Are You A Real Millionaire? $3 Million Is The New $1 Million

Although being a millionaire sounds nice, it's not that impressive anymore thanks to inflation. In order to be a real millionaire, you will need to have a net worth of at least $3 million, not $1 million. A $1 million net worth provided a great lifestyle before 1990. Not so much today.

If you retired today at 65 with $1 million, you may be able to spend $40,000 a year (4% withdrawal rate) for 25 years. But you might also run out of money before you die as well. In a relatively low interest rate environment, it's only natural to expect lower risk-adjusted returns.

In a higher interest rate environment, your dynamic safe withdrawal rate can go up. However, you've also got to be careful withdrawing too much because your asset values may be declining. In 2022, we saw the S&P 500 tumble by 20% because the Fed hiked rates aggressively.

Back in the 1990s or earlier, when the risk-free rate was closer to 5%, achieving a $1 million net worth was fantastic. Almost everything was cheaper back then. Can you imagine being able to go back in time and buy real estate at those prices? Back in 1990, the median home price was only $117,000. Today, the median home price is closer to $430,000.

Or how about being able to pay college tuition prices from the 1980s? If you had a $1 million net worth back then, you were pretty much set for life! Further, think how much your $1 million would be worth now.

Today, if you are a $1 million millionaire, you should still feel good. However, it's not like you're popping Crystal in the hot tub on your luxury yacht in the South of France. In fact, according to the latest Federal Reserve Consumer Finance Survey, the average American household is a millionaire!

Why $3 Million Is The New $1 Million

The reality is, withdrawing at a 4% rate is no longer recommended. Further expected returns for stocks, bonds, and other investments are down. Meanwhile, the risk-free rate of return is around 4% and likely heading lower as the economy fades and inflation declines.

Instead of sticking to a fixed withdrawal rate or net worth multiple target, adopt of dynamic safe withdrawal rate. This way, you'll adapt with the changing times.

Are you a real millionaire? Because $3 million is the new $1 million

Today, to be a real millionaire, you will need much more than $1 million. With $3 million, you can withdraw at a more appropriate 3% or 4% rate and generate $90,000 – $120,000 a year. $90,000 – $120,000 a year still isn't living a rich lifestyle. But it's above the real median household income of roughly $75,000.

In addition, we should all pray the government doesn't raise the minimum Social Security age to something absurd like 70+ years old to make the system whole. The average American should also pray the government doesn't drastically cut payouts.

If our prayers aren't answered, let's hope our 401(k)s and IRAs don't get taxed out the wazoo come distribution time. If our hopes for a well-managed government are crushed, then surely we'll have developed multiple income streams by retirement so no one event can get us down!

Inflation Really Makes Having Millions More Necessary

When I was working at McDonald's for $4.00 an hour in 1994, I filled up my 1987 Toyota Corolla FX16 babe-mobile for $1 a gallon. I distinctly remember not being excited about making $4.00 an hour.

However, I had to do it because my parents didn't give me much spending money. Besides, I wanted to do more than treat the ladies to free apple pies and Mcflurries.

The minimum wage in America is now between $7.25 – $18 an hour. Meanwhile, a gallon of gas is anywhere from $3.3 – $4.8 a gallon depending on where and what type you get.

It's interesting the minimum wage used to be 4X the amount of one gallon of gas ($4 vs. $1). Now the gap has fallen to only ~3X as the cost of goods has surged faster than wage inflation.

It's important to grow your earnings faster than your costs. Increase that gap as wide as possible. If you haven't asked for a raise in more than one year, it's time to get that hike. In addition, it is important to own real assets like real estate to ride the inflation wave. Both rents and real estate will appreciate with or faster than inflation.

With the world coming out of a pandemic slump, higher inflation is here. In 2022, CPI reached a 40-year high! Inflation should moderate over the next couple years. However, inflation will likely stay above the target 2% for years to come.

Are You A Real Millionaire? $3 Million Is The New $1 Million

Dreams Of Becoming A Real Millionaire

The most I ever thought I'd make after graduating from my public university, The College of William & Mary, was $100,000. That's how much a senior foreign service official was making back in the late 1990s. I respected my father's work and used him as a barometer for success.

I thought I'd start off at $30,000 and work my way up to that elusive six-figure mark by the time I was 60. If I diligently saved at least 20% of my income and invested wisely, reaching the magical $1 million figure would be achieved.

But instead of going into the public sector, I joined a bulge bracket Wall Street firm that paid handsomely. Actually, it didn't for the first year with a base salary of $40,000 in expensive New York City. In exchange for the potential to make six-figures one day, I worked like an indentured servant.

Every single MD at Goldman Sachs was a millionaire. I quickly became accustomed to the fact that I'd join their ranks if I stayed the course. Going public in 1999 was a cataclysmic event of wealth for everyone at the firm.

No Relief Hitting The Million Dollar Mark

At 28, I crossed the one million net worth mark. But, I didn't really know it until I started religiously tracking my finances after the financial crisis hit at age 31.

After 10 years working in finance, I was already beginning to lose motivation. I started regularly dreaming of doing something else, but I had not yet started my X-Factor. Therefore, I felt trapped. All I could do was take the punishment and keep on going.

Did I feel rich as a low single-digit millionaire in 2008? Not really. Even with no kids and a new spouse, I had a big mortgage and an unstable job. Further, I was thinking about a future in San Francisco or Honolulu with kids.

As the economy began to crumble, I felt like I was about to lose everything thanks to leverage. Luckily, I “only” lost about 32% of my net worth before the economy finally found a solid footing.

Financial Samurai net worth progression

Focus On Your Millionaire Journey

I encourage people to develop individual financial wealth. Yes, it's nice to grow your wealth together with your partner. However, divorces happen all the time. Be independent, so that no matter what happens, nobody can take away your financial freedom!

At the same time, it's often easier building wealth as a couple. Therefore, I suggest you read my post, The Average Net worth For The Above Average Couple. The post will give you some rational targets to shoot for.

There are about 15 million millionaire households in America or about 4.6% of the total population or 9.7% of the working population. To put these percentages into context, the Asian population in America is roughly 5.8%, and you see Asian people everywhere!

Further, thanks to the Stealth Wealth Movement, there is more untraceable wealth the government doesn't know about. After the boom in risk assets since the pandemic began, surely there will be even more millionaires once the Sentinels tally the results a year from now.

I fully expect the vast majority of Financial Samurai readers under 40 to be millionaires by their 60s. If you are fortunate to have a job for so long, accumulating a million dollars in your 401k or rollover IRA alone by 60 should be the reality for most.

Current Prices vs. Historical Prices

Here's a chart I put together with rough prices of goods and services today vs. in the past. This chart shows why having a $1 million net worth is not longer enough to be considered a real millionaire.

Table of various goods in their costs in the past and their costs today (2021) to show inflationary pressure

The most absurd rises in costs are college tuition, automobile, and housing prices.

Unless you are already rich or receive a scholarship, I don't think it's worth paying $58,500 in tuition to attend AOC's alma mater or similar private universities. Education is free now thanks to the internet. Go to a public school and use those savings to start a business or invest instead.

$49,500 for the average automobile price today vs. $75,000 for the median household income is also an interesting comparison. It shows why it's so easy for the typical person to get into so much financial trouble. Sure, financing and leasing makes cars more affordable. But borrowing money gives people a false sense of wealth, especially if they aren't aggressively saving already.

Finally, housing continues to be the most expensive cost for most people. Therefore, it makes sense for most people to get neutral housing by owning their own primary residence. Once you see yourself living somewhere for 5+ years, I would buy real estate following my 30/30/3 rule.

Inflation chart by category - inflation requires you to be a real millionaire with $3 million or more

After studying the above chart, if you want to build wealth, you should be more motivated to go long housing, healthcare stocks, food and beverage stocks, commodities, farmland, and education.

Inflation is picking up so much that the latest Social Security cost-of-living adjustment is up 5.9% for 2022! Those who are not consistently investing are getting left behind. At least the government is taking care of our current retirees.

If you can't beat inflation, invest in inflation. Inflation is simply too powerful a force to combat long term.

Why You May Need Millions To Retire Comfortably

Here's a chart I put together of a real family of three just getting by on $300,000 a year. This family has over a $5 million net worth and is living a relatively middle class lifestyle.

$5 million is a lot of money. However, it's hard to generate enough risk-adjusted cash flow to pay for all your living expenses in an expensive metropolitan area.

Middle class lifestyle on $300,000 a year - you need millions in capital

The reality is, to generate $300,000 a year from your invested capital would take at least $7,500,000 at a 4% rate of return. Therefore, having a $5 million net worth may not be enough to retire early with kids in a big city.

The family could take on more risk to try and get higher returns. However, when you've already won the game, you tend to stop playing as aggressively. The best move is probably for the family to relocate to a lower-cost area of the country. The only problem with this move is leaving behind a network of friends and family.

The New Millionaire Realty

Being a millionaire is nice, but it's not what it used to be. Inflation is like a sneaky cat that steals all your food when you’re not looking. If you want to be a real millionaire, shoot for at least a $3 million net worth. Aim to hit the net worth targets in my average net worth for the above average person post.

With a $3 million net worth and no government support at age 65, you can spend a comfortable $60,000 – $90,000 a year without fear of running out of money. You can probably go nuts and spend up to $150,000 a year for several years to really live it up.

Remember, we're trying to replicate in today's dollars the type of lifestyle a $1 million net worth would have provided 30+ years ago. Not only are we looking to mimic the lifestyle, we're also trying to mimic a person's financial state of mind. After all, one of the main purposes of having lots of money is so you can worry less about money.

At least shoot for having at least $1 million in investable assets in retirement excluding the value of your primary residence. Once you have your housing squared away and all your debt paid off, you don't need a six-figure retirement income to live a great life.

Life Should Still Be Good With Less

If you don't reach a $3 million net worth figure by retirement, don't worry! Depending on your tastes, needs, and where you live, you won't need $3 million. Besides, not everybody has the same chances of becoming a millionaire. A lot of luck is involved in building outsized wealth.

Further, Social Security should be there for most of us by our mid-60s. With the average Social Security payment of roughly $1,543 a month, we're talking an extra $18,516 a year in income. For those who retire at full retirement age (70+), the maximum Social Security benefit is $4,555 a month in 2023. $54,660 a year is like having $1.366 million at a 4% withdrawal rate. Not bad!

Therefore, even if you don't retire a real millionaire thanks to inflation, life is still pretty good. Think about how happy you were when you hardly had any money. Today, our social safety net is growing. There's also an ongoing massive generational wealth transfer that will make plenty of heirs rich without having to do anything.

Finally, if our government and our parents screw us, then at least we've got peace in America and free internet! With so many big media sites going behind paywalls, how cool is it that Financial Samurai still remains free? For the people surfing the internet at public libraries, I always think of you when writing my articles.

Best of luck on your millionaire journey. As you go about building your wealth, don't forget to also focus on your health. There's no use being a multi-millionaire if you don't feel good physically and mentally every day.

Become A Millionaire Owning Real Assets

It's hard to become a millionaire simply through savings. Further, income growth has not kept up with housing costs, college education costs, and health care costs. Therefore, in order to benefit from such rising costs, you should probably invest in these assets. 

After you get neutral housing inflation by owning your primary residence, you can invest in real estate through ETFs, REITs, and rental properties. One of my favorite way to invest in real estate is through real estate crowdfunding.

I've invested $810,000 in real estate across the heartland of America to take advantage of faster growth and potentially higher returns.

Buy real estate if you want to become a millionaire

Inflation acts as a tailwind for property prices. Meanwhile, inflation whittles down the real cost of debt. This one-two combination can create tremendous wealth over time.

My favorite real estate crowdfunding platform is Fundrise. It is one of the largest and oldest platforms, founded in 2012 with over $5 billion under management and over 500,000 investors. Fundrise smartly created private eREITs to earn income 100% passively. For most people, investing in a diversified eREIT for real estate exposure is the most appropriate way to go. Fundrise is free to sign up and explore. 

If you are an accredited investor, take a look at CrowdStreet. CrowdStreet enables you to invest in individual commercial real estate deals mostly in 18-hour cities. 18-hour cities are faster growing cities with lower valuations and higher cap rates. If you have a lot of capital, you can build your own best-of-the-best real estate fund. 

Fundrise

Invest In Private Growth Companies

Finally, millionaires love to build businesses and invest in private business. therefore, consider diversifying into private growth companies through an open venture capital fund.

Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Buy The Best Selling Personal Finance Book

Finally, if you want to become a multi-millionaire, purchase a hard copy of my new book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. My Wall Street Journal bestseller is jam packed with unique strategies to help you build your fortune while living your best life.

Buy This, Not That is a best seller on Amazon. By the time you finish BTNT you will gain at least 100X more value than its cost. After spending 30 years working in finance, writing about finance, and studying finance, I'm certain Buy This, Not That will change your life for the better!

Buy This Not That Book Reviews

Manage Your Finances In One Place 

All millionaires diligently track their finances. Do the same by signing up with Empower. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money.

The best feature is their Portfolio Fee Analyzer, which runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging! 

There is no better financial tool online that has helped me more to achieve financial freedom. It only takes a minute to sign up.

Related posts:

Who Makes A Million Dollars A Year? Discovering The Top 0.1% Income Earners

$10 Million: The Ideal Net Worth To Retire

Readers, what do you think constitutes a real millionaire nowadays? Why do you think some people are still stuck on a $1 million net worth providing the same lifestyle from decades ago? Are we so slow to change our way of thinking? Or is inflation too sneaky of a cat to notice as it creeps up on us?

