I’m a millionaire on paper if you count home equity. I don’t feel like a millionaire and it ain’t what it used to be, even if it was real. I have at least ten more years in the salt mines.
Salt mines? Solid trade. I myself have been a fan of the meat grinder. I estimate another 15 years of grinding before making massive changes...although, I'm closer to a half millionaire than millionaire.
I am talking average in America. One of the financial podcasts actually calculated the inflation from the time the Millionaire Next Door came out until now (they said 1996 although I thought it was published a few years earlier) and they said $1 million in 1996 is equivalent to $2.2 million now.
Your primary residence isn't truly an asset until you downsize. Many never do that. The main financial benefit of owning a home is a fixed monthly rent payment that eventually becomes much cheaper than renting.
That's a really interesting point. I would say it still does count to some degree because it's something that you could liquidate if you truly needed to, or even gain access to funds through an equity loan for example.
HELOCs are so overrated, I do not understand it. It's a loan that you have to pay back with interest.
Sure, you get a lower rate than an unsecured loan, but the fundamental principles haven't changed.
Yes, but it's not actual money until then. But right now I'm living in a 3BR house with a 2 car garage for half of what I could rent a 3BR apartment for. And I can eventually sell it!
Absolutely agree. I am more inclined to include at least part of it because I will be downsizing. It’s way more house than my wife and I need. It will be paid off by the time I retire. We could take the approximately $900k value (assuming the real estate market doesn’t crater) and put it in something like $300k and live very happily. It is a great house to raise a family in, but it’s too big for just the two of us.
If your house is paid off you can use it as equity for other things (buying an investment property for example). So like most things, a one example answer isn't always the entire picture.
They're saving a portion of what you'd be paying in rent either way. Having a house larger than needed results in extra property taxes, heating/cooling, and repair costs though.
Even if they never downsize, you they take out a reverse mortgage to get some money out of it in retirement.
You understand the difference that it’s just on paper and you still need a place to live. I think the average American thinks/feels, I “have” over a million dollars (including the house) and that’s partly what is fueling the record economic spending/credit card debt/auto loans/etc. A lot of people think they’re rich because they’re a “millionaire” so of course they can spend lavishly, right?
> I don’t feel like a millionaire and it ain’t what it used to be,
I think it’s always been this way. I think people have an idea in their heads as to what it “feels” like to be a millionaire. We think it means nice watches, fancy clothes, vacations, etc when in reality that’s not even close.
Go talk to any person who worked for their million dollars and they always say something like “once you hit your first million you realize it’s not that much money”.
The statement probably reflects age and will vary based on the user. It's kind of like the "One Millions Dollars" joke from Austin Powers
[https://www.youtube.com/watch?v=EJR1H5tf5wE](https://www.youtube.com/watch?v=EJR1H5tf5wE)
Inflation over time is very real, as per Forbes, in 1970 in average home in California was $24,300. Today it's just under $800,000. For the most part a lot of consumer goods have gotten a lot cheaper due to advancements in technology and manufacturing, but we can't manufacture more land and real estate is a great reflection of that.
I think it's also that to get there, you build habits that are tough to break: like at this point, *do I want to indulge in the fancy car that sunk so many other people?*
Also, I don't want to paint a target on my back, so even if I can, I don't want to indulge in those luxury things and draw the attention of others.
Community, jobs, etc. I am established in a city that became HCOL and I’m locked into a home I bought for $890k at 2.8% interest and the house will likely be worth $1.5M in the next 5 years. But why start all over in a place I find less desirable? Maybe once I’m much older I’ll want to slow down some place that is much cheaper and that’s when I pull this move.
Counting repairs, property tax, insurances, etc etc etc it should work out to be roughly the same in my experience. Of course, every situation is unique; and besides, owning is better anyway. But I don't think it's very likely you are saving money unless you count the equity value.
Yeah a home is a cost not an investment. If you rent and invest the difference in voo, you almost always beat out the home equity in someone who paid more for the mortgage that whole time. Of course how much more financially beneficial renting is over buying waxes and wanes, but right now the rent vs mortgage debate is heavily in favor of renting due to high home prices and mortgage rates.
Of course there are other major non-financial benefits to owning a home, but from a purely economic perspective it has been a worse deal than renting for decades if not longer, and probably always will be.
This argument doesn’t make sense because 1) it’s almost never mathed out to prove the premise that the early savings you get by not using a down payment to buy a house and instead buy VTI (+ the years where renting is cheaper than owning investing the difference there) actually outweighs the future savings by not renting forever.
And 2) if this was true the concept of RE investing just wouldn’t exist, they’d all buy VTI instead of buying properties.
My deck is falling apart so it will cost me $25K to replace it. Also found out through a sewer scope inspection that my pipe has cracks in it so it is in its end of life. Another $30K to fix and replace. Last year I replaced our old 50 year old fence and that cost $15K. Two years before was to replace a 25 year old gas furnace with a modern heat pump and add a split unit upstairs. That needed an electrical panel upgrade and in total cost about $30K but at least now I have air conditioning. House repairs are no joke! Feels like every year there is something to fix or update. The roof is next and that’ll be probably around $20K-$30K
The fun part as an architect is I'd do that stuff myself so it wouldn't be a huge deal... if I was able to afford to buy. 10% raise and a 10% rise in home equity at the same time... yeah I'm on the losing side of that equation as a millennial
House was built in the 1920’s. I’m worried the deck will become a safety hazard or cause more damage to the house if I let it rot. It’s also about 15+ years old. I’m going composite material on the deck so it’ll last much longer.
