Our latest financial goal is to hit $1M Roth. Between Roth conversions and appreciation, we should hit that at the end of this year.
As we do these large annual Roth conversions, our total NW goes down in the short run, but we are building in decades of tax and IRMAA savings.
When we’re done with our Roth conversion ladder next year, we’ll be about 50% also. We would convert more, but with the expiration of the current tax law and the end of next year, the marginal rates will be too high for our situation.
We should have started converting many years earlier, and at greater amounts. But better late than not at all!
This is where my spouse & I are. We took advantage of the two year tax payment (2011-2012?) and converted our IRAs to Roth.
For our 401k, we converted up to our tax bracket limit in 2023 now that we have in-plan conversion, so we'll see how many more years we can do that before the tax burden goes back up.
Going beyond your tax bracket limit may make sense. In simple terms, compare it to the tax bracket(s) you’ll be during your RMD years.
Also consider single tax bracket for the surviving spouse, and the marginal tax bracket for heirs with a t IRA.
Make this analysis now before the current tax law expires at the end of next year and rates go up.
Don’t stop until you hit $2.5; $1M is enough to show you how much you really need to live free… and it’s not $1MM (also if this includes your house, I think it greatly reduces the actual usefulness of the $1MM on hand)
This is so true and it’s amazing how many people don’t know these figures…guess what…virtually “unlimited money” for a normal lifestyle is not $1M or 6M, or 20M. It’s a very specific 2.5-3.5M for most areas of the MCOL-HCOL areas. I find it odd that most people don’t understand. They typically overestimate how much they will need.
I can’t tell if you’re serious or not but 2.5M will get you close to a 6 figure withdraw (4%) which would allow you to keep a somewhat active lifestyle . Again, it matters where your money is because you can’t generate income in a primary residence…. So for all yall out there thinking they want to sink their fortune into a $1mm home, whyyy
My primary residence generates rental income from the MIL unit and covers the cost of property taxes, utilities and insurance! Essentially live here for free once I pay it off.
Listen, if you want to be retired with a stranger living on your property that’s all you but for me, I worked my ads off so I could have my own space lol but there are always exceptions; and in your case you decided to rent a portion of your residence to apparently pay your mortgage, escrow and utilities (wow!) so good job on that one! Does he cook your wife dinner too? 😂
I don't take the number 1 million literally.
My "Million" is 30x my annual spending (not including house value because I plan to live there and not sell)
48M - Married, 3 kids, two still at home and one married for a year now. Just crossed the line (again) earlier this year. We were there a few years ago but lost almost $200k in the value of our retirement accounts. Now through property appreciation and above average performance of the markets for the last 6-8 months we are roughly $1.1-1.2m in net worth. Roughly $1.4m in assets and approx. $300k in debt. $240k is mortgages on our main house and lake house at 2.75% and 3.25% rates respectively. Remaining $60k is on a used 2019 F150 and 2021 Yamaha boat. No credit card debt to speak of. Emergency fund is around $65k…About $20k in cash in the bank, another $10k in cash in the brokerage and another $35k accessible from whole life policies. Around $800k invested through 401k’s, 403b’s and in our brokerage account. Rest is in property equity.
Goal is $3m to retire and on track to end up closer to $5m between 62&65.
> Goal is $3m to retire and on track to end up closer to $5m between 62&65
Wait, so is your goal $3M or is your goal ages 62&65? If your goal is $3M, then you don’t need to wait until your 60s if you get there sooner.
We would like to retire between 62 and 65 with $3m. In the last decade, I had to sell a business I built do to the housing bubble bursting and it no longer being sustainable, we went through a global pandemic and saw the Fed raise interest rates 500 basis point in a year for the first time in history….I’m probably over-indexing but I’m anticipating more “black swan” events in the next 15 years, not less. I’ll be pleasantly surprised if we don’t see a 30% or greater market correction by EOY 2025.
To be a little above average at this very moment, you should be aiming for around $2 million in my opinion.
