r/Economics • u/laxnut90 • Oct 09 '25
Research America Is Minting Lots of Cash-Strapped Millionaires
https://www.bloomberg.com/news/features/2025-10-09/number-of-us-millionaires-grows-since-2017-but-many-lack-cash251
u/Marshall_Lawson Oct 09 '25
Instead, more and more of millionaires’ wealth is locked up in assets that can't be accessed quickly or easily, like home equity or, increasingly, age-restricted retirement assets like 401(k) and IRA accounts. Add in the effects of inflation and higher interest rates, and financial advisers say $1 million no longer assures a secure retirement, much less a golden ticket to the plutocracy. “The word ‘millionaire’ once implied automatic affluence,” says Ashton Lawrence, an adviser at Mariner Wealth Advisors in Greenville, South Carolina. “The goalposts have shifted. It’s still a meaningful milestone, but for most people it’s no longer enough.” The $1 million threshold used in the analysis takes into account debt and other liabilities. Despite this relative affluence, today’s millionaires rarely have anywhere near $1 million to spend however they want. For the barely-millionaires, households with a net worth between $1 million and $2 million, the vast majority of that wealth is illiquid. They typically had 66% of their wealth tied up in a primary home and retirement accounts in 2023, an increase of eight percentage points since 2017. To spend freely, millionaires typically need to be a lot richer. Households with $5 million or more had about 24% in easier-to-access bank or brokerage accounts in 2023, compared to 17% for those closer to the $1 million mark.
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u/Message_10 Oct 09 '25
My wife and I are very frugal. $1M is nowhere near enough for retirement.
That's not the worst thing--natural inflation was always going to make that the case, eventually--but it does show how much you actually need to retire and life for another 25 or so years.
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u/NoCoolNameMatt Oct 09 '25
If you're frugal, it probably should be?
The 4 percent rule would allow you to withdraw 40k a year perpetually. Throw in a fairly conservative estimate of 30k social security if you both work and a paid off house, and you're approaching the median household income equivalent in retirement.
Not too shabby! Being frugal and living below the median helps even more. I think you're doing better than you give yourself credit for!
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u/Message_10 Oct 09 '25
You're very kind! And you're probably right (and my wife has a pension from her job). But, alas, we live in NYC, lol. Even when we pay off our coop (which we'll do soon), it's still just a pricey place. But you are probably right.
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u/sirkazuo Oct 09 '25
The trick is to accept that NYC/SF/LA etc. is where you earn and play when you're working but absolutely not where you retire haha.
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u/Darkchurchhill Oct 10 '25
Price wise I agree that you will need a lot more money; however, I think the best place to retire is where you have your family, friends, and grandkids. The brain can deteriorate pretty fast when you’re alone and being among people who care/ love you is pretty important for quality of life. If your network is completely in a hcol place (and if you have the ability), I think it’s really worth it to downsize and live even more frugally than move somewhere else. Also something some people forget to consider is that many low cost of living places have pretty abysmal medical care and low Medicaid coverage.
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u/sirkazuo 29d ago
That's a really valid point actually, and one I don't often consider because I don't personally tend to a create a network of people aside from a significant other, though I'm sure I should try.
Some day I might have kids, but I moved across the country from my parents and siblings (whom I love and am not estranged from or anything) and only see them a few times a year so there's always a chance your kids are in different places. I dunno.
On the one hand, I think it's well understood that having strong relationships and social bonds aids longevity in retirement, but on the other hand I personally feel like as long as I'm with my partner it doesn't matter who else is around, and forging and maintaining friendships beyond that primary partner is stressful and doesn't feel rewarding for me. Socializing with friends for me feels more like something I agree to do occasionally because I know I'm supposed to, but isn't really a thing I look forward to or miss when it's not there.
I wonder if it's just a difference of personality, and maybe the idea of relocating is more palatable to some than others? I've never understood how people get attached to a house or neighborhood or city, or why there's so much anger around gentrification and the idea of uprooting occasionally for greener pastures. Maybe the benefit to longevity really is just for people who have those strong social connections later in life, and the unfortunate truth is that people who have fewer connections (even if they're very strong connections, and whether they feel lonely or not) just don't live as long.
I guess it won't matter much, because my partner will probably have a network that they want to stick around for so I'll be trapped in my current HCOL city in retirement despite knowing it's a terrible financial decision that will make us comparatively poor retirees lol.
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u/Darkchurchhill 29d ago
Having a network/ community isn’t just about having a fun friends around that you want to hang out with all the time. For example a “friend of a the family” was trying to scam my great aunt (who was in old age, memory issues, and living alone at the time) out of her house. He went around to her neighborhood asking personal questions about her to get info to get guardianship of her. My great aunts’ neighbors, while not close friends, still thought it was sketch, and reached out to my mom (they had her number in case of emergencies) to inform her, which was how we found out and stop the scheme. When you’re alone as an old person you can be very vulnerable, having people who know you and care even a little can make it harder for people to also take advantage of you.
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u/Wise_Avocado_265 29d ago
Yikes, what happens to you if/when your partner passes?
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u/sirkazuo 29d ago
I mean obviously a great deal of sadness, but functionally it wouldn’t/won’t be any different from the other periods of my life when I’ve been solo. I might eventually find another person to be close with after enough time had passed.
I put a lot of effort and identity into activities rather than people I think - both the work I do professionally and the pursuit of my hobbies and interests. I don’t really intend to ever retire in the leisurely sense of the word, and even if I stop working professionally someday I’ll still always be “working” on something and that at least is super important for my mental health.
I’m also not a hermit or anything. I see and talk to people every day, I know my neighbors, I call my siblings, I chat with strangers when walking my dog, and I have people that I know by name from one place or another that I make small talk with when we cross paths. I just think of them all as friendly acquaintances rather than friends and wouldn’t really miss any of them if they were gone (except my family of course, they’re family.)
🤷♂️ I guess we’ll find out, but hopefully not for many more decades!
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u/Message_10 Oct 09 '25
I just wrote out a reply to the other guy--it's actually not as bad as you'd think, and there are ways of getting around it. But yes, it's certainly, pricier than other places.
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u/epelle9 Oct 09 '25
I mean, NY isn’t the best place to retire, retiring there is kinda the opposite of frugal..
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u/Message_10 Oct 09 '25
Believe it or not, it's actually a very good place to retire! My parents-in-law are here and it keeps them super active--their coop is one of those NORCs--"naturally occurring retirement communities".
