How Long / Hard To Become a Millionaire on Under $100k Income

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Nissanzx1
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Nissanzx1 » Fri Nov 16, 2018 12:10 am

sawhorse wrote:
Thu Nov 15, 2018 11:14 pm
One thing to keep in mind is that net worth fluctuates. Many people during the housing bubble were millionaires due to the value of their homes. Then the housing market crashed. Same with stock market ups and downs.

Life events also affect trajectory. Kids will totally alter the trajectory. In my early 30s, my husband and I were on path for a good net worth by age 40 or 45. Maybe not a million, but half a million. Then I lost my job and couldn't find a new one. My husband could only find one in a high cost of living area whereas we had lived in a low cost area before. I developed a debilitating illness that prevents me from working and costs tens of thousands a year even with insurance. I didn't have disability insurance because when I had previously applied, I was turned down each time due to preexisting conditions. We went from saving a big chunk of money to dipping into our savings. In addition we moved to conservative investments because we need the money to be available any time, so we have largely missed out on the stock market growth of the past few years.

My financial situation and path look completely different than they did even 5 years ago. Maybe someday I'll get back on the path, but I'm acutely aware that it may not ever happen especially if my condition further deteriorates and I'm unable to ever work again.
Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm
In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Wow, talk about being privileged and out of touch. Although I tend only to wish ill on awful people, and I don't think this statement makes you an awful person, sometimes I wish people who hold this view could get a temporary dose of bad fortune.
I took my first real job at 14 and have worked without interruption until today at 40. For 10 years, I worked a second job washing cars and as a janitor for $7.25/hr. Today, I work full time and have a small business I run every night and every weekend. Trust me, I'm not privileged whatsoever. Whatever you might or might not wish upon me is your choice and has no bearing on anything in reality.

You do bring up a valid point about serious health conditions and illness/mental illness. These arent mistakes but circumstances that usually can't be changed.

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Fri Nov 16, 2018 12:34 am

Nissanzx1 wrote:
Fri Nov 16, 2018 12:10 am
sawhorse wrote:
Thu Nov 15, 2018 11:14 pm
One thing to keep in mind is that net worth fluctuates. Many people during the housing bubble were millionaires due to the value of their homes. Then the housing market crashed. Same with stock market ups and downs.

Life events also affect trajectory. Kids will totally alter the trajectory. In my early 30s, my husband and I were on path for a good net worth by age 40 or 45. Maybe not a million, but half a million. Then I lost my job and couldn't find a new one. My husband could only find one in a high cost of living area whereas we had lived in a low cost area before. I developed a debilitating illness that prevents me from working and costs tens of thousands a year even with insurance. I didn't have disability insurance because when I had previously applied, I was turned down each time due to preexisting conditions. We went from saving a big chunk of money to dipping into our savings. In addition we moved to conservative investments because we need the money to be available any time, so we have largely missed out on the stock market growth of the past few years.

My financial situation and path look completely different than they did even 5 years ago. Maybe someday I'll get back on the path, but I'm acutely aware that it may not ever happen especially if my condition further deteriorates and I'm unable to ever work again.
Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm
In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Wow, talk about being privileged and out of touch. Although I tend only to wish ill on awful people, and I don't think this statement makes you an awful person, sometimes I wish people who hold this view could get a temporary dose of bad fortune.
I took my first real job at 14 and have worked without interruption until today at 40. For 10 years, I worked a second job washing cars and as a janitor for $7.25/hr. Today, I work full time and have a small business I run every night and every weekend. Trust me, I'm not privileged whatsoever. Whatever you might or might not wish upon me is your choice and has no bearing on anything in reality.

You do bring up a valid point about serious health conditions and illness/mental illness. These arent mistakes but circumstances that usually can't be changed.
Being able to work without interruption until age 40 is a privilege that many people do not have. For you to see otherwise indicates how fortunate you have been.

If it were possible, I would challenge you to live in my broken body and try to accumulate a million dollars by age 50.

You're not the only one who has worked since your teenage years and had second jobs. In fact it's pretty common.

By the way, the hardest I ever worked was when I was earning minimum wage. I worked many many hours for $6 an hour. Several of my co-workers worked three jobs. They will never be millionaires. For some, that was destined from literally before they were born due to their country of birth and their parents' conditions.

Another co-worker was born into abject poverty with an addicted mother and absent father. Spent most of her childhood taking care of siblings. Attended one of the worst school districts in the country.

I suppose these co-workers did potentially have one path to wealth: drugs and crime.

Nissanzx1
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Nissanzx1 » Fri Nov 16, 2018 12:53 am

sawhorse wrote:
Fri Nov 16, 2018 12:34 am
Nissanzx1 wrote:
Fri Nov 16, 2018 12:10 am
sawhorse wrote:
Thu Nov 15, 2018 11:14 pm
One thing to keep in mind is that net worth fluctuates. Many people during the housing bubble were millionaires due to the value of their homes. Then the housing market crashed. Same with stock market ups and downs.

Life events also affect trajectory. Kids will totally alter the trajectory. In my early 30s, my husband and I were on path for a good net worth by age 40 or 45. Maybe not a million, but half a million. Then I lost my job and couldn't find a new one. My husband could only find one in a high cost of living area whereas we had lived in a low cost area before. I developed a debilitating illness that prevents me from working and costs tens of thousands a year even with insurance. I didn't have disability insurance because when I had previously applied, I was turned down each time due to preexisting conditions. We went from saving a big chunk of money to dipping into our savings. In addition we moved to conservative investments because we need the money to be available any time, so we have largely missed out on the stock market growth of the past few years.

My financial situation and path look completely different than they did even 5 years ago. Maybe someday I'll get back on the path, but I'm acutely aware that it may not ever happen especially if my condition further deteriorates and I'm unable to ever work again.
Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm
In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Wow, talk about being privileged and out of touch. Although I tend only to wish ill on awful people, and I don't think this statement makes you an awful person, sometimes I wish people who hold this view could get a temporary dose of bad fortune.
I took my first real job at 14 and have worked without interruption until today at 40. For 10 years, I worked a second job washing cars and as a janitor for $7.25/hr. Today, I work full time and have a small business I run every night and every weekend. Trust me, I'm not privileged whatsoever. Whatever you might or might not wish upon me is your choice and has no bearing on anything in reality.

You do bring up a valid point about serious health conditions and illness/mental illness. These arent mistakes but circumstances that usually can't be changed.
Being able to work without interruption until age 40 is a privilege that many people do not have. For you to see otherwise indicates how fortunate you have been.

