Comment on Saying you feel like a million bucks is like 'meh' in today's economy.
ShittyRedditWasBetter@lemmy.world 9 months ago
You people can’t fucking math. 1M is more than enough to retire on if you want to live stingy.
Think about it.
Even twenty years ago, $1 million meant you could buy a great place for yourself and a business that would let you live large.
In 1960, $1 million meant a Beverly Hills mansion, a dozen cars, and a place by the beach.
Kind of a giant leap from that to ‘living stingy.’
I mean we’re splitting hairs at the point. It’s still a perfectly good middle class income, especially if you own your house already.
If you think the difference between a Beverly Hills mansion and a three bedroom in the Valley, is ‘splitting hairs,’ then I won’t try to change your mind.
1M is like way too much money for anyone to own
Absolutely not. It’s enough to provide you with any $4000 a month of retirement income.
KaiReeve@lemmy.world 9 months ago
This isn’t how retirement works.
If you try to retire on $1M you’re going to end up in a medicaid facility. Interest rates are high right now, so $1M in the bank may get you as much as $5,000/mo if you’re lucky. This is $60,000/yr and can be supplemented with social security to allow a person to live well enough at today’s cost of living.
However, inflation is a constant and is ideally restricted to 2-3% per year. This means that every year you live after you retire, your spending power is reduced by at least 2%. So even if interest rates stay high (they won’t) then by the time you hit 85 your $60,000/yr will feel more like $24,000. This will still be supplemented by social security, but you will also find that your needs are increasing by this age and you will likely need to start using your savings to pay a lovely nurse or two to help with, well, everything. In-home care and even nursing facilities are quite costly and will eat away at your savings, so if you only have $1M you better start dying soon after needing them.
This all assumes best-case-scenario. It doesn’t account for runaway inflation rates, pandemics, recessions, catastrophic events (it’s not uncommon for the elderly to accidentally set things on fire), or other possibilities that can take a bite out of your retirement savings.
When your money runs out you won’t be kicked out on the streets, thankfully. But a medicaid facility in the US can be nearly as dangerous for the elderly.
AlDente@sh.itjust.works 9 months ago
You’re ignoring that your balance will increase over time through interest and stock gains. I believe this is historically around 8%, exceeding inflation.
spacebirb@lemmy.world 9 months ago
No, you’re spending that increase to live. You leave the 1 million to generate gains and take off the top. In ten years that 1 million will have less purchasing power than before.
AlDente@sh.itjust.works 9 months ago
No, you always take less than the increase. This is why most FIRE plans revolve around living on 3-4%. The gain percentage minus withdrawal percentage should ideally leave you with a number greater than the losses due to inflation.
KaiReeve@lemmy.world 9 months ago
My scenario focuses solely on interest income for simplicity’s sake. There are other investments one can make to increase your gain, but such investments are more volatile. You could end up doing quite well and increasing your nut, or you could invest in the wrong stock and lose a large chunk of it.
I also left our other considerations for simplicity’s sake like the fact that most retirees are couples and past the age of 65 the odds that one of you will require significant medical treatment increases every year. Some elderly couples are getting divorced so as to only bankrupt one of them when this happens.
Life is messy and $1M will only work in the best case scenario. It’s just not realistic. By allowing people to think that $1M is enough, you’re actually leading them into ruin. We need to be aware that retirement is becoming a dicey proposition and we should be taking steps to ensure that the elderly will be provided for in the coming decades, especially since a large number of millennials won’t have children to make sure they are properly cared for.
AlDente@sh.itjust.works 9 months ago
That’s a long way of saying your “best-case scenario” is actually a worst-case scenario.