Can 29yr old live off $1.5 million w/working?
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Anonymous
But their HHI keeps pace with inflation. |
Anonymous
I'm not the PP (and I think it's crazy for a 29 yo to stop working at this point, but that is beside the point), but if the guy can live on a 3% drawdown (meaning it is 3% of whatever the balance is if it goes down) then he should be fine. As someone mentioned earlier, it's dependent on sequence of returns. If that 1.5M takes a hit in the first decade with negative growth, he would have to 3% of the less value. We have been in a mostly bull market for so long, with corrections short lived and not that deep, it's hard to imagine that we could take a hit, then stay stagnate at best of a good decade. |
Anonymous
You also don't seem to understand that the average person making $75k also has some type of health insurance and will be collecting some social security at some point. A 75 yr old today can easily live off of $75k because of medicare and they don't do or eat much. A 29 yr old may say they have a simple lifestyle, but they are going to want things, unlike a 75 yr old. As a PP mentioned, home maintenance, property tax, etc.. will eat up some of that $75K. 29 is very young. Who the heck knows what inflation will be like in 30 years when they are 59, still not able to get medicare and start getting middle aged illnesses. That $75k/yr is fixed and won't go far in 30 years, and especially if they need medical care. People who earn $75K now may make more later. They have the potential to increase their income and get social security. OP's brother does not. OP's brother is clearly not thinking about retirement. Most 29 yr olds cannot fathom what a 59, 69, 79 yr old's life is like, and how much it will cost to live in 30+yrs. |
Anonymous
Agreed. Plus, 75K on 1.5M is not a realistic number. |
Anonymous
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Reading through the thread, the 75K # came from 5% municipal bonds.
It is doubtful that this 29 year old has the type of account that would allow him to direct buy MB on par value, and even if he did, it would take a good deal of research to understand what and which bonds to buy himself. More realistically, he is looking at 45K/year (3%), and hope he doesn't hit major, unexpected expenses along the way, and stays healthy until he drops dead before his money runs out. You can't compare a young person with 1.5M and never working again to a person who is gainfully employed for even a decade or two. |
Anonymous
I’m the “permanent withdrawal rate” poster—and this is wrong. The permanent withdrawal rate means that you can withdraw 3% of your starting portfolio balance in year one and then adjust upward every year for inflation, regardless of what the markets are doing. And to answer another PP, the reason this works is because, yes, your investments are earning significantly more than inflation. That’s why these rules only work if you have a relatively high allocation of stocks (50-75%), not 100% municipal bonds as others have suggested. Based on backtesting to the 1890s, there has never been a 50-year period in which you would’ve run out of money by withdrawing 3%. This is why it’s known as the permanent withdrawal rate. Of course, at age 29, he could easily live more than 50 years. To my knowledge, there are no studies looking at time periods longer than 50 years, but that’s where the number comes from. |
Anonymous
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A new car alone would eat up half the expected $75k. Sure, they aren't buy a new car every year, but they will probably almost every decade, so that $75K/year in perpetuity doesn't really work.
Also, what the heck is he going to do all day for 30+ years? I hate working. I can't wait to quit when my kids are in college. But, I will be 56 and love to travel, which is expensive. When I don't travel, I will probably work my garden, maybe join a gym... all of which costs money. Even if he were to spend all day playing video games, those things cost money. But, I do hope that's not all he will be doing. Most people his age are working, so who is he going to hang out with during the day? I have the same problem in that most 56 yr olds are working, but at least I will have my spouse who is also retiring to hang out with. Most of us wish that weekends were 5 days/week so that we could have time to chill out, but if you have all 7 days/week x the rest of your life to chill out without any kind of hobby or people to hang out with, that would be very boring. What is he planning to do all day for the rest of his life such that he will only spend $75K/year forever? |
Anonymous
LOL 😂 Seriously, DCUM, poke your heads out of this bubble sometimes!! |
Anonymous
Say what you will...but how is the kid a deadbeat? It's his money...he's not receiving welfare of any kind or family handouts. You may think he is wasting his life, but he's not a deadbeat. |
Anonymous
Let's at least assume he knows how to buy a 30-year treasury (which is simple), which yields 4.74%. So, that's $71,100. |
Anonymous
Access to Medicare at age 65 will make a huge difference in his quality of life at that point. He’ll really be shooting himself in the foot if he avoids the required 10 years of work in his lifetime and misses out on that benefit. |
Anonymous
Bolded is "in theory". If 29 yo starts drawing down 3% on 1.5M now, 45K/year, and we hit a market crash with prolonged recovery, then he is depleting his initial balance every year that he doesn't have positive returns. So finally it turns around, but his new balance is closer to 1M between drawdown and crash. So at 35, he is moving forward with a much lower balance. It's like skydiving: the closer to the ground you start your jump, the less time you have to pull the cord on your parachute. Not a problem if you're 50 or even 40. But 29?? I think there is too much sequence of return risk for someone who stops working at 29. That said, I agree that your example is what the theory is and how it is supposed to work over a 30 year drawdown rate. |
Anonymous
Wait, are you trying to tell me that no risk 5% bonds won't be available forever and that it's not a good idea to base your entire financial future on the assumption that they will be? |
Anonymous
| Where are people getting 5% municipal bonds? Based on a quick Google search—and admittedly no other research—I just saw a T. Rowe Price Maryland municipal bond fund paying 3.3%. |
Anonymous
| Why did the brother get more inheritance? OP you never answered. |