Can 29yr old live off $1.5 million w/working?

[Anonymous]

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

Yes, he can retire at 55 or 60 with 1.5M and a paid off house. But this guy wants to retire AT 29! 1.5M is NOT enough to get you through 50+ years of living, including having to pay for healthcare for the next 36 years.

Maybe if you go live in small town (LCOL) and grow your own food and farm your own chickens for eggs and to eat. But it's a risky venture when you are only 29 to quit working with that little saved.

Yes it is, you absolute dolt.

Seriously, what exactly do you think this guy’s expenses will be?

[Anonymous]

Anonymous wrote:If he can live on 45K/year, paying for his own health insurance, receive no Medicare and probably receive no SS, for 50 to 60 years, go for it.

And for those saying there are people who live like that, it is rare that it's intentional, plus THEY will get Medicare and SS at a minimum.

I honestly can’t believe any relatively young person with a functioning brain would deliberately INCLUDE social security in their retirement plans! I’m planning as though that program will at a minimum be means tested and therefore I will get nothing. Anything I DO end up getting will be a bonus.

Tl;dr it’s difficult to take financial advice from someone banking on future social security payments seriously…

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

Yes, he can retire at 55 or 60 with 1.5M and a paid off house. But this guy wants to retire AT 29! 1.5M is NOT enough to get you through 50+ years of living, including having to pay for healthcare for the next 36 years.

Maybe if you go live in small town (LCOL) and grow your own food and farm your own chickens for eggs and to eat. But it's a risky venture when you are only 29 to quit working with that little saved.

Yes it is, you absolute dolt.

Seriously, what exactly do you think this guy’s expenses will be?

I am not the "dolt" (super rude, btw) but it would be an interesting experiment to run 29 yo's numbers.
45K yearly income with no SS
Expenses:
Federal (maybe state) taxes
Property taxes
Utilities
Healthcare (forever)
Home maintenance
Food

My 90 year old dad has a small, paid off home, has healthcare for life, no travel, no new clothes, no going out, and it still costs him 5K/month. And that is before income taxes. It all adds up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If he can live on 45K/year, paying for his own health insurance, receive no Medicare and probably receive no SS, for 50 to 60 years, go for it.

And for those saying there are people who live like that, it is rare that it's intentional, plus THEY will get Medicare and SS at a minimum.

I honestly can’t believe any relatively young person with a functioning brain would deliberately INCLUDE social security in their retirement plans! I’m planning as though that program will at a minimum be means tested and therefore I will get nothing. Anything I DO end up getting will be a bonus.

Tl;dr it’s difficult to take financial advice from someone banking on future social security payments seriously…

You are a seriously unpleasant person.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Interestingly, at least to me, I think a lot of learning and thinking is spurred by debating points of view if one is openminded. It's a little like back testing. And I appreciate that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Would you at least agree that safe withdrawal rates have not been tested over extended periods of times. Rather, the Trinity study on which this is based was only for a 30-year period?

I guess my point is that if we are going to state things as absolutes, all facts should be included.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Would you at least agree that safe withdrawal rates have not been tested over extended periods of times. Rather, the Trinity study on which this is based was only for a 30-year period?

I guess my point is that if we are going to state things as absolutes, all facts should be included.

Just as an aside--I'm not the same person making all the counterpoints here. I don't go around calling people dolts and the like for instance. The original Trinity study which suggested a 4% SWR was based on a 30 year period, but others have studied it for longer and with different withdrawal rates. And now anyone can basically replicate their study just by punching numbers into firecalc/cfiresim since that's essentially what their study involved (testing over all prior historical periods). (Side note--it is kind of amazing how much financial tools have grown that we can know replicate for free what took a major study to do in the past). If you put in 40, 50, 55, etc. years both your odds and your predicted end number not surprisingly tend to go up--just because time in the market is everything. If you adjust your spend the first 8 or so years to not tap into if it's down, your results go up even more. So having 1.5m when you are 29 is *better* than having it when you are 50 if you can commit to not increasing your spending more than inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Would you at least agree that safe withdrawal rates have not been tested over extended periods of times. Rather, the Trinity study on which this is based was only for a 30-year period?

I guess my point is that if we are going to state things as absolutes, all facts should be included.

Just as an aside--I'm not the same person making all the counterpoints here. I don't go around calling people dolts and the like for instance. The original Trinity study which suggested a 4% SWR was based on a 30 year period, but others have studied it for longer and with different withdrawal rates. And now anyone can basically replicate their study just by punching numbers into firecalc/cfiresim since that's essentially what their study involved (testing over all prior historical periods). (Side note--it is kind of amazing how much financial tools have grown that we can know replicate for free what took a major study to do in the past). If you put in 40, 50, 55, etc. years both your odds and your predicted end number not surprisingly tend to go up--just because time in the market is everything. If you adjust your spend the first 8 or so years to not tap into if it's down, your results go up even more. So having 1.5m when you are 29 is *better* than having it when you are 50 if you can commit to not increasing your spending more than inflation.

