The $1 Million Goal: Source of Motivation or Discouragement?

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LazyNihilist
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by LazyNihilist »

The goal is to accumulate 33.33 times annual expenditure before retiring, so you have income > expenditure. Whatever motivates people to best achieve the goal should be followed.

As NisiPrius has in his signature
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
The strong do what they can and the weak suffer what they must -Thucydides
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

member wrote:
I found your comments a little offensive and out of touch. English isn’t my first language so bear with me. I make 45K a year. I have bachelor degree from my country. I have 2 kids and single (maybe I shouldn’t have kids or shouldn’t get divorced right?). We don’t qualify for any government assistance. I’m paying 1K a month on daycare on 45K salary. Do I want to make more money? Of course I do, however, it also means, I have to work extra hours. Who will pick up the kids, feed them, and put them to bed at night? The second job wasn’t enough to pay for babysitter after business hours. There is no way I can save 20K a year even with no daycare expense. I know that I am lucky because I know so many earning less than me. I am neither a dummy nor lazy. I know I need to earn more but I have kids that need me. I want to be there for my kids when they get home from school. I want to pull myself out of the bootstraps but it seems impossible. Btw, I'm going back to school next year for a masters in Mathematics. I will be about 38 and hopefully my income will increase. 1 million dollars is a lot.
You're making the mistake of thinking I'm talking about you. I'm not. There is a huge difference between $45K and $30K. About a 50% difference. In fact, you're exhibit A in making my point. Here you are, single parent, two kids, English isn't your first language and you're making $45K- 50% more than $30K. My question is why someone would settle for $30k when someone who clearly has an uphill battle can make $45K.

And I agree with you that saving $20K of a $45K salary would be very, very difficult and probably impossible as a single parent of two. Single parenthood is highly correlated with poverty for a reason. Them kids are expensive!

At any rate, congratulations on your success so far and I hope the math degree works out great for you. Will you be teaching math afterward or looking for a job in industry?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

vitaflo wrote: Also, way too much emphasis here on income and not enough on job/career satisfaction. IMO, the later maters way more than the former.
Even more than that, job satisfaction actually LEADS to more income/net worth. If you like your job, you enjoy it more and work harder at it. Then you become more successful. Then you have more income. Then you are willing to work longer. Then you feel the need to spend less to make up for the fact that you hate your job. Then you have more wealth.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by member »

EmergDoc wrote:
member wrote:
I found your comments a little offensive and out of touch. English isn’t my first language so bear with me. I make 45K a year. I have bachelor degree from my country. I have 2 kids and single (maybe I shouldn’t have kids or shouldn’t get divorced right?). We don’t qualify for any government assistance. I’m paying 1K a month on daycare on 45K salary. Do I want to make more money? Of course I do, however, it also means, I have to work extra hours. Who will pick up the kids, feed them, and put them to bed at night? The second job wasn’t enough to pay for babysitter after business hours. There is no way I can save 20K a year even with no daycare expense. I know that I am lucky because I know so many earning less than me. I am neither a dummy nor lazy. I know I need to earn more but I have kids that need me. I want to be there for my kids when they get home from school. I want to pull myself out of the bootstraps but it seems impossible. Btw, I'm going back to school next year for a masters in Mathematics. I will be about 38 and hopefully my income will increase. 1 million dollars is a lot.
You're making the mistake of thinking I'm talking about you. I'm not. There is a huge difference between $45K and $30K. About a 50% difference. In fact, you're exhibit A in making my point. Here you are, single parent, two kids, English isn't your first language and you're making $45K- 50% more than $30K. My question is why someone would settle for $30k when someone who clearly has an uphill battle can make $45K.

And I agree with you that saving $20K of a $45K salary would be very, very difficult and probably impossible as a single parent of two. Single parenthood is highly correlated with poverty for a reason. Them kids are expensive!

