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That's amazing, and I think we would all love to be in the same position one day. I would have to disagree with "that's a lot more valuable than a few more mil

That's amazing, and I think we would all love to be in the same position one day. I would have to disagree with "that's a lot more valuable than a few more million dollars in the bank". Having a few million dollars in index funds (with some hedging) would also give you a Senior Developer salary, but would carry a lot less risk than running a software company. But I do understand what you're saying, and I certainly wouldn't complain if I had some passive income like that!

rufugee 9y ago
$2m at a conservative return of 6% would get you $120k but before taking capital gains tax. Let's say you're taxes at 15%... Now you're down to $102K. Not bad, but I'm sure you could make more as a senior developer. Assuming you've come up with a different strategy that's netting better returns, would you care to share? And what is your strategy for hedging?
- nathan_f77 9y ago
  6% would be extremely aggressive, so I was thinking more like $4M at 3%. And you're right, I suppose a senior developer would be making ~$150k, so you'd need around $5-$6 million. 3-4% is the typical withdrawal rate that people use on the /r/financialindependence subreddit: https://www.reddit.com/r/financialindependence/wiki/faq#wiki_how_much_do_i_need_to_save_to_retire.3F https://www.reddit.com/r/financialindependence/wiki/faq#wiki... My strategy would be to just put everything in a Vanguard Target Retirement Fund: https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement... It's cheaper and safer than a financial advisor, and you don't need to worry about rebalancing. I'd also throw a little bit of money into angel investing, but no more than 3%, and I'd expect to lose it all. For hedging, I think once a year I would just buy some OTM puts for the S&P 500. A sane number might be something like 0.2% of your assets. If you're absolutely convinced that we're on the verge of a stock market crash, then you should still use 0.2%, because you're probably wrong.
- Tharkun 9y ago
  Sounds like a nice US salary. Good luck netting half that in most of Europe.
- Spooky23 9y ago
  This is one of these scenarios where you work with an advisor and accountant, and make investment adjustments over time as rates change. I helped my dad with a scenario like this when he retired. You approach the problem so that you draw as much income as possible from tax exempt sources and use other vehicles for growth -- which preserves your cash generating capability later. When opportunity strikes, you overload. For example, buying NY tax exempt (and other municipal bonds) when they were depressed during the recession has yielded a decade of enhanced, safe, tax free income.
- kayoone 9y ago
  your 100k+ for a Senior developer are US only though. In Europe or Canada only very very few developers without management responsibility make that kind of money. Typical senior salaries are between 60-80k.
  - Arizhel 9y ago
    In Europe or Canada, they don't have the insanely-high healthcare insurance costs that Americans have.
- awinder 9y ago
  You'd pay taxes on the dev salary as well so you'd need less drawing "salary" as capital gains taxes than you would income + payroll taxes.
vpresident 9y ago
Your math is right, but getting to those millions can be chance or working really hard for years. And we can also take in consideration that most of us won't leave those millions there. Getting fancy can be as risky as running a software company. Comparing that with him working 6 months a year for the first part of his career and now living from two modest saas products seems pretty nice. ..and all the sitting-at-the-laptop photos are hilarious xD
pdog 9y ago
Assuming a withdrawal rate of 4% per year, even a few million in index funds would only yield about $120k annually. And that's not factoring in the risk of a market correction or downturn. The income you earn from owning your own business is worth at least twice as much as the equivalent income from dividends, interest, and capital gains.
- nathan_f77 9y ago
  I guess it's always nice when your hard work pays off, so you would attach more sentimental value to your income when you feel like you earned it. However, in financial terms, these businesses are typically valued at 2x-4x annual revenue. So a business that gives you an income of $120k per year is worth far less than a safe $4M investment that gives you an average return of $120k per year. If you could somehow prove that your business is extremely likely to produce at least $120k per year for the next 30 years, and with very little maintenance, then it would be worth closer to $4M.

rufugee 9y ago

$2m at a conservative return of 6% would get you $120k but before taking capital gains tax. Let's say you're taxes at 15%... Now you're down to $102K. Not bad, but I'm sure you could make more as a senior developer. Assuming you've come up with a different strategy that's netting better returns, would you care to share? And what is your strategy for hedging?

nathan_f77 9y ago
6% would be extremely aggressive, so I was thinking more like $4M at 3%. And you're right, I suppose a senior developer would be making ~$150k, so you'd need around $5-$6 million. 3-4% is the typical withdrawal rate that people use on the /r/financialindependence subreddit: https://www.reddit.com/r/financialindependence/wiki/faq#wiki_how_much_do_i_need_to_save_to_retire.3F https://www.reddit.com/r/financialindependence/wiki/faq#wiki... My strategy would be to just put everything in a Vanguard Target Retirement Fund: https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement... It's cheaper and safer than a financial advisor, and you don't need to worry about rebalancing. I'd also throw a little bit of money into angel investing, but no more than 3%, and I'd expect to lose it all. For hedging, I think once a year I would just buy some OTM puts for the S&P 500. A sane number might be something like 0.2% of your assets. If you're absolutely convinced that we're on the verge of a stock market crash, then you should still use 0.2%, because you're probably wrong.
Tharkun 9y ago
Sounds like a nice US salary. Good luck netting half that in most of Europe.
Spooky23 9y ago
This is one of these scenarios where you work with an advisor and accountant, and make investment adjustments over time as rates change. I helped my dad with a scenario like this when he retired. You approach the problem so that you draw as much income as possible from tax exempt sources and use other vehicles for growth -- which preserves your cash generating capability later. When opportunity strikes, you overload. For example, buying NY tax exempt (and other municipal bonds) when they were depressed during the recession has yielded a decade of enhanced, safe, tax free income.
kayoone 9y ago
your 100k+ for a Senior developer are US only though. In Europe or Canada only very very few developers without management responsibility make that kind of money. Typical senior salaries are between 60-80k.
- Arizhel 9y ago
  In Europe or Canada, they don't have the insanely-high healthcare insurance costs that Americans have.
awinder 9y ago
You'd pay taxes on the dev salary as well so you'd need less drawing "salary" as capital gains taxes than you would income + payroll taxes.

vpresident 9y ago

Your math is right, but getting to those millions can be chance or working really hard for years. And we can also take in consideration that most of us won't leave those millions there. Getting fancy can be as risky as running a software company. Comparing that with him working 6 months a year for the first part of his career and now living from two modest saas products seems pretty nice. ..and all the sitting-at-the-laptop photos are hilarious xD

pdog 9y ago

Assuming a withdrawal rate of 4% per year, even a few million in index funds would only yield about $120k annually. And that's not factoring in the risk of a market correction or downturn. The income you earn from owning your own business is worth at least twice as much as the equivalent income from dividends, interest, and capital gains.

nathan_f77 9y ago
I guess it's always nice when your hard work pays off, so you would attach more sentimental value to your income when you feel like you earned it. However, in financial terms, these businesses are typically valued at 2x-4x annual revenue. So a business that gives you an income of $120k per year is worth far less than a safe $4M investment that gives you an average return of $120k per year. If you could somehow prove that your business is extremely likely to produce at least $120k per year for the next 30 years, and with very little maintenance, then it would be worth closer to $4M.