Join 65,000+ others and subscribe to my free weekly newsletter. Since 2009, the newsletter has helped people achieve financial freedom sooner, rather than later. Are You A Real Millionaire is a FS original post.

281 thoughts on “Are You A Real Millionaire? $3 Million Is The New $1 Million”

  1. Hi Sam,

    Loved your latest newsletter!

    For anecdotal data, the new 3-million threshold to what once was a millionaire sounds/feels about right. Ballooning real estate value alone is making people asset millionaires.

    My wife (64) and I (73) are at roughly the 3-mil net worth level. We have zero debt, so my $65k passive income (my SSI + small pension) alone works just fine here in East Tennessee, even without what I continue to bring in from my business that I love.

    The real issue at our age is not knowing how many years we have left to eventually start drawing down funds and spoil ourselves (while we still can). That said, from my vantage point, I think for me to really feel “wealthy,” that’d be at $10 million (easily accessible) net worth. That way, short of yachts and all, whatever one really wants and needs is easily accessible via passive income alone.

    Spiraling education costs are a hideous travesty. Even if, due to an aging population, Big Education eventually runs out of “customers” and there will be competition. The whole system is out of whack. It simply makes zero sense to push/shame everyone into a college education. How many academics and true higher-education folks does a nation need? 5-10%? We need to get back to a good balance between “academia” and apprenticeships/trade schools. And one could also argue that education should entirely be public, because it’s for the good and survival of a nation. Which is precisely the way it was in Switzerland when I grew up there.

    nVidia, honestly, I don’t get it. I wish, of course, I had gotten their stock years ago, but as for product, obnoxious graphics cards that draw way too much power and run way too hot…? I am all in with AI, but I can’t see why nVidia should be THAT important, even if its server GPUs are now their primary business.

    Conrad

  2. Thanks for the great article Sam. We just crossed the $3 million net worth mark this week. My wife said “I don’t feel rich” and I said that’s exactly the reason we are. We live well below our means. I’m 45 and my wife is 40. Right now we have roughly 2.5 million in investable assets and 500K in real-estate. She is a full time stay at home caretaker for our one child. I can’t wait to retire and spend my time doing things I’m passionate about (some of which make a little money). But I’ll keep plowing at my job while it lasts (fingers crossed). If it does hold out, I’ll likely retire at 48/49 and then pursue my hobbies and interests which likely means I work “part time” but doing things I love.

    1. Financial Samurai

      Congrats! Do you feel the pressure of being the sole income earner? If she goes back to work, you can practice Wife FIRE and retire, as several of my peers have done.

      48/49 is only 3-4 years away. Might as well keep grinding, saving, and investing as much as possible until then!

      1. No pressure on being the sole income earner. It’s been this way for a long time now, but in the last couple of years I was fortunate to land a job that pays a silly amount. If it holds for a few more years then we should be all set to live comfortably without worries. If things go south, then I have to take comfort in the fact that our current net worth was once my retirement goal when I made much less (and we can in fact live on the returns, although we would have to revert our lifestyle back a few years). If the job vanishes then I’ll probably grab another similar job for a few years extra that pays a fraction of my current income, but it would allow our investments to grow and also cover expenses, insurance, and allow more modest contributions to our retirement accounts. Overall we are feeling very fortunate and lucky as we both come from very modest backgrounds.

  3. Sorry, but what withdrawal rates are you talking about? Why would one who is retired like to withdraw a penny from life savings other than for grave emergencies? Maybe it’s us, but we do not intend to withdraw anything to support ourselves in retirement other than RMDs. And after taking those I intend to pay taxes and the rest to the last penny plow in into ETFs, which should generate growing stream of dividends so we could live well and still be able to save about 15% each year. Now to the point: My wife and I receive about $70K in Social Security, about 6K tax-free annuity, $60K in royalties, $75K in dividends, and $50-100K in other investment income (all of which is reinvested), not counting RMDs. With two houses paid off and cars bought for cash, why would I even bother to withdraw anything other than RMD (about $120K 2 yrs from now), which after paying tax will be plowed in to investments (fortunately we live in states with below average cost of living). Thanks God 20% of our money is already in Roth that greedy government won’t force us to touch. So if people (including those pursuing FIRE ) can’t generate enough cash flow from investments to live on, maybe they are NOT ready to retire to begin with. Just my two cents.

    1. Ed K.
      I see your point about FIRE readiness, but I think you need to take total annual expenses and compare that to your Net Worth to calculate the withdrawal rate. When folks reference “withdrawal rates”, they mean “withdrawing” from Net Worth, not necessarily exclusively from retirement accounts.

      Sounds like you have been fortunate and invested well – congratulations.

  4. We’re early 50’s with a liquid net worth of about $3 million but definitely don’t feel financially secure. If we include our investment properties our net worth more then doubles to over $6 million, but with two kids to put through college soon and aging parents it never seems to feel like enough. I think one of the problems is that we keep very little in actual cash (although this is changing because of higher interest rates) with the majority of our money invested. With large market shifts our net worth can go up or down 10’s of thousands of dollars on any given day. I think my problem is that I look at these numbers on a daily basis which I know you shouldn’t do but unfortunately I work in finance. It also doesn’t help that we live in high cost NYC.

    1. Maybe you’ll feel much richer once your kids graduate from college? I definitely think you’ll feel richer once you no longer have to work for a living and have a lot more free time. As I get older, the freedom to do whatI want, becomes more and more valuable.

  5. Iam turning 60 next yr and I will retire.
    I own 3 properties outright worth 4.5million . When I retire 2 of my properties will give me $80,000 in rent per yr . I have $500,000 in super which I will draw out $20,000 per yr for 25 yrs giving me a total income to retire on of $100,000 ! I have no debts . My car is 2 yrs old . That is more then enough money for me to live on quite comfortably .

  6. Paul in North Carolina

    Great article and discussion. Years ago, I set my “exit target” from corporate life as $3M in investment portfolio, paid off house, and kids’ college funds fully funded. The last 10 years have been good to me and I’m approaching those targets (at $2.6M in market but other goals achieved).

    I agree with most everything in your article but question the reasoning of the classic 4% rule. I agree it’s safe level but think 6% is probably reasoanble as long as >60% of your assets are in the mutual funds tracking indices like S&P 500 and Russell 2000. Since you should have enough assets to cover extended downturns of up to 10 years, you SHOULD be able to live at 6-8% of your portfolio per year as long as the market is growing at >10% and then buckle down a bit if it starts dropping. I think the 4% rule is assuming you’ve put your portfolio largely in “SAFE” guaranteed funds that are paying at 80%). His point was that, if you look at the last 50 years of the stock market, gains have averaged >8% per year on average. While he didn’t predict the drops in 2000, 2008, etc., his guidelines proved right over the long-term. I maintained ~90% in index funds and it paid off far more than had I had a more conservative portfolio. It didn’t grow well from 2000 –> 2010 but 2010 –> 2021 more than made up for that.

    Okay, please present countering opinions – I really do want to hear another side?

    1. I think you should feel free to do whatever you think is comfortable given we all have different risk tolerance and goals.

      Here’s a post arguing why you may want to lower your withdrawal rate in retirement. As a reference, I have not had a day job since 2012 and I have two young children.

      One of the things you might realize after you leave your day job is a high reluctance to withdraw money given it won’t be what you are used to for so long.

      https://www.financialsamurai.com/proper-safe-withdrawal-rate/

  7. I’m 52 and worth $3.3 million. I think the only thing keeping me from leaving my job is inertia (doing the same thing over and over again without thinking about it). What is your and everyone here’s opinion on at what point should a person give up their job (not happy but not miserable working at) and move on? I make about $120k a year at my job and have about $60k a year in net rental income, also have about $10k a year in dividend income.

  8. Interesting, although I’d argue that the $300k couple only needs $150k once they quit working to maintain the same lifestyle. Can increase their fun money by $50k/yr and still only need 2/3 what they were bringing in before:

    No more FICA taxes, lower marginal income taxes, no more childcare, no more “baby/toddler” stuff, no more mortgage payment, no more 401k savings, no more college savings, no more life insurance. Those categories add up to close to $152k+ of that $300k.

  9. I live in one of the larger metro areas of Oklahoma. I hit 2 million in net assets after turning 64. I’m single and live in the same 2 bedroom, 1000 square foot home I purchased in 1986, my only debt is a car payment. Being full invested in the stock market, mostly in technology and I feel wealthy.

    The state is a great tax haven and I like living with a population of less than 4 million. I’ve travelled the world through out my life which is my passion, and plan continuing to do so. Visiting U.S. destinations and exploring places like L.A., S.F., N.Y., D.C., and Boston is always fun, but I don’t want to live there. I don’t need a McMansion, or live on the East or West coast or have an expensive address to impress anybody. It seems like so many people are seeking something elusive when they should just appreciate what they have.

  10. Happens to be our base target for retirement as well. So now that you brought it up, yes, I do view 3 million as the new 1 million. Hopefully 4 million won’t be the new 3 million by the time my wife and I retire, although going mostly stocks will certainly make it a wild and interesting ride. :)

  11. Do you really just take the standard deduction? Or is that just for easy math on the example you presented?

  12. I think this article is sadly right on the money. I thought for years that I’d be set once I crossed million dollar nw mark. Nope. My wife and I are now close to halfway mark to the second million (which has progressed surprisingly fast). At this point, I don’t think we’ll ever live on the streets but you never know. Do I feel like I have enough money to be able to do anything I want anytime I want? Not even close.

    The scary thing is I run into people my age- 50’s- all the time who have little or nothing saved for retirement and substantial mortgages. And they’re not exactly irresponsible people either.

    1. I see 50ish older people floating along financially as if the endgame is not approaching. And some of them are people I respect and love. I have had little success giving financial advice and having it stick. Broke people need financial advisors more than rich people.

      1. Mysticaltyger

        OMG, that last statement is so true. Unfortunately, the broke people won’t follow the best advice, which is frustrating. I also know good people who are broke, and it drives me crazy to see them suffer when it could have been prevented.

  13. Success Triangles

    “Inflation acts as a tailwind for property prices. Meanwhile, inflation whittles down the real cost of debt. This one-two combination can create tremendous wealth over time.”

    Agreed but inflation is rearing its nasty head right now with lumber, gas, housing prices, new cars, etc. That’s got to hurt those in retirement on fixed incomes. Thoughts?

  14. John A Johnston

    Good post. Didn’t quite understand this statement though:

    “If you retired today at 65 with $1 million, you may be able to spend $40,000 a year (4% withdrawal rate) for 25 years.” – In the statement, “may” was italicized, as if that outcome was uncertain. But if you park that money in an insured, no-interest account, you will be able to meet that goal exactly. This plan does not necessarily represent optimal retirement planning, but it’s ability to meet the stated goal is not in question.

    The following statement “But you might also run out of money before you die as well.” is certainly true, but doesn’t directly relate to the previous statement.

    1. Many people who retire at 65 today will have Social Security, so they may not need to use $40,000 per year from the cash account. Some will have more than $40,000 per year from a pension, so they may not need any money from the cash account.

  15. Hi Sam,

    How do you think about real estate equity for personal residences in the context of net worth? For us it’s half the balance sheet, but we wouldn’t cash out to move to a lower cost market, so I ignore it from a personal finance perspective.

  16. Sam– one question that I never had a chance to ask, but with these rules of thumb around withdrawal rates… i.e., $3mm with 2% withdrawal ($60k in income). This assumes you don’t touch the principle. While I can appreciate the conversation nature of this approach, what happens to the $3mm… is the idea that you leave it for your heirs?

    If so, that’s quite generous and while I want to help out the next generation, it seems rather excessive.

    1. A fair question. I do believe the ideal withdrawal rate does not touch principal if one is under the estate tax threshold limit. But that is more of an extreme or ultra conservative view.

      $3 million sounds like a decent amount today. But let’s say we die in 40 years. It’s the same thing. It won’t seem like a lot when our kids inherit it.

      Only the most risk loving person will try to calculate and time dying with zero. There are simply too many variables to not have a good financial buffer. Further, there are plenty of people and organization that need financial help.

      1. Thanks for the response.
        The actuary in me is always calculating my chance of dying ;)

        So, the goal isn’t to die with zero, but I also find it a bit odd to “not touch principle”. I think the answer is somewhere in the middle— have a good cushion, but perhaps don’t have to live miserly on $60k (if you are in a HCOL area).

        Perhaps an idea for another article— how much to leave behind, and why retiring with $3mm is more than enough.

        1. Paper Tiger

          While you are in the accumulation phase and saving for retirement, I think the goal should be to save and invest as if you would “never touch the principle.” This sets the bar high and helps you to maximize savings and investment decisions accordingly. Once you cross into retirement you can then determine how realistic it is to maintain your lifestyle without touching principle.

  17. Nicely written, you mention really good points.
    I use to want to resist Sam’s $300k to live a comfortable life, but he is accurate on the area in which he lives and based on the lifestyle. Appreciate that he mentions that you can decrease this number based on cost of living in your area. In our area, SoCal, for $150k we can afford to include a comfortable lifestyle and a mortgage on a ocean view condo, but that’s b/c other costs are lower-which doesn’t mean deprivation.

    Here’s where numbers can be deceiving and it’s so important to diversify. Personal Capital shows our NW as $1.1 million. But, the amount we can generate from our wealth is $160,000– bulk is in real estate, the rest from pension and stocks/bonds. With 3.5% SWR, we would need $4.57 in stocks/bonds to generate this amount. If we were to use Sam’s 2% SWR, we would need $8 million to generate this amount. That’s pretty crazy, especially b/c we never had super high paying jobs.

