Ep #144 Who Wants to be a Millionaire?

Remember the hit game show “Who Wants to Be a Millionaire?”—in 1998, that prize was worth only ~$500k in today’s dollars and in the early 1900s, the phrase to “feel like a million bucks” would mean having over $7 million today. While more Americans than ever now hold millionaire status, the buying power of that milestone has shrunk dramatically thanks to inflation and rising costs for housing, healthcare, and retirement. Listen to Adam and Ben unpack why $1 million may no longer guarantee the lifestyle you think, how inflation and psychology shape our money goals, and how to figure out what’s truly “enough” for you.

Chapters

0:00 Introduction to AB Conversations

0:35 The Million Dollar Question

1:49 Inflation’s Impact on Wealth

4:43 Psychology of Financial Goals

8:27 Planning for Financial Independence

11:17 Realistic Retirement Expectations

16:20 Conclusion and Final Thoughts

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Full Transcript:

[00:00:00] Adam Werner: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now.

[00:00:27] Ben Haas: Hey Adam. What's up my friend? How are we doing?

[00:00:31] Adam Werner: Doing great. How about yourself?

[00:00:33] Ben Haas: Awesome. I feel like a million bucks. So introducing the podcast today by title, Who Wants To Be a Millionaire? I'll let you maybe tell a little bit of the story, but we saw a stat not too long ago that really made us think about putting this podcast out there.

And some people might be drawn to it as we kind of were. Thinking about, you know, growing up as kids, there was a very famous show with Regis Philbin that would lead called, Who Wants to be a Millionaire. Lo and behold, we had to look this up. 1998, that first aired. Yeah. So the concept of a million dollars, we're gonna have to go back 30 years to provide some context here in our financial planning world of a million dollars used to sound like a lot of money.

Is it? Yeah. Is that what you need? Is that a target? Let's maybe get through some of it today.

[00:01:21] Adam Werner: Yeah. It's interesting because I think we both, when we were talk, thinking about the show thought it was kind of late nineties, early two thousands, and it was September of 1998. Apparently the first episode aired in the US version.

You look back and to your point, a million dollars at that point was maybe one of the biggest kind of game show prizes. Like that was, oh gosh, yes. It's a big deal, right? But now here we are 27 years later, which is just kind of crazy to think about. And you just look at the average inflation impact over the last 27 years.

It's roughly 2.5%. So that million dollars back in 1998 is basically worth 506,000 today. Right. So basically cut in half over a 27 year period. Or maybe the opposite way of looking at it is what would the total prize need to be today

to feel like it was a million dollars back in 1998 and you're basically at 2 million, it's like 1.97 million.

Have it feel the same financial impact. Those just, it just, I think it just goes to illustrate the power, or the negative impact that inflation can have on savings and dollars over longer stretches of time.

[00:02:40] Ben Haas: Yeah. I know we're gonna talk about the psychology a little bit. But I think, you know, you also looked this up the concept of, I feel like a million bucks, that originated like early 1900s. So if we're playing this kind of inflation game, to have said that back then was more like the equivalent of seven or $8 million today. So yeah, you know, twofold here we're gonna talk a little bit about inflation.

Certainly the compounding of numbers matters, the psychology matters. But the stat, what really kind of drove us to start this today was millionaires just aren't unicorns anymore. Right. Yeah. The recent study shows the data is that one in 10 Americans has a net worth of a million dollars. Right. And that's a 15 fold increase over these last, what'd you say, 27, 30 years since that show came.

Yeah. So let's just talk about it. What happened? Like why is just this concept of a million dollars probably not enough anymore?

[00:03:34] Adam Werner: Yeah, I mean it's all the standard things the same. You could basically probably look at any 30 year time period and see that impact from many of these same factors.

It is inflation, right? Just in general, right? Everything just costs more in the future. Asset growth, right? The investment world maybe expanding sure. 401k participation versus that old school idea of, well, I'm not necessarily setting aside these dollars. I have a pension through work. The company is doing that savings for me.

So that transitioning more to the individual drives, drives that higher. You think of the housing market right now? Home values, oh my gosh, yes. Have increased exponentially over time. And usually I think the idea has always been that, you know, home values kind of keep pace with inflation, but there certainly has been pockets of time where that has not been the case where home values have exceeded the rate of inflation.

So you put all those things together and you can very quickly see how smaller dollars in the past become very big dollars, you know, in today's world.

[00:04:43] Ben Haas: Yeah. And from, I know we've said this in different places, but we'll keep saying it so that people hear it. If you have like, let's take the house out of it, let's take cars, possessions out of it.

Let's just say you have a million dollars saved, not just a million dollar net worth. But a million dollars that can generate some sort of income for you. So you're 65, you're retired, you have a million dollars. How much will that realistically provide for you? Well, using that four 5% withdrawal rule, we're talking 40, $50,000 a year before taxes.

