How Much Money Do You Need To Feel Rich?

Wealth is a subjective concept, but one universal definition is: being able to live a comfortable life without having to work.

The White House says your rich if you make $250,000 a year, but what about cost of living?

When people are asked this question, it is all over the board. One lady from Southern California said rich to her is: "I’d like to have enough money so my family and I wouldn’t have to work anymore or worry about the necessities, and maybe travel a bit." She also added that she would need about $10 million to consider herself set.

Another woman from Seattle said "a couple thousand dollars a month."

Another from New York City wanted a billion (although she would still fly coach).

Experts peg the figure to be somewhere around $2 million and $12 million in savings.

On the high end of that range, a single person living in an expensive part of the country, New York City, for example, wanting to retire at age 35, would need at least $300,000 a year to feel rich.

A yearly income of $300,000 would allow for taxes, a $3,800 a month apartment, the average price in Manhattan, and a monthly spending allowance of around $12,000. Not too bad, especially since you’d do all this without a pesky job.

To generate $300,000 a year, beginning at age 35, you would need a nest egg of just under $12 million. That assumes a conservative investment portfolio generating a return of 5% a year, an inflation rate of 2.5% a year and social security benefits of $25,000 a year, starting at age 62.

Over time, the shape of your nest egg would resemble a bell curve, growing in the early years, and then declining as inflation required you to withdraw more money to maintain a lifestyle equivalent to $300,000 in 2010. The $12 million would finally dwindle to $934 when you turned 100.

If you live in a low cost part of the country, $100,000 a year should be enough. In that case, you would need about $4 million to retire at 35. But if you are willing to keep working until age 65, a mere $2 million would be enough.

Of course, there are other ways of determining wealth besides just what you’ll need to live well in retirement. Although not discussed by financial planners, one is relativity. Basically, you’re rich if you’re making more than your brother-in-law, or your neighbor.

That appears to be how the government measures affluence. The Obama administration wants to extend tax cuts for all but the wealthiest Americans, which it defines to be those families making more than $250,000, but that only includes about 2% of the population.

Financial planners caution not to confuse wealth with income. Some people can make a million a year, but be spending a million-and-a-half. They are not rich. Income relates to lifestyle, wealth relates to balance sheets.