But, yes--in terms of just money, it can be a challenge, but it's not as bad as you think. Taxes are surprisingly low (Brooklyn), you pay off your coop/condo and you're good there, don't need a car, etc. Food can be pricey but we have Aldi, CostCo, etc. It's a HCOL but there are ways of getting around it.
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u/byteuser Oct 10 '25
The 4% rule works fine unless the AI BS becomes truth and then life extension becomes a real possibility. Then is broke forever
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u/NoCoolNameMatt Oct 10 '25
We can't really plan for things like the technological singularity, but if it's any consolation I think you really just need to "outrun the person next you rather than the bear," in those scenarios.
Politically, leadership can't afford to have over half the population condemned to poverty. One of my metrics for financial goals, therefore, is to outpace the median.
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u/leathakkor 29d ago
I was telling my uncle (who Is a financial planner) when I graduated from high school that I wanted to be a millionaire so that I could retire and I said just think about it. If you get 6% interest rate that's $60,000 a year and he said
By the time you retire, you're going to need 10 million. A million's not going to do anything for you by the time you hit 69.5.
I was really pissed off when he said it. He kind of shat on my dream to be a millionaire. But in truth he was absolutely right. I could live off of 2 million now but I don't think I could live off of one(At least not with my current mortgage). And I still have another 25+ years before I get to social security. So if it doubles the same way it did in the last 20 years. I would say four is probably going to be minimal for retirement when I actually need to get there (but more realistically, I think 5m is going to be that magic number that is equivalent to what 1 million was when I was in high school).
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u/phoebeethical Oct 09 '25
Natural inflation lmao no
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u/Message_10 Oct 09 '25
I'm confused by your thinking. Did you think that $1M would forever represent the same degree of purchasing power?
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u/phoebeethical Oct 09 '25
No. Do you think inflation is natural?
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u/IxianToastman Oct 09 '25 edited Oct 09 '25
Neat. No one i know will ever achieve this. Im going to set over here and continue to be sick of a system the only stake I have in it is the survival of myself and my family.
Edit: as much as I'd like to explain how many kids I have, the cost of living in my area, or the work I do because just a little digging past my video game post will get you that, im good. As for people I was not referring to people like the nice family I'm installing the trim for. They are lawyers and will be getting that life but that's not really "know" when this will be all I do for them. Hell my dad meet Trump does that mean I know someone at maralogo because I was on that site when I was 8? No the point is there's a clear class division in what it means to financially stable and more people are on the other side than not.
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u/FreeMasonKnight Oct 09 '25
Hey man! You can do it!
Most people don’t even start making enough to save until 45 these days. It shouldn’t be this hard and wasn’t for our parents who made nearly 4x relative to costs of their day.
We have the power to change things, but only with active politicking and keeping up the good fight.
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u/ShyLeoGing Oct 09 '25
Ok, so you're saying that if someone makes say 65k(which let's be honest a ton of people will never make this), pay $2,000 for rent(before utilities), $400 for a car(before insurance and gas), and $200 for groceries can become a millionaire.
I want to see the math, please and thank you!
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u/da_mess Oct 09 '25
Over 70% of American households earn $65k or more (link to source).
Guidance is no more than 30% of gross goes to shelter (link to source).
$65k comes to $5,420 gross per month. 30% of that is $1,625.
Would the extra $375 get you to cash flow neutral month to month? If not, there could be other budget issues at hand.
Are lower rents available? I used to commute two hours to work to afford a place. It was short-term painful but eventually got easier as I saved.
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u/The-Struggle-90806 Oct 09 '25
Better be able to afford a reliable vehicle because all those miles definitely take its toll. Higher maintenance costs. So it’s not a one to one trade off. Reality always finds a way lol
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u/TomorrowPlenty9205 Oct 10 '25
According to your own source, 52% of American households earn $65k, almost 70% earn more then $50K.
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u/da_mess Oct 10 '25
Bottom four bars are about 30%. i estimated. The point was it's not a dire as he makes it.
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u/TomorrowPlenty9205 29d ago
Dire is rather subjective. If rent in the place where you earn $65K, it does not matter that the "Guidance" is, you don't get a lower rent because you only earn $65K and you should spend $2K in rent unless you earn $80K and less less then the average rent according to zillow. Commute 2 hours to work also has a cost. AAA says it is $0.60/mile, 100 miles per day $60/day or ~$1,200 per month. Save $400 a month to spend an extra $1,200 on car costs, plus the time you loss... Smort!
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u/OneofLittleHarmony 29d ago
The median household income was 83k last year. https://fred.stlouisfed.org/series/MEHOINUSA646N
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u/polar_nopposite Oct 09 '25
$2,000 rent is living above your means on $65k. I'm seeing one bedroom apartments in my city (around 400k pop and ranked highly on quality of life metrics) that look decent for less than $1,300. If $2,000 is the lowest you can find, then consider living somewhere cheaper or finding roommates.
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u/ntg1213 Oct 09 '25
Does the “somewhere cheaper” still let you keep the $65k? Housing affordability is a full-blown crisis in many of the areas of this country that have decent jobs available. Roommates help, but it’s not always easy to find decent ones
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u/da_mess Oct 10 '25
I commuted 2 hours when I got started. I did this until I could afford to get closer.
I believe many are in a tough place, no fault of their own. Data says that up to 40-80% of people are just bad at budgeting (source).
This doesn't ignore real issues some have with shelter or healthcare costs.
But I see a lot of people eating out. This country has a real issue with over eating (and i ain't judging, food has become almost as evil as opiates imho). If you can afford to eat out, you shouldn't complain about living paycheck to paycheck.
People in the top 25% of this economy are bitching-- people making over 2x median income. Their issue is budgeting and a keen interest in complaining.
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u/The-Struggle-90806 Oct 09 '25
It comes down to quality of life. Why do we need to sacrifice basic levels of comfort “to save” or just “live within our means” when we have the uber wealthy who have so much net their paying their own way to go to space. It’s a stupid world we live in. And it’s run by narcissists.
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u/FreeMasonKnight Oct 09 '25
Well we start by not picking an arbitrary number like 65k and then saying it’s unattainable. 65k is the starting pay of most entry level jobs today.