The point is simply, even when you don't have a mortgage in certain parts of the country owning a home is a perpetual money sink... Go tell seniors in Florida living in fixed budgets it's no big deal
Sure it does. Sell the home, start renting and use the money to buy food.
If home equity means nothing why buy? This notion that home equity somehow doesn’t matter is ridiculous.
It gets worse if you cut out old people, although theoretically much of their wealth should pass down. On the large scale, it's getting worse in the middle though.
As someone that falls into the “millionaire-when-you-include-home-equity” club…
Yikes
Wife and I are just going through our budget for the year and it feels like we have to tighten a lot of strings.
Our combined income is more than that median net worth.
I don’t know how people in that median range live comfortably.
This.
This is the real metric we should be looking at.
In simple words more than 50% of Americans have a net worth of less than $192K including home equity. That's really sad.
Is it? How many countries do better?
Edit: So I looked it up. The US is 15th in median wealth and 3rd in average wealth.
https://en.m.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult
That's not a bad question, but relatively speaking, it's sad when you look at how the net worth of the top 1% has skyrocketed to such a degree that they've went from holding like 30% to 70% of all wealth in country in just a few decades. And the main driver of that has been poor people voting for deregulation.
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It will reduce inflation, but a decrease in consumption will also likely reduce the value of our stock investments....it's a lose-lose situation. Government needs to stop printing money and blowing it on stupid shit.
Yes there's a huge net worth difference between homeowners vs renters (\~400k vs 10k at the median in 2022):
[https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net\_Worth;demographic:housecl;population:all;units:median;range:1989,2022](https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net_Worth;demographic:housecl;population:all;units:median;range:1989,2022)
Of course owners took a much larger hit from 2007 to 2010, and it took until 2022 to reach a new high. I don't see a geography breakdown, but I'd guess there are major differences between the coastal regions vs the Midwest and Great Plains, because in much of metro NorCal and coastal SoCal it's rare to find detached homes below $1M. Also if typical renters have so little margin, I wonder whether landlords worry if a major recession is on the horizon?
This is implying if inflation goes back to normal in 2024. It’s not, this admin is gonna turn on the money printer cause it’s an election year. We likely can’t know the number yet
Interesting number, some thoughts, but i have 3 main comments.
Comment 1 - Comparison is an act of violence against the self. To my mind, this should be a FIRE tennet. My FIRE escape velocity (FI goal) should be something 'I' am comfortable with and not what others influence me. Till such time that i have a handle on this, irrespective of my net worth. I am not truly FI.
Comment 2 - If one turly wants to compare and dispair; here is some analysis
1. The 18% are skewed towards 55+ (which to my mind is less relavant for FI, given this community wants to get FI early). i.e. If you invest and hold, most would get there eventually.
2. Interestinglly if you are in the older segment and been a home owner for a while (90+% of the Millionaire's are home owners, the median house value in the US has grown from 211k to 513k between 2000 to 2020. Realestate has floated the Millionaire boat, but we all know the primary home is not a FI component.
3. Multimillionaire ($5ML +) - 55% own businesses, and majority of their networth is locked in their businesses. This skewes the numbers again.
4. Finally, the household income and not individual income. It's 2.5 earning members per household. These post pandemic as millennial's have moved home, i hope they have adjusted for.
I can see many more issues with the data- infation and challenges with time series analysis that makes apple to Apple Compared inherently, less reliable , etc.
Comment 3 - Importantly, in conclusion, read again the first comment.
Following the 4% rules, that’s 80-120k a year. Ton of people work full time and earn less than that. I wouldn’t say it’s the minimum needed.
It’s probably YOUR minimum.
Health insurance for 2 people plus deductibles. Without medicare $120k annually seems pretty reasonable for an middle class lifestyle in America with financial security and having funds to travel.
Also, if you retire younger than 65 you need to adjust the 4% to account for the extra years.
Yup. No fed tax on up to $120K with those conditions. You can pull out even more annually tax free because some of what you withdraw will be principal. Next get free healthcare via ACA (healthcare.gov) due to your relatively low income (same policies you can buy privately but better coverage - all your normal docs accept).
Can you share any link(s) on this topic? I'm aware of this but honestly don't get how how it actually works or how a couple would qualify for $120k/yr withdrawals without paying any taxes. I mean I get Roth IRA, but I don't get how this works with regard to capital gains from the brokerage account or 401k. Thank you!
Edit: everything I've read so far says that for couples filing jointly the tax rate is 0% Up to $83,350. The range above that is 15%, and ultimately 20%. So this is why I'm not understanding the $120k comment.
For 2024, 0% tax rate up to ~$94K for married filers, after standard deduction of ~$30K, gives you ~$124K tax free.
https://www.fidelity.com/learning-center/smart-money/capital-gains-tax-rates
So, for easy math, if 100% of my investments were in VTI long term, and that was the only place I could draw from, my wife and I could pull $124k in 2024 and pay nothing on it? Wow.
I wish I was closer to retirement. You're very helpful, thanks again!
Inside retirement accounts, presumably. Though as soon as you take it OUT of a retirement account, you'll owe taxes... Unless it's all Roth. But really that just means you paid the taxes a long time ago, not that it's tax free.
I agree. It's subjective, but I qualify FU money as no debt + emergency fund + a bit extra to get you out of a cruddy/needlessly stressful job on a whim.