At any rate, congratulations on your success so far and I hope the math degree works out great for you. Will you be teaching math afterward or looking for a job in industry?
I apologize that I misunderstood your comments. Yes, I will find a teaching job. Thank you.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

tfb wrote:
EmergDoc wrote:I'm not saying you've got to build a website that'll pay you $200K a year. I'm saying that $30K just isn't that much money.
It actually is for a website. I have years of proof.
We need to talk about site monetization sometime. You are entirely too good at what you do on that site to not be making $30K a year from it. I'd start with writing this book:
My name is Harry Sit. My wife and I are both immigrants. We came to the US in our 20’s with only a few hundred dollars in our pockets and no other family members in the country. Today, we are on track to be able to retire in our 40’s.

Neither of us is a doctor, a lawyer, an investment banker or a corporate executive. Neither of us ever managed anyone in all our jobs. We never had any rental property or inheritance. We are just doing it the hard and boring way: earning a salary, saving, and investing.
The Boring Way to Retire In Your 40s

There's a massive market out there for writing as high-quality and well-researched as yours.
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555
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by 555 »

Christine_NM wrote:EmergDoc wrote:
I'm genuinely curious why a household would "settle" for an income of $30K.
I am enjoying reading this whole thread but with nothing much to offer on the original topic.

But I had to post when it occurred to me that the annual safe withdrawal rate on $1 million is just about $30,000!

Maybe you could squeeze $40k out of a million if you did not plan on living too long.

So is $1 million the new $30k a year, not something to be desired but something to be settled for? For those whose goal is a million, make that 3 million. Now you know how the $30k people feel. :( :shock:
That was my point here
viewtopic.php?f=10&t=163114#p2449206
555 wrote:You have to figure other retirement income sources into this, e.g. Social Security and Pension. If you have an income source of $40k per year, inflation indexed, then that is surely worth about $1M. A person with this income source, but zero in savings, is still essentially a millionaire. You can translate between income streams and asset values using annuity prices, and obviously the value depends on starting age, whether it's real or nominal, and whether it covers an individual or a couple. Even a person eligible for just $1k/month Social Security at age 62, is probably "worth" a few hundred $k, by such calculations.

The bottom line is that even a modest retirement income translates into a large sum (and vice versa).

Personally I will get zero from Social Security and Pension. I am on my own to save enough. For my situation, $1M is not enough. $2M maybe.

$1M is not a lot if it's the only source of retirement living (i.e. zero from Social Security and Pension). If someone does have these retirement income sources, then they will be fine with much less savings, and can survive with no savings at all.
If someone is expecting $2500 or $3000 per month from Social Security and/or Pension then they are essentially a millionaire, even if they save nothing.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by gator15 »

My savings goals are derived from fear. I guess I'm motivated by fear. Though I have a nice income, my fear is at any moment I could lose that job/income and will regret not having maximzed my savings opportunity when I had a good job with a good income. This has been my mentality for the last 6 years. My job is stable yet I don't treat it that way. As a result I save a large percentage of my income. I'm not sure when I will change my mindset. I feel lucky to be in my situation. That luck may not last so I will take advantage while I can. That means continuing to save aggressively.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by RunningRad »

Fascinating thread.

When I was younger, I viewed $1M as a goal, and the goal posts keep moving back, in a good way.

I do agree with those who advise to work backward from how much you need to cover your nut (multiply by 25 or 33.3 or whatever factor you can live with). Remember, the historical lessons are virtually guaranteed to not work exactly as they did in the past.

I view one's financial life as a baseball game, kinda boring, nine innings, hopefully won't go into extras (cannot afford to leave the game), and hopefully won't get sent to the showers early.
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution
rgs92
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by rgs92 »

A while back, I asked here if retirement was realistic for my wife and me (in our late 50s) with $1.25 million saved + $100,000 a year in (current) fixed pensions + $3000/month social security in a few years and got mixed reactions,
many saying I was not quite ready since I had a $3000/month mortgage payment (which includes property taxes + insurance).
So it sure seems that just a million would not be enough.
LFKB
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by LFKB »

It's a source of motivation for me. We hit $1.5M recently which was a milestone. I track our net worth and I find that every $100k is a baby milestone for me and every $500k feels like a big milestone.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by 4nursebee »

I set goals.
I work towards the goals as best I can see
I evaluate the results
I adapt.

