Reply to Do you consider a net worth of 2.5 million "rich?"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote]Anonymous wrote:
If you can stop working and live off your investment income and they draw 450K a year you are rich.

Anonymous wrote:
You'd have to have $11,250,000 in the bank to get this.

Anonymous wrote:
You can take $450k a year from $2.5M for about 5 years. You see that, right?[/quote]

To help this person (and try to spread more financial literacy)...   a "rule of thumb" safe withdrawal rate from your assets is 4% a year.   A safe amount is an amount that you can safely withdraw and still be 99% certain that your money will last the rest of your life.   Using that rate, you need $11.25 million "in the bank."   In the bank means that you have it invested in a diversified portfolio.  A diversified portfolio means that it is in a variety of stocks (equities), bonds, real estate (not the house you live in).

Yes, if you put $2.5 million in your mattress and spend $450k a year, it will last five years, assuming you don't have a house fire.   And you would miss out on a lifetime of $450k a year of income.  [/quote]

Thank you for this analysis. we manage to spend through $300K yearly. So if we started spending our capital, yes, it would run out in 5 years. It took way longer than 5 years to earn that capital. So, no not rich, but comfortable if you are careful.[/quote]

So because you spend 300k a year you aren't rich? What?  How did you get to the point that you can have that much money if you are so simple? We live pretty well (700k home, nanny, etc) and the only way we could spend 300k is if we accidentally paid cash for a new ferrari.[/quote]

I think the point is that if you can draw 450K a year from your savings without depleting it and it still grows in value, you are rich.

think mitt romney[/quote]

PPs point was that OP, with her "middle class lifestyle" (coupons, target, crappy cars, public schools, modest vacations once a year, wearing hand me downs) somehow still manages to spend 300k a year. I, too, am puzzled. Where does the momey go? We don't use coupons, have no hand me downs, drive a luxury car and still don't spend anywhere close to 300k. [/quote]

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