Just became a millionaire

jimi_man

Anonymous101 said:

Surely when people refer to "millionaires" they mean net worth?

All the other definitions are measuring something else entirely. Liquid / illiquid assets, people's FI pots, Spending power, ISA / pension / cash balances etc etc are all far too subjective. The only objective measure has to be total net worth. Whether you plan on spending it or not is totally irrelevant.

Yes... to a certain extent. I mean you could have a million in cash sitting in the bank, living in a rented house with no pension. Technically you are a net millionaire. But how many of us would want to be in that position, I know I wouldn't. 

kimwp

jimi_man said:

Audaxer said:

Alexland said:

Prism said:

Just to be a little pedantic - you say my net worth, don't you mean our net worth? Having a million each and having a million shared are quite different.

My thinking is that to become millionaires we need to get to the point where our half of shared assets plus our individually held assets are for each of us worth at least a million.
Our house is shared and ISAs perfectly match but pensions differ, which we are part addressing in our long term contribution planning, but still it probably won't be until we reach around £2.4 million that my wife will herself be worth a million.

Surely if your shared joint assets are over 2 million, then you are both worth a million no matter who has the most? However another thought after reading your post - can someone of around 40 years old be classed as a millionaire if a significant part of that million is in a pension that they cannot access for years?

And this is where the whole thing becomes a little bit nebulous. In the case of the OP, who is 42 and has money in DC pensions and a house, neither of which are liquid assets and as you say the DC pension that can't be accessed for 13-15 years then the 'million' is just a meaningless figure. In my case at the age of 56 I don't have a huge amount of liquid assets available for retirement (about £125k at present), so I would be far off being a millionaire. But I've been receiving a DB pension for five years which is currently around £31k and with a further £10k to come for me and my wife at 65 (plus State Pensions though of course everyone gets them) which is all way less than our spending requirements, so we certainly feel as though we are prepared for a comfortable retirement even though we'd never be described as millionaires in the conventional sense by any stretch of the imagination or would ever describe ourselves as rich. 

The reality is, I think in the case of the OP, is that he was probably just reflecting on the fact that he's managed to live a reasonable life thus far, by saving an adequate proportion of his earnings and that his life is going to plan. I suppose the million pound 'milestone' is just something that causes you to reflect on how far you've come and what's wrong with that.

In my case it was when I left my job and the pension started immediately and I knew that I'd have that guaranteed income landing in my bank account on the same day every month for ever which is an indescribable feeling. 

It may well be a bit 'show-off-ey' (in fact it probably is) however this is the pensions forum and people are interested in figures since it provides context and people like to compare what others have with their own situation. It does however, highlight the huge disparity in apparent wealth between those with DC pensions and those with DB pensions and I do wonder if that's a significant driver for those with DB pensions to convert to a DC pension?

Personally I'd love to have a DB pension of 30k, at the moment, I'm (lucky and frugal enough) to be saving that into my DC pension, but there's no guarantee it'll have the same value at the other end!

DT2001

kimwp said:

I think it seems a bit show-off-ey to crow about accruing 1 million and say it's totally do-able when for a lot of folks it isn't. We all got to where we are by luck of who we were born to and resultant work ethic and financial starting point, people we came into contact with etc etc. For most people £90k+bonuses is megabucks.

I agree that there is a large amount of luck involved. If you do not earn mega bucks (I’ve never paid HRT) you need more luck and to be a risk taker. When I was younger someone said you must do SAYE “it’s a no brainer”. I did it and the profit funded an investment in a business that eventually did OK but at one stage was a month away from being wound up. We’ve also converted property, taken on excessive mortgages, let rooms and been lucky with one or two contracts after going self employed. 

Our parents worked hard but weren’t able to help us financially so didn’t get a helping hand. I didn’t get a degree but worked full time and studied at night for professional exams.
It is possible - we need, as a country, to educate how children to make the most of their finances.

[Deleted User]

Worth tracking both the liquid “wealth” and the total.  Without the total, someone with 200K in investments, a million quid house and 200K mortgage would, presumably, show as “zero” on the first criterion, same as a broke guy under the bridge.  

Good point re tracking “net worth minus owed taxes”, if you want to figure out how much you can afford to spend.   I do that too. Suspect this number is about to take a dive as the taxes will go up.  

Haven’t started playing these games until after retirement became a possibility so no idea when net worth crossed a million.  Part of me is thinking that its best not to track too  much until you have to.  Could be psychologically counterproductive for a youngish person who shouldn’t even care if investments take a major hit during a bear market.  Just focus on growing income and investing what you can. 

