We keep raising the bar on what it takes to live comfortably in America.
I didn’t say rich because that is a relative term and differs for everyone. What’s essential is separating facts from reality.
Two recent articles come to mind. The first is a viral post by Michael Green, which states that our idea of a minimum income for a family of four is grossly understated.
It’s not $31,200 but between $130,000 and $150,000.
After digesting that depressing nugget of info, we move on to retirement savings.
The following article in The Wall Street Journal describes the new millionaire level as being $5 million.
“Popular culture still thinks of millionaires in terms of Scrooge McDuck or the top-hatted icon of Monopoly,” wrote Paul Donovan, chief economist at UBS’s wealth-management practice, in a note to clients this year. “The new dollar millionaires have broken a psychological wealth threshold, but their income and spending are that of middle-class households.”
Spending like a “stereotypical millionaire” probably requires at least $5 million.
The author describes these new millionaires as coupon clippers.
Let’s dive into these claims.
Many dispute the $150k salary as the definition of the poverty line. Various experts highlight methodological errors in data usage, the overstatement of necessary costs, and the neglect of existing poverty measures.
Not being an expert on this topic, I will defer to their data and common sense.
The media often shapes narratives to garner attention, rather than inform. We usually see this in personal finance. Scaring people sells advertising. In another example of media narrative fear-mongering, many Americans believe they need to fork over $100k in annual tuition for their children to get a seat at the economic table. There are thousands of colleges offering financial aid to qualified students, and virtually nobody pays the full sticker price for college tuition. These inconvenient truths don’t make it to the headlines.
We now turn to our $5 million problem. Do retirees really need this amount to live comfortably off their savings in addition to clipping coupons?
For reasonable people, the answer is unequivocally NO!
I offer something that these writers do not. Over the past 25 years, creating financial plans for individuals has taught me several valuable lessons. Specifically, how much clients need in retirement.
While there are exceptions in my experience, retiring with $1.5 to $ 2 million is the sweet spot. I’ve yet to encounter a client who has experienced financial difficulty when closing shop with these numbers.
It turns out there’s math to back this up. Thirty years ago, one million dollars was the standard of gold. Inflation changes the equation. This chart shows what $1 million in each past year would be worth in 2025 dollars using CPI-U calendar-year averages. A $1 million nest egg in 1995 would need roughly $2.1+ million today to maintain the same purchasing power, highlighting how inflation quietly but relentlessly raises the retirement finish line.
To maintain a millionaire’s standard of living in today’s dollars, retirees require approximately $2 million. I concur.
Of course, much depends on what state you live in, when you take social security, the availability of a pension, and a whole other host of matters. I’ve seen people retire with far less and live comfortably. The $1.5-2 million number applies to the expensive tristate region.
While it’s difficult to accumulate this sum over 40 years of saving, it is a far more reasonable goal than the $5 million advertised rate.
In fact, a young person starting at age 25, saving $800 monthly for 40 years and reciving a 7% return, along with 3% inflation, can achieve this with a low-cost, diversified portfolio of index funds. Again, simple, not easy.
Numerous challenges are present before reaching the finish line. If this weren’t the case, everyone would be wealthy. However, the key is not letting media narratives, designed for clicks, derail your hopes and dreams.
I can tell you from personal experience working with real people over 25 years is that you’re not poor if you make $150K anually, paying $100K a year in college costs for an undergraduate education is unnecessary, and clients with $5 million in retirement assets aren’t clipping coupons to make ends meet.
