A Million Dollars Doesn’t Go as Far as it Used to

no yield aheadAs a kid, I dreamed of being “a millionaire”.  I figured I would be a professional athlete and make $100,000 per year, buy a mansion for my family to live in and be famous.  Back then, (early 1970’s) it was a BIG DEAL to earn $100k in a year.  Pete Rose, the all-time baseball hit king, signed a contract for $100k per year and that was the kind of money I dreamed of making.

There was no way I could have convinced my parents that people my age would routinely earn $100,000+ per year and not be considered “rich” or anything more than middle class (in Chicago land).  Imagine earning a six figure income and having a tough time-saving money?  This is the society most of us live in today. People today ( my hand is up) have a tough time distinguishing between need and want.  While some of us are more frugal than others, it seems plausible to me that you should be able to save more than you do.

Let’s assume I accomplished my dream of being “a millionaire”, what happens next?  Well, for starters, if that was my investment net worth, I won’t be living in a mansion at retirement as that won’t buy a mansion these days in this area, nor would the property taxes be affordable.

Back in the 1970’s, if you had a million dollars in the bank, you had more money than you could ever spend.  Today, if you invest that money at Chase bank in a ten-year CD you could expect to earn only $10,000 per year (before taxes).  Obviously, that wouldn’t get you very far today.

Those millionaires with a retirement pension to go along with their investment nest egg are the ones that have it made as they can let their million grow and use it as fun money for trips, high-end cars, etc.

Unfortunately, I do not see many people under the age of sixty with a pension plan that they can count on during retirement.


What should the 40+ year old’s be thinking about now in light of this?

  1. Plan on working until at least age 70 – this is the single, best way to ensure being financially independent it gives you more years to save and grow your money while it shortens the years you will be living off your investment income.
  2. Your 401k will not be large enough by itself to generate sufficient retirement income – save another 5-10% of your income in a Tax-Managed account.
  3. Reduce the term of your mortgage – going to a 15-year mortgage makes the “count down” real and when that expense is gone, you’ll have much less need for current income
  4. If you have permanent (cash value) life insurance try to make larger payments if necessary to create the ability to stop making payments in sync with your reduced or stopped income at retirement.
  5. If you have the option for a Health Savings Account make sure to fund it so you have a large stash of cash available for medical expenses during retirement. Who knows what insurance will look like at that time, but you’ll maximize your flexibility if you have cash available.

Of course, these are just some of the ideas you might want to consider.

Email me if you would like to get a 2nd opinion about how your retirement plan is shaping up.

See our website, www.fortunefinancialgroup.com for more information.


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  1. Brad, thanks for the tips. Regarding your point: “Reduce the term of your mortgage – going to a 15-year mortgage makes the “count down” real and when that expense is gone, you’ll have much less need for current income.”

    I’ve actually heard arguments the other way to actually INCREASE the term of your mortgage. That way, you can increase your current cash flow by making smaller payments and sock the extra money away in an investment account that is hopefully growing faster than your ~4% mortgage interest. And you get the benefit of a mortgage interest tax deduction for a longer period of time. Obviously every situation is different, but I would be interested to know if you have any thoughts on that strategy.

    • Ron, I have supported that strategy for years as it works as long as you consistently invest the difference (30 yr. payment vs, 15 yr. payment). I personally tend to invest in all equities, so now I look as the mortgage principal payment as my “fixed income” investment.

  2. Pingback: How Much is Enough? | Life Planning Today

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