If it were possible, I would challenge you to live in my broken body and try to accumulate a million dollars by age 50.
***I don't know what your health issues are (it's not my business) but please don't take my statement as a personal attack on you.***

You're not the only one who has worked since your teenage years and had second jobs. In fact it's pretty common.
*** fair enough, but I don't find many my age working 7 day weeks***

By the way, the hardest I ever worked was when I was earning minimum wage. I worked many many hours for $6 an hour. Several of my co-workers worked three jobs. They will never be millionaires. For some, that was destined from literally before they were born due to their country of birth and their parents' conditions.
***Absolutes like "never"? Sure, you can come from a very poor country and have poor chances of wealth but "never?" Even you must know that's not true.***. Do you believe that most millionaires play professional sports or have won the lottery?

Another co-worker was born into abject poverty with an addicted mother and absent father. Spent most of her childhood taking care of siblings. Attended one of the worst school districts in the country.
***i attended a very inner-city, low income school in a rough neighborhood. I look back with fondness at my time there because I can literally deal with anyone from any background today- invaluable. I was admittedly lucky to have a Mom and Dad in the home, and aside from depression- both were functioning adults.

I suppose these co-workers did potentially have one path to wealth: drugs and crime.

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Fri Nov 16, 2018 1:06 am

Nissanzx1 wrote:
Fri Nov 16, 2018 12:53 am
By the way, the hardest I ever worked was when I was earning minimum wage. I worked many many hours for $6 an hour. Several of my co-workers worked three jobs. They will never be millionaires. For some, that was destined from literally before they were born due to their country of birth and their parents' conditions.
***Absolutes like "never"? Sure, you can come from a very poor country and have poor chances of wealth but "never?" Even you must know that's not true.***. Do you believe that most millionaires play professional sports or have won the lottery?
These coworkers will never be millionaires unless they win the lottery or go into crime. The amount of money they have, much of which they send to their relatives in their home country, is probably the most they could realistically have accumulated in their lives without taking major risks (and hence assuming the potential for major losses). They work incredibly long hours that leave no time to do anything else, live several to a room, and their frugality puts "frugal" Bogleheads to shame.

Tell me, what major mistakes have they made that has prevented them from becoming millionaires?

fareastwarriors
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by fareastwarriors » Fri Nov 16, 2018 1:14 am

sawhorse wrote:
Fri Nov 16, 2018 1:06 am
Nissanzx1 wrote:
Fri Nov 16, 2018 12:53 am
By the way, the hardest I ever worked was when I was earning minimum wage. I worked many many hours for $6 an hour. Several of my co-workers worked three jobs. They will never be millionaires. For some, that was destined from literally before they were born due to their country of birth and their parents' conditions.
***Absolutes like "never"? Sure, you can come from a very poor country and have poor chances of wealth but "never?" Even you must know that's not true.***. Do you believe that most millionaires play professional sports or have won the lottery?
These coworkers will never be millionaires unless they win the lottery or go into crime. The amount of money they have is probably the most they could realistically have accumulated in their lives without taking major risks (and hence assuming the potential for major losses). They work incredibly long hours that leave no time to do anything else, live several to a room, and their frugality puts "frugal" Bogleheads to shame.

Tell me, what major mistakes have they made that has prevented them from becoming millionaires?

Sawhorse, I agree with your many points. But for the Majority of us (here in this forum, following boglehead principles, and with decent health), a million dollars (and more) in 30-40 years is the likely outcome.

Some of us may be out of touch but most of us are self-made .
Last edited by fareastwarriors on Fri Nov 16, 2018 1:22 am, edited 1 time in total.

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Fri Nov 16, 2018 1:21 am

Something worth thinking about: Accumulating wealth sometimes involves being more selfish than one might feel is acceptable and/or act in questionable ways.

I know a woman who takes care of her brother with severe cerebral palsy. Her brother lives with her, and she spent a lot of money renovating her home to accommodate him. She also spends money on home nurses and medical technology like a sophisticated wheelchair.

Caring for her brother and improving his quality of life has caused her to accumulate less wealth than she otherwise could have. But it's the right thing to do, and being a good sister is more important to her than working toward being a millionaire.

I'm sure she feels better than if she kept that money in an investment account while her brother suffered.

You can also accumulate wealth through doing ethically or legally questionable things, and it can be pretty tempting if you're aiming for a numerical goal.

But at the end of your life, I would think it's better to exit with a clear conscience even if that means you don't have a million dollars.

Wricha
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Wricha » Fri Nov 16, 2018 2:25 am

Thank you sawhorse your point on health is clearly out of ones control and absolutely changes everything.

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Fri Nov 16, 2018 2:38 am

Wricha wrote:
Fri Nov 16, 2018 2:25 am
Thank you sawhorse your point on health is clearly out of ones control and absolutely changes everything.
Yes, which is why I urge people to have disability insurance if they can get it. I wasn't able to get a policy due to pre-existing conditions, but if you're healthy, it's a good idea to get insured while you can.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Nissanzx1 » Fri Nov 16, 2018 2:47 am

sawhorse wrote:
Fri Nov 16, 2018 1:06 am
Nissanzx1 wrote:
Fri Nov 16, 2018 12:53 am
By the way, the hardest I ever worked was when I was earning minimum wage. I worked many many hours for $6 an hour. Several of my co-workers worked three jobs. They will never be millionaires. For some, that was destined from literally before they were born due to their country of birth and their parents' conditions.
***Absolutes like "never"? Sure, you can come from a very poor country and have poor chances of wealth but "never?" Even you must know that's not true.***. Do you believe that most millionaires play professional sports or have won the lottery?
These coworkers will never be millionaires unless they win the lottery or go into crime. The amount of money they have, much of which they send to their relatives in their home country, is probably the most they could realistically have accumulated in their lives without taking major risks (and hence assuming the potential for major losses). They work incredibly long hours that leave no time to do anything else, live several to a room, and their frugality puts "frugal" Bogleheads to shame.

Tell me, what major mistakes have they made that has prevented them from becoming millionaires?
You are making a set of assumptions in your statements. If they choose to give up their money and send it back home then they have made a choice to never be wealthy. That isn't necessarily right or wrong, but certainly a choice with consequences. What you describe sounds close to human trafficking.

It's not as if a millionaire is a better person than a non-millionaire. But there are approximately 11 Million millionaires in the USA. Far from impossible. The vast majority are 1st generation rich (80% approximately), saving in Roths/401K's/ Real Estate slowly and steadily.

