$20M is retirement money. $1.2M isn't. But $1.2M is FU money, and that's the most important part. You can't stop working indefinitely, but it does give you the power to walk away from any job even if you don't have the next one lined up.

Or at least it should be. Many people with $1.2M cannot go a few months without a pay cheque because it's all locked in a house and a retirement fund -- make sure you're not one of them. An emergency fund is the best way, but I also recommend having an open HELOC. They're a lot easier to get when you have a job, and you don't have to draw on them until you have an emergency.

I know it’s way more than most people have, but $1.2M is not really FU money, at least in the US. It’s probably enough to take a gamble on, but it’s still not enough that you cannot be wiped out by bad luck or a significant health event while unemployed. And unless you are very young (and very lucky to have that much capital already) that $1.2M probably represents the gain from quite some years of work, and is critical as the basis for eventually gaining enough to actually be economically safe in retirement.

There's virtually no amount of net worth that would save you from a plane crash or an auto accident either - I would say 1.2M is enough as FU money in 99% of cases. Whether it's enough for you depends on your risk tolerance.

That's a huge blanket statement. Some people live under the bridge and to them even $1000 might be FU money. For the Bay Area, $1.2mil is enough for a family to scrape by if you have a house (on the way to getting paid off), otherwise that's not enough for a basic retirement and you are definitely on the hook to continue working, especially if you have (or plan to have) a family. If you say screw Bay Area and move to rural Montana, well, that's not 99% of cases.

You seem to misunderstand FU money. FU money it's not about "basic retirement" - it's about "I do not have to worry where my next meal is coming from for next X months/years". 1.2M$ can do a lot in that department.

Yeah, FU money and FIRE are different concepts (although there are some overlap). The former is just about being able to quit a job whenever (with the expectation that you will find another one eventually)

> $20M is retirement money. $1.2M isn't.

I live in a HCOL area, so I get this sentiment. But it doesn't match at all with actual reality in the US. The median 65-69 year old has a net worth of $272k, with the average being $1.25M [0]. A lot of places are pretty cheap - especially since even modest earners could get thousands of $ in SS each month.

[0] https://dqydj.com/average-median-top-net-worth-percentiles-b...

Retirement at age seventy requires less money than retirement at age forty.

The article is not about what kind of life style they can afford. It's more about their common belief system. They think they get where they are by hard working and ignore the luck factor. They think people poorer than them because they don't work hard enough.

Lifestyle with $1.2M in asset is not wildly different from $20M in asset

Yes they absolutely are. $1.2M in assets can easily be a normal home in a high CoL area. $20M in assets is either a few luxury homes in a high CoL area or dozens of regular homes. Someone with $1.2M might not even be a accredited investor if most of that is tied up in their primary residence so they don't even have access to many investment options that the $20M person/household has.

A person with $20M assets at 8% earns $1.6M per year. A 20x difference in assets is essentially an entire generation of wealth accumulation..

I completely agree. A frugal 30/40 something can have 1.2m net worth mostly locked up behind 401k and home value.

Both of which do nothing for that persons daily life. Can’t unlock home equity because they need a place to live. Not unlocking 401k value because… we’ll they are frugal and that is a bad idea.

While they are definitely well off, perhaps upper middle class, it is a vastly different lifestyle than 20mm net worth.

> A person with $20M assets at 8% earns $1.6M per year. A 20x difference in assets is essentially an entire generation of wealth accumulation..

Indeed, imagine saying: “there's not that much difference between $50,000 in assets and $1,000,000 in assets.” Of course more money earns more money, but it's still important not to underestimate the importance of a factor of 20. One can try it the other way: “there's not much difference between $20,000,000 and $400,000,000.” Except that many of us here probably can't really grasp either, I think we wouldn't believe that.

You are making an argument about assets and income. The parent said lifestyle. Warren buffet could have the same lifestyle as someone with 1.2 M in omaha

Could, but they don't. Someone with $1.2MM has enough that they could sustain a lifestyle that ~$36k/yr* could afford them. Someone with a NW of $20MM has enough that they could sustain a lifestyle of $600k/yr.

Those lifestyles are no where near being the same.

*based on a conservative 3% withdrawal, but the point stands irrespective of the withdrawal percentage.

This is again an argument based on income, not assets.

You could scrutinize loans based on assets to close the gap.

I really don’t think this is the case. One is owning a house, and probably still working. The other is owning a house and other passive income sources, probably enough that you don’t need to work. There is a massive gulf between a million and 20 million dollars.

I’m virtually certain that if you compare hours worked among households worth $20 million and households worth $1.2 million (controlling for retirement age), the former is significantly higher.

In theory ultra high wealth buys the luxury of leisure. In practice, in the US today, leisure monotonically decreases with income and wealth. By far the bottom quintile works much fewer hours than the top 1%.

