$7M vs $10M

[Anonymous]

Anonymous wrote:It really depends on your level of spending and comfort with uncertainty. For me, the difference between those numbers is the security of being able to cover my mother’s elder care and potentially my own if I live as long as she has. I’m 58 and could easily live another 40 years. The $250,000 the $7M generates is before taxes and inflation. Yes, I will certainly tap principal at some point, but still, $250,000 30-some years from now will not be a fortune. It’s crazy and cruel what decent elder care costs.

The 3-4% safe withdrawal rate assumptions factor in inflation. This means in 30-some years, you will be able to withdraw a lot more than 250k. But yes, there is a big difference between a 210k/yr safe withdrawal rate from 7M and 300k/yr safe withdrawal from 10M.

With 3 teen kids, our yearly expenses will be over 210k/yr for the next 10 years while we pay for college and grad/med/law school. Then there will hopefully be a few years of supporting our parents in elder care which will keep our yearly expenses close to 200k. Then a few years of awesome over the top traveling at an age where health insurance will be outrageous. So after 15 years of spending a little more than the safe withdrawal rate from 7M, we might get a few years where our expenses are under that since health care will be covered and we will not have a desire for extensive travel. Then elder care for ourselves will kick in and we will have to start spending down principal. With 10M, we would likely always be under the safe withdrawal rate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It really depends on your level of spending and comfort with uncertainty. For me, the difference between those numbers is the security of being able to cover my mother’s elder care and potentially my own if I live as long as she has. I’m 58 and could easily live another 40 years. The $250,000 the $7M generates is before taxes and inflation. Yes, I will certainly tap principal at some point, but still, $250,000 30-some years from now will not be a fortune. It’s crazy and cruel what decent elder care costs.

The 3-4% safe withdrawal rate assumptions factor in inflation. This means in 30-some years, you will be able to withdraw a lot more than 250k. But yes, there is a big difference between a 210k/yr safe withdrawal rate from 7M and 300k/yr safe withdrawal from 10M.

With 3 teen kids, our yearly expenses will be over 210k/yr for the next 10 years while we pay for college and grad/med/law school. Then there will hopefully be a few years of supporting our parents in elder care which will keep our yearly expenses close to 200k. Then a few years of awesome over the top traveling at an age where health insurance will be outrageous. So after 15 years of spending a little more than the safe withdrawal rate from 7M, we might get a few years where our expenses are under that since health care will be covered and we will not have a desire for extensive travel. Then elder care for ourselves will kick in and we will have to start spending down principal. With 10M, we would likely always be under the safe withdrawal rate.

Life rarely goes per plans....

[Anonymous]

This may help
https://www.bankrate.com/retirement/retirement-calculator/

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

And I'm the PP. We already have two homes within a 90 min drive from each other. So I have plenty in real estate to get any appreciation. We've looked at purchasing a condo in Hawaii. But we have even had a RE agent tell us it is not worth it unless you plan to use it 4-5 months of the year. Look at what happened to all the condo owners in Hawaii for almost 2 years with covid---they had to sell because they couldn't afford it without renters. And condos in Hawaii appreciate, but not that rapidly. Then you have the risk of hurricane hitting it, you have to pay someone to manage the renters, the cleaners, the repairs, boarding it up if a storm is going to hit, etc. If you need the rental income to afford it, then count out going over thanksgiving or xmas because that is when you get extra high rental rates and pay for much of your costs. But if you want to go then, you loose that chance. Also, to rent it out successfully, you have to plan when you go a full year in advance. If I'm going to do that I will just pay for the 2-3 weeks I want to go and not worry about the costs and hassle. Also, In Jan I want to go to Maui, in July I want to go to Kauai next year I want to visit the Big Island and Europe. So I'm not really using it as a vacation home for more than 2-3 weeks per year at most. If it sits vacant for more than X days per month, then I'm not breaking even. And I've tracked condos on all 4 major islands in Hawaii for over a decade----most of them have not appreciated as much as DCUM/SF/LA/Seattle/Boston area. I've had two real estate agents in Hawaii tell me not to buy unless we plan to actually live in it or it will cost us

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

+1 And when the airbnb market crashes, many vacation homes won't break even.