Anonymous101

Huge congratulations to the OP on continued progress. I'm on a similar path a few years behind, actually really similar . Its inspiring to hear of other people doing similar things. The important lessons as I see it are spending way below your means. Choosing your partner correctly, capping your spending and growing your income are the key levers here. Anyone that can do that will become wealthy in the long term.

[Deleted User]

Anonymous101 said:

Huge congratulations to the OP on continued progress. I'm on a similar path a few years behind, actually really similar . Its inspiring to hear of other people doing similar things. The important lessons as I see it are spending way below your means. Choosing your partner correctly, capping your spending and growing your income are the key levers here. Anyone that can do that will become wealthy in the long term.

“Wealthy” is a moving target.  One million pounds used to seem like unimaginable wealth to me when I started on a 20K salary in mid 90s. Remember being impressed when someone bought a 300K house. Today I’d say a couple needs a dwelling plus 5M USD in liquid assets to be really safe (assuming no DB pension) but even then you would not be  “wealthy”.  Obviously inflation has taken a toll but its more than that. 

mat1964

£1m in total assets including property equity really is pretty average if you live in the South East.  Most of the people I know fall into that category (and I doubt any of them feel very well off).

najan49

I seem to remember hearing recently that in order to live a “millionaire lifestyle” (however that is defined) you currently need about £7m.

Audaxer

jimi_man said:

Audaxer said:

Alexland said:

Prism said:

Just to be a little pedantic - you say my net worth, don't you mean our net worth? Having a million each and having a million shared are quite different.

My thinking is that to become millionaires we need to get to the point where our half of shared assets plus our individually held assets are for each of us worth at least a million.
Our house is shared and ISAs perfectly match but pensions differ, which we are part addressing in our long term contribution planning, but still it probably won't be until we reach around £2.4 million that my wife will herself be worth a million.

Surely if your shared joint assets are over 2 million, then you are both worth a million no matter who has the most? However another thought after reading your post - can someone of around 40 years old be classed as a millionaire if a significant part of that million is in a pension that they cannot access for years?

And this is where the whole thing becomes a little bit nebulous. In the case of the OP, who is 42 and has money in DC pensions and a house, neither of which are liquid assets and as you say the DC pension that can't be accessed for 13-15 years then the 'million' is just a meaningless figure. In my case at the age of 56 I don't have a huge amount of liquid assets available for retirement (about £125k at present), so I would be far off being a millionaire. But I've been receiving a DB pension for five years which is currently around £31k and with a further £10k to come for me and my wife at 65 (plus State Pensions though of course everyone gets them) which is all way less than our spending requirements, so we certainly feel as though we are prepared for a comfortable retirement even though we'd never be described as millionaires in the conventional sense by any stretch of the imagination or would ever describe ourselves as rich. 

I agree. For example, someone with a DC pension valued at £1m could call themselves a millionaire, but I'd say someone with a DB pension paying £40k a year is better off, even if not classed as a millionaire.

Prism

Audaxer said:

jimi_man said:

Audaxer said:

Alexland said:

Prism said:

Just to be a little pedantic - you say my net worth, don't you mean our net worth? Having a million each and having a million shared are quite different.

My thinking is that to become millionaires we need to get to the point where our half of shared assets plus our individually held assets are for each of us worth at least a million.
Our house is shared and ISAs perfectly match but pensions differ, which we are part addressing in our long term contribution planning, but still it probably won't be until we reach around £2.4 million that my wife will herself be worth a million.

Surely if your shared joint assets are over 2 million, then you are both worth a million no matter who has the most? However another thought after reading your post - can someone of around 40 years old be classed as a millionaire if a significant part of that million is in a pension that they cannot access for years?

And this is where the whole thing becomes a little bit nebulous. In the case of the OP, who is 42 and has money in DC pensions and a house, neither of which are liquid assets and as you say the DC pension that can't be accessed for 13-15 years then the 'million' is just a meaningless figure. In my case at the age of 56 I don't have a huge amount of liquid assets available for retirement (about £125k at present), so I would be far off being a millionaire. But I've been receiving a DB pension for five years which is currently around £31k and with a further £10k to come for me and my wife at 65 (plus State Pensions though of course everyone gets them) which is all way less than our spending requirements, so we certainly feel as though we are prepared for a comfortable retirement even though we'd never be described as millionaires in the conventional sense by any stretch of the imagination or would ever describe ourselves as rich. 

I agree. For example, someone with a DC pension valued at £1m could call themselves a millionaire, but I'd say someone with a DB pension paying £40k a year is better off, even if not classed as a millionaire.

Yes, DB pensions are hidden beneath the stats. For what its worth, when the ONS does its calculations on wealth it converts DB pensions into a value by using an equivalent annuity. Certainly not liquid though, and taxed too.