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  1. #141
    Senior Member Beargryllz's Avatar
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    Quote Originally Posted by Magic Poriferan View Post
    Sure, they are all human beings. But that never the less the amount of wealth a person has really changes their life.
    We absolutely all have different circumstances in life. Money is probably one of the more significant circumstances, but its presence won't change the human drive to attain more (of anything)

  2. #142
    Senior Member Survive & Stay Free's Avatar
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    Quote Originally Posted by Beargryllz View Post
    We absolutely all have different circumstances in life. Money is probably one of the more significant circumstances, but its presence won't change the human drive to attain more (of anything)
    I dont think anyone's arguing that but its a little different from feeling you havent enough. At least I think so. The one state I'd see as characterised by striving motivation, perhaps habit (just thinking of myself and book buying), the other by anxiety or worry, ie there is not enough.

  3. #143
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    Quote Originally Posted by Beargryllz View Post
    We are finally getting somewhere! This thread may still have potential...

  4. #144
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    Quote Originally Posted by highlander View Post
    People who equate 1M with being rich - you need to do the math.

    Also, consider there is value associated with the time you have left to work. So, if you are 25 and you have another 40 years to work, that is worth quite a bit in real dollars - probably quite a bit more than 1M. If you are 56 and you only have 9 years left, you need to have assets that will allow you to continue to live comfortably as the income stream diminishes. Age is an issue. Try getting a job when you're 60 vs 30.
    I know exactly what you mean but to be honest this is the same as arguments which were made recently in the UK about how if you lived in England and particularly London then by virtue of owning a house you could be considered a millionaire while your disposable income would be average or small besides.

    You're still a millionaire, I'm in what I would consider a high enough earning job for the local population/area in which I live, I've been saving for more than five years, I mean saving really hard with next to nothing which could be considered an indulgence and I'm nowhere near the 100,000 mark let alone the million mark. So I cant relate. I seriously suspect that the millionaires cant relate to me and my dilemmas either.

    Hence the problem with inequality per se and why I personally, besides some acknowledgement of an abstract "yeah, people always want more", cant really empathise with millionaires who feel they are not well off and need a tax break.

  5. #145
    Administrator highlander's Avatar
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    Quote Originally Posted by Lark View Post
    So I cant relate. I seriously suspect that the millionaires cant relate to me and my dilemmas either.
    I wouldn't be so sure. A lot of them started out with very little. They weren't born rich. They're just at the end of their working careers.

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  6. #146
    Senior Member Beargryllz's Avatar
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    Quote Originally Posted by highlander View Post
    I wouldn't be so sure. A lot of them started out with very little. They weren't born rich. They're just at the end of their working careers.
    More importantly, being to able to relate to a person on a financial level is only one common bond. I would imagine that any given millionaire and any given average person would still share more than a few passions or similar interests, likes and dislikes, etc. A person is not necessarily weird and inexplicable, as you might imagine, even if they do have significantly more disposable income than an average citizen.

    Many millionaires probably do, in fact, put up with the exact same bullshit that you and I do.

  7. #147
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    It's an odd article. About a thousand millionaires were asked if they "feel wealthy." About 42% said "no," and they indicated that they would need at least $7.5 million in investable assets before they begin to "feel wealthy."

    But what does it mean to "feel wealthy"? Is it a dream figure where you can buy your own jet and fly around the world, or is it just enough to finally quit the rat race, buy a bunch of good books, and put your feet up for the rest of your life?

    The millionaires who responded had an average age of 56, meaning that they were nearing retirement. With people nearing retirement, usually the big question that is asked for retirement purposes is: "What do you need in order to maintain your current standard of living?" That's what all near-retirees really aim for: To have sufficient principal to generate an income stream equal to 80-90 percent of the income they received while they were still working (and hopefully to achieve that number from investment returns alone, i.e., without dipping into the principal). So I'm assuming that the millionaire respondents probably had that number in mind (their current income), and then maybe tacked on an additional 10-25% "wealth premium" to come up with a number that truly makes them "feel wealthy."

    For retirement purposes, $7.5 million works out to a guaranteed annual pre-tax retirement income of about $250,000 to $300,000. (That's assuming the entire $7.5 million is invested at current market rates, and the investment returns we've seen over the last 10 years (3.5-4.0% per year) remain the same into the foreseeable future.) So I'm guessing that these millionaires were probably earning an average of $200,000 - $250,000 a year (pretax). That's a pretty comfortable upper-middle class income. If you save a bit and invest wisely over enough time, it'll make for a fat retirement investment. (And then you tack on the "wealth premium" to get to the original figures of 250k - 300k.)

