How much does it take to be ‘rich’ now?

[Gregmal]

8 minutes ago, KCLarkin said:

'Rich' is probably at least $5M of liquid assets. But you aren't really rich until >$20M. The term millionaire from the robber baron days is more akin to billionaires today.

 

This is easy to see when you translate capital into income. $5M at 5% is 'only' $250k per year. That is a nice, upper middle income. But nothing extravagant. You are dentist rich.

 

$1M is only $50k per year. That is literally the poverty line, where I live.

So the Fed raising rates is making people “richer”. 

[RedLion]

11 minutes ago, KCLarkin said:

'Rich' is probably at least $5M of liquid assets. But you aren't really rich until >$20M. The term millionaire from the robber baron days is more akin to billionaires today.

 

This is easy to see when you translate capital into income. $5M at 5% is 'only' $250k per year. That is a nice, upper middle income. But nothing extravagant. You are dentist rich.

 

$1M is only $50k per year. That is literally the poverty line, where I live.

$250k of investment income is a lot more than a $250k per year w2, especially in a high tax state. Probably the equivalent to a $400k w2 which is equivalent to what an ER doctor working a bunch of overtime would make. 
 

$50k at 0% income tax rate on qualified dividends with subsidized health insurance is equivalent to about 120k of self employment income minus taxes and insurance in Cali or probably most other states to some degree. 
 

 

Edited June 5, 2023 by RedLion

[thepupil]

15 minutes ago, RedLion said:

$250k of investment income is a lot more than a $250k per year w2, especially in a high tax state. Probably the equivalent to a $400k w2 which is equivalent to what an ER doctor working a bunch of overtime would make. 
 

$50k at 0% income tax rate on qualified dividends with subsidized health insurance is equivalent to about 120k of self employment income minus taxes and insurance in Cali or probably most other states to some degree. 
 

 

Absolutely! For most high income people, their biggest "expenses" are a) taxes b) savings and c) childcare/education. . The first two decline substantially when ones W-2 goes away. The third could also change drastically if one or two spouses don't work or you do public school.

 

our net takehome is about 58% of gross after taxes and 401k's, health insurance, etc.  

 

You can also see this in the percentiles. $2.5mm net worth is 94.5 percentile household net worth, whereas the "equivalent" income is $100K is only 82nd percentile of individual earners.

 

It's much more common to have income than it is to have the assets to endow that income. 

 

Edited June 5, 2023 by thepupil

[tede02]

9 minutes ago, thepupil said:

Absolutely! For most high income people, their biggest "expenses" are a) taxes b) savings and c) childcare/education. . The first two decline substantially when ones W-2 goes away. The third could also change drastically if one or two spouses don't work or you do public school.

 

our net takehome is about 58% of gross after taxes and 401k's, health insurance, etc.  

 

 

This is basically spot on for my wife and me. 

 

I was just doing the mental math on the expense of my two young kids the other day and the number was easily $30-40k annually. Nearly $20k of that is childcare.

[thepupil]

our nanny's total comp and benefits is $60K, so we need to make $100K to pay her. That's a luxurious choice/investment in my wife's career on our part, but day care would be $36K/year  / need to make $60K. In NYC, I've heard $80 or even $100K+ is not uncommon and there the marginal tax rate is more like 50% in which cash you could "need" $200K gross to pay for childcare*.

 

*by childcare, I mean the ultraluxurious/extravagant choice to pay someone full time to assist you in watching your children, which may make sense for some people   

 

Being short on time (which is what happens in a dual career household) is an incredibly expensive choice. 

 

 

Edited June 5, 2023 by thepupil

[Dinar]

1 hour ago, thepupil said:

our nanny's total comp and benefits is $60K, so we need to make $100K to pay her. That's a luxurious choice/investment in my wife's career on our part, but day care would be $36K/year  / need to make $60K. In NYC, I've heard $80 or even $100K+ is not uncommon and there the marginal tax rate is more like 50% in which cash you could "need" $200K gross to pay for childcare*.

 

*by childcare, I mean the ultraluxurious/extravagant choice to pay someone full time to assist you in watching your children, which may make sense for some people   

 

Being short on time (which is what happens in a dual career household) is an incredibly expensive choice. 

