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Who wants to be a millionaire?

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AUTHOR: R Quinn on 7/26/2024

Recently we were visiting one of our sons and his family, include a 13- year old granddaughter.

Out of the blue she stated she didn’t like millionaires. I couldn’t let that go unexplored. 

Why not, I asked. They think they are big deals and they show off.  How do you know a person is a millionaire, I asked. Because they have lots of stuff, fancy cars, and live in big houses. 

My son was afraid of where I was going with this and gave me a look. 

Do you know any millionaires, I asked. No, was the reply. I decided to end it there. I was tempted to say yes you do, but I was afraid where that might lead. 

Spotting a millionaire is not easy, they don’t wear badges or dress in the latest designer clothes. I was at dinner last night with friends. One guy was a electrician- or was. Now he is retired and owns 80 commercial and residential rental properties. 

Given the definition of net worth, I suspect there are far more millionaires than many people assume.   In fact, there are around 22 million millionaires in the United States. 79% of millionaires did not inherit their wealth. 

When a house and retirement savings are included, a net worth of $1,000,000 is not unattainable. Of course the big unknown is debt when considering net worth. 

Being a millionaire – or billionaire- does not mean you have a million in cash or a million to spend, but it may mean you have been around a while to get there. The median age of a millionaire household in the US is 62. 

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Kevin Lynch
3 months ago

R:

That could have been a great teaching moment, however, since she was 13, I am reminded of the saying, “Those convinced against their will, are of the same opinion still.” It’s hard to convince a teenager of almost anything, unless you are a TikTok influencer or a peer.

While the “doubling of a penny a day” is a great example for young people, my favorite is a financial planning piece I first saw in the 1990s that I am sure most HD readers have seen.

It is the IRA Piece showing what happens when one sibling begins investing in an IRA at age 18 and stops at age 28, and the second sibling delays investing in an IRA until age 28, and invests until age 65. As you will recall, the first sibling, who only invested for 10 years, ends up with a greater retirement fund than sibling number two, who invested for 37 years. (I am pretty sure the annual amount back then was $2,000 annually, in the example.)

Either way, she is fortunate to have a loving and understanding grandfather.

Mark Schwartz
3 months ago

Ouch, dare I say your grand daughter is being taught that in school? Where does a 13 year old come up with that statement, most likely she’s heard that somewhere else by someone she respects, maybe one of her teachers. Living paycheck to paycheck is not fun. I hope the youth of today will realize eventually how the real world works.

Richard Hayman
3 months ago

My financial guy saved me from panic more than a few times by keeping to the plan. My portfolio always came back and more in months or years, not decades.

It’s good feeling now knowing it’s virtually impossible to outlive our savings.

One good thing about our getting older is our spending has shrunk by about 2/3 over the past 22 years in retirement. Living in the same house for the past 45 years was key to our plan.

Moving to a CCRC next year with the plan to use our refundable entrance fee to pay our monthly fees should our investments vanish is the second key to feeling good about the next decade or two.

C H
3 months ago

Next time create an opportunity to tell granddaughter that millionairs are not recognised by what they spend but what they keep and invest.

jimwinstongmailcom
3 months ago

I have been a longtime reader of Jonathan Clements and owe much of my present-day solid financial footing to his many WSJ columns that I internalized starting in the mid 90’s. (Thank you, Jon!) When my kids were young and they claimed they witnessed wealth when they saw a fancy car or house, I would paraphrase Jon by saying that you can easily see what someone spent, but what they saved was invisible. That was painfully clear when many mansions in my neighborhood went into foreclosure around 2009. Separately, and not to be looking for nits, but there are more than 22 millionaires in the United States. Dropped word?

Last edited 3 months ago by jimwinstongmailcom
Mark Eckman
3 months ago

Well handled. Money discussions with children can be difficult. Back in the 1990s my 1st grader announced he was quitting school. This persisted for several days and I asked why. He said he didn’t have money for college and wanted to get a job. With a huge grin I told him I would make sure he would have money to go to college. He replied “where are you going to get the money?” I soon found myself in a full financial planning discussion with him. I explained some of our investments and thought that was the end of it. About 2 weeks later, he met me at the door with the newspaper financial section telling me which stocks I should sell.

Nuke Ken
3 months ago
Reply to  Mark Eckman

And what did this young financial prodigy end up majoring in at college?

David Lancaster
3 months ago

I would have explained to her that many people she assumed are millionaires are not Just because someone is in possession of a fancy car/house does not mean they have paid fully for it, ie they don’t really own it.

Olin
3 months ago

You missed a great opportunity to tell her how doubling a penny each day for 30 days would become a million.

Richard Hayman
3 months ago
Reply to  Olin

Doubling a penny daily for a month is $5,368,709.12 for 30 days.

Better to do it in a 31-day month for double the amount.

The power of compounding.

bbbobbins
3 months ago

Surely the point is you almost HAVE to be a millionaire considering all assets/property and NPV of pension/SS to have a degree of comfort in retirement.

If she is 13 in the 50 years to retirement maybe she’ll need $4m to aspire to the same standard. Heck she might need the first $1m in her 20s to buy any sort of home.

Dan Smith
3 months ago

Yep I still refer back to Millionaire Next Door. He drives an old hunk of Detroit Steel, and his favorite beer is a “free” one.
I agree that longevity played a huge part in my getting over the hump.

Rick Connor
3 months ago

Dick, that could have been an interesting teaching moment if your granddaughter was open to it. I remember showing my children the magic of compounding about that age. It is also useful for people to have a feel for how big numbers really are, like the difference between million, billion, and trillion. And you are right on about the role of debt – many big showoffs are sitting on a mountain of debt.

Jonathan Clements
Admin
3 months ago
Reply to  Rick Connor

Showing off is indeed a danger sign. The display of wealth is the mortal enemy of wealth, while true wealth is the money you can’t see.

Nuke Ken
3 months ago

Was attaining $100,000 net worth a culturally recognized milestone in 1965? That’s what a million in today’s dollars would have been worth back then.

Adam Starry
3 months ago
Reply to  Nuke Ken

There are a couple of interesting ways to look at this.

Adjusted for inflation you would have needed ~$9.43 million in 2022 to have the same buying power as $1million in 1961.

CPI Inflation Calculator (bls.gov)

That said in 1961 $1million was 171x the median family income of $5735.
In 2022 $9.43 million was 101x the median family income of $92,750.

Median Family Income in the United States (MEFAINUSA646N) | FRED | St. Louis Fed (stlouisfed.org)

If we take the assumption that one needs 25x of your current income to retire comfortably (4% rule). Then in 1961 the median family would need ~$143 thousand, and the 2022 median family would need $2.3million.

I guess this is a long way of saying $1million isn’t what it used to be. In 1961 it made one quite wealthy. Now it’s a nice sum but not really alot, especially if most of it is tied up in your house.

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