I myself am not a millionaire today due to an incredible amount of dumb money choices (if only I had found Bogle/ Dave Ramsey sooner). But I should be in another decade or so thanks to these thinkers. I've never made more than $60K in my life. You do not need to be high income to be a millionaire. It's about keeping the lifestyle/spending in check and sticking to principles of debt avoidance and saving. Of course, some will fall short because of things they can't control, but the majority will fall short because they aren't willing to sacrifice today for a payoff tomorrow.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by JoMoney » Fri Nov 16, 2018 3:54 am

Nissanzx1 wrote:
Fri Nov 16, 2018 2:47 am
...if only I had found Bogle/ Dave Ramsey sooner...
Despite Dave Ramsey's lousy mutual fund advice, I love one of his sayings, that there are only three things you can do with money, and you need to find balance between them "... You ought to always be spending some, giving some, and investing some—always ..."
"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: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Simple Simon » Fri Nov 16, 2018 4:23 am

MRMN wrote:
Thu Nov 15, 2018 4:27 pm
I earned more money my senior year of high school working as a concrete laborer than my mother did that same year.
Respect due to your mother for working as a concrete laborer :sharebeer

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by djpeteski » Fri Nov 16, 2018 8:10 am

So there are some key concepts that I have not seen answered to this question.

The first is that life is not linear. I recall being in my late 20's and hearing of a couple that was dumping $400/month into mutual funds. This was circa 1995. At the time I thought this was a nearly impossible feat and was thinking how wealthy this couple would become. Today if one person in a household maxes their 401K contributions, that comes almost 4 times that amount. What you are able to save today, is not what you will be able to save tomorrow.

My own life was not linear. In July '13 my household net worth was around 250K and I was 46. So after 20 years of working that was all I had, could I hope to only retire at age 67 with about 500K?

Some things went well and 49 months later I hit over 1 million in net worth. In 49 months I did three times the net worth that I had done in the previous 20 years. Part of it was luck, part of it was timing but mostly it was making good financial decisions overtime.

To me that is what you need to do, make good financial decisions today, and tomorrow will take care of itself.
bigtex wrote:
Thu Nov 15, 2018 4:03 pm
I am wondering how hard it is to become a millionaire on an income of less than $100k?
Yes this is very possible especially if one begins saving early. Many people smoke a pack of cigarettes that make less than 100K, put the cost of those cigs into a mutual fund and leave there from 18-65 and you'll have 2.5 million or so.
Is millionaire status still achievable by 50? by 40?
Reducing the time, is all dependent upon intensity and the shorter the time frame the more intense one has to be. There needs to be a significant delta between income and expense that is dedicated to savings in order to achieve a reduced time frame of building wealth.
If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth?
One answer: car payments. Drive into the local Walmart Neighborhood market. People shop there because they are trying to save money, its freaking horrible to shop there. Look in the parking lot. It will be filled with late model cars. These people are being killed by car payments. What happens when someone gets a raise at work? They upgrade their car.

Financial authors will never mention this as a large portion of their income comes from advertising and a lot of advertising is purchased by car companies.

The negative effects of owning late model cars go beyond interest cost and depreciation, which are both significant. Something "unexpected" happens. That new jeep needs 2k worth of tires, or other significant repairs are needed. Because the savings was cleared out to increase the down payment to make the payments affordable, there is no savings. So the only way to pay for this is a 401K loan, and the bad decisions cascade.
Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
Its highly rated and it depends on what parents teach their children more than anything else.
Last edited by djpeteski on Fri Nov 16, 2018 8:55 am, edited 2 times in total.

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Cycle
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Cycle » Fri Nov 16, 2018 8:26 am

As an individual, for much of my career my income was under 100k. I was very excited when it tipped the 100k threshold maybe 4 years ago.

Out of college, I started off with 0 debt and 40k to use for grad school. I ended up having work pay for most of grad school, used the rest of that money to help pay for a condo I bought when I was 24.

Maxing my 401k and Roth since I was 24, and contributing some (but not max) since I was 22, I will individually hit 1MM net worth when I'm 36. Household networth 2MM by 38.

If I didn't have the money from my parents, I would have accepted a NROTC full ride, so those handouts only impact that date for me by a couple years. If I had 100k in debt out of college though... Geeze add maybe 6 years.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Grt2bOutdoors » Fri Nov 16, 2018 8:29 am

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
Stick with it. If you have already saved 10,000, continue to put in $1,000 per month for 27 years and earn a nominal rate of return 7%, the account will be worth $1.022 million. You likely will not be making $60K for the remainder of your career, you'll either take a higher paying job or you'll receive raises or some combination of the two. Save half your raises, so when you ultimately get close to retirement, you won't be saving $1,000 per month, you'll be saving $2,000 per month or more. What controls account balances? - rate of savings, return on savings, expenses paid or rather "not paid". Most millionaires don't reach that status until their 50's, there are some who get their earlier by saving, some by receiving a windfall - lottery, inheritance, stock option mania. The majority though get there slowly.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Cycle
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Cycle » Fri Nov 16, 2018 8:36 am

djpeteski wrote:
Fri Nov 16, 2018 8:10 am

One answer: car payments. Drive into the local Walmart Neighborhood market. People shop their because they are trying to save money, its freaking horrible to shop their. Look in the parking lot. It will be filled with late model cars. These people are being killed by car payments. What happens when someone gets a raise at work? They upgrade their car.
Nail on the head. It pains me when I see a young engineer in my office earning 70k and owning a 40k new vehicle.

My father would go to the Lexus dealer with us to get us free lunch on Saturday and he'd get free gift bags for test driving one. He was a surgeon and made good money, but he was doing the equivalent of credit card churning or free time share lunching... His cars were always inexpensive (no power windows) and used. Typically not even new used, but old used. Never a luxury brand.

Now my wife and I just share a car. We are 65-70% net savers... For one more year, then the 19k daycare starts.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Grt2bOutdoors » Fri Nov 16, 2018 8:38 am

djpeteski wrote:
Fri Nov 16, 2018 8:10 am


To me that is what you need to do, make good financial decisions today, and tomorrow will take care of itself.
bigtex wrote:
Thu Nov 15, 2018 4:03 pm
I am wondering how hard it is to become a millionaire on an income of less than $100k?
Yes this is very possible especially if one begins saving early. Man people smoke a pack of cigarettes that make less than 100K, put the cost of those cigs into a mutual fund and leave there from 18-65 and you'll have 2.5 million or so.

Yup - $10K in Altria from 1987 to Oct. 2018 is worth $2.1 million today.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by tibbitts » Fri Nov 16, 2018 8:44 am

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
This question seems to be based on some flawed assumptions:

1. your numbers aren't inflation-adjusted.
2. you seem to imply that $1M somehow is associated with early FI.
3. you don't account for family size/responsibilities.
4. the calculators are based on historical returns; if you combine the lower future expected (by many/most here) with global investing's likely lower returns (vs. betting on one economy and winning, which is what most calculators are based on) and you end up with far less wealth accumulation.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by longinvest » Fri Nov 16, 2018 8:51 am

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
There's no reason to target one million dollar specifically.

Let's pick a family with two earners making $31,000 each, for a household income of $62,000. That's the approximate US median household income.