I love all the tools. And agree we have so much more access to tools and information than even 5 years ago.

Out of curiosity, I ran Firecalc.

Using a combination of 30 year Treasuries (which had been suggested earlier) and Total Market equities:
55 years: 45K (3% drawdown) 1.5MM initial portfolio
25% equities: 80% chance of success
0% equities: 23% chance of success
60 years: 45K (3% drawdown) 1.5mm initial portfolio
25% equities: 71.3% chance of success
0% equities: 21.3% chance of success

[Anonymous]

Anonymous wrote:No, that is not enough. As others have said, it isn’t enough at 65 let alone 29.

Yes it is not enough for you because 1.5m is what you make in a year. We already know it. But for the vast majority of average Americans it’s enough.
If you make the average $50k salary, 1.5m is your lifetime earnings.
The average worker would not hesitate to take their lifetime earnings today and quit working. Even more, it comes we a paid off house. What a dream!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

Yes, he can retire at 55 or 60 with 1.5M and a paid off house. But this guy wants to retire AT 29! 1.5M is NOT enough to get you through 50+ years of living, including having to pay for healthcare for the next 36 years.

Maybe if you go live in small town (LCOL) and grow your own food and farm your own chickens for eggs and to eat. But it's a risky venture when you are only 29 to quit working with that little saved.

Yes it is, you absolute dolt.

Seriously, what exactly do you think this guy’s expenses will be?

I am not the "dolt" (super rude, btw) but it would be an interesting experiment to run 29 yo's numbers.
45K yearly income with no SS
Expenses:
Federal (maybe state) taxes
Property taxes
Utilities
Healthcare (forever)
Home maintenance
Food

My 90 year old dad has a small, paid off home, has healthcare for life, no travel, no new clothes, no going out, and it still costs him 5K/month. And that is before income taxes. It all adds up.

Spending 5k/month? Paid off home, no healthcare costs, no travel.
Where is the money being spent?

I’m single, earn 55k, I pay rent, healthcare, clothes, I travel and I still save $800/month.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

Yes, he can retire at 55 or 60 with 1.5M and a paid off house. But this guy wants to retire AT 29! 1.5M is NOT enough to get you through 50+ years of living, including having to pay for healthcare for the next 36 years.

Maybe if you go live in small town (LCOL) and grow your own food and farm your own chickens for eggs and to eat. But it's a risky venture when you are only 29 to quit working with that little saved.

Yes it is, you absolute dolt.

Seriously, what exactly do you think this guy’s expenses will be?

I am not the "dolt" (super rude, btw) but it would be an interesting experiment to run 29 yo's numbers.
45K yearly income with no SS
Expenses:
Federal (maybe state) taxes
Property taxes
Utilities
Healthcare (forever)
Home maintenance
Food

My 90 year old dad has a small, paid off home, has healthcare for life, no travel, no new clothes, no going out, and it still costs him 5K/month. And that is before income taxes. It all adds up.

Spending 5k/month? Paid off home, no healthcare costs, no travel.
Where is the money being spent?

I’m single, earn 55k, I pay rent, healthcare, clothes, I travel and I still save $800/month.

High property tax state. Older home that keeps needing repairs. Utilities and food. We are working on utilities (just got rid of his landline) to bring them down, but it all adds up. I would guess you are paying less in rent than he is paying in property taxes, home insurance and maintenance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Would you at least agree that safe withdrawal rates have not been tested over extended periods of times. Rather, the Trinity study on which this is based was only for a 30-year period?

I guess my point is that if we are going to state things as absolutes, all facts should be included.

Just as an aside--I'm not the same person making all the counterpoints here. I don't go around calling people dolts and the like for instance. The original Trinity study which suggested a 4% SWR was based on a 30 year period, but others have studied it for longer and with different withdrawal rates. And now anyone can basically replicate their study just by punching numbers into firecalc/cfiresim since that's essentially what their study involved (testing over all prior historical periods). (Side note--it is kind of amazing how much financial tools have grown that we can know replicate for free what took a major study to do in the past). If you put in 40, 50, 55, etc. years both your odds and your predicted end number not surprisingly tend to go up--just because time in the market is everything. If you adjust your spend the first 8 or so years to not tap into if it's down, your results go up even more. So having 1.5m when you are 29 is *better* than having it when you are 50 if you can commit to not increasing your spending more than inflation.

I love all the tools. And agree we have so much more access to tools and information than even 5 years ago.