    Sam has brainwashed me a bit (my future self will appreciate it), I am now looking forward to increasing passive income to $200k to spend when we hit 50. I don’t foresee adding $44k passive income to be that challenging if we continue to do a mix of RE and equities. We finally FIRE’d this year, and since there we have an excess, it allows us to keep investing. There is a lot we can do to help others with the money we generate.

  18. 100 million and above- (top .02%)Is what you think of when the millionaire phrase was coined. Means a real mansion 10 thousand plus square feet, yacht, private plane, etc. (Elite Wall Streeters, Elite Tech, Celebrity actors and athletes, old money.)

    11 million -Luxury lifestyle top 1%, McMansion, First class flights, Private schools, Small yacht, etc. Still need to be careful how much you spend. Can retire early.
    Tech executives, Wall Streeters, small business owners, celebrity actors and athletes, Trust fund babies)

    I think its tough for lawyers, doctor, dentists, upper middle management to make it to 1%. They’d usually have to live in NYC or San Fran, where real estate helped alot in networth.
    Most White collar professionals can get to about 5 million with good saving practices.

    I think 3 million is enough to retire early and live a great lifestyle for one person, but you’d have to be really careful. In investing especially if inflation returns to double digits like the 70’s.

    1. AnonymousDVM

      Great observation James, I am a veterinarian that owns my own practice the last few years has been excellent coupled with a very aggressive savings rate and performance in the stock market has pushed my net worth close to the top 1% that you mention. I live in a more rural part of California and my competition is much less fierce as opposed to an urban area. Once I reach my financial goals I plan to retire and relocate to a more tax/business friendly state.

  19. Appreciate the article. I concur, like everything in life, I suppose it is all relative. Much of it probably has to do with one’s fixed expenses and where they are living geographically. I am in my mid-30s and I am in the mid to high 3M level. Also, steady income in excess of $500K annually and I feel fortunate to have saved that much at a young age, but feel very far from “rich”. I am not sure what that number would be like, but in today’s environment and everyone making so much money in crypto, I don’t quite feel like 3 to 4 mil is very much. It seems that so many people on Twitter are making millions every day and some of these alt coins, crazy world.

  20. Northwest Islander

    Agree with all of this too.

    Age 40, major West Coast city, $3.5M net worth and do not feel wealthy or even successful (corporate slave here). I will probably feel wealthy at $5M, so the equivalent of current net worth plus totally paid off homes – primary plus rental.

    Where I live, some of these numbers are way off base. My primary home insurance runs ~$5k/year (yes I have priced with multiple insurers) and my electric bill is $300-700/month. This is for a 2400sf home plus 1000sf detached office, so not living small but also not in a McMansion. No kids or spouse, but I spend about $5k/month on in-home parent care and maintenance for my two disabled parents. Without that monthly obligation, maybe I’d feel wealthy now!

  21. Agree. $1M is not enough to be financially free.

    $3M is a better estimate. Someone who has access to at least a $3M net worth likely feels financial free. I say access because having wealth locked into your home or an IRA when you’re not at the retirement age prevents you from being financial free.

    The $10M mark people are putting out there is probably when people start to truly feel wealthy.

  22. In retirement income scenarios, would it not be better to be living off of dividend income of about 2.75%-3% yield from a High Dividend Yield ETF (Vanguard VYM) or something similar.
    It would be better than the 2% safe withdrawal rate being discussed here.

      1. We live in a relatively low cost of living area in the south. I’m not sure; my wife is about 10 years away from a ~ $50k a year pension that increases the longer she works. I think getting to that point will help. With valuations so high and interest rates so low it’s very difficult to generate income from relatively “safe” investments, as I know you’re well aware. I think wealth is really more about income streams than a nest egg in today’s environment. Maybe it has always been that way.

        1. Wow – this is a very interesting point. I’ve been so focused on saving and increasing my income, but when it comes down to it to truly feel wealthy I would need income streams to support me. I’m 29K and worked my way up to making over $100K in Southern California, but it’s going to take me a long time to get to 3 million and by that time it will at least need to be double that because of inflation. Great point.

  23. It is certainly interesting how our perception of money changes over time. When I was a student I never imagined making a six figure income. That seemed like an impossible pipe dream. Then several years after I started working, I couldn’t wait to hit $100,000. And I started asking for raises to surpass that. Similarly, in my early 20s I initially expected a $1mil retirement goal would have me set for life. Fast forward several decades later and I know I’ll need more than that.

    Inflation is a biznatch but it is what it is. And we have to use smarts and earnings to beat it. Similarly, we have to be mindful and adaptive of significant changes in the economy with rates as low as they are. Gone are the days of 4-5% CDs and savings accounts that actually earn more than the cost of a cup of coffee a year. That’s why I’m investing, diversifying into alternative investments, continuing to save, building more passive income streams, and keeping my mortgage debt on the decline. Great post!

    1. 37 years old.. $ 1.2 Mil liquid mostly invested in sp 500 idex fund.. 10% in crypto ( yes i know but its only 10% now after the gains). Got a mortage on a house worth 450k to 500k.. own another 60k worth of land so net worth approx $ 1.7 million.. want to retire early and calculated my expenses at 70 to 80k annualy.. Or i can just start going part time when I am 40 to make my 70 to 80k a year and let the investments grow untouched until I retire fully at maybe 55 . any thoughts advice?

      1. Don’t get married or have kids!
        I joke, but really, those are enviable living expenses. Add a stay at home wife and a couple of kids in any coastal city and you’re working much longer. I used to think I’d be long out of working where I am right now. Not so.
        But really the kids are worth working however much longer it takes.

  24. the most important trick is to not have a wife or kids. I currently make $45k and invest about 2/3 of it. With a wife and kids your expenses go thru the roof. Suddenly, your food goes from $200 a month to $900 because wifey “needs” gluten free, vegan whole foods, you’re buying insurance for her fancy range rover, you need a big house for the family, childcare expenses, cost of kids’ extracurricular activities, and if you;re really unlucky, the wife spends thousands on shoes and handbags.

    I’ve surveyed my colleagues, most of whom have similar or slightly higher salaries than I, and the single guys average $36k a year in expenses, while the married ones average $82k (yes the wife generally earns money as well, but most of the married guys have to work a second job to get by and will never retire).

      1. Actually, with 7.8 billion humans in the world, human life has negative value, and Nate is doing the right thing for the planet as well as himself.

        1. Not true, people have been saying we’re too populated and will burn ourselves out for nearly 100 years and yet we keep growing, keep getting wealthier, and the richer we get the better we take care of our environment. More than 100% of pollution growth (including CO2 if you include that) has come from China, India, Brazil and a handful of other developing countries in the last 25 years as those levels have dropped in the US and Europe in that time, and even more on a per capita basis. We may reach the point at some time where we have too many humans for Earth, but there is no evidence we are there at this time.

          1. Actually, it has finally dawned on demographers that the global population is going to start decreasing by mid-century. A lot of governments are looking at the number of workers versus old people they will have and are beginning to, ever so gradually, panic.

            1. Exactly – Pampered (mostly white) brats will expect their SS payments on time. Who is going to be on the hamster wheel to make that $ if both demand and workers are lower due to demographic change?

              Concerns about overpopulation is as silly as concerns about Global Warming.

          2. China, India, Brazil has the right to use fossil fuel. And they will use. You cannot keep a third of humanity in poverty. Their elected governments have the duty to get their people out of misery and provide a better life.
            Your country and their allies have exploited these countries for centuries; got rich off their raw materials and big markets; traded slaves, killed millions, brought wars.
            You have got rich in the process, burnt all the coal and gas you wanted and now you want to lecture them what to do.
            Remember you are a generation away from a collapse. Asia is on the ascendancy. Your machinations can’t stop this rise.
            And stop telling them what to do. They will as much pollution as they want. Their priorities are much bigger than your second car or your third home or your frequent vacations.

            1. And that’s exactly why nothing the USA does matters even if you believe in CAGW which I don’t. The Paris Accord’s own data has the temperature dropping less than a degree even with the USA at zero emissions, which won’t happen short of killing the economy.

              That said, the US hasn’t exploited anyone. The US is one of the few countries in the world with > 85% of its GDP coming internally as well as most of its supplies. And the countries trading with the US for the other 15% of GDP are far, far better off than they were pre-US relationship. Even in the US, the states that were least tied to slavery are the ones with the highest GDP. The brainwashing on US = bad overseas is horrible and inaccurate at best. If what you think was true, the south would have 90% of the US’ millionaires and the highest standard of living due to exploitation. The truth is exploitation usually stifles growth.

      1. Either one of those prevents you from being free to actually live life. Spending 80 hours a week at the office to pay all those extra expenses means you don’t have free time to travel the world and you never get to retire, or retirement is postponed by 20 years.

        Wife=more bills=more work

        Kids=more bills=more work

        more work=less free time and less living life.

        1. If I have to explain this, that means I’m talking to the wrong person. I will hold onto my pearls… Good Luck dude.

          1. Neither POV is wrong. Just depends on what your life goals are. For you, maybe its kid. For him, maybe its traveling, less work stress and early retirement.

            Second, you can’t ignore marriage laws are extremely against men in most states these days as a risk – even if you do everything right, there is a not insignificant chance you may be taken to the woodshed with ~50% of marriages ending, 75% of which are initiated by women. We shouldn’t go back to the days 200 years ago where women had very limited rights in marriage but the pendulum has swung way too far the other way. (PS I’m married, and we choose 15 years ago to not have kids, but if I had to do it all over again, I’d do the same thing without tying myself to government through marriage and just live with her)

    1. Depends who you marry. I am a wife, and I make $270,000 per year and have $1.25mm in my 401k at 44. My husband is 48 and just crossed $1mm in his 401k. We also have 3 kids. My husband is doing much better financially with me around.

    2. “yes the wife generally earns money as well” – you do not deserve to be in a relationship if this is what matters to you. I, “the wife” make $175K and my hubby makes about the same. We have single bank account and there’s no “his” or “her” money. It is about partnership, clearly a hard concept for you to understand.

      1. You do realize you are an exception right on income? I agree 100% a partnership is best but frequently what each side thinks of a partnership is not the same (ie one side wants to spend, the other save, one side wants to lavish and spoil the kids, the other doesn’t, one side gets bored of sex with one person, the other doesn’t and on and on). Add to that the breadwinner in a marriage even today is still 70% of the time a guy, and in higher income houses closer to 85%. That wouldn’t be a huge issue but divorce laws drastically favor women in the vast majority of the country today.

    3. OR…. you find a partner that has the same values as you and you double (or more) your income and savings rate,with the same (or fractionally higher) housing costs and supercharge your path to wealth. Those kids though… They’ll always be an expense, but I wouldn’t trade mine for the world.

    4. Dunning freaking kruger

      If you do some World Wide Web research you will probably have an epiphany. People that marry and that have the same opinion on money, religion, children and in laws are statistically much better off financially.

      Anecdotally, in my circle Of trust, married couples work together. At our age, 50, the household is financially independent. Mortgages are either paid for or soon to be gone. College is funded. No consumer
      Debt.

      The children are the reward for everything. You cannot put a monetary price on the little humans. And they are not as
      Expensive as what you are led to believe.

      1. Kids don’t have to be that expensive, but a lot of people, especially a lot of women but certainly not exclusively, think their kids need private school, private lessons, club sports, golfing, etc etc. My old boss spends about $175k/yr on his 3 kids, post tax, or about $300k/yr pre-tax. Even in the example above, the $300k income family, they are spending a huge portion of their budget on kids and future kids, including size of the place they get.

        Some people get a lot of rewards for children, others don’t. Neither side is wrong, its just different preferences like everything else in life. I prefer nieces and nephews.

        1. Engineer guy

          I was raised to believe that kids don’t have to be that expensive. We then had 4 kids. It is true that the out of pocket costs can be kept low, and maybe even covered by the tax advantages. BUT! I was never really informed about the loss of income compared to a working spouse… To keep costs low it makes no sense for both parents to work when having babies. Even once they are in school it would totally suck to have both spouses working. Now after 12 years of pregnancy and babies and preschoolers we’ve basically sacrificed one entire career worth of past and potential income. Maybe 500k to 2 million or more dollars depending on career prospects. I have friends whose wives are becoming vice presidents etc. while we entertain my wife subbing maybe 1 day a week for a hundred bucks… I wouldn’t do it differently, just kind of annoyed that this is glossed over when talking about how much kids cost. They are expensive. That doesn’t mean it’s not worth it, just something to be aware of.

      2. You’re absolutely right. But so are other people. The difference? Who they marry. It is, no doubt, the biggest decision you will ever make in your life.
        Chose wisely and there are great benefits to a team working together. Chose poorly and you get screwed, and men take the brunt of the screwing.
        One area where I disagree with you is that kids are expensive. They just are. They can be more or less so, but I think for the vast majority of parents they want their kid to have a “better” life than they had. And that translates to spending and support that by any objective measure is expensive.

      1. For those of us that don’t have an extra 10M laying around, all that is really needed is 200k. Double it up. I’ve done it and plan to do every year. Could probably even do it with 100k

        1. For those of us that don’t have an extra 200k laying around, all that is really needed is 100 bucks. Just double it up 11 times. I’ve done it and plan to do every year. Could probably even do it with 50 bucks

        2. If you could double your money every year without fail, you’d be a 100 millionaire in no time, especially still working and adding to the pot. $100k doubled every year would be over $10m in 7 years and $100m in 10 years. Its not realistic to assume you can double your money. Sure – it happens, but so do -90% years for folks with that much risk. There is a reason 90% of portfolio managers lose to the market over 10 years and retail investors are even worse.

