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The Cullens Are Millionaires!WSJ columnist Terri Cullen, who reported on personal finance blogs a year ago among the first in major financial media, achieved million-dollar-net-worth milestone lately. For those who is still working toward the millionaire status, Terri shares why a million dollars does not mean everything. To me, a million dollar is more a good pool of financial resource I can tap to pursue meaningful life in my late 30s and 40s. Surely, a million dollar is hardly enough for happy retirement without extra income streams. From Wall Street Journal:
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I have always been plagued by the $100,000 income cap on tradional-IRA-to-Roth IRA conversion. However, although our 401(k) balance is much higher than Roth IRA balance in our last monthly tally ($84,000 vs $13,000), we will most likely choose not to convert, since our tax ...
Fortunately we have too many "highly compensated employees" at Microsoft so I will only know of this on paper instead of reality. PFBlog readers, have you been penalized for being highly compensated?
Good starting point to understand the solo 401(k).
Unless we can count on housing appreciation forever, we need to go back to the basics by saving for the rainy day.
I don't have a subscription to WSJ. Does the article discuss Terri Cullen's debts? If Ms. Cullen still has a mortgage, for instance, she doesn't have a million dollar net worth, as yet. What's important, of course, is net worth not total asset worth. (I'm sure this is not her case, but suppose she did a cash-out refi on the appreciated value of her house, such that she has $500K in mortgage debt. What good is the assets totaling a million dollars?)
What regular folks need to know for themselves is whether their liquid assets play a large role in their net worth. For example, unless you are renting out a portion of your house, it's hard to generate an income stream therefrom. (I ignore reverse mortgages, as the income stream is dependent on accumulating debt). In Ms. Cullen's case, over and above her home, a million dollar net worth in liquid assets would be something to write about. That would be a $40K/year income stream, assuming a 4% draw-down. If she doesn't have any other debts, that would certainly be walk-away-from-the-job financial freedom!
With best regards.
Suresh,
Interesting comment, but the term "net worth" covers exactly what you are describing. Net worth is what, more or less, what you have when you subtract debts from your assets. A simple asset count of greater than $1 million is not impressive, but a net worth over $1 million is.
Harold
Harold,
mm said "WSJ columnist Terri Cullen ... achieved million-dollar-net-worth milestone."
But, the WSJ excerpt above only includes the following phrase "we've accumulated $1 million in assets." The excerpt includes neither a phrase to the effect that "we've accumulated $1M in net worth," nor a phrase to the effect that "we don't have any debt."
Does the unexcerpted portion of the WSJ article make it clear that the author and her husband do not have any debt? Either mm correctly summarized what was not excerpted, or assumed that the Cullen family doesn't have any debts in which case their $1M in assets corresponds to their $1M in net worth.
With best regards.
Suresh
I read that article. They still have $125,000 on mortgage and HELOC. But their assets - liability (net worth) is greater than 1 million. They didn't even count the pension her husband has.
But their house is over $500,000.
Another set of financial advisors define millionair as net worth - house equity. In other words, you really can't count your house equity unless you plan to sell and move. She discussed that as well.
The term 'net worth' is never meant just for asset and ignoring liability. If that is the case, you can go to LA or NY city to buy a million dolloar house with $900,000 mortgage and claim you are a millionaire.