Goals motivate me.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by acegolfer »

tennisplyr wrote:Was wondering if this kind of goal-setting/mentality is doing more harm than good? Your thoughts?
Great discussion. I'll share my experience from talking to college students about the $1 million goal.

I explained that if they invest $5k in the market every year for 40 years, this $200k (=$5k * 40) investment is likely to grow 5 times to $1 million =FV(7%,40,5000,0,1). Many responded that there's no way they can save $5k a year. I was going to explain the tax benefit of IRA but gave up.

It seemed to me that young students these days are short sighted. They just complain about short term things such as high cost of education, student loans, credit card debt. They can't plan for the long term. I felt sorry for the young ppl.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Lynette »

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Last edited by Lynette on Wed Dec 06, 2017 9:50 am, edited 2 times in total.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by pointyhead »

Was wondering if this kind of goal-setting/mentality is doing more harm than good? Your thoughts?
It really depends upon the individual. What one person finds motivating another will find discouraging. However, as a "middle-class" millionaire I guess I was motivated. Having not yet reached 50, and having saved investable assets greater than 1 million, (a correction will change that), and having only had one year where I earned over 6 figures in my working life it seems doable to me. My lowest year of income around $600 but I was 14 then but many years my income wasn't very great like 25K.

Whenever an opportunity presents itself I do talk about saving, investing, and boglehead type principals to friends and co-workers. Usually, it falls on deaf ears and I hear similar reasons listed in the thread e.g. debt, student loans, enjoy life now, don't make enough, it's too hard etc, etc, occassionally, I get someone really interested and they start reading and changing.

I think I have been very fortunate. I received a decent free public school education and my parents cared about me. Lucked into marrying a good spouse with similar goals and we were both able to afford to go back to school as adults (twice once in my 30's and once in my 40's) which will really pay off over the next few years. We both haven't always worked but probably over 70% of the time we were both working. Wasn't easy--60 to 100 hour work weeks--full time student and full time job--but it wasn't that hard either

What seems key to me is to always save. I only found this site and these ideas in the last 3 or 4 years. Now that I employ the ideas expressed here I think the 2nd and 3rd million will come much, much quicker. Of course, it may all go to shit next week :D

Best of luck!

PH
YttriumNitrate
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by YttriumNitrate »

Boy, this question sure did spark some comments.
Last edited by YttriumNitrate on Mon Jun 08, 2015 7:38 pm, edited 1 time in total.
ShiftF5
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by ShiftF5 »

I've always been fascinated by this -- a group of people all presented with basically the same opportunity will produce a scatter shot pattern of results.

Generally a few will do exceptionally well, some (many?) will do ok, and some (many?) will not make much or anything of the opportunity.

Why? I guess there are thousands of reasons (education, background, home life, motivation, etc.) but the results are what they are.

I'm fascinated by that.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by KlangFool »

acegolfer wrote:
Great discussion. I'll share my experience from talking to college students about the $1 million goal.

I explained that if they invest $5k in the market every year for 40 years, this $200k (=$5k * 40) investment is likely to grow 5 times to $1 million =FV(7%,40,5000,0,1). Many responded that there's no way they can save $5k a year. I was going to explain the tax benefit of IRA but gave up.

It seemed to me that young students these days are short sighted. They just complain about short term things such as high cost of education, student loans, credit card debt. They can't plan for the long term. I felt sorry for the young ppl.
acegolfer,

Both of my kids had saved 10K. And, they had not finish high school yet.

We gave $25 to each one of them for their birthday and X'mas. They collect cash gift from their family and relatives on Chinese New Year. They get to choose how to spend / save those money from childhood.

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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by LazyNihilist »

acegolfer wrote:
tennisplyr wrote:Was wondering if this kind of goal-setting/mentality is doing more harm than good? Your thoughts?
Great discussion. I'll share my experience from talking to college students about the $1 million goal.

