$7,000,000 is not enough to be rich!

Quote from thriftybob:

You can't retire comfortably with only $2 million. You have up to 30 years to live, you get no interest from your savings, and the dollars themselves are declining in value about 5 or 6% per year. Do the math.
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You sure can. I "retired" from the corporate world 15 years ago at age 40 with $600K. Have not worked for a penny since then. Trading income is my sole source. So in those years I've paid all living expenses and my $600K is a lot larger than it was back then.

Anyone who retires with $2 million and can't be comfortable has poor money management skills. A measly 5% per year kicks off $100K and doesn't touch your principal. And if you have a house paid off (again, another thing smart investors do prior to retiring) then your expenses are not that significant unless you want to be a globe traveler and then expenses can get steep.
 
Please let me know where your 5% guaranteed investment is, I would like in on that.

Or, you might need to deal with market fluctuations that don't fit your $100k / yr nut. So you need a little more to feel "rich". Which is a lot more than comfortable. My family would be comfortable on half of what my wife and I make, but we are a damn site from being rich.
 
I think the way to approach how much money you need is a matter of matching income investments with anticipated liabilities - that much is common knowledge. Further, I think it makes sense to have a few categories of lifestyle liabilities which can be dynamically chosen. Part of what I think keeps people up at night is the thought that they might one day have to cut back -even if that is not very probable.

1. Very Basic Food & Shelter -> cover this with income from 30-year TIPS
2. Middle-Class Food/Shelter/Transport/Leisure -> cover difference between this and #1 with a conservative mixed duration bond portfolio
3. Luxury Food/Shelter/Transport/Travel/Leisure -> cover difference between this and #2 with a 'moderate' equity portfolio
4. More Luxury -> cover difference between this and #3 with more aggressive investments, hedge funds, etc

Rebalance as needed. For perspective, #1 means no cable TV. #2 means kids go to state school. #3 kids go to ivy league. #4 means frequent travel and multiple homes.

You could allocate $2M just on #1 still not feel quite disaster-proof.

I think I could probably make things work with less than $7M. $5M perhaps:
#1 1.5M
#2 1.5M
#3 1M
#4 1M

Not that I have given this much thought while my fortune is having an existence problem...

It is for the better that the rich don't feel quite comfortable -> they must either produce value or take risks.
 
If you know how to make 20% pa then 2M will spit out 400K pa minus inflation = 300.

If you have 7m and not look after money then each year 5% down due to inflation. Spend 300K and you will be out of money in 16 years.

learn trading !
 
Quote from macroman:

If you know how to make 20% pa then 2M will spit out 400K pa minus inflation = 300.

If you have 7m and not look after money then each year 5% down due to inflation. Spend 300K and you will be out of money in 16 years.

learn trading !
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That's not really the topic is it ? There are definetely several trades where one could make a living with a 7mil investment and some savvy. It still requires work though, and stress to think one might not get succesful. I doubt many financially successful people remain idle, and the risk in the endeavour they undertake might have to do with this feeling they need more money to feel safe, no matter how much they have.
 
Quote from DHOHHI:

You sure can. I "retired" from the corporate world 15 years ago at age 40 with $600K. Have not worked for a penny since then. Trading income is my sole source. So in those years I've paid all living expenses and my $600K is a lot larger than it was back then.

Anyone who retires with $2 million and can't be comfortable has poor money management skills. A measly 5% per year kicks off $100K and doesn't touch your principal. And if you have a house paid off (again, another thing smart investors do prior to retiring) then your expenses are not that significant unless you want to be a globe traveler and then expenses can get steep.
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Sorry, apparently you didn't retire, but became a trader, which is quite a bit different. Not mentionning that 100k per year is way too small for many to live on - particulary for those who are worth 7mil and up.
 
$2 mil is a great start, and is probably doable with the assumption you have some seperate pension money and SS coming in monthly. A heavy down market, like I think I've seen oh, 3 times in my short time on earth can really put a dent in things. How about all the dividends that were suspended for alot of retirees during this last blow out? Not to mention a health problem or 2 can eat up some of that $2 mil pretty quick.
 
Quote from caementarius:

I think the way to approach how much money you need is a matter of matching income investments with anticipated liabilities - that much is common knowledge. Further, I think it makes sense to have a few categories of lifestyle liabilities which can be dynamically chosen. Part of what I think keeps people up at night is the thought that they might one day have to cut back -even if that is not very probable.

1. Very Basic Food & Shelter -> cover this with income from 30-year TIPS
2. Middle-Class Food/Shelter/Transport/Leisure -> cover difference between this and #1 with a conservative mixed duration bond portfolio
3. Luxury Food/Shelter/Transport/Travel/Leisure -> cover difference between this and #2 with a 'moderate' equity portfolio
4. More Luxury -> cover difference between this and #3 with more aggressive investments, hedge funds, etc

Rebalance as needed. For perspective, #1 means no cable TV. #2 means kids go to state school. #3 kids go to ivy league. #4 means frequent travel and multiple homes.

You could allocate $2M just on #1 still not feel quite disaster-proof.

I think I could probably make things work with less than $7M. $5M perhaps:
#1 1.5M
#2 1.5M
#3 1M
#4 1M

Not that I have given this much thought while my fortune is having an existence problem...

It is for the better that the rich don't feel quite comfortable -> they must either produce value or take risks.
More...

1. TIPS - do you REALLY believe the government's published inflation numbers? They are running 1/3 of the real inflation. And to add insult to injury, you lose 405 or so of what little you get to taxes.

2. Bonds - Honestly, do you not think rates are going to rise? What happens to bond values when rates rise?

3. Equities - Equities are a big risk no matter how conservative the portfolio. Look what happened to those owning stock portfolios or bonds in the 30's. What makes you think this depression will be better?
 
Quote from thriftybob:

1. TIPS - do you REALLY believe the government's published inflation numbers? They are running 1/3 of the real inflation. And to add insult to injury, you lose 405 or so of what little you get to taxes.

2. Bonds - Honestly, do you not think rates are going to rise? What happens to bond values when rates rise?

3. Equities - Equities are a big risk no matter how conservative the portfolio. Look what happened to those owning stock portfolios or bonds in the 30's. What makes you think this depression will be better?
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Well, precisely my point. There is always risk. I think the key is to match your most important expenses with the least risky and the most extravagant with the most risky. Yeah, it'd be painful to put anyone in TIPS or any long duration fixed income right now..
 
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