With 3 million dollars in liquid assets (ie: not a house), you can bring in about $120k from the safest of investments. Just a high yield savings account. Fully insured.
With an index fund, you can bring in $300k.
That’s enough to live on, given how many people live on that much or less from their job.
So some millionaires may work, but they’re not really the same.
But most “millionaires” are paper millionaires — they have a house and a car and a retirement fund and an emergency fund. Upper-middle-class, for sure, but they’re still working or retired from a lifetime of working.
And yet ultimately that’s what every retirement and disability system of any kind has to be based on. Whether you’re talking traditional methods of just letting your old or sick relatives live with you, state-run pension systems or disability, or private retirement accounts and disability insurance, it’s all ultimately the same deal. The systems vary extremely in their effectiveness and equity. But ultimately there’s no getting around the unavoidable truth. If you want to live in a world where the elderly and disabled are simply not abandoned to die, some of the labor of the young and healthy will be siphoned off to support the old and infirm.
If you want to live in a world where you yourself will not be cast out onto the street to die when you are too old to work, then for some of your later years you will depend on the labor of others, just as you did when you were a child.
And yet ultimately that’s what every retirement and disability system of any kind has to be based on.
There’s a fundamental distinction to be made to the below point of yours:
If you want to live in a world where you yourself will not be cast out onto the street to die when you are too old to work, then for some of your later years you will depend on the labor of others, just as you did when you were a child.
I strongly disagree with your first point, but maybe you misunderstood me. Investment returns are basically letting other people work for your profits, with nothing given in return. I.e. a form of wage theft (or other shenanigans like messing up the environment for profits or exploiting resources or funding a totalitarian regime).
Your second point - while correct - has nothing to do with my criticism of (stock / fund) investment returns: That could be (and was for a few decades, at least in Germany) a generational contract, where society manages to pay out pensions from which elderly / retired people can afford living & care from the GDP. Those pay-outs have been paid in advance by those needing them because they funded the old and retired people at the time they were still in work.
For that system, you do not need any kind of finance products. Of course that doesn’t keep our corrupt governments from spending our retirement money elsewhere and investing in shady funds for private profits and shitty retirement payments. So in today’s world, in practice, yes, people rely on finance product returns for their retirement savings and most of us have no choice in that. But it wasn’t always like that, and it should not be, because it’s a pyramid scheme.
As the other said, it’s not per person. Wealthfront and betterment insure up to like 500k, because they put the money in several banks. Vanguard probably has a similar thing.
I learned recently that FinTech companies like Wealthfront actually aren’t FDIC insured but like to claim they are because the banks they use behind the scenes are.
But there was one case where a similar FinTech company went belly up for whatever reason and their platform closed down, and customers couldn’t claim back their savings because apparently all the money from everyone was pooled into a single (or a couple) of accounts on each of the backend banks, and the banks had no idea how much was owned by who. I moved most of my money out of my Wealthfront HYSA after learning about that.
It’s technically true (“insured via”) but customers get into a false sense of security. We don’t know how they manage the money in their partner banks behind the scenes. If they operate like Yotta (in the linked article) did, then good luck getting your money back if Wealthfront suddenly closes. And the worst part is you can’t claim insurance with Wealthfront because they aren’t actually insured (the partner banks are) and they don’t actually have any of your money.
Of course I’m not claiming Wealthfront has the same setup. But I’d rather just deal directly with an FDIC-insured bank than have that uncertainty. Besides, Wealthfront’s rates aren’t any better than other banks right now anyway.
Yup. 3 million and my husband would not work at all. hed handle whatever he wanted and I’d work from home as I do now, maybe a less stressful job. A lot would be donated and given away to those in need.
With 3 million dollars in liquid assets (ie: not a house), you can bring in about $120k from the safest of investments. Just a high yield savings account. Fully insured.
With an index fund, you can bring in $300k.
That’s enough to live on, given how many people live on that much or less from their job.