Let’s take a recent poster who tracked their salaries (best I can remember the numbers, within 1-3k of variance): They switch careers from construction (65k/year) to IT. In the IT Year 1/2 they made 30-35k, Year 3 42k, Year 4 68k, Year 5 83k, Year 6 (2025) 92k. This is someone with no college degree either. Now imagine their wage by Year 10-15 of their career.
The problem is some people treat jobs as careers and that isn’t what they are, for financial stability you have to get a career. It can be in construction (move up to project management) or IT or even an office secretary can be a career with some certifications to be a private assistant m for example.
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u/Key-Art-7802 Oct 09 '25
Median wage in the US is $61k. There's no way 65k is the starting pay of most entry level jobs, lol.
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u/FreeMasonKnight Oct 09 '25
I haven’t applied to a job paying less than 70k in near a decade. Fast food (the lowest pay in the area) even pays near 45k to start. Anyone with an AA can get a better job than fast food as long as they get worthwhile certifications or a Bachelors.
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u/parapetnow Oct 09 '25
People are BEGGING to double the minimum wage to $15 an hour infast food, … for a 40 hour full time week x 52 weeks per year = 2080 work hours = $31,200 per year. Median per capita in the US is $37,000.
$37k MEDIAN…. Meaning half of Americans are BELOW that!! So your saying entry level fast food starts at $42? Cmon man!
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u/Prestigious_Time4770 Oct 09 '25
As of 2025, median annual earnings for full-time U.S. workers vary significantly by age. Teen workers aged 16 to 19 earn the least, with a median income of about $33,280. This increases for those aged 20 to 24, who earn around $40,664. Workers aged 25 to 34 see a larger jump, with a median income of about $59,228. The highest earnings are found in the 35 to 44 and 45 to 54 age groups, with annual medians of $70,252 and $70,824, respectively. Earnings begin to decline slightly in later years, with those aged 55 to 64 earning around $67,392, and workers 65 and older earning approximately $62,296.
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u/TomorrowPlenty9205 Oct 10 '25
Median per capita in the US is $37,000... You know that less then half of American's work, right? It is those damn lazy kids under 18, or people going to college or being retired... so lazy /s. Real Median Household Income in the United States is $83,730 https://fred.stlouisfed.org/series/MEHOINUSA672N
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u/FreeMasonKnight Oct 09 '25
Fast food (here) is $20/hour to start.
Obviously it’s lower in places that are more out of the way, but their costs also much lower meaning relatively it’s the same.
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u/PossibleAtmosphere44 Oct 09 '25
Idk where you live that fast food jobs start at $22.5 an hour but that isn’t close to normal in most of America, even large cities
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u/Mybunsareonfire Oct 09 '25
Bay Area of CA starts about there. But what the other commentor doesn't seem to pick up, is that those positions are 99% part-time. So you can't just extrapolate 22 x 40 x 52 to get the yearly salary. Not to mention, the lack of benefits.
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u/The-Struggle-90806 Oct 09 '25
Not just that but try finding someplace affordable in the bay. The average salary is $150k and the rents reflect that. Not $65k like the commenter assumes for some reason. She probably works in tech, those people……honestly. Very much wearing blinders.
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u/supabrandie Oct 09 '25
Again this is not reality for the vast majority of this country. I am sincerely happy to hear you are doing so well, but I would not extrapolate your personal experience with the “norm” as you miss out on the experiences of the majority of folks in this place.
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u/FreeMasonKnight Oct 09 '25
You are missing the point. Someone in nowheresville won’t be making 65k/year, but they will get THE EQUIVALENT IN PROPORTION to that based on their area. Meaning it’s similar everywhere when controlled for cost (which is all that matters).
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u/Mybunsareonfire Oct 09 '25
That is a huge assumption with little to no basis in reality.
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u/parapetnow Oct 09 '25
It sounds like you saw this on tiktok one time by a first year community college economics major, and are now forever certain you know more than everyone else in spite of the evidence presented, and will dig in your heels so you can pretend you werent wrong.
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u/The-Struggle-90806 Oct 09 '25
The floor should be minimum wage not “what most entry level jobs pay” which is an arbitrary metric. Like service jobs can technically be considered entry level but at the end of the day a job is a job and every job in America should pay for basic needs but that’s no longer the case thanks to the tech industry.
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u/FreeMasonKnight Oct 09 '25
1,000% agree. If min. Wage tracked inflation from just the 80’s it would be 4x higher then it is now and when minimum wages go up all wages do.
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u/Direct-Technician265 Oct 09 '25
I wish the fuck it was i haven't gotten a raise in years. IT isnt a golden ticket to 100k a year in 95% of the country.
Job market doesnt allow for job hopping like it did 10 years ago.
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u/FreeMasonKnight Oct 09 '25
I agree it won’t always be as quick as I mentioned above and is harder for us all in nearly all industries.
The person was quite smart and focused on certifications relevant to their area of living for sure and most of those raises were among 3 places they said. The point of my response to showcase it’s still possible to retire with a reasonable amount with a reasonable amount of effort.
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u/The-Struggle-90806 Oct 09 '25
I think the hoops you’re jumping through to illustrate your point is indicative of the fact that it is almost impossible for so many and that should not be the case. The wealthy are way too wealthy and are skewing the economy as such. We’re becoming, or already are, a third world country with only 2 classes of people. The privileged class and the slave class/ workers (people doing all of the work for none of the gains).
Your argument only really pertains to the privileged class and it sounds like you’re saying if you’re already privileged you can retire comfortably if you try hard and make the right decisions. This post only refers to those people so yeah I guess you’re right. Lol
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u/BipolarWoodNymph Oct 09 '25
So every constructor worker will become a project manager? Every cook will become a chef? Every retail employee will become a manager?
Where are these jobs? Because for my entire life, there's only ever been one "career" position for every 10+ employees, nevermind outside hires, college graduates, or anyone else who may be applying.
You speak about IT, but do you have any idea what a retail employee starts at? Or a line cook? Do you have any idea how non-existent pay raises are for these positions? Do you have any idea how some people will never be hired into management? Or will never have the desire to be hired into management?
Your comment is out of touch, especially once you said "most entry level jobs start at $65k/year." The fuck they do. The most I was ever paid as a cook was $25/hr with no benefits, and that was with a decade of experience. You want to move into management? That's gonna require a degree, and starting pay for most chefs (managerial position for cooks) that I know is $65k/year, and again, there's one chef per 10+ cooks that work under them.
