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 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.[b] we manage to spend through $300K yearly[/b]. 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]

That must be hard![/quote]

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