St. Patrick’s Day is nigh. Images of chubby black pots spilling over with gold coins are everywhere. As a financial writer I feel compelled to ask, “Just how much is that gold worth?”
Most of us grew up imagining that pot and how thrilling it would feel to travel to the end of the rainbow and find it. The myth varies with the teller, but I like thinking the fairies put the gold there and tricky leprechauns are carefully watching over it. They could be guarding it for their own amusement – tapping out shoes can get tedious – or to protect humans from the worst of greed.
But exactly how much would be in that pot? A lot? Enough to make me rich forever? We put the question to investors surveyed in February: “If you were to find a pot of gold at the end of the rainbow, how much would you expect to be in it?”
By far the largest share of respondents would expect the pot to contain $1 million in gold. A surprisingly modest answer, especially considering the relative affluence of the respondents. Even millionaires with up to $5 million to invest most commonly imagine the leprechauns sitting on a stash of $1 million.
The story is quaint, and so is the expectation. Financial planners warn us that $1 million isn’t what it used to be. The Department of Labor’s inflation calculator spells it out pretty starkly. In 1956 – in the midst of the baby boom years - $1 million was worth today’s equivalent of nearly $8.47 million. Fast forward to 1980 – the beginning of the Millennial generation – and $1 million was worth $2.8 million today.
Inflation may be eating away at that $1 million, but the Millionaire remains a powerful cultural icon. Obama’s tax plan is known as a “Millionaire tax.” The Internet is teeming with tips on becoming a millionaire by (insert age here), three easy steps to becoming a millionaire, secrets of the self-made millionaire. And ABC is still asking us “Who Wants to Be a Millionaire?”
The prevailing wisdom is that $1 million will likely leave you secure, but not rich in your golden years. A 4 percent withdrawal rate on that savings will yield $40,000 a year. The numbers are clear, yet $1 million remains a popular retirement benchmark.
The wealthiest – those with $5 million and more – have their sights set a little higher. The largest share – 26 percent – expect that pot of gold at the end of the rainbow to be worth $25 million, but the second largest share – 24 percent – are looking for a mere $1 million.
Science – which seem to be ruining so much good fun these days – tell us to put all these dreams aside. Aerial images show us that rainbows are circles, not arcs. No end to the rainbow. No pot of gold. (Or, we can choose to believe the leprechauns are much more clever than anyone could have imagined.)