Jonathan Clements from the Wall Street Journal writes A Cool Million No Longer Buys You a Luxe Retirement. His point is that a million doesn't get the style of retirement one would expect since:
A million ain't what it used to be. Inflation is the culprit and our money is the victim. A million dollars is only worth 54% of its value from 1987, due to inflation averaging about 3% annually. Similarly, 20 years from now a million dollars will only be worth $550,000 in today's dollars.
Homes are typically a big asset. Many people are millionaires due to rising home prices, which wouldn't be accessible in retirement. For example, the median price of homes in LA, San Francisco or New York is over $500,000. Even if one had a million in investments yielding 5%, that would be about $50,000, a comfortable, but not necessarily luxurious retirement.
The challenge is that a million dollars is still a lot of money, with only 2% of Americans having that much or more. So before saying one is saving too much, check if one's savings is on track to become at least million dollars by retirement:-)
For more on Reaping the Rewards, check back every Friday for a new segment.
Photo Credit: morgueFile.com, Paul Anderson
A million ain't what it used to be. Inflation is the culprit and our money is the victim. A million dollars is only worth 54% of its value from 1987, due to inflation averaging about 3% annually. Similarly, 20 years from now a million dollars will only be worth $550,000 in today's dollars.
Homes are typically a big asset. Many people are millionaires due to rising home prices, which wouldn't be accessible in retirement. For example, the median price of homes in LA, San Francisco or New York is over $500,000. Even if one had a million in investments yielding 5%, that would be about $50,000, a comfortable, but not necessarily luxurious retirement.
The challenge is that a million dollars is still a lot of money, with only 2% of Americans having that much or more. So before saying one is saving too much, check if one's savings is on track to become at least million dollars by retirement:-)
For more on Reaping the Rewards, check back every Friday for a new segment.
Photo Credit: morgueFile.com, Paul Anderson
This is not financial advice. Please consult a professional advisor.
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