How to become a millionaire retiree -- then and now

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Browser
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How to become a millionaire retiree -- then and now

Post by Browser » Sun Aug 31, 2014 11:40 am

To become a millionaire by investing in the U.S. stock market over a 30-year working career, you could have done so by investing $200/month ($2400/yr.) in inflation-adjusted dollars beginning in the years 1972-1978 (ending 2001-2007). According to the Census Bureau the mean income for males in 1972 was about $8600, so that would have represented a savings rate of about 25% of earnings.

Starting in the years 1979-81 (ending 2008-2010), you would have needed to invest about $5000 annually in stocks (inflation adjusted) to retire as millionaire in 30 years. In 1978, the mean income was about $13,000, which would have represented a savings rate of approximately 38%.

Starting in 1982-84 (ending 2011-2013), you would have needed to invest $6,000 annually (inflation-adjusted) to achieve the $1M goal at retirement in 30 years. Mean salary in 1982 was about $17,000, which would have required a saving rate of 35%. These are the approximate figures for male wage-earners. Female wage-earners in the years 1972-1984 had mean earnings less than half that of males.

In general, it looks like you could have ended up as a millionaire by investing about 25% of your salary into U.S. stocks if you'd started back in the early to mid 1970s and retired in the early to mid-2000s (assuming you were earning the average salary for males). Those retiring more recently could have done so by saving at least one-third of their salaries. With expected investment returns being much lower going forward from 2014, those who are beginning their retirement savings now and planning on retiring as millionaires in 30 years might want to start socking away even more than that in stocks. Average salary for males in the U.S. in 2013 was about $50,000. One-third of that is about $17,000. Start saving amigos!
Last edited by Browser on Tue Sep 02, 2014 2:28 pm, edited 1 time in total.
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zaboomafoozarg
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Re: How to become a millionaire retiree -- then and now

Post by zaboomafoozarg » Sun Aug 31, 2014 11:59 am

Interesting, I've never seen the amounts in terms of average pay percentages.

livesoft
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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 12:34 pm

Those mean salaries seem rather low to me, so probably include minimum wage and lower workers.

Minimum wage was about $1.80 in 1976. So 50 weeks times 40 hours times $1.80 per hour = $3600 a year at minimum wage in 1976,

Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
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Re: How to become a millionaire retiree -- then and now

Post by agent13x » Sun Aug 31, 2014 12:53 pm

Browser wrote:With expected investment returns being much lower going forward from 2014, those who are beginning their retirement savings now and planning on retiring as millionaires in 30 years might want to start socking away even more than that in stocks. Average salary for males in the U.S. in 2013 was about $50,000. One-third of that is about $17,000. Start saving amigos!
Is it a coincidence then that the 401k max contribution is $17,500?

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Re: How to become a millionaire retiree -- then and now

Post by Tycoon » Sun Aug 31, 2014 1:00 pm

If I would have listened to the prevailing attitudes that proclaimed lower returns where forthcoming I would not be a millionaire. No one knows what the future has in store.
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Re: How to become a millionaire retiree -- then and now

Post by Wagnerjb » Sun Aug 31, 2014 1:00 pm

Why only a 30-year working career? If the person has a four year college education and then a 30-year career, they are retiring in their very early 50's. I would call that retiring quite early.

Try running the models with a 40-year working career (which would also qualify as retiring early). I bet you find it much easier to accumulate $1 million. :D

Best wishes.
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Re: How to become a millionaire retiree -- then and now

Post by berntson » Sun Aug 31, 2014 1:01 pm

Also keep in mind that mean income is significantly higher than the median. Since the average is driven up by a few exceptionally high wage earners, the median is probably a better measure of what income is "typical". On the other hand, median worker income will be higher than the median income, since median income includes retirees, the unemployed, etc.

Right now, the median worker income is about $40,000. Assuming 4% real return*, the median worker needs to save 45% of her income ($18,000) to be an inflation adjusted millionaire in 30 years.

*This is probably a bit low for an all-stock portfolio. But then again, most investors hold at least some bonds. So 4% real is probably a good guess at future returns.

