Today we have a special Sunday post.
It’s unique for a few reasons…
First, I usually don’t post on Sundays.
Second, this will be a very short post compared to most of the ones I write.
Third, this post will focus on what you think and why instead of what I think and why. 🙂
To summarize, we are having a very interesting discussion in the Millionaire Money Mentors forums. It started with a general question: “Is $1 million still worth $1 million?” Answer: of course it’s not because of inflation.
But the real question behind this was about wealth and we got into a great discussion with various perspectives.
I don’t want to tell any more than that or otherwise I might influence the responses, so here’s what I’d like for you to do in the comments section below…simply answer the following:
What net worth does someone need to have to be considered rich?
Please give an actual number as well as the reasons why you believe this is the appropriate “rich” level.
There’s no right answer…simply looking for your thoughts and opinions.
Sufficiently rich is no debt + invested asset base of $2 million throwing-off 6% or $120,000/year in cash flow. Plus near cash reserves of $120,000 and a home.
I am 35 and no longer believe $1M is the same $1M it was to my parents. My wife and I are aiming for 3-5M by retirement and are currently at about 1.3M NW. I think 3-5M is the new Million. I have 4 other friends that are 30-35 who have a NW of $1-4M and we all did it with a combination of good jobs and real estate investments. I just know too many other people in their thirties who have $1M to think that it’s anything special. None of us feel like we’re rich or even talk about how much money we have. We all just feel that we need more and we keep grinding.
Totally agree. My husband and I are both over 60. He’s 67 a Dr. and still working. I’m 62 retired but doing deliveries and volunteering. We have $2 million plus saved/invested and are shooting for $3m in the next few years. We also have at least $400 – $500k in our primary home when eventually sell.
I like to define rich and wealthy separately. I feel rich is someone with a high income, but maybe not much net worth – they better keep their day job. Wealth, however, is the ability to sustain your current lifestyle without having to work. With those defi ng options in mind, wealth really becomes an individual thing, but to answer the question, I feel one needs a minimum of 2-3M net worth (not including equity in residence) to retire today. In another 5 – 10 years it’s going to be a different story. But that is a minimum. 3-5M would provide a much better quality of retirement. Of course, if one has additional cash flow, from perhaps a pension, real estate, etc., then 2-3 M looks significantly better.
I like this definition of ‘rich’ vs ‘wealthy.
🙂
I also like this.
Being RICH is like beauty, it is in the eye of the beholder. To those who struggle with the dream of becoming wealthy, the person down the street, who exhibits many possessions, is considered rich, even though they have there in consideration of what is being rich. In my way of thinking., being rich, is having the resources available to maintain my lifestyle as long as time permits . Having two pensions, plus social security provides the financials needed for a comfortable retirement life that I enjoy, and worked over 42 years to achieve. This gives me the feeling of being rich, compared to many others. Having to put a number on it is extremely difficult. But if necessary, $100k in cash, and investments, was my goal to becoming rich in my lifetime. Having $55K yearly pension benefits and lifetime health benefits ensures my standard of living to continue with little worry. I’m RICH, in my opinion.
I agree with your sentiments Bernd.
I would say having even a 100k in NET WORTH, and enough cash reserves to cover revolving debt, is rich in any corner of this world where at least a third of us live in abject poverty. And that’s putting it mildly.
2 X what you currently have = rich
Yes, this. I think for many, 2-3x what you have or hope to have will be what you might equate to “rich.” Of course its all perspective and becomes a bit of a moving target. I would bet that very few people think of themselves as rich. Fortunate, comfortable, perhaps even well-off, but rich, I don’t think many people, even those is FIRE success think of themselves that way.
It depends upon your spending level & the point where wage income is longer required to meet spending. This can be lower than many expect because you can buy a SPIA at 70 to cover income for the rest of your life. So if you add the delta between our expenses ($100k) & expected SSI payments ($75k), I can buy a joint SPIA for $330k today. I am going to want to work until at least 70, so I can earn at least 50% of expenses via work, so it will require an additional $650k so a total of $1 million declining each year until 70 when it will require $350k.
For a minimum target I would say $2 million net worth.
I think that rich should include being free of a mortgage or other major debt regardless of NW.
The cost of living in your area is also a factor.
A more general response is enough investments and other income, including distributions from retirement accounts, to cover your expenses if you decide to stop working. That number will vary based on each situation.
