tag:blogger.com,1999:blog-5465015914589377788.post2094411688406924652..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: DecamillionairesMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5465015914589377788.post-670912387772859102013-01-03T09:14:54.363-05:002013-01-03T09:14:54.363-05:00@Patrick: My first thought about someone who had ...@Patrick: My first thought about someone who had a guaranteed income of a million dollars per year is that there would be no shortage of "helpers" willing to provide a large lump sum now in exhange for the future million-per-year payments. So, even if we focus on income it is possible to spend yourself broke.<br /><br />I'm content with the decamillionaire level as an amount of wealth that allows a person to spend extravagantly (in the eyes of the average person) without ever running out of money.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-18876725820347495622013-01-03T09:08:52.648-05:002013-01-03T09:08:52.648-05:00I think there's no amount of income that allow...I think there's no amount of income that allows you to spend without thinking, since there's no limit to the amount of money people are willing to take from you. Your example of the sports star (or lottery winner for that matter) illustrate that.<br /><br />Maybe we should switch to "millionators": people who earn a million dollars per year?Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-61242815429005872772013-01-02T14:49:24.092-05:002013-01-02T14:49:24.092-05:00@Anonymous: You're right that I chose a fairly...@Anonymous: You're right that I chose a fairly low valuation for the pension. I wanted to avoid the criticism that the people in my example didn't have a net worth of at least a million dollars. I did this to avoid distracting from the main point of the article.<br /><br />Even if we set aside the problem of not knowing how long we'll live, you have to bring back future pension payments at some interest rate to get a present value. If we assume, say, a 3% return above the inflation indexing, 15 years of payments would have a present value of less than just multiplying the monthly payment by 12x15. We then have to factor in mortality probabilities to get a proper actuarial valuation.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-15468725322981588702013-01-02T14:17:26.096-05:002013-01-02T14:17:26.096-05:00"rule of thumb that an indexed pension is wor..."rule of thumb that an indexed pension is worth about 15 years’ worth of payments"<br /><br />I suppose that's just assuming that a person will live 15 years in retirement, say retires @ age 65 and passes @ age 80. But the rule-of-thumb seems to break down pretty significantly, at least in my case. I expect to retire in 2015 at age 56 with a pension of 34.2k until age 65 in 2024 when it reduces to 27.3k. It's indexed, so I believe can consider this all in today's dollars. The 15 year value would be living to age 70 w payments of 9*34.2k + 6*27.3 = $472k.<br /><br />But I can realistically expect to live longer:<br />if live to to 80, it's worth 9*34.2k + 16*27.3 = $745k<br />if live to to 90, it's worth 9*34.2k + 26*27.3 = $1,018k<br />if live to to 95, it's worth 9*34.2k + 31*27.3 = $1,154k (my financial planning assumption)<br /><br />These valuations are much higher than the rule of thumb, so I guess the rule only applies when a person expects to live 15 years in retirement. (Actually, I'm surprised at the greater value in my case; I would have thought it would be actuarily adjusted to give approximately the same value for any retirement age.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76798158182644218382012-12-28T13:32:21.943-05:002012-12-28T13:32:21.943-05:00@Anonymous: Quite correct. I didn't want to ...@Anonymous: Quite correct. I didn't want to add too much detail that would distract from the main point that being a millionaire is not the same as being rich.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-42050432591536447332012-12-28T13:27:41.686-05:002012-12-28T13:27:41.686-05:00shouldn't CPP & OAS expectations be includ...shouldn't CPP & OAS expectations be included in net worth as well?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-16997170342272177032012-12-26T05:43:24.016-05:002012-12-26T05:43:24.016-05:00@Miiockm: A fair point. Tragically, Sam died a f...@Miiockm: A fair point. Tragically, Sam died a few months before this financial snapshot was taken. The $5500 per month pension that Christie receives is a combination of her own pension and her surviving spouse benefits from Sam's pension. So, all the money now belongs to Christie.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-42512821584322545062012-12-26T00:40:39.124-05:002012-12-26T00:40:39.124-05:00I wouldn't call someone a millionaire if they ...I wouldn't call someone a millionaire if they only had a million split between them and their spouse.Miiockmhttp://www.miiockm.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-26496142428862959792012-12-24T08:41:19.406-05:002012-12-24T08:41:19.406-05:00@Big Cajun Man: Or as I'm going to try to get...@Big Cajun Man: Or as I'm going to try to get into the habit of saying, like a lot of internet decamillionaires.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-65442515865832514072012-12-24T06:25:51.066-05:002012-12-24T06:25:51.066-05:00Indeed, pro athletes have proven to be able to squ...Indeed, pro athletes have proven to be able to squander whatever sum of cash they receive. There are some happy exceptions like Barry Sanders or Matt Bonner but too many get too rich too soon (like a lot of Internet millionaires too).<br /><br />Merry Christmas!!!Big Cajun Manhttp://www.canajunfinances.comnoreply@blogger.com