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Re: How to become a millionaire retiree -- then and now

Post by Toons » Sun Aug 31, 2014 1:04 pm

Browser wrote: Start saving amigos!
+1,Add to that LBYO,Stay out of Debt. :happy
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Re: How to become a millionaire retiree -- then and now

Post by tibbitts » Sun Aug 31, 2014 1:07 pm

Tycoon wrote:If I would have listened to the prevailing attitudes that proclaimed lower returns where forthcoming I would not be a millionaire. No one knows what the future has in store.
What predictions were these? When where they made? I don't recall a time when there was such a large consensus regarding lower returns going forward, but that could be partly just my perception.

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Re: How to become a millionaire retiree -- then and now

Post by EnjoyIt » Sun Aug 31, 2014 1:20 pm

Also, Ideally most people's income rises as they get more experience and promotions. That makes saving even easier.

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Tycoon
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Re: How to become a millionaire retiree -- then and now

Post by Tycoon » Sun Aug 31, 2014 1:31 pm

tibbitts wrote:
Tycoon wrote:If I would have listened to the prevailing attitudes that proclaimed lower returns where forthcoming I would not be a millionaire. No one knows what the future has in store.
What predictions were these? When where they made? I don't recall a time when there was such a large consensus regarding lower returns going forward, but that could be partly just my perception.
I'm just stating observations from 30+ years of investing. No harm intended.
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Re: How to become a millionaire retiree -- then and now

Post by letsgobobby » Sun Aug 31, 2014 1:42 pm

Browser wrote:To become a millionaire (in inflation-adjusted dollars) by investing in the U.S. stock market over a 30-year working career, you could have done so by investing $200/month ($2400/yr.) in inflation-adjusted dollars beginning in the years 1972-1978 (ending 2001-2007). According to the Census Bureau the mean income for males in 1972 was about $8600, so that would have represented a savings rate of about 25% of earnings.

Starting in the years 1979-81 (ending 2008-2010), you would have needed to invest about $5000 annually in stocks (inflation adjusted) to retire as millionaire in 30 years. In 1978, the mean income was about $13,000, which would have represented a savings rate of approximately 38%.

Starting in 1982-84 (ending 2011-2013), you would have needed to invest $6,000 annually (inflation-adjusted) to achieve the $1M goal at retirement in 30 years. Mean salary in 1982 was about $17,000, which would have required a saving rate of 35%. These are the approximate figures for male wage-earners. Female wage-earners in the years 1972-1984 had mean earnings less than half that of males.

In general, it looks like you could have ended up as a millionaire by investing about 25% of your salary into U.S. stocks if you'd started back in the early to mid 1970s and retired in the early to mid-2000s (assuming you were earning the average salary for males). Those retiring more recently could have done so by saving at least one-third of their salaries. With expected investment returns being much lower going forward from 2014, those who are beginning their retirement savings now and planning on retiring as millionaires in 30 years might want to start socking away even more than that in stocks. Average salary for males in the U.S. in 2013 was about $50,000. One-third of that is about $17,000. Start saving amigos!
I'm having trouble understanding what "$1 million real" means in these examples. How much money is that in 2014 dollars?

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Re: How to become a millionaire retiree -- then and now

Post by Ged » Sun Aug 31, 2014 6:03 pm

livesoft wrote:Those mean salaries seem rather low to me, so probably include minimum wage and lower workers.

Minimum wage was about $1.80 in 1976. So 50 weeks times 40 hours times $1.80 per hour = $3600 a year at minimum wage in 1976,

Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
That seems rather high to me. I came out of college in that time frame with a ChemE PhD and got about $25K from a Fortune 100 company. It went up pretty rapidly from there though thanks to inflation.

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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 6:07 pm

Ged wrote:
livesoft wrote:Those mean salaries seem rather low to me, so probably include minimum wage and lower workers.

Minimum wage was about $1.80 in 1976. So 50 weeks times 40 hours times $1.80 per hour = $3600 a year at minimum wage in 1976,

Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
That seems rather high to me. I came out of college in that time frame with a ChemE PhD and got about $25K from a Fortune 100 company. It went up pretty rapidly from there though thanks to inflation.
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livesoft
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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 6:14 pm

I found this: http://www.postsecondary.org/last12/401095Salary.pdf
The results show the usual pattern. Between 1951 and 1969, average starting salaries for engineers increased by 118 percent, from $19,100 to $41,500. After 1969 the decline in real salaries was less than in the business fields. In the Northwestern survey data, starting salaries declined by 11 percent to $36,900 by 1994.
In most fields, starting salaries declined between 1980 and 1995.
This suggests lower average salaries in 1980-1981 for new graduates: http://files.eric.ed.gov/fulltext/ED224717.pdf Perhaps all my friends did better than average?
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Re: How to become a millionaire retiree -- then and now

