?”. Here is a Link to this relaxing divergence:
http://blog.estately.com/2015/03/what-does-each-state-have-more-of-than-any-other/
I want to thank everyone for their participation in this discussion. The distinct perspectives are all well developed and instructive.
Best Wishes.
Year = 2015
1965 = $7,549,365.08
1975 = $4,420,167.29
1985 = $2,210,083.64
So pick a year and then ask the question what percentage of the population has the equivalent amount now.
That would tell us more insight into what is going on.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1,000,000.00&year1=1985&year2=2015
As to retirement planning the 1 million number doesn't mean much.
Yes, a 4% withdraw rate is doable on 1 mil but not a Lifestyle of the Rich and Famous.
With 1 mill and $25K social security, you could live well in most parts of the USA on $65K. But even with that, it will be reduced by taxes.
$5 Million Is the New $1 Million: But Can You Save Your Way to 'Wealthy'?
http://www.dailyfinance.com/2013/09/10/retirement-savings-millionaire-wealthy/
---------------
If I only had 1 Mil. I would not have retired at 51. A small pension with a imputed (7%) values of $200,000 at 60 and SS of 25K at 63 with an imputed value of $357,000 gave me the confidence it could be done. 1 Mil alone for a single person isn't enough - it could be done but, why constrain yourself that way if you can help it.
I think it is time we retire the 1 mil. as some sort of goal.
Another aspect in this is the word 'household' I tend to think in terms of an individual. A 'household' could be 2 people. It could have taken 2 people to get to 1 mil. Again, if it is 2 people that 1 mil. means even less since that money needs to support two people.