 

 

In NYC, the marginal tax rate on a self-employed individual or income of a spouse in a dual income household can easily be 60%.  $60K for a nanny including benefits is cheap.  By the way, never heard of anyone paying benefits for a nanny.  An acquaintance is a lawyer who wants to go work for the government one day, so wanted to employ a nanny on the books - made three dozen offers, all declined, since all were on the dole and wanted cash.

[maxthetrade]

What an interesting thread! I live in a small town in Germany and most of you would be shocked how little I spend and still, I eat japanese Wagyu, drink good wine, have nice vacations, drive a X3M, etc. all on <60k/year. I really can't think of much that i'd like to do but don't do because of monetary considerations. Money just keeps piling up. The one thing that comes to mind is that I'd like to travel by NetJets, I really hate the security shit and lines at airports. And one day when I'm really pissed I'll sign up  

[maxthetrade]

12 hours ago, Gregmal said:

What if you wanna live in Monaco or on Fischer Island? 

 

You might be surprised but with the exception of rent/real estate it's not very expensive. If you're comfortable living in a small appartment  (~€3k/month) your tax savings will easily pay for everything! 

[Blugolds11]

 

We went with a foreign Au Pair. Was cheaper than daycare by a couple hundred a month, but the real "value" is in the flexibility, no need to take and pick up from a location outside the home. can set their hours as you wish, up to 46/week I believe and if you do the math, it works out to be like $8/hr. Work hours can change week to week so if parents want to plan a getaway they can for an evening etc. Also, they can watch more than one child, and thats when the savings really pile up, rather than paying for two kids in daycare. 

 

Childcare costs are staggering no matter how you slice it. 

[CorpRaider]

I like that methodology @thepupil. Playing around with what I might consider wealthy (versus rich); maybe top 10% or 20% of income...

Edited June 5, 2023 by CorpRaider

[thepupil]

39 minutes ago, Dinar said:

In NYC, the marginal tax rate on a self-employed individual or income of a spouse in a dual income household can easily be 60%.  $60K for a nanny including benefits is cheap.  By the way, never heard of anyone paying benefits for a nanny.  An acquaintance is a lawyer who wants to go work for the government one day, so wanted to employ a nanny on the books - made three dozen offers, all declined, since all were on the dole and wanted cash.

I think DC market standard probably includes a greater % "on the books". in the interview process it was about 50/50. our nanny is a citizen so she wants the social security/income/etc. my family/friends who live inother parts are shocked we pay "on the books" w/ health insurance, etc. 

[james22]

3 hours ago, Intelligent_Investor said:

However much annual income you need pre-tax and multiply by 50, so you are essentially assuming a 2% withdrawal rate on your investments. So if you think you need 150K/year you would need 7.5M I think this withdrawal rate is sufficiently low to provide a buffer if stuff goes wrong/you have an unexpected expense. While you might be able to get away with say 1 or 2 million, one large, unexpected expense and most of your wealth is gone and you need to go work again.

 

4% is considered the Safe Withdrawal Rate because it survived the historical worst-case scenarios.

 

2% leaves time and money on the table.

 

https://www.kitces.com/blog/4-percent-rule-bengen-morningstar-report-the-state-of-retirement-income-safe-withdrawal-rates/

[james22]

29 minutes ago, maxthetrade said:

 

You might be surprised but with the exception of rent/real estate it's not very expensive. If you're comfortable living in a small appartment  (~€3k/month) your tax savings will easily pay for everything! 

 

I actually looked at a Fisher Island condo as a retirement home.

 

~$400k for 500sf, live with a bunch of boat captains and nannys. 

 

Neither the golf club membership or marina slip rental were terribly expensive.

 

Would have been entertaining.

[thepupil]

54 minutes ago, maxthetrade said:

What an interesting thread! I live in a small town in Germany and most of you would be shocked how little I spend and still, I eat japanese Wagyu, drink good wine, have nice vacations, drive a X3M, etc. all on <60k/year. I really can't think of much that i'd like to do but don't do because of monetary considerations. Money just keeps piling up. The one thing that comes to mind is that I'd like to travel by NetJets, I really hate the security shit and lines at airports. And one day when I'm really pissed I'll sign up  

do you have a family? is the 60K pre or post tax?