Post by Ged » Sun Aug 31, 2014 6:39 pm

livesoft wrote:I found this: http://www.postsecondary.org/last12/401095Salary.pdf
The results show the usual pattern. Between 1951 and 1969, average starting salaries for engineers increased by 118 percent, from $19,100 to $41,500. After 1969 the decline in real salaries was less than in the business fields. In the Northwestern survey data, starting salaries declined by 11 percent to $36,900 by 1994.
In most fields, starting salaries declined between 1980 and 1995.
This suggests lower average salaries in 1980-1981 for new graduates: http://files.eric.ed.gov/fulltext/ED224717.pdf Perhaps all my friends did better than average?
$21,800 in 1980 for ChemE.

Did your friends show you their actual offer letters?

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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 6:56 pm

Now I am embarassed by my great starting salary and that of my spouse.
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Re: How to become a millionaire retiree -- then and now

Post by zaboomafoozarg » Sun Aug 31, 2014 7:04 pm

livesoft wrote:Now I am embarassed by my great starting salary and that of my spouse.
"embarassed" :D

I have some classmates in an engineering program (electrical) who started at mid-to-high 30's in 2004.

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Re: How to become a millionaire retiree -- then and now

Post by user5027 » Sun Aug 31, 2014 7:08 pm

livesoft wrote:Now I am embarassed by my great starting salary and that of my spouse.
No worries. We appreciated the taxes you've paid. :D

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Re: How to become a millionaire retiree -- then and now

Post by notinuse » Sun Aug 31, 2014 7:08 pm

$24,600 annually in 1982 for electrical engineering. That was about average for the time, if I remember correctly. There weren't a lot of jobs available that year.

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Re: How to become a millionaire retiree -- then and now

Post by burt » Sun Aug 31, 2014 7:13 pm

Ged wrote:
livesoft wrote:Those mean salaries seem rather low to me, so probably include minimum wage and lower workers.

Minimum wage was about $1.80 in 1976. So 50 weeks times 40 hours times $1.80 per hour = $3600 a year at minimum wage in 1976,

Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
That seems rather high to me. I came out of college in that time frame with a ChemE PhD and got about $25K from a Fortune 100 company. It went up pretty rapidly from there though thanks to inflation.
Yes, seems a little high. $18,000 with BSEE, 1977, Fortune 100, for me.

What's really interesting is my summer job at a small refinery.
Cleaning tanks, painting pipes, digging ditches, $7/hr-1976 equals $27/hour today.

Yeah, times were better.

burt

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Re: How to become a millionaire retiree -- then and now

Post by rnitz » Sun Aug 31, 2014 7:48 pm

burt wrote:
Ged wrote:
livesoft wrote:Those mean salaries seem rather low to me, so probably include minimum wage and lower workers.

Minimum wage was about $1.80 in 1976. So 50 weeks times 40 hours times $1.80 per hour = $3600 a year at minimum wage in 1976,

Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
That seems rather high to me. I came out of college in that time frame with a ChemE PhD and got about $25K from a Fortune 100 company. It went up pretty rapidly from there though thanks to inflation.
Yes, seems a little high. $18,000 with BSEE, 1977, Fortune 100, for me.

What's really interesting is my summer job at a small refinery.
Cleaning tanks, painting pipes, digging ditches, $7/hr-1976 equals $27/hour today.

Yeah, times were better.

burt
Yeah, Livesoft - I'm going to call BS on that one as well. Graduated in '80 and the only group that came close (not $30K) was petroleum engineering. EE's were next, then ChemE's. I can tell you that at Stanford, essentially no ChemE's made $30K coming out of school with a BS in the late '70s.

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Re: How to become a millionaire retiree -- then and now

Post by tibbitts » Sun Aug 31, 2014 8:42 pm

EnjoyIt wrote:Also, Ideally most people's income rises as they get more experience and promotions. That makes saving even easier.
That's the biggest change I've seen during the past thirty-plus years. Salaries now grow more slowly, if at all, and top out much sooner, for the typical person, than before.