I explained that if they invest $5k in the market every year for 40 years, this $200k (=$5k * 40) investment is likely to grow 5 times to $1 million =FV(7%,40,5000,0,1). Many responded that there's no way they can save $5k a year. I was going to explain the tax benefit of IRA but gave up.

It seemed to me that young students these days are short sighted. They just complain about short term things such as high cost of education, student loans, credit card debt. They can't plan for the long term. I felt sorry for the young ppl.
When students don't have an income, its a struggle saving $100 per month or not getting into even more debt, let alone saving $5K per year. Priorities for students are different.
I only started thinking about savings once I had a steady job.
The strong do what they can and the weak suffer what they must -Thucydides
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Re: The $1 Million Goal: Source of Motivation or Discouragem

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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Christine_NM »

^^Wow, Confused, you are a fantastic writer. Please let me know if you ever get the time to self-publish for Amazon Kindle. I'd buy an e-book of yours.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

Confused wrote:
My spouse is currently the high-earner of the family, since I'm just a part-time intern. My spouse makes $12.50/hour at a job that doesn't let anybody work more than 37.5 hours per week, to avoid benefits. When (s)he started there, (s)he made $9.50/hour. My spouse has a Bachelors Degree in Public Health. Yet the only job (s)he could find was doing manual labor in a warehouse. I have a Bachelors Degree in Business Management and all I could find was tech support in call centers. Parlayed that into some bottom-rung programming jobs at $13/hour. So I went back to school to try to increase that.
So you haven't settled....you're a student working part-time and expecting a higher salary upon completion of your training.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Paul78 »

Motivation for me.

1. I have a decent paying job
2. My million will be worth a lot less than your (related to me being young and inflation). But to be fair my current goal is to have 1.5-2mil in today's dollars by the time I retire.


But yes if I was making half as much or if I had the same income but was married to a stay at home mom/had 2-3 kids it would be far more discouraging. YES my goal would still be at least one million (ie drop from the current 1.5-2 mil range down to 1 mil) but it would take much much longer to happen and would only be assured to happen if I lengthen my working career.

edit- And yes it could also be MUCH easier to reach the 1 mil (and more) if I married someone with a similar income to me and only have 0-2 kids.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by 555 »

Paul78 wrote:...But yes if I was making half as much or if I had the same income but was married to a stay at home mom/had 2-3 kids it would be far more discouraging. ...
I am married to a stay at home mom and have 3 kids. I have a 5 figure income and a 7 figure portfolio. When I get to about $2M I will retire early. (It will be my only source of income.) It can be done.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by jfave33 »

There is always a trade off between time vs money vs stress vs quality of family life vs time spent with children and their upbringing. Let's not bash the $30k-$50k family as a general rule. Chances are they work just as hard as you do if not more so and if not worked a lot harder bringing up their children themselves rather than using daycare etc.

$1m at retirement is not too difficult. Save $5500 at 7% from 22 gives you $1m at 60. Now for $1m in today's terms you'd need a heck of a lot more. You'd probably need $3m at retirement for that. Not that anyone really 'needs' that much.

Plus yes social security should play a larger part of the retirement pot for low earners due to the way it is calculated. Assuming it doesn't go through many changes which isn't very realistic. Countries like the UK have already made several changes this past 5 years to their social security system. The same could easily happen in the Us before the younger Bogleheads claim SS.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by stemikger »

Grt2bOutdoors wrote:
stemikger wrote:
I'm not that impressed when I see people making $100K a more and save a million then when someone who only makes $50 to 70K save a million.
The first error is to let money be the source of being impressed. The second flaw in your statement is "you're not impressed when you see people making $100K and save a million". What you don't know is when they started earning that $100K. Remember, it's not what you make, it's what you save and time in the market is another important lever to reach any large sum of money. The other thing, is someone making $100K+ is paying much more in taxes than the fellow at $50K - it's not a one for one comparison. Important to look at all the variables before reaching a sound conclusion. Shooting from the hip usually leads to poor conclusions and outcomes.
Trust me, if you knew me you would know I am not impressed by money. What I meant was that I am always very motivated by people who don't earn what is considered a large salary in today's society and still manage to get there. I understand there are many variables and situations, but people like Paul Navone for instance who never made more than $11 per hour or Earl Crawley who was a dyslexic parking lot attendant and were still able to achieve their goals. That is what I meant when I said I am impressed. Here they are below if you are interested.