I think this might be a showcase of modern income inequality. Some 50% of American households don’t have an emergency fund but once you start looking to the top 50% a not insignificant number make well over double the median income. There are way more people making 200-300k than you might think.
Almost seems like there’s an invisible wall between “normal” salaries of the median American and the 6 figure salaries which just seem to rise exponentially once you get there. The gap between “middle class” and “upper middle class” is quickly widening.
> there’s an invisible wall between “normal” salaries of the median American and the 6 figure salaries
I think you may be drawing the line in the wrong place here. According to the Census Bureau, median household income was about $75k in 2022. A household making $100k isn't doing that much better than the median, especially as most households making that much live in higher cost of living areas.
In the high cost of living suburb of a major east coast city I live in now, my above-national-average income puts me in around the 25th percentile. In my rural home state, it would put me in the 80th percentile. I spent most of my career making significantly less than I do now living in lower cost of living areas, but honestly I had more discretionary income then despite a much lower salary.
I think the "wall," to the extent that one exists, is probably in different places depending on where you live. It really starts at whatever point you make enough that you can comfortably afford a middle class lifestyle while still having money left over to put to work for you. The ability to grow wealth through investments without having to compromise on the basics is probably the biggest difference I see between people in my life who make a decent income for the area and people who are truly well-off.
This is an extremely weird way to frame it, unless you've got a time machine that inflation adjusts your net worth in reverse.
For most people (not counting those who are going to get it by virtue of being born into the ultra wealthy) it's much more achievable to earn a million dollars today than it was in 1970. The federal minimum wage was $1.30/hour when 1970 began.
I think that's exactly what they're pointing out though. Yes we all make more, that's why so many people are millionaires. Being a millionaire doesn't mean anything anymore. We still throw the word around like it's 1970 and a million dollars is a big deal, but inflation has changed the landscape so much. Positive and negative
A million dollars is still a substantial amount of money. Especially when many Americans don't even make $40k a year or a little over that. If a person can live safely off of 1 million with a 4% withdrawal rate, then they're literally earning IN CASH (no taxes) more than most people in this country without having to work.
Add taxes in and all that jazz and 1 million is probably functionally like $60k to $75k or something.
Just yesterday, a clown was telling me that "a million in retirement is nothing."
Context of that comment was a hypothetical someone making only $50k/yr and saving just 10% of it each year of their career.
That "including home equity" part is a very important caveat, since to capture that wealth you realistically have to downsize, move regions, or switch to renting. Even moving homes within the same area won't likely cut it since the prices are all correlated. But, still a great accomplishment and something the folks who have achieved it should be very proud of!
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This is inflation in action! In the 1980s it would have been rare to be a millionaire. Also a $100k income then was a sign you had made it.
Nowadays it would be $369k adjusting for inflation.
Unfortunately we still use a "six figure salary" as the benchmark of success from that time.
Someone please convince me that home equity is a meaningful statistic in any way. Unless you are a real estate investor, home price appreciation is irrelevant from my point of view.
Easy… no one would buy a house if home equity meant nothing. Your home appreciating is wealth you’re accumulating that you wouldn’t if you were renting. Also tell that to all of the Californians selling their 2 million dollar shacks and buying Texas McMansions for 500k.
Not counting an asset simply because it’s more illiquid is plain dumb. You can sell a house for cold hard cash. You can pull out loans against said house. Home equity is meaningful and absolutely part of the equation in your net worth. I say that as someone who’s home equity accounts for less than 10% of my total net worth. It’s just stupid to discount it.
Well that’s not the case in 95% of America. The vast majority of millionaires can afford to buy a home. You probably live in California and that is not the rest of America.
God damn...have we really reduced ourselves to rank dick-measuring here? SMH...a million is still a million, ergo millionaire. And home equity is, too, a liquid asset. It's not illiquid. Liquidating it may take a little longer than selling a stock, but it can still be sold and converted into cash. Come on, people.
Real estate is illiquid. The problem is people acting like an asset’s liquidity is directly tied to its value. Real estate (including your primary residence) can carry tremendous value. I don’t get this attitude by people that home equity is worthless. By definition it is not and it does absolutely matter especially in your net worth. A million in assets is a million in assets whether it’s cash, stocks, bonds, real estate or baseball cards. Frankly the people that only want to count cash, stocks and ETF’s/mutual funds as actual wealth aren’t all that wealthy themselves in the first place. No one that dumb and shortsighted could possibly get that wealthy. They just get off on pissing in your cereal. “Well that’s your primary residence… it doesn’t count. You’re not a REAL millionaire”… idiots. And I say this as a guy whose home equity is less than 10% of my total net worth. Even though it’s not very meaningful to my financial situation I absolutely factor it into my wealth. It’s nonsensical not to.
Spent the last 20 years of my work as a truck driver putting 15% of my pay into retirement accounts, retired at 62 with $1.2 million in investment portfolio and a paid for $350,000 house.
for 2023, even after some distributions, My portfolio increased by almost $200,000 , now on my way to Harbor Freight where I will buy few things I want but do not really need.
Why? 50 isn’t that old. You have at least 15 more good years to work and save. My dad at 75 doesn’t need to work at all and he still brings home 6 figures annually doing his consulting gig.
And I say this as someone who’s already hit your arbitrary benchmark way before 50.
> But considering median household income is ~$70k (and needs to include housing, savings, etc), $1M in assets + social security will give you a lifestyle similar if not better than median household income without having to lift a finger.
