Why did the brother get more inheritance? OP you never answered.

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%.

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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.

But their HHI keeps pace with inflation.

Agreed. Plus, 75K on 1.5M is not a realistic number.

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?

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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.

How is 3% withdrawal rate out of 1.5 million "permanent" for a 29 year old AND a 67 year old? Don't you have to adjust the percent for age? Please explain the math.

yeah I don’t understand that either unless the assumption is that the rate of investment return is going to perpetually be more than inflation?

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.

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.

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.

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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.

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 wrote: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.

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.

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Anonymous wrote:Doable with a certain lifestyle. I agree he will have a hard time finding a woman who will go for it.

It's not doable. You have to pay for health insurance, taxes/maintenance on the house. He's only worked 8-9 years? You have to work min 10 to get any social security, and then it's on the average earnings over those 10+ years. He's not likely to get much.

99% chance this doesn't end well and he's a burden to you and society.

Why not work a job making $40K and live the extremely frugal lifestyle while saving. Then see if you really like the lifestyle?

Geez...so fine, you convince the kid he has to work two more years for SS and Medicare. Doubt that is a super-hard sell.

However, the median income in the United States today is only like $39,000 per person. I doubt that the median worker making $39k has any savings at all. I guess your view is the median person out there is just a future burden to society.

There are plenty of FIRE advocates out there who can easily sustain their lives on a $75,000/year income and $1.5MM in the bank that you will try not to touch.

This. He'll be fine for a while. One day, he may get a job or not. This board and this town is full of workahilics who work their lives away.

I'd rather be a workaholic than a perfectly healthy deadbeat 29 year old living off of a meager income stream.

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.

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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.

But their HHI keeps pace with inflation.

LOL 😂

Seriously, DCUM, poke your heads out of this bubble sometimes!!

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 wrote:

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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.

How is 3% withdrawal rate out of 1.5 million "permanent" for a 29 year old AND a 67 year old? Don't you have to adjust the percent for age? Please explain the math.

yeah I don’t understand that either unless the assumption is that the rate of investment return is going to perpetually be more than inflation?

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.

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.

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 wrote:

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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.

But their HHI keeps pace with inflation.

Agreed. Plus, 75K on 1.5M is not a realistic number.

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…

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 wrote:

Anonymous wrote:

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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.

How is 3% withdrawal rate out of 1.5 million "permanent" for a 29 year old AND a 67 year old? Don't you have to adjust the percent for age? Please explain the math.

yeah I don’t understand that either unless the assumption is that the rate of investment return is going to perpetually be more than inflation?

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 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.

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.

But their HHI keeps pace with inflation.