Last time I crunched the numbers, $1M will provide security but probably not indefinitely sustainable income. If you manage 6-7% in the stock market, that's $60-70k/year, but 6-7% is the decade-over-decade average. Any one given year can be 1% (or even negative).
$10M on the other hand provides solidly middle-class income even in years of terrible market performance.
$1,500 invested yearly, at 7% interest, generates ~60k in 20 years. So even at your inflated income estimates, this is definitely worth thinking about.
I agree about the 10% return being unrealistic, but I don't think $10,000 per year is right either. His spreadsheet shows $474,000 after 20 years. A 4% withdrawal rate on that is $18,960, which is still not exactly lavish, but more than enough to live on where I come from. Especially if your house is paid for, your healthcare is covered and your car doesn't break down very often. That's actually pretty close to my annual expenditure, and I rent, have to pay for health insurance, and my car breaks down all the damn time.
it's not that absurd when you consider opportunity costs. even if your actual expenses are only 10k/yr, at a 7% avg rate of return, after 17 years you're down 170k plus ~140k in lost interest. at 20k/yr you hit 340k plus ~280k in lost interest.
I agree that 10-15% is a little optimistic, but even with a more realistic 4-7% you'd still have $300,000-500,000 at the end of 30 years, which is nothing to sneeze at.
And if they're making a 7% rate of return for 27 years, how's the person who already had $10 million in wealth and earning 7% per year ($700k per year in wealth appreciation alone from year 1) changing during those 27 years?
If you put these 700k in Vanguard, you could get ~3.21% per year forever. That works out to 22k$/year. Perhaps it's below poverty line in US, but for some countries that could be upper part of middle-class income.
sure but if you keep spending moderate, it may grow to $2.5M-$3M, as it would probably already be around $2M in those 10 years. Instead of $8M at 60, perhaps you've spent along the way and only end up with $3M at 60?
A 10% raise per year over 3 decades means 17x your original salary, earning you $1.7m annually by 50. Probably not something you can reliably plan for. That's why it's important to keep consumption in check.
$10k gets you $32 a month, roughly. And that's not even an especially safe rate of return - true fixed income would be closer to 4% before inflation, i.e. 2.5% after inflation.
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