2020 was one of the worst years by far. I don’t even need to present statistics or numbers to prove that. It’s just common knowledge.
What’s surprising is this.
As reported by Acorns, 1.7 million Americans became millionaires in 2020. Millionaires now make up 8.8% of the U.S. population.
That means almost 1 in 10, 8.8%, of U.S. adults are now millionaires, up from 7% in 2015.
Americans represent 39.1% of the 56.1 million people who are millionaires globally.
That’s a big deal. Well actually, it’s not. Being a millionaire, apparently, means nothing now.
There are more complicated lessons behind the headline.
It took $1.05 to buy in 2020 what $1 can buy in 2019. And that is if we believe that inflation is only 3.9%.
If you plan to retire comfortably, solo or with a loved one, you must consider inflation. And in understanding what a million dollars is really worth, you must consider inflation.
When looking at your portfolio and computing your retirement fund, including an allowance for taxes. You may have $1M by the time you retire but what about taxes? How much will uncle Sam take?
If you take money from a qualified retirement account like a 401(k) or IRA, the distribution is fully taxable as ordinary income, except if it is a ROTH IRA.
Dividends and interest earned outside of qualified retirement accounts are taxed in the year earned.
Remember, tax matters.
Consider time, too.
How long do you have before you retire and how long do you think you will have after retirement? Those who own stocks are likely to make more money in the long run than those who own CDs and bonds. Of course, it also comes with higher risks.
Consider dividend-yielding assets.
Owners make more money over time than loaners. Owners of real estate make more money than renters. But consider the responsibilities and problems that come with owning and running rental properties.
Lastly, consider bear markets and economic turmoils. Vaccines may be rolling out but strains are moving faster.
Finally, consider protecting your investment.
When another dip comes, how will you react? How will your portfolio react? Will you sell stocks at deflated prices out of fear and fail to get back in? Will you take advantage of bargains and add to your portfolio in tough times?
Consider gold. Gold is the best store of value. While your portfolio might show $1M by the time you retire, inflation could take out half of its value.
Gold is the one asset that thrives through all economic distresses. So, call us and we will be happy to answer any questions about gold.