Is $1,000,000 Enough? (By Age)
31:45 Share

Here's a big question. Is a million dollars enough.

Brand, I am so excited to talk about this because everyone always assured ires to be a millionaire wanted hit that magical seven figure status. But the question that everyone has in a lot of the troll in the comments will say to us, a million dollars is not enough for a million. Why would you even set your sites on a million dollars? Just is not gonna the job.

get IT inflation. And then even the if you puts withdraw rates on there, if you do like a safe withdraw RAID, I mean, depend on how aggressive you want to be. Use of what's considered industry standard? Around four percent. Yeah, maybe a million dollars to visit .

that a four percent would draw IT a million dollar portfolio. Could cash flow you 4 thousand dollars a year， increasing with inflation? And so the question becomes all, if I can't live off for forty thousand dollars a year, is that enough? And and even more so, depending on my age of a million dollars, isn't enough right now. Will IT even be close to being enough when I get to retire? We thought IT would be interest resting that you show you an exercise of how inflation can erode the value of your dollars through ty. But for a fifty five year old, by the time that they get to retire age to sixty five, a million dollars at that time would only be the equivalent of about seven hundred and forty forty dollars purchasing s age forty five, by the time that they get to sixty five a million dollars, then that only be worth a little bit more than five hundred and fifty thousand dollars and come to a twenty five year old by the time of twenty five year old gets all the way to retirement at age sixty five, forty years in the future a million dollars then would be the equivalent of about three hundred and .

six thousand dollars that we're given the troll their love and is so like preach, preach, preach. But let's hit pause. I still want people to know I have content out there, talks about the value and how hard IT is to reach that first hundred thousand dollars.

And that's an achievement upon itself because you start building your army of doll bills and starts building upon itself. Let me go to just tell you, a million dollars is still an incredible achievement. And there's a reason we even did a content, a show on the milestones you should be trying to reach.

And we still get a million dollars because you know what doesn't happen without your first million, you will get to three million. You don't five million without crossing that seven figures. So don't let some roll out there.

Even the way we've set this up so far tell you, hey, that's just a million arges in a it's still I tune the money. We just can tell you, let's answer the questions, some key questions that I think we should chAllenge. What is a million dollars? How can I help you? Let's go to detail on what we want to cover.

IT, yeah. And I think a mutants, intuitive ly get this, you understand this, but a lot of you still have the goal. Hey, I hit million dollar s status by age fifty five, or by forty five, or by even maybe early on at thirty five. So like you said, but we're going to answer some questions.

One, if you have a million dollars now today, are you at the stage where you could take your foot off the guess, uh, how about this? If not a million dollars? If that's not enough, how much do I need in order to be able to retire? comfortable?

Ly, when I get to her time at age, or if you don't have enough now, what steps do you be taking? How what should you be saving in order to be able to get there? So we want to be able to quantify and specify that for you. So wherever you are in your financial journey, you will understand your 4 for every decade.

twenty eight, fifties, forties, fifty fifties. We're going to answer these three questions I got when we are doing our content meeting. I was just like, I can't wait to do this show because this is going answer all of your financial motors I want you to strap in, we're going to load you up and we're going look at this and angles that I don't haven't seen anybody else cover some kind .

of excited hit this. So let's job right into is an exciting decade because you are Young and your ambitious and you have your entire life ahead of you. And so what if you happen to be a twenty five old who all the sudden head one million dollars first.

even though we live in the social media world where they everybody believing that your make a million hours a year, if they don't make a million, they make a half a million hours year is just not reality. I want you guys not. I got to think this is a rounding air of data of how many twenty five years have a but we love numbers.

We love that. So we said, let's go with IT. Let's actually daydream. What is IT like for a twenty five year old to have a million dollars at age twenty five? What does that mean?

So without doing anything else, if you just had a million dollars twenty five, and you could earn an annualize nine and a half percent rate of return between now in the time you get to retirement, by the time you get to eight sixty five, that million dollars could have growing to forty four million dollars. But I know what you throws out there.

