What’s a million bucks?

When I was a kid in the 70s, we’d say, “I wish I were a millionaire!”, “I bet a millionaire lives in that mansion!” or “When I grow up, I’m gonna be a millionaire!” It was the ultimate goal. If you had a million, you’d won the financial race. You could lounge by the pool every day, reading novels and enjoying the easy life that a million dollars would grant you, your family, and your heirs.

A million dollars was not a realistic goal for me and my classmates. We were middle-class kids, and a million bucks was the dream that would never be attained. We didn’t need a million, we just sort of aimed at it like one aims at being prom queen but is perfectly happy getting a date or one hopes to win the World Cup but is happy to make the quarter-finals.

But just how big was that unattainable goal?

What would a million-dollar retirement get you in 1975?

The website MyBudget360 made a nice little chart showing US Department of Labor statistics comparing 1975 to 2015. The DOL says that in 1975 the average home sold for…are you ready for this?…$48,000. In that case, a millionaire could own not just an average American home but a whole neighborhood of more than 20 homes! Pretty nice, huh?

Let’s look at it another way. Let’s assume our millionaire is an older, single woman, Veronica, who has been renting all of her life, so Veronica wants to know:

If I retire today at age 65, buying an average home and living an average lifestyle, how long will my million dollars last me?

The answer is: 75 years past the age of retirement! You see, the DOL pegs the average income in 1975 at $12,686. For the sake of simplicity, we’ll assume expenses were similar to income (not really fair, I know). Still, very generally speaking an unmarried millionaire could buy a home and live a modest lifestyle for 75 years past his/her first day of retirement. (We’re excluding interest income, inflation, and a whole lot of other things to make this easy.)

So, a million dollars really was a lofty, unattainable goal that would drive a child of the 70s to work hard and save harder. It didn’t need to be reached because no one lives to be 140 years old (yes, that’s age 65 + 75 years of retirement)!

What would a million-dollar retirement get you in 2015?

You can see this problem coming, right? Do you want to guess before I drop these figures on you? That same chart on MyBudget360 shows very different statistics for the mid-2010s. The average US home back in 2015 cost $270,200. An unbelievable difference, right? And the average income was $51,759. For simplicity, we’ll again assume that expenses are similar to income, no interest is earned, there is no inflation, and so on.

Veronica was still asking the same question in 2015 that she was asking in 1975:

If I retire today at age 65, buying an average home and living an average lifestyle, how long will my million dollars last me?

The answer isn’t 75 years; it’s…just…14. That’s right. Veronica, retiring in 2015 with a million dollars, could still afford an average house, but her cash would run out in a mere 14 years. With many Americans now living into their 90s, Veronica probably isn’t too excited that her million will be gone by the time she hits 79.

It’s a very good thing that Veronica never married or had kids that she wanted to leave money to, because she couldn’t afford them! As it is, Veronica is going to have to sell her home (or get a reverse mortgage or similar) in order to eat after the age of 79 (if retiring at 65).

What would that dream retirement look like today?

While a child growing up in the 70s, a million dollars was the dream to be aimed at. As we’ve seen, maybe it wasn’t so far-fetched as I once believed. At the time of this writing in 2018, USAinflationcalculator tells us that today’s equivalent of $1,000,000 from 1975 would be a jaw-dropping $4,656,988.85. Gulp! That’s right, my million-dollar goal in 1975 would become a 4.7 million-dollar goal today. Don’t panic too much. No one is suggesting that the average US expat has to have $4.7 million in order to retire, but it does give some much-needed perspective to our thinking.

Remember that the old million dollar goal was the fanciful, unattainable goal. It was the impetus for hard working and even harder savings. We didn’t expect to reach it, but we knew that we had to head in that direction if we wanted to provide our family with a home and for 10, 15 or even 20 years of retirement.

We would’ve settled happily for half of that million, even a third, or perhaps a quarter of a million dollars. (We would’ve settled for even less if we had already paid off our home.) So, maybe even today, we don’t need to aim at $4.7 million but merely a third or a quarter of that sum.

The fact that $4.7 million is too high of a goal is the good news. The bad news is that 10, 15 or even 20 years of retirement may not be enough to cover our lifespans anymore and that most of us aren’t retiring in 2018.

Aim High: The Millionaire Expat isn’t far-fetched

When I first began corresponding with Andrew Hallam, author of Millionaire Teacher and now Millionaire Expat, I thought those were exaggerated titles. I joked that maybe the next book should be Millionaire Missionary. Sadly, my joke wasn’t as crazy as it sounded even to my own ears. Yes, it sounds like a lot of money. Yes, it sounds like a lofty, prideful goal. But, no, it isn’t far from reality. Teachers, missionaries, nonprofit workers, and other expats who are living on somewhat limited incomes need to re-think their financial goals.

Do we really want to go into our retirement years (and they will come!), being a financial burden to friends, family, and faithful donors? If not, we need to save harder and invest more wisely than we ever imagined. Remember earlier when I wrote that we starry-eyed kids in the 70s, “would’ve settled for a quarter of a million dollars”? Well, if we are aiming at a lump sum dollar amount on which to retire, we shouldn’t be aiming at a quarter of a million dollars but more like a quarter of 4.7 million dollars. That would be $1,175,000! (Of course, that number is likely to rise not shrink for those of us retiring in 2030, 2040, etc.) Are you on track to retire today with $1,175,000 in your retirement fund? No, me neither.

All is not lost. Hallam shows us in his final of 9 Steps to Financial Freedom that the lump sum amount isn’t as important as the amount of annual income in retirement.

Still, like those little dreamers of the 70s, let’s pick a number – a really, really big number – and let’s run after it with grit and discipline. It may seem an impossible goal and it may seem like more than we’ll ever need, but we’ve got to aim at something or we will never obtain Financial Freedom or the chance to be Recklessly Generous.

We’re not asking you to aim at 4.7 million dollars, but it may not be so far-fetched to aim at saving 1.175 million dollars and thus becoming a Millionaire Teacher, Millionaire Expat or Millionaire Missionary.

As many motivational speakers have said:

It’s better to aim high and miss it than to aim low and hit it!