      2. I believe being a “millionaire” implies a certain amount of freedom – being able to travel and spend relatively freely without worry of what the market or your investments do on a yearly basis.

        Given this type of expectation and the inflation of $1Mil from after WWII when ‘millionaire’ term became more aspirational, then $10Mil in today’s dollars is a more realistic approximation of living a historical ‘millionaire’ lifestyle and freedom…

          1. Yea, $25mil is even better. Why not $100Mil? My point is the same though that $10Mil would be the minimum today for a life of ‘relative’ luxury.
            You are not buying Lear jets and Yachts but you can have multiple homes, multiple cars, do and travel all you want and still give sizable money to charity without losing sleep if the market crashes tomorrow.

            1. One of the goals may be to try to accumulate up to the maximum estimate tax threshold per person. So $11.7 million or $23.4 million per couple.

              Seems like a good goal that’s a good enough amount of wealth to have for sure. Anything more is just super gravy.

        1. Yes, I think you are exactly right. At $10M, I suspect I feel financially more or less just like “millionaires” must have felt 70-100 years ago. Yes folks, this is how much it takes.

  25. Leaving the workforce in 2 years and will conservatively have between $6M – $7M. Have $5.8M invested now, contribute ~$250k annually (will be $325k this year but bad years it’s $200k) and am assuming 5%-7% growth.

    No pension but wife started working again (she was bored) and her $90k salary added to my $400k-$650k means another 401k to max out and a boost to our ‘fun’ spending money. We have 1 kid still in college but have undergrad fully covered and $40k already parked for part of grad school (will cover between 100% of 2 years at a couple of target schools and less than 1 at another – I hate the college scam ;).

    No mortgage, no car payments/leases, nice primary residence worth $700k in the South. We drive older model cars to save money.

    I share all this because I agree completely that $1M and even $3M isn’t “luxurious” anymore for people who’ve been living a reasonable but not really a HNW lifestyle. I’ve saved a lot for years (had nothing into late-30s before earnings raised quickly) and am constantly working the numbers to understand how much will make me feel comfortable in all kinds of situations. What about a 30% downturn? Should I annuitize part of this (but give up the growth and control)? Am I covered for early nursing home due to stroke or paralysis?

    Would ‘maybe’ like a beach home but not thrilled with the upkeep costs and certainly not the hurricane threats. Won’t just buy a 2nd home – must be ON the beach and not 1 mile back with ‘beach views’ if you squint and look in between many rooftops. Those are expensive though (saw a couple I liked this summer for ‘only’ $1.8M and $25k annual taxes). My current thinking is if I buy a $1M-$1.5M beach home, have $5.5M-$6M left over, withdraw at 4%, take SS at 70+, and use an expected $1M inheritance as a buffer, we should be fine. That’s the point though – “should be fine” is crazy to have to say.

      1. I think when publishing things like this use a family of five instead of three. Most ppl want three children not just one. Children are fun . Stop using one child mathematics we are not communist China . I did not see school fees in your yearly expenses. Pls let us know with family of five what to expect ty

        1. Got it. I didn’t realize most families want three children. I thought the preference was for mostly two children today. Thank you for your insight.

          “In the United States, nearly half of adults consider two to be the ideal number of children, according to Gallup polls, with three as the next most popular option, preferred by 26 percent. Two is the favorite across Europe, too.”

          For a family of five, simply add $50,000 per child per year. How many kids do you have and what is your background? Always good to know where readers are coming from.

    1. So, if you have $1 million, you can spend $50,000 a year and run out of money after 20 years? Really? Is the $1 million tucked in an envelope behind the washer Dave Ramsey? What a bunch of hogwash!!

    2. Don’t assume that inheritance is coming. Money is never “yours” until it’s in your bank. Making assumptions about future windfalls can lead to overspending. Probably won’t be a problem when you have $7 million, but let other readers beware.

    3. As long as it’s really a beach house. That means varnished particle board walls and second-hand furnishings, even from the thrift store. This was the way beach houses were when I was a kid.

      Why do it that way now? Not because you can’t afford better, but because it isn’t a question of if the house will be totaled. It’s only a question of when.

      People building mansions on the beach, full of antique furniture, wallboard, expensive paneling, appliances, etc. but only two feet above the high water mark really annoys me. It annoys me even more that they will expect help and insurance money when that expensive home turns into debris, litter, and toxic waste.

      And yes, I saw this happen again and again when I lived on the Gulf Coast. Personally, I rent for the beach and keep my vacation cabin way up in the mountains where my biggest threat is an occasional bear.

  26. Much like yourself I too was chasing that 1Mil mark. However as I progress in life I am beginning to realize that 1 mil will no longer cut it. Its crazy to imagine how much the cost of living has increased due to inflation. They tell us 2% on average, however what they don’t tell us is 2% in every conceivable category. 2% increase in food. 2% increase in transportation, 2% in housing etc. This all adds up to more than 2% if you ask me. And all the while ones job income only increases at a minimum of 2% a maximum of 8% if were lucky.

    I am now looking to hit that million dollar mark several times over to enjoy a stress free, financial free life.

    This

    1. Yup – I think for most Americans somewhere around $3m is fine in today’s dollars ($120k/year 4% safe withdraw rate) with lower spenders maybe in the $1.75-$2m range and higher spenders in the $4-5m range, but you have to adjust that for inflation so for most that’ll be a $4 to $6 million target depending on both your age and expected retirement date.

      One thing a lot of people budgeting for retirement dont fully appreciate IMO is 1) no mortgage payment 2) taxes are lower – no FICA at the very least, but also qualified dividends and LT capital gains are lower taxes than while working at peak 3) Less work expense – car isn’t as important, less gas, less new clothes, etc. 4) Not having to save a lot of your income for retirement (you are already there!) 5) Lower income means you qualify for government subsidized things – including healthcare and these free checks floating around in the last year 6) Kids are usually long gone, if any

      So if you have no change in lifestyle, you need *substantially* less income than during your working years as your expenses, including taxes, are likely half your working amount, or even lower. Even if you add a hobby or increase travel, it is unlikely to approach your annual expenses while working.

  27. I am always amazed and dumbfounded by the amount of money people have and spend. Maybe it is just a regional thing, but, wow, just wow.

  28. $300,000 in gross income and you can only save $37,000? Of course you can’t retire early with this math! You need to get your savings rate up significantly. Closer to 25-30% would be a good start. And yes this is possible. Buy a smaller house, live in a less expensive city, use public schools and public transportation, share a car, ride a bicycle as much as possible (to reduce dependency on a car), learn how to fix and maintain your home and possessions. Shop at Goodwill, use coupons and sales on groceries. The list goes on…

  29. My Perspective

    It’s all about location. I could retire and play video games and some golf here and there (and save money golfing by playing public courses during weekdays). I’m on track to have about 4.5 million when I retire (in 20 years) but I really don’t think I’m going to need that much money. I live in the midwest and don’t have the desire to move to a more expensive area. I’m making 140k a year and that’s really good out here. I still live in my cheap starter home I purchased for 90k during the housing crisis and am not even sure I plan on moving (It’s now worth about 220k).

  30. * Creating a new post here is response to Samurai’s comment on the latest “what I would do differently post”, June 2019…

    Well, I am going to be the devil’s advocate and try to make the case that $3Mil in assets for retirement does not lead to “luxurious” retirement living…

    I FIREd June 2018 at 50yo and I spent quite a bit of time analyzing spending expectations, etc. I live in a medium COL area (Phoenix) and I have an expectation I want to be able to live a retired life without compromise and without worries of detrimental market trends affecting my retirement life.

    To REALLY lead a retired life without compromise, I believe you need to be have ~$10mil in net assets or generating ~$250K at 2.5% withdrawal/cashflow assumption rate (not the “4% rule”)

    Here is my quick logic:
    1) If you retire early (much before mid-60’s) the “4% retirement rule” really isn’t conservative enough to ensure market effects do not affect your retirement lifestyle. As has been said before, 2.5% might be a better long term, safe assumption (I might even say 2%!). Given, the 2.5% assumption, $10mil generates $250K of safe income and you (might) be able to preserve all your capital with basic CD laddering or income from bond type investments. Assuming this is your safe income level in retirement, let’s look at your budget for leading a “luxurious retirement”…

    2) Your budget…. Let’s consider the essentials – for luxurious living. I assume:

    Health Insurance: you have to pay for your own insurance and you want solid coverage – like gold or better on ACA and you are 50yo+. Premiums plus your high deductible before you can touch one dollar of insurance reimbursements… Your Annual Total = $30K+/year

    Housing: you have a very nice house and likely a second home somewhere else. They are both paid for but you need to cover the ongoing carrying cost for each house – taxes-$10K/yr/house, insurance-$2K, utilities-$3K, maintenance-$2K, HOA, etc.). Of course these depend on location, etc. but a safe assumption for two larger houses in nice areas would be… Your Annual Total = $34K+

    Routine Cost of Living Outside of Housing: you like to have nice wine and multiple dinners out every week ($300/wk, $15K/yr), you want to drive two very nice cars every 3-5yrs ($15K), your eating at home, sundries, clothes, gym/club membership, movies once/week, performing arts, etc. ($10K/yr). I am sure you can think of many other things to put here… Your Annual Total = $40K+

    Kids Support: you still have kid(s) in college or maybe they are out and you’d like to share your success by helping them buy their first house or new car, maybe you have grand kids you want to help with schooling (remember that $15K/yr tax free give exemption per person..) … –> Living a luxurious lifestyle should definitely allow for this, right? Amortizing this expectation over multiple kids, grandkids… Your Annual Total = ~$15k/yr

    Travel and Leading Your Luxurious Life: Now the true finer things in life. Lots of things you can put here (a new boat, multiple time shares, car collecting, etc.) but I would assume some nice luxury travel (6 times/year, business class, 4-5 star hotels or cruises in suite level rooms) and also reasonable charitable giving to causes you believe in. Travel (6 trips/cruises @ $15K/trip) and charitable giving of $20K/year. Your Annual Total = $110K/year

    Grand Total = $229K if my math is correct. This is just for these boxes and I think I could argue a couple of these might be on the conservative side. I also suspect, many could think of other expenses to include here in living their truly “luxurious retirement life”…

    So, looking at a very conservative withdrawal/cashflow assumption and somewhat liberal spending assumptions against a luxurious retirement lifestyle, I suggest that $3Mil is not going to cut it. My Conclusion: Eight Digit FI is the new “millionaire” realty today!

    The term Millionaire should represent something beyond just comfortable living. That could be had with $3Mil but luxurious retirement living requires much more… Eight Digit FI

    Your Thoughts…..?

    1. @ImESP, congratulations to you on your FIRE last year. Your FatFIRE budget example is an inspiring way to dream big.

      Good news: In your calculations, you can factor in some eventual tailwinds due to Social Security and Medicare.

      Bad news: your breakdowns of costs are all post-tax, but your 229k grand total is pre-tax. You will need to withdraw more to end up with 229k to spend.

      1. Hi Thomas47,

        Thanx for the response! You are right on the pre/post tax point, eventual benefit of SS and Medicare, and the fact that even $229K might not be enough!

        My main point was just to spit-ball some rough numbers to conclude that any level of ‘luxurious’ retirement requires quite a bit more than $3mil and even ‘comfortable’ retirement might be tight on $3mil if there is any sustained level of market downturn or unexpected early costs.

        What do you think?

        1. ImESP,

          Good post…interesting. I’m not sure the lifestyle you describe is quite what I expect in retirement, but I hope to live as “luxurious” as possible.

          Let me ask your thoughts on my situation: I’m 48 (49 in August), I have just over $1 million in net worth (including equity in my primary home). However, at age 50 I will be receiving three pension checks worth just over $120K/year (just over $10K/month). I’ve done some research and most calculations value pensions at $18k-$22K per $100 of monthly income (so with $10K in monthly income this would be valued at ~$2 million – this is how an actuary would value a pension in a divorce settlement also). So, I’m sitting at ~$3 million (according to that valuation). Is this presumptuous of me? This is income I will have the rest of my life…plus my wife will get a portion of it the rest of her life if I die before her.

          Additionally, when I turn 60 I will get a 4th pension valued at around $1500/month if I walk away at 51 years old…1% more per year if I stay longer. And, of course, eventually a SS check.

          My guess is I’ll have – in today’s dollars – around $14,000/month in pension/SS when I’m 62/63. This is close to $3mil (according to the $18k-$22k per $100 valuation).

          One of my biggest financial regrets is – when I was younger – I didn’t aggressively put money into my 401k/457/Roth accounts (because I knew I was getting a pension I didn’t feel the need…I put in around $40/paycheck until I was in my late 30’s)…now at 48 I max it out. I suspect when I’m 55 or so I’ll have close to $500K in those accounts. I plan to not ever touch that money…until I hit the minimum withdrawal age – and then leave the accounts to my wife.

          Anyhow, your breakdown got me thinking about what I’m worth….and what kind of lifestyle I’ll have (and want).

          Thanks for the post!

          1. Chris B., nice work on maxing out your contributions. You will be eligible for higher maximums with catch-up contributions starting in January, since 2020 is the year you turn 50.

        2. It’s too difficult to generalize the amounts. The thought exercise of categories, goals, and priorities is useful for anyone to work through, even if we all have different numbers for what we consider ‘luxurious’.

    2. That is crazy spending. I choose retirement and driving my nice car for greater than 3 to 5 years, or enjoying retirement in my new (and paid for) gourmet kitchen cooking together or creating his favorite things. Eating out but not at $15K of our annual income. Don’t need a second home, prefer someone else take care of our vacation residences!

      Sorry not trying to be negative but that premise would only suit a mighty few.