I would say to be rich, versus well-off, about $7 million in net worth around age 56-60. This allows someone to take about 1 million and just go have fun for the next 10 years etc. with no real threat of adversely impacting their net worth base.
7 million is certainly not private jet level rich – but a level that should isolate the family from most money worries so long as they don’t try and act big league.
What does it profit a man if he gains the whole world, but loses his soul? Matt. 16:26; Mark 8:36
“Rich” to me is enough to take care of oneself and one’s family, and assure that you or none of those closest to you become a financial burden to others (family members or society), and strive to have plenty left over to accomplish good and help others. What that really means is life long control of the S of ESI, so there always remains some I even when E slows down or stops. Relatively little is needed to cover actual “needs,” but no amount of money is enough to keep doing the most amount of good — except generosity and a lose hold on your pocketbook.
And I say all of this as a continuing personal goal, not a personal accomplishment.
To me “rich” is a mixture of income and wealth that creates generous expenditure options and independence (at least at an earlier age than most) from having to work. There are a lot of combos of income and net worth that can achieve that. Maybe 10x wage income + investments and savings minus all debt > $5 million does it. So person earning $400k a year in wages with a million in the net worth gets there. Or a person with $200k in wages and $3m in net worth. Or a retired person with $5m in net worth. All seem “rich” to me for different reasons.
“You must / are rich”…. Usually comes from someone that has less than you. The type of car, the size of house, the vacation…all materialistic .
For me, “Rich” is what you give back that no one ever see’s.
So based on a number, I guess I am not rich (4M),
But I am happy.
Reading some of the replies it seems like it is not necessarily a ‘Net Worth’ answer as a lot of retirees have pensions from business or gov’t employment that actually do not increase their actual net worth (since pensions are non-owned assets), but makes for steady solid income and lifetime cash flow, but would end at death, much like social security would not change one’s net worth but would certainly be enjoyed after age 62;
So my answer would be sufficient cash flow or assets to generate income to live the way (lifestyle) you desire; our life is self-funded from work/savings/IRAs/real estate, IE no pensions, so for my wife and me we set that number at $5 mil and began to give to charity assets above that amount. We can easily generate our needed with the assets we own, mainly stock market currently with some real estate.
There’s the old saying “two ways to be rich: have a lot, or not want a lot”. But to answer your Q, I think the number is enough to have $10,000/mos in retirement income COLA into perpetuity. Between my pension, SS and savings, I will meet this mark and then some. So I am wealthy. If you want a fixed number, I think $2.5M is the new $1M.
What does it profit a man if he gains the whole world, but loses his soul? Matt. 16:26; Mark 8:36
1. A peaceful soul.
2. A giving attitude.
3. Your heart leans towards keeping your hands open….
4. Great health.
10. As far as a monetary figure, you don’t need much in your portfolio if you have set up your financial plan to provide more than you spend….
A. 2 pensions
B. 2 annuities
C. 2 SS that we don’t draw yet.
The above will provide more than $86K without touching our $1M+ investment portfolio. No debts certainly provides the security to allow deep sleeps. 🙂 We are NOT big spenders. Personal Capital states we won’t have to draw down on any of our assets until 72. We save now and are not working for pay in any manner.
Giving to others will increase your self esteem. Could be your time or talents or funds. Heartily recommend all of you try it….and increase it if it is bringing your hearts the joy it does to ours. God speed all of you.
Heartily agree about giving to others. We not only give to charities but go to downtown Portland (Oregon) to bless the homeless.
I still believe $1 mil net worth is an appropriate figure for “rich”. It’s an achievable goal for almost anyone that has a job and the ability to save regularly for a long period of time. It’s also an amount that most could live on IF they adjusted their assets,liabilities and expectations when they retire. For most of of the civilized world, they would do backflips to have a million in net worth.
For me what I want is a passive income to throw off about $150k/yr in today’s dollars in perpetuity and that would make me feel rich/wealthy.
I believe $3M today is entry level for being rich.
Rich to me is spending what you want without ANY concern for cost. That would take at least 10M for my type of living. More realistically 5-6M is pretty close. Another factor in the US is health insurance or costs, so you can say that a person who is not worried about these is rich.
To me, “rich” is a state of mind and a lifestyle. Whatever net worth number that allows you to feel secure, generally comfortable and enjoying your life is pretty close, in my mind. I’ve met quite a few folks with 8 and 9 figure net worth who are simply miserable on most days; many times due to their insatiable quest to obtain more and more, and then at some point realizing that they missed out on a lot of other things in the process. I’ve also met many folks who are living on small or no pensions and social security who are among the most content. At the end of the day, “rich” is about what you do with what you have.
