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Schwab Study: The average American needs $1.4 million to feel financially comfortable

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    Schwab Study: The average American needs $1.4 million to feel financially comfortable

    Came across this article, it is pre-Covid 19 - but still is an interesting view at how different generations perceive the 'rich life'.

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    How Much Money Do You Need to Be Wealthy in America?

    A few million should do it. But for some, it’s not just about the cash—it’s what you do with it.
    By Suzanne Woolley
    May 15, 2018, 4:00 AM PDT





    Many Americans cite leading a stress-free life and having “peace of mind” as their personal definition of wealth. That doesn’t sound too money-centric on the face of it—until you consider that money, or specifically the lack of it, is a major source of stress.

    Americans don’t like to admit that assets can buy happiness—just 11 percent of those surveyed for the second annual Modern Wealth Index from Charles Schwab chose “having lots of money” as their definition of wealth. But while most respondents selected more high-minded concepts as their keys to contentment, they weren’t afraid to put a number on what they needed to get there.

    To be financially comfortable in America today requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey. The net worth needed to be “wealthy”? That’s an average $2.4 million, the same as last year in the online survey of 1,000 Americans between age 21 and 75.




    There were some heartening signs amid the numbers. While 18 percent defined wealth as being able to afford anything they desired, 17 percent said it was “loving relationships with family and friends.” That jibes with how Joe Duran, chief executive officer of money manager United Capital, said he likes to think of “wealth.” After building and selling his first company, “I realized that money is nothing more than fuel,” he said. “It is a resource that lets you have choices, but if you don’t think about what you are working for, you will die rich but not live rich.”

    The survey asked people to choose which of the below statements came closest to their personal definition of wealth. When asked about what made respondents feel “wealthy” in their daily lives, the survey found that spending time with family was most commonly cited, at 62 percent overall. That was followed by what can be the most elusive of things, cited at about the same level across generations: “taking time for myself,” which came in at 55 percent. Hard to do either of those without some bank, though.




    Life’s little luxuries matter, too—but they are called “luxuries” for a reason. Having meals out or food delivered made 41 percent of people feel “wealthy” in their daily lives. Even services such as Netflix, Spotify or Amazon Prime made life feel richer for an overall 33 percent—particularly for millennials, at 44 percent, compared with 29 percent and 23 percent for Generation X and baby boomers, respectively. Write-in comments for what made people feel “wealthy” included “access to healthcare,” “being able to help close friends and family financially” and “just waking up in the morning.” Only one of those doesn’t require money—sort of.





    Millennials displayed some youthful optimism when it came to their financial future. Some 64 percent of twenty- and thirty-somethings believe they’ll be wealthy (the cash kind) at some point in their lives, compared with 22 percent of boomers. Maybe better financial habits will help that happen, since more millennials than boomers said they regularly rebalance their portfolio—49 percent compared with 43 percent, respectively. The same percentage of millennials and boomers, 24 percent, felt “very confident” about reaching financial goals.

    In line with many other surveys put out by financial services firms, the Schwab survey stresses how people who have a written financial plan feel more stable and are more on top of their daily finances. Some 52 percent of boomers, however, said they didn’t have a plan because they didn’t have enough money to need a plan. People that chose “other” to explain why they lacked a financial plan wrote in responses such as “I have trust issues with financial people, especially after the 2008 crisis” and “all my information has been compromised by criminals.” Not a lot of “peace of mind” there.

    Still, in these troubled times, there is hope. The survey found that the American Dream is not dead, at least the one that dictates that making money is indeed the path to bliss. Some 49 percent of respondents said that saving and investing is “the key to wealth,” with another 40 percent choosing “hard work.”

    Eleven percent, however, cited luck.

    Link to original article here.
    Last edited by james.hendrickson; 06-15-2020, 01:36 PM.
    james.c.hendrickson@gmail.com
    202.468.6043

    #2
    The 2 and a half million mark s about where I think I need to be before retiring
    Brian

    Comment


      #3
      Is that with or without a paid off home?

      and for couples is that the total amount (1.4 million) or is that per person?

      Comment


        #4
        Originally posted by Jluke View Post
        Is that with or without a paid off home?

        and for couples is that the total amount (1.4 million) or is that per person?
        It talks about net worth, so I'd assume it doesn't matter much... $1.4M net worth is $1.4M net worth. As for single vs. couple... It doesn't seem to indicate, but my guess is that it's asking for opinions on a personal/individual basis. But really, how much more does a couple spend in day-to-day expenses than a single person? maybe another 30%?

