4 ms·
Yes, it is possible. Think of total assets as annuity, annual loan as payment from annuity, and interest as management fee charged by annuity administrator. Ba
by akg_67 5y ago
Yes, it is possible. Think of total assets as annuity, annual loan as payment from annuity, and interest as management fee charged by annuity administrator.
Back of the napkin calculations:
Total assets $100 million
Annual Expenses as Annual Income
Annual withdrawal = $4 million
Assuming 40% tax, tax due = $1 million
Asset liquidated = $5 million
Remaining asset = $95 million
End of Year asset @ 4% growth = 98.8 million
Annual Expenses as Loan
Annual withdrawal as loan = $4 million
1% interest on annual loan = $40,000
Asset liquidated to pay loan interest and taxes on liquidated assets = $60,000
Remaining assets = $99.940 million
EOY asset = $103.937 million - $4 million
- WalterBright 5y ago1% interest on annual loan? I'd like to know who your lender is! Inflation - ignored. What happens when your asset goes down in value - ignored.
- novok 5y agoAt IBKR, the margin loan rate is %1.1-%0.75 after the first $100k, and anyone can get that with no special negotiation effort. https://www.interactivebrokers.com/en/index.php?f=46376&p=m https://www.interactivebrokers.com/en/index.php?f=46376&p=m Now imagine you're a billionaire!
- WalterBright 5y agoYou're right. But I don't think that is likely to hold for very long. I've never seen interest rates this low in my life. Furthermore, when interest rates do go up, suddenly you're paying a lot of money for that large accumulated debt.
- cudgy 5y agoPeople have been saying “I’ve never seen interest rates this low in my life” for the last few decades. Also, much of the debt could be tied to long-term loans in which case the overall interest rate would not move much.