Author Topic: Wealthy people more likely to skip retirement  (Read 6077 times)

Silvie

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Wealthy people more likely to skip retirement
« on: August 16, 2013, 09:41:28 AM »
I found this on Yahoo:

http://finance.yahoo.com/news/wealthy-people-more-likely-skip-171928023.html

Some quotes from the article:

If a wealthy worker's income is mostly derived from their paycheck, they're more likely to associate their money with work and feel less secure at the prospect of ending their cash flow altogether. They may simply feel like they haven't earned enough to sustain their lifestyles for the long-term. If you're used to an $800,000/year lifestyle, you'll feel pressure to replicate that same income in retirement, as well.

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Most wealthy investors said they wouldn't really feel financially secure until they had saved at least  $5 million.

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$800,000/year???? If I had that much money, I would retire immediately!

Cromacster

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Re: Wealthy people more likely to skip retirement
« Reply #1 on: August 16, 2013, 10:26:35 AM »


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$800,000/year???? If I had that much money, I would retire immediately!

The issue is they are currently also spending 800,000 a year.  If they instantly switch from 800,000 spending per year to...say 100,000 a year.  It could feel like poverty for them.  Obviously these people have no mustache, probably not even the skin on their face to grow one.

Lans Holman

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Re: Wealthy people more likely to skip retirement
« Reply #2 on: August 16, 2013, 10:51:33 AM »
Maybe they're also more likely to enjoy or at least take some satisfaction from their work?  I could see where if you're cleaning toilets you're going to want to quit ASAP but if your job is more presitigious and forms the bulk of your social life it's harder to imagine walking away.

Silvie

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Re: Wealthy people more likely to skip retirement
« Reply #3 on: August 16, 2013, 10:56:34 AM »


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$800,000/year???? If I had that much money, I would retire immediately!

The issue is they are currently also spending 800,000 a year.  If they instantly switch from 800,000 spending per year to...say 100,000 a year.  It could feel like poverty for them.  Obviously these people have no mustache, probably not even the skin on their face to grow one.


I know, can you imagine spending that much money? I wouldn't even know how!

Silvie

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Re: Wealthy people more likely to skip retirement
« Reply #4 on: August 16, 2013, 10:57:17 AM »
Maybe they're also more likely to enjoy or at least take some satisfaction from their work?  I could see where if you're cleaning toilets you're going to want to quit ASAP but if your job is more presitigious and forms the bulk of your social life it's harder to imagine walking away.

I hope so! If they don't plan on retiring at all, they better love their jobs.

mpbaker22

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Re: Wealthy people more likely to skip retirement
« Reply #5 on: August 16, 2013, 11:10:41 AM »
My dad has a job in or near this category (probably 500-600k this year).    Somehow the money was never saved, but he didn't live an outlandish lifestyle.  Their house was just under $300,000.  But they got a new car every 3-4 years or 90,000 miles, whichever came first. It was suburbans and minivans and switched to minivans and civics after a while, but a lot of stupid expenses on repairs and maintenance.

The biggest 'issue' was they had 6 kids- they paid for most of our college tuition (probably 80-90% but a few of us went to public school for well under 20K/year) and they bought most of us new cars upon graduation (I got a civic with 130K miles on it).

Anyway, before this gets too long, my parents got divorced while I was in college, which is why I know so much about their financial history.  This did split their savings in half, but I once asked my dad why he didn't just quit his job at which he worked 80+ hours a week.  He said he couldn't afford to retire.  If I remember right, they both came out with well over a million, and he's still working at 58, and still claiming he can't afford to retire.

One last point - it's exactly that lifestlye that has brought me to MMM.  Even if it wasn't on BMWs and Porsche, I've seen that spending more money doesn't really make one happier.  Oddly enough, I make about 1/10 the salary but am planning to retire well before 58.

Luckily I've educated myself on personal finance.



Some 'stupid' things that money was spent on - They aren't all exactly stupid, and some of them might pay themselves back ... :
$20,000 on maintenance and repairs for the honda civic i'm driving.  This was in the first 3 years of the car's life, in addition to the 20+K purchase price.  Plus, the car before this one was traded in for ~$6K after being purchased for $20+K 3 years prior.
literally $1000+/month on eating out for the past 8 years or so.
New kitchen - $20,000 estimated
Finished basement - $20-$40K estimated
College tuition - 512K - 2 private schools 4 public, though I think my sister might have a scholarship, and I might be overestimating the other private school
2 new cars every 3 years for the past 15 years - $250,000+
2 new cars for graduates + used one for me + 2 for my sister (right, 2 cars!) - $85-$100K

You can see how without living a super fancy lifestyle, you can spend A TON of money!
« Last Edit: August 16, 2013, 11:20:26 AM by mpbaker22 »

Albert

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Re: Wealthy people more likely to skip retirement
« Reply #6 on: August 16, 2013, 12:49:39 PM »
Ok, I don't know anyone like that but I can easily imagine spending pretty much unlimited money on housing.