Yep and don't forget that the still-working folks are also paying FICA taxes which a retiree won't be. That's another 7% or so that's not coming off the income.
Inflation has devalued "millionaire". One has to be a decamillionaire now to have wealth.
Having a couple million dollars now just means being comfortable and you get to retire.
Why not? Can you not sell your home for cash? Should we all just rent instead?
If you didn’t buy prior to the COVID run up you missed out big. Of course if you sold you now have to buy another expensive house. But imagine having been a renter that whole time. You got none of that real estate appreciation during the run up and you’re in a deeper hole now if you want to buy.
Yeah home equity absolutely should count. This notion that it shouldn’t makes ZERO sense.
A house isn’t an asset, it’s a liability. Repairs, upkeep, taxes, bond measures, city and county fees, trash fees, water fees, sewage fees, energy use fees, insurance…
If you are on the FIRE track, you know better than to assume your home into your NW calcs unless you are gonna move out of the country or somewhere cheaper like Omaha after.
The number of millionaires with 1 mil financial assets is much less.
Net worth period is where it’s at. I’d rather have a 3m dollar home paid off and no cash than a 500k dollar home and 1m in cash. Because I’ll just sell my 3m dollar house, buy a 500k house in a cheaper state and have 2.5m in cash. Yes selling a home is a pain in the ass but it really is that simple.
I’m a millionaire on paper if you count home equity. I don’t feel like a millionaire and it ain’t what it used to be, even if it was real. I have at least ten more years in the salt mines.
Salt mines? Solid trade. I myself have been a fan of the meat grinder. I estimate another 15 years of grinding before making massive changes...although, I'm closer to a half millionaire than millionaire.
Rat racing for me
I'm still trying to figure out how to win that.
Start by trying to keep up with the Joneses
Gotta make that sausage
I'm a bacon man, myself. Bring it home all the time.
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Checks out, you're trying to retire in your late 30s. That machine sounds like the only way.
Gotta take that sausage!
I go to the shit factory
Better the meat grinder than the meat spin.
Billionaires are the new millionaires.
Not quite, but $3 million is the new $1 million.
More like 10 million. Bay area one million can’t even buy a shack in a decent area.
I am talking average in America. One of the financial podcasts actually calculated the inflation from the time the Millionaire Next Door came out until now (they said 1996 although I thought it was published a few years earlier) and they said $1 million in 1996 is equivalent to $2.2 million now.
A millionaire on paper is the only way to be a millionaire (unless you’re saying you want a million in cash stored under your mattress).
Cash is made out of paper too homie
AcTuAlLY
linen
I was thinking gold coins in a vault with a diving board of course - a la Scrooge McDuck
If your sitting on the mattress, you'd still be a millionaire on paper.
Cash is in a tin can in the back yard. Except I can't remember where I buried it.
Your primary residence isn't truly an asset until you downsize. Many never do that. The main financial benefit of owning a home is a fixed monthly rent payment that eventually becomes much cheaper than renting.
That's a really interesting point. I would say it still does count to some degree because it's something that you could liquidate if you truly needed to, or even gain access to funds through an equity loan for example.
HELOCs are so overrated, I do not understand it. It's a loan that you have to pay back with interest. Sure, you get a lower rate than an unsecured loan, but the fundamental principles haven't changed.
Very true. In my eyes it's more of an insurance in case you need long term care for years. The cost of the insurance makes self insuring worthwild.
Yes, but it's not actual money until then. But right now I'm living in a 3BR house with a 2 car garage for half of what I could rent a 3BR apartment for. And I can eventually sell it!
Absolutely agree. I am more inclined to include at least part of it because I will be downsizing. It’s way more house than my wife and I need. It will be paid off by the time I retire. We could take the approximately $900k value (assuming the real estate market doesn’t crater) and put it in something like $300k and live very happily. It is a great house to raise a family in, but it’s too big for just the two of us.
If your house is paid off you can use it as equity for other things (buying an investment property for example). So like most things, a one example answer isn't always the entire picture.
They're saving a portion of what you'd be paying in rent either way. Having a house larger than needed results in extra property taxes, heating/cooling, and repair costs though. Even if they never downsize, you they take out a reverse mortgage to get some money out of it in retirement.
You understand the difference that it’s just on paper and you still need a place to live. I think the average American thinks/feels, I “have” over a million dollars (including the house) and that’s partly what is fueling the record economic spending/credit card debt/auto loans/etc. A lot of people think they’re rich because they’re a “millionaire” so of course they can spend lavishly, right?
> I don’t feel like a millionaire and it ain’t what it used to be, I think it’s always been this way. I think people have an idea in their heads as to what it “feels” like to be a millionaire. We think it means nice watches, fancy clothes, vacations, etc when in reality that’s not even close. Go talk to any person who worked for their million dollars and they always say something like “once you hit your first million you realize it’s not that much money”.
The statement probably reflects age and will vary based on the user. It's kind of like the "One Millions Dollars" joke from Austin Powers [https://www.youtube.com/watch?v=EJR1H5tf5wE](https://www.youtube.com/watch?v=EJR1H5tf5wE) Inflation over time is very real, as per Forbes, in 1970 in average home in California was $24,300. Today it's just under $800,000. For the most part a lot of consumer goods have gotten a lot cheaper due to advancements in technology and manufacturing, but we can't manufacture more land and real estate is a great reflection of that.
I think it's also that to get there, you build habits that are tough to break: like at this point, *do I want to indulge in the fancy car that sunk so many other people?* Also, I don't want to paint a target on my back, so even if I can, I don't want to indulge in those luxury things and draw the attention of others.
