Why Being a Millionaire At Retirement Isn’t a Big Deal Anymore

For many, millionaire status is a pipe dream. But to be reasonably comfortable in your golden years, a million dollars is only the threshold.

Celebrated in song, literature, movie plots and motivational seminars, becoming a millionaire status was a sign of financial independence. In the past, perhaps. Today, not so much.

Retiring baby boomers find, as baseball legend Yogi Berra said, “The future ain’t what is used to be,” and neither is a million dollars. It takes $6.2 million today to buy what $1 million bought in the 1970s. Over the past 40 years, inflation averaged 4.83 percent a year, with total inflation at 383 percent.

To minimize the risk of running out of money in retirement, not withdrawing more that 4 percent of principal a year, it takes $1.25 million dollars to provide $50,000 a year in cash flow. That’s $4,166 before taxes per month, hardly a princely sum.

However, the near-retirees are not even close to that baseline. The average savings of a 50 year old is $43,797, according to statisticsbrain.com. Already, 80 percent of those ages 30 to 54 do not believe they will have enough money by the time they retire. Sadly, many of them are right.

Outside of winning the lottery or a big inheritance, financial freedom is a do-it-yourself project. There is no magic, but there are strategies. Obviously, saving for the future is foundational, but you must recognize the time value of money.

To be a millionaire by 65, starting at 30 with savings growing at 6 percent annually, you need to invest $2,164 per month. Wait until 35, and you must save $3,164 per month. Starting at 40, a startling $6,102 per month. Learning to control debt and wasteful spending as well as disciplined saving and investing at a young age pays off.

How else to get there if you are not one of those big-money singers, actors, sports stars or technology wunderkinds?

The millionaires I know as a financial advisor did it the old-fashioned way through hard work and prudent and disciplined saving. They took advantage of stock options, pensions, company retirement plans and other benefits. Some built closely-held businesses with sustainable value and well-thought-out succession plans.

They invested in stocks with sufficient patience and discipline to ride through periodic downturns. In many instances, they added money to equity accounts when everybody else panicked and sold, a strategy the legendary investor Sir John Templeton advocated years ago. They invested in real estate, exercising prudence relative to long-term investing, and paying attention to market cycles.

They were not afraid to pay for good financial planning, legal and tax counsel to keep and grow more of what they earn. They answered the “what if?” questions with defensive strategies involving life, health, disability and liability insurance to secure the future. They recognized the wisdom of a comprehensive estate plan so as to not leave their family and surviving spouse in dire straits.

What is your plan for retirement security when $1million is no longer enough?

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Written by Lewis Walker, CFP, president of Walker Capital Management, LCC in Peachtree Corners, Ga. Securities and certain advisory services offered through The Strategic Financial Alliance Inc. (SFA). Lewis Walker is a registered representative of The SFA, which is otherwise unaffiliated with Walker Capital Management. 770-441-2603. lewisw@theinvestmentcoach.com.

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