Are you still in the military? What do you do?
One of the issues to consider is how old you are. Retiring on 2 million at age 35 isn’t going to work out so well. Doing it at 60 is fine. If you earned 5% on the money, you could draw $100K per year without touching the principle. Assuming you’ll live another 30 years, you could draw down the principle at another 3% per year, giving you another 60K. Then you also have Social Security, whatever retirement plan you might have had, and your home is no doubt fully paid for. You may also be thinking of moving into a smaller home, so perhaps you sell the house and move into a smaller one and put away another half million bucks.
Retiring at 60 with 2 million in the bank will give you a very nice upper-middle class retirement. Retiring at 35 with 2 million in the bank will give you a middle class lifestyle at best if you don’t want to run out of money somewhere along the way. And since anyone who has managed to put away 2 million by age 35 is probably already in the upper class, it would be a major reduction in the standard of living.
I guess my previous post was a bit garbled. No, I’m not still ‘in’, thank god. I retired from the Seabees in 1990 with enough money in the bank to maybe survive for a year with three kids in the house. My present spouse and I have banked our retirement since then and she assures me that when we pull the plug in a couple of years, we’ll be okay. I still get the shakes thinking about not having a paycheck, so will probably look for some sort of work such as part-time auto or RV sales. At present I’m a facilities manager for a government contractor and my wife is a property manager for GSA. I guess we would fall into the category of “well off”, by previous posters’ definitions.
Age is certainly very important and your scenario nearly works but you have made no allowance for inflation. Ideally you want to be able to increase the amount you withdraw each year.
Plus you will need to average over 7% gains on your money for your scenario to last 30 years, which means investing at some level of risk - increasing the likelihood that things go wrong and you run out. If you only made 5%, you would run out after 20 years.
You misunderstand. the lifestyle I layed out is what I consider to be the minimum to be in the “rich” category. And you’re right, no way is this doable on $2m in cash plus your house and toys.
I was just highlighting what investment bankers considered fuck you money and what at least the corporate america people I know to be minimum fuck you money. This is not the same as being rich
This is a link to some interesting research in Australia on precisely that question. Condensed version: the majority of people in all income brackets consider themselves “reasonably comfortable”, and people’s perceptions of their wealth don’t actually vary an awful lot depending on income bracket. (They vary some, but not as much as you’d expect). And you can find at least some people who consider themselves “rich” or “poor” in almost any income bracket.
I think there is an important difference in that research. They use “prosperous”, not “rich”. I think there is a big difference - I certainly regard myself as being prosperous.
I have a relative who is rich and would not deny it - two million dollar homes, one on a lake, one in the mountains. Country club membership. His and her Lexuses. Vacations anywhere he wants. Puts on family events costing tens of thousands. That needs an income one heck of a lot higher than $250k.
Interesting–it’s not. As I said earlier, around $50K is middle middle, i.e., the median family income. Folks earning $100,000, according to this (admittedly biased) site, are in the 95th percentile of Americans. Only 5% of Americans have more money than you do. You’re in the upper quarter of the upper quintile of incomes. No way is that middle middle; considering it upper middle seems to me to be lowballing it.
Given all the responses here, I think I can come up with an objective measurement of “rich”: A rich person earns more money than you do.
Daniel
I guess I should also say that I think it’s silly to deny being rich because there are people who earn more than you, or who have to work less than you. There’s only one person on earth who earns the most money; is he the only non-rich person? Anyone can always point to a wealthier class and say, “I think being rich means owning your own island,” or, “I think if you end up driving the same jet for a few years instead of buying a new one each year, you’re not really rich,” or, “If you have to budget for the big international gala parties you throw, you’re not really rich.” That kind of relativism makes the word totally useless (except in the sense of the definition I offered in the above post).
Daniel
[QUOTE=Caffeine.addict]
$45 per week and she comes every week. Does a nice job too. I doubt I could afford $120 per cleaning.