And will forty four million in that? What about inflation? We ve got affect that, even fracturing in inflation. Do you recognize that at that stage of life, forty four million dollars then would feel like thirteen and a half million dollars today.

I think you could do OK on that, right? If we again, to apply just a safe withdraw rate to that means that age sixty five, this portfolio could provide for you about five hundred and forty thousand dollars in annual old cash days. dollars. So if you are a twenty five year old and you have a million dollars being right now, yeah you know what you you on easy .

street now this fun exert A N thought exert but like we just a round that you're welcome to reach out. But let's let's actually bring this back.

Now if we've told people will twenty five, if you had a million dollars, you couldn't quit working though, even though as powerful as that, because you assumed on this as a key assumption, twenty five year old has a million dollars, doesn't need the money until they turn sixty five, and we just let IT grow. But there really is somebody might come to and say, twenty five, I want to quit working that doesn't really work. What does somebody need to to be doing if they actually want to be successful?

So let's think through this in sort of a case study format. Let's say that you're twenty five years old. And what we did, we said that the median income for our financial muts, we actually pulled this from our financial milton survey meeting.

And income for folks in their twenty years was somewhere between fifty and one hundred thousand dollars of annual income. So we just went right the middle instead. Let's assume that at twenty five your income is eighty seven thousand five hundred dollars.

And let's assume that over your working career you have a three percent payer ise each year. On average, you are gonna an aggressive investor because you're starting so early. Lets assume that you can make nine and a half percent on your investments. And then when you get to retirement at age sixty five, we're just can use the four percent safe draw rate to determine how much we can count on that portfolio providing us. And our goal for financial opinion is going to say we want to be able to replace eighty percent of our free .

time income.

Now when you get to retirement, we recognize that it's not income. You're trying to replace IT is expenses. We understand that, that's the way that you plan.

However, for someone is twenty five, I don't know what their expenses are gonna. So the best thing that we can use the best metric are gonna for the the exercise is just to replace eighty percent of your preretirement income. So let's see how the numbers play out again. At age twenty five, you start with an income of eighty seven thousand five hundred dollars. Well, just because of inflationary pressures and because you're getting pay raises at the rate of inflation each year, by the time you get to age sixty five, your turn to working income is about two hundred and eighty five thousand dollars a year, pretty .

respect.

So what that means is that if you are gna aim for a portfolio that's gonna have an eighty percent replacement ratio, that income you need of a portfolio of about five points, seven million dollars by the time that you get to age sixty five. So for a twenty five year old, that would be the number that you're .

shooting towards OK. That doesn't that number, by the way. Because if we think about this from an inflation that doesn't even seem that crazy to because if I say what a million dollars when I was in the midi, when I looked at a million dollars, I would say right now, probably somewhere between two and a half to three million dollars.

Is that because of what's happened in inflation in the thirty plus two years that i've been out? So this makes sense that probably in the future, for twenty five year old, five point seven million. But what would they need to have two day?

Because look for twenty five year old, do you get forty years for your money to grow? And I know the power of compounding growth is just exponential. So I bet these numbers more digestible than people probably really before.

before even go there. I want to Normalize five. Seven sounds like a lot of money and IT, but this is forty years in the future. So just a sort of level set.

What this means is when you're drawing that eighty percent of you preview time income, it's going to be the equivalent purchasing power of seventy thousand dollars in days dollars. So I just don't think we're not talking about crazy, crazy out there assumptions. This is a very realistic assumptions, the portfolio that would generate seventy thousand dollars in today's dollars. So the question U S is if i'm twenty five and I want to get to five point seven by the time I get to retirement, how much what I needed saved today? One hundred and thirty thousand dollars.

O, K, by the way, that still we had A Q N A show that we recorded early this morning. Twenty seven year old couple had a little over one hundred thousand dollars. I was like, minute, that's grateful.

So even that's a lot of money. So I think that the reality is is even most twenty five years old, I am just being very self reflective and transparent. And have one hundred and twenty thousand thousand dollars when I was twenty five.

And I think that's can probably the majority of our audience. So what is their savings, right? Because I always tell people in the beginning, your savings rate is even more important than even what you get in rate of return or investments. So what's the savings rate that would help a twenty five year old? Because there are a billionaire of time, they probably can get away with a lot for a little.

