11 ms·

The problem really comes down to security. Unless you have 10+ million in the bank, you are probably at a non zero risk of having one of the following occur -

by lumost 5y ago

The problem really comes down to security. Unless you have 10+ million in the bank, you are probably at a non zero risk of having one of the following occur - unable to retire/aged out of the workforce - lose house - lose job and unable to find replacement. - unable to afford living in your area. - broken by medical bill/disaster. - unable to afford education/childcare for children My partner and I work in well known tech companies, but don’t come from money - we are well off as long as one of us doesn’t get a bad performance review and there isn’t a crash. It’ll be decades if ever when I have the financial security to consider myself wealthy.

AnimalMuppet 5y ago
No, with only 5 million in the bank, you are not at risk of losing your house - not unless you mess up spectacularly. Even a catastrophic medical issue shouldn't make you lose your house, unless you don't bother to have insurance - and if you have 5 million in the bank, you absolutely can afford to have insurance.
- rootusrootus 5y ago
  Hell, with a paid off house and a mere 2M in savings I could choose to retire. Even without touching the principle, if there is no mortgage in the picture $60K/year is equivalent to over $100K in real annual income. In lots of places that's plenty for a very comfortable lifestyle.
shoto_io 5y ago
It never stops. I met a very, very wealthy guy a while back. All he was concerned with was how to preserve his wealth for the next generation. He did not feel financially secure at all. So, what will happen once you succeeded bringing those risks down to zero? Is that the time you start pursuing your dreams or will you start trying to get the next set of risks down to zero?
- phendrenad2 5y ago
  Sample size of one. I imagine not all wealthy people are interested in passing it to their children (if any).
space_fountain 5y ago
But these things are relative right 1 million at 6% a year yields 60k per year which plenty of people live on. The median income in the US is only ~70k. I'm not saying you should accept a large reduction in your quality of life or to move, but that is the trade off you're making right?
- lumost 5y ago
  Incomes keep pace with inflation and generally don’t have crash years which diminish their future value. If you are taking the full 6% then inflation is eating the asset, in 30 years the 60k will be equivalent to 24k. If you started this in 98 then you would have seen your assets halved twice, and would be living off of 15k or so in 2008.
  - space_fountain 5y ago
    Inflation adjusted the stock market has grown at 7% per year. I'm not sure what the proper return rate to assume is, but 6% doesn't seem far off it and that's before eating into the principle because none of us will live forever
    - dlp211 5y ago
      This is a common mistake and doesn't account for sequence risk. While it is true that the long run, inflation adjusted, DRIP average is about 7%, over the short run, those returns are not guaranteed and a few bad years can break your retirement. A much safer withdrawal rate is 3-4% with some inflation adjusted caps and floors so that in good years you grow your investments and in bad years you maintain a certain level of lifestyle.
      - space_fountain 5y ago
        Well regardless 40k is still completely livable even ignoring the tax advantages we give capital right? I'm not saying a millionaire is wrong to want more, plenty of people can and do live on the passive income generated by that amount of money
gowld 5y ago
And how much would need to feel secure against the threat of asteroid collision? Absolute catastrophe is always possible. Jeff Bezos could die from a heart attach or a murder, even though he spends $1M on security. Everyone knows they need 2x their current wealth to feel secure.
kgin 5y ago
The average American will make 1.5 million TOTAL during their entire working lifetime from teenager to retirement/death. If you have that amount or more on hand right now in investable assets, the only thing keeping you from financial freedom is the desire to have a fancier lifestyle than the average American.
- medvezhenok 5y ago
  *Present day value. Not including fringe benefits like insurance, 401k match, etc. And if we have a period of high inflation, you have to make sure your assets actually stay on top of that; otherwise your 1.5M can quickly shrink in real value. And also you have to include the implied value of Social Security for the average worker, as well as any asset appreciation they experience from owning a house (Social Security is roughly ~500K present value, since avg. payment is ~1.5K/month, paid off house(s) could be worth up to another $1M in appreciation over a lifetime). So that's closer to $3M (minus taxes) to equal the average American (and whatever inheritance they might or might not have). Yes, most likely you are set if you have 1.5M - but it's not a guarantee.
  - deleted 5y ago
    [deleted]
rtsil 5y ago
Wealthy is like AI, always the next step, never the current circumstances. Even with 1 million in the bank, the only risk you may face is a slightly worse lifestyle and the possibility of having to relocate to a cheaper area. In a world where working remote at least partially has become a viable solution unless you work in hardware.
- lumost 5y ago
  My first tech job paid 30k/yr 10 years ago. Present tech incomes are not necessarily indicative of future earnings potential. Agreed that with 1 million in the bank destitution is not a real risk, but childcare can run 30-70k/yr. Being forced by circumstances to uproot is far from ideal. 1 million in the bank with drawdowns also runs a severe risk of being hit by a crash sometime in the next 30-70 years one might draw from it.