In their 20s, they pay down debt, accumulate a down payment, and buy a modest house at the end of their 20s with a 30-year mortgage. They don't start saving and investing before the age of 30. Then, they work, live below their means, save, and invest from age 30 to 64. At age 65, they retire. Each would qualify for a annual $15,500 Social Security pension at age 66, but they decide that one of them will claim at age 65 and get $14,000 and the other will delay until 70 to get $20,000.

We'll assume, for simplicity, that their expenses are relatively level all along. Their mortgage is modest, and once it's paid, an equivalent HELOC is used to spread the cost of maintenance (kitchen remodel, roof, etc.).

How much should they save to retire with dignity? I'll use a similar calculation to what I've shown in the post The Mathematics of Retirement Investing.

One of the spouses likes aggressive investing, but the other is risk averse. They compromise to holding a 50/50 stocks/bonds portfolio (with stocks subdivided between domestic and international, and bonds subdivided between nominal and inflation-indexed) all life long, during both work years and retirement. They know that market returns fluctuate, but, for planning purpose, they use a real 3.5% growth trend for such a balanced portfolio.

To retire with dignity, they'll need to:
  • Accumulate ($20,000 X 5) = $100,000 to fill the gap in Social Security payments from age 65 to 69.
  • Save and invest enough in a tax-deferred accounts to equalize ($62,000 - savings) with ($14,000 + $20,000 + portfolio withdrawals).
At a real 3.5% growth rate, investing $1000 per year for 35 years, from age 30 to 64, would grow to a total of $66,674 at age 65. Accumulating $100,000 requires $1,500 in annual savings and investing. At age 65 with a 50/50 portfolio, the VPW table allows for a 4.8% withdrawal percentage. Multiplying $66,674 by 4.8% gives $3,200. In other words, each additional $1,000 in annual savings would project into portfolio withdrawals fluctuating from $3,200 in retirement; that's 3.2 times the annual savings.

So we want to find the additional savings such that ($62,000 - $1,500 - additional savings) = ($14,000 + $20,000 + 3.2 X additional savings).

Code: Select all

S = additional savings
$62,000 - $1,500 - S = $14,000 + $20,000 + 3.2 S
$60,500 - S = $34,000 + 3.2 S
$60,500 - $34,000 = 3.2 S + S
$26,500 = 4.2 S
S = $26,500 / 4.2 = $6,310
So, the household must save ($1,500 + $6310) = $7,810 annually into a tax-deferred account, from 30 to 64, living on the equivalent of a ($62,000 - $7,810) = $54,190 pre-tax income to preserve a relatively similar (but fluctuating) standard of living in retirement. Such savings would grow toward a ($7,810 / $1,000 X $66,674) = $520,724 portfolio.

This couple doesn't need a million dollar portfolio to retire with dignity. It only needs approximately half as much in inflation-adjusted terms!

What the calculations above are suggesting is a dynamic savings rate. It projects variable percentage withdrawals back into accumulation years. Similar to VPW, it requires annual calculations without taking the past into account. Let me illustrate this.

At age 30, starting with a $0 portfolio, according to the above calculations, they need to save $7,810 into a tax-deferred account. That's a 12.6% savings rate.

Every year, they redo the above calculations based on their current portfolio balance and current income, using an updated investment horizon. At age 35, for example, maybe they've been unlucky and their portfolio has only grown to $37,500 (inflation-adjusted) . The household income is still $62,000. Let's do the calculations, keeping the constant real 3.5% portfolio growth trend but for a 30 year investment horizon from age 35 to 64.

In 30 years, $37,500 would grow to $105,255. This would cover the Social Security gap and allow for an additional ($5,255 X 4.8%) = $252 VPW portfolio withdrawal. In 30 years, investing $1000 per year would grow to a total of $51,623 and allow for a ($51,623 X 4.8%) = $2,478 VPW withdrawal.

We want to find the additional savings such that ($62,000 - additional savings) = ($14,000 + $20,000 + $252 + 2.478 X additional savings).

Code: Select all

S = additional savings
$62,000 - S = $14,000 + $20,000 + $252 + 2.478 S
$62,000 - S = $34,252 + 2.478 S
$62,000 - $34,252 = 2.478 S + S
$27,748 = 3.478 S
S = $27,748 / 3.478 = $7,978
So, the household must save $7,978 at age 35 into a tax-deferred account, living on the equivalent of a ($62,000 - $7,978) = $54,022 pre-tax income. That's a 12.9% savings rate.

See how the savings rate fluctuates according to market returns. Lower market returns leads to a slightly higher savings rate, naturally letting them buy slightly more investment assets when they're down. Higher market returns would lead to a slightly lower savings rate, naturally letting them buy slightly less investment assets when they're up. Maybe I should start a thread called Variable Savings Rate (VSR) as a prelude for Variable Percentage Withdrawal (VPW). :wink:

Added: I just started a new thread The Variable Savings Rate (VSR) -- an accumulation-time prelude to VPW.
Last edited by longinvest on Fri Nov 16, 2018 10:20 am, edited 3 times in total.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic / international) stocks / domestic (nominal / inflation-indexed) long-term bonds | VCN/VXC/VLB/ZRR

mbasherp
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by mbasherp » Fri Nov 16, 2018 9:26 am

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth?
Many things that are simple are not easy. This is one of them. Building wealth on a more moderate income takes diligence over time. Lots of people might be diligent for a while, but they slip over to the immediate gratification side enough to derail a long term plan.

My household is coming in around $110k this year. We invest approximately $3600/month, including our mortgage principal payment (which counts for NW purposes). My net worth projection spreadsheet currently shows that we will be net > $1 million in our forties. In fact, $2 million by 50, if we contribute the same and see 2.5% inflation with 4% real returns. And most of our twenties amounted to almost nothing!

Control expenses over a long time and put the excess to work.

mmmodem
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by mmmodem » Fri Nov 16, 2018 9:32 am

How long?
About 10 years. I started saving in a 401k and Roth IRA in 2017.

Under 40?
I am under 40

Under 6 figures?
Until this year, I made under 6 figures

How hard?
That depends on you. As others already stated, max out your retirement accounts. That's all I did and 10 years later, we have $1M. Saving ~$1800 a month may not be easy but it isn't impossible. Yes, there was incredible growth the last few years. But do you remember in 2008 how much fear there was in this country about stocks and real estate? Our investments went negative for 2 years before we saw any gains.

The odds were stacked against us. DW and I are first generation in this country and grew up food stamp poor. Parents had difficulty putting food on the table and shelter over our heads. I paid for my own college. I have been supporting my family since I was 16 working 2 jobs sometimes, started off at $4.25 minimum wage. I am still supporting my parents and DW's parents today with their living costs. I lived in the Bay Area, CA. It's a high cost of living area.

Yes, being married helps and my spouse worked but this was on and off, after child 3, she became stay at home. We did have one thing going for us and that is excellent health. Today, we are still maxing out my 401k, two Roth IRA, and family HSA. That's over $3000 a month, on $103k income for a family of 5. Easy? No. But the point is that it isn't impossible.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by ryman554 » Fri Nov 16, 2018 10:23 am

bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
Really, that's $22k/year. That is absolutely possible.

