Recently we were visiting one of our sons and his family, include a 13- year old granddaughter. Out of the blue she stated she didn’t like millionaires. I couldn’t let that go unexplored.  Why not, I asked. They think they are big deals and they show off.  How do you know a person is a millionaire, I asked. Because they have lots of stuff, fancy cars, and live in big houses.  My son was afraid of where I was going with this and gave me a look.  Do you know any millionaires, I asked. No, was the reply. I decided to end it there. I was tempted to say yes you do, but I was afraid where that might lead.  Spotting a millionaire is not easy, they don’t wear badges or dress in the latest designer clothes. I was at dinner last night with friends. One guy was a electrician- or was. Now he is retired and owns 80 commercial and residential rental properties.  Given the definition of net worth, I suspect there are far more millionaires than many people assume.   In fact, there are around 22 million millionaires in the United States. 79% of millionaires did not inherit their wealth.  When a house and retirement savings are included, a net worth of $1,000,000 is not unattainable. Of course the big unknown is debt when considering net worth.  Being a millionaire - or billionaire- does not mean you have a million in cash or a million to spend, but it may mean you have been around a while to get there. The median age of a millionaire household in the US is 62. 

I HAVE BEEN ACCUSED of being too critical of America’s spending habits. I’m not in touch with families who live paycheck to paycheck, or so I’m told. I was roundly attacked by folks on Facebook, who claimed I lacked sympathy for the federal workers who ran out of money during the government shutdown—even before they missed a payday. We all know there are Americans who struggle to get by on very low incomes. But that’s the minority. Let’s talk about the great majority of households—those that spend money unnecessarily. Consider three statistics pulled together by BecomingMinimalist.com: 3.1% of the world’s children live in the U.S. and yet our kids own 40% of the toys purchased worldwide. Americans devote more dollars to shoes, jewelry and watches than they do to higher education. The average U.S. home has almost tripled in size over the past half-century. Yup, walk-in closets and bathrooms the size of small apartments are, it seems, essential. But all the while, the size of the average American family has been declining. I have eaten in homes in more than 15 European countries. Their homes are very nice, comfortable and, by American standards, quite small. The average size of a new home in the U.S. is 2,204 square feet, while in France it’s 1,228. I was window shopping in Germany a few years ago and noticed the steep price of men’s shoes. I asked how people could afford the prices, which include a 20% or so sales tax. The reply: Germans don’t own many pairs of shoes. By contrast, the average American owns 19 pairs, many of them never used. Given that many Americans prefer to sit in their car when ordering fast food or doing their banking, what are all the shoes for? Apparently, those boots aren’t made for walking. Visit Rome or Amsterdam and your traffic risk is being run over by a scooter or bicycle. Meanwhile, the three top-selling vehicles in the U.S. in 2018 were pickup trucks. “Americans bought over 17 million vehicles for the fourth year in a row in 2018, and 68% of them were trucks and SUVs, continuing a years-long trend away from cars that’s been driven by increasing choice, low gas prices and improving fuel economy,” says Fox News. Unless you need a big vehicle to generate income, that’s not transportation. Instead, those are luxury items—and they often cost $40,000 and up. In 2014, there were 48,500 self-storage facilities in the U.S., almost double the number of McDonald’s and Starbucks combined. We’re talking about places to store stuff that’s largely unnecessary or even forgotten about. Keep in mind that this is in addition to basements, attics and garages. One survey showed that roughly a quarter of homeowners can’t use their garage for their car because it’s so cluttered. I’m guessing another hefty percentage simply can’t get that pickup to fit in the garage. Public policy is set using survey data and lots of assumptions. I have trouble reconciling much of that research with the reality of America’s spending habits. How can you claim to be living paycheck to paycheck, and yet have more stuff than you can store in your house or afford a vehicle way beyond what you need to get from here to there? And one final cantankerous thought: Wouldn’t our financial future be a tad brighter if, instead of spending $73 billion each year on state lotteries, we invested the money? Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Shortsighted, Farewell Money and One Last Thing. Follow Dick on Twitter @QuinnsComments. [xyz-ihs snippet="Donate"]

