Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

If he lives 60 more years, that's only 25k a year or basically 2k/month, in today's money. With this money he has to pay taxes, insurance, and upkeep on a home, plus maintenance and eventual replacement on a modest car. Plus food, clothing and healthcare. Even for a "nice, quiet, fulfilling life." I think your confidence is unfounded.

Never understand why DCUM people can’t understand buying bonds.

You buy $1.5MM of risk free bonds at 5% and you make $75k per year without touching the principal.

Many people can live on that per year.

This.

Once people understand this, it's like a lightbulb going off.

This is in theory. Have you actually done this?

I have a now 8-year-ladder of tax free bonds paying 5%. The yield to maturity is not 5% due to the premium you have to pay to get them. And it is next to impossible to buy them directly. You have to go through a bond broker of some sort. I have them in an account that I manage. But before I moved them, I was paying .04 in a managed account. If I wanted to keep buying them (which I don't) I would have had to stay in that managed account.

And, as mentioned, they are not inflation adjusted.

First, I am not suggesting this 29 year old do this, but it absolutely can be done and there are plenty of people that can live off of $75k per year essentially indefinitely.

I can easily buy municipal bonds through my brokerage account for little to no fees.

I get that inflation eats up your $75k, however, at least housing costs are fixed at just property tax + insurance. In theory, your home appreciates, so minimal increases in housing costs + increase in house price are a nice hedge against inflation.

Also, one would maybe think that this kid can live off of less than $75k right now, so he can bank the difference and increase the $75k per year.

We have no idea where this kid lives. I get that that if this kid lives in the DMV it will be hard...but then the kid can always sell the house today for probably a decent amount (again, if it is in the DMV) and move to any number of low-cost areas.

I don't recommend it, but it's definitely doable.

Interesting. Actual coupons? No premium to get the 5% on high quality munis? Where is this? We bought them at 100K/bond, from 2 different sources, and there was always a premium.

ML. Possible because they are a primary dealer in many municipals that it is a perk for clients. Also, I have highest status.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

If he lives 60 more years, that's only 25k a year or basically 2k/month, in today's money. With this money he has to pay taxes, insurance, and upkeep on a home, plus maintenance and eventual replacement on a modest car. Plus food, clothing and healthcare. Even for a "nice, quiet, fulfilling life." I think your confidence is unfounded.

Never understand why DCUM people can’t understand buying bonds.

You buy $1.5MM of risk free bonds at 5% and you make $75k per year without touching the principal.

Many people can live on that per year.

This.

Once people understand this, it's like a lightbulb going off.

The average DCUM type doesn’t understand that 75K is the current MEDIAN American *household* income. Bunch of book smart idiots acting like 75K is poverty wages for a single man WITHOUT A MORTGAGE…

The plan you think is so tractable erodes away every year with inflation. In 60 years, that $75K will be the equivalent of $13K today. Nowhere near the median HHI. Instead, OP would find their quality of life significantly degraded after just 10 years, thereby increasing withdrawals and cutting into principal. Maintaining a $75K lifestyle in today’s dollars would last until OP reaches 50 years old. Then…all money is gone and no pension or SS to cover expenses.

You DO realize that people manage to save and even invest on a HHI of 75K, don’t you? Think about it.

Anonymous wrote:I guess he could stretch his money by stealing groceries at the self checkout

I love it when people do this. lol over here.

He “did the math.” MYOB.

1.5M isn’t what it used to be. I think it unlikely that it will last him, but with extreme frugality and some luck it could. At any rate, he’ll figure it out if he is running out of money quickly.

Anonymous wrote:

Anonymous wrote:"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.

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.

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.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

If he lives 60 more years, that's only 25k a year or basically 2k/month, in today's money. With this money he has to pay taxes, insurance, and upkeep on a home, plus maintenance and eventual replacement on a modest car. Plus food, clothing and healthcare. Even for a "nice, quiet, fulfilling life." I think your confidence is unfounded.

Never understand why DCUM people can’t understand buying bonds.

You buy $1.5MM of risk free bonds at 5% and you make $75k per year without touching the principal.

Many people can live on that per year.

This.

Once people understand this, it's like a lightbulb going off.

This is in theory. Have you actually done this?

I have a now 8-year-ladder of tax free bonds paying 5%. The yield to maturity is not 5% due to the premium you have to pay to get them. And it is next to impossible to buy them directly. You have to go through a bond broker of some sort. I have them in an account that I manage. But before I moved them, I was paying .04 in a managed account. If I wanted to keep buying them (which I don't) I would have had to stay in that managed account.

And, as mentioned, they are not inflation adjusted.

First, I am not suggesting this 29 year old do this, but it absolutely can be done and there are plenty of people that can live off of $75k per year essentially indefinitely.

I can easily buy municipal bonds through my brokerage account for little to no fees.

I get that inflation eats up your $75k, however, at least housing costs are fixed at just property tax + insurance. In theory, your home appreciates, so minimal increases in housing costs + increase in house price are a nice hedge against inflation.

Also, one would maybe think that this kid can live off of less than $75k right now, so he can bank the difference and increase the $75k per year.

We have no idea where this kid lives. I get that that if this kid lives in the DMV it will be hard...but then the kid can always sell the house today for probably a decent amount (again, if it is in the DMV) and move to any number of low-cost areas.

I don't recommend it, but it's definitely doable.

Interesting. Actual coupons? No premium to get the 5% on high quality munis? Where is this? We bought them at 100K/bond, from 2 different sources, and there was always a premium.

Anonymous wrote:If he doesn't pay SS tax, he's not going to be rescued by SS payouts at 65.

+1 At 29 he may not have ten years of work history.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This board truly has no clue what the lifestyle of the average American is like.

