5 ms·
What is your $2m generating? For instance, if you invested in high quality dividend stocks, you can get 3% and it should generally grow about what GDP does (whi
by prewett 2y ago
What is your $2m generating? For instance, if you invested in high quality dividend stocks, you can get 3% and it should generally grow about what GDP does (which should also include inflation effects). So that's $60k/year, or after 15% dividend tax + let's say 5% California state tax, for a net of $48k. If you're in somewhere rent-controlled, seems like even with a family you're not going to on the streets starving.
Alternatively, if you have $2m in stocks that are growing, you could consider the growth amount as potential income, because you could always sell it. Generally the growth is better than 3%, but down times will also hurt worse since you might have to sell at a low.
Or you could purchase a residence with $1m, and buy dividends with the rest. Taxes on the residence will be about $10k, with dividend income of $24k, leaving $14k for food, etc.
You won't independently wealthy in any of these scenarios (not in the Bay Area, anyway), but in these scenarios you don't actually need much from a job, maybe $40k with a family. So you should be able to save several years worth of that on a Bay Area salary, which leaves you with quite a long runway.
And if things get really bad, you can move to the middle of nowhere, buy a house for $300k and actually be independently wealthy.
- fragmede 2y agoif you're only getting 3% with dividends, can I interest you with an HYSA paying 5%?
- toomuchtodo 2y ago10 year US treasuries my good friend, no state or local income taxes and HYSA rates will decline as the Fed lowers the federal funds rate. 3% is on par for SCHD, which is a popular ETF dividend fund (that provides income, but also growth). Different risk profile than treasuries though. https://finance.yahoo.com/quote/SCHD/ https://finance.yahoo.com/quote/SCHD/
- fragmede 2y agoWe're still under a yield curve inversion, no? 3-month t-bills are paying 5.149% which is more than the rest.
- toomuchtodo 2y agoWhich will decline as the Fed cuts rates. Longer duration locks in risk free yields longer. Your portfolio goals and allocation will of course drive your strategy.
- kridsdale3 2y ago3% comes from traditional FIRE texts which find it to be the withdrawal rate that would survive all historic recessions.
- throwaheyy 2y agoHYSA varies with interest rates
- jjav 2y ago> can I interest you with an HYSA paying 5% Don't plan a retirement around a HYSA at 5% because those rates will go back down.
- prewett 2y agoThe 5% HYSA minus the FED-targeted rate of 2% is back to 3%. But high quality dividend companies generally raise their dividend each year, plus you get the increase in stock value. So you only get 3% in income, but your total return is much better.