My mother's cousin is probably the richest person I know personally, I'd be surprised if he is worth less than 5 millions. He is, however, a very frugal guy. Probably too frugal, because they have no kids and all that money will be left to some distant relatives...

SnackDog

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Re: Wealthy people more likely to skip retirement
« Reply #7 on: August 16, 2013, 01:10:40 PM »
$5 million ain't all that much. At 4% SWR, it's only $200,000/yr.  Might sound like a lot, but not to someone spending four times that much.

Also, if you had $200,000/yr you could potentially spend:
- $40K on income taxes in the US
- $50K on a property or two with insurance, maintenance and property tax
- $40K on kids in college, assuming you are in your 50s
- $60k on dining out, entertainment, holidays, petrol, insurance and clothes (just $5k/mo)
- leaving a surplus of only $10k/yr for medical emergencies, etc.

dragoncar

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Re: Wealthy people more likely to skip retirement
« Reply #8 on: August 16, 2013, 03:17:17 PM »
$5 million ain't all that much. At 4% SWR, it's only $200,000/yr.  Might sound like a lot, but not to someone spending four times that much.

Also, if you had $200,000/yr you could potentially spend:
- $40K on income taxes in the US
- $50K on a property or two with insurance, maintenance and property tax
- $40K on kids in college, assuming you are in your 50s
- $60k on dining out, entertainment, holidays, petrol, insurance and clothes (just $5k/mo)
- leaving a surplus of only $10k/yr for medical emergencies, etc.

Wow, you tried hard and couldn't get to 200k.  A 10k surplus for "emergencies" means nothing when you have $5 million in the bank.

BlueMR2

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Re: Wealthy people more likely to skip retirement
« Reply #9 on: August 17, 2013, 06:22:41 AM »
If a wealthy worker's income is mostly derived from their paycheck, they're more likely to associate their money with work and feel less secure at the prospect of ending their cash flow altogether. They may simply feel like they haven't earned enough to sustain their lifestyles for the long-term. If you're used to an $800,000/year lifestyle, you'll feel pressure to replicate that same income in retirement, as well.

Even with much smaller amounts of income, there's that feeling of insecurity at retiring...  I don't even make a tenth of that.  The math says I can safely retire in 3 years if quit my 2 big expensive hobbies and 16 years if I keep them and spend at my largest historic amounts on them.  Despite what the math says, I really don't feel at all comfortable about potentially retiring in 3 years and not having that paycheck!

DocCyane

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Re: Wealthy people more likely to skip retirement
« Reply #10 on: August 17, 2013, 07:32:35 AM »
The few people I know in the super high earning category don't plan on retiring because they don't seem to do any actual work. They are in banking or finance or something like that, and their workday consists of reading the newspaper, drinking coffee, answering a few emails, deciding where to lunch and who with, and attending a few meetings.

Compared to how I spend my work day -- and most of you, I'd imagine -- this isn't work. This is socializing and passing time. Retiring from plush offices and company credit cards hardly seems advantageous.

mpbaker22

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Re: Wealthy people more likely to skip retirement
« Reply #11 on: August 17, 2013, 08:20:35 AM »
The few people I know in the super high earning category don't plan on retiring because they don't seem to do any actual work. They are in banking or finance or something like that, and their workday consists of reading the newspaper, drinking coffee, answering a few emails, deciding where to lunch and who with, and attending a few meetings.

Compared to how I spend my work day -- and most of you, I'd imagine -- this isn't work. This is socializing and passing time. Retiring from plush offices and company credit cards hardly seems advantageous.

Sounds about what I do, but I also started a topic related to being bored.  I think at this level of income most of the 'work' is actually negotiating with someone at the same level of your associate company, usually on a golf course.  Although that isn't the case for my dad, so I'm not so sure.

Silvie

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Re: Wealthy people more likely to skip retirement
« Reply #12 on: August 19, 2013, 11:12:15 AM »
If a wealthy worker's income is mostly derived from their paycheck, they're more likely to associate their money with work and feel less secure at the prospect of ending their cash flow altogether. They may simply feel like they haven't earned enough to sustain their lifestyles for the long-term. If you're used to an $800,000/year lifestyle, you'll feel pressure to replicate that same income in retirement, as well.