They certainly can. If you started zero, when your goal is to be able to get to five point seven by the time you get to sixty five, your savings rate throughout your entire working career, we need to be about nine point six percent. Notice, we need to say twenty five percent, which is what we aspire to, what we want you saving because you're starting so early.

So what this means is that in year one, you you be saving about seven hundred dollars a month. And then every year, as your income increased, you would keep your savings percentage static at nine point six percent. So four, five, twenty five years, les, this should get you excited. You should recognize that the future is yours. If you can just start saving and putting something away today.

I love this number because ten percent is is very doable. And a lot of times when you think about especially you have employer match with your retirement plans and other things in your income, you've got this knocked that you're go ten percent. But I do want to caution because all of you will feel like you ve got to get out a gel free card.

It's not twenty five percent like we talk about for all the other decades. That's because I recognizing your chinese is aspirational. You don't have you your peak earning years yet.

Life is expensive. Money is is hard to come into, but do not sleep on this as you start getting pay raises. I do want you to aspire and even make movement towards that twenty five percent.

Guess what it'll do for you? Every assumption we've got here is if you work until your age sixty five, if you can actually get aggressive with that savings rate at a Young age, guess what you get. You get the option, the flexibility to do things on your terms and maybe that retirement date, instead of being sixty five, maybe it's fifty five, maybe it's fifty. You get to choose your own adventure by investing more earlier, give yourself that type of flexibility and owe your time .

that much sooner. I so twenty five is a pretty hard charge to hit a million, but maybe you're someone who is very ambitious. You said, you know, I have a goal. I want to hit one million dollars of liquid wealth by the time that I get to thirty five. Now still going to be very, very difficult to do, but not outside the rammer possibility.

And so if I do that, what do the numbers look like? Well, if you have a million dollars invested at age thirty five, and you can earn eight and a half percent annualized over the course of your working career, that million dollars without adding another dollar to IT has the potential to grow to almost twelve point seven million dollars by the time that you get to retirement. But we know that twelve point seven then won't be worth the same as that is now. So if we account for inflation, that means that your portfolio would be the equivalent of about five point two million dollars in today's dollars.

Amazing as we go through these decades IT IT. I keep saying that three to five percent, three to five million dollars IT really is the key number that I think a lot of people are aspiring to. And i'm noticing a trend here just like i'm yes, the thirteen million dollars is big, but if you that's future dollars, you came really paid into that because numbers do crazy things.

When when you get to expansion, ally, you got decades of growth. If you bring you back to what a person would need in today's purchasing, I think five million dollars for a thirty five year old, you know, they are thirty years to get there. I bet this is going to feel a little more doable than most people even realized.

Yeah, what's wild is if we just applied, you know, a four percent withdraw rate to that five point two million dollars at eight sixty five, that could provide you with two hundred and nine thousand dollars in two days dollars. So you're talking about a very, very healthy retirement lifestyle, very, very healthy cash flow in retirement that if you can get to a million dollars by the .

age thirty five, a of you work with us. And where is so thankful to have you? But I still want to put IT under the lens of myself.

You guys know I had several goals. I wanted to make six figures by the time I was thirty, and I wanted to be liquid figures, liquid seven figures. By time out forty, I didn't reach the forty number.

I'm just being honest with you guys. I did not have now I had a network over seven figures. But if I was looking at just retirement assets, investment assets I didn't reach, I go. So I still think this is very aspirational. Not many thirty five year olds have a million dollars, so we need to show them what does IT look like if you really are trying to figure out what I need if it's not a million dollars. So again.

let's look at a very similar case that let's say that you're thirty five years old, let's say you're now at this party of career making a hundred thousand dollars a year. We're going to assume that your salary increases on average about three percent per year to keep up with inflation gonna. Assume your rate of return is eight and half percent between now and retirement.

We're going to use a four percent safe with the draw when you get to age sixty five. And again, our goal is going to be an income replacement of eighty percent of your private type income because we don't know what your expenses are gonna be. They're still so much life to happen.