Save a third, spend a third, get taxed on a third.... can you live on 22 or 33k a year? It may be a struggle at 66k/year, but you aren't getting taxed a third (or even close to it). If you're making 100k/year, you still aren't getting taxed on a third, but could you live on 44k/year? I almost do that today with a family of 4 (but no mortgage)

GAAP
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by GAAP » Fri Nov 16, 2018 10:26 am

theplayer11 wrote:
Thu Nov 15, 2018 5:37 pm
GAAP wrote:
Thu Nov 15, 2018 4:52 pm
bigtex wrote:
Thu Nov 15, 2018 4:47 pm
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
In the early years it is slow, with most of the gain coming from new investments -- not investment returns. That changes over time, but can be discouraging at first. The important thing is to continue saving.
so true..looking back, I had $113K saved at the end of 2008 at age 43. Today I'm at $765. After mortgage is paid and college tuition payments are over, retirement saving really ramps up.
It struck me this morning that building equity in a mortgaged house works exactly the same as saving for a future goal. They both illustrate the power of compounding over time. The more you pay on the mortgage and the sooner you do it, the sooner it's paid off. The more you save and the sooner you do it, the sooner you hit your goal.

For some reason, people seem to find it easier to pre-pay the mortgage than save for retirement.

Retired2013
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Retired2013 » Fri Nov 16, 2018 12:28 pm

Always planed to be able to retire by age 55 with $1M.

In 1985 making $16k and DW making $16k.
Each contributed 10% - 12% to 401(k) with first 5% matched by company.
Each contributed to IRA (back then max was $2k each).
Company contributed 8% to a Cash Balance Retirement Account.

In 1999 wife retires (making $32k) and I'm making $68k. Our agreement was that I would max out my 401(k) each year and max out both IRAs.

2005 I lost my job and new job only paid $40k. Job covered expense and job had good health insurance. Stopped contributions to 401(k) except for company match of 4.5%. In 2009 - 2012 I did contribute the full amount to 401(k) to lower my income so that I could then do ROTH conversions. This was a work-around since company didn't allow for a ROTH 401(k).

Retired at 56. Salary never made 90k. First $M at age 44, second $M at age 53, third at age 60.

Compounding works magic if you start early. I wish I could get my nephews and nieces to listen to me and take action.

wolf359
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by wolf359 » Fri Nov 16, 2018 12:49 pm

How long it takes to accumulate $1 million in assets is not a function of income (although the higher the income, the easier it is.) It's a function of:

1) How much is being saved (in absolute dollar amounts).
2) How much time elapses.
3) Market return received (Sequence of returns.)

Most people described in the book "The Millionaire Next Door" became millionaires with incomes below $100,000. This was a factor of the time the book was written (in the early 1990's, when $100K incomes were rarer.)

#1 is under your control, to a degree. You can save more (to a point) or earn more.

#2 is also under your control. You can work longer until you meet your objective.

#3 is not under your control in the stock market. If you own a business or real estate, you may be able to directly control your investments, but Bogleheads usually use index funds and rely on market returns.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by inbox788 » Fri Nov 16, 2018 1:00 pm

Retired2013 wrote:
Fri Nov 16, 2018 12:28 pm
Compounding works magic if you start early. I wish I could get my nephews and nieces to listen to me and take action.
Savings and investing is what's left over after one spends from their earnings. Are these young pre-BH overspending or underearning? Both seem to be more common phenomena these days. Some have taken the other extreme, like the FIRE movement. It may be a bit chaotic, but reality ultimately kicks in. They'll figure it out in due time on their own, but keep providing them with your experience and encouragement. We're counting on them to take care of us in our retirement!

https://www.nytimes.com/2018/09/11/styl ... early.html

https://www.telegraph.co.uk/news/2017/1 ... t-housing/

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Stormbringer » Fri Nov 16, 2018 1:20 pm

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
I am wondering how hard it is to become a millionaire on an income of less than $100k?
There are numerous ways to "be" a millionaire:
  • The 401(k) millionaire has a million dollars in retirement accounts, but to access the money he needs to pay income taxes, and possibly even a tax penalty, so he is arguably not really a millionaire.
  • The paper millionaire has equity in something that has, at least in theory, a market value of a million dollars. However, it might be completely illiquid (e.g. shares restricted after an IPO) or be something where the very fact that the owner would sell it would cause it lose value (e.g. what would happen to AMZN if Jeff Bezos decided to liquidate his holdings). And then there would likely be a capital gain tax to be paid. Again, arguably not a millionaire.
  • A cash-flow millionaire, who doesn't have a million dollars as such, but has an income stream with a net present value of a million dollars. For example, someone with a generous pension. Rarely considered a millionaire, but maybe should be.
  • A "real" millionaire, being a person with a million dollar in cash, or cash-like holdings that could be freely spent at any time. Or alternately, anyone who could liquidate everything to cash and have a million dollars after taxes and other costs.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by MisterMister » Fri Nov 16, 2018 2:09 pm

Retired2013 wrote:
Fri Nov 16, 2018 12:28 pm
Always planed to be able to retire by age 55 with $1M.

In 1985 making $16k and DW making $16k.
Each contributed 10% - 12% to 401(k) with first 5% matched by company.
Each contributed to IRA (back then max was $2k each).
Company contributed 8% to a Cash Balance Retirement Account.

In 1999 wife retires (making $32k) and I'm making $68k. Our agreement was that I would max out my 401(k) each year and max out both IRAs.

2005 I lost my job and new job only paid $40k. Job covered expense and job had good health insurance. Stopped contributions to 401(k) except for company match of 4.5%. In 2009 - 2012 I did contribute the full amount to 401(k) to lower my income so that I could then do ROTH conversions. This was a work-around since company didn't allow for a ROTH 401(k).

Retired at 56. Salary never made 90k. First $M at age 44, second $M at age 53, third at age 60.

Compounding works magic if you start early. I wish I could get my nephews and nieces to listen to me and take action.
You, sir, are a magician. I am 67, newly retired. Have worked my whole life earning much more than you and have about 1.5M. And I have contributed to IRAs along the way and do not have an extravagant lifestyle.

Will you be my investment advisor? :happy

Retired2013
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Retired2013 » Fri Nov 16, 2018 3:12 pm

MisterMister wrote:
Fri Nov 16, 2018 2:09 pm
Retired2013 wrote:
Fri Nov 16, 2018 12:28 pm
Always planed to be able to retire by age 55 with $1M.

In 1985 making $16k and DW making $16k.
Each contributed 10% - 12% to 401(k) with first 5% matched by company.
Each contributed to IRA (back then max was $2k each).
Company contributed 8% to a Cash Balance Retirement Account.