https://www.youtube.com/watch?v=kWwz1LizZA4

https://www.youtube.com/watch?v=XD0svDGyLWU
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
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White Coat Investor
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

I took a lot of heat for comments in this thread. I guess my point is this. There are a few different ways to build wealth:

1) Boost income
2) Boost savings rate
3) Boost rate of return on those savings

If you're making $100K+, chances are that working on 2 and 3 is going to give you the most bang for your time and effort. If you're making $30K, chances are that working on 1 is going to give you the most bang for your time and effort, especially given the marginal utility of additional income. Working on 1 will also make it easier to work on 2.

If $30K seems like a normal income to people, then make is $20K, or $10K, or whatever figure seems right to you where boosting income is clearly the easiest way to build wealth. People come to this site to get help building wealth. The two people in the thread who note their income is relatively low ($30K and $45K) compared to the average US household have noted in subsequent comments that they are actively working on # 1 rather than merely working on # 2 and # 3 and "settling" for a lower income. So the answer to my question, "Why would someone who comes to Bogleheads settle for an income of $30K" is that as near as I can tell, there is no such person out there. And that's as it should be. Actually, that would probably be a pretty easy question to answer with an anonymous poll. Maybe there are a lot more people on this forum with lower than average incomes than it seems.

At any rate, a very sincere apology to anyone I offended in the discussion. That was not my intent. Recognizing a priori that this was a sensitive subject, I tried to phrase my genuine question/comment in a way that would not offend. Obviously I wasn't even close to successful at doing that. I'm sorry.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by livesoft »

Quite a few "reaching-2-commas" threads lately. I have a 2-comma goal nowadays as well: I want my portfolio to increase by $1 Million in a single year simply from investment gains. A good year in the stock market can make this possible, but it is also quite a few years away.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Wolkenspiel »

zaboomafoozarg wrote: Originally I told myself that when I crossed each $100k mark, I would get myself a little something as celebration. So far I haven't done that because when compared to what many people have, another $100k isn't anything great.
$100k is the median 401k balance at retirement. Good to see the Bogleheads keeping things in perspective :greedy
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by ShiftF5 »

livesoft wrote:Quite a few "reaching-2-commas" threads lately. I have a 2-comma goal nowadays as well: I want my portfolio to increase by $1 Million in a single year simply from investment gains. A good year in the stock market can make this possible, but it is also quite a few years away.
Steak Dinners all around when livesoft's portfolio increases by $1MM. :D
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by JoMoney »

livesoft wrote:Quite a few "reaching-2-commas" threads lately. I have a 2-comma goal nowadays as well: I want my portfolio to increase by $1 Million in a single year simply from investment gains. A good year in the stock market can make this possible, but it is also quite a few years away.
How good of a year? The broad Chinese stock market (SSE / Shanghai Stock Index) has doubled over the last year... [M* Chart]
While tantalizing, that kind of rapid growth can leave a bitter after taste.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by livesoft »

Yes, I realize that it is easy-come, easy-go.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by bhsince87 »

Wolkenspiel wrote:
zaboomafoozarg wrote: Originally I told myself that when I crossed each $100k mark, I would get myself a little something as celebration. So far I haven't done that because when compared to what many people have, another $100k isn't anything great.
$100k is the median 401k balance at retirement. Good to see the Bogleheads keeping things in perspective :greedy
But also keep in mind that most people retiring today with those $100k balances didn't have a 401k option available in the early part of their working careers.
Time is what we want most, but what we use worst. William Penn
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by White Coat Investor »

bhsince87 wrote:
Wolkenspiel wrote:
zaboomafoozarg wrote: Originally I told myself that when I crossed each $100k mark, I would get myself a little something as celebration. So far I haven't done that because when compared to what many people have, another $100k isn't anything great.
$100k is the median 401k balance at retirement. Good to see the Bogleheads keeping things in perspective :greedy
But also keep in mind that most people retiring today with those $100k balances didn't have a 401k option available in the early part of their working careers.
I don't think that's it at all. The issue is that most people retiring today with those $100K balances

1) Never earned a ton
2) Never saved much of it
3) Had low returns due to never learning how to invest or paying too much in fees.

