Yeah 3 million is a good minimum, but it also matters whether you keep working or live off the wealth generated. You want to be sure you never have to cut into principal, even with potential expenses like tuition, school trips, inflation over time, I'm kind of using 5% average return as a target, which is conservative.
5%? That’s very low, historically speaking. Even if you had 1m in a dividend fund that you didn’t really care about daily share prices, 1m in cds, and 1m riding in the market you should be able to automatically generate income of over 150k with just the 2m, while the other 1m compounds, without touching principal of any of it. That 3m should turn into 4m in 7 years, and 5m in 10 or so. Also, assuming this is deferred comp no taxes until withdrawn. Throw in monthly whatever SS is, and 3m should be plenty unless you’re living in a major metro and don’t own your home.
This. The drastic uptick in home values and the tax burden of where you are located has become a major player.
Yeah I don’t really consider my personal residence to be part of my net worth. I know it is in the traditional definition, but the only people it will be worth something to are beneficiaries after I die. What matters to me is income in and out, without touching principal.
Yeah, Tax+Insurance can become near a mortgage payment even after you have the home paid off... Depending on where it is.
The problem in America is not the avg household income but the spread and variance of the wealth spectrum. Such a high concentration of wealth now, about 24%, in the top few % of households while a large percentage of people/households are poor. And there has been direct govt tax law that has made this happen.
That is why I am somewhat amused by the Dave Ramsey obsession with paying off your mortgage and being “free”. It is a great goal but you still have taxes, insurance, power, water, garbage, fuel, auto insurance, and food as necessary costs. Then throw in all of the other stuff in life. I am all about projected revenue streams and costs, not what something is labeled as a line item on a spreadsheet. For us, real estate taxes and insurance is about the same as principal and interest. Granted, we live in a relative modest house with a small mortgage at a crazy low interest rate, but the costs are the costs. Throw in HOAs for our Florida friends and that becomes a pretty good sized number.
Yeah, I've become more of a cash is king type. If you can have cash in investments you can liquidate relatively quickly you're better off than being "debt free."
Still nice not to have a mortgage because as you've said, the other costs will be there. Didn't rush to pay it off, just glad it's gone.
It depends on post tax dollars on the dividends that end up in your bank account, and certainty of the investment. Ramsey is dismissive and says he interviewed thousands of millionaires and none of them got rich by playing that delta but I call bullshit. If your rate is 2.5% and you return 10% long term in the market, with compounding the amount can become staggering over a period of years. I also call bullshit on the hate for rewards cards, assuming you aren’t buying shit you can’t afford. Thousands of dollars a year, compounding year after year adds up.
I think it’s great to have a paid off mortgage, it is just the opportunity cost of doing it. Max out retirement and get that money in the overall market for as long of a term you can, assuming the post tax effective rate is less than what you are paying on the mortgage. If one missed out on the last two years of returns in the interest of laying off the mortgage, one lost out on massive returns.
Aren’t you in the st. Pete area? If so, maybe that makes sense. In Iowa 10m is a lot. I suppose it depends on how many beaks need feeding.
They say the S&P avg is 8.4% a year going back to 1926. Here is some trivia: how many times has S&P returned between 8-12% over last 99 years?