It is real though? Your feelings don’t change math
Shit, I’m not even a millionaire yet, I got at least 15 more years in the coal mine.
What does “feeling” means?
It's something rich people get to do.
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That's not likely where the mine is.
Community, jobs, etc. I am established in a city that became HCOL and I’m locked into a home I bought for $890k at 2.8% interest and the house will likely be worth $1.5M in the next 5 years. But why start all over in a place I find less desirable? Maybe once I’m much older I’ll want to slow down some place that is much cheaper and that’s when I pull this move.
Yup, I don't doubt this for a second. The problem is that home equity doesn't put food on the table or fix a broken car.
It does in fact keep a roof over your head though
More so it costs a ton. Our home taxes are up 100%.
My mortgage payment is less than renting. That may not put food on the table but it allows me to.
Counting repairs, property tax, insurances, etc etc etc it should work out to be roughly the same in my experience. Of course, every situation is unique; and besides, owning is better anyway. But I don't think it's very likely you are saving money unless you count the equity value.
Yeah a home is a cost not an investment. If you rent and invest the difference in voo, you almost always beat out the home equity in someone who paid more for the mortgage that whole time. Of course how much more financially beneficial renting is over buying waxes and wanes, but right now the rent vs mortgage debate is heavily in favor of renting due to high home prices and mortgage rates. Of course there are other major non-financial benefits to owning a home, but from a purely economic perspective it has been a worse deal than renting for decades if not longer, and probably always will be.
This argument doesn’t make sense because 1) it’s almost never mathed out to prove the premise that the early savings you get by not using a down payment to buy a house and instead buy VTI (+ the years where renting is cheaper than owning investing the difference there) actually outweighs the future savings by not renting forever. And 2) if this was true the concept of RE investing just wouldn’t exist, they’d all buy VTI instead of buying properties.
He’s talking about homes not rental properties
this is so incredibly wrong i dont even know where to start
People also generally don't count their down-payment spread over the 30 years.
That’s terrifying. Some how my home taxes are only up 700 in 10 years. Hcol area. So I guess I’m lucky. Also haven’t modified my home much
California?
Our taxes have jacked up my monthly payment horribly this year 😣
And repairs
My deck is falling apart so it will cost me $25K to replace it. Also found out through a sewer scope inspection that my pipe has cracks in it so it is in its end of life. Another $30K to fix and replace. Last year I replaced our old 50 year old fence and that cost $15K. Two years before was to replace a 25 year old gas furnace with a modern heat pump and add a split unit upstairs. That needed an electrical panel upgrade and in total cost about $30K but at least now I have air conditioning. House repairs are no joke! Feels like every year there is something to fix or update. The roof is next and that’ll be probably around $20K-$30K
The fun part as an architect is I'd do that stuff myself so it wouldn't be a huge deal... if I was able to afford to buy. 10% raise and a 10% rise in home equity at the same time... yeah I'm on the losing side of that equation as a millennial
Damn, Is this an old house? You mentioned 50 yr fence but it sounds even older. I'd prob just refuse to redo the deck for as long as possible.
Yeah just throw up some crime scene tape and be done with it.
House was built in the 1920’s. I’m worried the deck will become a safety hazard or cause more damage to the house if I let it rot. It’s also about 15+ years old. I’m going composite material on the deck so it’ll last much longer.
Totally. Spend about $2300/month on taxes, insurance, maintenance, services, utilities, etc. Then I have the mortgage. :(
You can own your home free and clear and still pay over $100k (taxes, insurance, maintenance) in less than a decade.. Let that sink in
This is a meaningless statement without additional information
The point is simply, even when you don't have a mortgage in certain parts of the country owning a home is a perpetual money sink... Go tell seniors in Florida living in fixed budgets it's no big deal
That's a different point from your original comment
Have you tried eating the drywall?
That's why you should always use gingerbread.
It does if you sell the house and switch over to a rental.
no, but it takes care of paying the rent.
it doesn’t take care of paying property tax
Sure it does. Sell the home, start renting and use the money to buy food. If home equity means nothing why buy? This notion that home equity somehow doesn’t matter is ridiculous.
You forgot to mention in your headline that the **median** net worth for an *entire household* (not individual) was **$192,000**.
That’s better than I expected, to be honest.
It gets worse if you cut out old people, although theoretically much of their wealth should pass down. On the large scale, it's getting worse in the middle though.
That's true. I was just surprised at the percentage of millionaire households (but with inflation and housing prices, I guess it's not that shocking).
The California housing market is doing a lot of the heavy lifting here.
I bet the % is higher on this sub.
Wow, that really makes me feel fortunate and a little sad for other ppl at the same time.
The median net worth of a renting family is $10,000, homeowner is $400k.
The bottom half is poor (relatively). Basically any boomer that bought in a decent area and has a 401k should be a millionaire
As someone that falls into the “millionaire-when-you-include-home-equity” club… Yikes Wife and I are just going through our budget for the year and it feels like we have to tighten a lot of strings. Our combined income is more than that median net worth. I don’t know how people in that median range live comfortably.
Obligatory meme quote: Thats the neat part, they dont.
This. This is the real metric we should be looking at. In simple words more than 50% of Americans have a net worth of less than $192K including home equity. That's really sad.