So some millionaires may work, but they’re not really the same.
But most “millionaires” are paper millionaires — they have a house and a car and a retirement fund and an emergency fund. Upper-middle-class, for sure, but they’re still working or retired from a lifetime of working.
That’s why I specified liquid, not-a-house, money.
Investment returns are by definition the fruits of other people’s labor.
And yet ultimately that’s what every retirement and disability system of any kind has to be based on. Whether you’re talking traditional methods of just letting your old or sick relatives live with you, state-run pension systems or disability, or private retirement accounts and disability insurance, it’s all ultimately the same deal. The systems vary extremely in their effectiveness and equity. But ultimately there’s no getting around the unavoidable truth. If you want to live in a world where the elderly and disabled are simply not abandoned to die, some of the labor of the young and healthy will be siphoned off to support the old and infirm.
If you want to live in a world where you yourself will not be cast out onto the street to die when you are too old to work, then for some of your later years you will depend on the labor of others, just as you did when you were a child.
There’s a fundamental distinction to be made to the below point of yours:
I strongly disagree with your first point, but maybe you misunderstood me. Investment returns are basically letting other people work for your profits, with nothing given in return. I.e. a form of wage theft (or other shenanigans like messing up the environment for profits or exploiting resources or funding a totalitarian regime).
Your second point - while correct - has nothing to do with my criticism of (stock / fund) investment returns: That could be (and was for a few decades, at least in Germany) a generational contract, where society manages to pay out pensions from which elderly / retired people can afford living & care from the GDP. Those pay-outs have been paid in advance by those needing them because they funded the old and retired people at the time they were still in work.
For that system, you do not need any kind of finance products. Of course that doesn’t keep our corrupt governments from spending our retirement money elsewhere and investing in shady funds for private profits and shitty retirement payments. So in today’s world, in practice, yes, people rely on finance product returns for their retirement savings and most of us have no choice in that. But it wasn’t always like that, and it should not be, because it’s a pyramid scheme.
That’s just retirement
I thought FDIC insurance capped at 250k/person
It’s per person per bank (or similar), so you can split deposits across multiple banks and stay FDIC insured over $250k.
As the other said, it’s not per person. Wealthfront and betterment insure up to like 500k, because they put the money in several banks. Vanguard probably has a similar thing.
I learned recently that FinTech companies like Wealthfront actually aren’t FDIC insured but like to claim they are because the banks they use behind the scenes are.
But there was one case where a similar FinTech company went belly up for whatever reason and their platform closed down, and customers couldn’t claim back their savings because apparently all the money from everyone was pooled into a single (or a couple) of accounts on each of the backend banks, and the banks had no idea how much was owned by who. I moved most of my money out of my Wealthfront HYSA after learning about that.
To see if your financial institution is directly insured, you can check here: https://banks.data.fdic.gov/bankfind-suite/bank
EDIT: Found an article: https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-promise.html
Well that’s concerning. They say it’s all insured via the partner banks ( https://www.wealthfront.com/blog/wealthfront-fdic-insurance/ ) but you can just put anything on a website.
It’s technically true (“insured via”) but customers get into a false sense of security. We don’t know how they manage the money in their partner banks behind the scenes. If they operate like Yotta (in the linked article) did, then good luck getting your money back if Wealthfront suddenly closes. And the worst part is you can’t claim insurance with Wealthfront because they aren’t actually insured (the partner banks are) and they don’t actually have any of your money.
Of course I’m not claiming Wealthfront has the same setup. But I’d rather just deal directly with an FDIC-insured bank than have that uncertainty. Besides, Wealthfront’s rates aren’t any better than other banks right now anyway.
Yup. 3 million and my husband would not work at all. hed handle whatever he wanted and I’d work from home as I do now, maybe a less stressful job. A lot would be donated and given away to those in need.
For the vast majority of millionaires, their wealth is mostly home equity, not liquid funds.