Why the Rich Don't Feel Rich
Reuters reports that a Fidelity Investments survey found 42 percent of more than 1,000 Americans who have at least $1 million in assets aren't feeling very wealthy.
They say they'd need to have at least $7.5 million to feel they're well-to-do.
As ridiculous as that may sound to some, it makes perfect sense to me. There is every indication that America could enter a hyperinflationary period not unlike the 1970s.
Inflation is a boon to people who owe money -- your fixed-rate mortgage could be a charm if inflation pushes housing values up -- but a real drag to people who have money.
As the cost of goods and services increases, you see, every dollar you have buys less of them.
And your retirement plan suddenly looks very shaky.
Let's say you have accumulated a nest egg of $1 million after a lifetime of sacrifice and prudent decisions.
You put your nest egg into a relatively secure fund that pays you a 5 percent annual return, so you can enjoy a $50,000 retirement income.
But then inflation soars to 10 percent!
At the end of the first year, you've been able to live off your 5 percent interest, so you still have, technically, $1 million in your account.
But inflation has reduced the purchasing value of your $1 million by 10 percent or $100,000! Technically, your $1 million nest egg is worth only the equivalent of $900,000.
What's worse: Your $50,000 retirement income is able to purchase only the equivalent of $45,000 in goods and services -- because its value has gone down by 10 percent, too.
Now you have to take more money out of your account to live on, which means you're now drawing down your principal.
You can see how easy it could be, five to 10 years down the line, to run completely out of dough -- and that assumes the economy doesn't melt down again.
And so it is that a million bucks isn't what it used to be.
What we need in America is a massive infusion of wealth -- not riches.
Consider: We all dream about winning the lottery, but an excess of dough doesn't drive an excess of happiness.
According to a John Stossel report, one woman who won the lottery said she was very happy for a spell, but then the thrill wore off.
Stossel also cited a survey of 49 of the world's richest folks. The mega-rich aren't a whit happier than any of us average Joes.
Stossel interviewed Jean Chatsky, a columnist for Money magazine, who conducted an interesting poll that may explain why.
Chatsky found that money makes folks happier only if their family's income is below $30,000 a year.
Once a family's income exceeds $50,000 -- once it is able to meet basic material needs -- more money doesn't equate to more happiness.
What we all long for is some stability, security and the notion that our future looks bright.
All most of us want is to spend less than we earn, yet still provide for our families.
All most of us want is the opportunity to work and produce and assemble a little long-term wealth of our own, so we can retire one day.
With our economy a mess, our spending out of control, our unemployment high and our future looking dicey, such wealth is hard to come by.
So I hope you can forgive the rich for not feeling so rich anymore.
©2011 Tom Purcell.