Agreed.
After reading “Your Money or Your Life” in the late 1970s, I calculated that we needed $4 million to be rich by retirement. I couldn’t envision how we would amass that much. Four years ago, our financial advisor ran projections and told us we were financially set, and I still had fears of being a bag lady. Now at ages 66 and 67, we have over $5 million, are semi-retired, and have not drawn from IRAs or SS. I think we’re are rich now.
I believe your lifestyle dictates how rich one feels. I feel RICH with $1.3m. I am 62, single, no kids, no debt and live what some people would define as a simple lifestyle, but I’m super happy. I have a nice home, but it’s not my dream home and I have a 3 year old car, but it’s not one of the popular luxury cars. I travel, I eat out a lot at nice restaurants and I buy pretty much what I want because
I’m rich and I can!! 😀
Ditto for me. I am RICH at 67 single, no debt with $1.2 million. I am receiving Social Security. I have 3 adult children who live independently. I am living in my dream home which might be modest to some in a low cost of living city. I can go where I choose and buy what I want. I am also able to give to my favorite charities.
10 million is beginning of rich. 1-5 million middle class, 5-10 million is upper middle class. Less than 1 million lower middle class.100 million starting of filthy rich and wealthy.
You nailed it!
I’d go with $5 million to land in the rich category. This is enough to enable $200K annual withdrawal at 4% of assets, leaving 4% for inflation/growth, presuming an annualized 8% return. Monte Carlo simulation with 90% stocks/10% cash gives an 80% chance for your savings to last 50 years (which should be more than enough). Plus this is enough that if needed/wanted you can withdraw more for emergencies/special occasions without really damaging your long term prospects.
As I think about it more, the number for being rich really ties to financial independence. When I have enough wealth that any work I do is on my terms, I think I’m rich. Not there yet, but have my eye on the prize. . .
To keep as short as possible
Goal: No work necessary and enough money to provide top 10% American income annually until mid 80’s
Outcome: Anywhere from 2.0 to 2.2M of invested liquid assets depending on your current age (30 to 50)
Items to consider:
Passive income streams could reduce above
Assume withdrawals are taxable
One could argue figures are lower if you owe nothing on house given that is essentially an income increase but I took position you’d find other avenues to spend.
$5 million and a house.
I guess it depends on the person. I got to over 1 million net worth last year and realize after reading some of these comments that perhaps that is not “enough” but for me, it gives me great peace of mind and feels like plenty. I don’t have a mortgage, some other smaller debts, and live very simply. I don’t need much to be happy.
I think that’s the key, some people retire with very little savings and live on SS or a small pension and seem very happy and others like to live a bit bigger, take lots of trips and have many hobbies. The reality is that all money does at the end of the day gives you more choices with how you want to spend your life.
For me, money also means very little if you don’t have your health and happiness. I see many people my age (56) and older that are still grinding and can barely walk or have many health issues, so what difference does it make if you have a bunch of money squirreled away and can’t do anything because you don’t have your health?
Steven Junko and Dan hit it out of the park quoting the book of Matthew.
My father would say in the 70s that health is wealth and people laughed at him. Especially after the Covid pandemic, people aren’t laughing anymore about health are they?
If you don’t have your health what good is all the money in the world? If you don’t have your health you can’t work, take care of your family, or even enjoy all the money you worked so hard to earn.
One thing that troubles me in many of the millionaire interviews is that so few give to charity or serve in their communities in volunteering or at places of worship or in other places where they could prove useful. Serving others should be synonymous with breathing.
That all being said as a personal health and spiritual view, the Bible also adds that a wise and prudent man sees trouble ahead and takes precautions. So do your financial research, start investing early, live beneath your means, and live a life filled with prosperity, joy, good health, and abundance.
Ted from Phoenix
Since rich is relative, the only accurate way to define it is by comparison to the entire population. In the US a one million dollar net worth puts you in the top 5% of the population in terms of wealth. Being in the top 5%, logically, is the best definition of rich. That feels low to me, I have much more than that and I don’t feel rich. But it’s probably pretty close to the right number.
Rich is a relative term as everyone has stated here. To me, rich is having the time and money to do what you want when you want it. It doesn’t matter what others think quite honestly. This is the reason I outlined in my Retire Early #19 interview and how and when I achieved it in 2017 at 54.