        I guess I'm a bit below my millenial compatriots -- I've felt pretty financially comfortable since our NW was around $700k or so, though $2M probably seems like a pretty good line for feeling "wealthy".
        "Praestantia per minutus" ... "Acta non verba"

        Comment


          #5
          Originally posted by kork13 View Post
          It talks about net worth, so I'd assume it doesn't matter much... $1.4M net worth is $1.4M net worth.
          I think it matters tremendously. The value of my home is irrelevant to how financially comfortable I feel. I'd be much more comfortable with a 200K home and $1.2 mil in the bank than I would with a $1.2 mil home and 200K in the bank.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


            #6
            Originally posted by disneysteve View Post

            I think it matters tremendously. The value of my home is irrelevant to how financially comfortable I feel. I'd be much more comfortable with a 200K home and $1.2 mil in the bank than I would with a $1.2 mil home and 200K in the bank.
            True, but that's a bit of an extreme scenario. More reasonable would be (for example) $1.2M in the bank + $400k home - $200k mortgage, vs $1M in the bank + paid off $400k home.

            And while your home is certainly not something to lightly throw around, it is very much sellable as an asset. But if nothing else, knowing that you're living in and can well afford a nice house ($400k vs $200k for example) would certainly improve my perceived feeling of wealth/financial security, even if the net numbers are the same. YMMV, but that's been my experience (having moved around alot in the last decade, and living in a variety of very different homes/neighborhoods).
            "Praestantia per minutus" ... "Acta non verba"

            Comment


              #7
              Originally posted by kork13 View Post

              True, but that's a bit of an extreme scenario. More reasonable would be (for example) $1.2M in the bank + $400k home - $200k mortgage, vs $1M in the bank + paid off $400k home.
              We have $1.3 million in investments and a 225K paid off home. Call us extreme .
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #8
                Originally posted by disneysteve View Post

                We have $1.3 million in investments and a 225K paid off home. Call us extreme .
                Extreme how? That's totally typical. When I said "extreme" I was referring to your scenario of a $1.2M house with $200k on the back.

                (Reading my post again, I should have said "or" not "vs.")
                "Praestantia per minutus" ... "Acta non verba"

                Comment


                  #9
                  Originally posted by kork13 View Post
                  Extreme how? That's totally typical. When I said "extreme" I was referring to your scenario of a $1.2M house with $200k on the back.

                  (Reading my post again, I should have said "or" not "vs.")
                  Oops. Sorry about that. Yes, that would be extreme.
                  Steve

                  * Despite the high cost of living, it remains very popular.
                  * Why should I pay for my daughter's education when she already knows everything?
                  * There are no shortcuts to anywhere worth going.

                  Comment


                    #10
                    The article leaves me desiring more information. Net worth. When? At retirement? Or right now? Are we talking combined/married, or for a single person?

                    I wonder what the disparity is between millennials and boomers. Grand visions of traveling during retirement, casino buffets, spoiling grandchildren, versus overlanding in a van at one's leisure and going to coachella every year?

                    Comment


                      #11
                      Originally posted by ua_guy View Post
                      The article leaves me desiring more information. Net worth. When? At retirement? Or right now? Are we talking combined/married, or for a single person?

                      I wonder what the disparity is between millennials and boomers. Grand visions of traveling during retirement, casino buffets, spoiling grandchildren, versus overlanding in a van at one's leisure and going to coachella every year?
                      New articles like this always piecemeal the information from survey/study results, and almost never gives a complete picture of the parameters for the study. Honestly, not surprised it leaves the reader confused.

                      i personally assumed the disparity was largely due to experience. For example, many millennials don't realize how expensive medical insurance & copays can be for older folks. Plus, Boomers (very possibly at their peak earning years, if still working) probably have higher lifestyle expenses than younger folks do, having lived a long & successful (or even troublesome) career.
                      "Praestantia per minutus" ... "Acta non verba"

                      Comment


                        #12
                        I'll need $3M maybe $5M.
                        LivingAlmostLarge Blog

                        Comment


                          #13
                          Originally posted by LivingAlmostLarge View Post
                          I'll need $3M maybe $5M.
                          To retire or just to feel financially comfortable? Those are two very different questions.

                          I think we are financially comfortable now and we've got about $1.4 million in our portfolio, but I want to have $2.25 or so for retirement.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment


                            #14
                            to retire. Comfotable and probably able to retire if we really wanted to? Now. If we decided to live "mustachian". I don't think my DH is ready to be with us full time which is pretty much the entirety of the equation. He's not ready to "child" rear full time so why bother retiring? I guess to do what? Best thing he could do is homeschool and we seem to be failing at it.
                            LivingAlmostLarge Blog

                            Comment

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