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  1. #1
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    Prodigious Accumulator of Wealth

    According to the Millionaire Next Door you are an accumulator of wealth if your net worth (not including your primary residence)>than your annual earnings x age x10%. I guess this would take inflation into account by using your annual earnings which normally would increase somewhat with inflation. I'm sure it is far from perfect but interesting formula as a guideline, especially if you are younger and have less earning years to see how you are doing from an accumulation stand point.

  2. Electrical/Wiring/Trolling Motors Moderator CatFan's Avatar
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    #2
    So at age 60, earning $100,000 a year, the threshold is $100,000*60*0.1=$600,000? That doesn’t seem like an exceptional amount to me.
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    #3
    Wouldn't a percent of annual earnings compared to net worth be better to determine if you are accumulating wealth?
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    #4
    I think it's also got to consider that you were making the same annual salary for a while, because if your salary just increased or something it wouldn't be accurate. I would think an average over the last however many years would be better too. Interesting calculation for sure though

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    #5
    Quote Originally Posted by CatFan View Post
    So at age 60, earning $100,000 a year, the threshold is $100,000*60*0.1=$600,000? That doesn’t seem like an exceptional amount to me.
    I thought the same thing but if they are taking out your principal residence and basing it on your annual earnings then I guess it gives a framework.

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    #6
    Quote Originally Posted by boneil View Post
    Wouldn't a percent of annual earnings compared to net worth be better to determine if you are accumulating wealth?
    I think they wanted to factor in an age component though because younger people earn less and would have accumulated less assets but have more time to save and build.

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    #7
    Accumulator, probably a good formula. Enough to retire ... quite possibly, quite possibly not.

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    #8
    Quote Originally Posted by TampaJim View Post
    Accumulator, probably a good formula. Enough to retire ... quite possibly, quite possibly not.
    Yep. The formula just tells you if you are doing a good job savings, It is not projecting whether you savings are invested in a way to see you through retirement.

  9. Electrical/Wiring/Trolling Motors Moderator CatFan's Avatar
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    #9
    Quote Originally Posted by NitroZ7 View Post
    I think they wanted to factor in an age component though because younger people earn less and would have accumulated less assets but have more time to save and build.
    But prodigious basically means “remarkably great in extent”. I wouldn’t really call $600K remarkable for a 60 year-old making $100K.
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    #10
    Quote Originally Posted by CatFan View Post
    But prodigious basically means “remarkably great in extent”. I wouldn’t really call $600K remarkable for a 60 year-old making $100K.
    I'm not so sure ... at least in respect to American's behavior.
    The metric is net worth, leaving out the super majority easily.
    And then you're going above the zero line to a decent value.

    The average 60 year old in America has $200k in net worth.

  11. Electrical/Wiring/Trolling Motors Moderator CatFan's Avatar
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    #11
    Quote Originally Posted by TampaJim View Post

    The average 60 year old in America has $200k in net worth.
    Does that include their residence? Either way, that number is a bit stunning.
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    #12
    Quote Originally Posted by CatFan View Post
    Does that include their residence? Either way, that number is a bit stunning.
    Yes, the $200k does include it. The "accumulator" formula does not include it.
    BBC is an anomaly, not the standard. Most Americans are struggling, quite a bit.
    Look no farther than the fact over 50% don't pay income tax, excluding FICA.
    Most US families are check to check and less than $1,000 for an emergency.

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    #13
    Quote Originally Posted by CatFan View Post
    But prodigious basically means “remarkably great in extent”. I wouldn’t really call $600K remarkable for a 60 year-old making $100K.
    That number would be on the very low end. The higher your net worth exceeds it is what really makes you a saver.If you had $599,999.00 you would fall into the average accumulator. The book was published in 1996 so the savings rate may have been more at that time. They released another book, the Next Millionaire Next Door I am going to read.
    It may be a bit more current.

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    #14
    The actual formula is Net Worth > annual earnings x age x 10% - divorce losses.....
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    #15
    I would think that a 60 year old with 600K in retirement savings is behind. Now if that is augmented with a sizable defined pension and zero debt, they will have a somewhat safe retirement. I also think it largely depends on what part of the US you retire too.

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    #16
    Quote Originally Posted by Bassin08 View Post
    I would think that a 60 year old with 600K in retirement savings is behind. Now if that is augmented with a sizable defined pension and zero debt, they will have a somewhat safe retirement. I also think it largely depends on what part of the US you retire too.
    I'd say you're incorrect. Most US citizens will never have $600k in net worth, period.
    Much less a pension to enjoy. But again, perspective is skewed on this board, badly.

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    #17
    Quote Originally Posted by TampaJim View Post
    I'd say you're incorrect. Most US citizens will never have $600k in net worth, period.
    Much less a pension to enjoy. But again, perspective is skewed on this board, badly.
    It must be. I see pictures of the boats, trucks, cars, houses and the way people talk about their investments in the stock market. There has to be a lot of multi-millionaires on this forum alone. If a person is 60 years old and only has 600K put away for retirement, they had better stop spending and start saving now.

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    #18
    Quote Originally Posted by Bassin08 View Post
    If a person is 60 years old and only has 600K put away for retirement, they had better stop spending and start saving now.
    Unfortunately, it's more skewed than you're imagining. Most 60 year old folks are struggling to pay the bills nowadays. Saving money is a long passed dream. And with the recent economic pressures, it's now less likely than ever. Our own expenses, particular versus income, are now higher. And the US healthcare industry is leading the charge.

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    #19
    Excluding value of primary residence I question.
    Lot of variables in that one

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    #20
    Quote Originally Posted by Bassin08 View Post
    It must be. I see pictures of the boats, trucks, cars, houses and the way people talk about their investments in the stock market. There has to be a lot of multi-millionaires on this forum alone. If a person is 60 years old and only has 600K put away for retirement, they had better stop spending and start saving now.
    For 99% of those people, it’s called trying to keep up with the Jones’ and being a debt slave! Majority of these folks will have a very rude awakening when this house of cards collapses.

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