Wealthy vs “Rich” is very different.
2 definitions for me:
1. 2-3x what you have or plan to have, so ~ $10-15M
2. Enough to spend frivolously without consequences … yachts, mtn homes, baseball teams, etc … so $B’s
In financial terms, if you wanted to define “rich” as being in the top 1% of Americans, you would need net worth in excess of $10 million, or annual household income in excess of $500k.
Why do people target wealth? Most want it for the opportunities that it creates: pleasurable experiences (travel abroad, fine-dining, lavish hotels, etc.), acquisition of other assets, ability to provide for others generously, and as a kind of security blanket. The reality is that death transitions us from material wealth to wealth of the afterlife. You become worth $0 at the time of death and a transfer of assets flows to others. While not all of us are able to become millionaires, all of us have access and the opportunity to love and know God and that engendered infinite wealth in heaven.
As a millionaire, I think feeling rich (materially) is not a binary experience, but a more nuanced, partial type of emotion. Do I feel rich with a NW around 2 million? A little. Will I feel more rich at 10 million. Probably a bit more. But even then it will remain elusive and I’m sure my flesh will desire more. Our bodies were designed to pursue things infinite that only one thing can satisfy.
I’d like to reiterate the great quotes above:
“What does it profit a man if he gains the whole world, but loses his soul? Matt. 16:26; Mark 8:36”
That type of wealth is infinite.
Like.
M nailed it.
Yes. A crass definition of rich could be that you are never constrained by the cost of anything – you can have or do whatever you want. But what about living a life rich in meaning?
Possessions turn into burdens that need to be polished, stored, insured and maintained in many ways. So you hire people to do that for you and on and on it goes.
I generally prefer to think about what amount will allow me to sleep well at night and pursue a life of meaning. For me and my husband that number is 4 million dollars.
$7M with 4-5% in annual returns.
Context:
Family of 6 in NYC tri state area with annual expenses in excess of $180k per year (and that’s with spending on necessities).
Great question and very insightful comments. Here’s my take on what’s it take to be rich:
Good health since without it everything else is irrelevant.
No debt (mortgage, credit cards, etc.).
Passive income to meet ALL your expenses.
Cash equal to 3-6 months living expenses (pillow money because you never know…)
Pre-paid health care (medicare in our case).
Investment accounts “growing” for legacy purposes.
No financial stress.
Everyone is different, but I put it at 2 million +.
Completely agree with your criteria. My number is higher at $5 million with exactly everything else you said.
Also agree with this one.
Great comments embedded above about 1) Health! 2) the often overlooked concept of Net Present Value of passive income & 3) baseline expenses. (I’ve noticed significant variation in both expense and wealth accounting on our ESI interviews 🙂 )
My personal definition of “millionaire” follows the simple concept of secure income + legacy.
A) “Paychecks + Playchecks” = passive income sources that are 2x reasonable inflation adjusted baseline expenses(those expenses including risk shifting insurances=health, property, LTC etc).
B) Legacy = combined additional Asset net worth of $1-2M when passive kicks in that perpetually grows at your own risk adjusted SWAN rate/investment mix.
Income needs are highly sensitive to whatever spot on the planet you want to call home, but you’re likely a NPV millionaire several times over if you have only A). Tokyo & San Jose is not Tulsa which is not Panama which is not Thailand.
Legacy Asset NW B) functions as further insurance to A) and future giving combination of planned inheritances + “legacy make the world a better place” desires.
ESI you said I had to go with 1 number, I’ll go with $2M Asset/Legacy because I think that’s what you’re really asking for with a number.
BTW I found some inflation data and cool graph for us numbers people at https://smartasset.com/investing/inflation-calculator#vh1kvu43Ia
1991 1M=~2M today
In terms of financial wealth, to me rich means enough to be able to CHOOSE to work for purposes other than money but still be:
1- debt free and secure in basic needs (food, housing, clothing, healthcare, iPhone 12 Pro Max)
2- generous with family, friends (don’t want to be the one avoiding pulling out the credit card after dinner) and charity (for many a precursor to happiness)..
3- fully satisfied without wanting for much beyond financial security/simplicity (don’t be held hostage to the bombardment of commercials pulling your emotional strings, or that Google marketing strategy aiming to take control from you over your spending habits).