Out of curiosity, I ran Firecalc.

Using a combination of 30 year Treasuries (which had been suggested earlier) and Total Market equities:
55 years: 45K (3% drawdown) 1.5MM initial portfolio
25% equities: 80% chance of success
0% equities: 23% chance of success
60 years: 45K (3% drawdown) 1.5mm initial portfolio
25% equities: 71.3% chance of success
0% equities: 21.3% chance of success

The safewithdrawal portfolio studies are usually based on a balance of 60-70% equities (Total market) and 30-40% (total bond index).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Inflation. My kid lives in a MCOL area. Their rent just went up 27% for the next year lease. So did many of the apartments near them. So unless they want to get a roommate or live in a downgraded apartment, they are paying much more next year (and likely after that). And by downgraded apartment, I mean one without AC (think area that it's required), one that has carpet everywhere but the kitchen and bathroom (even the eating area would have carpet), apartment is 40+ yo and not been updated in 20+ years, etc. No inside parking (think upper midwest where it snows a lot), etc.

The safe withdrawal rates are tested for inflation--including periods of intense inflation (e.g. 1970s). You draw down your initial amount + inflation.

Seriously, how realistic do you think it is that this 29 year old, who doesn't want to work, will be able to manage his inheritance in a way that he can make it work? Seems to me that if he had the chops to invest in such a way to make it work, he would work, at the very least to secure Medicare and SS.

I have no idea--I don't know him. I just am noting that the safe withdrawal rate formulas are adjusted for inflation.

Would you at least agree that safe withdrawal rates have not been tested over extended periods of times. Rather, the Trinity study on which this is based was only for a 30-year period?

I guess my point is that if we are going to state things as absolutes, all facts should be included.

Just as an aside--I'm not the same person making all the counterpoints here. I don't go around calling people dolts and the like for instance. The original Trinity study which suggested a 4% SWR was based on a 30 year period, but others have studied it for longer and with different withdrawal rates. And now anyone can basically replicate their study just by punching numbers into firecalc/cfiresim since that's essentially what their study involved (testing over all prior historical periods). (Side note--it is kind of amazing how much financial tools have grown that we can know replicate for free what took a major study to do in the past). If you put in 40, 50, 55, etc. years both your odds and your predicted end number not surprisingly tend to go up--just because time in the market is everything. If you adjust your spend the first 8 or so years to not tap into if it's down, your results go up even more. So having 1.5m when you are 29 is *better* than having it when you are 50 if you can commit to not increasing your spending more than inflation.

I love all the tools. And agree we have so much more access to tools and information than even 5 years ago.

Out of curiosity, I ran Firecalc.

Using a combination of 30 year Treasuries (which had been suggested earlier) and Total Market equities:
55 years: 45K (3% drawdown) 1.5MM initial portfolio
25% equities: 80% chance of success
0% equities: 23% chance of success
60 years: 45K (3% drawdown) 1.5mm initial portfolio
25% equities: 71.3% chance of success
0% equities: 21.3% chance of success

The safewithdrawal portfolio studies are usually based on a balance of 60-70% equities (Total market) and 30-40% (total bond index).

Adding--the higher equity investment is why you have to be attentive to sequence of return risks in the early years of withdrawal.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

If he lives 60 more years, that's only 25k a year or basically 2k/month, in today's money. With this money he has to pay taxes, insurance, and upkeep on a home, plus maintenance and eventual replacement on a modest car. Plus food, clothing and healthcare. Even for a "nice, quiet, fulfilling life." I think your confidence is unfounded.

Never understand why DCUM people can’t understand buying bonds.

You buy $1.5MM of risk free bonds at 5% and you make $75k per year without touching the principal.

Many people can live on that per year.

This.

Once people understand this, it's like a lightbulb going off.

The average DCUM type doesn’t understand that 75K is the current MEDIAN American *household* income. Bunch of book smart idiots acting like 75K is poverty wages for a single man WITHOUT A MORTGAGE…

Most people making 75K have health insurance thru their job for moderate rates.
Sure he could live on it if invested properly, but it would be a miserly life as it's not inflation adjusted. He won't get SS and if he does it wont be very much as it's the average of your income over 10+ years (and he might not even have 10 years of work).
Sure no mortgage, but you have property taxes that keep going up and up and up. The house will require maintenance, he will need a car to get places (because he isn't living on that in an urban area)

People making the average 75k have to pay rent or a mortgage. He doesn’t have to. Big advantage there.
Healthcare? He can get affordable obamacare.
Social Security? This isn’t free. Workers contribute to it from their paycheck. He can take the 7% SS contribution that workers have to pay, invest it wisely and match or beat SS in the end.
Home maintenance? Everyone has to do it.