Edited June 5, 2023 by thepupil

[gfp]

58 minutes ago, maxthetrade said:

What an interesting thread! I live in a small town in Germany and most of you would be shocked how little I spend and still, I eat japanese Wagyu, drink good wine, have nice vacations, drive a X3M, etc. all on <60k/year. I really can't think of much that i'd like to do but don't do because of monetary considerations. Money just keeps piling up. The one thing that comes to mind is that I'd like to travel by NetJets, I really hate the security shit and lines at airports. And one day when I'm really pissed I'll sign up  

Well you didn't live on less than 60k the year you bought the X3M.

[Dinar]

@thepupil, Europe is very cheap, Germany particularly.  I remember having amazing Michelin star restaurant meals that would be $300 per person in NYC and paying $75 per person.  Italy and Spain same story.  Real estate is a bargain as well.  Healthcare is as well a bargain.  

 

In terms of nannies, most nannies on Upper West Side in Manhattan are legal, they are just all on the dole, that's why they don't want to work on the books.  Some also "work" as home attendants for their healthy relatives, so don't want to lose the ability to double dip!

Edited June 5, 2023 by Dinar

[maxthetrade]

23 minutes ago, thepupil said:

do you have a family? is the 60K pre or post tax?

 

I don't have family, the 60k is post tax, I pay ~40% on non investment income.

[maxthetrade]

20 minutes ago, gfp said:

Well you didn't live on less than 60k the year you bought the X3M.

 

Of course not but cost per year is around 5-6k not counting opportunity cost which is probably the biggest cost.  

[ICUMD]

Agree with the 20 M liquid asset definition of Rich.

Over 100M is Ultra rich.

 

 

 

 

 

 

 

 

 

 

 

[Spooky]

Great thread. As a recently minted millionaire it certainly doesn't feel like a million goes that far anymore. The average home where I'm from in the Greater Toronto Area is now $1,196,101 in Canadian funny money.

 

I also echo other people's sentiment that the money itself does not make me happy / improve my happiness.

 

Looks like I need to move to a lower cost place to live and use the money for something that will have a real impact on my life.

[crs223]

How does the govt calculate financial aid for kids going to college?  is quitting your w2 job before college a viable strategy?  how does govt decide who is eligible?

 

Id love to get free college, electricity, healthcare, etc in exchange for quitting my job!  ha!  I bet i could get some housing subsidies too. $California!

[thepupil]

5 minutes ago, crs223 said:

How does the govt calculate financial aid for kids going to college?  is quitting your w2 job before college a viable strategy?  how does govt decide who is eligible?

 

Id love to get free college, electricity, healthcare, etc in exchange for quitting my job!  ha!  I bet i could get some housing subsidies too. $California!

there are ways to optimize one’s assets and income for this. Generally you weight your assets toward retirement account, primary home equity and avoid income in the years leading up to college, and then apply to FAFSA only (there are schools that use another form).

 

this is not my plan, but I’m aware of the methods. You can google around. Can make sense for someone who has a kid that can get into the top 10-20 schools with generous aid to game the EFC lower. In many cases don’t  think makes sense. 

[rohitc99]

My takeaway from the thread - how expensive raising kids is. No wonder population growth is slowing and even dropping. I am sure my kids and their generation is already on the fence on having kids of their own and it is showing up in the stats already

 

From a pure economics standpoint, marry - dont have kids and you can retire 20 years early 

 

Edited June 5, 2023 by rohitc99

[rkbabang]

Great thread.  I agree with whatever gets you enough to live the lifestyle you want makes you rich.   It doesn't matter what other people think.  I really only know two types of people in my life.  People who think a million dollars isn't really that much money and people who think $100k in the bank makes you rich.

 

 

[Parsad]

8 hours ago, Paarslaars said:

A life shared with friends and family in good health is all you need.

 

Everything else is gravy...

 

Very true!

 

Until you get hit with a $250K medical bill because you didn't buy travel insurance or you get diagnosed with ALS and need care for the rest of your remaining life. 

 

Cheers!