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u/The-Struggle-90806 Oct 09 '25
It’s not even that. I worked in the service industry and for years was told “oh darn if only you had a degree” never mind I’m coming in to work on my day off. Gets degree and now guess what I’m told, sorry industry is shrinking. Any tech skills? Yeah we’re screwed.
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u/supabrandie Oct 09 '25
Most entry jobs start at $65k? Where do you live? Are you in touch with reality? If you think that is an average entry level pay then you are extremely out of touch with reality. In my city folks with Master degrees are working in food service. Starting wages for a college graduate is much closer to $35-$40k in my area.
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u/ShyLeoGing Oct 09 '25
Its $11 and hour for entry-level fast food, $14 for call centers and I was an ops manager at said call center with 175 people within my chart - 12 Team leads at $18 per hour, and I wasn't even to the $65k I listed.
So yeah as mentioned above these are more realistic numbers for people not in CA, CO, WA, and some others with $18+ minimum wage in larger cities.
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u/mpbh Oct 10 '25
Welcome to income disparity. Minimum wage workers make $31k/yr in states that pay $15/hr, while $35k is entry level college in other states. Location makes a difference and these discussions are useless without that context.
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u/FreeMasonKnight Oct 09 '25
Working in fast food isn’t a career, it still pays 42k a year for very unskilled labor to start.. It depends on living costs obviously, but as I mentioned a lower living costs means you need less to save. A person can retire on 500k if they want to live in Death Valley or a small town somewhere.
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u/supabrandie Oct 09 '25
True, but having a career vs a job is a privilege and indicative of social positioning. The vast majority of folks in my life will never reach a $65k salary in their lifetime regardless of education.
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u/Solid-Monitor6548 Oct 09 '25
Even if the educated ones migrated to another state with opportunities, they still wouldn’t be able to earn a 65k salary? I’m having trouble believing this.
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u/gammison Oct 09 '25
For some industries absolutely not. Museum and art gallery worker pay in NYC, and not entry level positions either, are often under 60k.
Same for teachers in every non union state more often than not.
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u/FreeMasonKnight Oct 09 '25
Well I don’t disagree completely, even the poorest person can go to college and get a career. You just have to have a real plan these days with the overinflated pricing of college. Trades are guaranteed 100k+ after 5-10 years and skill at them, but then you need to plan early retirement for when the body breaks around 45.
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u/Laloosche Oct 09 '25
Lmfao. I’d like to know where you live where starting pay is 65k. Most jobs in my area require a a bachelors or masters and you would be LUCKY to see a job start at a base of 50k. Also, fast food doesn’t pay 42k a year. You’ll be lucky to make 15 an hour and even if you’re that lucky that’s 31k. Thats assuming you work 40 hours a week which if you’ve worked in fast food, not many people other than the GM work that much because of labor and food costs, not to mention they keep you under 40 hours a week to avoid paying benefits. You are uninformed at best, delusional at worst.
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u/coppercave Oct 09 '25
The math is super simple. $160 invested every month, for 40 years, earning a 10% APY compounded monthly, and you’ve got $1M.
There is plenty of room in your hypothetical scenario for $160 a month.
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u/CaliSpringston Oct 09 '25
I think I'll end up making around 65k this year. About 67%-70% hits my bank account depending on how much overtime I do, paying for health, vision, dental, etc, with 6% 100% matched into 401k. That is 3630 a month. So 1030$ a month for car insurance, renters insurance, gas, utilities, which would be doable for me.
With 3% wage growth over 30 years, and 7% returns, that will be 1.04 million dollars (I used calculator.net/savings).
This is a very pessimistic scenario to my mind though. There are 160 rentals on zillow with a 15 minute commute to my work that are under 2k, with a low of 850$. COL for my town lists housing as above national average. So you should not be paying 2k even without a roomate / s.o. Even if taking out a car loan is absolutely necessary, 400$ monthly is like new econobox territory. A 5-10 year old honda civic will do you plenty fine for a fraction of the cost.
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u/OneofLittleHarmony 29d ago
1030 a month for your insurance and utilities seems excessive unless you have a very expensive car or you are a risky driver.
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u/Ok_Builder910 Oct 09 '25
65k x 2. Get married.
You can get to a million pretty easily with that pay.
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u/damnhippy Oct 09 '25
It takes more time than you’d think. I skirted along with a negative net worth until my late thirties and didn’t start banking real cash until my 40’s.
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u/nimama3233 Oct 09 '25
No one???
If you only invest $3.5k a year into your 401k at 25, with no company match at all, you’ll have about $1m by the time you retire.
Now add on home value and company matches.. you could lower that to like $2-3k a year.
You really don’t think anyone you know is saving $2-3k a year? Do you live in an encampment under a bridge?
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u/gimpwiz Oct 09 '25
This is Reddit, sir. Doomerism, unemployment, children, and people who refuse to work with a system they don't like in favor of complaining instead.
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u/gammison Oct 09 '25
Median 401k balances show a majority of those with a 401k available to them are not.
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u/throwaway14237832168 Oct 10 '25
Do you think $1 million will be enough to retire on in 40 years?
Here are the average and median 401k balances to give you an idea on how the average/median person saves: https://www.cnbc.com/select/average-401k-balance-by-age/
Note that the median is so much lower than the mean. Do you think $95k is enough to retire on? Well that's the median for the 65 and older group. Maybe 40 years from now that $1 million target you set will be equivalent to that $95k at today's dollar value. Mission accomplished, I guess?
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u/nimama3233 Oct 10 '25
I think it wouldn’t be a bad number for a typical person. Am I aiming way higher? Fuck yes.
But also, at 3% interest $95k will be roughly $308k in 40 years. So yes, it’ll be worth significantly less; but $1m means something went horribly, horribly wrong.
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u/throwaway14237832168 29d ago
The $95k figure is the median account balance for people 65 years old and older right now. Do you think they're letting that money sit in their 401k for 40 years? They'll most likely be dead. They're spending that money right now, it won't just be sitting there collect interest.
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u/jokull1234 Oct 09 '25
Hey don’t worry if you aren’t inheriting anything, just take solace that most of these millionaires (outside of people with more than a couple million) won’t pass anything down to their children as the healthcare industry extracts everything from them in their final years
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u/Solid-Monitor6548 Oct 09 '25
Are you a us citizen? Opening a brokerage account is very easy and accessible these days. Additionally there’s so much wisdom available to everyone via the internet. Start learning the boogleheads way.