    3. I think assuming 2.5% in a well balanced investment portfolio is nuts though – if you have your money split between bonds, equities, real estate and if desired other investment types, you should easily average a 5% return even over a really terrible period and likely closer to 8%. Government bonds are also not risk free anymore. The closest you can get to risk free over a long period of time is a very well diversified portfolio.

      Investing all of your wealth solely into bonds and the equiv drastically increases your risk for retirement, IMO, as you are not sufficiently hedged for periods of elevated inflation. You can get 5-8% cap rates fairly easily on real estate in the midwest and south/southeast even with the recent run up in prices which if you dont need to sell, you don’t even really care all that much if prices drop as you still get your rental income every month. And if inflation takes off, you benefit both from rental income increasing as well as asset value increasing.

      Lastly, you are doing vacations wrong if you are averaging $15k/trip for a very nice vacation, especially in retirement when you have tons of flexibility! Airline miles = basically free international biz class, plus utilize hotel points/award nights + flexibility on location and timing and you can do those same trips for as cheap as $2-3k for two people with a bit of planning. I did 4 international trips in 2019 for 6 weeks of vacation for a grand total of $11k out of pocket, plus another $8-10k my wife spent on Gucci stuff on those trips. And adding another week to each of those trips would have been less than $1.5k/week (just ran out of vacation time at work).

    4. My thought is that your budget is absurd. Given the fact that the average income is 50-60k per year and you require 250k to live. You my friend have excessive tastes and are quoting prices for things way beyond what they cost in actuality

  31. This analysis is dead on. I live in the NY area and earn less than $300k, but more than $100k. Daycare for me is $1600 a month. The $5,000 tax benefit from the government should be location adjusted, like so many other things. But, that’s what we get for living in high COL areas.

  32. Frederick Atwater

    What I love about the comments section on this site is the diversity of opinions WITHOUT the “you’re so stupid” genre that typically a response section degenerates into way too rapidly. Maybe there are those comments but they are screened out.

    Either way.. $3M or $5M… great. I’ll take either one and be fine. Agree that $1M would be a bit tighter to live on, but we are all different. I like about $10k/mo as a consumption rate. I can go wherever I want.. eat whatever I want, sleep in generally nice VRBOs while traveling.. etc. $120k/yr (after tax) is $150-ish pre tax. $150,000/4% rate of return = $3.75M… so for me $3.75M is a good #… but yours WILL be different depending on your tastes, cost of living, goals, etc.

    And as a different twist to the equation, my generalized $150k / year is cut in half due to a military pension+combat disability. So now $75k / yr is my need. $75k / 4% = $1.875M. Am I there? Yep, and then some for sure.

    Your amount is your amount, based on your individual situation. Just figure out what it is and go get it!! Good luck! You can do it!

    R
    Fred

  33. It’s all about disposable income, when talking about wealth. Everyone has bill, some more than others. Take away the Bill’s and what can you live on to enjoy life with. 100k disposable anywhere in America is nice. Even 70k. Net worth is so hard to gauge on it’s own because of how much producing Income vs non producing one might have.

  34. Sam – figure out a way to put likes or claps on all comments. The comments with the most likes or claps, go all the way up to the top.

  35. I grew up in a poor family so I know what’s like to live paycheck to paycheck when things were looking up, but I also know what it’s like to wonder if we’ll be able to eat. I always thought of rich people as snobby and never cared to be like them. However, I am now 42 years old and have a net worth of $4.3 million. My perspective hasn’t changed a whole lot. I can live frugally and don’t really care about expensive cars, fancy this and that. My house is worth less than $250k. I agree that $1 million is far less than it was 50 years ago. Or even 100 years ago. But if you are in the 1% like I am, then you should appreciate the wealth that you have. I give regularly in small doses to those who are less fortunate. As for the article, this assumes that you let your $1m sit in a bank account and let it dwindle away. Instead, placing $1 million into the same investment account that I have turns an avg 8% return per year. That is $80,000 (pre-tax) per year to live off without ever touching your $1 million. But simply letting $1 million sit in a bank account isn’t doing you any favors.

    1. I’m guessing the 8% is nominal not real returns? Also you have to factor in sequence of returns risk when thinking about withdrawal rates. You might average 8% but that could mean being up 20% one year down 40% in another year, etc. For those reasons, a lower withdrawal rate is needed to ensure you dont run out of money before you die. Over a 30 year retirement, the consensus had been 4% as a safe withdrawal rate. However, looking ahead to the next 10 years, a lower withdrawal rate (less than 3%) might be necessary.

  36. First of all, I think the whole concept of being a millionaire is so you wouldn’t have to consider every gallon of milk or box of pizza you consume… Like seriously, what’s the point of being a millionaire if you still have to factor EVERY single variables like literally everyone else?…… My take, $10million+ is what qualifies a true millionaire in this day and age

    Having a so being power of about $33,300 a month, sets you at $400,000 a year, translating to $10million after 25yrs,in my books, only at this level can a man truly be referred to as being “A Rich Man” ,cus let’s face it, without a good enough spending power, you’re just gonna keep moving in circles,like every other cooperate worker doing ‘just OKAY’ for himself.

    1. EightDigitFI

      I agree with Eyiz in that $10Mil (not $3Mil) is really the “new millionaire”. The millionaire term really got going after WWII and if you look at $1Mil then an extrapolate it for COL adjustments into today, you are get ~$10Mil. This level of ‘millionaire’ means that, living a luxurious (but not stupid) life, you never have to worry about money. Within reason, you can buy what you want, live where you want, travel when/where you want, and be philanthropic at a generous level.
      That is not the typical FIRE advocate but that is what I would see as an appropriate definition of “millionaire” today, correlated back to when it became more in heavy use as a reference for “rich”.

        1. I was 49YO when I achieved eight digit FI. Certainly a lot of hard work and savings in along the way but the two biggest factors were investing in real estate from an early age and a reasonably large benefit from the IPO buyout (almost always something like this is required to get there early).

  37. It isn’t even worth looking forward, unless you want panic attacks. Having 4 kids, one out of college from first marriage (NY school $250k for 4 years all in) and three due to be in college while I’m in my early 60’s having $3 mil even now is terrifying! When (if) I retire in 10 years, with the tax realities in front of us (unless the feds can learn to live on $1.5 trillion a year and collect $3 trillion to pay down debt) and the states don’t go bankrupt with pension failures, I think $6 million will be the new $3 million and old $1 million. I have only mortgage debt but have good equity in my homes…provided we don’t have another mortgage crisis. Rest is cash in very conservative investments (I sleep well at night). Just plan, work the plan try not to anticipate what is wealth and what is not.

    Not menioned in the article is the key my father (of 6 kids) taught us all, health is wealth.

    Good luck!

  38. One expense I didn’t see under spending $200K was medical expenses. Medical insurance i.e: high deductible HSA can run 5-10K annually depending on the employer.
    During retirement if you don’t have supplemental insurance with Medicare that nest egg can be depleted.
    I agree having $3 million is a reasonable amount most people could manage during retirement. The key is prudent investing and diversity in your assets while flying under the radar. Over the years I have seen people leveraged with all the toys trying to project a wealthy existence. A lot of quiet Millionaires choose to live within their means and aren’t interested in other’s approval.

  39. I’m 55 years old. I’ve just reached 3 million in net worth, mostly accomplished with income property purchased while working in the real estate industry. I did take 7 years off from work to raise my children as a single dad. I started working hard on the rentals and my company after the children were grown. The cash flow today is about $100,000 annually (achieved largely in the last 5 years) . However, that money is being highly taxed since it is produced in CA. I now earn $200,000 (pre-tax) per year self employed. However, with over 1.4M in debt and a very high tax rate on my earnings and cash flow, I still don’t feel “wealthy”. I drive old cars and work 60 hours per week. …just the responsibility from my “passive” real estate investments and trying to handle my company and tax planning year to year is a substantial burden. I envy anyone that can sit on CD’s or Treasuries and provide for themselves and or their family.

    It’s hard for me to imagine any annual income number that will make someone feel “rich” or “free” if they are running the day to day operations of managing a growing company with day to day responsibility for growing and protecting the revenue. And….tax planning.

    1. Blessed and Thankful

      Let me start by saying that we know we are blessed to have what we do and we take our finances very seriously…we always have. We set goals when we were very young and have exceeded each of them. We believe that it the key to most anything…write down your goals and work to achieve them every day.

      We currently have $1,800,000 in real estate debt and a little over $11,000,000 in net worth.

      I started working at 8 years old and 49 years later, I finally get to slow down a little bit after selling our biggest business…one that we had run for 34 years, and took 90% of my time. It was no big deal…we sold it for $500K just to be done with it. We wanted it gone so much we even owner financed $300K of the sale for five years. We were after the seven-figure long-term lease we received as part of the sale.

      My wife and I were just barely 19 when we got married. A few months later we bought our first property. We have been buying, building, and occasionally selling properties ever since. When we started the business, I was taking $12K a year and my wife was making zero. I’ve never been paid over $100K annually and I think that was just one or two years. We never paid my wife over $30K annually…she didn’t like to come to work more than a few hours a week…mostly just to take me to lunch and get me away from my office :)

      Five years ago our CPA had us drop our each of our incomes to $200 a month…yep we each receive $2,400 annually from our businesses…just enough to keep us on as employees for our company paid health insurance. Our CPA showed us that we no longer needed the income and that the money we paid ourselves was just going to taxes anyway.

      We signed a nine-year lease with the buyers of our business on the part of the property that our business was in for $1,050,000…we still owe $1,182,000 on that little five tenant shopping center…it will be paid off about the same time their lease is up for renewal.

      Our total rental income is a little over $340K annually and increasing as rents increase…it’s just enough to cover basic living expenses, taxes, insurances and mortgages.

      My wife’s car is five years old. My truck is eleven years old. We currently own commercial and residential properties, most of which will be paid off in 20 to 24 months. At that time we can start paying extra on the few remaining mortgages and have almost everything paid off in the next six years.

      We live in Texas and I can tell you for certain, we do not feel rich or wealthy…we are comfortable most of the time (as long as everyone pays their rents and we don’t have too many unexpected repairs) and when we feel we have excess funds, we find that we donate much of it…we also find that we donate a lot more time, now that we are working fewer hours. We volunteered with youth for twelve-hours on Saturday.

      Many of our friends are building million dollar, or multi-million dollar homes…We live in a house that we built for $350K thirteen years ago, worth about $580K now…we have seventeen years remaining on that mortgage. We don’t want to have the tax burden of a property valued at more than that if it’s not producing an income. Our homestead property taxes are already a little over $10K a year.

      In order for us to feel completely secure, we would need to have no mortgages, 10% of our net worth in cash,
      10% in our homestead,
      5% stocks, and
      75% in income producing real estate…

      …then I think we would feel comfortable taking a real vacation or two and spending a little on a new car for my wife…I’ll likely try to emulate Sam Walton and keep my same old truck forever.

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  44. TodaysTomSawyer

    Nice article. Congratulations on crossing over $1 million while you are still young! I did so at age 50. Ducked back under (that was in 2009) and then recovered to where it’s now near $2 million. My projection is that I will be at $3 million in 7 years at the age of 63. However that is like grabbing the brass ring because inflation will raise the target to maybe $4 million.

    I voted that $5 million is what it takes for someone to feel like a millionaire. My average annual gain is not estimated to be 4% but nearly 8% (I’m more optimistic). $5 million at 8% is $400,000 annual income. It is enough to make you live on the ocean front or gulf front properties and live the lifestyle of those areas. Like Santa Monica or San Francisco.

    1. As the age grows, you need to think on medical expenses .. anything around cancer or auto immune conditions or chronic diseases will quickly drain your savings… all these diseases come in automatically when you have a fast high stress lifestyle

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  49. Hi Sam I’m 18 and a senior in highschool. I am nowhere close today, but i am working to be a millionaire soon. I have virtually no money, and my mother has no extra money due to her high debt. i do well in school, I take three languages, and i’m looking for a job, but unfortunately it’s hard to even get something at a fast food restaurant. And is it better to get a top 10 college or a college i can graduate from with no student loans? What can i do now in order to get a big income in the next several years? Thank you so much for your time!

    1. I’d shoot for a top 10 college and get as much student grants as possible. Get the next grades possible, take on leadership roles, and study something practical. Use every summer to work as a summer internship. You will be far ahead of others.

      I am also bias towards fantastic state schools like ucla, berkeley, William and Mary etc.

      1. I know this post is from many years ago, but i really hope you will see this and can help me! I’m a freshmen in high school and I’m really stressing about the future and all that because first of all, I have no idea what I want to do in life, so really I just want a job that I know how to do and pays good. Secondly, I feel like I’m not doing enough to prepare in order to get into good colleges or eventually get a good job. So are there any specific internships, extracurricular activities, or jobs even that you would recommend for me? Thanks!

    2. Don’t feel like a college education is necessary to get ahead in life. There are many great professions you can make quite a bit at by going to trade school or associates school. Don’t fall for the myth that everyone needs to go to an ivy league to get a good job.
      If you do go to college, look up the return on investment. The best thing you can do is not change your major since that adds years and tens of thousands of dollars, so try to be sure you’ll like what you go into. Internships are HUGE. They open doors to employment more so than your GPA or extracurricular involvement. Any employer would gladly take a 3.0 student with experience than a 4.0 with none. If you need to take out loans, that’s OK! Many people are so adverse to student loans but its a good return on investment if you stick with it. Your career will be the primary income source in your life, so maximize it. Student loans are OK as long as you choose a college to match your degree. Obviously, you’re going to be in debt longer going to Harvard on an art degree than a state school for engineering.