In 1999 wife retires (making $32k) and I'm making $68k. Our agreement was that I would max out my 401(k) each year and max out both IRAs.

2005 I lost my job and new job only paid $40k. Job covered expense and job had good health insurance. Stopped contributions to 401(k) except for company match of 4.5%. In 2009 - 2012 I did contribute the full amount to 401(k) to lower my income so that I could then do ROTH conversions. This was a work-around since company didn't allow for a ROTH 401(k).

Retired at 56. Salary never made 90k. First $M at age 44, second $M at age 53, third at age 60.

Compounding works magic if you start early. I wish I could get my nephews and nieces to listen to me and take action.
You, sir, are a magician. I am 67, newly retired. Have worked my whole life earning much more than you and have about 1.5M. And I have contributed to IRAs along the way and do not have an extravagant lifestyle.

Will you be my investment advisor? :happy
We are amazed at were we are also! That's why getting to $M can be done. No magic!

Just pay yourself first! Live on what's left. You don't miss what ever you didn't have when you get the paycheck.
Auto pay taken out for 401(k). Discipline to make the IRA contribution each year.

We live in a LCOL area.

Our first house was a started house, $50k Mtg @ 13%. Put extra $$ on mtg as other debt was paid off. Mtg. retired in 7 yrs. However, then had a house built $168k. $110k Mtg 7.5%. Played a game to see how fast we could retire that mtg. Five years, mtg paid when wife retired (job eliminated) & her 40th birthday wish). Cashed in taxable brokerage account to complete. Then saved the retired Mtg payments that we were making. That was the last penny in interest or fees we ever paid.

This is not the typical BH.

I did do some (a lot) day trading in my 401(k). Only used three funds, S&P 500, Stable Value & company stock fund (Dow Stock). A group of us at work would gather together around 3 pm each day. Some employees even called in from NY City to get in on the conversation. We would talk about the current events of the day and were we thought the markets were heading. Each of us would then make our own decision on if we were going to make any change in our 401(k) by 4 pm. We actually competed against each other to see who was obtaining the highest returns. If the company stock moved + or - 5%, most of use would move in or out. My boss actually stayed 100% in company stock. If he was out for a day, he hated it and had to get back in. If the stock price dropped, he would say buying more shares. In the end, most of us in the group left $M.

I remember receiving a letter from the company (all employees did) that said employees shouldn't be day trading in their 401(k). This is when day trading was big as a job (late 1990's?). Remember that? I remember asking are they going to be here when I retire and supporting me and my wife? No! If it's not illegal, we can still day trade. In fact, to this date, I have keep my 401(k) at the company because of low or no fees and the ability to trade daily. Still using only the three funds for my 401(k).

I know, market timing. My wife hates it but it has worked well for our balance.

The only thing we didn't do was travel. In-laws had a cottage and other family members had cottages next door. Summers weekends were spent at the cottage.

When people ask my wife who she has as an adviser, she says she sleeps with her adviser. He's not available.

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telemark
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by telemark » Fri Nov 16, 2018 3:33 pm

Anecdotally, I started working in my late twenties, income ranged from $28k to $85k, broke into seven figures in my middle fifties, so about thirty years. It would have been shorter if I had been even slightly clueful about investing: I didn't even open a Roth IRA until 2010.

Not saying anyone can do it, but it's possible, or at least it was once.

bigtex
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by bigtex » Fri Nov 16, 2018 5:17 pm

Thanks for the comments everyone. Why is it assumed the returns will be more like 6% in the future instead of the historical 9/10%?

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JoMoney
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by JoMoney » Fri Nov 16, 2018 5:33 pm

bigtex wrote:
Fri Nov 16, 2018 5:17 pm
Thanks for the comments everyone. Why is it assumed the returns will be more like 6% in the future instead of the historical 9/10%?
Valuations are higher now than in the past.
"Risk free" interest rates are low, so combined with "Equity Risk Premium" return should be lower.
Growth has picked up a bit recently, but if you're gauging growth over slightly longer recent past period, we've been in an anemic low-growth environment. Financials, oil/materials, telecom, and others haven't been doing especially well. If you're projecting the recent past as forward projections for growth it doesn't look great.
2% growth + 2% inflation + 2% dividend
Past 20 year period return was a little over 6%
Last edited by JoMoney on Fri Nov 16, 2018 5:41 pm, edited 2 times in total.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

staythecourse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by staythecourse » Fri Nov 16, 2018 5:35 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
Don't be discouraged. I remember seeing a graph a while back showing the typical 401k growth over 20-40 years of employment. It was interesting how dramatic the growth at the END of the last 10 years vs. all the preceding yours prior. It seems a LARGE portion of the noticeable growth is in the last 10 years of saving so don't be surprised if the needle doesn't seem to be moving so to speak.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by dknightd » Fri Nov 16, 2018 5:58 pm

I think I read someplace that if you save 30% of your gross pay for 30 years you should be able to replace all your take home pay in retirement. Can't find it now, but pretty sure that should work for most people.

Church Lady
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Church Lady » Fri Nov 16, 2018 6:41 pm

A great many calculators will tell you how long to save lump sum L given monthly savings of s and return r. But as the saying goes, a million dollars isn't what it used to be.

Just for fun: https://portfoliocharts.com/portfolio/classic-60-40/

Navigate to that page, then scroll down to the chart labeled 'Financial Independence'. You can change the savings rate and years of expenses already saved values. This calculator will tell you how long you have to save to be financially independent, which is more to the point I think.

If you don't like the Classic 60-40 portfolio, you can poke around portfoliocharts.com and find others that may be more to what you are actually doing. For example, https://portfoliocharts.com/portfolio/m ... -ultimate/

Here is the overview: https://portfoliocharts.com/resources/
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

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JoMoney
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by JoMoney » Fri Nov 16, 2018 6:47 pm

dknightd wrote:
Fri Nov 16, 2018 5:58 pm
I think I read someplace that if you save 30% of your gross pay for 30 years you should be able to replace all your take home pay in retirement. Can't find it now, but pretty sure that should work for most people.
That should work... even less could work.

.3 x 30 = 9 times gross pay (assuming no growth)
U.S. Savings bonds will double after 20 years. I would expect even a risk-averse investor could find something suitable that can double their investments over a 30 year period... so lets say a very conservative investor doubles the 9x gross pay saved to be 18x after 30 years
If they started at age 30 and ended at age 60, a 60 year old male can currently buy a SPIA with a 6.1% payout, which means it only takes 16.4x gross pay to fully replace what they were making... and since they're accustomed living on only 70% of their income, they should have lots of wiggle room.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

KlangFool
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by KlangFool » Fri Nov 16, 2018 11:23 pm

dknightd wrote:
Fri Nov 16, 2018 5:58 pm
I think I read someplace that if you save 30% of your gross pay for 30 years you should be able to replace all your take home pay in retirement. Can't find it now, but pretty sure that should work for most people.
dknightd,

If you check your pay slip and so on, you will find that taxes (social security, Medicare, Federal, state) takes out about 30% of your gross income. So, saving 30+% of your gross income is equivalent to your annual expense. If you save 1 year of expense every year, as long as your portfolio grows at the rate of inflation, you could reach FI in 20 to 30 years.

