3 ms·
I'd say you can have substantial freedom (not luxury) with less. But 7% yield is a bit optimistic, because you pay tax on nominal growth. Say, if you achieve 8
by FabHK 8y ago
I'd say you can have substantial freedom (not luxury) with less.
But 7% yield is a bit optimistic, because you pay tax on nominal growth. Say, if you achieve 8% nominal growth, have a 37.5% tax rate, you're left with 5%. Now deduct 2% inflation, and you can only take out 3% per year.
Thus, your $10m only give you $300k a year (after tax, real), which is enough for 5, I'd say (maybe not in NY, but in many other nice places). However, that assumes 8% nominal return, which is not something I'd bet my retirement on, given current elevated asset values.
- mrhappyunhappy 8y agoThis 7% being thrown around is not a real return. Adjusted for inflation you’d be lucky to get 4%, assuming you are not collecting when the market is tanking.
- FabHK 8y agoYes. My claim is that the situation is exacerbated by the fact that you pay taxes on the nominal return; in other words, you need to "pay" inflation out of after-tax return. Thus, your real after-tax return is minuscule; and you should, in my view, calculate only with 2% or max 3% sustainable withdrawal rate to be prudent.