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Dad, Are We Rich?

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Re: Dad, Are We Rich?

#151

Post by IanCal »

Mvandenbergh wrote: post #55
challenger22 wrote: post #43

Earlier quoted context omitted.

Look up the 4% rule and firecalc.com to learn how this 100x multiple is a lot less, more like 25x realistically. A lot of people are irrationally intolerant of risk. Try not to let fear dominate your intuition about investing.

That 4% is empirically derived from data covering the 20th century and is appropriate for earlyish retirement. There's two reasons to be more conservative: 1) We may be in a low-yield world for a long time. 2) Those studies were based on earlier retirement, not on people leaving the workforce in their 20s and 30s, the way that some very lucky HN readers may do.

Although on the flip side, the number also assumes you have no flexibility and don't change your spending according to how much you have left.

It's a tricky one to work out, and 4% is (as you say) definitely not a number you can easily use for retiring in your 30s.

Re: Dad, Are We Rich?

#152

Post by notacoward »

harryh wrote: post #97
sudosteph wrote: post #67

It's a bit ridiculous to see the hoops that some of the wealthy will jump through so they don't have to feel guilty about their position in the world. The person writing this article is almost certainly "rich" by any reasonable standard. Meanwhile, most families making 60k in the US (especially in areas with the best job markets and high COL) - are not. The world income comparison thing at the end is not meaningful i…

The world income comparison thing at the end is not meaningful in the slightest. Why not? I would say that it's very important to understand that even middle class Americans are quite well off when compared to the vast majority of the rest of the world.

It's also very important as a step on the way to understanding how precarious that position is. That inequality is unsustainable in the face of increasing ability to have someone do the same work elsewhere for a fraction of the cost. People need to adjust and plan accordingly, but first they need to understand how anomalous the US "middle class" has been.

Re: Dad, Are We Rich?

#153

Post by SketchySeaBeast »

jedberg wrote: post #112
SketchySeaBeast wrote: post #45

Earlier quoted context omitted.

That also makes those with a truly extravagant lifestyle part of not-rich - I think you'd need to be in the billions to rich a level that you truly could maintain without working - one can always rack up an extraordinary bill buying a new personal jet or private yacht every week.

My definition throws away extreme outliers of people who buy a new yacht each week. But even if you include them, I suspect someone with that much money has figured out to set aside enough to eat and have very comfortable clothing and shelter.

> "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save.

My argument was that that initial statement isn't true - the incredibly rich can live lifestyles that don't hit that criteria.

Re: Dad, Are We Rich?

#154

Post by jjeaff »

geggam wrote: post #78
ac29 wrote: post #61

Earlier quoted context omitted.

80th percentile household income in Santa Clara County is $200k/yr [0]. The linked dataset doesn't go any higher, but I suspect 500k/year is 95th percentile or above, which puts you in the upper class. Even in the Bay, $500k/yr is the "own two homes and a few Porches" level. [0] http://www.vitalsigns.mtc.ca.gov/income

If you are single maybe. I think of a middle class man being what my old man was. Single income, wife stayed home and he provided for everyone. 4 kids. Good luck having 2 homes and some porsches with only 500k in the valley supporting a wife and kids

A $2.5m mortgage would cost you around $13k a month, Porsche lease less than $1k a month. You've got about $15k a month left in take home pay what in the world are you going to spend that on and still feel middle class?

Re: Dad, Are We Rich?

#155

Post by jjeaff »

germanlee wrote: post #65
jedberg wrote: post #7

My measure of rich is "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save. So yeah, if you want a big house and nice cars and nice vacations, you wouldn't consider yourself rich compared to people who don't h…

Warren Buffet had an interesting take on "being rich". He defined it as being able to withstand economic, medical, etc catastrophe and still being able to maintain your standard of living and be able to rebuild your wealth in a reasonable amount of time. I think he set "rich" as having $25 million of liquid assets. He said have that amount of liquid assets will shelter you from a few medical or economic disasters and…

If you have $3m, sure, a business crisis could wipe you out, but if a medical one does, it's your own fault. Health plans can't even have maximum lifetime payouts in the US anymore. They will have to pay for everything over your out of pocket max.

