<p>What would the “new” $ amount be that a Million Dollars signifies? What would it be based on?
Isn’t local cost of living a HUGE factor in such an “index”???</p>
<p>Going back to OP.
“Those who have equal or greater than 1 Million USD in networth is a millionaire. Networth = “what you have” - “what you owe”. How to calculate the networth, however, is a totally different story.”</p>
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<li>I frankly do not see it this way. I do not count real estate, cars. I have to live somewhere and drive a car. So, they are not liquid to me (not cash). So, to me is what I see as my balance minus what I owe in debt. If debt is zero, than it is even more simple. It is your account balance, do not need to calculate. </li>
</ul>
<p>In regard to what you tell kids, it is very personal. I am not telling anybody about balance, but I tell kids how much we are making. And I am very loud about my bonuses and increases. But again these are my preferences.</p>
<p>Take a million dollars from way back when and then adjust it in regards to inflation and present value of said money, and the result is the actual value of $1 mill today.</p>
<p>^What do you mean from way back? Why not to use just your current balance? We are discussing label in connection to today, correct? Or we are discussing who had that much 100 years ago? I am not sure what time value of money has to do with this thread. I am confused.</p>
<p>Oh, if you’re using it from today onwards, you need to use the future value of money (FV) instead of PV. Similar calculation. It is inherently less precise though because you have to estimate inflation.</p>
<p>^But they grow, we are still working, right? Or assumption is that nobody with a million have sources of income any more?</p>
<p>I outlined the static case because performers mom suggested the $1m number.</p>
<p>It’s basically just Principal* (1 + (Interest rate-inflation)) for every compounding year. You have to do it individually every year because of inflation.</p>
<p>…^and because of additional principal</p>
<p>Account balances aren’t enough - you may have unrealized capital gains and you have to consider the effect of taxes on those gains.</p>
<p>Which are taxed at a flat 15% in the LR. Obama wants to change that though (IMHO this is a horrible idea)</p>
<p>My opinion is that tax rates on capital gains will have to go up in the future so I’m often inclined to book gains sooner rather than later unless we’re talking long-term divvy stocks.</p>
<p>Fact is, being a millionaire meant you were REALLY rich back in the day when gas was $.25 a gallon and the price of a VW beetle was $1200. Now in the day of $4.00 a gallon gas and the $24,000 VW beetle–being a millionaire is better than a poke in the eye with a sharp stick, but it no longer means that you are REALLY rich.</p>
<p>The problem with raising the CG tax is that it will have the effect of stifling investment.</p>
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<p>Well, you can see how hard it is to make decisions on paying for spending and I think that all sources of revenue will be looked at. The city where I work just doubled parking meter fees - I have no doubt that it will have an impact on downtown businesses that compete with suburban malls.</p>
<p>S2 has been very interested in financial issues, how insurance policies and 401(k)s work, etc., so it has made for interesting campfire discussions – which is when these things seem to happen. He is my practical child. </p>
<p>S1 is the typical math major when it comes to money. If it involves numbers, he can’t be bothered. He will be my kid who has lots of $$ in the bank but forgets to pay his student loans. Drives my former accountant/financial analyst DH crazy. 
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<p>DH and I both think we didn’t pay enough attention to money management with the kids, in retrospect, in large part because they inherited our thrifty genes. (S2 paid $8 for textbooks last semester.) They didn’t want a lot of STUFF, so teaching them how to budget was never necessary. They stuck their money in the bank.</p>
<p>I think that a good way to teach money management is to have them go through an intro to finance book so that they have an inherent feel for the time value of money. It then makes it easier to talk about insurance, investments, mortgages and other loans.</p>
<p>NewHope, thanks for the explanation. I suspect that many of the people who talk about transferring personal property, or putting money in someone else’s name, really don’t follow the rules because they don’t see that as having anything to do with ownership.</p>
<p>"Account balances aren’t enough - you may have unrealized capital gains and you have to consider the effect of taxes on those gains. "</p>
<p>-non-taxable at the moment. Only taxable when withdraw. So, forget taxes for the most of us here, we are taling about 401k, right? We never even had other savings, there is no reason for other savings, at least in our case.</p>
<p>
There are two exclusions to gift tax.</p>
<p>One is a yearly amount, currently $13,000/year. Gift tax is not owed on gifts under this amount.</p>
<p>The second is a lifetime exemption. For 2011 this amount is $5,000,000, which not un-coincidentally is the same as the Federal estate tax exemption. Gifts in this category are basically using up your estate tax exemption before you die - your estate exemption is reduced by the amount of gifts you gave that would have triggered gift tax.</p>
<p>Two caveats: 1) I don’t remember if gifting your house gives you a stepped up basis. There’s probably ways to structure the deal to get stepped-up basis. 2) IIRC, there are tax forms that need to be filed to count a gift against your lifetime exemption. If you don’t file, the IRS can and will hit you later for gift tax. This has become a focus area with the IRS - they are scrutinizing transfer records looking for low priced transactions between family members.</p>