4- financially secure enough such that you can maintain your lifestyle with a nest egg that produces annual income to sustain you for life ideally at a <3-4% withdrawal rate
5- able to provide a reasonable inheritance your kids
6- able to safely cover average expected healthcare costs in retirement (about $250k/couple)
7- able to reasonably cover some surprise expenses (ie new roof, bank of mom and dad, legal problem, etc.)
8- able to travel as desired, perhaps 4-8 weeks/year probably optimal for most retirees
9- able to and hopefully still willing to keep up date night! (why not use finances to reinforce valued relationships)
10- able to lounge/walk at a crystal clear white sand beach with a good book, a cooler and a good Cuban sandwich, your favorite tunes AND not waste any time in the moment needing to concern oneself with finances.
SS/pensions are excluded for purpose of simplicity but can be used to subtract from the size of the nest egg needed. I would pin the number somewhere around $5M for a couple that had the average 2-3 children (not nonuplets: https://www.npr.org/2021/05/06/994244064/nonuplets-woman-from-mali-gives-birth-to-9-babies) and expecting average longevity, or $3-4M if single/widow, at full retirement age in today's dollars, and an extra $1M ($600K if single) for every 5 years of early retirement. So retiring 10 years early pegs the number at $7M for a couple – living expenses for an extra decade is expensive especially if you had children likely still in need of some financial support. This projection also presumes living in the US MCOLA. I'd add 20% for HCOL/VHCOL and subtract 20% for LCOL (all you expats living it up in Costa Rica).
These projections also assume you still have to pay taxes on the withdrawals (ie. IRA/401(k), real estate asset sale and tax rates remain similar to today's, About 20% less if the funds are mainly in taxable accounts upon which taxes have already been paid.
For the FIRE crowd out there, this projection would put a couple in MCOL at $9M if retiring 20 years early, $11M in HCOL and $7M in sunny Mexico while fulfilling my criteria above for basic needs, happiness and stability.
Bottom line is if you go out on a limb an put out a number, there have to be a lot of stipulations around it. For example, someone with a 40 year life expectancy in retirement has clearly different circumstances from someone with a much reduced life expectancy. Having children later in life can also put a kink in your financial trajectory, etc.
All that being said, being rich is defined differently by people, often not measured by finances. Some need a lot less money but are grateful for their health, abilities and family. For others with skewed priorities, it will indeed always be 2x where you are at. From what I've seen and read extreme wealth is not a shelter from divorce, depression, suicide, tragedy, addiction, chaos and other vices.
Abundance always come from the almighty God, not from a brokerage statement. Remember that if you don't achieve your target number and learn what really matters to you versus what society prioritizes for you.
$7 mil for MCOL area retiring at 57? What areas would you consider MCOL? 3% on $7mil is $210k pre-tax and maybe $150k post-tax in today’s dollars. Seems a little high in my opinion especially if you factor in SS at 67 or 70.
Thanks Stan for the feedback.
I did say in my post to subtract out the value of SS from the “rich” number. For most millionaires here, that is about $1M over their retirement lifetime, or $2M/couple so that brings, at 57, the number down to a $5M “nest egg” for ME to feel “rich”.
Also, my calculation here is not a FI number. It’s a feel “rich” number given the topic of the thread, so a “little high” is the expectation where one can feel free to spend and manage unexpected expenses without worry. There are many that live on a <$1M nest egg, but financially speaking they are as a group less likely to feel rich/secure. At 57, it is not unusual for healthy people this day and age to live into their 90's. Financial advisors say to plan to 100 even though there is a low likelihood to live to that age to minimize poverty risk in the latest years.
I also factor in SORR in my though process. A 50% market correction can take one from FI to 1/2FI quickly. 2x FI therefore logically gives a cushion from worry to help one feel rich.
Remember, this is just my subjective opinion due to my own personal preferences and circumstances. I like my current level of charity. My commercial RE expenses alone easily exceed $100K/year and I want to keep these income producing properties in retirement. I would like my kids to be debt free upon completion of graduate school. I also don't want them to go into wedding debt, want to assist with first homes and if they start businesses. I would like to contribute financially to eventual grandchildren. That's what makes this my "rich" number. For someone with different goals that number can be very different, hence the variability in responses shaped by circumstances. I have healthy net worth 20 years short of retirement but with that also comes a lot of expenses (business, RE, tax bracket, etc.), so my "rich" number is skewed to the higher end probably.
I identify with your thought process and agree with your algebra.