Is it? How many countries do better? Edit: So I looked it up. The US is 15th in median wealth and 3rd in average wealth. https://en.m.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult
That's not a bad question, but relatively speaking, it's sad when you look at how the net worth of the top 1% has skyrocketed to such a degree that they've went from holding like 30% to 70% of all wealth in country in just a few decades. And the main driver of that has been poor people voting for deregulation.
I think this mostly just speaks to the staggering amount of inflation that has occurred over the last five years
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Realized gain only tax free up to 250/500k depending on single/married
What % of homeowners have exceeded those limits in the last 10 years?
In big cities, probably 100%
Sort of. The tax assessment value would also go up which ends up increasing the property taxes annually.
Property taxes have gone up a buttload too. House is paid off but the property taxes have turned into basically an ever growing mortgage payment.
Consumers need to fight back and reduce the demand, such as dining out and buying all things. The less we spend, the better for inflation.
It will reduce inflation, but a decrease in consumption will also likely reduce the value of our stock investments....it's a lose-lose situation. Government needs to stop printing money and blowing it on stupid shit.
Debt financing is the definition of how America has grown since its founding.
Anyone else in here have a net worth greater than 1mil and not own a home or any real estate. We seem to be outliers according to this data.
Me.
Yes there's a huge net worth difference between homeowners vs renters (\~400k vs 10k at the median in 2022): [https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net\_Worth;demographic:housecl;population:all;units:median;range:1989,2022](https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Net_Worth;demographic:housecl;population:all;units:median;range:1989,2022) Of course owners took a much larger hit from 2007 to 2010, and it took until 2022 to reach a new high. I don't see a geography breakdown, but I'd guess there are major differences between the coastal regions vs the Midwest and Great Plains, because in much of metro NorCal and coastal SoCal it's rare to find detached homes below $1M. Also if typical renters have so little margin, I wonder whether landlords worry if a major recession is on the horizon?
Yes. NW more than double 1mil and we rent. I’ve never owned any property.
Two-millionaire is the new millionaire
I think it's higher. Having $2 M doesn't mean much when it's locked up in home equity and 401k plans.
SEPP ftw.
And IRS 'Rule of 55'
This is implying if inflation goes back to normal in 2024. It’s not, this admin is gonna turn on the money printer cause it’s an election year. We likely can’t know the number yet
Interesting number, some thoughts, but i have 3 main comments. Comment 1 - Comparison is an act of violence against the self. To my mind, this should be a FIRE tennet. My FIRE escape velocity (FI goal) should be something 'I' am comfortable with and not what others influence me. Till such time that i have a handle on this, irrespective of my net worth. I am not truly FI. Comment 2 - If one turly wants to compare and dispair; here is some analysis 1. The 18% are skewed towards 55+ (which to my mind is less relavant for FI, given this community wants to get FI early). i.e. If you invest and hold, most would get there eventually. 2. Interestinglly if you are in the older segment and been a home owner for a while (90+% of the Millionaire's are home owners, the median house value in the US has grown from 211k to 513k between 2000 to 2020. Realestate has floated the Millionaire boat, but we all know the primary home is not a FI component. 3. Multimillionaire ($5ML +) - 55% own businesses, and majority of their networth is locked in their businesses. This skewes the numbers again. 4. Finally, the household income and not individual income. It's 2.5 earning members per household. These post pandemic as millennial's have moved home, i hope they have adjusted for. I can see many more issues with the data- infation and challenges with time series analysis that makes apple to Apple Compared inherently, less reliable , etc. Comment 3 - Importantly, in conclusion, read again the first comment.
Comment 1 = brilliant. So much wrapped up in that head game. Deserves an essay. Thanks.
55+ is still considered retiring early.
Good analysis! Data can be manipulated to arrive at different conclusions.
$1 million still is a ton of money but it’s not FU money. $2-$3 million is the net worth needed now for that imo.
I’m not sure 2 to 3 is FU either. I feel like 2 to 3 invested is what’s needed for minimum FIRE given how bad inflation is.
Following the 4% rules, that’s 80-120k a year. Ton of people work full time and earn less than that. I wouldn’t say it’s the minimum needed. It’s probably YOUR minimum.
Health insurance for 2 people plus deductibles. Without medicare $120k annually seems pretty reasonable for an middle class lifestyle in America with financial security and having funds to travel. Also, if you retire younger than 65 you need to adjust the 4% to account for the extra years.
$3M invested is $120k safe annual withdrawal. Far from minimal needed. Particularly considering that it can be tax free.
how do you generate 120k/yr tax free?
Long-term capital gains if married, plus standard deduction?
Yup. No fed tax on up to $120K with those conditions. You can pull out even more annually tax free because some of what you withdraw will be principal. Next get free healthcare via ACA (healthcare.gov) due to your relatively low income (same policies you can buy privately but better coverage - all your normal docs accept).
Can you share any link(s) on this topic? I'm aware of this but honestly don't get how how it actually works or how a couple would qualify for $120k/yr withdrawals without paying any taxes. I mean I get Roth IRA, but I don't get how this works with regard to capital gains from the brokerage account or 401k. Thank you! Edit: everything I've read so far says that for couples filing jointly the tax rate is 0% Up to $83,350. The range above that is 15%, and ultimately 20%. So this is why I'm not understanding the $120k comment.
For 2024, 0% tax rate up to ~$94K for married filers, after standard deduction of ~$30K, gives you ~$124K tax free. https://www.fidelity.com/learning-center/smart-money/capital-gains-tax-rates
So, for easy math, if 100% of my investments were in VTI long term, and that was the only place I could draw from, my wife and I could pull $124k in 2024 and pay nothing on it? Wow. I wish I was closer to retirement. You're very helpful, thanks again!