It used to be that just breathing got you a COLA every year, and an occasional merit increase on top of that. Now, particularly since the last recession, lots of people work for years with no COLA and no other pay increase. Sometimes benefits even decrease or are charged to the employee when they used to be employer-paid. Organizations are flatter today, so the old path of raises for promotions is simply no longer applicable to as many people. Lots of employees face layoffs at the beginning of what used to be their prime earnings years. You still sometimes see traction in careers and pay for employees in their twenties, but not as much after that. Outstanding employees certainly still have opportunities throughout their careers, but the pay-for-getting-old assumption that benefited so many for so long seems to be fading away. And perhaps it should, but as a result, the "savings getting easier" isn't happening.

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Re: How to become a millionaire retiree -- then and now

Post by Leeraar » Sun Aug 31, 2014 9:02 pm

I started in 1980, aged 30, at $28,700 with a Princeton PhD. A few months later I discovered the janitors were making $35,000.

I had well over $1 million by 2000, 20 years later. My salary by then was about $100,000. Sometimes you get lucky, that was a very good 20-year run.

I saved $200 a month for my kids' college funds starting in 1990. 20 years later, that was about $120,000.

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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 9:16 pm

OK, I accept the BS call, but reluctantly. I will have to get SS statement of annual earnings from my spouse to confirm her recollection of her starting salary. I don't think I have tax returns back that far.

I turned down a job offer for $40,000 in 1986, so I hope folks caught up to that by then.

Does anybody remember the starting salary of Michael Lewis at Salomon Brothers in 1986 as noted in his book Liar's Poker?
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Re: How to become a millionaire retiree -- then and now

Post by Nukeboilermaker » Sun Aug 31, 2014 9:27 pm

We are talking about the same equivalent purchasing power correct? If so, then I'm certainly on pace to retire comfy with my savings rate (28 years old).

Funny to watch you "wise" ones banter about starting pay...

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Re: How to become a millionaire retiree -- then and now

Post by Jack » Sun Aug 31, 2014 9:32 pm

livesoft wrote:Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
Nope. Nope. Nope. Not even close.

$30,000 in 1978 is the equivalent of $110,000 today. Fresh out of college engineers are not making $110,000 today and they weren't making the equivalent in 1978. That $30,000 number is a gross exaggeration.

The average starting salary for an engineer today is about $60,000 which would have been about $17,000 in 1978.

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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 9:37 pm

Nukeboilermaker wrote:Funny to watch you "wise" ones banter about starting pay...
I went to a birthday party for a mentor of mine. It was fun to learn what my science professors were making while I was a student. They all made less than the engineering graduates, except it turned out that one had negotiated for a higher starting salary and got it, but the others did not know that until this party. Guess which professor I worked for? :)
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Re: How to become a millionaire retiree -- then and now

Post by MnD » Sun Aug 31, 2014 9:49 pm

Browser wrote:With expected investment returns being much lower going forward from 2014, those who are beginning their retirement savings now and planning on retiring as millionaires in 30 years might want to start socking away even more than that in stocks.
Another fortune teller on the "much lower" investment returns hubris.
And the "average income" crowd typically saves nothing or next to nothing for retirement so not sure how useful that ratio is.

I'd instead concentrate on what it takes to make well above an average income.
Then sock away a decent chunk of that above average income and not worry about the Gloomy Gus cartel with respect to future returns.

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Re: How to become a millionaire retiree -- then and now

Post by Zapped » Sun Aug 31, 2014 9:54 pm

I don't mean to "pile on" the debunking of livesoft's estimate of 1978 engineering salaries, but I would like to add another data point to the anecdotal replies.

In 1984 when I graduated from a well-regarded engineering program with my BSEE, typical offers my friends & I were getting were in the $26K-$30K range. Personally my highest offer was around $29K from a defense contractor, but I chose a private sector position for about $27.5K because that particular job and location was the most attractive to me.
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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 10:03 pm

Zapped wrote:I don't mean to "pile on" the debunking of livesoft's estimate of 1978 engineering salaries, but I would like to add another data point to the anecdotal replies.

