You don't even need a fancy startup. Interest rates are quite low right now, which makes saving more difficult. But if we assume an average 5%, saving just $6,000 per year once you reach normal working age doing a regular old job will find you with well over $1.2M by the time you retire.
$6,000 is a lot of money, but it's not that much money. An iPhone, for example, costs approximately $2000-3000 by the time it is all said and done and I see a lot of them out on the street in the hands of normal Americans.
With enough time, $1.2M can be made with a regular job. Nobody said you had to be in the 1% of net worth holders by the time you turn 25, or it doesn't count.
The top 1% won't be $1.2M by the time I retire. For your comparison to be valid go ask someone who was born in the 40's how easy it would have been for them to save $6,000/year.
A fair point. I was really just attempting to illustrate how $1.2M is not that difficult to acquire.
I admit, I come with a biased perspective. Everyone I know born in the 40s were farmers. They all pretty much lived a life of poverty, putting all their income into appreciating assets. They're now all sitting on multi-million dollar fortunes.
Assuming you are in the mid-to-high end earning range of the 99%ers, if you want to live a life of poverty, there's a good chance you'll make the 1% list someday too.
That's the problem with blanket statements. I would think someone who made their millions through questionable banking tricks is quite a bit different to the poor dirt farmer who sold his farm at retirement, no?
The article suggests $300K - $400K income and $1.2M in wealth. As far as being in the 1% when you retire, $1.2M now is not the same as $1.2M in 40 years. I doubt $1.2M will put you in the 1% 40 years from now given inflation & cost of living changes.
1. Time value of money. $1.2 million in 40 years will be about $2.65 million then, assuming 2% inflation.
2. 5% average savings. As far as I can tell, interest rates are no longer exceeding inflation, and haven't been for quite a long time in market-time. I would count on your interest to barely have you breaking even, all in, unless you're taking risks with the money.
You don't even need to be an entrepreneur. A nurse/engineer couple could hit $200k in their 30's, and that income would allow a rate of saving that would lead to well over $1.2m in home equity and retirement accounts in their 50's or 60's.
I'm not sure how you mean this. A Series A round doesn't confer any personal wealth - it's investment in the company in order to help it grow.
Do you mean the valuation of the private company that takes place as part of the Series A round typically gives the founders some level of paper wealth that puts them in the 1%? If so, this makes sense. (Of course, it generally takes a lot of work to convert that into something that can actually be realized in a liquidity sense.)
Given a lump sum of cash and annual withdrawal of a certain percentage of that cash (3% per year is safe, 4% is pushing it, 5% is a sure way to lose your money), you would need the following amounts of money to pay yourself $50,000 per year:
$1.67 Million @ 3% (1 / .03 * 50,000)
$1.25 Million @ 4% (1 / .04 * 50,000)
$1.00 Million @ 5% (1 / .05 * 50,000)
Put another way, if you have X Million, how much could you safely withdraw each year at 3% per year?
$1M: $30k / year
$2M: $60k / year
$3M: $90k / year
$10M: $300k / year
Keep in mind you will pay tax on these figures (15% Long Term Capital Gains tax if you're lucky, or more if it's regular income). And this does not account for inflation, so assume the value of money gets cut in half every 25-30 years.
So basically for a team of 2-3 tech founders raising a series A round is the entry ticket to becoming part of the 1% (on paper at least).