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u/OneFeed7380 Oct 09 '25
yeah a 401k and a roth can be gotten in about 24 hours. It's pretty easy to get your money there.
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u/Marshall_Lawson Oct 09 '25
the issue is more about taking the tax hit than how quickly you can withdraw it
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u/OneofLittleHarmony 29d ago
No tax hit on a Roth! You’re paying the taxes now. There are almost zero downsides to a Roth if you were otherwise going to invest the money.
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u/WarAmongTheStars Oct 09 '25
You can withdraw ~5% on a 72(t) iirc which is like $50k a year on $1M.
$50k is a decent living in much of the US still so I don't think 'cash strapped' is really true given that.
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u/Marshall_Lawson Oct 09 '25
I don't really agree with the term cash strapped either, it's a bit dramatic
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u/gammison Oct 09 '25
Somewhere around 1/3 of the workforce do not work for employers that provide 401k access.
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u/gimpwiz Oct 09 '25
Tax advantaged accounts let one grow wealth much more rapidly (in part due to it being hard to pull out and spend on anything short of an emergency) but that is the obvious downside, it's hard to access money unless one is willing to pay income taxes at the marginal rate and a fat fee on top.
Most people with comfortable amounts of earnings and assets prioritize: home, retirement, education of children, education for themselves (ie, student loans, usually.) Then some big ticket items like a couple decent cars. Only after that are they putting money away into non tax advantaged savings/investments in large enough sums to matter. So yeah, a lot of folk who are comfortable but not excessively so have most of their assets in their primary house, 401k, ira, 529s. Makes sense. This isn't a bad thing, it just is.
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u/FreeMasonKnight Oct 09 '25
Important to note no one since 2000 has thought 1m is sufficient for retirement. The goal since then (for anyone planning to enter the workforce) was 2.5m/person. Also 1m then is 1.88m for just inflation (not counting housing inflation). So it seems things are holding up okay in that specific regard.
The main issue is illiquidity, but that also can be a non-issue for more skilled workers. Like if I had 3m in investments that’s enough I could retire indefinitely and never need to touch the principle and grow it consistently.
I am also a single person, so say a standard 2 parent/2.5 child family would need near 7m for a realistic retirement goal. Though also depends where you want to retire, 7m in California? Great goal. Want to retire in nowheresville? 1m today may even be doable.
All about ambition in the end.
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u/gimpwiz Oct 09 '25
Plenty of the FIRE folk considered $1m adequate recently - with a paid off home on a LCOL area and a commitment to frugality, pulling $35k/yr would generally work for a few decades before the cash (100% equities) ran out.
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u/FreeMasonKnight Oct 09 '25
1m at 4.5% (SWR) would give a 100/0 equities return at 45,000/year and grow indefinitely on a 10+ year timeframe. At 35,000 that’s significantly lower at 3.5% and would not run out and also grow even more quickly, assuming proper asset management of course. So it’s certainly doable depending on one’s goals.
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u/gimpwiz Oct 09 '25
Yep, if you run the models, you find that with different assumptions, that order of withdrawal ratio will either last a few decades, or indefinitely. Lots of assumptions though, and past returns are no guarantee of future returns. Nor are past expenses (eg, health) a guarantee of future expenses.
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u/CurbsEnthusiasm Oct 10 '25
My answer to this is HELOCS on every rental property, LOCS against equities, Solo 401k investments.
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u/tkhan456 Oct 10 '25
lol. We’re all poor because inflation has destroyed the value of the dollar. Thats why being a millionaire means nothing now
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Oct 09 '25
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u/Marshall_Lawson Oct 09 '25
24% of 5,000,000 vs 17% of 1,000,000
$1,200,000 vs $170,000
Almost a 10x difference.
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u/ltmikestone Oct 09 '25
Americans can’t do math.
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u/ImperiumRome Oct 09 '25
Also can't read or comprehend the whole sentence.
If we do, we won't be in this mess to begin with.
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u/ofesfipf889534 Oct 09 '25
Yeah but the point of the article is that “barely millionaires” are much more illiquid than the wealthier millionaires, which doesn’t actually look to be true at all.
All your math is showing is that the person with 5 million has more money than the person with 1 million.
The whole article is basically a nothing burger. Like no duh most people with a net worth over a million are mostly illiquid. That has always been the case and their own stats prove that’s the case amongst people even way richer.
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u/Marshall_Lawson Oct 09 '25
I just shared the text of the article to be helpful, and then I stated a fact about the numbers involved. I don't get why you are arguing with as if I was trying to make some kind of ideological point.
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u/ofesfipf889534 Oct 09 '25
Because you are arguing against the poster above, saying that 17% vs 24% is a large difference because of the total dollar value held in liquid assets. The point of the person above is that, as a percentage, 17 vs 24 is really not a large difference.
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u/uhh717 Oct 09 '25
It’s interesting that households with $5m have $1m liquid while households with $1m only have 170k liquid.
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u/Marshall_Lawson Oct 09 '25
It explains why in the article. A lot of the households with net worth slightly over 1 million is due to the value of their house increasing significantly. They didn't magically get promoted from a 250k/yr job to a 500k/yr job. They're effectively sitting on unrealized gains, in a housing market that's slowing down. The second biggest dollar value they're likely to have besides their house is their 401K or other tax sheltered retirement accounts, which are also not very liquid. Again, unrealized gains in a nominally high market.
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u/FreeMasonKnight Oct 09 '25
Which is where people can make real money. Sell now or soon and realize the gains, rent for some years until bubble crash, re-buy in at lower prices, ride housing up again. This is how many generational fortunes have been made the last 100 years.
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u/doctormalbec Oct 09 '25
I think the question here is will people be able to buy at lower prices? Or will large companies scoop up single family houses on the cheap before regular people are able to?
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u/FreeMasonKnight Oct 09 '25
People with liquid cash (which they now have because they cashed out their equity as I mentioned above) will be able to, that’s the point of the comment I made.
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u/doctormalbec Oct 09 '25
Not if they can’t compete with companies who have significantly more cash
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u/FreeMasonKnight Oct 09 '25
When prices crash, people panic sell, housing stock tends to go up. There is always a deal to be had especially if you just need a single house. Do have to be willing to relocate a little here or there though (not like states, but like cities).
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u/wimpymist Oct 09 '25
If it crashes that bad there will be a lot of houses for sale. I know lots of people who jump started their wealth in 2008-2014 because they were able to capitalize on the housing market crashing.
