‘Our kids say our small house is embarrassing’: My husband and I earn $160K, have $1 million in retirement savings, cook at home and drive an old Honda. Are we missing out?

We put away about 20% of our income into retirement and college savings. We have more than $1 million in retirement funds. This was mostly on a cop’s salary, as I was a stay-at-home mother. My husband is now retired, and I went back to work.

I see people with less money and bigger expenses (student loans, giant mortgages, credit-card debt, etc.) living a much more lavish life than we do. Our kids say that our small — but cute! — house is embarrassing, and people here in the suburbs see us as poor. 

Are we missing the boat? We wanted to save aggressively for retirement and our kids’ college costs. But should we be redecorating, going to Cancun and Disney World and getting takeout every night instead? 

How are these other people affording this luxe life? And if we stay this frugal, will we wind up rich but too old to spend the money? I don’t begrudge anyone else enjoyment and high-end stuff. I just wonder if I’m doing this wrong. 

Thank you sincerely for reading my letter. It helped just asking this out loud. 

Frugal Wife

Dear Frugal,

Wealth does not mean that you drive a Tesla Model X Plaid TSLA, -0.77%, live in a sought-after ZIP code, wear a flashy watch and/or take Instagrammable META, +2.72% vacations. In fact, that can mean the exact opposite. It can also mean that you are less wealthy than the person next door living in a modest house that has not been decked out with electric gates and a McMansion-style extension. Indeed, credit-card debt hit a record $866 billion in the third quarter of 2022, up 19% from the same period a year earlier, according to TransUnion’s TRU, +2.04% most recent quarterly report.

Have you missed out? I think you probably already know the answer to that question. You didn’t miss out on the memories of dinner at home with your family or taking holidays in your old, much-loved car, or by being able to rest your head on the pillow at night, safe in the knowledge that, despite not being part of the 1%, you managed to accrue $1 million in retirement savings and keep your living costs low. Your house is, no doubt, filled with memories. Good for you for not feeling the pressure to constantly upgrade to a bigger pile.

How are people affording their lifestyles? Some people, particularly those in the tech sector — which, unfortunately, has suffered widespread layoffs in recent months — have enough to play around with while maximizing their 401(k)s and putting aside 12 months of expenses for a rainy day. But they don’t represent the majority of Americans. In fact, the personal saving rate — meaning personal saving as a percentage of disposable income — fell to 2.4% in November from 8.9% in November 2019, before the coronavirus pandemic. 

Sure, wealthier people are paying more taxes: Some economists say the personal saving rate could be falling as more investors pay capital gains taxes on stocks they sold in the last year. Still, “excess savings” — the amount households saved versus what they would have saved had it not been for COVID-19 and the resulting job losses — hit $1.7 trillion by mid-2022. And $1.35 trillion of that was held by the top and third income quartiles. To put that mid-2022 figure in context, in the second quarter of 2021, excess savings stood at $2.26 trillion.

But some say the recent loss of jobs in the tech sector does not bode well for those who are only living for today. Tom Siebel, a billionaire serial entrepreneur whose latest title is CEO of C3.ai AI, +1.34%, told my colleague Levi Sumagaysay last November: “Before this is over, everyone will feel the sting, large companies and small.” He added, “All this weird, entitled behavior is coming to an end. No more people working in pajamas at home, being paid in bitcoin. This era will be a zinger, unfortunately.” He further cautioned about a significant downturn ahead.

Ignore your friends and neighbors who are living it up at Disney World. The Disney vacation site Mousehacking said its baseline Disney World DIS, +0.83% vacation for a family of four — two adults, one child 10 or older, and one child aged 3 to 9 — costs $6,320, or $316 per person per night, in 2023. “This includes flights, transportation to and from Disney World, a five-night stay at Pop Century, five-day tickets without park hopper, Genie+ at two parks, and quick-service meals, snacks, and two table service meals,” the site says.

Call me old-fashioned, but I’d rather book an Airbnb ABNB, -0.78% in an old market town. Plus, fun-park rides leave me with a headache — second only to the final bill. 

Follow Quentin Fottrell on Twitter.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

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