You Are a Millionaire? Big Deal

I wrote an article for the July issue of Practical Accountant about a hypothetical married individual who was planning to retire shortly. The bulk of the couple's wealth is in their home and a 401(k) plan. As with many articles, once I started to do the interview, I received a number of responses to my questions that surprised me.

In particular, I got the distinct impression that $1 million won't necessarily mean the type of retirement that this couple expected. And why? The couple might be used to spending a lot, their expenses might be high, longer life expectancies, tax impact of withdrawing funds from 401(k) plan, a desire for a vacation home, or to travel, etc. The list goes on. And let's not forget possible increases in medical costs, plus medical and long-term care insurance premiums, and the fact that retirees often become risk adverse with their investments, thereby reducing their returns, and not keeping pace with inflation.

The result is that practitioners are increasingly talking to clients about the desirability of working beyond the normal retirement age so that a bigger nest egg can be built and, if possible, delaying minimum distributions from retirement accounts until they are absolutely required.

What a difference a generation makes. When the parents of Baby Boomers retired, they and their planners, if they had one, would probably had been very happy with  $1 million to pay for retirement. That is no longer the case it seems unless these millionaires are willing to live austerely. So what's it going to be like for Generation X and Generation Y? How many millions will they need when they retire? Maybe that is why some parents are creating Roth IRAs for their working teenagers.

I guess being a millionaire is not what it used to be, and it's no wonder that Donald Trump continues to go after that next deal.