I’ve just had a very rough quote for a transfer out of my defined benefit final salary pension and if I were to accept it, we’d be pushed into the ranks of millionaires!
The thing is that I just don’t look like a millionaire, spend like a millionaire and I definitely don’t look like a millionaire. So what’s that all about then?
Of course the first question is; what does it mean to be a millionaire?
In fact, being a millionaire is no longer a rarity at all. There are over 40 million millionaires in the world (that’s about 1 per 200 people) but in the states there are over 17 million (around 5%) and even in the UK there about 3.6 million (6%) with London having more than its fair share – although exactly how many million and billionaires have homes in London but don’t call it home (for tax purposes) is anyone’s guess.
Now, GFF wasn’t born with a silver spoon in his mouth. I also don’t look like a millionaire as I don’t shop in Millionaire&Spencers (much) or have a jewelry collection to rival Mr T. And neither was George Gordon Byron, 6th Baron Byron FRS who was born in lodgings and had to endure part of his life in rural Aberdeenshire – I’ve been to his (not ruined) house and it’s no Blenheim Palace nor even a Haddo House).
Most of what I have is down to my own guile, stinginess and occasional hard work. I’ve been helped in that I don’t want to show-off my wealth and my parents attitude to obscene displays of wealth or conspicuous consumption have prevented me from “showing off”.
And lucky for me because in the Millionaire Next Door by Thomas Stanley, you’d find out that most millionaires are quite ordinary people who’ve generally followed the basic principles of earning well (but not like footballers or hedge fund managers), saving well (over many years) and investing wisely. They avoid flashy things and are generally content with life. They go under the radar and don’t look like millionaires, drive beat up old cars and defintely don’t look flash – just like GFF).
The book is from 1996 originally and it has a few detractors but I think that it’s a good guide to a longer term view of wealth. A lot of the FIRE movement is written from the perspective of millennials (or Xennials) but the path to FI may just be time (and massively rising property values + final salary pensions). So don’t dismiss Boomers experiences outright.
Has becoming a millionaire changed you GFF?
No, can’t say it has. I should add that I’m the same old grump as I was a few days ago. The difference is that if I transfer our my old final salary pension I’ll get a large 5 figure sum for it. I haven’t done it yet and I’m not decided if I should or shouldn’t.
One thing that I should add is that our family problem is that having money that I’ll need to wait over 20 years to access is a bit of a problem when we are looking at Early Retirment and not Fancy Retirement. I’ve covered it here, and here and here and here and here. We’re not out of the woods yet and raising a family can be a very expensive experience – years of new shoes, violin lessons, school uniforms and holidays await us.
So, I’m more focused on the here and now. In part 2 I’ll talk about transferring out and the balance between longevity risk, sequence of returns risk and how on earth my modest pension is worth so much.