Even with much smaller amounts of income, there's that feeling of insecurity at retiring...  I don't even make a tenth of that.  The math says I can safely retire in 3 years if quit my 2 big expensive hobbies and 16 years if I keep them and spend at my largest historic amounts on them.  Despite what the math says, I really don't feel at all comfortable about potentially retiring in 3 years and not having that paycheck!

How about dropping 1 hobby and retire in 10 years? May I ask what these expensive hobbies are? I'm curious :)

Undecided

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Re: Wealthy people more likely to skip retirement
« Reply #13 on: August 19, 2013, 11:45:42 AM »
The few people I know in the super high earning category don't plan on retiring because they don't seem to do any actual work. They are in banking or finance or something like that, and their workday consists of reading the newspaper, drinking coffee, answering a few emails, deciding where to lunch and who with, and attending a few meetings.

Compared to how I spend my work day -- and most of you, I'd imagine -- this isn't work. This is socializing and passing time. Retiring from plush offices and company credit cards hardly seems advantageous.

They might also make some difficult decisions, applying exceptional insight and judgment, at some point during the day.

Mr.Macinstache

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Re: Wealthy people more likely to skip retirement
« Reply #14 on: August 19, 2013, 11:55:56 AM »
My dad has a job in or near this category (probably 500-600k this year).    Somehow the money was never saved, but he didn't live an outlandish lifestyle.  Their house was just under $300,000.  But they got a new car every 3-4 years or 90,000 miles, whichever came first. It was suburbans and minivans and switched to minivans and civics after a while, but a lot of stupid expenses on repairs and maintenance.

The biggest 'issue' was they had 6 kids- they paid for most of our college tuition (probably 80-90% but a few of us went to public school for well under 20K/year) and they bought most of us new cars upon graduation (I got a civic with 130K miles on it).

Anyway, before this gets too long, my parents got divorced while I was in college, which is why I know so much about their financial history.  This did split their savings in half, but I once asked my dad why he didn't just quit his job at which he worked 80+ hours a week.  He said he couldn't afford to retire.  If I remember right, they both came out with well over a million, and he's still working at 58, and still claiming he can't afford to retire.

One last point - it's exactly that lifestlye that has brought me to MMM.  Even if it wasn't on BMWs and Porsche, I've seen that spending more money doesn't really make one happier.  Oddly enough, I make about 1/10 the salary but am planning to retire well before 58.

Luckily I've educated myself on personal finance.



Some 'stupid' things that money was spent on - They aren't all exactly stupid, and some of them might pay themselves back ... :
$20,000 on maintenance and repairs for the honda civic i'm driving.  This was in the first 3 years of the car's life, in addition to the 20+K purchase price.  Plus, the car before this one was traded in for ~$6K after being purchased for $20+K 3 years prior.
literally $1000+/month on eating out for the past 8 years or so.
New kitchen - $20,000 estimated
Finished basement - $20-$40K estimated
College tuition - 512K - 2 private schools 4 public, though I think my sister might have a scholarship, and I might be overestimating the other private school
2 new cars every 3 years for the past 15 years - $250,000+
2 new cars for graduates + used one for me + 2 for my sister (right, 2 cars!) - $85-$100K

You can see how without living a super fancy lifestyle, you can spend A TON of money!

We have similar Parents. Mine just retired at 68. They made great money, but spent soo much of it away too on cars and their furnishing a big house and expenses. They recently moved down a little but they have a 15yr mortgage at 68yrs old! What? I just can't image that. But that's the thing with that baby boomer generation. They never felt hard times and spent as much as they earned it seems. These are the same parents that never taught me how to save or invest anything. This is what pushed me toward the MMM lifestyle, along with the crash of 08. After that, it was wake up time.


dragoncar

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Re: Wealthy people more likely to skip retirement
« Reply #15 on: August 19, 2013, 01:31:49 PM »
The few people I know in the super high earning category don't plan on retiring because they don't seem to do any actual work. They are in banking or finance or something like that, and their workday consists of reading the newspaper, drinking coffee, answering a few emails, deciding where to lunch and who with, and attending a few meetings.

Compared to how I spend my work day -- and most of you, I'd imagine -- this isn't work. This is socializing and passing time. Retiring from plush offices and company credit cards hardly seems advantageous.
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