When Becoming a Millionaire is Not Greedy

Check out this great article from Financial Planning with charts and numbers on amounts of money that need to be saved. To meet real living expenses. (You will need a free account to view the article)

Our culture and ideals about retirement are shifting. Generation X and subsequent generations have been raised on the sidelines of watching their grandparents retire into pension-supported retirements, their parents either generating substantial wealth for themselves, or perhaps having varied career opportunities and being much more responsible for their own retirement. As Gen X advances in age, one thing is becoming clear for many: the responsibility for saving for the future is falling more and more on the shoulders of this group.

Yet here is where things get really tricky for many in America's middle class. Their identity may not be defined by reaching millionaire status. Yet this exactly where many will need to be in order to reach a comfortable place of retirement, or working by choice and not necessity. While there are many financial planners that can run the numbers and tell you how much you need to save to meet your retirement goals, there are few that are equipped to help you deal with the reality of what those numbers mean.

For many, while the idea of having a million plus dollars seems appealing, the other side of the coin is the felt responsibility that comes with managing over a million-dollar portfolio. Psychologically we often equate having more money with having more to manage. This means that we feel uncertain about our responsibilities.

The other challenge that we face when we are told we need to accumulate more than a million dollars is a few mathematical steps are often omitted. This is not deceit, but rather financial planners and other investment professionals take for granted their deeper understanding of how compounding interest works, and that is why we need such big numbers in the future. The logical brain of many people have a hard time conceptualizing the compounding effects of both saving and inflation. Sure they are terms that are thrown around a lot in the media, and financial press. But my experience says if you have not worked directly in the investment and money management world, the understanding of compounding interest is limited.

So there is both a real knowledge gap that must be crossed in order to help people understand the importance of getting to a million-dollar level. But there is also a major psychological gap as well. Often times the values of the middle class can reflect humility and a desire not to have so much money, so as not to appear greedy. Another dimension can be for different religious traditions in which excess money is to be avoided.

This is why the facts alone may not be enough to encourage you to accumulate an appropriate amount of money for your future.

In 30 years millionaires will not be the ones driving flashy cars and living in big homes. They will be middle-class folks with enough money to retire and afford the same standard of living to which they have grown accustomed. Saving a million dollars is not about being showy, but rather about taking responsibility for yourself, your spouse and your family. In our culture, where we pride ourselves on self care, it will take a large enough bucket to maintain our independence instead of having to rely on family members.

So even if you get to the place where you understand the need to accumulate enough money, has your spouse come to understand things in the same way? Having these conversations early and often is key to making it to the long term goal.