Look at the poll I put up today:

[Edit: Oops, wrong link. Was pasting that one somewhere else.

viewtopic.php?f=2&t=163384&newpost=2453585 ]

Only 3% of Bogleheads have a household income less than the median US household income. This is a pretty select group here. $1 M doesn't seem like a lot to someone with a 6 figure salary, the discipline and wisdom to save 15-30% of it, and the knowledge of how to invest it well. However, to the guy making $40K and spending all of it who couldn't tell you the difference between a Roth IRA and an emerging market fund, $1 Million is a ton of moola.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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zaboomafoozarg
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by zaboomafoozarg »

Wolkenspiel wrote:
zaboomafoozarg wrote: Originally I told myself that when I crossed each $100k mark, I would get myself a little something as celebration. So far I haven't done that because when compared to what many people have, another $100k isn't anything great.
$100k is the median 401k balance at retirement. Good to see the Bogleheads keeping things in perspective :greedy
Well I compare myself against this forum, not real life :D I'm pretty sure that I am below median in the net worth survey.

I do realize it's likely more than anyone in my extended family has saved up before, and I've still got 20 or 30 more years to work. So I am very fortunate. But I suppose that's even more reason to not celebrate.
Workinghard
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Workinghard »

EmergDoc wrote:[
Only 3% of Bogleheads have a household income less than the median US household income. This is a pretty select group here. $1 M doesn't seem like a lot to someone with a 6 figure salary, the discipline and wisdom to save 15-30% of it, and the knowledge of how to invest it well. However, to the guy making $40K and spending all of it who couldn't tell you the difference between a Roth IRA and an emerging market fund, $1 Million is a ton of moola.
I was thinking about this and went back and averaged our Social Security earnings. It took us 23 years to reach the 1m goal. We started -40K. Most of those years we had no goal, no idea of what we were doing, and just randomly saved what we could once debt was paid off. We didn't know a lot about investments, allocation, or having a budget. Our savings increased four years ago when I went back to work. That's also when we became more proactive. During those 23 years, my average income was 29K. My husbands average income was 53K. If we look at his SS record for all 35 years, his average earnings were 40K.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by MathWizard »

gator15 wrote:My savings goals are derived from fear. I guess I'm motivated by fear. Though I have a nice income, my fear is at any moment I could lose that job/income and will regret not having maximzed my savings opportunity when I had a good job with a good income. This has been my mentality for the last 6 years. My job is stable yet I don't treat it that way. As a result I save a large percentage of my income. I'm not sure when I will change my mindset. I feel lucky to be in my situation. That luck may not last so I will take advantage while I can. That means continuing to save aggressively.
I feel the same way. As long as what we are living on exceeds the income stream we can generate
from SS and the investments, it feels like we are in jeopardy. Our standard of living would have
to drop if I lost my job.

It will feel nice when we get to the point where we are living on less than what we could draw in
retirement. (I am on track to get there in about 7 to 8 years)
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by tphp99 »

$1M is just a number. Yes, it can be a double-edged sword. But is it out of touch? Perhaps it's only inappropriate for most.

More importantly though, I feel the problem is the lack of a goal altogether. Saving $1M on the "average" salary is tough, so forget $1M, set a different number. But how much has the "average" Joe saved. Statistics will tell you the average savings/retirement account balance is terrible. Right? The $1M goal does not even come into play.

Much like a "runner" complaining the sub 3 hour marathon is out of touch, when said "runner" doesn't even run. I run and my goal is to qualify for the Boston marathon, but I've long realized this old body can't do sub 3 hour or perhaps it's not a goal for me. I don't give the "real" runners a hard time when they discuss about sub-3.