Re: Dad, Are We Rich?

#156

Post by manicdee »

jedberg wrote: post #7

My measure of rich is "Can I live my current lifestyle without regular income from a job?". If the answer is yes, then you are rich. The trick here is to make sure to keep your lifestyle costs in line with your salary when you first start out, so that as your income grows you can save. So yeah, if you want a big house and nice cars and nice vacations, you wouldn't consider yourself rich compared to people who don't h…

That situation would be better described as “independently wealthy” rather than rich. Independently wealthy is specifically the scenario where your investments are your major source of income and you can maintain your lifestyle without extra income.

Rich for me is about current liquid assets, and doesn’t relate to income. Rich vs wealthy is cash pool versus cash generation.

A cleaner who wins the lottery is rich. A homeless person with enough investment income to cover food and transport is wealthy.

Re: Dad, Are We Rich?

#158

Post by zaius »

jaccarmac wrote: post #59
simonh wrote: post #2

Some wealthy trust fund babies were asked how much wealth they thought they would need to really feel financially secure long term. They had inherited wealth ranging from tens, up to hundreds of millions. Almost all of them named a figure about double their personal net worth, regardless of what that net worth was.

Sounds fascinating, got a source for that? Seems to dovetail with the research re: happiness and net worth not being correlated after a point.

I'm guessing GP read in in the interview with Abigail Disney

https://www.thecut.com/2019/03/abigail-disney-has-more-money...

> They did a study at the Chronicle of Philanthropy years ago where they asked people who inherited money, “What amount of money would you need to feel totally secure?” And every single one of them, no matter what they had, named a number that was roughly twice what they inherited. So that’s what you need to know about money, right? If that is your primary measure of success or value in life, then good luck with that, because it will never feel good.

Re: Dad, Are We Rich?

#159

Post by vasco »

trowawee wrote: post #130
magnamerc wrote: post #128

Earlier quoted context omitted.

Doctors are way overpaid. The barriers to entry to become a physician are un-necessarily high, and I have a suspicion that that's by design. You only need a moderate amount of intelligence to learn and apply medicine. If the barriers to entry were lowered, then physician salaries would fall precipitously as supply would outgrow demand.

Disclaimer: I'm married to a doctor. That said, I agree with your point that they are over-paid, but I absolutely don't agree with the idea that you only need a moderate amount of intelligence to work as a physician. A slight majority of my friend group is physicians, both through my spouse's education and work and through a collegiate friend group that mostly went into medicine. While I have many, many complaints ab…

That's their argument, that the barriers to entry are too high. Obviously people who've successfully navigated those barriers will be inteligent and capable, but perhaps we could lower the average skill and knowledge level of doctors by 10% but reduce costs by 50% (by having more people into the profession) and therefore being able to provide appropriate care to more people and detect conditions earlier. This could make for a net-positive result in terms of overall health in society. Similarly, if you use technology to supplement a human doctor, you should likely be able to train doctors less and achieve similar outcomes.

Re: Dad, Are We Rich?

#160

Post by geggam »

jjeaff wrote: post #154
geggam wrote: post #78

Earlier quoted context omitted.

If you are single maybe. I think of a middle class man being what my old man was. Single income, wife stayed home and he provided for everyone. 4 kids. Good luck having 2 homes and some porsches with only 500k in the valley supporting a wife and kids

A $2.5m mortgage would cost you around $13k a month, Porsche lease less than $1k a month. You've got about $15k a month left in take home pay what in the world are you going to spend that on and still feel middle class?

Just to follow up here.

500k/yr is around 41k a month. Figure you are going to be paying about 40% in taxes or 16,400 a month in taxes you get 24600 left

Considering you just spent 14k on a house and car you get 10,600k left. Groceries for a family in the bay runs around 2k a month so now you are down to 8k a month. Wife needs a car plus you need insurance gas and maintenance. Parking runs what $45 / day or 1350... lunches run around 30/day or 900... you haven't paid for clothes or extra curricular activities ( karate lessons 1k / month )

Family is not cheap, Family in the bay is hella expensive

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