So we're going to shoot for a high income replacement ratio. What is things is that at thirty five, your income is one hundred thousand dollars. By the time you get to age sixty five, your income will have grown to be about two hundred and forty three thousand dollars a year. Again, our goal is going to be able to replace eighty percent of this numbers. So I in order to do that, by the time that this thirty five year old gets to age sixty five, they will have need to, they will need to have accumulated a portfolio worth about four point eight five million dollars.

IT is amazing. I comes back to really does. And what I like is, I guess we have thirty years for somebody who's thirty five right now watching this and say, well, what would I need to be at right now? Because I don't have a million hours.

You guys showed that a million hours thirty five. But that's still so aspirational. It's such a hard goal to reach.

What would somebody who's actually really been trying hard, been saving, been proposing saving for the future? What would IT take right now at thirty five without another? Or to get there.

if you, at thirty five have saved and invested three hundred and eighty two thousand dollars without saving another dollar, without putting any more into the pot, that three hundred and eighty two thousand dollars, if you can grow, and eight and a half percent annualized, has the potential to turn into four point eight million dollars by the time that you get to age sixty five, three hundred and eighty thousand. Difficult, impossible get.

If there's a lot of researching to pip on what year I go pull the data from, cause for a few years, the data was around eight thirty three. But I think most recently is pride because of some of the inflation and cost of living. IT has been in the age thirty six for a lot of people that they actually discover investing somewhere in their ID thirties.

So a lot of you are probably just now finding the money by showing you say, hey, I want na turn on the ability for our army of dollar bills to work harder than I can with my brain, my back, my hands. How do I do this and where do I start? And we so we have a case study now for you, or give IT. We done the research for you. Even if you're starting at zero right now, in your age thirty five, you can still reach these goals with what savings.

right? If you can save twenty four point one percent of your gross income and you can stick to that savings percentage for your entire working career, even starting at zero and thirty five, you still have the ability to build to a portfolio four point eight million dollars by the time that you get to age sixty five.

Now I think you know this is hopefully guys are starting to see that there's something beyon beyond just us trying to motivate you. We are actually pretty nerdy. We've put the math behind IT that's twenty five percent savings rate that we tell you guys by way. If you make under two hundred thousand as a married couple hundred thousand a single individual, you got to counter your employer match in that number um you can quickly see that's tired to numbers. It's time to the math as well. I also encourage money, got outcome sash resources we have what will twenty five percent do for you? And IT is a very powerful tool because maybe you're not perfectly thirty five, maybe you're thirty two, maybe you're go check out that resource so you can kind of figure out what savings rate in your age and the power of time can do for you.

Again, for someone, this person at thirty five, they have a hundred thousand million in call. This means that in the first year, they're saving about two thousand dollars a month, and then that number increases as their salary goes up through time. Again, that's basically maxing out your former one.

K, that would be the equivalent of someone doing that. So if you can do that, even starting at thirty five, you can set your future financial self up for success. And that's why we tell you to shoot for twenty five percent, because there's a really good chance for folks that in their toys, in their thirties, a lot of life has not happened for you.

You may be in the missing middle or about to the medal of your future health, going to look like your lifestyle, your income, your career, your location. So if you you can start early and if you can save consistently, there's a really good chance that windows unknown, unknown come your way. And you've done the hard work early on, you will be able to push through that, still reach the financial goals you have as your life against.

But I want to take the the coach. Power here until you'd stay motivated in the fact that I know in the messy middle, there's a lot of chances when you you're short on time, you're short of money, you got the kids, you ve got your career obligations. All these things are pushing hard on your it's easy to say I need relief and i'll just take this party time off and come back later.

Don't do IT I make really hard decisions on how do you live your life, where do you live, what type of car you drive because you'll never, ever, ever get those thirties back. You can get your twenty years back. You'll never build to get the third ties back. Don't sleep on this very important time because the world multiple of what every dollar has the potential to become is still super strong in your thirties.

Brand, let's now talk about the is a lot of folks a lot of folks who said, you know, what about the time I get into my forties? I want to be a liquid million or and this was even one of your goals that you laid. And we know studies have shown that most people cross seven figure status somewhere in their late forty.