People are way too sensitive - just look at it this way. This site is full "real" savers (just kidding here - please don't blast me). Bogleheads are a special breed like sub-3 marathoners. :sharebeer
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Leesbro63 »

I forget the actual parameters, but THE MILLIONAIRE NEXT DOOR had a good scale relating savings to income and age.
fortyofforty
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by fortyofforty »

I like tangible, easy to remember goals. So, I like having a goal of a million dollars. However, given the economic situation, I am concerned that even a million in funds set aside for retirement may not be enough. I don't know any more. At one time it seemed like a fortune. Now it seems like an amount in the middle of the range of funds that might be needed.
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William Million
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by William Million »

Million is an interesting goal for many since 4% SWR ($40,000) plus social security plus paid off house means a good retirement for many people.

I believe most focused Americans can reach that goal, although single-parenthood or disability make it far more difficult. One of the important Boglehead truisms is that income is only part of the equation - spending and saving are also important. Many people with similar incomes spend vastly different amounts on house and car. I'm from a city with sky-high real estate. I've chosen not to live there, even though I like the quality of life. These spending choices are so important.

Finally, the house as savings vehicle is ridiculously overrated. Many people put too much income into their house operating under the illusion that it's their best investment.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by KlangFool »

Folks,

Only 10% of American household has asset of 1 millions or more.. Just to put the number in context. So, if those 10% cannot retire, the other 90% is in a bigger hole.

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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Leesbro63 »

I'll bet the number is significantly smaller if you exclude the personal residence or other consumable use assets. Yeah, homes can be converted to cash but someone with a $1M portfolio is generally in a better financial position than someone with a $300,000 house and a $700,000 portfolio.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by cherijoh »

madbrain wrote:
vitaflo wrote: 4% = 30 years
3.5% = 40 years
3% = 50 years
2.5% = 60 years

So in my spreadsheet a 30 year old would have a 2.5% drawdown, which is 40x, so that seems right. The reason I like doing it like this is because it ties my spending and age to what I need for retirement. Thus the amount I need for retirement changes every year. When my total savings hits the number I need based on these variables, I retire. If that happens when I turn 45, great. If it takes until 65, oh well. But it means I'm not working longer than I need to, and I'm not tying it to one specific number that may or may not be right for my situation.
A 30 year old male in the US has a 76.1 year life expectancy, which would be 46 years. Even using your table, that would be between 3 and 3.5% withdrawal rate.
A 30 year old female in the US has a 80.9 year life expectancy is , so you could use 50 year and your 3% SWR. But still not 60 year and 2.5%.
You would have to be 20 to use that rate, and that point we are probably not really talking about someone actually retiring, but probably living on their inheritance. Or maybe the odd ball 20-year old IPO millionaire.

IMO, using 2.5% withdrawal rate for a 30 year old is still being too conservative, if one has properly estimated expenses, which IMO is a prerequisite to any retirement. But of course, they are much harder to predict over long periods.
Madbrain, you are ignoring the very important point that you are quoting MEDIAN life expectancy. So 50% of people life longer than that. In addition, it is a moving target. When your 30-year old male hits 75, his life expectancy is not the residual of his life expectancy at 30 (i.e., 1.1 years).

I see someone else posted essentially the same thing as me earlier in the thread.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by Garco »

I don't understand the fascination with $1 million as a goal. Yes, it's a nice sum to have. But a million dollars ain't what it used to be, back when I was growing up in the 1960's and the TV show "Millionaire" was popular. A guy named Michael Tipton shows up on your doorstep out of the blue and gifts you with a million dollars from John Beresford Tipton. Wow! You're rich!

In 2015 dollars, however, that's been inflated away to just $127 thousand in 1961 dollars. A nice sum of money but not much to retire on. A million dollars isn't what it used to be.