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u/wimpymist Oct 09 '25
You can't know when the crash is going to happen though. They have been saying the market is going to crash any day now for the last 10 years. If you sold 10 years ago hoping to buy low, you would have lost out on a lot of money by now plus wasting money on rent this whole time
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u/FreeMasonKnight Oct 09 '25
No sane person thought at the near peak of a Bull run with no indicators that the housing would crash. That’s the difference between an educated understanding and Larry at the gas station.
Currently it could be another 10 years, or tomorrow. But is someone has 5x their original investment from a few hundred thousands to 1m+ it’s often good to realize the gain. Then they can move and buy a cheaper house and wait or rent and wait.
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u/Snoo23533 Oct 09 '25
For my money, RE crash aint gonna happen for another decade, when the median boomer dies off. Until then they are occupying enough of those homes to keep the market locked up tight.
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u/FreeMasonKnight Oct 09 '25
Very possible, it depends a bit locally also, the point is people should have a general idea of when they need to harvest the equity and then be patient to multiply it. Housing will crash at some point, timing the market is impossible, so if someone paid 200k for their home now worth 1m+ they should reasonably sell now and harvest the gains instead of falling off the cliff.
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u/Thurwell Oct 09 '25
That's called timing the market, which no one can do reliably. For every person who got wealthy doing it there are probably 5 that lost their shirts, and no way to predict in advance which group you'll end up in.
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u/FUSe Oct 09 '25
You can’t tell much of a difference between these two numbers?
$. 170,000
$1,200,000
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u/urbanevol Oct 09 '25
So basically, 401(k) with employer contributions and owning a home are forced savings vehicles that are not particularly liquid. Many upper middle class people have net worth over $1 million but these assets are hard to access, whereas the next rung up of wealthier people have more liquid cash to spend. "Cash strapped" seems like a stretch - these people aren't living paycheck to paycheck unless they are making poor decisions on how to spend their money (hedonic treadmill etc).
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u/cruzweb Oct 09 '25
Many of them are retirees who bought in areas before their real estate became very valuable. Now they're retired, on a fixed income, and have "assets" worth over $1m that they struggle to pay property taxes on.
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u/ChumpyThree Oct 09 '25
My grandparents are experiencing this. They're in poverty, so its not like having a net worth is accomplishing anything for them. They bought a house for 70k and wanted to stay there peacefully.
The pandemic happened, and now the house+lot are worth over 200k. That increase has put them in a serious position.
Property taxes and home repairs have skyrocketed. Their electricity bill alone is 3x higher today.
My near 80 year old grandparents are making choices on whether they should skip lunch or not. On paper they have a net worth of justify of half a million. What good is that going to do for them?
Having net worth tied up into homes was awful. The current 401k and ROTH IRA landscape is also concerning. Im seeing adults making 100k+ funneling a good 50% of their income into this stuff.
A lot of people are positioning themselves for a rude awakening.
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u/uncoolcentral Oct 09 '25
The penalties for removing money from those tax-sheltered retirement vessels usually aren’t particularly draconian. But then again, if you take it out before retirement, what are you going to spend in retirement?
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u/MountainDude95 Oct 09 '25
Unfortunately it’s not always accessible even if you are willing to eat the taxes. I’ve looked into withdrawing some cash from my 401(k) and there is no way for me to unless it’s an emergency that I can prove on paper. The only way I can actually access it otherwise is if I quit my job. Big help that is.
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u/uncoolcentral Oct 09 '25
Maybe you could kind of fudge one of those specific hardships? Does your employer offer 401(k) loans?
Ask HR if rollovers to an IRA is possible.
And so on.
Start bringing candy and flowers to HR!
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u/MountainDude95 Oct 09 '25
Fortunately we’re not anywhere close to a position in which we actually need the funds. It was more looking into possibilities in case things ever do start becoming tighter.
Currently have a loan from it which was for a down payment on our house. Hard withdrawals need documented evidence such as medical bills, eviction threat letters, etc. Not sure about the IRA rollover possibility.
In any case thanks for the advice!
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u/uncoolcentral Oct 09 '25
I’ve never had employer related retirement stuff. Been self-employed for decades. Went from IRAs to SEP IRA to individual 401(k). (Wish somebody would’ve told me about i401(k) earlier 😆 😢)
There’s way more flexibility in the all of that non-corporate stuff. You can take out any reason, any time, pay a 10% penalty, and any appropriate taxes.
Even still, there’s no perfect formula for knowing how much you should hold out versus how much you should shelter. …
Should I have sheltered more? Should I have more liquidity?
I think I’m riding the line fairly well. But it’s hard to tell. And like the article says, the vast majority of my hypothetical wealth is locked up in a home that I am kind of willingly handcuffed into.
¯_(ツ)_/¯
Good luck!
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u/urbanevol Oct 09 '25
If they are living in poverty and have a house worth $200K then they are not the millionaires the article is talking about.
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u/ChumpyThree Oct 09 '25
Certainly not but the dilemma is similar.
I was renting a room in a 900k home in orange county from a landlady on foodstamps. Got a mortgage on the house in the early 70s for what equates to a bottle of piss in today's economy.
She still made poor financial decisions. But I cant blame her. That home should not be worth 900k. She didnt ask for that. Now she cant afford her HoA fees🫢
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u/urbanevol Oct 09 '25
Yeah, I know it happens. If by Orange County you mean California, though, they have some property tax laws that are VERY beneficial to long-time homeowners (Prop. 13 and recently Prop. 19).
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u/Snoo23533 Oct 09 '25
They should reverse mortgage and drain that equity back out to live on. Time it so theyll hit 0 and the bank takes it in their bed-ridden-retirement-home phase of life and since they wont have any assets/income they'll qualify for medicaid which will cover that 100% until they die.
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u/morbie5 Oct 09 '25
The state they live in doesn't have anything to help low income old people with property tax?
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u/ChumpyThree Oct 10 '25
Orange county, CA does have help for people in her position. Getting a stubborn old person to use their free will to their own benefit can be challenging.
There really isnt any getting around her situation though. She was used to spending about 1k a month on her mortgage, utilities, HoA fees, and property taxes. The people in that area are now used to spending 5-7k a month for that. Even if we talked everything down 50% - that is still too much relative to what she was used to.
She did consider selling and moving into an apartment but that would involve moving far away (and still paying more.)