There are many millionaires in my family. Some in the USA and some in my home country. The income and education range widely. The only commonality among us is we save 30+% or more of our gross income.

Save 1/3, spend 1/3, and pay 1/3 in taxes is a very old saying. I just do not remember where I read it.

KlangFool

heyyou
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by heyyou » Sat Nov 17, 2018 1:31 am

Why is it assumed the returns will be more like 6% in the future instead of the historical 9/10%?
Periods of high returns are often followed by periods of low returns, but the hidden good news is: You just keep buying fund shares if you can keep your job, so those shares purchased in the lesser period will then grow extra during the next period of better returns. Expect those cycles to occur a couple times or more during your accumulation period.

That is just one of the reasons that stocks pay more than bonds, the purchaser does not know what the future returns will be from the investment. In the short term, the risks are annoying, but over the long term, you are rewarded extra for tolerating those annoyances.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by maroon » Sat Nov 17, 2018 2:11 am

Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by oldcomputerguy » Sat Nov 17, 2018 6:50 am

bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
... or, saving roughly 22% of that $100k per year. Not an easy task.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by goblue100 » Sat Nov 17, 2018 7:14 am

oldcomputerguy wrote:
Sat Nov 17, 2018 6:50 am

... or, saving roughly 22% of that $100k per year. Not an easy task.
May not be easy, but doable. How about this?
He takes a sheet of paper and puts two numbers on it:

Age 65 $1,000,000

Then he asks, "do you think you can get money to grow at, say, 9 percent?"

If you agree, and most people do, he tells you that a 9 percent return will double money in 8 years. "Now let's work it backwards."

And he produces a series of figures like this:

Age 57 $500,000 Age 49 $250,000 Age 41 $125,000 Age 33 $ 62,500 Age 25 $ 31,250

"Doesn't look so difficult, does it?" he says.

And it doesn't. If you can put together $31,250 by the time you are 25 or $62,500 by the time you are 33, you'll have enough saved AT THAT TIME so that you won't have to save another dime for the rest of your life (if a million is your end goal)
https://assetbuilder.com/knowledge-cent ... till-works
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by indexonlyplease » Sat Nov 17, 2018 7:15 am

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
Don't get stuck on the idea of becoming a millionaire. Most can't even spell it. The best you can do is max out your 401k and your Roth IRA. When you make more money start a tax account. The best investemnt is a great job you enjoy because you may be there for 40 plus years. If you can get a job with a pension even better. So, you may not need to become a millionaire.

Also, live debt free and you will get there faster and have less stress of having bill along the way. Don't forget to enjoy life also. You are only young once.

I think this idea FI and of become a millionaire by 40 and quiting your job is false and only for a few of the lucky ones. If it was easy we all would have been there.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by KlangFool » Sat Nov 17, 2018 7:41 am

maroon wrote:
Sat Nov 17, 2018 2:11 am
Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.
maroon,

1) At 35K per year, you only need to save 11K in order to save 30+%.

2) At 35K per year, taxes take out closer to 20+% of the gross income.

3) So, at 35K per year, even after saving 11K aka 30+%, the amount of gross income available for spending is around 40% to 50%.

KlangFool

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CyclingDuo
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by CyclingDuo » Sat Nov 17, 2018 8:21 am

oldcomputerguy wrote:
Sat Nov 17, 2018 6:50 am
bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
... or, saving roughly 22% of that $100k per year. Not an easy task.
Yes, that figure of 22% can be daunting for many with a family and expenses.

How does that fit in with the usual various suggested saving rates from the financial planning community if we use that $100K gross income figure...

10% per year = $10,000 or $833 per month ($27.40 per day)
15% per year = $15,000 or $1250 per month ($41.10 per day)
17.52% per year = $17,520 or $1460 per month ($48.00 per day)
20% per year = $20,000 or $1666 per month ($54.80 per day)
22% per year = $22,000 or $1833 per month ($60.27 per day)

The green colored one is David Bach's simple formula for becoming a millionaire by paying yourself first is to save the equivalent of one hourly wage per day. Using his formula, the savings rate would be right in the middle of that pack of recommendations from the financial planning community and is highlighted in green above. It's less daunting than 22%.

His premise is based on working 90,000 hours over your lifetime. Take one hour's wage per day and multiply it by 365 days per year, and it all works out quite well even if you are using your starting hourly wage in your teen years and in your 20's when your savings began. As your salary increases over the years, so does your hourly wage - and thus your savings.

Suppose you make $50,000 annually and you work a full-time job, 40 hours a week. You'll be paid for about 2,080 hours of work in a year, equaling roughly $24 per hour. Bank that much each day, and you'll be golden, according to Bach.

1 year of saving is $24 X 365 = $8760 (17.52% of a $50K gross income)

Using the $100K annual salary example, that breaks down to a $48 an hour job, or...

1 year of saving is $48 X 365 = $17,520 (17.52% of a $100K gross income)

https://www.businessinsider.com/how-muc ... ey-2016-12
https://www.cnbc.com/2018/01/24/wealth- ... naire.html

This blogger ran some numbers of the formula for a couple each making $20 an hour and saving a combined $40 per day. The blogger also mentions including the premise of the employer match in a 401k and an incremental increase in salary to come up with how many years to hit your millionaire status...

http://onecentatatime.com/how-to-become ... -day-easy/
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Sat Nov 17, 2018 8:33 am

KlangFool wrote:
Sat Nov 17, 2018 7:41 am
maroon wrote:
Sat Nov 17, 2018 2:11 am
Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.
maroon,

1) At 35K per year, you only need to save 11K in order to save 30+%.

2) At 35K per year, taxes take out closer to 20+% of the gross income.

3) So, at 35K per year, even after saving 11K aka 30+%, the amount of gross income available for spending is around 40% to 50%.

KlangFool
It's very hard to save $11k when you're only making $35k. Like you said, the amount of gross income available for spending is around 40-50%. That's $14-17.5k a year. It depends on the cost of living in your area and whether you have children and other major essential expenses, but it's not easy anywhere other than perhaps very low cost areas with no children, and it's pretty much impossible in a high cost area and/or with children.
Last edited by sawhorse on Sat Nov 17, 2018 8:37 am, edited 1 time in total.

longinvest
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by longinvest » Sat Nov 17, 2018 8:37 am

KlangFool wrote:
Sat Nov 17, 2018 7:41 am
maroon wrote:
Sat Nov 17, 2018 2:11 am
Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.
maroon,

1) At 35K per year, you only need to save 11K in order to save 30+%.