I never set a target for my retirement fund. I worked til I got tired of it, the kids were through college and on their own, and I could afford to live at the same lifestyle in retirement as I had while working. My total accumulation was well above a million. If it hadn't been, then I would have continued working (as long as I was able to) until I had achieved a good nestegg.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by tj »

Garco wrote:I don't understand the fascination with $1 million as a goal. Yes, it's a nice sum to have. But a million dollars ain't what it used to be, back when I was growing up in the 1960's and the TV show "Millionaire" was popular. A guy named Michael Tipton shows up on your doorstep out of the blue and gifts you with a million dollars from John Beresford Tipton. Wow! You're rich!

In 2015 dollars, however, that's been inflated away to just $127 thousand in 1961 dollars. A nice sum of money but not much to retire on. A million dollars isn't what it used to be.

I never set a target for my retirement fund. I worked til I got tired of it, the kids were through college and on their own, and I could afford to live at the same lifestyle in retirement as I had while working. My total accumulation was well above a million. If it hadn't been, then I would have continued working (as long as I was able to) until I had achieved a good nestegg.

I would hold the opposite opinion of that - that $1 million in 2015 is a lot, as was $127,000 in 1961.

I'm personally shooting for $500k in today's $$$ + paid off residence 30 years from now. (I am almost 30). I would say I spend around $30k per year with almost half of that on housing, so that seems like a good enough number to shoot for.

i also did grow up in an environment with fairly heavy spending which didn't necessarily lead to increased happiness, so the idea of working longer (or in a higher paying more stressful environment) just to accumulate more stuff (and $) just isn't all that appealing.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by texasdiver »

Garco wrote:I don't understand the fascination with $1 million as a goal. Yes, it's a nice sum to have. But a million dollars ain't what it used to be, back when I was growing up in the 1960's and the TV show "Millionaire" was popular. A guy named Michael Tipton shows up on your doorstep out of the blue and gifts you with a million dollars from John Beresford Tipton. Wow! You're rich!

In 2015 dollars, however, that's been inflated away to just $127 thousand in 1961 dollars. A nice sum of money but not much to retire on. A million dollars isn't what it used to be.

I never set a target for my retirement fund. I worked til I got tired of it, the kids were through college and on their own, and I could afford to live at the same lifestyle in retirement as I had while working. My total accumulation was well above a million. If it hadn't been, then I would have continued working (as long as I was able to) until I had achieved a good nestegg.
A little bit of googling tells me that the US median household income in 1961 was $5,700 and the median home price was $16,500 and average cost of a new car was $2,250.

If our hypothetical 1961 retiree is using a safe withdrawal rate of 4% her $127,000 portfolio will kick off $5,080 per year or about 90% of the median household income.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by tj »

I remember stories of my grandfather passing on condo's in Newport Beach,CA for $50k. Those are now multi-million properties.

To suggest that $127k was not a lot of $$ in the 60's, and that for that reason $1,000,000 is not a lot today, is probably the most out-of-touch comment from this thread! :)
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by texasdiver »

livesoft wrote:Quite a few "reaching-2-commas" threads lately. I have a 2-comma goal nowadays as well: I want my portfolio to increase by $1 Million in a single year simply from investment gains. A good year in the stock market can make this possible, but it is also quite a few years away.
Since 1970, the best year in the S&P 500 was 37.58% in 1995. The S&P 500 has exceeded 30% eight separate times since 1970. So let's consider a 30% gain to be a very good year.

In order for a 30% gain in the market to return $1 million one would have to start with a portfolio size of $3.333 million.
In order for a 37.58% gain in the market to return $1 million one would have to start with a portfolio size of $2.66 million

It will be a long time before I reach that point but I expect those are not actually such farfetched numbers for a lot of people on this board.
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by 555 »

I think the following is a useful way to visualize how much $1Million is.

For a couple to earn $1Million over their careers, assuming 40 year career, working 50 weeks per year, 40 hours per week, they need to earn $6.25 per hour.
tj
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Re: The $1 Million Goal: Source of Motivation or Discouragem

Post by tj »

555 wrote:I think the following is a useful way to visualize how much $1Million is.

For a couple to earn $1Million over their careers, assuming 40 year career, working 50 weeks per year, 40 hours per week, they need to earn $6.25 per hour.
This ignores taxes and expenses. To add those would drastically increase the $ per hour.
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