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

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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]"Safe withdrawal rate" of 3-4% on $1.5M is somewhere in the $45K-$60K a year range.  If he lives modestly and doesn't have to pay rent or mortgage, that seems doable to me (assuming he can find some reasonably affordable health insurance.) Probably a little too close for comfort for me personally, but I don't think it's way out of line.[/quote]

That "safe" withdrawal rate assumes you are 65 and will have no money left when you die. The "safe" withdrawal rate for a young person is much lower. [/quote]

No, it actually can be considered a safe withdrawal rate (esp. leaning towards 3%) at any age insofar as anything is truly safe.  Because the majority of time your assets are growing more than you are drawing down.  The greatest likelihood if he doesn't spend down above 3-4% of initial drawdown + inflation is that he will be far richer than he is now.  The key thing is to watch for is sequence of returns risk in the first decade.  If the market goes down and he continues to draw it down further multiple years in a row it can diminish the asset.  So his rule should be something like if the market is down in a given year, reduce or eliminate his drawdown by picking up some other source of income (e.g. part-time work). If it were me, for the first decade of retirement, at the beginning of each quarter, I would calculate out the difference between what my initial drawdown + inflation was and what it would be if I were retiring right now.  If the latter is lower, use that and supplement with work income if need be.  If the latter is higher, stick to the original former drawdown.

The other big risks are that what he thinks is a reasonable spending rate as a single 29 year old guy don't hold up if and when his life changes.  So he should be making investments in himself--and at least occasionally doing things that add to his resume-so that he can more smoothly re-enter work if need be.  This will also address the other issue that he may find it boring and isolating to not be working.[/quote]

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