So I think this is, in reality, a realistic option for folks s in the forties to get to a million dollars. And so the question becomes, is IT enough? Yeah.

I was pretty excited about getting to the forties because it's kind of like when you know everybody knows I love millionaire door, but when you see the millions next door has their whole wealth calculation or which are network to be and have always said, you know it's not really fair for twenty something or thirty something to do that millionaire calculation because it's just not the reality of wind people cross.

And so when we've done this for the choice, done this for the thorium IT was definitely kind of in that aspirational of shooting for the moon. More of this is what you would see on in the gram more than what you see on the money I show. But now that we're in the forties, I think this is the decade where you kind of count to see million air seven figure status cross. So I don't think this numbers could be as crazy as like the twenty something.

What was IT close in the forty?

You'll see because you're older, it's a lot different .

if you've been able to accumulate a million dollars by the time you get to forty five and you can earn seven and a half percent on your investments for the rest of your career, that million dollars without adding another dollar too.

IT has the ability to turn into almost four and a half million dollars and just, you know, four and a half million dollars twenty years in the future will feel the equivalent of two and half million dollars today, and two and half million dollars still a very healthy retirement porfolio. If we applied the four percent, withdraw to that sum of money. This means that you could count on cash flow from your portfolio of just under a hundred thousand dollars .

a year in today's remember how earlier chinese I was talking about that when I graduated college in the mid dunes and I red million or next door the the whole golf a million dollars was just so powerful to me. But now I feel like it's changed and it's somewhere between two and a half to probably three and half million dollars. And I think it's very telling that right now, if you do if you've reached this at age forty five and did absolutely nothing else, you're going to have the equivalent of that two and a half million dollars or hundred thousand dollars a year for the rest of your life. That's pretty successful.

So but let's say that you don't don't want to just stop now OK. what? Not just a general plan that tells me a general idea.

I want something a little more specialized. Let's look at the case study. Let's assume that you are forty five years old and your income is one hundred and twenty five thousand dollars year.

Further, remainder of your career, you get three percent salary increases. You can invest your dollars. They can earn seven and a half percent. And when you get to retirement at sixty five, you're going to count on a four percent withdraw, right? again.

Your goal is to replace eighty percent of your prior type income for the forty five year old while they are making one hundred and twenty five thousand dollars. Today, when they get to retirement, their immediate a preretirement income has grown to about two hundred and twenty five thousand dollars. What if the goal is to replace eighty percent of that amount? The amount that this forty five world will need to build towards is about four and a half million dollars that lies up very, very nicely.

So but how much would you actually have to bring you back to if we were going to make this work? And dial is, and IT does time and IT is amazing. This is the first decade where we go seen intersection isn't. And that's what so wild about IT.

When you bring IT back, how much would you need to have saved today to be able to accomplish that ride? A million dollars, one million and twelve thousand dollars are financial mutants that behave like financial mutants. This is the reality that they actually get to see inside their financial life.

And and I go in through one more cold water point, and I want to put some raise of sunshine on this, is that if you had to start from zero at forty five and still want to reach the same four and a half million dollars by sixty five, that's only twenty years. What percent of your savings would be required .

would actually have to save almost fifty seven percent of your growth income? And Frankly, that becomes daunting and difficult.

Let me tell you the raise of sunshine here. Really, we're saying for somebody who has a million dollars and does absolutely nothing else until later, sixty five is going to have this sweet path forward. A lot of you guys might be finding this content in your hundred and fifty thousand, two hundred and fifty thousand in year in your forties. It's not over for you.

All you have to do is you need to say, i've heard these guys IT sounds like there is another scenario that I can choose and still be successful as what if i'm saving twenty five, thirty, maybe even thirty five percent? I do fifty six percent, but these guys didn't give me credit that I might have a quarter of million dollars already working for me. You can still do this IT just means more of the responsibility falls on your shoulder because you have less time IT doesn't mean that the game is over, just mean you guys get serious and don't waste another day another ounce of your time.

