I don't understand how a forum for "traders" has so many people with such crappy math skills. This isn't complicated people, there's just 2 main variables. Rate of return, and how much you want to spend in a year.
*obviously it's a little different for each person, but we can make some common assumptions that are reasonably accurate.
Start with 1,000,000 and make 10% a year, every year, forever
- Deduct 30% for taxes = You now have 70,000
- Leave 2% in the fund to cover long-term inflation = You now have 50,000
- Leave 3% in the fund so your principle grows a little = You now have 20,000
You want to live your life spending 20,000 a year? Are you planning on living in the ghetto with 6 room mates and eating Mcdicks every meal?
Ok, let's say you're a better "trader" than that, and you want to spend more every year.
Start with 500,000 and you want to spend 50k a year
- Leave 2% in the fund to cover inflation = 50,000 spending now needs 60,000 after tax
- Leave 3% in the fund so the principle grows = 60,000 after tax is now 75,000 after tax
75,000 after tax requires 107,000 before tax.
107,000 / 500,000 = a required rate of return of 21.4%
You think you can make 21.4% a year, every year, forever, starting in 2015 after the great bull market is over? Ok, be my guest
starting with 1,000,000 in my mind is bare minimum. You'd still need to make 20% a year ever year, FOREVER to have a reasonable amount of spending money. And if you have even one negative year along the way, those drawdowns are incredibly amplified when you're pulling out spending money. It's likely one negative year ends your run and you have to find a job.
Anybody here want to run the math on starting with 250,000 ? It's hilarious how high your rate of return needs to be, EVERY YEAR, just to break even. Yeah, I'm sure the average dude on Elite Trader is up to the challenge