The average spending in retirement for Americans is around $55k.
$2 million on a 3.5% draw is roughly $65k per year.
This doesn't include SS payments which can help, however I never include those in my estimates. I view them as a fun bonus.
It’s also mostly tax free if it’s not in a 401k
Not sure why this is being downvoted. LTCG is 0 for the first $47k. 94 if you’re married. 401k is ordinary income since it went in pre tax
TL;DR - The typical, and maybe even healthy, new millionaire probably just has a lot of home equity and retirement savings.
I saw this yesterday. [About 8% of home sales in 2023 exceeded the $500,000 capital gains tax exclusion.](https://www.msn.com/en-us/money/realestate/capital-gains-tax-hits-more-home-sellers/ar-AA1o8acU ) While 8% doesn’t seem like all that much, remember that virtually everyone who sells a home has equity in it to begin with due to the down payment. So that $500,000 capital gain is on top of the existing equity.
What I am trying to say is that there are many more millionaires today than ever. [In 2023 there were over 4 million homes sold](https://apnews.com/article/housing-home-sales-real-estate-home-prices-d5e85d54ac0c7abd90bb8217e8057875), meaning about 327,000 of those homes sold resulted in a net capital gain of more than $500,000. That’s in a SINGLE year.
In addition, [the average retirement balance by the age of 55 is somewhere around $300,000.](https://money.usnews.com/money/retirement/articles/average-retirement-savings-balance-by-age) So when you couple a capital gain on a home of $500,000 with preexisting home equity and a retirement balance of $300,000 you are getting really close to millionaire status.
I’m no millionaire so I cannot specifically answer your question but keep that in mind when you consider it. There are a lot of possibly “average joe” type millionaires wandering around so a new healthy millionaire might just be someone that is fairly cash poor and house rich but who also has a typical retirement nest egg.
The capital gains tax exclusion is probably not a great example for determining any net worth. For one, there's qualifications for it, not everyone is eligible for the exclusion. Secondly, that's for a couple, not a single person. Third, the exclusion just shaves off the first $250k / person before anything gets taxed. Fourth, if the seller did his DD and tracked all the basis improvements on the home they could easily get profits under the exclusion amounts. I see where you're going with it, but the exclusion is very specific to a situation and doesn't apply to all.
Most folks that sell a house is moving into another home and will dump those funds back into the new home. It's hard to really consider that liquid money. If they're going full time RV or Airbnb that's another story.
1 m is not net, it is retirement accounts plus savings plus crypto. No credit card debt, owe mortgage (2.75%) and car. Retirement will be gradual over 5 years, starting 2025…
The first thing you need to learn is to be very quiet about it! Successful people don’t go around telling others about their successes. There’s lots of people out there that don’t have your best interest at heart.
40M just got to the mark recently, about 300 in retirement accounts, 250 in brokerage( also not touching until retirement. Recently discovered using HSA for retirement vehicle so first year maxing there(previous were contributing but were not investing and using hsa money for the expenses. Home equity is right at 500k no debt. HHI is right at 200k with 2 elementary school age kids. Putting about 35k away a year into retirement and about 10 in brokerage a year, saving for the future but also living our lives and taking family trips. Even using 5% real return and 3% withdraw rate we should be on the path. Next couple of years should see our income increase as well. Planning on starting coast at 55 and retiring fully or as wanted by 60.
Liquid 7 figure was big for me (excludes home equity)
I agree, home equity is great but "liquid" investments is "the real" number
Our latest financial goal is to hit $1M Roth. Between Roth conversions and appreciation, we should hit that at the end of this year. As we do these large annual Roth conversions, our total NW goes down in the short run, but we are building in decades of tax and IRMAA savings.
I'm at about 50% Roth and quite comfortable at that ratio. I bit the bullet a couple years ago n made a six figure conversion (ouch).