Of course he can retire with 1.5mil and a paid off house! Of course it’s possible to squander it, but it’s also possible to live a nice, quiet, fulfilling life.

If he lives 60 more years, that's only 25k a year or basically 2k/month, in today's money. With this money he has to pay taxes, insurance, and upkeep on a home, plus maintenance and eventual replacement on a modest car. Plus food, clothing and healthcare. Even for a "nice, quiet, fulfilling life." I think your confidence is unfounded.

Never understand why DCUM people can’t understand buying bonds.

You buy $1.5MM of risk free bonds at 5% and you make $75k per year without touching the principal.

Many people can live on that per year.

This.

Once people understand this, it's like a lightbulb going off.

This is in theory. Have you actually done this?

I have a now 8-year-ladder of tax free bonds paying 5%. The yield to maturity is not 5% due to the premium you have to pay to get them. And it is next to impossible to buy them directly. You have to go through a bond broker of some sort. I have them in an account that I manage. But before I moved them, I was paying .04 in a managed account. If I wanted to keep buying them (which I don't) I would have had to stay in that managed account.

And, as mentioned, they are not inflation adjusted.

First, I am not suggesting this 29 year old do this, but it absolutely can be done and there are plenty of people that can live off of $75k per year essentially indefinitely.

I can easily buy municipal bonds through my brokerage account for little to no fees.

I get that inflation eats up your $75k, however, at least housing costs are fixed at just property tax + insurance. In theory, your home appreciates, so minimal increases in housing costs + increase in house price are a nice hedge against inflation.

Also, one would maybe think that this kid can live off of less than $75k right now, so he can bank the difference and increase the $75k per year.

We have no idea where this kid lives. I get that that if this kid lives in the DMV it will be hard...but then the kid can always sell the house today for probably a decent amount (again, if it is in the DMV) and move to any number of low-cost areas.

I don't recommend it, but it's definitely doable.

Anonymous wrote:

Anonymous wrote:He needs 10 years of work history to get Medicare when he’s 65. Same requirement for social security. Does he have that?

He could just take a small low-stress job that provides health insurance and be in a much better position than he would be if he forgoes work entirely. I don’t really understand dropping out of the workforce before he’s 30.

Even that won’t make much of a difference. He will qualify but social security is based on your 35 highest earnings years. So he will get the social security equivalent of a minimum wage or close to minimum wage person times 10/35. So the equivalent of 1/4 of what someone with the lowest possible lifetime social security check could make. In todays dollars that is something like $300/ per month, albeit indexed for inflation.

It will help some but not much. Maybe basic groceries for 1 for the month or a bit more than utilities for the month.

Curious: Will he have to pay income/inheritance tax on the house and 1.5mm?

Anonymous wrote:He needs 10 years of work history to get Medicare when he’s 65. Same requirement for social security. Does he have that?

He could just take a small low-stress job that provides health insurance and be in a much better position than he would be if he forgoes work entirely. I don’t really understand dropping out of the workforce before he’s 30.

Even that won’t make much of a difference. He will qualify but social security is based on your 35 highest earnings years. So he will get the social security equivalent of a minimum wage or close to minimum wage person times 10/35. So the equivalent of 1/4 of what someone with the lowest possible lifetime social security check could make. In todays dollars that is something like $300/ per month, albeit indexed for inflation.

It will help some but not much. Maybe basic groceries for 1 for the month or a bit more than utilities for the month.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

I think most people think that eventually a 29 year old will want a family. I also don't think people take into consideration how expenses generally increase as one ages: healthcare becomes more expensive as more things go wrong, home maintenance becomes more expensive the older a house becomes, property taxes increase....

I think comparing a 29 yo who doesn't want to work with a family who works hard to GENERATE income that they can generate over many decades is a very different thing.

I know a guy who basically did this many years ago. He was a woodsy guy who just wanted to live in a quiet place in Michigan. He never traveled overseas, never had a family and always lived rather modestly. Last time I saw him, he was still quiet happy with his life!

I have a family and live in the Washington area, so it would not be enough for me to quit.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

15k a year will not cover rent in most places. It would be stupid to sell his house.

Anonymous wrote:

Anonymous wrote:Can my brother live the rest of his life without working? He is 29 years old and inherited a modest house and about $1.5 million. He has no intention to ever work again. He is not a big spender, no lavish vacations or expensive shopping sprees. He does make questionable financial choices sometimes such as paying way too much for something because he didn’t do any research. He is not great at “adulting” like remembering to paying bills and frequently lets his Obama insurance lapse. Overall a functioning person who has no interest in working. He has “done the math” and has determined that he never needs to work again and can live off the money we inherited from our parents. I’m not convinced but he is not open to discussion.

I inherited the same amount of money minus the house. I put it in an investment account. I don’t think it is enough to live on but maybe my life is just very different? I have a wife and a baby. We own a house and want to save for school and college. I did tell my brother that he is going to have a hard time finding a woman with his situation but he always seems to have a new girl he met on Tinder so who knows?

A 29 year old needs a nest egg that can last 61 years by most traditional measures. Negligible social security and pension. Such a person would need to be able to live off an initial withdrawal of 1/61 of available savings, with subsequent withdrawals indexed for inflation. That’s basically $1.5M / 61 = $24,600. Even if we’re talking after-tax money, this is a pretty LMC lifestyle.

Lol, no. 3% is considered a "permanent withdrawal rate" (i.e., you NEVER run out of money). So he can take out $1.5M x 0.03 = $45K the first year and adjust that up for inflation forever. If he sells the house and nets another $500K, he can bump that up to $60K forever. Only on DCUM can people not understand how *one person* can live off that.

Anonymous wrote:"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.

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.