“Millionaire Status…What Does it Mean in 2019?”

Let’s be very clear, one million dollars is a LOT of money.  Whether it is 1980, 2000, or 2019 the $1 Million mark in net worth has been the hallmark of whether or not you have “arrived” in life.  But, what does being a millionaire in 2019 actually mean? Is it all that rare to be a millionaire anymore?  If I have a million dollars saved up, am I safe to retire with no cares in the world?  While there are many aspects other than money that are important to focus on as we approach retirement, we will take a look at what the long-touted millionaire can do in 2019.

What is a Millionaire Anyway?

Some people like to think that a millionaire is someone who makes $1 Million dollars a year.  While that would certainly be an incredible salary, the unfortunate thing could be that this same person might also spend ALL $1 Million dollars within the year.  Leaving them with $0 by year end and forcing them to start the rat race all over again.  A millionaire is someone who has at least a one-million-dollar net worth.  Net worth is found by taking the value of what you own (401k, savings, houses, cars, etc..) and subtracting what you owe (mortgages, auto loans, student loans, etc..) to arrive at your net worth.  For example, someone who owns $1.5M in assets and owes $500K in debt would have exactly a $1.0M net worth.

If I’m 65 with $1M, Can I Retire?

Our clients often ask us the question of whether they can retire based on what they have saved up.  While we get the intention behind this question, the answer depends on so many different personal factors.  How much do you plan on spending every year in retirement?  What does your $1M look like?  Is it all in your 401k?  Is some of your $1M in the equity of your home which you don’t plan on selling?  Are you counting your life insurance towards your $1M?  What are your hopes, goals, and dreams for retirement?  Knowing the answer to these questions, will help us to craft a customized plan and ultimately help to provide clarity and guidance for an individual looking into their next phase of life.

Should $1M Be My Goal?

Once again, the answer here depends on individual circumstances, but at Van Gelder Financial we do feel strongly that the effects of inflation over the next decades will ultimately mean that individuals in their 20’s, 30’s, and 40’s need to take it into account.  For someone who is 35 years old today and wants to retire at 65 with a $50,000 income from their retirement assets, will actually need over $90,500 in future dollars if we assume a 2.0% inflation rate.  Using a 4% rule (meaning I only want to live off of 4% of my retirement funds on an annual basis), this individual would need over $2.2M in retirement assets!

Certainly, thanks to inflation, one million dollars in 2019 is not what it used to be in 1980.  While it is still a significant amount of money, we believe everyone’s goals for later in life are unique and the one-million-dollar mark might not be what you should be aiming for.  If you haven’t already, we encourage you to reach out to one of our advisors to start thinking about your individual plan and how you can take action today to set yourself up for the future!

June 28th, 2019