Dear MarketWatch,
I am in my mid-70s and already retired. My goal is to become a millionaire before leaving this world. When I was young, I did not invest much for it to amount to anything, and then I had to use what I had saved.
Now after liquidating most of my assets, I have savings of about $100,000, which stays pretty much steady, plus a fixed annuity of $200,000 that receives dividends, and $400,000 in additional savings that averages approximately $350 a month in interest. I have a Vanguard stock account I invest $500 a month into. I have about $9,000 in that account.
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My income with everything is around $7,100 each month, and about $5,000 is for living expenses. I don’t want to lose in the stock market, so most of my money is not making much. I do have Medicare and secondary insurance, so not many medical bills. I am in fairly good health. I am leaving money to heirs when I die, but I want to enjoy some life while I’m here and still make some money.
With life insurance and savings, I have about $768,000 total assets in mostly cash. Is there any way to get to that million or am I stuck at this amount? At my age I need to make quick money.
Retired Saver
Dear Retired,
At your age (or any age) the drive to “make quick money” is a dangerous one. That alone should not be an aspiration.
Wanting to reach the $1 million mark before you die, on the other hand, is a better way of phrasing your goals, and it isn’t impossible, but it will take time, energy and some adjustments — adjustments you may not be willing or interested in making.
First and foremost, you need that money to take care of you, so while some say “cash is king,” having something invested should work in your favor.
“A lot of times with clients age 70-plus, a large concern for them is losing money in volatile markets and cutting into their savings since they no longer work,” said Andrew Fincher, a certified financial planner at VLP Financial Advisors in Vienna, Va.
“Because of this, many times they are overly concentrated in cash or ultra-conservative investments,” he added. “While that’s a very valid concern, the flip side of this is longevity and inflation risk. If the cash isn’t in high-yield savings, it likely isn’t keeping up with inflation and, over a long period of time.”
Now your fixed annuity can help to a degree, but the interest rate attached may be much lower than you’d get from a balanced investment portfolio. You could look into other similar products like indexed annuities, which are tied to the performance of the market (but still have protections in place so that you don’t receive less than the principal).
If you’re wary of investment portfolios, perhaps look at target-date funds, which are linked to a year for retirement and automatically adjust to become more conservative over time. You don’t have to invest in one, but it will give you an idea of how other people in your age cohort are invested, and what their returns look like. Many major investment companies offer target-date funds, and you can find one with 2025, 2030, 2045 and so on to get started. You’ll see how they vary between allocations of stocks and bonds there.
(Side note: I am not a financial planner — specifically, not your financial planner — and I do not make investment recommendations to anyone.)
Outflow versus inflow
What’s great about your situation is that your outflow is well below your inflow, a scenario so many people would love to have! You also have the extra protection of not one — but two — health-insurance plans, so you’re certainly in a good spot.
In order to reach $1 million, you’d have to invest your money, keep your spending low to avoid touching the total and allow it to generate returns over time. It could take seven to 15 years.
The elephant in the room: Why do you want to be a millionaire?
“Sure, that’s a nice round number, and it sounds cool,” said David Foster, a certified financial planner and founder of Gateway Wealth Management in Saint Louis, Mo. But he asks: How will that help you live your best life?
“You can’t take it with you when you’re gone,” he added. He advises you to figure out how you can use the money you’ve got to make your life better, or someone else’s life better, that is, your heirs and/or favorite charities.”
Whether you decide to go for the $1 million or not, having some money invested can help with that inflation and longevity risk, so if you were to decide not to aim for $1 million, it still wouldn’t hurt to follow up with a qualified and trustworthy financial planner to construct a portfolio that will help you in the long run.
While doing some soul-searching, you might find it’s really more about the sound of “$1 million” rather than what you can do with the money.
Thanks in part to your current spending and saving, you already have the wherewithal to enjoy your time, have money to fall back on in your old age, and the possibility of leaving behind an inheritance.
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