Financial Well Being

They sound pretty fairly well off to me.

Did you know you could have set up a poll to go along with the question.

Oh, Big Welcome to A2K.

Did you mention where they lived? Standard of living in the specific area? I suspect the 55 yr old is the male?

The income isn't that high for an urban US area (San Fran, NY, DC, Boston), but the investments look good and there's no debt, which is a key factor.

Also, a $300,000 can mean a lot of things, depending on where you live. I can get a 2 bedroom within 10 miles of Boston with a small yard for that, but probably a lot more house somewhere else.

I'm going with comfortable - well-off if in a small suburban area.

I would say "comfortable". What you did not mention is what provisions have these folks made for retirement? Pension from their companies? 401Ks? This could make a big difference in how well they could live in their later years.

bb, Our home is worth a tad more, because we live in Silicon Valley, and we have a tad more in our retirement savings. Our income is about $75,000, although my wife works three days a week, and both of us draws social security, and I've been retired for four years. In all the Abuzz and A2K forums concerning finance and investments, I've always declared ourselves to be "comfortable." As somebody suggested, it makes a difference on where you live, what your mortgage and other fixed expenses are, how many children you have (going to college), and how much of your income you are saving for retirement. c.i.

C.I.

So I'm guessing you must have between $1.2 mil and 1.7 mil
in investments\retirement funds. To come out at $75k annually. Now what would make a difference in that gross number would be the type of investment such as property. bonds, mutual funds. And I hope you have assistance of a professional money manager?


Also, FWIW you must not have a great deal of fixed expenses to travel as you do.

Thanks for the replies. The location would be a midsize city in a low tax state. Let's say about half of the investments are in tax deferred accounts with about 10% of current income continuing to fund those accounts. One small pension will be available at age 65.

This was really a rhetorical question because of a conversation about 'perceived' wealth. In an age when many people are living paycheck to paycheck or approaching their retirement years with, say $25,000 saved it's important to put it all in perspective. There are some millionaires who probably feel they are "comfortable and others with maybe $100,000 feeling the same way.
A couple who decides to live fairly modestly in retirement will be able to stretch their savings much farther than say, the millionaire who wants to live well. I have a hunch that if I heard from some people with the modest assets mentioned above ($25k) they might be more inclined to say "well off". I think to use the word wealthy takes many more bucks before people percieve themselves that way.

husker, As of 9/30, our retirement funds consisted of 28% cash, 20% annuities, 22% bonds, and 30% equities. I transferred some of our equities into bonds just before I retired at 63, and that was four years ago. We sold income property two years ago, because I didn't want to 'manage' anything during my retirement. I try to draw as little as possible from our retirement savings every year, and have managed to stay below 4%. With 70% in cash, annuities and bonds, I sleep at night pretty good, and don't worry about the fluctuations of the market. Your guess on our net assets is pretty good. You get an "A." c.i.

bbagby - There is a phrase that has been used quite a bit in the last 15 years - "property rich, cash poor". This is a large portion of those retiring or getting ready to that bought houses in the 1960s/1970s and watch their property values soar but they put little away for their own retirements. Most of those properties were on the east or west coast where property values soared and as these people retire they sell their houses and buy a less expensive property in FL or AZ and use the cash difference as their retirement nest egg.

In the right markets some of these people's nest eggs ended up being a million or more but that's a pretty risky way to finance a retirement.

As you mention though, perception plays a large part here. "Comfortable" is generally the standard the person is accustomed to.

The reply about "property rich, cash poor" brings another question to mind. In the first situation, the couple with the $300,000 home sells and moves. Is it wiser to get a mortgage and put as little down on a house as is feasible and invest the rest or is it better to just pay cash for the house?
The easy rule of thumb is this: If you can earn more in an investment than you pay in a mortage then keep the money invested and take out a mortage. I tend to disagree with that because investments are not guaranteed (as we've all seen in the last 3 years). Home appreciation isn't either of course. Also, those who say, never pay off your mortgage because of the above mentioned philosophy would not advocate taking out a mortage on a paid off home to invest the proceeds; it's deemed too risky. Interesting contradiction.

Another aspect to that can also be the people's ages and health condition. If they don't expect both will live another 5 years why buy the house outright? They'd be better off with a 5% down mortgage and paying the PMI. When the 1st one goes the house is paid in full and the other lives off of the remaning investments from the sale of the 1st house.

There can be lots of aspects to consider. More than I care to think about to be honest... lol

As far as 'perception' goes, many in third world countries that barely eek out a living to keep food on the table will probably say they are "comfortable." Your example of the millionaire is well founded. Many may have a nice home and car, but very little or nothing saved. That's the reason why many middle-class families had to turn to food banks for food when they lost their jobs in Silicon Valley. Many have moved out of this area, because of the high cost of living. The unemployment rate here is almost 8 percent. The irony of all this is that the home prices in our zip code continues to increase. c.i.

Not mentioned:

1. job stability
2. # children
3. health of family
4.how investments are distributed.

$300,000 for a house? Depends on where this house is. What's the condition of the house. Is the value increasing or decreasing.

I have a condo, valued in the Boston area at $350,000. Means nothing really, since the same place if located in Wisconsin would have a value of about $150,000.


Well Off: to me this means $5 million or more.

The couple you described are the American middle class, trying to survive and pay taxes.

bb, I hate to use the word "never," but as a general rule, you should not pay off a mortgage just because you have the money. Many variables must be considered, not only how much you can earn vs how much your mortgage interest. For starters, one should look at how much longer he intends to live in that house. If it's less than five years, don't pay off the mortgage. If one is still working, the mortgage interest and property taxes can be deducted from your tax returns, but not if you pay off the mortgage. All important considerations. c.i.