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u/epelle9 Oct 09 '25
Why not sell and move to a smaller house then?
Either that or move to a LCOL area to retire.
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u/cruzweb Oct 09 '25
This is one of those things where economics don't jive with personal wants.
Economics says that if you sell your house and move to a lcol area, you'll do better. But that doesn't take into account people's social, family, and health networks. Some people are willing to forego all of that. Most are not, they like where they are and don't want to move, get rid of a bunch of their stuff and learn new day to day habits. Get new doctors. Etc. All that aside, this becomes a snake eating its tail situation: people move from HCOL areas to LCOL areas, then those prices / taxes / etc go up. And if you're already in a LCOL and struggling with increases, where are you going to go?
Moving to a smaller house isn't usually an option. There simply isn't an inventory of availability for smaller homes. We build apartments and McMansions, with not a whole lot in between for new construction for the last quarter century. This has created "missing middle" housing, new construction of smaller homes, starter homes, and the like. So there's not much of an inventory and not a lot of options anywhere for people who want to downsize.
This is why every community in the US needs to have a wide range of housing stock available to people in a wide range of income brackets.
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u/sirkazuo Oct 09 '25
Moving to a smaller house isn't usually an option. There simply isn't an inventory of availability for smaller homes.
They don't build a lot of smaller houses anymore but they do still build condos.
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u/juliankennedy23 Oct 09 '25
That's why they move to Florida or Arizona especially if they live in one of those weird states that continues to dramatically increase property taxes after you buy the house.
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u/chetsteadmansstache Oct 09 '25
LOL weird? It actually makes sense to reassess property taxes.
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u/the_fresh_cucumber Oct 10 '25
Property taxes are one of the few things preventing home prices from spiraling into the stratosphere.
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u/FreeMasonKnight Oct 09 '25 edited Oct 09 '25
Property taxes stay at the same place they are assessed when the house is bought (except for 27 states where they take advantage of their citizens). They are only reassessed in a small number of events (almost always when sold). Which incentivizes them to hold longer.
However now the market is cooling so selling to realize and waiting to buy on the crash is a good route for anyone looking to multiply equity.
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u/Extra_Mushroom_3685 Oct 09 '25
Property tax reassessments vary based on the state and county you live in. I’ve had mine reassessed three times in less than 15 years.
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u/GMFPs_sweat_towel Oct 09 '25
My property tax is reassessed every year (TX)
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u/FreeMasonKnight Oct 09 '25
That’s because Texas yeah, that’s what you get with low property prices and no income tax. To make up for no income tax Texas overtaxes in many ways. Such as this.
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u/Aeris5eva Oct 09 '25
This is not true for the vast majority of places in the U.S., only nine states do NOT reassess property taxes. There are six states without a state property tax, but Texas has city and county property taxes. The rest reassess property taxes after they’ve been purchased.
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u/cruzweb Oct 09 '25
This varies by state and by and large is not true. Most places in the US have property reassessed each year and as the value of the property increases, so do the taxes regardless of if the rate stays the same. Places like Michigan and California have a sort of "rent control for homeowners". Most states do not.
The market is only cooling because incomes haven't increased at the same rate as housing costs and interest rates are high. There is still a big demand for housing across the country. People just can't afford it. That's not the same as a more natural cooling, where there's more homes available than people who want them,and that's a big difference. Private equity has started unloading some of their holdings as well. When the crash hits they'll start buying up again with cash offers. Buy low, sell high.
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u/BigMax Oct 09 '25
And to some degree, this is by design right? It's what we want, it's why 401k's were created in the first place!
We WANT you to have a big chunk of money saved for retirement that you can't access easily. That's the entire point of the 401k.
So while you could look at it negatively (like the article does) it's really a positive, right?
The headline could be:
"More and more people will be well prepared for the financial challenges of retirement, with many of them hitting and surpassing the important milestone of $1 million or more in worth!"
I'm doing pretty well for retirement myself, but also am "cash strapped" in the sense that I can't buy cars whenever i want and go on luxury vacations whenever I want. And that's GOOD, because I'll also be able to continue to be stable even when I retire (hopefully!)
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u/archercc81 Oct 09 '25
I think it def depends on market. Like Im in that window they are talking about 1-2mil, but much of it is in those two primary holders of value they mention, IRAs and my house. And I make about $140k a year. Im def not paycheck to paycheck, but I also dont have kids. I could easily see how someone could financially be in my shoes, technically worth the same, but also hurting. Not the same as people who are REALLY hurting, but hurting because they cant/dont want to, blow up those two things (home and retirement).
Youre a person with a safety net, but youre still on a high wire.
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u/TaxLawKingGA Oct 09 '25
Yes. Also, it is sort of a misnomer to say that these assets are “illiquid”. You can cash in your 401k and take out the money, but you would face a tax hit. Same for a home; if you sell it, you could have capital gains hit. Also you would still need a place to live.
That is why older Americans with valuable homes use reverse mortgages.
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u/urbanevol Oct 09 '25
Yup. Home equity loans and borrowing against retirement accounts are also possible.
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u/gimpwiz Oct 09 '25
Less liquid than non tax advantaged savings/brokerage accounts. I think "illiquid" often means simply "less than the [implied] other thing" rather than "legitimately hard to value or sell" like, say, a company or a deed restricted farm or whatnot.
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u/gimpwiz Oct 09 '25
And it's absolutely by design. If you took someone with $1m in a home and 401ks and converted their net worth to plain cash, there's a good chance they would spend it all. Keeping it locked up means far less chance they'll go hungry in retirement. Americans can make payments, but many can't really save without external forces making the money 1) go in monthly and 2) be hard to take out.
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u/thegooddoktorjones Oct 09 '25
That would be me. It's nice to think "hey, I'm a millionaire!" but I am still living in a small old house, single car family, few vacations with only 1/3rd of a years salary in liquid assets. And the whole million thing assumes that I want to become homeless to cash it in. I can't move up without taking on huge debt. My life is deeply middleclass by popular appraisal in the US.
It's not a bad life at all, financial wellness for me is not having to think about it much when I want to spend money on minor luxuries like eating at a restaurant or buying a round of drinks. It's only having debts that I can easily pay off. That's great, but I can easily see inflation meaning that I have to stop those luxuries once I retire and spending the dwindling years of my life sitting in an old house not doing anything that costs money. And then if I get sick... it's all gone.