In 1984 when I graduated from a well-regarded engineering program with my BSEE, typical offers my friends & I were getting were in the $26K-$30K range. Personally my highest offer was around $29K from a defense contractor, but I chose a private sector position for about $27.5K because that particular job and location was the most attractive to me.
No worries about pile-ing on at all. You did see the quote I used above about starting salaries dropping between 1980 and 1995, right?
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Re: How to become a millionaire retiree -- then and now

Post by Dale_G » Sun Aug 31, 2014 10:09 pm

I may as well take the record low starting salary until someone even more grown up shows up.

My first job out of school as a EE in 1960 paid $6,000 a year - and we were supposed to work a half day on Saturday. Yeah, a defense contractor out west paid $7,200, but those jobs were almost temporary in nature. Bell Laboratories offered $5,600.

Does the word "inflation" ring a bell?

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Re: How to become a millionaire retiree -- then and now

Post by livesoft » Sun Aug 31, 2014 10:14 pm

Let me try this "out" for the BS: What about total compensation? I know that the job I started in 1986 paid an additional 15% of salary into a 403(b) without me contributing anything. Also, we have learned that oil companies were big on contributing to 401(k)s. So did any of you starting engineers get a big chunk of additional compensation into retirement plans?

Many of my classmates who started at Oracle and Intel and Microsoft got stock shares. Many retired very early.
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Re: How to become a millionaire retiree -- then and now

Post by bhsince87 » Sun Aug 31, 2014 10:18 pm

I started with a BSEE in 1987 at a salary of $27k. That was typical for middle America. California or other high COL locations were offering around $33k.

Most interesting, as a manger, in 2012 I hired a new BSEE into the same industry, in the same city in which I started 25 years earlier.

His starting salary was $55k, which is almost exactly what my $27k would inflate to, according to CPI numbers.
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Re: How to become a millionaire retiree -- then and now

Post by market timer » Sun Aug 31, 2014 10:26 pm

livesoft wrote:Does anybody remember the starting salary of Michael Lewis at Salomon Brothers in 1986 as noted in his book Liar's Poker?
$48K/yr as an associate in 1985. http://www.cbsnews.com/news/what-is-mic ... rth-today/

That's worth $106K/yr today.

For reference, that's what first-year analysts (fresh out of college) would be expected to make today in a similar role. For someone entering as an associate like Michael Lewis did, the pay would be closer to $190K.

Michael Lewis earned $225K/yr the year before he left in 1987, which is an exceptional ramp up in pay. He must have been a very good salesman.
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Re: How to become a millionaire retiree -- then and now

Post by bhsince87 » Sun Aug 31, 2014 10:28 pm

As far as retirement plans or other compensation goes, in 1987 I got a defined benefit pension plan, and that was it. No idea what it was worth though.

I was in that for almost 10 years before they went 401k, after which I got the typical 5% match.

My defined pension benefit from that 10 years is supposed to be around $900 per month when I turn 67 in 18 years, so I guess I could run some numbers on that. But I can ballpark it enough to know that it wasn't a huge amount of money back then.

I think the particular industry and locations have a huge impact on starting salaries. As I mentioned above, a typical starting engineer salary for us in most locations in the US now is around 55-58k. In San Jose, it's $75k. Boston $65k. In most of Europe, it's around $70k USD. Taiwan is about $60k. Korea $55k. China around $50k.

Not to totally derail the thread, but at my previous employer, they were hiring H1-B engineers from Taiwan in the US for about $30k per year.
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Re: How to become a millionaire retiree -- then and now

Post by scotthal » Mon Sep 01, 2014 12:21 am

Took the lowest offer - $31.4k - for my MSCS in '84; retired (laid off) in early '08. I was a millionaire retiree for almost 6 months... 6 years later, still retired (& now a multi-millionaire, some days (market froth)); realize that I could've :: should've spent more on experience during the accumulation phase.
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Re: How to become a millionaire retiree -- then and now

Post by HomerJ » Mon Sep 01, 2014 1:04 am

Jack wrote:
livesoft wrote:Fresh out of college engineers in 1978 - 1979 made about $30,000 a year with ChemE even higher.
Nope. Nope. Nope. Not even close.

$30,000 in 1978 is the equivalent of $110,000 today. Fresh out of college engineers are not making $110,000 today and they weren't making the equivalent in 1978. That $30,000 number is a gross exaggeration.

The average starting salary for an engineer today is about $60,000 which would have been about $17,000 in 1978.
My dad graduated with a ChemE degree in 1969 and I think he made $9000 in his first job... He thought it was a fortune.