The pool service comes once per week in the summer and every other in the winter and puts the chemicals in and cleans the sides. We have one of those auto cleaners which is why it is pretty reasonable.
You must mean income earned from a job. Unless a rich person is living by spending down a pile of cash in a mattress, he or she is also living on income, though not earned by working.
Upper middles usually earn their income from occupation, and need to continue working to maintain their lifestyle. This is what makes them a part of the middle class. In the source quoted by the OP, I’d say that what they meant by “rich” was upper middle class, not Paris Hilton.
I call you “upper middle”, by my earlier statement.
This is an interesting website. According to the website, someone at exactly $100,000 is among the upper 0.66% of people on earth, incomewise.
Daniel
I think we are comfortably in the middle for where we live (Orange County, CA). Together we make a hair under $100K per year and have two damn nice cars with no car payments. We’ve got a mortgage, but it’s only got 10 years left on it.
But we have a son with special needs (albeit for only another year or two), so our saving has ground to a halt while we shell out $5K a month for his services (yeah, you read that right). We are having pre-tax money deferred to pay for it and raised our salaries to accomodate it- gotta love a family business.
We take multiple vacations every year, both with and without our kids (2 with, 2 without, usually) and I don’t have to worry about how much I sepnd at the grocery store or at Target.
But in a few years, we will be well on our way to upper-middle-class and onward towards “holy shit, you bought WHAT?!?”
I’m not bragging. Noticed that I put us in the “comfortable” range for where we are. It just shows how insane things are around here.
If I wanted to live elsewhere, I could buy a town, I guess. But I don’t wan’t to, yet. We are thinking about Costa Rica, though. Moving there, not buying it! 
Sounds like me in small town commuterville UK! Here, the £ equivalent of circa $400k bought us a 2-bed new build, as we couldn’t afford the $600k it would cost us in the city for a 2/3-bed house in need of improvement and investment. This is south west UK - in the south east city where I grew up, $600k doesn’t buy you a 1-bed apartment.
Hubby and I make just over the national average between us (£ equivalent of $120k), which is by no means well off, but our jobs are quite high status as our immediate peers are making around the $100k mark each. We’d be earning much more if we weren’t working in the charitable sector. Here, we’re upper middle class by birth, education and profession. We’re still paying off student debts but, apart from that, we own a big chunk of our house and our own 2 year old car. We don’t have to hide under the beds from the landlord any more (as we did when we were first married!) and we don’t have to worry unduly about bills, so I feel pretty well off. Not rich, but certainly well heeled enough to afford a cleaner if I didn’t have to worry about our dogs attacking them.
IMHO, if you can stop working tomorrow and continue living comfortibly for at least 20 years or until you die (whatever comes last) you are rich.
There are “working rich”. Traders and partners in law firms or investment banks who make $500 k a year or more and people like that. They can’t stop working though because their wealthy lifestyle requires them to buy almost more than they make.
There is “house rich (or poor)” or “ghetto rich” (or Ni**er rich as they call it in the movie Boiler Room) where you have a million dollar home, a Ferarri and can’t afford the gas for it.
And then there is mega rich. If you have to ask if you are mega rich you aren’t.
My pinko head translates this to, “If you can stop contributing to society in any way and live off of other folks’ sweat for the rest of your life, you’re rich.” That to me isn’t just rich, that’s obscenely rich, foment-revolution rich, Marie Antoinette rich. I’ll make an exception for folks who’ve worked their asses off to reach that point, but folks who never have to work are at a level of wealth that calls our whole system into question, IMO. The word “rich” can certainly apply to people who aren’t just parasites.
Daniel
Why do you hate retirees?
This is just here to provide the minimum words necessary to let the post go through; I think just quoting these two passages is all the answer this question deserves.
Daniel
I would think that people who spend enough to keep several other people in work, yet do not take up a job themselves are very useful contributors to society - a net gain of several jobs.