[Anonymous]

https://www.usatoday.com/story/money/personalfinance/2023/08/02/how-much-money-americans-need-for-retirement/70507274007/

"How much money do you need to retire? Most Americans calculate $1.8 million, survey says."

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

+1 And when the airbnb market crashes, many vacation homes won't break even.

Apparently that's already happening with several hosts getting out of the BNB business.. switching to long-term rentals or selling. AirBNBs are no longer the value alternative to hotels at this point so unless you want a big place where multiple families can hang out together, hotels are far more convenient and cheaper/not that much more. Also more easily cancellable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

And I'm the PP. We already have two homes within a 90 min drive from each other. So I have plenty in real estate to get any appreciation. We've looked at purchasing a condo in Hawaii. But we have even had a RE agent tell us it is not worth it unless you plan to use it 4-5 months of the year. Look at what happened to all the condo owners in Hawaii for almost 2 years with covid---they had to sell because they couldn't afford it without renters. And condos in Hawaii appreciate, but not that rapidly. Then you have the risk of hurricane hitting it, you have to pay someone to manage the renters, the cleaners, the repairs, boarding it up if a storm is going to hit, etc. If you need the rental income to afford it, then count out going over thanksgiving or xmas because that is when you get extra high rental rates and pay for much of your costs. But if you want to go then, you loose that chance. Also, to rent it out successfully, you have to plan when you go a full year in advance. If I'm going to do that I will just pay for the 2-3 weeks I want to go and not worry about the costs and hassle. Also, In Jan I want to go to Maui, in July I want to go to Kauai next year I want to visit the Big Island and Europe. So I'm not really using it as a vacation home for more than 2-3 weeks per year at most. If it sits vacant for more than X days per month, then I'm not breaking even. And I've tracked condos on all 4 major islands in Hawaii for over a decade----most of them have not appreciated as much as DCUM/SF/LA/Seattle/Boston area. I've had two real estate agents in Hawaii tell me not to buy unless we plan to actually live in it or it will cost us

We thought about doing something similar closeby but the same constraint applies even to those properties closer. Prices are too high. There was a thread about whether a second home was worth it and the general consensus seemed to be that you can't it as an investment. If you have to live (and let's say you will) 4+ months at your vacation property for it to make sense, that's 4 months you are NOT living in your primary residence! And the added maintenance on top of everything else just makes it not worth it. Maybe I'm just too lazy and cheap..

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There is no difference between a net worth of $7M vs, a $10M net worth. Unless you are looking to buy some big expenditure like a $1.7M Beach house. Better off to do the beach rental for 2 weeks and let someone else deal with maintenance and upkeep. A diversified portfolio would easily generate about $250k off the $7M. For most people that would be enough. You need more cash flow............you are a spender. Maybe that should be the focus and not the nest egg. Curb your spending. This is coming from a 63 yo man with a net worth of $4M. No worries at all.

The 2 week beach rental is so true. We have researched and concluded that a "vacation home" is not worth the purchase unless you plan to actually be there for 4-5 months of the year. If you plan to rent it out, that means you have to plan your scheduled times a year in advance and if you can do that, you can plan and find a rental just as easily. When you add maintenance and all costs you likely come out ahead just renting when needed

Except that if you keep the second home long enough, there’s a good chance the asset appreciation will cover the carrying costs or even net you a profit. We’ve had our vacation home 12 years and in that time it has tripled in value. I would have been happy breaking even, but if we sold it right now we’d come out have doubled our investment after expenses.

That's recency bias. I don't think RE has returned more than the stock market over the long-term.