I agree with your earmark for education. Stepping back now at 44 and looking at the opportunities I had in my life relative to my parents, education made all the difference. I couldn’t feel “rich” without being able to provide that for my children (and, hopefully, grandchildren).
M-119 I agree with you here. My goal would be to have the net worth spin off enough income as to avoid the 3-4% drawdown each year on the principal.
My net worth is largely in income producing real estate so I’d probably be able to avoid a sell off or draw-down on my market accounts.
You’re spot on here though.
Not to be too controversial here (though somehow I do think it was part of ESI original intent, to see the back and forth), I have about $10M Net Worth (investable), under 50 yrs old, with a family. Good paying executive work. My wife and I do not feel rich. Extremely grateful and appreciative of our situation. However we do not feel rich. We still really think over smaller over purchases and don’t live lavish lifestyle etc… We know we could do a bit more, but when we see how some “rich” lifestyles are, we could not do that, we don’t believe. All choices (expenses) over time can have consequences. We don’t have enough that it can’t get depleted if we went really crazy…
there are others that are really rich, that unless they are buying Islands and personal planes and truly ridiculous items, there is just no reasonable way for them to deplete.
Not to mention the income off of their investments is MASSIVE, more than my NW…
I don’t know the number, we are so happy and fortunate and WE KNOW IT, but don’t believe to be “financially Rich”.. though I went through the cycles that all go through, i thought it was 1M, then 2M, then 4M then 6.5M then 8M.. I thought then 10M since double digit.. haha, there is always a higher one…
So in summary, ‘who cares’, really ‘who cares’ the numbers, we should optimize our own reality and situation and make the most of it. This is why I enjoy ESI, all levels of incomes and NW can share and gain something.
Sorry for long post, i don’t write much but it’s Sunday, I had a few min, and peaked my interest to respond.
Being rich today to me means having enough money to not work and maintain ones preferred lifestyle indefinitely, adjusted for the cost of living where one chooses to live.
So if you want to spend $100,000/ year to maintain your lifestyle, you need more than $2 million assuming a 5% annual return (the “more” due to inflation). But that $100k goes much further in Kansas or Alabama than Silicon Valley or NYC. So I would think it would be more like $4 million to maintain the same lifestyle in the high cost areas.
Of course this assumes zero non-portfolio income. So if you have a pension or side hustle or SS or whatever of $100,000 (in this example) without a regular “job” and your costs are the same, in my definition you are rich! Many people (like me) have both non- portfolio and portfolio income (and potentially drawdown).
So someone in my definition would be rich with $100k in non-portfolio income, and $2 million in invested assets if they have $200,000 in desired lifestyle costs.
I call it the Lottery Test. What amount of money, if it appeared in your bank account, and was yours to keep, would you just retire on instantly? In the 70s that may have well been $1M. But today that would just accelerate retirement, but for many people in these forums would not change their day to day life very much.
Assuming home paid off, no debt, conservative 5-7% returns, desire for $150K life in retirement, comes to $2.5M on the dot. So for me $2.5M is the new $1M where if Lottery Test happened I’d just be done.
$ 6,000,000 Threshold.
– This is predicated on a rule I have always had that my income (active or passive ) was at the most , 7% of my net worth. So I backed in the numbers.
– This would allow for a $420k passive income. (Preferably through real estate cashflow and a small amount from the market )
– This is the amount of threshold income I’d need to: 1. Pay Bills – 2. Contribute to SEP – 3. Pay taxes – 4. Have $200k of float to invest each year.
-Eliminating debt is not a factor. Cheap debt is critical given the likelihood of inflationary years ahead.
– Could still qualify for bank loans at this level.
– Could continue to create generational wealth for my family. I’m not spending-down my core net worth – rather I’m continuing to build it.
Again this is my minimum number for me to consider myself wealthy or “rich”.
Really like the question and the responses.
Lots of great comments here.
I was born in 1963. If I use http://www.usinflationcalculator.com it tells me that $1,000,000 then is worth $8,727,254.90 today. I finished school in 1981 & it tells me that $1,000,000 then would be worth $2,937,887.79 today. I prefer to use the 2nd number as it is when I was done with school & able to start working and thus being able to earn, save and invest.
But, whichever number you use, $1M USD is definitely not nearly what it was and has far from having the purchasing power that it used to.