      Good luck on your journey!

      1. Thank you both for such prompt replies! I’ve applied to Berkeley, UCLA, Cornell and Columbia, all of which I would love to attend, but I also have a full scholarship to my home town college. I’m lost on internships though. Is there a particular type of business I should try to get? Is the year after graduating highschool too early to apply? any other tips for internships? Thank you so much again for replying!

        1. We are in the same boat! I am also a senior in high school right now, and applied to a range of top private universities and public schools. (I got rejected from Stanford early action, and that really just motivated me to apply to some extra schools and focus on scholarships.)

          As a high school student with two internships right now, hopefully I can help answer your questions a little bit in that regard. For the very first internship you get, I would focus on anything that is available. Find absolutely anything related to business, and go for it. Once you have that first internship, you can start building up a network which will accomplish two things. First of all, people will take you more seriously as a high schooler applying to internships when you already some experience! And as I am sure you have heard before, who you know can be just as important as what you know. One of the internships I have right now working for a startup in business strategy, marketing, and software development (no one does just one thing at a startup :) was offered to me from a contact I made interning in Risk Management last summer. He quit his job once his startup began taking off, and when projects started piling up, I was the first person he thought of. Basically just work as hard as you can in the best opportunities that are available to you and it will pay off!

        2. Always go to the best … it does not matter on tuition fees..
          Top venture capital and Hedge funds don’t open the doors to anything other than the top ivy like Wharton, Stanford and Harvard… this is just the difference of whether you want to be multi-million holder or just a million$ guy :-)

  50. Based on your chart, it looks like real estate out performs everything. Why wouldn’t everybody use leverage and buy rental homes or apartment complexes? Im 28, live in Texas, have watched my rental homes double and apartment complex rise 50% in one year. Net worth is right around $1,000,000. Rising real estate prices will cause majority of the US to rent, why not have tenants pay off your mortgages. Its simple math. I never understood why more people don’t invest in RE.

    College tuition is just becoming a liability for millennials.

  51. Great website, but i have to disagree. With 1 million USD in America you can buy a nice home, a tesla as your car, and grow with the future, obviously you are still working not sleeping all day so you still have an income but you are financially secure at that point, having knocked off the mortgage.

  52. It is instructive to look to WallStr to see who they think “Rich” is.

    The thresholds to be accredited havent changed since 1982, it is $1M. The SEC is likely to set a new rule in 2015, if inflation adjusted, it will be $2.5M.

  53. This is depressing. Carrot in front of the donkey. Just when you think you are making real progress and can actually see the light at the end of the tunnel… wham, inflation says, “not so fast.” Now you need $3M to live like a $1M. This is why I never have a specific dollar goal in mind that I want to reach. As long as you always live within your means, save religiously and invest in dividend paying stocks that provide an indefinite income you can survive and enjoy without ever reaching the coveted ‘millionaire” status. I always laugh when I hear the news reports highlighting how many new millionaires there are in the country. Meaningless, sensationalist media. Before the new currency removed 10 zeros in Zimbabwe everyone there was a trillionaire. It’s all meaningless. It’s all about your purchasing power and how you want to live.

  54. Sam, I would like to point out one thing… I read on one of your previous posts about how you do not like Roth 401k or Roth IRA. But, in this article you contradict that by your fear that taxes on our 401k’s will be considerably higher. The reason that I go with Roth is that I know now what I am paying in taxes, but you can’t account for what the government will be in 40 years. I would argue that we cannot continue to sustain our economy and government with out BOTH spending cuts AND raising taxes. I just want my money stashed away from a situation like that.

  55. Hi Financial Samurai ,

    I´m 19 , i am learning as much as i can from everything , investing, personal finance , early retirement , i´ve already the mentality , and the habits of not spending in doodads, neither expensive things i don´t need, i invest almost all my money , and my goal is to be financially free at 35 , i know i´m going to make it , just to tell that your website and all the articles , motivates me and inspires me a lot!!, thanks for that!

    keep on with the nice job .

    1. Wow, you are lucky to start reading about personal finance and making money at age 19. You are ahead of so many folks your age. Best to you and definitely keep in touch here!

  56. Well, this is a timely post for me — we just recently hit the one million mark not including home equity! It has been anti-climactic. No changes for us, just keeping working and saving. I do not feel rich at all, probably because we live in California in a high cost of living area where I feel like every one has millions more than we do. I’m hoping we will make it to 2 million in the next 7 years (is that possible?! Lol) and then I will feel more secure. Sam, I want to let you know that I love your site! It inspires me to try to earn more income and be smarter with our investments!

    1. Congrats! All yah gotta do is move to Indiana, like my blogging friend Holly from ClubThrifty says, and all will be good!

      Thanks for reading my site. I’m glad I’ve help you get on top of your finances more!

  57. Interesting (and slightly disheartening!) discussion, but I still think hitting that $1 million mark and technically becoming a millionaire has a pretty nice ring to it. Sure, it may not mean the same thing it did 15 – 20 years ago, but it still has some real psychological value to me. I know it won’t buy me a fancy lifestyle, but I can’t wait to get there – and then keep going (and hopefully have the awareness to realise when ‘enough is enough’).

  58. I would consider a millionaire a millionaire and also include that a married couple with a net worth of 1 million is still considered a millionaire. I do think that 1 million is certainly not the same value and buying power it once was so your 3 million dollar argument certainly makes sense.

  59. Whoa, whoa, whoa… Slow the hell down, Sam! People like me come to this site to learn how to be millionaires. “Not that impressive”? “Not what it used to be”? Now I need $3 million to be cool? Well, that’s a real discouraging kick in the groin. It’s as though someone just moved the marathon finish line three times farther away while I’m halfway through the race. Geeze, Louise!

  60. Yes, I think $3 million is the new $1 million because of the prices of commodities going up each year. You need to have something extra for emergency purposes and having more than enough would be good. Having $3 will make you live a simple and fulfilling life for more than 2 decades.

  61. $10 mil, $5mil, $3mil…Wow, most of your readers are very ambitious and probably also know how to make lots of money outside of their normal job. I wonder how many will actually even get close to those figures after tax and more importantly how they plan to get there if they’re salaried employees without striking it very rich in a early start up stage. Good luck to them in reaching their lofty goals.

    For me personally, as someone in late 30s who makes less than $200k/yr, if I had a choice between a guarantee of continuing to earn my current salary for next 35 years adjusted for inflation or $3 mil(the new million) after tax cash today, but can never make that salary again, I’d still take the $3mil today in a heartbeat.

    1. Josh, I really agree with your comment about people’s lofty goals…although I do think it is great to shoot for the stars the stark reality is that to get truly wealthy you are not going to get there having a $200,000/year job. There needs to be some leverage, whether that is leveraging yourself by starting your own business, or leveraging money like in real estate. Yes you can save 75% of your after tax income for years and years and have a couple million bucks, but by the time you get there a couple million isn’t what it was when you started out. Think about it, we are all pretty much saying here it takes $3M to be what $1M used to be…when people hit the $3M mark twenty years from now it is going to be $7M. I think my point in all of this is to not just aim big from what your target number is, but more so the timeline you are going to get there. Short of winning the lottery, you’ve got to really hustle to get there as quick as possible!

      I also agree with you on taking the $3M now vs. a great salary forever (sort of what I did). That’s the trap people fall into thinking they’ll just keep working, one day they’ll wake up and wonder where the last 35 years went!

      1. Financiable.com

        I don’t know if I agree with you on the $3m now vs. a good salary. If you are in your lower to mid thirties with a 200k salary you are doing something right and would be selling yourself short accepting the $3m in exchange for never working again. Assuming a conservative return of 3% your at 90k gross vs $200k gross. Would I walk away for $6m? Yes. Ultimately one needs to evaluate if they like what they are doing, is it sustainable and is it providing the money they need at their current age bracket.

        Also lets not forget about the cost of healthcare, having $3m, $5m, $7m in the bank isn’t akkn to a pension that guarantees healthcare coverage into the future. Anybody going through open enrollment now is likely staring at some pain in the way of increased premiums in 2015.

        1. Actually I gave up a 7 figure income in my early 40’s because at some point how much is enough? Is it really worth trading the only commodity that you cannot purchase, your time, for more dollars that (if you are a reasonably responsible person) you will never spend?

    2. My husband and I only have our salaries and make nothing outside of our jobs. We make slightly less than $200K a year and should reach a million in about 4 years…I will be 40. We got here by starting to invest in our 401K’s at 22 and starting Roth IRA’s. We did not make much when we graduated from college, but we put money away anyway. Now we max both of our 401K’s, our Roth IRA’s and put money into taxable accounts as well as college funds for our kids. I think once we started saving it became ingrained that we could never spend it (or at least until we retire). Plus, we have become addicted to saving money. We have done nothing special or extraordinary to hopefully obtain our first goal of $1 million. And we really feel like we haven’t given up much either. We don’t buy new cars, have a decent house and have no other debt.

        1. Thanks! I think it will happen but who knows?? And even though we make slightly less than $200K and I am 36….we plan on retiring at 55. Maybe.

    3. $200K is a great salary, and I have no doubt if you keep it up for 30 years you’ll have at least $3 million. BUT, who has that type of energy? Not many I say.

      I bet you’ll want to pull the chord sooner than 30 years.

  62. Sam,

    I’d agree that $3M in invested assets is the new $1M. After working for several years and keeping most of the cash in the bank, I’ve taken a big push to move the cash into assets that provide cash flow through rental income and dividends. Besides a non-liquid investment in a start up and the value of my residence, we have about $2M+ in invested assets throwing off about $50-70k per year, and that would cover our living expenses but without a lot of margin so I’d like to get that number about 2-3X higher prior to really retiring.

    Total net worth is approximately $3.5M per year. This is living in Thailand as you already know. With that there is a solid measure of security but not a feeling of being “rich” per se (although I appear to be ahead of my expat peers)… at age 41 I still have a ton of energy and curiousness combined with a willingness to keep working- just took on a new job that is challenging but an opportunity for further professional growth. Hopefully I can deliver good results and make a solid career here.

    -Mike

    1. Surely $50-70K/year in Thailand is more than enough to live luxuriously and support a family no, Mike?

      What keeps you driving for more given $3.5 mil is like $15 mil here in the US!

      1. What drives me to keep working? The power of children, my friend. We have a 16 month old and plans to have another child or two… it was a huge wake up call as our expenses have escalated quite a bit, and will continue to do so with education costs being very high from grade school on… it’s OK though, I’m happy to keep working. Like I said we can live well on $50K a year in Thailand but without much margin for savings, and I just like to have a >50% savings rate after living this way the past 18 years!

        With a 16 month old running around the house, it’s not like I’d be getting any rest if I wasn’t working anyway. Working actually gives a good life balance.

        -Mike

  63. hi Sam,
    Would you also post the table with the historical prices in 2014 dollars?

    I always thought the Howell’s were real ‘millionaires’. What were they doing on that tiny boat on that 3-hour tour, though ?

      1. Thanks Sam – I feel old now :-)

        As a kid, the first time I heard the term ‘millionaire’ was probably on the TV show ‘Gilligan’s Island’.

        The comments on people always figuring about 3x are interesting. I wonder if I thought the same when my NW was a third of what it is today…

        1. Ahhhhhh, OK. Yes, I remember watching Gilligan’s Island, but forgot their names.

          That is funny about anybody at any income or net worth level requiring 3X more to feel rich. It’s like this crazy safety buffer for wealth.

  64. Inflation is sadly inevitable and it’s rather depressing isn’t it that salaries haven’t keep up with the rate of rises in costs. It’s kinda nuts how $1mil has lost its luster as a financial goal and that we’re shooting for multiple millions now. But it’s good to be aware of the decreasing value of each dollar we earn so that we can at least remember to keep adjusting our financial goals and save, save, save. Here’s to aiming for $3mil!

  65. Cleveland represents the more typical American city, so yes, $1 million in liquid assets (excluding primary home) should be very very comfortable living.

    Median household income in the USA seems to be around $51,000 or so. That doesn’t seem like too much of a challenge in Cleveland. In fact, I would think a college educated individual would be likely to find employment with salaries in the range of $75,000 to $125,000/year with not too much effort. With good salary and low cost of living, seems like there would be little excuse for not building a sizable nest egg?

    The more expensive coastal cities, and to a certain extent, some of the costlier central cities (such as Chicago, Denver, Dallas, etc.), $1 million may not be as adequate. Thank god for Social Security!

    1. @Ace, came across this recently and thought you might find it of interest to complement your ‘median household figure’…
      The Social Security Administration has just released wage statistics for 2013, and the numbers are startling. Last year, 50 percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000. Also read that 66% of individual workers (144 million total, 120 million f/t, 86 million private sector) make less than $42,000.

      The conversation we are having on this FS board is valuable to me, because this subject is not very socially acceptable (at least in my life). We are anonymous here, but among others who share the same interests and concerns, so I really appreciate it. As the figures above show, not everybody is concerned with ‘millionaire’ definitions or has the wherewithal to save and consume. But we can all try to do our best, and it is really helpful to read the thoughts of others in a conversation I would never have with a close friend or family.

      1. Sam,

        Your very first commenter on this article mentioned Cleveland. And thinking about this…. Cleveland is a good anecdote for the typical (average) American city.

        And for folks in Cleveland; I mean this in an economic construct. Cleveland seems like a very nice place to live.

        If everybody decides to move to Cleveland, then cost of living would start to skyrocket! I think part of Cleveland’s charm is that it is off the radar, but at same time, geographically close to the East Coast.