That's not lavish. We know that's not poverty like let's not sneeze at that. But you're certainly not, you know, flying first class around the world and taking lavish vacations all the time on 40 grand a year. Right. If there's some social security pension with it, fine, you may be fine. We're not saying that you've saved a million dollars and it's not enough.

Yeah, but let's really be putting that in context, that idea of I need a million dollars and I'm gonna be financially independent. That may not be the case, depending on your life.

[00:05:45] Adam Werner: Yeah. And I think that's where, at least one of the first things that popped into my head when we were kind of prepping for this, that idea of the pension having so much weight for people that, let's go back 25 years.

Retirees or people who are freshly retiring probably had a pension. May have also been on the, you know, the 401k or the 403 B side, right? They were saving, in addition to having a pension, right home, values were increasing, saving a million dollars on top of having maybe a couple social security payments in the household, a pension or two, that million dollars really, that, that was the buffer, right?

That extra 40,000 probably felt like excess back then. Yeah. Now with the proliferation of the employers or the employee side of saving for retirement, getting away from those pensions, that million dollars, just, it's not the buffer that maybe it once was, which again, just puts more of the pressure on the individual to do the hard work of saving.

And investing over time.

[00:06:47] Ben Haas: Or let's play the game show here. So, Adam's really good at jeopardy. Adam, Adam knows a lot of things. He goes on Who wants to be a millionaire and wins. He phones a friend Ben, who bails him out of the last

second. You know, you win a million dollars. Do you at 40 years old just stop working, right?

Yeah. Is a million dollars truly financial independence for a guy with a home but still got a mortgage, you know, you've got three kids? Like it's probably not that psychological independence that you might have felt like that would've, might've been 30 years ago.

[00:07:23] Adam Werner: Yeah. Yeah. When you poses that question, I'm thinking, you know, is, you know, you win a million dollars, is that enough to retire?

Yeah, if you were a few months away from retirement or maybe a couple years from retirement, maybe. Fair. it is the depressing side of just thinking about these really large dollars and just the impact that inflation just does have over time. It really takes these really big numbers that still sound big if you're from a certain generation.

It just erodes that, you know, we were just having a conversation the other day and we'll age ourselves here. I always had in my head, you know, when I got outta high school into college, like a car payment.

[00:08:00] Ben Haas: Oh yeah.

[00:08:01] Adam Werner: Car payment was like $250 or $300. And now you say that to a kid today, they'll just stare you like, you're insane, old man. You can't buy a car for a $250 a month for a car payment, it doesn't exist, but it did at one point. But the, that is not today. So I think that's kind of the parallel here too, is what used to be from a dollar standpoint, just time just move moves and marches on and everything kind of rises along with that.

[00:08:27] Ben Haas: So let's, let's define why this is, and we see this in other places in like behavioral finance psychology, it is a bias. It's called anchoring, right? We believe we latch onto a number, a story, some sort of a frame of reference that we have. And even if the world changes, we just, we can't move off that anchor, right?

So this psychology of chasing a million dollars, why does that feel so important and strong and like that has to be true. It's 'cause that's what we thought and that's the way it was 30 years ago, but we haven't moved on from it. But I mean, maybe I can flip it back to you. When we say we're chasing a million dollars, what we're really chasing is not the million dollars.

[00:09:10] Adam Werner: Right? Yeah. It's, it, what's what it represents, right? It's the financial independence that at one time a million dollars probably did afford you maybe some of that independence. It's the security of having that as kind of your backstop. Yeah. But yeah, it is, it really just comes back to what am I actually looking to accomplish, or what am I looking to achieve? And does that million dollars afford me the flexibility and the freedom to do what I want and when I want to do it? Yeah, and that's, I certainly, I think where the impact has shifted.

[00:09:45] Ben Haas: Right? This is the basis of the work that we do. We need to align money to what matters to you, and yes, we need to find a way to have numbers align to it, but we really do want to prevent people from chasing some generic headline or keeping up with the Joneses or you know, having these lifestyle creeps that can happen when you're making money and making good money. It is to figure out what your number is and then figure out how we use the good forces of compounding returns to kind of offset what we're really highlighting today is the negative drag of inflation.

[00:10:23] Adam Werner: And the reality of it too. You know, we've certainly had people sit in our office and tell us, this is my goal. Once I hit a million dollars or whatever that number is, a million point, you know, 1.5 million, two, whatever that number is, people, it's that's my target.

And when I hit that's my freedom. I'm gonna be able to retire. But I think the reality is because inflation never stops, it's a moving target. So once somebody gets to retirements, even say they, they hit their goal of whatever that dollar amount is, we know that inflation will continue to march on and impact that purchasing power that, that target is going to shift and move over time and become potentially harder and harder to achieve with inflation increasing over time.