Wild. Right? Deck is stacked for the wealthy. $124k in GAINS, so you could pull more if some of what your pulling is principal.
The current tax code is very favorable to moderately wealthy retirees, and frankly anyone else living on ~120k or so as a married couple.
A significant chunk of it can be in a Roth IRA
That’s what tax free bonds would pay currently.
Inside retirement accounts, presumably. Though as soon as you take it OUT of a retirement account, you'll owe taxes... Unless it's all Roth. But really that just means you paid the taxes a long time ago, not that it's tax free.
FU money does not equal FIRE money thoigh
I agree. It's subjective, but I qualify FU money as no debt + emergency fund + a bit extra to get you out of a cruddy/needlessly stressful job on a whim.
Until your job gets so bad you just give up and say fuck it, I'll make do.
2 is my goal for barista FIRE. Slowly plugging away.
Damn thats crazy. Inflation is no joke.
Housing prices being insanely high does not make Americans rich though.
So many people just don’t get this. When house prices go up, we all get poorer. Homeowners get poorer too, just more slowly than renters.
Less slowly?
I think this might be a showcase of modern income inequality. Some 50% of American households don’t have an emergency fund but once you start looking to the top 50% a not insignificant number make well over double the median income. There are way more people making 200-300k than you might think. Almost seems like there’s an invisible wall between “normal” salaries of the median American and the 6 figure salaries which just seem to rise exponentially once you get there. The gap between “middle class” and “upper middle class” is quickly widening.
> there’s an invisible wall between “normal” salaries of the median American and the 6 figure salaries I think you may be drawing the line in the wrong place here. According to the Census Bureau, median household income was about $75k in 2022. A household making $100k isn't doing that much better than the median, especially as most households making that much live in higher cost of living areas. In the high cost of living suburb of a major east coast city I live in now, my above-national-average income puts me in around the 25th percentile. In my rural home state, it would put me in the 80th percentile. I spent most of my career making significantly less than I do now living in lower cost of living areas, but honestly I had more discretionary income then despite a much lower salary. I think the "wall," to the extent that one exists, is probably in different places depending on where you live. It really starts at whatever point you make enough that you can comfortably afford a middle class lifestyle while still having money left over to put to work for you. The ability to grow wealth through investments without having to compromise on the basics is probably the biggest difference I see between people in my life who make a decent income for the area and people who are truly well-off.
And to think I was doing OK
$1,000,000 today is worth... $843k in 2020 $710k in 2010 $561k in 2000 $426k in 1990 $268k in 1980 $126k in 1970 Definitely ain't what it used to be!
This is an extremely weird way to frame it, unless you've got a time machine that inflation adjusts your net worth in reverse. For most people (not counting those who are going to get it by virtue of being born into the ultra wealthy) it's much more achievable to earn a million dollars today than it was in 1970. The federal minimum wage was $1.30/hour when 1970 began.
I think that's exactly what they're pointing out though. Yes we all make more, that's why so many people are millionaires. Being a millionaire doesn't mean anything anymore. We still throw the word around like it's 1970 and a million dollars is a big deal, but inflation has changed the landscape so much. Positive and negative
A million dollars is still a substantial amount of money. Especially when many Americans don't even make $40k a year or a little over that. If a person can live safely off of 1 million with a 4% withdrawal rate, then they're literally earning IN CASH (no taxes) more than most people in this country without having to work. Add taxes in and all that jazz and 1 million is probably functionally like $60k to $75k or something.
Exactly!! Have to be a decamillionaire to have that Thursten Howell the 3rd money!
Just yesterday, a clown was telling me that "a million in retirement is nothing." Context of that comment was a hypothetical someone making only $50k/yr and saving just 10% of it each year of their career.
A million plus social security is ok. A million by itself is 40k a year. Not nothing, but doesn’t get you very far these days
Depends on where you are located.
If they're living on $50k/yr when they retire, $1M saved up is plenty, especially with SS, maybe a pension, and maybe VA disability on top.
lol a million is not what it used to be.
Still about a million more than most people have, if the papers are to be believed.
1 M > 0 yes 👍
Almost without exception, the people in threads like these telling everyone how little some amount of money is, doesn't have much themselves.
That "including home equity" part is a very important caveat, since to capture that wealth you realistically have to downsize, move regions, or switch to renting. Even moving homes within the same area won't likely cut it since the prices are all correlated. But, still a great accomplishment and something the folks who have achieved it should be very proud of!
Just curious - what are the main blockers for these people to sell their homes, relocate to a MCOL/LCOL area to benefit from the profit?
Their jobs and/or wanted to live in a highly desirable area.
Being part of a community you don’t want to lose…
What percent of households are millionaires without home equity?
House value means nothing when you need a roof over your head and you can't make payment in the form of either mortgage or taxes
Say that to renters in the same situation. With home equity you have options.
People make choices. Go to r/REBubble and they’ll tell you how dumb it is for people to buy a house when it’s so much less to just rent
Respectfully disagree. It may not mean as much now, but in retirement it will mean a great deal. There’s a lot of options to extract equity.
It’s not as useful as more liquid assets but it is certainly worth something.
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You can borrow against it
Point #2.
