I came across this story today, promoted on twitter by a Financial Planner, using it as an example of what appears to be a great strategy to follow…. Janitor dies at 92 with $8M saved. You can read it here. My synopsis: someone worked all their life, drove a crappy car, dressed in clothes held together by paperclips. They died. They gave away a ton of money to a hospital and a library.
Why on earth is this supposed to inspire anyone?
I can certainly appreciate leaving a legacy, and I’m ok with the concept of being savvy with your money. But I just can’t seem to understand the attraction of being a millionaire if it means living like this. It reminds me of stories from The Millionaire Next Door that talks about how many millionaires drive second hand cars and live in modest houses. Why would that be be desirable?
The glaring reason of course is that a million is now chump change. If you are a head of household and have accumulated $1M by full retirement age its likely you will have to make some frugal decisions to ‘stretch that dollar’. However, when most people dream of being a millionaire I don’t think that this is what they envisage.
If we go back to our janitor with his $8M that’s probably how he felt. He’d saved up ‘some money’ but with a modest mind it may have appeared quite small. If he focused on living frugally and spending money from social security, then he could leave his nest egg untouched. If he retired in 1988 that would give him 27 years growth, and the markets have averaged about 12% in that time. That means he’d only actually need $375K invested back at age 65 in order to have it be worth $8M today. Incidentally, these numbers really highlight the problem with ‘averaged returns’ since the stock market is cyclical, he would have actually needed to initially invest $600K to get to $8M.
Assuming an indexed approach to investing, the biggest gain for this portfolio occurred in 2013, it gained about $2M. Last year a paltry $1M on top of that. Here’s the biggest challenge. Do you really want to earn $2M in gains when you are 90 years old and walking around with clothes that are stapled together? Life needs to be about balance.
Quote from Washington Post article
Where’s the plan here? Where’s the goal? To live poor and die rich? Mission Accomplished.
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