People seem to have really high numbers based upon the assumption that you have to have assets generating returns for retirement income. If you use a SPIA at 70 or in your 70s the need for much of these assets disappears (as you can buy mortality credits which result in 8%+ guaranteed income for the rest of your life). You will also have SS by then also. Then you can give the assets away while your alive which will lower you taxable income to lower tax brackets. The gov’t gives everyone a huge incentive give money away when you are alive (like a 30%+ match). In most years, this can erase up to 60% of your taxable income. For this year its 100%.
I don’t disagree with the SPIA approach for certain people. One of my businesses sells SPIAs and they certainly have their first place – another spoke in the much larger wheel. Permanent life insurance and infinite banking works well too. All spokes. Great point.
Blog article on the subject:
https://ofdollarsanddata.com/is-1-million-still-worth-1-million/
“…the plot of what someone considers rich against net worth also has a positively sloped fit line, suggesting that richer people think you need even more money to be considered rich than relatively poorer people:
(See blog article for graphic)
This plot is interesting because we can see the large mass of people that believe you need $5 million or $10 million (or more) to be considered rich.”
Rich is relative. I would consider Rich in an American context to mean one is able to comfortably keep pace with the top 1% or maybe top 5%. That means things like:
Multiple upscale homes in upscale neighborhoods.
Travel first class without worrying about the cost
Lots of paid help and staff
Ability to comfortably pay full freight for exclusive services like private schools, universities, and clubs.
Ability to waste lots of money (full gut kitchen remodels because the last one was “dated” etc.)
I would expect one needs a minimum net worth in the $5 million range, or minimum annual income in the $500,000 range to live like that.
Wealthy is:
Being healthy
Spending unlimited time with your kids
0 debt
10 million net worth
Healthcare is a big deterrent to wealth.
Everyone is just 1 hospital admission away from poverty .
I am 46 years old and plan to work as long as I can for employer sponsored health care.
I agree healthcare is a huge issue in the Us – it is both expensive and outcomes are not very good.
I suggest you Max out contributions to an HSA, then you will be able to someday get a high deductible health plan for not too much $$ every month and be insulated from a huge healthcare bill. Dont work forever just for health insurance.
$50 million USD
When I can afford to have a multi family office, travel by shared pvt plane
That will be when I feel rich
When we have what we need, we want for nothing…rich!
I would say $2-3 million depending on your spending levels. As many other responders mentioned, it really is about your mindset and your outlook on life and your beliefs.
Be fit and healthy.
Paid off house or Equivalent.
3 M to manage living expenses, travel, hobbies
2 M cushion for uncertainties
Unlimited time for you to do what you like. Example on hobbies, family and kids
Enough to pass on to the next generation.
So in total $ term today it is $5.5 M.
use an inflation calculator online to see how many millions it takes today to equal a mil in any other year. I have a net 6mm but about 5 mm is real estate. I heard that everyone thinks twice what they have would be rich. 9.6 mm today is about equal to what 1mm was worth when I was born 1958. I do not feel rich but I feel financially secure.
768k invested is likely to cover my family’s cashflow needs in perpetuity. I hit Coast Fi based on these metrics and now spend much time with the family (3 children). This planned path of time emphasis is a wealth few enjoy and a willingness to recognize enough is key.
Under 40 and retirement likely assured discounting all other sources of income should another penny never be contributed: Wealth of reduced stress and increased wellbeing.
I am working on building a business that will likely pay mostly hands-off distributions comparable to a 1.25m portfolio within a few years: Placing safety net 2 into place that is disassociated with Coast Fi’s investment net and allows for effective Fat Fi at 2x the current lifestyle spend. This is Rich upon attainment.
What is wealth? The ability to cover one’s living needs and wants in a low stress and planned managed manner.
What is rich? Having wealth obtained and an abundance of cashflow in excess of lifestyle.
It’s all relative…not my relatives. 😁 But I’ll select a FAT FIRE of 40X+ would make you feel good. That and good health.
$2 to $4 million depending upon your age. A 30 year old with $2 million seems far richer to me than a 65 year old with $2 million.
Depends on pensions and other payments you will receive throughout retirement. $10 million puts you at a level I would consider “rich”.
So, wading through the comments above makes me wonder why would we need a net worth of the top 2% or more of the United States to be considered “rich” . Approximately anything above $6 million net worth is in the top 2% in the USA. Are we just putting ourselves under undue pressure to gain more and more throughout our lives just to prove that we are rich? Or do we need to look at our core values and our objectives in life including spending lifestyle to say – “I have enough now” “I now need to see how I give back to the world” that in itself is richness in way.
