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You assume that a million generates $40k to $60k, inflation-adjusted, for the next 40 years? I suppose that's one assumption to make. You know that the last ti

You assume that a million generates $40k to $60k, inflation-adjusted, for the next 40 years? I suppose that's one assumption to make. You know that the last time the US GDP grew more than 4% was back in 2000, right? And 2010 worldwide? Both with a continued downward trend since at least the 60's? (This obviously doesn't preclude >4% ROI, but that in turn means increasing income inequality, and at some point, there's a price to be paid for that)

edoceo 6y ago
It's not about GDP, it's about Equities - eg: SPX which averages like 10% growth over last 30 years or something. Getting 4% off $1M isn't that hard at all. And with $1M you may be able to get some portion to work higher yields.
- groby_b 6y ago
  Equities don't keep growing indefinitely without underlying economic growth, and GDP represents that economic growth. There is no immutable law that SPX needs to keep growing 10%. It has been outpacing GDP because increasingly, production is being concentrated in fewer, larger companies. So right now, they are growing. There are limits to that growth if GDP isn't growing as well - there are only so many smaller companies you can put out of business. This - investing into SPX, or VFIAX, or any other market aggregate - is a viable strategy in the face of unlimited growth. It's a reasonable mid-term strategy. It's entirely unclear that there will be unchecked economic growth for 40 years. In fact, there's very good reason to assume there won't. As for "get some portion to work higher yields" - those yields carry risk. They're not just making you more money, you stand a better chance to lose money, too. Which in turn means much less return, even if you manage to maintain 4%. And to make matters worse, you're timing dependent - if you'd invested $1M in 1999, you would've been back to $1M in 2012. Except, if you'd lived off it for those 13 years, you'd be down to half your initial investment, ~$480K. FIRE is a high-risk strategy. I'm not saying it can't work out, but over 40 years, there are a lot of things that can happen, and most FIRE proponents have very small safety margins. The crux is that that doesn't seem particularly problematic in your 20s and 30s - worst case, you start again, right? Except "start again" in your 50s, 60s, 70s is a really sucky proposition. Ultimately, everybody takes their own risks, but let's not underplay those risks.
  - edoceo 6y ago
    Folks keep saying lots of logical things like this (for decades). And yet TSLA p/e is 1800. And there are a dozen TSLA on the horizon. And the market keeps making new ones.

edoceo 6y ago

It's not about GDP, it's about Equities - eg: SPX which averages like 10% growth over last 30 years or something. Getting 4% off $1M isn't that hard at all. And with $1M you may be able to get some portion to work higher yields.

groby_b 6y ago
Equities don't keep growing indefinitely without underlying economic growth, and GDP represents that economic growth. There is no immutable law that SPX needs to keep growing 10%. It has been outpacing GDP because increasingly, production is being concentrated in fewer, larger companies. So right now, they are growing. There are limits to that growth if GDP isn't growing as well - there are only so many smaller companies you can put out of business. This - investing into SPX, or VFIAX, or any other market aggregate - is a viable strategy in the face of unlimited growth. It's a reasonable mid-term strategy. It's entirely unclear that there will be unchecked economic growth for 40 years. In fact, there's very good reason to assume there won't. As for "get some portion to work higher yields" - those yields carry risk. They're not just making you more money, you stand a better chance to lose money, too. Which in turn means much less return, even if you manage to maintain 4%. And to make matters worse, you're timing dependent - if you'd invested $1M in 1999, you would've been back to $1M in 2012. Except, if you'd lived off it for those 13 years, you'd be down to half your initial investment, ~$480K. FIRE is a high-risk strategy. I'm not saying it can't work out, but over 40 years, there are a lot of things that can happen, and most FIRE proponents have very small safety margins. The crux is that that doesn't seem particularly problematic in your 20s and 30s - worst case, you start again, right? Except "start again" in your 50s, 60s, 70s is a really sucky proposition. Ultimately, everybody takes their own risks, but let's not underplay those risks.
- edoceo 6y ago
  Folks keep saying lots of logical things like this (for decades). And yet TSLA p/e is 1800. And there are a dozen TSLA on the horizon. And the market keeps making new ones.