Jonathan used to chastise me for saying that I thought a good goal for retirement income was to replace 100% of base pay or salary- excluding overtime and any form of bonuses.  I was making a suggestion, opinion, not suggesting a requirement because given most people don’t reach that goal, it is obviously not required even while desirable.  However, that’s the way Connie and I live. In fact, between my pension and our combined social security, gross income is a bit more than 100% replacement- based on my salary in 2008. Ah, there’s the rub. The value of that income has been eroded 49% so are we actually now living on 50% replacement. I ask myself, where would we be if we started at 75%? Who could be neutral in this debate? Who else but AI, so I asked ChatGPT? The answer was most people need 70% to 80% - conventional wisdom from AI. It said, “Most People Don’t Need 100% Income Replacement in Retirement.” So, I asked why. Here are the reasons given. 1. Work-related expenses disappear When you retire, you stop paying for: Commuting (gas, train, parking, tolls) Work clothes/uniforms Lunches out or convenience spending Professional dues, licenses, union fees Higher childcare or pet-sitter costs for long workdays This alone can reduce required income by 5–10%. Well maybe, but just as maybe, some of that may not apply. Dues, fees, commuting costs or childcare didn’t apply to us.  2. You’re no longer saving for retirement This is one of the biggest reasons 100% replacement isn’t necessary. A portion of income likely goes into: 401(k) contributions IRA contributions Catch-up contributions Taxable investment saving In retirement, you stop saving — you’re withdrawing instead. That frees up 10–20% of your gross income. Again maybe, or perhaps probably, but anything above 10% may be a stretch for many people. We never saved above 10% unless you count my non-cash compensation. Plus in retirement we still save - in 529 plans (by choice) and into an emergency fund.  3. Taxes are usually lower in retirement Retirees often pay less in taxes because: Social Security is partly tax-free You control how much you withdraw each year You’re not paying payroll taxes (FICA) anymore Many states reduce taxes for seniors or exempt Social Security For high earners, losing the 6.2% Social Security payroll tax alone makes a big difference. Again maybe. But RMDs can hurt. Tax laws change. Investment income can vary. In some cases the FICA taxable wage base may be a minority portion of wages.  4. Mortgage is gone For many households, the mortgage is 20–30% of spending. That could be a biggy - if the mortgage ends just before or upon retirement. In our case the mortgage was paid more than five years before I retired so there was no impact.  5. Kids and major obligations are gone People often spend less because: No more college tuition No more dependent expenses Fewer insurance needs (life, disability) Even affluent households see expenses drop by 10–15% here. I have two problems with this assumption. There may not be children. Plus by the time a person retires these expenses probably have long been gone, unless you have children in college when your 65.  There it is. AI expertise on retirement income. The question is how will all this apply to your situation. It’s still my opinion and only my opinion than as a buffer against inflation and unpredictable events that ..%...is a desirable goal. 

