Where do Wealthy people keep their money ?

joesoap1264

Albermarle said:

When one attains a certain level of wealth, inflation ceases to matter

That is a personal viewpoint that not everyone would agree with (of course no issue with having a personal viewpoint)  To see ones hard earned assets dwindling away in real terms, even if the effect on your lifestyle is minimal, is still quite painful for some. Plus inflation is bad for the country as a whole, and could even bring some public unrest/ serious economic instability that would affect everybody, even the wealthy.

Methinks you are talking hyper inflation, which is happening now in parts of the world, and in Germany before the last  two wars.
I f one has money in the bank and high inflation , bank rates usually follow to curb it  as they are now , best for ten years and rising, so how does inflation affect the money in the bank other than make it grow , until you decide to spend it, especially when inflation returns back down to zero which it was post 2008 till 2020.
Just don,t but your Ferrari yet 😷😷

Grumpy_chap

Albermarle said:

B0bbyEwing said:

km1500 said:

1 million is not wealthy

Behave yourself.

Having a Million can mean different things.

If a household ( not an individual) has £1M in assets, they are not really wealthy in most peoples understanding of what that means, and in fact at least 10% of the country is in this position. The number might sound 'wealthy' and for sure you have a comfortable position, but it could look something like this.

Couple age 55, kids left home.- mortgage paid.
3 or 4 bed semi in slightly above average price area- £450K
One works part time as a teacher with a pension built up for £5kpa - notional worth £175K
One works full time in junior/middle management role - DC pot built up £200K
Physical assets - cars; house contents, collections, jewelery - £50K
£30K emergency fund
£100K in S&S ISA's
= One Million Pounds but still will have to work for at least another 5 years to build up a good retirement pot.

Now if they had Two Million is assets between them, they would be in the Top 5% of the population.

If they had One Million Pounds in disposable cash to spend between them that would be out of the ordinary, and if they had a Million to spend each on top of assets then that would be definitely very wealthy.

Due to the above there is no actual agreed definition of what a  Millionaire is. Most definitions though tend to be more in line with the latter examples. That is having a Million pound of disposable income, in addition to assets like your house and pensions.

This post, which is excellent, is the perfect demonstration of why threads about "the wealthy" and statistics are problematical.

A household having assets of £1m and, hence, statistically the top 10% or an individual having the £1m assets and top 5%.  That data is then used to influence tax policy etc.
How many of those are actually feeling "wealthy", or are even exceptional?  I suspect very few.
The statistic of "wealthy" top 10% or top 5% has to be measured against life-stage.

Having all the things like the mortgage-free primary residence, adequately large pension fund, nice cars and things etc., and then also having £1m in cash or readily liquidised assets is an entirely different metric all together.

These definitions also change with time.  For my father's generation, where the final salary pension was common, there would not have been the consideration of an "asset value" to that income stream.  Pension changes to defined contribution schemes have totally changed how pension funds are viewed.

uk1

People often make generalisations about others in a completely different set of circumstances and project on them based on their own perspectives and “what they would do”.  The general assertion for example, that you are completely mad if you are wealthy but are not overly concerned about loss through inflation is simply not true.  Some wealthy people are not concerned about this at all.

There are some who have made enough cash and assets in their working lives that means that when they give up the stress they have experienced in making their way they have worked out that they both have enough and do not need or want to worry about issues such as inflation eroding the value of their cash.  Enough is enough and making it more might not be their issue.  As long as they believe that they will not run out of cash they might be content to shrug when thinking about their total pot diminishing through inflation not meeting say cash deposits interest for example. They might worry more about some risks than others.  In other words the fear of cash value erosion is less than the bigger (in their minds) risks of making the wrong speculative investment choices.  As previously suggested being debt-free might be a situation that they could only have dreamt about and that might be more than enough to make them content.

So mortgage-free assets in a couple or few homes for their own personal use, extremely regular self-indulgent decent holidays and travel, indulging their family in luxuries they might not otherwise afford; affordable philanthropy and a decent level of cash for increasing concerns like provision for private healthcare might simply mean sizeable cash in a couples separate names in a different banks is enough for them.

Some who have struggled and had a tough’ish start may like the reassurance of having decent amounts of liquidity which provides both continuous reassurance and gives them a feeling of security and they do not have sleepless nights.  Some have made sufficient money that their major challenge is learning - often for the first time in what may have been a comparatively frugal life, how to spend and enjoy it rather than protect and increase it.