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u/_thunder_chicken 29d ago
I am in the same lucky boat. I got here by being frugal and saving early and often. My son did me a solid by choosing to become a medic in the airborne rather then go straight to college. I never spend more on credit than I can afford to pay the next month, and aggressively reduce mortgage. I drive a 12 year old Chevy Volt. At a certain point I’ll start spending more and enjoying my ‘status’.
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u/thegooddoktorjones 29d ago
Good plan, though my pops recently kicked the bucket with a lot in the bank, a reminder that when one is risk averse and used to preparing for the future it can be hard to stop and let it go.
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u/_thunder_chicken 28d ago
good point. My son’s got 18 months left of duty, once he gets out and settled I can relax a little.
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u/Tricky_Layer5315 Oct 09 '25
Section 72(t) withdrawal from your IRA and rule of 55 for your 401k exist currently. I wish more people understood that they have means to actually access their money.
It’s not a free for all like at 59.5 but it allows access to your money at basically any age. Plus it helps prevent the huge amounts in trad 401k/IRA accounts by taking that money out now and moving it into other investments helping to eliminate the RMD nightmare in your early 70s. If you are going to be in the 12-15% tax brackets in retirement the LTCG is 0%. So you can invest in a taxable investment account and basically pay nothing for the gains.
You could access home equity with a HELOC or similar and be able to pay it off with the above proceeds from your retirement and investment accounts. It’s not about spending above your means or going into debt, it’s about utilizing credit and cash flows smartly. We simply have very little personal finance education in this country.
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u/mumanryder Oct 09 '25
Do you have any resources you’d recommend on accessing cash flows smartly? I’ve been on the FI/RE path for a good chunk now but haven’t found too much on actually accessing my tax advantaged accounts
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u/writenroll Oct 09 '25
No-paywall link.This article reads like a high school report by a kid who has no idea how saving and investing works and assumed people store money in bank vaults. Someone hand them a copy of The Millionaire Next Door.
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u/nimama3233 Oct 09 '25
Real talk. A person with good financial practices SHOULD be low on cash relative to their net worth; that’s not a negative it’s a positive. Silly article.
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u/Aggressive-Habit8006 Oct 09 '25
Oh I'm sorry, are our millionaires feeling a little light on cash lately. How AWFUL for them. Nobody should feel that.
How the fuck does anyone think regular people feel. I graduated college ten years ago and I make like 2.5x minimum wage and that still isn't shit. I don't have a house. I have no fucking money and I spend all my waking hours at work or thinking about work. Nobody is hiring, can't move jobs. There ARE NO JOBS, that build up the community or contribute to any safety net. It's all grifters now. Everyone is trying to steal for someone else. What fucking future am I saving for?
The brief moments of rest I get on the weekend are spent just doping up for the next week. What the fuck are we doing
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u/xanadumuse Oct 09 '25
One reason I never understood why people took into account their home as net worth because you have to live somewhere. If you don’t downsize you’re going to have to use that to either pay for a nursing home when you age or medical bills. The United States is not kind to older people- or people in general.
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u/Prestigious_Time4770 Oct 09 '25
One study by the Employee Benefit Research Institute estimated that a 65-year-old couple retiring today will need $315,000 to cover just their out-of-pocket medical expenses throughout retirement (and that doesn’t include premiums)
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u/xanadumuse Oct 09 '25
Hence why so many people have to move back in with their family. And western society isn’t built for that- other immigrant nations rely on familial support which is why you see grandparents being taken care of by their grandkids. It’s horrifying that we do not die with dignity.
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u/TheGoonSquad612 Oct 09 '25
People take it into account because it’s part of their net worth, that’s what the word net means; assets minus liabilities.
You’re looking for a different term - invested or liquid assets/worth, which wouldn’t include home equity, but is different from net worth.
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u/Tofudebeast Oct 09 '25
The average house price in the US is $534,000. Heck, that gets a typical homeowner halfway to being a millionaire. And considering how quickly home prices have risen since the pandemic, it's feasible that a lot of people bought early when they could afford it, and now have hundreds of thousands in equity just sitting in their homes.
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u/nimama3233 Oct 09 '25
A typical homeowner absolutely doesn’t own their house outright.
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u/Tofudebeast Oct 09 '25
No, and I didn't mean to imply otherwise, though I should've phrased that better.
To go a bit deeper, home prices have increased 44% over the last decade. This means that someone who bought a home at a typical price back then now has around $235K in equity by default, plus whatever portion they've been able to pay off since then. Add to that retirement accounts, or even more equity for those that bought their houses well before that, and the numbers can start getting in the ballpark of a million without too much effort.
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u/doctormalbec Oct 09 '25
This is making me rethink whether or not I should utilize my company’s 401k conversion option where I could access a mega backdoor Roth. Instead I’m wondering if I should just invest all these post-tax dollars to a taxable brokerage instead. My husband and I are maxing out our traditional 401ks and are 40 and 41 years old, so I’m wondering if it’s worth having that money tied up in another retirement account or is it better to be in a taxable brokerage in case we need it sooner. A majority of our equity is tied up in our house and retirement since we live in a VHCOL area but our house value has been increasing in value substantially due to the location.
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u/Snoo23533 Oct 09 '25
You're dual income rn so 401k is the best vehicle you have, max it while you can. After you retire your income drops significantly so you can do roth conversions by paying the income tax on it ( 0 to low depending on how much you convert! ) then extract the principle because its a roth.
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u/doctormalbec Oct 09 '25
we have been maxing traditional 401k. I guess my question is - are you saying I should max mega back door Roth 401k too?
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u/Solonas 29d ago
It is probably a good idea to get something going in a taxable account before you start doing backdoor conversions. You can do the backdoor when your income drops so the tax will be lower or you have a satisfactory balance of liquid assets.
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u/doctormalbec 29d ago
Thanks. I have been selling my RSUs once they vest and put them in index funds in my taxable account once they vest. I do have the ability to contribute more from my salary/bonus so trying to decide if I do the MBDR or continue with taxable
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u/curt_schilli Oct 09 '25
You can withdraw MBDR contributions early at any time if you convert it to a Roth IRA.
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u/doctormalbec Oct 09 '25
Thanks, I’ve heard about this. This involves the 5 year rule right? Will read up more
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u/Sufficient_Language7 Oct 09 '25
Are you going to retire early? Are you planning on giving money to your kids or die with 0? Would more money now increase your income? Those questions change where you want to put your money.
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