Pity The Rich
The rich have it so bad these days. People say mean things about them and Congress almost raised their taxes a little bit. That would really cut into the caviar budget. A new survey shows that most wealthy people don’t feel wealthy:
A million dollars ain’t what it used to be. More than four out of ten American millionaires say they do not feel rich. Indeed many would need to have at least $7.5 million in order to feel they were truly rich, according to a Fidelity Investments survey.
Some 42 percent of the more than 1,000 millionaires surveyed by Fidelity said they did not feel wealthy. Respondents had at least $1 million in investable assets, excluding any real estate or retirement accounts.
“Every person in the survey is wealthy,” said Sanjiv Mirchandani, president of National Financial, a unit of Fidelity. “But they are still worried about outliving their assets.”
Perhaps they’ve been watching too much Glenn Beck. Perhaps this disconnect between reality for the rich and the non-rich is why our policies have been so weighted towards the rich. The wealthy think they’re just getting by on their measly $3M and really have no idea of what regular people experience. But they think they do.
Tags: class warfare, taxes
I am a bit worried about posting this, but here goes… please be gentle
My day job is as a financial advisor. I have clients with $200,000 who feel wealthy and those with $1.2 million who do not, and they are both right.
A quick rule of thumb is that if you retire with $X in the bank, you can live on 5% of $X per year during retirement.
If a dual-income couple has $1.2 million at retirement, this means that they can have about $60,000 per year (pre-tax) of income from their investments. Given the current worries over Social Security, they may look at the $60,000 as their only dependable income stream, and it may well be significantly less than they had been bringing in with two incomes. As such, they correctly do not feel wealthy, as they are not certain that they will not run out of money during their lives.
A widow or widower with $200,000 in the bank, but whose income needs are met with a $20,000 state pension and Social Security benefits of $15,000 per year, whose house and cars are paid off, and who is used to living on a salary of $35,000 a year (when there was a mortgage), may feel wealthy, as their spending needs are met WITHOUT touching the $200,000.
‘Wealthy’ may more properly be considered the lack of financial worries, rather than ‘better off than most.’ $1 million in the bank today doesn’t eliminate financial worries.
Please note that I am a staunch supporter of fair (progressive) taxation, and those with more income paying a higher percentage of it in taxes to support our society.
I am noting that there is a temptation to use the label ‘millionaires’ to create an ‘us versus them’ environment.
Times have changed. When I graduated college in the early 1980s, $25,000 was a very good starting salary, and $1 million in retirement assets could have provided a comfortable retirement for most Americans. $1 million in the early 1980s is likely worth about $500,000 or so now, and yet the label ‘millionaires’ doesn’t adjust to this fact.
We are all a bit careless with the term “millionaire.” Technically a millionaire is someone whose net worth is $1 million. If you have a big house and a 401(k) that have been appreciating for a while, you might already be a millionaire or darn close. but not even be in the highest tax bracket.
But I think when we are talking about taxation of millionaires, we are talking about people with incomes of $1 million regardless of net worth. In the US we tax income, not net worth.
interesting. I see your point in that if someone has been living on X for a certain amount of time, they would want to continue that lifestyle. Especially if they have multiple house and car payments as a result of that lifestyle. That said, there are many many many more people used to a much smaller X, and “cutting back” for them may mean 2 meals a day, or half doses of medicine. The guy with 1,000,000 in the bank who’s retirement plan was cut from 50,000 a year to 25,000 can deal with it. He will still be able to afford a decent retirement…. maybe not in Rittenhouse Sq, but that’s what shared sacrifice is.
Some may not feel rich, but much more people dont even feel secure.
sell your Jag, buy an Audi….. get over it.
I disagree Ben, a million banked by retirement, especially for a working couple, is a very reasonable and conservative amount. In fact, if they only have a million banked, they were either high income earners who squandered the money on extraneous mishmash of the fabled American dream, or they were working class shmucks earning the equivalent of under $100k/couple who were frugal with their spending, wise in their investments, and reasonably sure they would live to retire. Although a little luck never hurts either.
thats a million, plus (WildAssGuess) of 25k a year in retirement pension (for one person) if you retire at 60 that million in the bank will pay you an additional 25k a year if you live till you’re 100. That is 50k a year for one person who, one would assume has reitred because the house and cars are paid off. That’s not bad. It’s certainly better than the 68 year old who is still working a factory job because their retirement was fucked up in order to make sure the first guy can take a cruise a year.
perhaps my numbers may be a little low. maybe 2million in the bank with a yearly income on 50k would be the point where they need to stop bitching and pull their weight. Im used to taking care of my needs and bills, and am able to save some on less thank 40k a year (between 2 jobs) so i dont really care to hear about any gripes from suburbanites in Mcmansions who feel like they have all their money only because of themselves and owe nothing to the workers who made their company, or the community that supported their business, or the country they live in that allows them to have a Hummer and 342 channels. The point is, most people who feel like they are being squeezed and are paying enough have no clue.