I love IT bra. Now let's talk about those in the fifty. The question is, is a million dollars enough if I am in my fifty? So fine, a fifty five year old, and I have a million dollars without saving anymore.

That one million over the next decade, the last decade of my career, can nearly double IT turns into the one point nine million dollars. And if we count for inflation, that's actually equivalent today of about a million and a half one point four million dollars. If I apply a four percent withdraw rate to that number, that means I can count on port 4， generate for me about fifty seven thousand dollars a year in annual cash.

Yeah, I not too shabby, especially because we have talked about a lot with the others twenty years and years. I wouldn't to be talking about social security much because it's just so much weird stuff going on with funding and making sure is enough resources there.

There might be changes coming up with household security, anal, but on a fifty five year old and you know you're retiring ten years, you're probably getting into that safety zone where the politicians aren't going to necessary change all the rules. So you take that fifty seven thousand plus the social safety net of social security. This still is not the worst thing i've ever seen. This is actually a pretty good retirement.

But our financial mutes are you. So let's assume that you're fifty five years old and you make a hundred and fifty thousand stage of your career, your sellers going to increase about three percent per year of the next decade. You're gonna earn about six and a half percent on your money because you're now starting to regress your rist taller and timing.

You can have a four percent safe draw rate. You still are going to aim for an eighty percent income replacement ratio. So while you're making one hundred and fifty thousand dollars today, by the time you get to retire midday sixty five, you're in couple of grown to just over two hundred thousand dollars. And if all water a place, eighty percent of that number, I will need to have accumulated about four million dollars by the time I get to age sixty five.

So the question becomes, if i'm gonna do that, where do I need to be fifty five? If I want to be on track to get to four million by sixty five? And the answers, about two point one million dollars, but I don't feel like this does a justice brand because what we know is just because we get to fifty five and just because we get to multi millionaire status IT doesn't mean that we stop saving. This doesn't even account for someone who hits these numbers in their fifties and keeps adding to the pot and keeps saving and keeps putting dollars in.

I feel like for the two scenario we just laid out for the for the fifty five year old who's watching this, if you're just if you have a million dollars of fifty five, good. It's growing. It's good now to be great.

And that's kind of what this lot is showing. Itd, be nice if you have two point one, because now you can really let IT roll. All this shows as man is IT an incredibly powerful if you use and leverage time. And a lot of you guys are watching and we throw so many numbers that you probably how do I do this for myself because I I love what I did. But you in run mass area because of thirty, i'm some number in between the that okay, we got you covered if you go check us out and learned money got out com, we actually have a know your number course.

And while we design this course, but because I think there's a lot of people that don't need to financial advice or but they're trying to figure out how the ahead of the curve they behind the curve are right where they need to be. And on top of that, what is changed by your behavior if you save a few hundred dollars more a month or if you have this amount of lump sum that comes in, how does that impact things? We have built IT all in.

Or how about inflation? We just came through a post inflation every period. What if our inflation percentage of three percent isn't what you should be? Maybe you wanted play around and you want to do four percent? Or what about if you didn't like how we the rates of returns over time based on your aging, your risk profile, you can play around with the know your number course and actually pull every one of those levers, play with the different numbers, come up with different scenarios and really kind of string together. What is your financial situation look like?

At the end of the day, personal finance is incredible personal and well, a million dollars is a wonderful goal and it's an amazing milestone to hit. IT may not be your milestone or IT may not be the in of your journey, but remember, you can get two million, three million, four million, five million, million, unless you get to one million.

First, guys, we give you a tons of free stuff. Got a money out, out come resources. The big take way.

I want everybody to hear out IT today is your money should work harder than you do. So don't let another second of time pass you by get that money working. A S A P.

I'm your Brown present. Mister boo hanson. Money about team out.

The money guy show is hosted by brian present. Abound wealth management is a registered investment and visor firm regulated by the securities and exchange commission in accordance and compliance with the securities laws and regulations. Abound wealth management does not render or offer to render personalized investment or tax advice through the money I show. The information provided is for informational purposes only, and does not constitute financial tax, investment or legal advice.