Saturday, March 24, 2007

who wants to be a millionaire

i just read an article in the paper that indicated that there are roughly 2.9 million millionaires in the united states today. that translates roughly to 1% of the us population and puts you in some decent company, especially considering the awful savings rate of us americans. now, a million bucks is a good deal of money, but it doesn't mean that you can simply go hog wild and forget about your finances.

i once estimated (in my younger days) that i would need about 2 million dollars to retire -- i could easily live off the interest and not have any financial worries. i don't remember what i used as a rate of return or rate of inflation, but it still seems like something that would be easily doable. heck, if you're making a relatively safe 5% on that, you'll have 100k in spending cash each year without having to tap into your nest egg, though to be honest, i probably estimated earning closer to 10% on it.

i've come to my senses, though. while having 2 million dollars available to fund my retirement would be nice, it certainly is not a goal of mine. my goal in retirement is to have an account that i can safely make withdrawals from for the rest of my life. how large this fund needs to be depends on my expenses. if i could live off of $25,000 per year, a fund of $500,000 might be what i need. if i needed $100,000 per year, i'd need a significantly larger account to start from. the bottom line is that i won't be living off interest entirely. my retirement account will continue to earn interest, but i'll also likely be eating away at the principal, so i'll have to have some solid data about how much i spend to know how long my money will last.

to that end, i've had to break out of the typical paycheck to paycheck mentality. fortunately for me, i was able to break out of that mold many years ago and start building something for my future. now, how about you?

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