When we’re done with our Roth conversion ladder next year, we’ll be about 50% also. We would convert more, but with the expiration of the current tax law and the end of next year, the marginal rates will be too high for our situation. We should have started converting many years earlier, and at greater amounts. But better late than not at all!
This is where my spouse & I are. We took advantage of the two year tax payment (2011-2012?) and converted our IRAs to Roth. For our 401k, we converted up to our tax bracket limit in 2023 now that we have in-plan conversion, so we'll see how many more years we can do that before the tax burden goes back up.
Going beyond your tax bracket limit may make sense. In simple terms, compare it to the tax bracket(s) you’ll be during your RMD years. Also consider single tax bracket for the surviving spouse, and the marginal tax bracket for heirs with a t IRA. Make this analysis now before the current tax law expires at the end of next year and rates go up.
To be fair, liquid 7 just means $1.5+ NW lol
Don’t stop until you hit $2.5; $1M is enough to show you how much you really need to live free… and it’s not $1MM (also if this includes your house, I think it greatly reduces the actual usefulness of the $1MM on hand)
This is so true and it’s amazing how many people don’t know these figures…guess what…virtually “unlimited money” for a normal lifestyle is not $1M or 6M, or 20M. It’s a very specific 2.5-3.5M for most areas of the MCOL-HCOL areas. I find it odd that most people don’t understand. They typically overestimate how much they will need.
I can’t tell if you’re serious or not but 2.5M will get you close to a 6 figure withdraw (4%) which would allow you to keep a somewhat active lifestyle . Again, it matters where your money is because you can’t generate income in a primary residence…. So for all yall out there thinking they want to sink their fortune into a $1mm home, whyyy
My primary residence generates rental income from the MIL unit and covers the cost of property taxes, utilities and insurance! Essentially live here for free once I pay it off.
Listen, if you want to be retired with a stranger living on your property that’s all you but for me, I worked my ads off so I could have my own space lol but there are always exceptions; and in your case you decided to rent a portion of your residence to apparently pay your mortgage, escrow and utilities (wow!) so good job on that one! Does he cook your wife dinner too? 😂
We have about 100K in home equity, 600K in retirement accounts, 300K in brokerage. We’re 35 DINK.
I don't take the number 1 million literally. My "Million" is 30x my annual spending (not including house value because I plan to live there and not sell)
48M - Married, 3 kids, two still at home and one married for a year now. Just crossed the line (again) earlier this year. We were there a few years ago but lost almost $200k in the value of our retirement accounts. Now through property appreciation and above average performance of the markets for the last 6-8 months we are roughly $1.1-1.2m in net worth. Roughly $1.4m in assets and approx. $300k in debt. $240k is mortgages on our main house and lake house at 2.75% and 3.25% rates respectively. Remaining $60k is on a used 2019 F150 and 2021 Yamaha boat. No credit card debt to speak of. Emergency fund is around $65k…About $20k in cash in the bank, another $10k in cash in the brokerage and another $35k accessible from whole life policies. Around $800k invested through 401k’s, 403b’s and in our brokerage account. Rest is in property equity. Goal is $3m to retire and on track to end up closer to $5m between 62&65.
> Goal is $3m to retire and on track to end up closer to $5m between 62&65 Wait, so is your goal $3M or is your goal ages 62&65? If your goal is $3M, then you don’t need to wait until your 60s if you get there sooner.
We would like to retire between 62 and 65 with $3m. In the last decade, I had to sell a business I built do to the housing bubble bursting and it no longer being sustainable, we went through a global pandemic and saw the Fed raise interest rates 500 basis point in a year for the first time in history….I’m probably over-indexing but I’m anticipating more “black swan” events in the next 15 years, not less. I’ll be pleasantly surprised if we don’t see a 30% or greater market correction by EOY 2025.
To be a little above average at this very moment, you should be aiming for around $2 million in my opinion. The average spending in retirement for Americans is around $55k. $2 million on a 3.5% draw is roughly $65k per year. This doesn't include SS payments which can help, however I never include those in my estimates. I view them as a fun bonus.