“Given the current worries over Social Security, they may look at the $60,000 as their only dependable income stream”
They may look at it that way, but I notice the other couple is pulling in $15,000 in SS, so I have to guess the better-off couple is doing the same. The more they (or one of them) earned, the more likely that a defined-benefit pension is involved as well. I realize you’re talking only about how people “feel,” but that’s their problem, isn’t it?
The days of people living in retirement as they did while working went the way of people staying in their homes long enough to pay off 30-year mortgages. That’s how they used to do it (and I know plenty of older retirees who still do) — eliminate your mortgage payment and everything else is more affordable. Most folks don’t do that anymore; indeed, with most boomers using their homes as a retirement plan, selling the home is part of their retirement planning, which is why this housing bust has extended many people’s working lives.
Don’t forget healthcare costs for the wrinklies. After 65 it’s just patch, patch, patch and even with Medicare you’ve got to have a supplemental policy and there are still deductibles. Combine skyrocketing healthcare costs with tanking housing values and the boomers are going to be working for a very long time. Or just dying. I suspect the boomers are going to reverse some of the longevity gains we made in the last 50 years.
My target has me retiring at age 69, I may hit my target earlier, but that has no bearing on today. Social security is a bonus, IOW, I plan is if it doesn’t exist.
A buddy of mine started late, however was able to bank nearly 50% of his gross for the last two years. Damn! He makes about $30k, just a bit more than the mean Delawarian. What’s your target Ben?
all the points made as to why retiring with 2m isnt as good as it used to be further drives home how vital it is to ease the burden on people who have much less. And when (at least THIS liberal) talks about raising taxes on the rich, im talking about Michelle Rollins types.
Right, meatball. It’s reasonable to suppose that people will bank ‘only” a million by retirement, if they don’t fritter away their earnings on paying off education loans or reproducing. @@
“My target has me retiring at age 69”
What’s overlooked in discussions about raising the retirement age is that a lot of people get involuntarily retired by their employers once they pass 60. Wal-Mart only needs so many greeters, so lots of people end up taking reduced benefits at an earlier age than they might prefer.
I concur with this survey.
Mere multi-millionaires are pikers compared to the likes of moi.
Why, I hire them to trim the hair in my nostrils, for god’s sake.
Can’t trust that to the bloody wogs running around the estate mind you.
And if I so much as sneeze while they’re performing their duties they KNOW they’ll be black-balled from the best clubs in perpetuity.
Look, all I’m trying to say is save as EARLY and as much as you can. I try to emphasize this point with any young person my sphere of influence touches when the subject comes up. Don’t begrudge some lowly middle class worker his and her million that they did scape together over the years. Take whats left when I die, I don’t care about that (even though that amount isn’t subject to estate tax).
Right, meatball. It’s reasonable to suppose that people will bank ‘only” a million by retirement, if they don’t fritter away their earnings on paying off education loans or reproducing. @@.
Plenty of us have done this, but I’ll stop short of invoking bootstraps. Getting to that goal is a combination of planning, timing, discipline, and quite frankly luck. But one way to be sure to never reach that goal is to not put it out there in the first place.
Now I sound like I’m selling munies. Find yourself a retirement calculator like this. It is pretty easy to see the power of compound intrest.
When overall there is a negative savings rate in the USA, it’s hard for me to feel bad about the lifestyle sacrifices of Americans who manage to retire with one million dollars in the bank. When 1 out of 3 American families no longer live below the poverty rate or near it–in short when there is a substantial shift toward shared prosperity in the American system–come talk to me then about the woes of millionaires. I’d probably have more sympathy then.
Dana: The savings rate has moved into positive territory since the Great Recession’s bottom. That’s one (relatively minor) reason demand still lags. Couldn’t find the latest numbers on a quick search, but I remember it passed 4% about last June. Don’t know if it’s still that high.
Thanks, Geezer. The last rate I read was at the end of the Bush presidency. Glad to hear its ticked up.
Tax Holiday For Outsourcers Yeah!
I have a comment in moderation because I added a link to bloomberg’s retirement calculator. The calculator shows that if you save early, consistantly, and over a long period of time, $1million at retirement ain’t all that hard to do. Heed the power of compound interest was probably going to be the 15th commandment.
You’ve been rescued! Sorry about that, meatball.
given the current economic climate, the fact that the Feds are doing all they can to make things worse, and the inevitable massive inflation that will result from Obama’s idiocy I agree with them.
The dollar is worth shit. The actions of liberals right now, and the fact that the “cuts” many Republicans want are only a mere bandaid should give everyone pause, not just millionaires. One word. Inflation.