Not all sizes or approaches fits all. 

bostonerimus

1 Million is really just an inflation linked 40k per year in retirement. When you start drawdown seven figures does not look as large as when you are working.

Of course 1 Million is a good pot to have and most people won't come close. Pensions are just another example of the uneven distribution of wealth in the UK.

Albermarle

uk1 said:

People often make generalisations about others in a completely different set of circumstances and project on them based on their own perspectives and “what they would do”.  The general assertion for example, that you are completely mad if you are wealthy but are not overly concerned about loss through inflation is simply not true.  Some wealthy people are not concerned about this at all.

There are some who have made enough cash and assets in their working lives that means that when they give up the stress they have experienced in making their way they have worked out that they both have enough and do not need or want to worry about issues such as inflation eroding the value of their cash.  Enough is enough and making it more might not be their issue.  As long as they believe that they will not run out of cash they might be content to shrug when thinking about their total pot diminishing through inflation not meeting say cash deposits interest for example. They might worry more about some risks than others.  In other words the fear of cash value erosion is less than the bigger (in their minds) risks of making the wrong speculative investment choices.  As previously suggested being debt-free might be a situation that they could only have dreamt about and that might be more than enough to make them content.

So mortgage-free assets in a couple or few homes for their own personal use, extremely regular self-indulgent decent holidays and travel, indulging their family in luxuries they might not otherwise afford; affordable philanthropy and a decent level of cash for increasing concerns like provision for private healthcare might simply mean sizeable cash in a couples separate names in a different banks is enough for them.

Some who have struggled and had a tough’ish start may like the reassurance of having decent amounts of liquidity which provides both continuous reassurance and gives them a feeling of security and they do not have sleepless nights.  Some have made sufficient money that their major challenge is learning - often for the first time in what may have been a comparatively frugal life, how to spend and enjoy it rather than protect and increase it.

Not all sizes or approaches fits all. 

Of course it is horses for courses. However if you read most posts on this forum along the lines of 'have I got enough to retire' 'is my pot big enough' ' can you check my calculations before I pull the trigger' then you see that in almost every case the plans/spreadsheets etc are based on being mainly invested, and on there being some growth 1 or 2 % above inflation. Usually with some level of cash buffer as well. 
If you changed that to 100% cash and generally losing 1 or 2 % to inflation, the plans look less good.

In other words all other things being equal, the ones 100% in cash would have to have a bigger pot to start with/work longer.

Caveat is we do not know for sure what the future will bring and with hindsight in 20 years time it could look different.

Millyonare

bostonerimus said:

1 Million is really just an inflation linked 40k per year in retirement. When you start drawdown seven figures does not look as large as when you are working.

Of course 1 Million is a good pot to have and most people won't come close. Pensions are just another example of the uneven distribution of wealth in the UK.

Anyone with a private or public pension pot of £1m+ is in the top 3% of all UK adults. One is in a better position than 99% of all people on the planet. It is a very gilded position. 

Grumpy_chap

Millyonare said:

Anyone with a private or public pension pot of £1m+ is in the top 3% of all UK adults. One is in a better position than 99% of all people on the planet. It is a very gilded position. 

That is very probably a meaningless statistic.  Both considered at the UK level or the global level.
It is not the "very gilded position" that you suggest - it would facilitate around £40k to £50 of annual income from retirement which is nice but by no means exceptional income level to have or aspire to for a comfortable retirement.

Consider the UK position, top 3% (although other posters mentioned 5%, the difference is not important) of individuals.  If the individual has all / bulk of the pension fund for the household (couple) then it is top 10%.  That is poor pension planning to have all the funds in one half of the household but also reality in many cases resulting from employee-linked pensions.

The trouble is, the "top 3% (or whatever) of all UK adults" is rather meaningless in the context of pension funds.
That entire group includes everyone from

• Student not yet had a job and pension fund zero
• 20yo first job and third pay packet making first pension contribution 8% of £20k for one month, that's £133 pension fund
• 67yo just about to retire - this is the time the individual will have the largest pension and the time that the £1m pot (or whatever the value is) becomes relevant
• 90yo with pension fund largely depleted

The critical assessment is the percent of individuals that have a £1m pension fund at the point just before retirement.

