3 ms·

> At $1mm you really are independently wealthy in most cases. This doesn't strike me as true. A big facet to consider also is liquidity. Are you talking about

> At $1mm you really are independently wealthy in most cases. This doesn't strike me as true. A big facet to consider also is liquidity. Are you talking about $1M in net worth? If so, I disagree with you: a big chunk of that $1M is likely very illiquid for a younger person, tied up in a house and retirement accounts with penalties for withdrawal. But sure, if you have managed to save $1M above and beyond equity in your home and tax advantaged retirement accounts, then you are probably independently wealthy (but your actual net worth is probably significantly higher than $1M).

ericmay 5y ago
Well, I'd say if you look at what I wrote it was a savings rate of $10,000/year so my underlying assumption is that goes into the market, which will be liquid. You could choose to do a Traditional 401k or Roth 401k. Both are liquid enough. My point wasn't to really give a breakdown of all savings forms, but just to show that saving $10,000/year with historical returns will net you close to $900,000. You don't even have to put it in a tax-advantaged account. Though you should. And that amount is plenty to retire on and be independently wealthy at least today and for the next 5 or so years. Though I guess maybe that's not the best choice of words since what I mean to say is that you can just live pretty comfortably without working - more financially independent than "wealthy". Certainly economic conditions can change, so the more the better. And just to be clear, you could take $1mm right now with 0 assets and buy a decent enough house for <$200,000 and pay pretty low taxes. You'd still have $800,000 left over to appreciate with low cost of living in the vast majority of America.
- sanderjd 5y ago
  Retirement accounts aren't liquid at all if what we're talking about is reaching financial independence and retiring really early (in your 30s or 40s say), which is what I thought we were talking about. But if you're strictly talking about being financially independent enough to retire at the normal time (when you can access retirement accounts), then I agree with you. On the house point, people always seem to forget that people already live someplace and also often have families. No, it is not possible to find a house for a family of four where I live for less than $200k.
  - ericmay 5y ago
    Sure they are. For example your Roth IRA contributions can be taken out at any time. You’ve already paid taxes on them. The interest though has to wait until I believe 55 years old. You should do your own research (you as in anyone reading this) to see what investment options are right for your personal goals. > No, it is not possible to find a house for a family of four where I live for less than $200k Well we weren’t talking about you specifically, but Americans in general. If you need $10mm retire in the Bay Area or something g ya know that’s just what you’ll personally have to work on. I don’t have an answer for you. You can buy affordable houses and live comfortably in almost anywhere in America. In fact there are people who retire and move to other countries, or live very frugally on much less, like $400,000.
    - sanderjd 5y ago
      You're right about the principal in Roth accounts, but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason. The age to withdraw without penalty (for both types of accounts) is 59.5. 200k is unrealistic in most population centers in the country, not just the Bay Area (I don't live there).
      - ericmay 5y ago
        Why are you shifting goalposts? You don’t need to live near a population center. Even so, it depends on what you mean by population centers. If you’ve got a million dollars you don’t need to work, so you don’t have to incur the higher expenses. You can live 30 minutes or so outside of MCOL cities like Columbus and get houses for $200,000 or $300,000. That might be unrealistic for you but that doesn’t generalize to the vast majority of people in America. > but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason. Not so clear cut. So first if you’re a high enough earner you’re adjusted family income is >$200,000 or so before the Roth IRA starts being phased out for you. So we’re already talking about the top 10% or so of all income earners in the U.S. Second, you tend to put the money in a traditional IRA, but you might withdraw (probably actually) less than you were making with your income. So if you’ve been phased out and can only contribute to a Traditional IRA, depending on when you want to retire you might withdraw $100,000/year (or less) and potentially pay a lower tax rate on that income then your marginal contribution rate on a Roth. Lastly, you can still contribute $19,000 to a Roth 401k which doesn’t have contribution challenges related to income (at least for the income the vast majority of people would ever make - idk what happens if you make $1mm or something).

ericmay 5y ago

Well, I'd say if you look at what I wrote it was a savings rate of $10,000/year so my underlying assumption is that goes into the market, which will be liquid. You could choose to do a Traditional 401k or Roth 401k. Both are liquid enough. My point wasn't to really give a breakdown of all savings forms, but just to show that saving $10,000/year with historical returns will net you close to $900,000. You don't even have to put it in a tax-advantaged account. Though you should. And that amount is plenty to retire on and be independently wealthy at least today and for the next 5 or so years. Though I guess maybe that's not the best choice of words since what I mean to say is that you can just live pretty comfortably without working - more financially independent than "wealthy". Certainly economic conditions can change, so the more the better. And just to be clear, you could take $1mm right now with 0 assets and buy a decent enough house for <$200,000 and pay pretty low taxes. You'd still have $800,000 left over to appreciate with low cost of living in the vast majority of America.

sanderjd 5y ago
Retirement accounts aren't liquid at all if what we're talking about is reaching financial independence and retiring really early (in your 30s or 40s say), which is what I thought we were talking about. But if you're strictly talking about being financially independent enough to retire at the normal time (when you can access retirement accounts), then I agree with you. On the house point, people always seem to forget that people already live someplace and also often have families. No, it is not possible to find a house for a family of four where I live for less than $200k.
- ericmay 5y ago
  Sure they are. For example your Roth IRA contributions can be taken out at any time. You’ve already paid taxes on them. The interest though has to wait until I believe 55 years old. You should do your own research (you as in anyone reading this) to see what investment options are right for your personal goals. > No, it is not possible to find a house for a family of four where I live for less than $200k Well we weren’t talking about you specifically, but Americans in general. If you need $10mm retire in the Bay Area or something g ya know that’s just what you’ll personally have to work on. I don’t have an answer for you. You can buy affordable houses and live comfortably in almost anywhere in America. In fact there are people who retire and move to other countries, or live very frugally on much less, like $400,000.
  - sanderjd 5y ago
    You're right about the principal in Roth accounts, but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason. The age to withdraw without penalty (for both types of accounts) is 59.5. 200k is unrealistic in most population centers in the country, not just the Bay Area (I don't live there).
    - ericmay 5y ago
      Why are you shifting goalposts? You don’t need to live near a population center. Even so, it depends on what you mean by population centers. If you’ve got a million dollars you don’t need to work, so you don’t have to incur the higher expenses. You can live 30 minutes or so outside of MCOL cities like Columbus and get houses for $200,000 or $300,000. That might be unrealistic for you but that doesn’t generalize to the vast majority of people in America. > but most people (especially high earners at time of contribution) put their savings in traditional retirement accounts, for good reason. Not so clear cut. So first if you’re a high enough earner you’re adjusted family income is >$200,000 or so before the Roth IRA starts being phased out for you. So we’re already talking about the top 10% or so of all income earners in the U.S. Second, you tend to put the money in a traditional IRA, but you might withdraw (probably actually) less than you were making with your income. So if you’ve been phased out and can only contribute to a Traditional IRA, depending on when you want to retire you might withdraw $100,000/year (or less) and potentially pay a lower tax rate on that income then your marginal contribution rate on a Roth. Lastly, you can still contribute $19,000 to a Roth 401k which doesn’t have contribution challenges related to income (at least for the income the vast majority of people would ever make - idk what happens if you make $1mm or something).