Ok I’ll admit I didn’t believe this, but it turns out it’s partially true [1]. Hours worked by wage group increases up to the 95% level, then drops again. So the bottom quintile works substantially fewer hours than the top quintile of earners, but the top 5% work fewer hours than the top 90-95%.

Edit: forgot link

[1] https://www.epi.org/publication/ib348-trends-us-work-hours-w...

Wouldn't that be axiomatically true, given that the bottom quintile would contain all of the unemployed?

Citation needed. And also depends on the definition of work. If we define work as trading health for pay (whether mental or physical), then I'm not sure there is a monotonically increasing relationship.

If we define work as "hours spent doing something", then potentially. But I like my first definition better.

Being a CEO is one of the highest impact careers in terms of lowering life expectancy. Most high paid careers are extremely stressful and come with more serious health impact than the average worker.

https://www.businessinsider.com/stress-effect-on-aging-healt...

Middle managers are more stressed than CEO's.

Responsibilities cause stress, but power to address those responsibilities mitigates it somewhat. CEO's have much more of that power than middle managers do.

https://www.shrm.org/resourcesandtools/hr-topics/employee-re...

> Being a CEO is one of the highest impact careers in terms of lowering life expectancy. Most high paid careers are extremely stressful and come with more serious health impact than the average worker.

Perhaps, though that effect must be offset by other things (and/or access to healthcare), since the life expectancy based on income graph is monotonically increasing for both genders.

http://www.equality-of-opportunity.org/health/

My hunch is that the well off might have stress on the job (though again, this is a subset of well-paid positions, and I think the subset is actually smaller than you think), but everyone else has a lot more stress outside of the job which is much more important. The stress associated with poverty cannot be understated - it lowers IQ by ~15 points.

(Poverty and IQ: https://www.pbs.org/newshour/economy/making-sense/analysis-h...)

Hand me $1.2M and I'll start thinking about how much I can adjust my retirement date. Hand me $20M and I'll retire the day the check clears.

Uh no. $1.2 is my retirement fund. I have another 20+ years of work ahead of me. $20 million and I’m retiring tomorrow and earning 1.2+ in interest most years.

None of which is to imply I’m not rich to most of the country. I am. But I still have to work 40+/week to pay my mortgage.

> But I still have to work 40+/week to pay my mortgage.

...and child care (for 3 children under 3 years old), elder care (my parents are over 70 with existing and emerging conditions), etc. I just don't really expect to retire, to be perfectly honest, despite what my net worth is on paper.

If you do a modest 2% annual withdrawal on $20M, that's $400K pre-tax. You can live very comfortably and likely never need to work another day in your life regardless of your current age.

If you are retired with $1.2M in assets, even a 3% draw down rate only gives you $36K a year. You can make that work if you are frugal but that is a vastly different lifestyle from the $20M individual.

I find that really hard to believe. $1.2M in assets will not go far after factoring in raising/educating two or more kids. Certain they will be comfortable, but someone with $20M can really afford the best in terms of home in an urban area, education, and medical care.

$1.2M in assets is nothing. Invested yielding 4% in bonds and you got $50k pre-tax, I guess its ok if you're single with no dependents. Otherwise you're working. Worse if its tied up in your property, because then you're getting poorer with 1 or 2% property tax.

Nope. $1-2M is not enough to escape the rat race, tbh.

This is not really true. There are plenty of people that are retired with ~$1MM in assets and thus, are not part of the rat race. But they live a frugal life if they continue to live in America.

If you're extremely frugal, have a very small family (no kids or at most one) and live in a world where inflation doesn't exist, $1M would last you (and I'm being VERY generous) for about 20 years. If you're 40 now then your future will be $0 at 60, which happens to be the time where the really expensive stuff kicks in (like health issues and insurance). So, nope, 1M is not enough to stop worrying about money; neither 2-3M, about 5M+ is where you can retire and coast on that if you manage it wisely.

One isn’t retired, the other is.

I worked for over a decade at a large trust company.

The lifestyle difference between 1.2 and 20 million in assets are not similar.

$1.2 million is comfortable and $20 million is generational wealth. Many people who have that level of assets are part of a multi family office that will literally do your chores for you.

https://www.wsj.com/articles/SB10001424127887323551004578441...

So, exactly howm many grains of rice make a pile?

Of course wealth is a gradient, and any buckets are approximations.

They're saying "household" remember. If you have ten children, $1.2M can be used up extremely quickly.

Lifestyle doesn't matter. You can be extremely wealthy and live austerely, if you desire. What matters is security, power/influence, and so the ability to pass wealth to further generations.

A 20x increase seems pretty significant to me, if that 20X is at the very top of you pyramid of needs. That's 19M of possibly pure play money

Depends on where you live. In the Bay Area/New York I'd say the two do have wildly different lifestyles.

Someone with $21M doesn't belong in the same group as someone with $1B. Someone with few assets doesn't belong in the same group as someone deep in debt.

All simplifying assumptions necessarily group some unlike elements. But we need to simplify in order to describe complex systems.