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I'd consider it a head start on my retirement fund - a chance to retire a few years early - and invest at least 90% of it accordingly. I'd use the rule of thum

I'd consider it a head start on my retirement fund - a chance to retire a few years early - and invest at least 90% of it accordingly. I'd use the rule of thumb for windfalls: allow yourself to spend 5-10% of it to celebrate. That said, there isn't much right now that I'm interested in spending money on all at once. Buy that laptop I've been holding out on. Maybe take nicer vacations than usual for a few years. Maybe help my parents pay for some renovations they weren't sure how they'd afford. I wouldn't change anything else about my life. Increasing ongoing expenses defeats the point of investing it towards retirement; and there aren't many areas in which a modest increase in expenditures would create a corresponding increase in happiness. Whereas retiring at 60 instead of 65; having more of my life in good health without having to work... that's the best thing I can imagine.

scalesolved 9y ago
A head start?!? Where in the world do you live and what figure of savings would you need to be able to retire?
deanmoriarty 9y ago
I seriously hope you're joking and you're just being provocative right? In what world or lifestyle $2.5M after-tax is just a "head start" or "a chance to retire at 60 vs 65"? By investing it in traditional index funds, at a relatively safe withdrawal rate of 4% it would allow you to pull $100k a year in perpetuity (adjusting from inflation each onward year), most of which taxed at a ridiculously low rate, or none at all.
- cimmanom 9y ago
  Expecting reliable 7% returns seems extremely optimistic to me (I'm fairly certain our 100-year growth rate cannot and will not be sustained). Certainly the market hasn't returned that much during my lifetime. If the stock market returns 4% instead of 7%, you'd need $10M in the bank to keep up with 3% inflation and return $100K/yr. $5M for $50K/yr. And one typically moves one's assets into lower-risk/lower-return investments as one approaches retirement. Given my family's longevity, I need to plan for survival till about 100 y/o. With increasing costs over time due to aging-related costs (even if I spend $50K/yr now, paying for assisted living or home aides plus of course medical care could easily bring that up past $100K). And an assumption that social security will not exist in any meaningful form by the time I reach retirement age. Yes, 60 vs. 65 was an enormous exaggeration, but right now I intend to save nearly $100K for every year of planned retirement. $2.5M would cover 25 years of retirement. At $50k/yr in savings, that leaves me with 2 years of work for every year before 75 I want to retire. So: I still need to work another (2/3 * (75 - $current_age)) years (minus savings too date, of course). Without the $2.5M, the equation would be (2/3 * (100 - $current_age)). So it allows for retirement ~17 years earlier than originally planned. And yes, saving that much is unrealistic for the vast majority of Americans. I suspect we're headed for an enormous retirement-related social/economic crisis in the next few decades.

scalesolved 9y ago

A head start?!? Where in the world do you live and what figure of savings would you need to be able to retire?

deanmoriarty 9y ago

I seriously hope you're joking and you're just being provocative right? In what world or lifestyle $2.5M after-tax is just a "head start" or "a chance to retire at 60 vs 65"? By investing it in traditional index funds, at a relatively safe withdrawal rate of 4% it would allow you to pull $100k a year in perpetuity (adjusting from inflation each onward year), most of which taxed at a ridiculously low rate, or none at all.

cimmanom 9y ago
Expecting reliable 7% returns seems extremely optimistic to me (I'm fairly certain our 100-year growth rate cannot and will not be sustained). Certainly the market hasn't returned that much during my lifetime. If the stock market returns 4% instead of 7%, you'd need $10M in the bank to keep up with 3% inflation and return $100K/yr. $5M for $50K/yr. And one typically moves one's assets into lower-risk/lower-return investments as one approaches retirement. Given my family's longevity, I need to plan for survival till about 100 y/o. With increasing costs over time due to aging-related costs (even if I spend $50K/yr now, paying for assisted living or home aides plus of course medical care could easily bring that up past $100K). And an assumption that social security will not exist in any meaningful form by the time I reach retirement age. Yes, 60 vs. 65 was an enormous exaggeration, but right now I intend to save nearly $100K for every year of planned retirement. $2.5M would cover 25 years of retirement. At $50k/yr in savings, that leaves me with 2 years of work for every year before 75 I want to retire. So: I still need to work another (2/3 * (75 - $current_age)) years (minus savings too date, of course). Without the $2.5M, the equation would be (2/3 * (100 - $current_age)). So it allows for retirement ~17 years earlier than originally planned. And yes, saving that much is unrealistic for the vast majority of Americans. I suspect we're headed for an enormous retirement-related social/economic crisis in the next few decades.