2) At 35K per year, taxes take out closer to 20+% of the gross income.

3) So, at 35K per year, even after saving 11K aka 30+%, the amount of gross income available for spending is around 40% to 50%.

KlangFool
KlangFool,

Such a post can be harmful to young median income members who will be discouraged by the daunting level of savings it calls for.

The reality is that a worker with a 35K salary doesn't need to save 30% of his income and accumulate 1 million dollars to retire with dignity. He only needs between $250,000 and $300,000 at age 65 in addition to his Social Security pension which he'll delay until age 70 to preserve his standard of living in retirement. See my previous post for detailed calculations.

Targeting a "number" is generally a bad idea. A better approach is to use a variable savings rate (VSR) that adapts to the worker's situation, retirement horizon, and portfolio balance every year. See this thread for details: The Variable Savings Rate (VSR) -- an accumulation-time prelude to VPW.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic / international) stocks / domestic (nominal / inflation-indexed) long-term bonds | VCN/VXC/VLB/ZRR

lostdog
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by lostdog » Sat Nov 17, 2018 8:58 am

Most Americans don't have $100,000 by the time they're 60 years old. Bogleheads are rare.

Ever read the anonymous comments at the end of FIRE article on Yahoo or MarketWatch?
Last edited by lostdog on Sat Nov 17, 2018 9:00 am, edited 1 time in total.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by CyclingDuo » Sat Nov 17, 2018 8:59 am

longinvest wrote:
Sat Nov 17, 2018 8:37 am
KlangFool wrote:
Sat Nov 17, 2018 7:41 am
maroon wrote:
Sat Nov 17, 2018 2:11 am
Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.
maroon,

1) At 35K per year, you only need to save 11K in order to save 30+%.

2) At 35K per year, taxes take out closer to 20+% of the gross income.

3) So, at 35K per year, even after saving 11K aka 30+%, the amount of gross income available for spending is around 40% to 50%.

KlangFool
KlangFool,

Such a post can be harmful to young median income members who will be discouraged by the daunting level of savings it calls for.

The reality is that a worker with a 35K salary doesn't need to save 30% of his income and accumulate 1 million dollars to retire with dignity. He only needs between $250,000 and $300,000 at age 65 in addition to his Social Security pension which he'll delay until age 70 to preserve his standard of living in retirement. See my previous post for detailed calculations.

Targeting a "number" is generally a bad idea. A better approach is to use a variable savings rate (VSR) that adapts to the worker's situation, retirement horizon, and portfolio balance every year. See this thread for details: The Variable Savings Rate (VSR) -- an accumulation-time prelude to VPW.
Agree that daunting numbers can indeed scare off young workers and those earning lower salaries. Tossing out figures and statements such as "make sure you max out your 401k and your Roth IRA every year", or "make sure you save 30% of your income" to those on lower salaries could indeed be detrimental. Call it "saving beyond your means".

Klang comes from a culture of super savers...

http://time.com/money/4140460/super-sav ... t-savings/
https://www.moneyunder30.com/percentage ... very-month

...and he has oft stated his goals of saving the equivalent of his annual expenses each year until he hits his number. Nothing wrong with that, but as you point out longinvest - that level of savings is not necessary for everyone and could easily put somebody upside down with regard to their household cash flow.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Cycle
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Cycle » Sat Nov 17, 2018 10:26 am

Retired2013 wrote:
Fri Nov 16, 2018 3:12 pm

I did do some (a lot) day trading in my 401(k). Only used three funds, S&P 500, Stable Value & company stock fund (Dow Stock). A group of us at work would gather together around 3 pm each day. Some employees even called in from NY City to get in on the conversation. We would talk about the current events of the day and were we thought the markets were heading. Each of us would then make our own decision on if we were going to make any change in our 401(k) by 4 pm. We actually competed against each other to see who was obtaining the highest returns. If the company stock moved + or - 5%, most of use would move in or out. My boss actually stayed 100% in company stock. If he was out for a day, he hated it and had to get back in. If the stock price dropped, he would say buying more shares. In the end, most of us in the group left $M.
Over my cubicle wall, there are a few guys that do this, both with the company stock and their 401k. These guys are in their late 50s/early 60s all with financial advisors. 401k has freeze periods, so they really try to get the market timing right. They are high income underaccumulators of wealth.

They never talk about risk or fees or tax loss harvesting, just about what the market is doing.

I'm so lucky to have discovered the 3-fund and BH as I know exactly what I'll be doing in all market situations, as it's written in my IPS.

I feel like a finacial genius when I hear people talk about timing the market. The simple fact that I stay the course will allow me to beat most investors after fees... Especially the market timers.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by KlangFool » Sat Nov 17, 2018 10:47 am

longinvest wrote:
Sat Nov 17, 2018 8:37 am
KlangFool wrote:
Sat Nov 17, 2018 7:41 am
maroon wrote:
Sat Nov 17, 2018 2:11 am
Those of you suggesting to save $22K/year, or 30% of your gross pay, or 1/3 of your salary, etc. - these are great suggestions, but hard to implement at lower income levels. For example, it's hard to save $22K/year when earning $35K/year. I think it's misguided to say people who aren't millionaires (or close to it) by a certain timeframe have made "big" mistakes.
maroon,

1) At 35K per year, you only need to save 11K in order to save 30+%.

2) At 35K per year, taxes take out closer to 20+% of the gross income.

3) So, at 35K per year, even after saving 11K aka 30+%, the amount of gross income available for spending is around 40% to 50%.

KlangFool
KlangFool,

Such a post can be harmful to young median income members who will be discouraged by the daunting level of savings it calls for.

The reality is that a worker with a 35K salary doesn't need to save 30% of his income and accumulate 1 million dollars to retire with dignity.
longinvest,

1) My answer is about saving 30+% of gross income. It has nothing to do with reaching 1 million.

2) I do not believe in saving for retirement. Saving for retirement is only viable for folks that will be fully-employed continuously (30 to 40 years) until retirement age.

3) For FI purposes, the person earning 35K per year and saving 11K per year only need 25X to 33X aka 265K or 363K in order to FI. It is much less than 1 million.

4) For folks that believe they could be fully-employed for 30 to 40 years, they could save a lot less. I am not one of those people.

KlangFool

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by DrivingFun » Sat Nov 17, 2018 10:55 am

goblue100 wrote:
Thu Nov 15, 2018 4:30 pm
That is not that tough.
Not sure what planet you live on, but the one I live on saving $1,800/month for a 21 year old is nearly impossible. Considering they are probably still in college for another year. And when they do get out, most are not going to earning much more than 30-50k/yr, with student loans and other bills.

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