  66. This is a good argument for the 3 million goal. I agree that 1 million is simply not enough anymore esp for a couple to retire, enjoy their grandkids if they have them, etc. I have been so focused on getting out of debt that I haven’t thought about what my “number” is. I just know that I will be throwing my money into investments like crazy given our late start.

    1. Sounds good Cat. Just don’t forget the liquidity angle. It seems like one “can’t lose” investing in the market nowadays. But the day of reckoning will come and I think you’ll enjoy my Investment articles more. When will the debt be paid off?

      1. Yes, housing in Montreal is some of the most affordable in Canada and, with the strong U.S. dollar, as of today, you’re looking at a 14% exchange rate. Also, the economy is pretty weak right now in Quebec. At some point, I imagine U.S. investors might start buying up some property around here.

          1. Yes, winter is coming and gotta stay busy. Going to check out the startup scene in Montreal on December 2nd:

  67. Really interesting argument. I think you are right that $3 million is the new million, but how does that, in your opinion, jive with people who embrace early retirement and reject consumerism. Is the 3 million really only for those who will retire now or in 20 years. Of course that is why this is the beauty of personal finance because it is truly personal. 1 million goes far in rural areas, but not so much in the metropolitan areas of the coasts.

  68. I agree! Not only do you need $3+million, but the ability to keep pace with inflation. As your table indicates, inflation will devastate your retirement or earnings in general. I started working on multiple income streams more than 20 years ago. My goal was always to have the choice to work vs. needing to work to support myself.

    1. I did too, the multiple streams (apartments, real estate, vacation rental). I can say the 2nd home/vacation rental is a myth/loser compared to full-time rentals. Real Estate “can be” the best hedge against inflation, or just getting lucky in the right city (Portland, Ore. rents have almost doubled in 4 years).
      I too started about 20 years ago, had a business then (one stream), apartments (another stream), wife worked (another stream). Lost enough in stock market plays to turn me off completely to having someone else manage my future, or just panic and fear dictate my portfolio worth. So I have minimum investment in 401Ks and Roths ( < 100,000)
      I do have over 4.5 MM in real estate with a net worth over 3 MM, and people, don't count your primary residence in your factorings.
      The last thing I'll point out, which is interesting as krantcents says above, is the goal of choice to work vs. needing to work (even leaving off 'to support myself' in the statement. I'm starting up again at American Express, can earn good money (software developer) and had sat home for the past two years, putzing around. I'm 54 this year.
      So I agree with everyone that telling your boss to shove it, is a great objective. But why, when you can make such good money, is that even a consideration is my new philosophy. I think that money chase can be 'out of control' at times (mentally), as living a good life (for me) has meant:
      a) living below my means
      b) multiple income streams, meaning never in "dire straights" … never have to knock on wood
      c) never having a car payment (new car smells are over-rated)
      d) other people pay my mortgages, and I'm snowball paying off everything currently following the Dave Ramsey philosophy of debt snowball paydown. BTW Financial Peace, by Dave Ramsey, is a great read, as is the Millionaire Next Door, of course.
      e) always have a 20 year old Ford F-150/F-250 to haul crap
      f) only use investment money (equity) for
      i) leveraging into more appreciable assets (ie; tap it for purchasing more real estate)
      ii) investing in yourself ( health, education, marriage)
      Too many people I see mortgage their homes for their kids educations, that is on them, if
      you haven't reached your financial goals. Yes, debt sucks, but community college is an
      option. YOU taking on the debt is a bad move (you'll know when they have to pull shots
      @ Starbucks, or decide after Law school that the legal field isn't their 'calling')
      g) from your multiple income streams: its not what you make, its what you keep (from the government- tax-wise)

      So these are some of the principles I've used, but about the job … I guess I'm working because computers and programming challenge me more than Sodoku puzzles, or a wood shop, and because I have a 100% remote position, its like being retired, but getting paid to do what I like anyway.

      And trust me about the real estate investing. It was sound advice I got from a very smart, 300 million-aire, at the ripe age of 20 years old, when I asked him "how would you invest $10,000" ?

  69. By definition, having $1,000,000 makes you a millionaire. You’re right it’s not worth what it used to be but it’s still a lot of money in a lot of areas. Parts of the country you can get an amazing house for under 200k! So it’s all relative to location and expected lifestyle. I would say a millionaire regardless of time is an impressive feat especially if you earned it yourself.

    Yes there are approx 9.5 million millionaires but some of that wealth is passed generation to generation too. Lot of buying power right there. And to anyone who can defy the odds and work their way into the prestigious ranks of being a millionaire has my respect. That’s dedication, sacrifice, and smarts. As you said 4% is a lot. But at the same time it isn’t a whole lot.

    Also, some of those millionaires living in cheap states actually are filthy rich potentially popping bottles of Dom P and doing great. The 9.5 million millionaires calculated in that stat doesn’t include home value if memory serves so having 40-45k of discretionary money with house and more than likely cars paid off leaves a lot of spending power for that person/household. Just my 2 cents :-)!

    1. To be a millionaire in Kansas can buy you a lot of stuff and a great lifestyle. But what happens for 5 months of the year when it’s cold?

      $40K/year is just fine in many parts of the country if one has no debt for sure.

  70. I am convinced that the government will someday further raise the age at which you can get Soc. Sec. or even means test it. That is why this week, at nearly age 62 I am going to sign up for benefits, even though I don’t need them right now. I believe that if someone is already receiving benefits, they won’t take them away. However, they might change the rules of the game and prevent someone from getting anything if some community activist decides I have enough wealth already. I also believe that our 401Ks, Roth IRAs etc. will someday be taxed by means of a distribution fee or something similar. There is simply too much money in these accounts for the government not to cast its’ greedy eyes in that direction.

  71. I’m not sure if net worth is the end goal to focus on.

    Many of the comments reflect the huge differences in return on money. What if you had a net worth of 1 million but made 20% return per year? For example, maybe you have an equity position in a business that has yielded a huge return on investment. Conversely, what if you had 5 million in a savings account and made only .3% return? Obviously these are extremes however likely.

    I feel that the best measure of wealth is cash flow. How much do you have coming in every month? You don’t spend your net worth you spend cash coming in. I believe that the Europeans calculate their net worth (wealth) by what they have coming in each month. I’d rather focus on increasing my monthly income and let the whole net worth thing happen.

      1. Sam, what do you feel is a better move, to pay down notes on rented property to increase monthly cash flow OR purchase new investments like stock or more RE?

  72. In 1962 there were 80,000 U.S. millionaires. Inflation adjusted that million is worth $7,881,821. in todays dollars. If you were a millionaire then you would have been in the top .5% of the U.S. population. Now if you want to make it in the top 1% you need a little over 8 million.

    Growing up a millionaire was a person who didn’t have to work if they didn’t want to, or someone who could afford all the “finer material things” in life. When I picture a millionaire I envision that Mr. Mega Bucks guy in the monopoly game. My guess is he’s worth around 8 million today.

    1. Love it Bill. That’s some good quantitative analysis. HOWEVER, I say we don’t need $8 million bucks to feel like $1 million back in 1962 because the quality of our lives are so much better now.

      TVs are ubiquitous. So are iPhones and laptops. Everybody can catch an affordable flight to paradise (not Chicago), and lots of other good stuff that has allowed for the equalization of lifestyles imo.

  73. I think $10 million will allow me to live in comfortable. Being able to compound my net worth at 10-15% would provide $1-1.5 million in growth annually. And having to live off the dividends of 3% would provide a nice $300,000 in spending money. I guess the other option is to move to a foreign country like the Philippines where the cost of living is much lower!

    1. Hmmm…. might be tough to live comfortably on $10 million, especially if you are still living at home! How is it that you’ve come up with the highest figure to live most comfortably out of all of us? :)

  74. I am still shy of 30K to reach a million and I don’t think it is enough. I still drive a cheap low mileage car, recently planning to move out to SF to increase my wealth. My passive income is still not there and I dont feel like an almost millionaire. It is also easy to loose it than to earn it back for sure. I would agree that a cool 3M is a good place to start feeling like a millionaire!

  75. One million after tax is still a lot of money. My guess is that the 10 million millionaires in net worth in US is probably pretax. After tax figure may reduce that number down to 9 million perhaps?

  76. Funny that you mention the $3 million number, that’s about what my goal is. And it’s amazing how easily achievable it is.

    Start working at 22, max out 401k (17,500), roth ira (5,500) and hsa (3300). Work for 8 years and you’ll end up in the 250-300k range and never have to contribute again. 7% return on 275k over 35 years should put you right near 3 million dollars. 275,000*(1+.07)^35

    And that’s why my goal is to save up 300k by 30 :) Math is fun.

    1. Good goal to save $300K by 30.. but I just realized…. hmmm, MAYBE not see easy to return 10X by 60! Sounds daunting if one puts it this way… lots of landmines could happen. Best of luck of course!

  77. Paula / Afford Anything

    Am I the only person with an adolescent sense of humor? Sorry Sam, but I have to break it to you: Your chart lists the cost of “Pubic” College, not “Public.” :-)

  78. Sam

    Well, it was a BIG day when my net worth crossed $1M. I lived well below my means for many years to get there. I banked raises and bonuses and windfalls. I invested conservatively but consistently. And it is a huge achievement to arrive there. True- it is not what it used to be but it is a milestone that most people never attain and it is an indication that you are doing many things right.

    My net worth is now $3M including the house, $2.5 excluding the house. Do I feel better now than when I crossed the $1M mark? Not really. I think that each milestone after a million increases the sense of calm that you feel- knowing that it would be difficult to knock the ship off-track.

    If I was to retire at 55 years old– the $2.5M does not cut it yet for retirement purposes. If I live to 95 ( you must plan to live long) it only allows spending of $62,500 /year for 40 years on a straight line no interest basis. That is not enough taking into account inflation. Might work ok in the here and now– but it is not a life of luxury. You’d expect to spend more with millions in savings right?

    I am shooting for $5M — that allows for $125,000 annual spending over 40 years assuming no growth of principal. Investing conservatively might get me 5% which I assume will keep me up with inflation. So I can continue spending the equivalent of $125K till I die.

    I save over $100K per year these days– and with investment gain I typically see my net worth grow $200K / year. So– every 5 years should see a new million in net worth. Theoretically anyway.

    The truth is that I am much more conservative these days. I favor CD’s and stable value over S&P 500. That is a luxury. I want to protect more than I want to grow.

    1. Great stuff! How old are you now? I totally here you on PRINCIPAL PROTECTION now vs. growth. Maybe you can take $300,000 over your $3 million and hunt for unicorns since it sounds like you’ve got a pretty good cushion.

      Too bad the best CDs are now at only 2.3% for a 5-year.

  79. The term Millionaire USED to imply a relatively exclusive club. 4% of the working population is somewhat rare but hardly exclusive.

    I think the current definition of a “real” Millionaire should be an individual (or family) that earns $1,000,000 per year (pre-tax)…in any form (e.g. income, capital gains etc.).

    Glenn

      1. By my definition, we reached millionaire status for the first time this year. Next year is looking good as well. Beyond that also looks good but my experience tells me I cannot be certain. It took 18 years to get to this point, we could have been done it in less time but it took this long due to our focus on passive income. At this time, Passive Income >> Active Income. Also, I made a LOT of mistakes on the way.

        I have read the post you linked and its your blog, so who am I to disagree with you…but respectfully, I will :-)

        If you cannot spend it safely, Net Worth is not very useful.

        Your linked post says that “for most”, income is linked to a job. Of course, as you implied, that does not have to be the case. Passive or at least Semi-Passive income is MUCH harder to obtain but if you can get it high enough RELATIVE TO YOUR SPENDING (all forms of taxation included), you NEVER have to touch your capital. At that stage, your Net Worth number is less relevant.

        Glenn
        P.S. I really enjoy your blog.

          1. Never really had a “day job”…

            My sources are 2 small businesses (10-15 employees each). Nothing glamorous but have solid management in place. One that I built from the ground up right out of University and another that we purchased about 6 years ago. We have some real estate but we have not bought any in 10 years as the numbers haven’t made any sense.

            The business I started is now run by my wife. Personally, I would like to put a manager in place there as well but she really enjoys the work and doesn’t want to.

            With the business we acquired, I am now down to talking with my manager every couple of weeks and showing up for various social events.

            Getting the businesses profitable was TRIVIAL compared to getting them to run without me.

            So…I would say that my source are “semi-passive” rather than passive. They are passive in that I am not needed on a daily (or weekly or monthly for that matter) basis but ultimately I still am still involved in (and responsible for) large decisions.

            Glenn

  80. $3mm lets you put it on cruise control if you are disciplined with your lifestyle and investing. Earn 5% for $150k income without touching principle. Live on $100k and reinvest $50k. Not rich, but comfortable without having to increase income.

    If you choose to be active with your investments (real estate, for example), earn 10% for $300k in income, which starts to feel more like wealth.

    1. I donno about earning 5% Jon. There’s definitely risk involved which reaching for that figure. Sounds nice though! I’d be more conservative and shoot for a 3% annual return with the 10 year yield at 2.3%.

  81. I do agree 1M is not alot like before, I just past 4M this year and still don’t feel rich, maybe because we are still working very hard to accumulate NW.

    I do agree there’s a lot of stealth wealth going around. Especially for immigrants, they can easily hide their wealth overseas .

    1. Nice job! How old are you and what net worth are you targeting before you call it quits?

      My neighbor’s dad is probably worth $20 million and still works every day in construction and drives a crappy truck.

  82. One million isn’t what it used to be but it’s still a lot of money. Can one retire with one million dollar? Probably, depending on where you’re living. $3 million would be a nice goal to aim for.