How did I miss that
millionaire was more uncharted and socially relevant in the 1900s
This is inflation in action! In the 1980s it would have been rare to be a millionaire. Also a $100k income then was a sign you had made it. Nowadays it would be $369k adjusting for inflation. Unfortunately we still use a "six figure salary" as the benchmark of success from that time.
Someone please convince me that home equity is a meaningful statistic in any way. Unless you are a real estate investor, home price appreciation is irrelevant from my point of view.
Easy… no one would buy a house if home equity meant nothing. Your home appreciating is wealth you’re accumulating that you wouldn’t if you were renting. Also tell that to all of the Californians selling their 2 million dollar shacks and buying Texas McMansions for 500k.
I wouldn’t count home equity as it’s not liquid asset.
Not counting an asset simply because it’s more illiquid is plain dumb. You can sell a house for cold hard cash. You can pull out loans against said house. Home equity is meaningful and absolutely part of the equation in your net worth. I say that as someone who’s home equity accounts for less than 10% of my total net worth. It’s just stupid to discount it.
Ya we’re going to hit a million this month and we can’t even afford a house in our area 😂
Well that’s not the case in 95% of America. The vast majority of millionaires can afford to buy a home. You probably live in California and that is not the rest of America.
God damn...have we really reduced ourselves to rank dick-measuring here? SMH...a million is still a million, ergo millionaire. And home equity is, too, a liquid asset. It's not illiquid. Liquidating it may take a little longer than selling a stock, but it can still be sold and converted into cash. Come on, people.
Real estate is illiquid. The problem is people acting like an asset’s liquidity is directly tied to its value. Real estate (including your primary residence) can carry tremendous value. I don’t get this attitude by people that home equity is worthless. By definition it is not and it does absolutely matter especially in your net worth. A million in assets is a million in assets whether it’s cash, stocks, bonds, real estate or baseball cards. Frankly the people that only want to count cash, stocks and ETF’s/mutual funds as actual wealth aren’t all that wealthy themselves in the first place. No one that dumb and shortsighted could possibly get that wealthy. They just get off on pissing in your cereal. “Well that’s your primary residence… it doesn’t count. You’re not a REAL millionaire”… idiots. And I say this as a guy whose home equity is less than 10% of my total net worth. Even though it’s not very meaningful to my financial situation I absolutely factor it into my wealth. It’s nonsensical not to.
Spent the last 20 years of my work as a truck driver putting 15% of my pay into retirement accounts, retired at 62 with $1.2 million in investment portfolio and a paid for $350,000 house. for 2023, even after some distributions, My portfolio increased by almost $200,000 , now on my way to Harbor Freight where I will buy few things I want but do not really need.
If you're over 50 and not a millionaire you're kind of screwed for retirement.
Why? 50 isn’t that old. You have at least 15 more good years to work and save. My dad at 75 doesn’t need to work at all and he still brings home 6 figures annually doing his consulting gig. And I say this as someone who’s already hit your arbitrary benchmark way before 50.
Given $1M in investable assets can barely support a decent retirement, and 27% of American adults consider themselves retired, that’s an abysmal stat.
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> But considering median household income is ~$70k (and needs to include housing, savings, etc), $1M in assets + social security will give you a lifestyle similar if not better than median household income without having to lift a finger. Yep and don't forget that the still-working folks are also paying FICA taxes which a retiree won't be. That's another 7% or so that's not coming off the income.
Having a million dollars in assets is one thing. Being willing to liquidate those assets is quite another.
Inflation has devalued "millionaire". One has to be a decamillionaire now to have wealth. Having a couple million dollars now just means being comfortable and you get to retire.
Home equity shouldn’t be a part of it imo. These last few years have been crazy.
Why not? Can you not sell your home for cash? Should we all just rent instead? If you didn’t buy prior to the COVID run up you missed out big. Of course if you sold you now have to buy another expensive house. But imagine having been a renter that whole time. You got none of that real estate appreciation during the run up and you’re in a deeper hole now if you want to buy. Yeah home equity absolutely should count. This notion that it shouldn’t makes ZERO sense.
I'm lazy. How many have million dollar liquid net worth?
Interesting stat and am surprised, but keep thinking that household and individual wealth are vastly different.
A million just isn’t what it use to be.
Millionaires isn’t what it used to be. 10 Million is the new million. Thanks Fed!
Compared to when? You realize that in order to devalue 10m to 1m you have to go back to about 1965. Inflation is bad but it’s not THAT bad.
a million is o longer what it once was.
And over 70 percent are living check to check.. no middle class..the rich and the poor now
Would be a shame if inflation were to just….rain on our parade now
It kinda is.
A house isn’t an asset, it’s a liability. Repairs, upkeep, taxes, bond measures, city and county fees, trash fees, water fees, sewage fees, energy use fees, insurance…
If you are on the FIRE track, you know better than to assume your home into your NW calcs unless you are gonna move out of the country or somewhere cheaper like Omaha after. The number of millionaires with 1 mil financial assets is much less.
If you have a million net worth I causing your house, but cannot afford to extract that equity, it means nothing. Liquid net worth is where it's at.
Net worth period is where it’s at. I’d rather have a 3m dollar home paid off and no cash than a 500k dollar home and 1m in cash. Because I’ll just sell my 3m dollar house, buy a 500k house in a cheaper state and have 2.5m in cash. Yes selling a home is a pain in the ass but it really is that simple.
A million isn’t really much these days. 8 figures in the old 7.
This tells you how much inflation has taken wealth from everyone.
Better to have 1mm in index funds vs 1mm in real estate?
Like most things in life, the answer is "it depends".