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TL;DR: $40k/year in exchange for working full time = not wealthy. $40k/year without having to work = wealthy. I consider $40k/year pretty good, and definitely

by lkbm 5y ago

TL;DR: $40k/year in exchange for working full time = not wealthy. $40k/year without having to work = wealthy. I consider $40k/year pretty good, and definitely enough for me to live comfortably on here in Austin TX (Source: I've lived here for 13 years now, and I'm only just now getting close to spending+taxes [retirement+charity excluded] exceeding $40k as I've started spending more liberally.) I've got friends here getting by on half that. So no, earning $40k/year as an individual is pretty good. It's only slightly over the 50%ile (but nearly double the 25%ile). Not wealthy. However, having enough money in savings that you get $40k/year without having to work is something else entirely. A 65-year-old with that nest egg is borderline-wealthy. A 40-year-old with that level of savings is solidly wealthy. If you can retire by age 40 and still have a higher income than half the country in your retirement, that's wealthy. Sure, you don't have a private jet, but you do have forty hours extra free time each week.

PaulDavisThe1st 5y ago
I agree with everything you wrote here except this: > However, having enough money in savings that you get $40k/year without having to work is something else entirely. A 65-year-old with that nest egg is borderline-wealthy. A 40-year-old with that level of savings is solidly wealthy. Why the difference? The 65 year old is going to be able to actually draw down some of the nest egg much sooner than the 40 year old. The 40 year old will be 65 some day. Could you explain what you mean? Is it just that the 40 year may still earn/save even more money, despite not actually needing to?
- lkbm 5y ago
  Yeah, I don't have a great answer to that question, but it certainly feels like there's a tangible wealth difference between "I can retire at standard retirement age" vs. "I can retire 15 years early". It's the same a 20-year-old owning a house vs. a 40-year-old owning a house. Same assets, but the former stands out as exceptionally well-off.
- deleted 5y ago
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- ghaff 5y ago
  I think the statement makes the most sense if you assume the 40 year old could choose to retire but doesn't. If they do retire, there's at least a greater level of risk to get to 65 with sufficient principal to continue paying out $40K/year. (Alternatively, the market is such that the principal is higher by the time they're 65.)

by lkbm 5y ago

PaulDavisThe1st 5y ago

I agree with everything you wrote here except this: > However, having enough money in savings that you get $40k/year without having to work is something else entirely. A 65-year-old with that nest egg is borderline-wealthy. A 40-year-old with that level of savings is solidly wealthy. Why the difference? The 65 year old is going to be able to actually draw down some of the nest egg much sooner than the 40 year old. The 40 year old will be 65 some day. Could you explain what you mean? Is it just that the 40 year may still earn/save even more money, despite not actually needing to?

lkbm 5y ago
Yeah, I don't have a great answer to that question, but it certainly feels like there's a tangible wealth difference between "I can retire at standard retirement age" vs. "I can retire 15 years early". It's the same a 20-year-old owning a house vs. a 40-year-old owning a house. Same assets, but the former stands out as exceptionally well-off.
deleted 5y ago
[deleted]
ghaff 5y ago
I think the statement makes the most sense if you assume the 40 year old could choose to retire but doesn't. If they do retire, there's at least a greater level of risk to get to 65 with sufficient principal to continue paying out $40K/year. (Alternatively, the market is such that the principal is higher by the time they're 65.)