Having said that for a couple in retirement today a starting nest egg of $4 million invested wisely is plenty enough to live a very very comfortable life in almost ALL parts/towns in the USA until 100 years of age. Good luck to all of you and your dreams to achieve your goals. God Bless……And to use the oft quoted famous cliche phrase we all here on this forum will “likely run out of time before we run out of money”………
My 60 year old husband says 10 million
My 22 year old daughter says 5 million
I (54 years old) say 40 million….this buys beach front property in Southern California, more than generous charity contributions and plenty of vacations.
$421,000 is currently the annual income you need to be a top 1% earner in the USA. Using the 4% guideline, that means roughly $10.5M. Since much of the investment income will be taxed less than an earned income of $421k, let’s call it $8M.
That said, we have approximately $6.5M, are retired at 54 and are very comfortable, but I would not call us rich.
Good math / reasoning here Scott.
We are same age / same net worth and I’m right with you. I don’t feel wealthy.
I think ‘rich’ means different things to different people and depending on the definition of ‘rich’ you’ll get different answers (and many comments point to the different definitions of ‘rich’).
For the definition of ‘rich’ that means ‘I can buy anything I want, whenever I want’: While it depends on how much you ‘want’, I’d argue for this definition you’d need to be a billionaire.
For the definition of ‘rich’ that means ‘I’ve got a lot of money’: I’d say $3M (only because you specifically asked for a number). For that amount of money, you could buy a decent home in any city and live relatively comfortably.
‘Feeling rich’ has to do with what you want and who you compare yourself to, so it’s too subjective. Multi-millionaires can easily ‘feel not rich’ in a HCOL area. But just because they don’t ‘feel’ rich, doesn’t mean they aren’t.
I’d be curious which definition of ‘rich’ most people are thinking of when they use the word.
To me:
“Wealthy” is something quantifiable, such as net worth in the top 10, 5, 1, 0.1%tile etc.
“Rich” is relative and more dependent on your peer group. If you are making or worth 2 standard deviations above your peers, you probably feel “rich.” Or at least your peers will think you are!
2-3M doing well
4-5M feeling real good, wealthy
6-10M very wealthy
$10-20M super wealthy
$20M+ rich
$100M+ very very rich
$500M+ mega rich
Of course there are 100 other important variables.
I would suggest that rich is around $50m-100m.an amount that that isn’t achieved by just working hard and saving but is more unique. Most folks could get to $10m over a work career, so it should be higher than that.
Rich to me is also when you can pay to have difficult problems resolved without them cutting into your wealth. For instance, sometimes things don’t get resolved through normal application processes. They require lobbying or hiring specialists especially medical and tax.
You ask an interesting question, what net worth does someone need to have in order to be considered rich. One of my best friends had accumulated more than $7 million by age 54 and some may have considered him rich. Unfortunately, he was diagnosed with a rare cancer and died in less than 6 months. In the preceding 5 years, he kept saying he just needed to work for one more year in order to hit a number that would enable him to retire and do the things he always wanted to. He was so happy to show me the Ferrari he purchased 6 months before he was diagnosed, but it was the first thing he sold when he was diagnosed with cancer.
My mother- and father-in-law passed away in the past 18 months because of cancer and they had a net worth of almost $10 million and they were both under the age of 80. My own parents who are in their eighties and healthy celebrated their 60th wedding anniversary this year with 100 family members present and have a net worth of $600 k. Even though both my parents-in-law had a deep faith I know that they would rather be healthy and see their children and grandchildren continue to grow and develop.
My lessons from these observations are that net worth is not just a dollar number that is calculated on the assets we accumulate in life but also has to integrate your future potential and your current state of health (mental, physical and spiritual).
The mistake many of us make is to focus on the things that are easily measured – our net worth calculated on a spreadsheet. That focus leads us to work harder and longer and forego the exercise, self-reflection, friendships, family, and faith that make the tapestry of life full and meaningful.
Ozzie,
I just want to say thank you for posting such a thought-provoking and profound reply. It really puts things in perspective.
Again, many thanks.
I’d think $3m of investment assets throwing off 5% per year in passive income should qualify as “rich”. That’s $150k of income from your investments without touching the principal.
That said, I’d think this qualifies more under the “wealthy” moniker because it involves planning and intentional actions to build this type of passive income. Rich connotes money in a bank account or earning a high income from working in my mind.