When I graduated with a NucE degree in 1992, I got $36,000... and I thought that was a fortune as well...

I find it hard to believe that most engineers in 1979 made $30k starting.

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Re: How to become a millionaire retiree -- then and now

Post by pascalwager » Mon Sep 01, 2014 1:26 am

In 1965 starting salary for a BSEE was $7,000 and $10,000 for an MSEE.

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Re: How to become a millionaire retiree -- then and now

Post by OutInThirteen » Mon Sep 01, 2014 2:06 am

Started with a major oil company with an MS in Civil Engineering in 1978 with a salary of almost $19,000. That was about the highest starting salary for my graduating class. Due in part to the company losing many experienced engineers to smaller independent oil companies (mainly petroleum engineers), to retain staff, engineer salaries made big gains for five years straight. I received one annual raise >22%. Salary by 1983 was >$40,000. IIRC, petroleum engineers were starting at about $36,000 by that time. Of course we know what inflation was running back then. Final salary when I retired at 59 was more than 8 times my starting pay. But I still don't have $1,000,000 :( Oh well.

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Re: How to become a millionaire retiree -- then and now

Post by grayfox » Mon Sep 01, 2014 5:51 am

Actual data:

1978 BSEE graduates $14,700 exactly
BSME and CS were about the same.

Business Majors were getting offers of about $12,500. They were very jealous of engineers about that.
Geology majors had the highest, maybe about $18,000 - $20,000 ?, shocking everybody. And we thought they were just collecting rocks.
(I forget exactly how much they were offered. Oil industry, of course.)

14,700 was quickly bumped up to $16,800 by the end of 1978.
Then the raises came fast and furious.
About 1986-87, passed $50,000 which was classified as "highly compensated employee"
1997-98 $100,000

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rustymutt
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Re: How to become a millionaire retiree -- then and now

Post by rustymutt » Mon Sep 01, 2014 6:12 am

Tycoon wrote:If I would have listened to the prevailing attitudes that proclaimed lower returns where forthcoming I would not be a millionaire. No one knows what the future has in store.
Thank you Tycoon! plus one.
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Re: How to become a millionaire retiree -- then and now

Post by Kenkat » Mon Sep 01, 2014 9:29 am

Wagnerjb wrote:Why only a 30-year working career? If the person has a four year college education and then a 30-year career, they are retiring in their very early 50's. I would call that retiring quite early.

Try running the models with a 40-year working career (which would also qualify as retiring early). I bet you find it much easier to accumulate $1 million. :D

Best wishes.
I agree. One of the single best financial decisions I ever made was to start saving and investing as soon as possible. I had a co-op job in college as part of my degree program and so I was eligible for the company 401k and a match as well. As soon as I graduated, I started saving and investing additional money as well.

Starting early gives you that 40 year timeframe if needed. It is not unrealistic to expect your portfolio to double one last time between years 30 and 40.

p.s. Nice analysis overall Browser. These are the types of numbers that the average investor can get their hands around. Great information for convincing people to become savers/investors.

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Re: How to become a millionaire retiree -- then and now

Post by Browser » Mon Sep 01, 2014 10:08 am

letsgobobby wrote:
Browser wrote:To become a millionaire (in inflation-adjusted dollars) by investing in the U.S. stock market over a 30-year working career, you could have done so by investing $200/month ($2400/yr.) in inflation-adjusted dollars beginning in the years 1972-1978 (ending 2001-2007). According to the Census Bureau the mean income for males in 1972 was about $8600, so that would have represented a savings rate of about 25% of earnings.

Starting in the years 1979-81 (ending 2008-2010), you would have needed to invest about $5000 annually in stocks (inflation adjusted) to retire as millionaire in 30 years. In 1978, the mean income was about $13,000, which would have represented a savings rate of approximately 38%.

Starting in 1982-84 (ending 2011-2013), you would have needed to invest $6,000 annually (inflation-adjusted) to achieve the $1M goal at retirement in 30 years. Mean salary in 1982 was about $17,000, which would have required a saving rate of 35%. These are the approximate figures for male wage-earners. Female wage-earners in the years 1972-1984 had mean earnings less than half that of males.