    OTOH, later on, the article goes on to say that "four in 10 millionaires report that their most pressing financial concern is securing enough resources to support their lifestyle during retirement [...]" IOW, about the same number (40%) of millionaire respondents indicated they are going to have trouble even maintaining their current lifestyle (never mind "feeling wealthy").

    So again, the "feel wealthy" number seems like a fantasy number: a target that they would ideally like to hit but almost certainly won't. Actually most retirees don't even get anywhere near matching their pre-retirement income and lifestyle. Most retirees have to accept a big drop in income and pare back their lifestyle and/or move someplace with a cheaper cost of living. Again, I'm just guesstimating, but based on the numbers I'm throwing around so far, a lot of these millionaires could easily end up with an income of $150k in retirement.

    Will they be well-off with $150k in retirement? Certainly. They know perfectly well that they're better off than most. Also, these guys are pretty good with their money; they could live comfortably on a lot less than that, if they had to. Nonetheless, they won't end up "feeling wealthy" if they have to pare back their lifestyle when they retire and/or move someplace with a cheaper cost of living (which is what happens to most retirees). No one "feels wealthy" when they're taking a big financial hit, millionaire or not.

    Anyway, my point is not to address whether these millionaires are greedy or need to be taxed more or whatever. I'm just pointing out that this "feeling wealthy" number is probably kind of a red herring, a fantasy number.

    Fidelity probably likes the "feeling wealthy" number because it might provide more information than simply asking "How much money would you need in order to maintain your current income/lifestyle?" A question about "feeling wealthy" probably presumes that the respondent will tack on a "wealth premium." Then Fidelity can use that "wealth premium" as a gauge of sentiment about the future of the economy. The more worried people are about the economy, the more of a "wealth premium" they're going to add into this fantasy number. And in fact a lot of the survey is geared toward exactly that: Measuring investor sentiment and worries for purposes of looking into the future.

    But like I say, I wouldn't put much stock in the actual "feeling wealthy" number itself. Most near-retirees are looking at a big drop in income and a significant paring back of their lifestyle. To ask them what would make them "feel wealthy" is kind of weird.

  8. #148
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    Quote Originally Posted by FineLine View Post
    For retirement purposes, $7.5 million works out to a guaranteed annual pre-tax retirement income of about $250,000 to $300,000. (That's assuming the entire $7.5 million is invested at current market rates, and the investment returns we've seen over the last 10 years (3.5-4.0% per year) remain the same into the foreseeable future.) So I'm guessing that these millionaires were probably earning an average of $200,000 - $250,000 a year (pretax). That's a pretty comfortable upper-middle class income. If you save a bit and invest wisely over enough time, it'll make for a fat retirement investment. (And then you tack on the "wealth premium" to get to the original figures of 250k - 300k.)
    I haven't checked out the Maths, but did you consider that inflation would probably eat up 2.5-4% of that return per year to maintain the principle?

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    Quote Originally Posted by InvisibleJim View Post
    I haven't checked out the Maths, but did you consider that inflation would probably eat up 2.5-4% of that return per year to maintain the principle?
    I didn't go into all the auxiliary calculations that accompany these things. But yes, you're entirely right. Pensions and annuities often have COLAs attached to them--cost of living adjustments that bump the numbers up for inflation. But flat investments don't. So unless the investor re-invests part of the proceeds, inflation will eat at the value of both the principal and the income coming off the principal.

    Also, sometimes you just have a bad investing year. Sometimes you just don't get the returns you expected. In which case you may have to draw down the principal to meet your bills.

    But here is how all of that is usually handled in real life: Try to stretch your principal as far as possible while holding off on drawing Social Security, and then Social Security comes to the rescue (preferably at age 70) about the time your principal starts seeing big withdrawals.

    Or just buy a big annuity and get a nice steady income stream with a COLA, and let the professional money manager in charge of the annuity worry about balancing the principal against inflation.

  10. #150
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    Quote Originally Posted by FineLine View Post
    Or just buy a big annuity and get a nice steady income stream with a COLA, and let the professional money manager in charge of the annuity worry about balancing the principal against inflation.
    Yes, if inflation is 4.5% per year (likely) then the expected return on investment would need to be 6.5% (ish) to earn $150,000k as an effective Present Value salary. Therefore $7.5 Million does need to work a bit to earn that, it's certainly comfortable but it isn't a rock solid guarantee.

    Therefore I suggest that we all start saving and investing pronto.

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