WHAT’S THE REALITY of most Americans’ financial life? It seems that many are having difficulty making ends meet. For instance, 42% of Americans say they’re struggling financially, the highest rate since Monmouth University began conducting its survey five years ago. If this is true, many Americans are certainly in big trouble. But I think that’s a big “if.” Why do I doubt such findings? For starters, the result is based on a survey, and people may not be honest in their answers. Ask yourself this: If close to half of Americans are struggling financially, who’s keeping all the businesses selling non-essential goods and services going? I recently drove a few blocks down the main street of a suburban town. In that short stretch, there were multiple nail salons, beauty salons, liquor stores, fitness facilities and coffee shops, not to mention restaurants, pizza shops and Chinese take-outs. I guess if a smartphone is a necessity, then so is an egg roll. Who’s buying those expensive pickup trucks? Who are the tens of millions of Americans who visit theme parks each year—and sometimes go into debt to do so? Survey results and spending patterns just don’t match up. I maintain that nearly all Americans can accumulate a modest emergency fund if they wanted to—and yet a Federal Reserve survey finds that just 68% of Americans would be able to cover an unexpected $400 expense entirely with cash. I’ll go further and say if the typical family let me review its credit card charges and what’s in its grocery cart, I’d find significant savings. A survey conducted by the Bureau of Labor Statistics found that the average American household spends $2,912 annually on entertainment, representing 3% of total income. Another $2,376 a year is spent on food not purchased from the grocery store. Here’s my favorite result: The average family supposedly saves 18% of their monthly income, based on the difference between their after-tax income and what they say they spend. If this is accurate, the average family should have no problem with retirement savings, creating an emergency fund or paying off credit cards in full each month. [xyz-ihs snippet="Mobile-Subscribe"] Which survey are we to believe? I’m not suggesting the majority of Americans have lots of cash to throw around, or that many lower-income Americans are not struggling. But I am suggesting Americans often mismanage what they have and they aren’t honest about it, either with themselves or with the folks who conduct surveys. Their lifestyle is based on spending—often paid for with debt—before taking the more prudent steps of saving and investing. The average household credit-card debt is $6,270. About 29% make the minimum or a low payment each month and are charged, on average, about 15% interest for the privilege. Only 14% of men and 10% of women say they pay off their balance in full each month. That means a lot of money is going to interest payments. If you can’t pay the card balance in full each month, you may be living beyond your means. A recent GOBankingRates survey found that 30% of Americans have between $1,001 and $5,000 in credit card debt, 15% have $5,001 or more in credit card debt and about 6% have more than $10,000. Is all that debt caused by spending on necessities? Color me skeptical. My question: Where does individual financial responsibility begin? Some Americans seem to have an unusual view of debt and who creates it. This Tweet caught my eye: “Debt is banks keeping you poor by loaning you money for things that will take half a lifetime to pay back…. That’s what it is, debt is caused by big banks and governments.” Yup, that’s the problem, Americans are forced to borrow. In my opinion, a family’s lifestyle should be based on its total income minus three expenses: taxes, savings and necessary insurance such as health care. I suspect many people wouldn’t be happy with what that meant for their lifestyle. Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles. [xyz-ihs snippet="Donate"]

You faced no financial disasters through life, you were not disabled, you simply went through life with no specific financial plans for the future and now you are old, retired with minimal income or resources. How would you feel accepting money or substantial gifts (car) from adult children? Glad, embarrassed, ashamed, entitled, grateful?

TIME VALUE OF MONEY, asset class, diversification, dollar-cost averaging: This is the language of investment professionals. But it isn’t the language of everyday Americans, including those saving for retirement in their employer’s 401(k) plan. Trust me, I know. During my nearly 30 years overseeing 401(k) plans, including providing financial education to participants, it became clear to me that using such plans as intended wasn’t easy for most people. For diversification, employees would often invest in several different mutual funds all focused on a similar collection of U.S. stocks—with no thought of adding bonds or foreign shares. In many cases, workers couldn’t be dissuaded from putting all their money in their employer’s stock. When target-date funds were added to a plan’s menu of investment options, many participants bought them as one of several investments, thereby negating the intended purpose. During the 2008-09 financial crisis, employees often panicked, even if retirement was decades away. Needless to say, this locked in losses and meant they missed out on the subsequent recovery. Even worse, some workers were turned off investing in stocks and instead retreated to bond funds and other-fixed income options, in the process likely making their retirement-income goal impossible to achieve. Participants consistently displayed a tendency to be ultra-conservative or dangerously risky with their investments. In either case, they put their retirement in jeopardy. It was rare that employees adjusted their investment mix as retirement approached. Many focused on their retirement date as if, on that date, they would use all the money in their account, thereby missing the vital point of allocating their investments to maximize an income stream over what could be 20 years or more. All these missteps were common, despite extensive and ongoing efforts to educate plan participants. The reality: Workers can be overwhelmed by the choices they’re required to make—and by the consequences of making wrong choices. This is often compounded by employers adding too many investment options, which leads to indecision or throwing a dart at several funds with nice sounding names. One plan I reviewed for a friend offered 42 different mutual funds. That friend, not understanding the differences among the funds, chose none and instead defaulted to a fixed-income fund. Result? He retired with $45,000 in his account. For most Americans, 401(k) plans are the most important retirement savings vehicle available to them, especially so when there’s an employer match. And yet these plans won’t provide a secure retirement if used incorrectly. Getting workers to save is the first step. Teaching them to invest is the second. We have a long way to go. Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. [xyz-ihs snippet="Donate"]