Now, consider that into the wider global expansion that has been suggested.  We see the same need to treat total pension asset value as a function relative to age / life-stage and also location.  The £1m may well be a far greater than average entry into retirement than the global average entry into retirement but what are the costs of living in those other global locations that are being considered?  Particularly, in the case of pensions, the costs of end-of-life care?  When my Father was looking for nursing home provision, the costs were £60k upwards per year.  

We should also not frown on those that have been prudent and reached a largely self-funding retirement.  Without these individuals having funds, the state funding would have to be massively increased and the state does not have the funds to do that.

bostonerimus

Many people will look at 1 Million and think "that's a lot of money to spend".
The retirement nerd will look at 1Million and think "that's an inflation linked 40k a year in retirement".
The truly wealthy will think "1 Million, that's just pocket money".

uk1

Albermarle said:

uk1 said:

People often make generalisations about others in a completely different set of circumstances and project on them based on their own perspectives and “what they would do”.  The general assertion for example, that you are completely mad if you are wealthy but are not overly concerned about loss through inflation is simply not true.  Some wealthy people are not concerned about this at all.

There are some who have made enough cash and assets in their working lives that means that when they give up the stress they have experienced in making their way they have worked out that they both have enough and do not need or want to worry about issues such as inflation eroding the value of their cash.  Enough is enough and making it more might not be their issue.  As long as they believe that they will not run out of cash they might be content to shrug when thinking about their total pot diminishing through inflation not meeting say cash deposits interest for example. They might worry more about some risks than others.  In other words the fear of cash value erosion is less than the bigger (in their minds) risks of making the wrong speculative investment choices.  As previously suggested being debt-free might be a situation that they could only have dreamt about and that might be more than enough to make them content.

So mortgage-free assets in a couple or few homes for their own personal use, extremely regular self-indulgent decent holidays and travel, indulging their family in luxuries they might not otherwise afford; affordable philanthropy and a decent level of cash for increasing concerns like provision for private healthcare might simply mean sizeable cash in a couples separate names in a different banks is enough for them.

Some who have struggled and had a tough’ish start may like the reassurance of having decent amounts of liquidity which provides both continuous reassurance and gives them a feeling of security and they do not have sleepless nights.  Some have made sufficient money that their major challenge is learning - often for the first time in what may have been a comparatively frugal life, how to spend and enjoy it rather than protect and increase it.

Not all sizes or approaches fits all. 

Of course it is horses for courses. However if you read most posts on this forum along the lines of 'have I got enough to retire' 'is my pot big enough' ' can you check my calculations before I pull the trigger' then you see that in almost every case the plans/spreadsheets etc are based on being mainly invested, and on there being some growth 1 or 2 % above inflation. Usually with some level of cash buffer as well. 
If you changed that to 100% cash and generally losing 1 or 2 % to inflation, the plans look less good.

In other words all other things being equal, the ones 100% in cash would have to have a bigger pot to start with/work longer.

Caveat is we do not know for sure what the future will bring and with hindsight in 20 years time it could look different.

The fundamental error you have made in replying is not understanding what I have said and the group of people I see as described in this OP question. I am sorry if I was wrong in my understanding of the question or if my reply was unclear or confusing for you.

Firstly, I was not answering “most posts on this forum” and I admire anyone who think they can or should.    I was dealing from personal knowledge and experience with the question about people who have got as far as £1m in cash and what they might do with it which was the topic of this particular thread rather than as you believe “the rest of the forum”.  So, I was simply expressing an opinion about people with £1m + who currently have it in liquidity.  They have mostly paid off mortgages and have other assets including pensions, property etc etc.  That is reality rather than a philosophical point about aspirants with less who make up almost the entirety of the “the rest of the forum”.  The “rest of this forum” is about people who would like to have £1m to lodge.  This thread seemed to me to be about those that already have £1m in cash and how they might think of it and use it. To many of the very few people in this situation it is “walking” tactical cash rather than investment or savings. 

uk1

bostonerimus said:

Many people will look at 1 Million and think "that's a lot of money to spend".
The retirement nerd will look at 1Million and think "that's an inflation linked 40k a year in retirement".
The truly wealthy will think "1 Million, that's just pocket money".

You clearly do understand this.  The people in this group consider it almost as “walking cash” for want of a better phrase.