^ Right off the top, you would be taxed on the $30k annually. Assuming this is some blend of interest income and investment gains, these are all taxable.
Where can you get health insurance for $3k annually? Have you ever actually shopped for a policy on your own (not thru an employer)? A good plan for a family will run you ~$2k per month…
I guess you will need to use your principal for the kids’ college (since you aren’t saving for it), thereby decreasing your annual $30k income.
There are several other more minor assumptions that I think are underestimated, but the big ones are you still have to pay income taxes and health insurance is a lot more pricey than you think.
Conclusion: $2 million is not enough to retire at an age of early 30’s.
Where are you coming up with the idea that I’d be taxed on the 30k annually? The fact pattern begins with the premise that I have 2,000,000 in cash assets. I’m not taxed on withdrawing my own money from the bank. I’d be taxed on gains.
FYI, I pay like 80/month for my own health insurance (and I run it through my business). I don’t have a government or employer subsidizing me (high deductible). My friend in NJ is paying like 150/month for some plan that has virtually no deductible. So that number wasn’t pulled out of thin air.
I think your assumption is that I am trying to tow a family behind me. This whole analysis was built on the assumption that I don’t have anyone else to care for (otherwise yeah it’d be insane).
I don’t have children, at least not yet. Yeah it’d be a different calculation then. But even so, if you’re in the right neighborhood, the public schools can be decent. And if your kid is smart, he should be able to get a full ride to a state school.
In other words, if my net worth is $50K I’d work in a $10K/year job. If it $100K then in $40K/year. And so on. May not be exactly square but salary requirement rises faster than net worth rises.
If he earns only long-term capital gains and dividends, he will pay no taxes. 30k tax-free on 1.8M is cake. He could easily, and would, do much better. The median family of four in America lives off far less than what 2M could throw off in perpetuity.
Tax Rate on Long-Term Capital Gains and Qualified Dividend Income
Capital gain income from assets held longer than one year are generally taxed at special long-term capital gains tax rates. The rate that applies depends on which ordinary income tax bracket you fall under.
0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,
15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and
20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket
^ He’s not planning to earn anything on his $2MM. If you only spend $30k per year, $2MM will last you 66 years, so he’s planning to die in his late 90’s with basically no cash left.
Capital gain income from assets held longer than one year are generally taxed at special long-term capital gains tax rates. The rate that applies depends on which ordinary income tax bracket you fall under.
0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,
This I was certainly not aware of.
Anyway, sounds like mlw has the health care issue figured out, I’ve never heard of anything even remotely close to $80/month, even for a high deductible policy.
As I said, there are plenty of other areas in your analysis that we could poke holes at, such as higgmond’s suggestion that $250/mo for utilities is way low. But it sounds as though you’d be happy living as a near-pauper (and also a lonesome existence), which I know I couldn’t do myself with $2 million just sitting in the bank.
If I had $2M land in my bank account tomorrow, I’d continue going to work and doing what I do. Gives the flexibility to work a job you actually enjoy (assuming you don’t enjoy your current job, which I do). Difference is I’d probably just live by spending my entire salary since I wouldn’t have any need to save any more.
Yeah, don’t know why you just wouldn’t buy vwinx and live happily ever after if you don’t have much ambition. And my health insurance costs me $99 a month. High deductible of course. And i pay the full premium. The most i ever paid. Ten years ago i was paying half that. And the aca fix that was just passed regarding high deductible plans should keep my premium from going up three times next year as i was expecting.
Who knew…better than fiction. From wikipedia: At the age of 22, Evangelista married Elite executive Gerald Marie.[9] They were married from 1987 to 1993.[10] In 1999, she became pregnant by French football player Fabien Barthez. At 6 months pregnant, she delivered a stillborn baby. The couple then broke up and Evangelista left modelling for several years to recuperate.[11] On October 11, 2006, Evangelista gave birth to a boy, Augustin James, refusing to name his biological father, sparking rumours.[10] While pregnant, she appeared on the August 2006 issue of Vogue. In late June 2011, Evangelista filed court papers that revealed her son was fathered by billionaire Frenchman François-Henri Pinault, by then the husband of actress Salma Hayek.[12][13] After several court appearances aimed at establishing a child support agreement, on August 1, 2011, Evangelista formally filed for a child support order in Manhattan Family Court, seeking $46,000 in monthly child support from Pinault. It was reported that if granted, this amount “would probably be the largest support order in the history of the family court”.[14][15] A heavily-publicized[16] child support trial began on May 3, 2012,[17] and included testimony from both Pinault and Evangelista, with Evangelista’s attorney claiming that Pinault had never supported the child.[18][19] Several days into the trial, on May 7, 2012, Evangelista and Pinault reached an out-of-court settlement.[20]
My average electricity/gas bill combined is 160/month. My water is 15 per month. My FIOS is under 58 a month.
250/month for basic utilities is not out of the question
I don’t consider eating 3 meals a day (one of them being a restaurant) and going on regular vacations, while living in a new 3-bedroom house, to be the existing of a pauper
Let me put it this way: I’m too much of a hard-charger to sit on my hands for the next 60 years. But I’m saying the prudent thing to do would be to consider that 2 million as a safety net. You can make risque career choices that you wouldn’t normally make in your current situation e.g.
joining a start-up and only being compensated with stock options
going to an underdeveloped country on some of charity project
trying your hand at Broadway acting (you get the point)
Taking an entry-level job in another field that you’ve always been interested in but didn’t major in
My point is that 2 million dollars opens up so many lifestyle doors if you play your cards right. The problem is that most people see $2,000,000 and blow their wad too soon.
My monthly total for those things is ~$175 most of the year. Add an extra $100 May-September because power bill pretty much triples in the Texas summer. My power bill this winter has been $20-25/month and will likely go to $80-100 once I have to start running the AC.
^ Yeah, I know. My dad’s place is normally $200-300/month in winter for nat gas because its so cold and he has a ~4500 sq ft house, so that doesn’t help.
One year in college, our house was the least efficient house. Ever. It wasn’t insulated very well and had an old AC unit, so between all the parties, doors open all the time and 90-100 F daytime temperatures, it wasn’t uncommon for us to have $400-600 power bills in July/Aug/Sept. Granted we split that 6 ways, but still. Guess when you have that many people splitting the bill nobody has any incentive to conserve.
Yes, along with crying and cuddling a bottle of whisky for inner warmth. But in all seriousness, I have gas heat in my house its just relatively rare that I have to turn it on. It generally stays pretty comfortable in my house until it starts getting below 40-45.
^Don’t know about Houston, but in San Antonio, I rarely needed a jacket. Normally, a hoodie sweatshirt was good enough to be outside during the winter. Might need something heavy about two days per year. And I rarely used my heater.
I wouldn’t want to work for a heartless tyrant whose sole means of exerting control is through the paycheck. Large savings relative to your recurring bills are a great hedge if you have such an employer.
You guys are some serious misers. I live outside of Philly and my heating bill is north of $800 per month Dec - Feb and my electric is north of $200/month Jul & Aug. Other months aren’t as bad, but electric is never less than $75. House isn’t that big either and heat and A/C are on timers.