What is "wealthy?" Most millionaires say they're not

Old_Tony actually raised that point in one of the first posts on the thread.

 

We are going through the process right now and trying to do as much as we can without doing too much and fucking everything up.

The amount of counter top length and yes or no to the island question is a big factor, also.

And there is a lot of truth to the Chris Rock bit. My dad died with less than $1,000 to his name. My wife and I hope to have at least $250,000 to $500,000 in combined property value and cash value for our daughter when we are gone. She is also the only granddaughter of two two sets of grandparents.

 

He's talking about a 4% per annum draw ... retirement planners routinely suggest you can do that without running the risk of outliving your money ... doesn't mean the account won't be empty when you shuffle loose the mortal coil, just that there's likely to always be money in the bank.

 

If I had $1,000,000, I would buy at least five properties at about $100,000 a pop and rent each out for $1,000 a month.

 

Do the math a bit more ...

Taxes
Insurance
Depreciation
Maintenance/Repairs

Your $12K per year per property is gonna translate, under the best of circumstances, to maybe half that.

 

Not sure I'd go that route. I guess if you were judicious with where you bought and so forth.

I paid $140K for a house in 2005. I rent it out now. The current tenant floated "$75-$80K" as a hypothetical starting offer this weekend when I dropped by.

I had a deal in place to sell it for $100,200K to the last renter, but he bailed at the last.

And besides the risk of depreciation, owning five houses would be a pain in the ass unless you outsourced to a property management company. Which would cut into your income.

I'm not saying it can't be done. And I'll probably do it again some day - in a nicer neighborhood closer to my current home. It's just that there are some drawbacks.

 

Some of the research I've read suggests that, surprisingly, seniors' expenses begin to decline and that tends to offset inflation. But there's certainly some market risk anticipated in that rule of thumb. AND, it's for seniors ... Yours truly (50 YO) would find himself hurtin' for certain' if he tried to make it on 4% per year out of his net worth.

 

MOST millionaires have net worths that are just barely above $1 million. Hell, I am good friends with several such folks. They're not wealthy by American standards. They're not poor, of course, but they're not wealthy.

 

Ragu -- the 4 percent is a rule of thumb. Obviously it's going to vary and sometimes greatly based on what the person's Social Security and/or pension income is, whether the house is paid off, health-care coverage, how old the children are and whether they'll be fully out of the nest, etc. etc. But 4 percent has proved to be a good rule over time, although I have read suggestions that you should plan to draw less (3 percent, say) based on the factors you cited. And if that's the case, it further illustrates just how much $1 million isn't.

And yeah, dq, I anticipate living cheaper in retirement. The house will be paid off, that's the real biggie.

I think a lot of it is still guesswork because the first generation that spent its careers in the 401k/non-pension world is just hitting its 60s. Self-funded retirement for the majority of Americans is a pretty new thing.

 

They'll get significant need-based financial aid. Someone making $100,000-$200,000 will not.

 

Well exactly. It's relative, just like a lot of other terms. Who's fat? Who's tall? Who's smart?

Is Eduardo Nunez a good baseball player, or does he suck?