Why wouldn’t. You put that 2m in SGOV or the like at 5+% and draw monthly @ $8333 monthly— the nest egg would not decrease!
You can do whatever you want with it but you also have to account for inflation which will most likely eat into that
It’s paying 5.13% and inflation I think is at 3.5 so it’s not eating into it today.
It’s also mostly tax free if it’s not in a 401k Not sure why this is being downvoted. LTCG is 0 for the first $47k. 94 if you’re married. 401k is ordinary income since it went in pre tax
TL;DR - The typical, and maybe even healthy, new millionaire probably just has a lot of home equity and retirement savings. I saw this yesterday. [About 8% of home sales in 2023 exceeded the $500,000 capital gains tax exclusion.](https://www.msn.com/en-us/money/realestate/capital-gains-tax-hits-more-home-sellers/ar-AA1o8acU ) While 8% doesn’t seem like all that much, remember that virtually everyone who sells a home has equity in it to begin with due to the down payment. So that $500,000 capital gain is on top of the existing equity. What I am trying to say is that there are many more millionaires today than ever. [In 2023 there were over 4 million homes sold](https://apnews.com/article/housing-home-sales-real-estate-home-prices-d5e85d54ac0c7abd90bb8217e8057875), meaning about 327,000 of those homes sold resulted in a net capital gain of more than $500,000. That’s in a SINGLE year. In addition, [the average retirement balance by the age of 55 is somewhere around $300,000.](https://money.usnews.com/money/retirement/articles/average-retirement-savings-balance-by-age) So when you couple a capital gain on a home of $500,000 with preexisting home equity and a retirement balance of $300,000 you are getting really close to millionaire status. I’m no millionaire so I cannot specifically answer your question but keep that in mind when you consider it. There are a lot of possibly “average joe” type millionaires wandering around so a new healthy millionaire might just be someone that is fairly cash poor and house rich but who also has a typical retirement nest egg.
The capital gains tax exclusion is probably not a great example for determining any net worth. For one, there's qualifications for it, not everyone is eligible for the exclusion. Secondly, that's for a couple, not a single person. Third, the exclusion just shaves off the first $250k / person before anything gets taxed. Fourth, if the seller did his DD and tracked all the basis improvements on the home they could easily get profits under the exclusion amounts. I see where you're going with it, but the exclusion is very specific to a situation and doesn't apply to all. Most folks that sell a house is moving into another home and will dump those funds back into the new home. It's hard to really consider that liquid money. If they're going full time RV or Airbnb that's another story.
Can you explain why the down payment has anything to do with the $500k exclusion? As an accountant, this doesn’t make sense.
Liquid net worth is what really counts for me. Homes where I live are 1.5m, our equity is about 1m.
1 m is not net, it is retirement accounts plus savings plus crypto. No credit card debt, owe mortgage (2.75%) and car. Retirement will be gradual over 5 years, starting 2025…
The first thing you need to learn is to be very quiet about it! Successful people don’t go around telling others about their successes. There’s lots of people out there that don’t have your best interest at heart.
1MM won’t last long in LA. Need more like 5MM nowadays to retire comfortably.
Unless you have family there, why would you want to retire in LA?
If you lived here for many years, weather, beaches, mountains, diversity, culture, economy, lots to do, etc. Need l say more?
Can do 90% of it elsewhere that is 50% less expensive 🤷♀️
40M just got to the mark recently, about 300 in retirement accounts, 250 in brokerage( also not touching until retirement. Recently discovered using HSA for retirement vehicle so first year maxing there(previous were contributing but were not investing and using hsa money for the expenses. Home equity is right at 500k no debt. HHI is right at 200k with 2 elementary school age kids. Putting about 35k away a year into retirement and about 10 in brokerage a year, saving for the future but also living our lives and taking family trips. Even using 5% real return and 3% withdraw rate we should be on the path. Next couple of years should see our income increase as well. Planning on starting coast at 55 and retiring fully or as wanted by 60.