by lumost 5y ago

AnimalMuppet 5y ago

No, with only 5 million in the bank, you are not at risk of losing your house - not unless you mess up spectacularly. Even a catastrophic medical issue shouldn't make you lose your house, unless you don't bother to have insurance - and if you have 5 million in the bank, you absolutely can afford to have insurance.

rootusrootus 5y ago
Hell, with a paid off house and a mere 2M in savings I could choose to retire. Even without touching the principle, if there is no mortgage in the picture $60K/year is equivalent to over $100K in real annual income. In lots of places that's plenty for a very comfortable lifestyle.

shoto_io 5y ago

It never stops. I met a very, very wealthy guy a while back. All he was concerned with was how to preserve his wealth for the next generation. He did not feel financially secure at all. So, what will happen once you succeeded bringing those risks down to zero? Is that the time you start pursuing your dreams or will you start trying to get the next set of risks down to zero?

phendrenad2 5y ago
Sample size of one. I imagine not all wealthy people are interested in passing it to their children (if any).

space_fountain 5y ago

But these things are relative right 1 million at 6% a year yields 60k per year which plenty of people live on. The median income in the US is only ~70k. I'm not saying you should accept a large reduction in your quality of life or to move, but that is the trade off you're making right?

lumost 5y ago
Incomes keep pace with inflation and generally don’t have crash years which diminish their future value. If you are taking the full 6% then inflation is eating the asset, in 30 years the 60k will be equivalent to 24k. If you started this in 98 then you would have seen your assets halved twice, and would be living off of 15k or so in 2008.
- space_fountain 5y ago
  Inflation adjusted the stock market has grown at 7% per year. I'm not sure what the proper return rate to assume is, but 6% doesn't seem far off it and that's before eating into the principle because none of us will live forever
  - dlp211 5y ago
    This is a common mistake and doesn't account for sequence risk. While it is true that the long run, inflation adjusted, DRIP average is about 7%, over the short run, those returns are not guaranteed and a few bad years can break your retirement. A much safer withdrawal rate is 3-4% with some inflation adjusted caps and floors so that in good years you grow your investments and in bad years you maintain a certain level of lifestyle.
    - space_fountain 5y ago
      Well regardless 40k is still completely livable even ignoring the tax advantages we give capital right? I'm not saying a millionaire is wrong to want more, plenty of people can and do live on the passive income generated by that amount of money

gowld 5y ago

And how much would need to feel secure against the threat of asteroid collision? Absolute catastrophe is always possible. Jeff Bezos could die from a heart attach or a murder, even though he spends $1M on security. Everyone knows they need 2x their current wealth to feel secure.

kgin 5y ago

The average American will make 1.5 million TOTAL during their entire working lifetime from teenager to retirement/death. If you have that amount or more on hand right now in investable assets, the only thing keeping you from financial freedom is the desire to have a fancier lifestyle than the average American.

medvezhenok 5y ago
*Present day value. Not including fringe benefits like insurance, 401k match, etc. And if we have a period of high inflation, you have to make sure your assets actually stay on top of that; otherwise your 1.5M can quickly shrink in real value. And also you have to include the implied value of Social Security for the average worker, as well as any asset appreciation they experience from owning a house (Social Security is roughly ~500K present value, since avg. payment is ~1.5K/month, paid off house(s) could be worth up to another $1M in appreciation over a lifetime). So that's closer to $3M (minus taxes) to equal the average American (and whatever inheritance they might or might not have). Yes, most likely you are set if you have 1.5M - but it's not a guarantee.
- deleted 5y ago
  [deleted]

rtsil 5y ago

Wealthy is like AI, always the next step, never the current circumstances. Even with 1 million in the bank, the only risk you may face is a slightly worse lifestyle and the possibility of having to relocate to a cheaper area. In a world where working remote at least partially has become a viable solution unless you work in hardware.

lumost 5y ago
My first tech job paid 30k/yr 10 years ago. Present tech incomes are not necessarily indicative of future earnings potential. Agreed that with 1 million in the bank destitution is not a real risk, but childcare can run 30-70k/yr. Being forced by circumstances to uproot is far from ideal. 1 million in the bank with drawdowns also runs a severe risk of being hit by a crash sometime in the next 30-70 years one might draw from it.