In general, it looks like you could have ended up as a millionaire by investing about 25% of your salary into U.S. stocks if you'd started back in the early to mid 1970s and retired in the early to mid-2000s (assuming you were earning the average salary for males). Those retiring more recently could have done so by saving at least one-third of their salaries. With expected investment returns being much lower going forward from 2014, those who are beginning their retirement savings now and planning on retiring as millionaires in 30 years might want to start socking away even more than that in stocks. Average salary for males in the U.S. in 2013 was about $50,000. One-third of that is about $17,000. Start saving amigos!
I'm having trouble understanding what "$1 million real" means in these examples. How much money is that in 2014 dollars?
I used Portfolio Visualizer to run the numbers. Upon examining the reported data more closely, it appears to me that PV adjusts the annual contributions for inflation; that is, it assumes that the "real" value of your annual contributions remains constant. However, the annual portfolio returns do not appear to be inflation-adjusted or "real" returns; rather they are nominal returns. Therefore, the ending portfolio value is in current dollars; that is, dollar value at the time of retirement. Those familiar with PV can confirm.
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Re: How to become a millionaire retiree -- then and now

Post by Herekittykitty » Mon Sep 01, 2014 10:11 am

Very interesting.
I don't know anything.

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Re: How to become a millionaire retiree -- then and now

Post by linenfort » Mon Sep 01, 2014 10:22 am

Browser wrote: Start saving amigos!
I save as many amigos as I can.
Is it too early for an all-bond-portfolio thread?

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Re: How to become a millionaire retiree -- then and now

Post by placeholder » Mon Sep 01, 2014 10:45 am

I'm sure that starting salaries then (as now) depended on the area where the person was being hired but when I hired in as an electronics engineer in 1981 in a low cost midwest city starting pay was about 20k.

inbox788
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Re: How to become a millionaire retiree -- then and now

Post by inbox788 » Mon Sep 01, 2014 11:34 am

Wagnerjb wrote:Why only a 30-year working career? If the person has a four year college education and then a 30-year career, they are retiring in their very early 50's. I would call that retiring quite early.

Try running the models with a 40-year working career (which would also qualify as retiring early). I bet you find it much easier to accumulate $1 million. :D
The comparison is the same 30 years, just different starting years. Some may consider it the luck of the draw (Ovarian Lottery) and that also applies to the year one graduates college. Same intelligence, potential, degree, occupation, but someone graduating in a recession vs. boom has quite different prospects and outcomes.

My concern is inflation adjusted $1 million or not vs salary numbers. What are the inflation adjusted $1 million for each of the years? What inflation measurement are they using? Purchasing power of $1 million is quite different in 1972 vs 2001 vs 1984 vs today. Are we looking at more than $5 million real dollars today as a goal?

http://www.measuringworth.com/uscompare ... esult=2014

Current data is only available till 2013. In 2013, the relative worth of $1,000.00 from 1972 is:

$5,570.00 using the Consumer Price Index
$4,270.00 using the GDP deflator
$5,100.00 using the unskilled wage
$6,080.00 using the Production Worker Compensation
$8,670.00 using the nominal GDP per capita
$13,100.00 using the relative share of GDP

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Re: How to become a millionaire retiree -- then and now

Post by Browser » Mon Sep 01, 2014 11:58 am

Yep. I million isn't worth what it used to be. If you're using the 4% rule, that's a lousy $40K/year income. Still, that would be about 80% of the average man's salary in 2013. So if you're the average man, saving $1M would be about right. Actually, with your SS income added in your standard of living would be better than it was when you were working, because you wouldn't have to be saving a third of it for retirement anymore and no more SS tax. :happy But then again, maybe you should be putting something away to pay for your long-term care. :(
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Re: How to become a millionaire retiree -- then and now

Post by letsgobobby » Mon Sep 01, 2014 12:30 pm

inbox788 wrote:
My concern is inflation adjusted $1 million or not vs salary numbers. What are the inflation adjusted $1 million for each of the years? What inflation measurement are they using? Purchasing power of $1 million is quite different in 1972 vs 2001 vs 1984 vs today. Are we looking at more than $5 million real dollars today as a goal?
That is exactly my point. What was the purchasing power of $1 million for the 1972 person retiring 30 years later in 2002? $1 million in 1972 purchasing power? In 2002 purchasing power? In 2014 purchasing power?

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