  83. “Son, things are a lot worse than I’ve let on. We might lose the house………….The lake house. Sorry for the pause.” – Anders Holmvik’s father

    “Health plus Freedom equals Happiness.” – Scott Adams

    Whatever rung is next up from where you are, that is a worthy goal. $10 million might be a fair representation of what $1 million meant back in the ‘Mad Men’ days, but that was unobtainable for 99.9% of us then, as it is now. Everybody likes to dream that status. FS readers are well on their way!

    1. I like that. Shoot for the next “rung” from where you are now. Don’t worry about comparisons. well said !

      1. Financial Samurai says …nice.

        Sam, you gotta be fresh! “Nice!”

        (That is a sound clip of Brian Baumgartner/Kevin from the American “The Office”, M.O.C. is “Mail Order Comedy” where the Workaholics first incorporated.) Your view of the forest sounds great, a nice change of pace from your ‘panoramic ocean view’.

  84. I’d say 2 millions. That way you can say you’re a multi millionaire. Heh heh.
    Yes, it’s easier to accumulate a million now and it’s not quite what it was in the old days. However, we also have a lot more choices on location. We can live in Thailand, Argentina, and many other places and stretch that million a long way. The world is much more global now.

  85. Do I feel a material difference in lifestyle? Not really. But there is less financial stress knowing we can weather a financial emergency. My fiscal projection is to now withdraw a SWR of less than 3% for the first five years of retirement, thereafter reduced to under 1.5% (after modest pension & SS kick in)for the remainder of our lives assuming 5% investment returns and 3% inflation. I exclude both houses from net worth figures.

  86. One million isn’t what it used to be, but it is still something to shoot for. First, a million now seems fairly obtainable for many, and obtainable early in life. The next million should be easier with growth, debt paydown, and continued savings. I’m shooting for $1,000,000 by 40 with the goal that $2,000,000 should be easily obtainable by 50. All this is subject to a prolonged bear market, but so long as you are diversified and continue to save every year, you shouldn’t fear a bear market.

    So I say, shoot for a million, but not as a final destination, but rather your first.

    1. Ah, once you get to $1 mil, it’s easier to lose lots of money too. It’s definitely not a guarantee as a lot of people tend to take more risk once they reach $1 million b/c they feel more invincible! Just be careful.

      1. Done by Forty

        Super interesting insight there, Sam. I would initially guess people would become naturally more risk averse as they had more and more to lose. But I suppose risk appetite isn’t rational anyway.

  87. Myles Money

    $1m in income-generating assets would do very nicely, thank you… it may not cover all my expenses till the end of time (especially after marriage and kids) but it would be a pretty good start. Where do I sign up?

  88. No doubt $1M does not put you on easy street, but there is definitely a geographic location piece to the puzzle. $1M liquid net worth in SF probably means you are below the median, where as if you are in rural Nebraska you probably run the town like that dude in the Classic Patrick Swayze movie “Road House”…lol

    I remember gas under $1 and my dad buying a beer in a cooler next to the pump at the gas station as a roadie…whole different subject but how crazy was that! Yes regardless of location though I think it takes $3million + to afford the security that $1M used to. Even as a person who has been fortunate enough to accumulate what should way more than enough, I still to worry about inflation eroding the value of my net worth. I suppose you just have to make sure you stay in the game across many asset classes.

    1. I’m moving to NEbraska! I loved Patrick in Road House!

      I remember him coming to the trading floor at 1 New York Plaza in NYC (50th Floor). We all got to say hello as he checked us out at work. Sad he died so soon.

        1. @nbsdmp, your post reminded me of a nice memory from Don Barrett at laradio.com, though sad, I hope this will help you remember him with a smile…
          I met Patrick Swayze during the marketing of MGM’s Road House. Patrick was a tough bad-ass bouncer in the movie who in real life happened to be a pussy-cat, gracious, kind and professional at all times. I’m guessing he treated us marketing folk like he did his friends.
          A press junket is a looooong weekend where a studio invites 150 press people to one central location, usually New York or Los Angeles for marathon interviews. They are grueling as one tv person after another sits in a hotel make-shift studio for 5-10 minutes with each principal. Think KTLA/Channel 5′s Sam Rubin when he broadcasts his interviews sitting face to face with the personality and some giant poster between them. On our last day of this weekend, Patrick had 43 separate tv interviews. It was a particularly long day because of technical problems.
          Ira Miller, MGM’s marketing guru in New York, had two teenage daughters who were huge Swayze fans. They had seen Dirty Dancing and Ghost dozens of times. We marketing people rarely integrate our personal lives with the task at hand. But Ira wanted to bring his two girls to the hotel that Sunday just to hang around and maybe get to say hello at the end of the day.
          After a weekend of working with him, we all fell in love with Patrick. Even though the weekend was long and we were winding down late Sunday afternoon, we decided to bring in the girls for an interview pretending to be from a youth-oriented show. Within a minute Swayze knew that something was up. He stopped the interview and wanted to know who they were. When Ira introduced his daughters, Swayze beamed and told the girls to join him. Meanwhile, the cameras were still rolling. Patrick teased them, posed with them for photos, gave them autographs and stayed an extra 15 minutes. We knew how tired he was but it was just the kind of guy he was. He knew he had been treated with professionalism all weekend and instinctively knew that we would not have needlessly delayed the end of his task if it didn’t mean so much to the girls.
          We all became big fans of Swayze that weekend. I’m sure all of us who spent that press weekend with him twenty years ago are especially sad that one of the good guys died far before his time.

    2. Roger McNealus

      A year later and a dollar short…so to say.

      I live in Nebraska and you might be surprised how many millionaires/multimillionaires there are here.

      While I don’t run a “Roadhouse,” I do own a successful distribution business.

      We live “the good life” here in the beef state.

      I do find people are pretty much the same everywhere I go. Yet, Nebraska remains fly-over country. We like it that way!

      Drive the interstate and claim to know the state while you whirl by at 75 MPH. Makes sense.

      Anyway, the less coastal influence, the better it is here. So please continue to fly over and whiz through. Thanks for stopping by! :)

  89. I agree that one million is not what it used to be. I crossed one million pretty quickly with my real estate holdings and I am close to two now. I still don’t consider myself rich yet, but I am guessing many people would. I want to get to ten million in net worth in the next ten years or sooner. I think that would provide enough passive income for me to feel free to do almost anything I wanted without worrying about working. I am sure I will still work to challenge my self and because I enjoy it.

  90. It’s crazy how quickly inflation changes the value of things. Especially as inflation is only a little guy really. Yet we do tend to cling to some ‘barriers’ like 1 million net worth or an annual wage of 100k, the same in the UK. Can’t wait for billionaires to become the norm.

    I agree with Mr Frugalwoods, my spending would be higher by myself rather than together with the missus!

  91. Easy mistake, but that millionaire number is actually closer to 5 million Americans. 10 million is the number of households which is a little misleadingly. That puts the percentage closer to 2% which does include minors and young adults, but still isn’t that impressive.

    The principles of sociology still stand: it’s rare and unlikely that anyone will move up a social class in their lifetime. Granted, there are tons of more ways and opportunities to make millions, especially through a startup or online business, so making a million should be easier.

    Yes the number of millionaires is increasing every year, but so is our general population. I wonder which is increasing at a faster rate. I’d still guess population.

    A million is nothing in cities like NYC or SF if you plan to retire there, that’s for sure. But, a million can go a long way in many parts of the country.

    1. You’ll have to prove to me there are only 5 million, millionaires to win! Couldnt one argue that 10 million houses actually produce AT LEAST 10 million individual millionaires since who says one spouse contributes nothing financially? To have The default assumption that each spouse is only a millionaire if they combined forces is one of the questions I point out in this post.

      4% is of the working population of America (~250 mil) not the total population.

      1. Google “number of millionaires in usa”. It says 5,231,000 as of 2012. We’ll say there are 5.5 mil now. 5.5/250=2.2%

          1. I believe there are that many spouses, and significant others that don’t contribute. I’ve seen personally in friends, and family as well as for myself. I believe you need somewhere between 3 and 5 million. What you haven’t taken account of is special needs family members. The toxic cost to retirement. Grandparents that have to use their funds to help grandchildren. Its pretty hard to say, “no to a grandchild that needs special education, medical, and social skills, mental health.” Young parents just can’t get ahead sometimes.

        1. Millionaire is meaningless for several reasons.

          Sam’s post above focuses on inflation. That’s certainly one reason it’s meaningless.

          Another is the point you highlight. “Household millionaires” is not the same as individual millionaire.

          Further, “Net worth millionaire” doesn’t count for much if those assets are non-incoming producing assets like house or property.

          “Millionaire” has always been about the idea, not the number. As another reader posted above, a “millionaire” is someone who can live a very comfortable lifestyle without worrying about how to pay for it. Maybe back in the 70s, $1M *investible NW* was enough to do that. Nowadays I’d peg it closer to $5M *investible NW*. I prefer “affluent” to “millionaire” for this reason.

          1. Describing a real millionaire as having $5 million is exactly the feedback I’m looking for. A lot of people have been throwing around $5 million as the new figure, but I think $3 million is good enough.

  92. I had two different jobs when minimum wage was $4.25 – Walmart cashier and service desk and hostess at Waffle House. Worst jobs ever! I also remember filling up my tank for .99 cents a gallon. Those were the days!

    I agree with you that a million dollars isn’t what it used to be. On the other hand, we’re not necessarily shooting for millions in retirement. Our spending is low and our debt is almost non-existent now. I am counting on our retirement accounts and rental property income to support us. If social security is still around, that would be great.

  93. Stefanie @ The Broke and Beautiful Life

    I went to a LearnVest event two weeks ago where they showed research that people, regardless of income level (to a point I assume), say they would need to earn 3x as much to feel financially free.

    While the first million is definitely a goal for me, it’s certainly not an end goal.

      1. Sam,

        I think the point was people need to have 3X of whatever they are making today to feel secure, it’s an endless escalator…

        -Mike

  94. Another Reader

    Real wealth, which you are associating with “millionaire status” is achieved when you no longer spend your time worrying about whether the safe withdrawal rate is 3, 3.5, or 4 percent. Really wealthy people are generally interested in preserving and growing their wealth for the future, so they never spend a dime of their assets. They only spend income, whether it is asset or salary income, and only a portion of that.

    With $5MM, you can withdraw 4 percent per your formula and have what you consider to be the ideal income of $200k. The reality is that most folks with $5MM are generating much more than 4 percent on their investments, and can take an income of $200k or more without thinking about it.

    Fifty years ago $1MM would get you to that point. But 50 years ago, having a $10k salary was something to boast about.

    Therefore, my answer is $5MM is the new $1MM.

    1. I agree – $5m is the new “millionaire.” It would generate enough income to live comfortably without dipping into principal. Anything less than that, and you’re still in the rat race.

      1. Your still in the rat race? With 1m you can buy and nice home and a tesla, invest the rest of your assets and continue making a decent income each year. You are completely financially secure, no rat race. Unless your not economical with your spending, your putting yourself in the rat race you don’t have to be in.

    2. I can get down with that definition, and $5 million. I’ve heard the $5 million number thrown around a lot, but I think we don’t have to go THAT far yet. $3 million is good enough!

  95. You need to create a new word for a $3 million millionaire. A tri-millionaire? Make it a thing. :)

    But really $1 million is good enough for me. I live in a low cost of living area so I can easily live off $40k/yr. I’m single though too so that makes a monumental difference.

  96. I think you are right to talk about what a Million buys.

    Being a millionaire would be a dramatically different feeling in Cleveland than in San Francisco. Could I retire on a million in SF? Maybe, but it would take some hustlin’. In Cleveland? Without a doubt.

    As to the couple argument… I tend to believe that separate finances in a marriage is a symptom of broader communication difficulties. Not always, for sure, but a lot of the time.

    Being a couple is a huge financial multiplier. Cost of living goes down, earning power goes up, and combined finances gives you a much bigger pile of capital to work with. I think it only makes sense to use a lower number for 2 people as a couple than on their own.

    A million would be a pretty solid net worth for us. Our burn rate is so low that it wouldn’t be a problem.

    Honestly, we probably spend less combined than I would by myself if I was single!

    1. Jay @ ThinkingWealthy

      You mention your burn rate, but shouldn’t that increase in retirement since you have more time outside of the office and will thus spend more money? I agree that a million isn’t much at all – especially in a big city, but in South Dakota….

      Personally, I think it’s more like $2.5-3MM so you can draw $70k plus and not have to worry about anything (assuming your mortgage is paid off).

      1. I agree, Jay. That’s my biggest concern about retirement – how much money will I be spending? Right now I can’t spend money when I’m at work, but I do spend on my days off. If all my days are now work-free won’t I be eating out more and looking for other ways to entertain myself? I’ll also want to travel more than one major vacation every few years. So in that respect I feel like I need to hit that 3 million mark so I won’t have to worry. Worry is my middle name as it is!

    2. Completely agree, the amount of money $1,000,000 would throw off for me would be plenty to live comfortably here in Tampa. I’d probably want to achieve more, but I wouldn’t need to work anymore.

      1. I live in a college town in the midwest and feel very wealthy with $2.5M (age 34). I have few peers my age in terms of self made wealth.

        In a city like NYC you need money to buy space and entertainment. Where I live, space is cheap and most entertainment is relatively cheap or free. Having more money in the midwest would not improve my life like it might in a crowded city like New York.

        The $1M vs $3M debate really comes down to location and the lifestyle that you want to live.

        1. Which college town? I’m in the same boat. Midwest is the best for accumulating wealth with a reasonable cost of living!

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