And I'm the PP. We already have two homes within a 90 min drive from each other. So I have plenty in real estate to get any appreciation. We've looked at purchasing a condo in Hawaii. But we have even had a RE agent tell us it is not worth it unless you plan to use it 4-5 months of the year. Look at what happened to all the condo owners in Hawaii for almost 2 years with covid---they had to sell because they couldn't afford it without renters. And condos in Hawaii appreciate, but not that rapidly. Then you have the risk of hurricane hitting it, you have to pay someone to manage the renters, the cleaners, the repairs, boarding it up if a storm is going to hit, etc. If you need the rental income to afford it, then count out going over thanksgiving or xmas because that is when you get extra high rental rates and pay for much of your costs. But if you want to go then, you loose that chance. Also, to rent it out successfully, you have to plan when you go a full year in advance. If I'm going to do that I will just pay for the 2-3 weeks I want to go and not worry about the costs and hassle. Also, In Jan I want to go to Maui, in July I want to go to Kauai next year I want to visit the Big Island and Europe. So I'm not really using it as a vacation home for more than 2-3 weeks per year at most. If it sits vacant for more than X days per month, then I'm not breaking even. And I've tracked condos on all 4 major islands in Hawaii for over a decade----most of them have not appreciated as much as DCUM/SF/LA/Seattle/Boston area. I've had two real estate agents in Hawaii tell me not to buy unless we plan to actually live in it or it will cost us

We thought about doing something similar closeby but the same constraint applies even to those properties closer. Prices are too high. There was a thread about whether a second home was worth it and the general consensus seemed to be that you can't it as an investment. If you have to live (and let's say you will) 4+ months at your vacation property for it to make sense, that's 4 months you are NOT living in your primary residence! And the added maintenance on top of everything else just makes it not worth it. Maybe I'm just too lazy and cheap..

Nope---just reasonable! we live between our two properties now, but in reality we are at one more than the other. But we can afford it and one is just for us (2 bed condo in the city) and the other has space for when friends and family come to visit. But in reality, if we didn't have the $$$ it would be much easier to VRBO a house for a week or two when family comes to visit.

[Anonymous]

Either is plenty for us, especially since we will have a paid off home, social security and a few million in inheritance. We already have $3M excluding home equity, so assuming that doubles in 10 years, we'll have $6M by age 52. And that doesn't count for anything new being saved.

[Anonymous]

Anonymous wrote:Everyone saying "$10M" please post what that number was 5 or 10 years ago adjusting for inflation, or did you pick it just because the leading digit is 1?

A world with inflation and people who irrationally cling to round numbers?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Everyone saying "$10M" please post what that number was 5 or 10 years ago adjusting for inflation, or did you pick it just because the leading digit is 1?

In what world do you live ?

A world with inflation and people who irrationally cling to round numbers?

[Anonymous]

Anonymous wrote:

Anonymous wrote:It really depends on your level of spending and comfort with uncertainty. For me, the difference between those numbers is the security of being able to cover my mother’s elder care and potentially my own if I live as long as she has. I’m 58 and could easily live another 40 years. The $250,000 the $7M generates is before taxes and inflation. Yes, I will certainly tap principal at some point, but still, $250,000 30-some years from now will not be a fortune. It’s crazy and cruel what decent elder care costs.

The 3-4% safe withdrawal rate assumptions factor in inflation. This means in 30-some years, you will be able to withdraw a lot more than 250k. But yes, there is a big difference between a 210k/yr safe withdrawal rate from 7M and 300k/yr safe withdrawal from 10M.

With 3 teen kids, our yearly expenses will be over 210k/yr for the next 10 years while we pay for college and grad/med/law school. Then there will hopefully be a few years of supporting our parents in elder care which will keep our yearly expenses close to 200k. Then a few years of awesome over the top traveling at an age where health insurance will be outrageous. So after 15 years of spending a little more than the safe withdrawal rate from 7M, we might get a few years where our expenses are under that since health care will be covered and we will not have a desire for extensive travel. Then elder care for ourselves will kick in and we will have to start spending down principal. With 10M, we would likely always be under the safe withdrawal rate.

How old are you and how old will you be when those teens are done with grad school?