So it's not, it's not even that you could just, and it's more critical, I think for the younger individuals to not just anchor to a number. So, you know, someone in our, age range, right in your forties that maybe you're looking for retirement in 20 years. It's kind of a fool's errand to just pick a number and say, this is what I'm gonna shoot for because there's such a long runway, so many things are going to happen and kind of meander this path along the way that, yeah, just, I think this is where just building the right habits, doing the right things will put you on that path and hopefully get you to where you wanna be and be able to course correct along the way.

[00:11:48] Ben Haas: Yeah, and we could be really honest here too, and say while we're speaking maybe to certain people to say, don't anchor on a number that might not be too realistic. Like it's gonna be shooting too low.

[00:12:00] Adam Werner: Yeah. Oh,

[00:12:00] Ben Haas: Maybe we should tease like a future podcast. Like we've definitely sat in front of people that they've got a very different view on I can't give money away until I hit $10 million, or I'm not gonna be able to do what I want to do and retire until I hit $5 million. And we say, well, how did we come up with that number?

Right? Why do certain people that we would say are wealthy? Why do certain rich people, quote unquote, feel poor? Like, maybe that should be a podcast. But yeah. It's coming back to that same idea. Our job as planners is to figure out what is enough for you. And then we have to do the math on how do we balance the good forces of compounding dollars with the purchasing power of the dollar eroding over time.

[00:12:43] Adam Werner: And that's it. The idea of yeah, those are opposing forces, right? Saving and then having that compounding growth in your investments over time. Hopefully counteracting. Or even better, you're earning even more than that rate of inflation. So you're actually feeling your purchasing power increase over, over periods of time.

So yeah, that, that should certainly be part of the process. Right? And we've talked about this before and I think there's been so many examples. People get it, but the earlier you start, the more powerful that becomes. It's hard, especially because of inflation, right? Yeah. Think, Think. If you're a younger professional starting out now and you're looking to buy a house, it just, it feels incredibly daunting that it's just never going to happen.

But it's the reality. Getting started earlier has a huge impact and we certainly see it with some of our younger clients that have put themselves in a really good spot. It just, it buys them so much flexibility at some point later in life, to be able to decisions from a position of strength rather than feeling like you're kind of backed into a corner and you're remove some of those options in the future.

But, you know, just aligning what you need instead of just picking a random number, kind of thin air to say, well, but this is a big number, so that'll be good.

[00:14:08] Ben Haas: Yeah. If you are closer to retirement and the question is a million dollars enough? We'll go back to the big question. Yeah. It depends, but, you know, I'm gonna err on the side of probably thinking it's not right.

Because if you've been, you know, in whatever field, if you've been working long enough, you're probably making more than the $40,000. Mm-hmm. Million dollars will afford you. So we believe that financial planning needs to exist. And that's why we say we wanna do planning before we even talk about investing.

You know, but let's create a scenario here where we can think about what is this money for? What do you really need? And then let's just do the math together, because security is the goal here, right? Clarity is the real goal. It's not a generic number.

[00:14:54] Adam Werner: Yeah. And I know we've said this before too. You think back and it was probably around the time that, Who Wants to be a M illionaire, was on the air the ING commercials where, you know, people were walking around with a number. Yeah. Floating above their head. There's probably, we could probably go on YouTube and find a clip from Who wants to be a Millionaire with that commercial playing.

That's the idea, right? We need to, our job is to try to help people figure out what should that number be or at least a ballpark idea of what someone's for their specific situation, what should that target be? Again, just rather than picking a number out of thin air or basing it off of the historical, you know, yeah, well my parents did X, Y, z, this is what they needed.

So if I do that, I'm gonna be fine. Just time changes those conversations.

[00:15:39] Ben Haas: No doubt about it. To finish up the, Who wants to be a Millionaire? I'm not even gonna give you multiple choice. Guinness. Guinness Book of World Records. Who has spent the most time on, on television in their lifetime?

[00:15:53] Adam Werner: Oh, well you're teeing this up. It has to be Regis.

[00:15:55] Ben Haas: Of course it is. It wasn't just Who wants to be a Millionaire? It was Regis and Kelly. It was, yeah.

[00:16:02] Adam Werner: Yeah. Yeah. Well done though.

[00:16:04] Ben Haas: Well done.

[00:16:04] Adam Werner: RRIP. Regis.

[00:16:06] Ben Haas: Yeah. Thank you. Good chat. Million dollars, I mean. I don't play the lottery. Sounds great. It'd be nice.

Yeah. I'm not gonna, yeah, nobody's gonna.

[00:16:17] Adam Werner: It can't hurt.

[00:16:18] Ben Haas: It can't hurt. Alright. Until next time.

[00:16:22] Adam Werner: See you then.

[00:16:23] Ben Haas: Bye.

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.

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Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.  are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.