Ask HN: How much money would you need to feel comfortable never working again?
What's your number, beyond which you can do anything you want without worrying about money or working for someone else? Does this change for you when you factor in having a family?
43 comments
[ 2.9 ms ] story [ 76.1 ms ] thread>In short, you want ~25x your annual expenses to be able to retire (not annual income - annual expenses). This allows you to draw ~4% every year and more-or-less never run out of funds (presuming a conservative, stable investment.
________________
https://www.quora.com/How-much-money-do-you-think-you-need-t...
If you expect to live longer than that, 4% seems aggressive - it's far more than you'll make annually in interest in low-risk investments, and arguably more than you can expect from the stock market in recent conditions, especially after accounting for inflation.
* your investment horizon is > 10 years, so you can afford riskier investments
* at that level of money, you’re eligible for private banking / personal wealth management and thus to better deals and performance than you would make on your own (I’m thinking Berkshire Hathaway for instance)
* presumably you don’t keep the principal intact until you die (except if you want to pass it on to your kids) so really all you have to do is earn enough interest to last ~ 50/60 years. That means doubling your original investment in 50 years, so less than 2% interest. Seems reasonable even using “safe” investments (and with a 50 year horizon, pretty much any investment is safe).
I’m curious what average yearly returns wealth managers can sustain, and if it’s significantly better than 3-4%
But why would you want to pay for "private bank / personal wealth management", when, quite frankly, the "managed" investments at best only outdo unmanaged investments by a tenth or two of a percent?
Because you could retire at 50, and be hit by a bus the next day.
Or retire at 50 and live to 95.
The math doesn't change.
I don’t think I’m super materialistic, the only possessions I really find “enjoyable” are probably my tech - best smartphone, tablet, etc. And fortunately these are orders of magnitude cheaper than being a car-guy. The only big expense I imagine from being an adult would be travel, I really like diving into totally different world views.
So my tentative number is about $1.5 million, maybe even $2 million, for somewhere between $60K-$80K. This is obviously crazy a lot of money. But if you compare it to how much some businesses sell for, it seems achievable.
So, while it looks crazy at this point in your career, it's not beyond your potential.
If you're going the employee path, a successful employee at Google and the rest can save a million dollars after 5 to 10 years if they're frugal enough.
Not to mention if you make it to a management/CTO or similar position, you might be able to make "crazy" amounts of money as well.
Seriously bud, at your age, $1.5 - $2m is attainable even if you have a job!!
Questions:
1) Do you want to leave money behind, or exit as close to zero as possible. If you are aiming for zero, then the amount is significantly less. But has the risk of being off by a few years.
2) How much do you need each year?
3) What do you think inflation will do? Most calculations assume inflation is a fixed amount. Everyone knows it is wrong but you have to use something.
4) How much will your investments pull in each year? Like #2 you have to choose a number. The higher you choose the more likely you are going for a risky investment and will lose everything.
5) Do you expect to need long term care or some other retirement home facilities? My dad is looking at this, and the retirement home is like 50% more than his normal living expenses. Assisted living is like triple his normal living expenses. But a lot depends upon size of the retirement home.
6) What is your tax rate? Those investments will be taxed, as will, most likely, up to half of your Social Security. Your country might be different.
Simple method: answer 2 / (answer 4 – answer 3)
example: assume 75000 a year (before taxes), investments 7%, inflation 3%
75,000 / (0.07 – 0.03) = 75,000 / 0.04 = 1,875,000
This will leave 1,875,000 for your children.
Oh you expect to draw Social Security and a pension?
How much? Assume 2K a month SS, and 500 a month on your pension. That’s 2500 * 12 = 30000
Then it is now:
(75,000 – 30,000) / (0.07 – 0.03) = 40,000 / 0.04 = 1,000,000
So with absolutely safe investment of a 1% checking account, I would say 12 Million USD in Cash ? I know that there is inflation factor but in 2018, thats the number.
Reach goal is $20M.
If I left CA, these numbers would change quite drastically to 2 M at 35 and 1 M at 65.
these numbers would be total net worth. with a family of about 3.
3M in 401ks
Have wife, we both work.
I'm pretty much starting out in my career though, so the true number may end up being much higher, and my enthusiasm may wane after doing this for a decade.
From a religious perspective, I think our purpose should be contributing something to the world as long as we live. Work is one of the best forms of contribution, which is why people pay for it. If I'm just sitting there living off a hoard, I might as well be dead. I would not be happy to not work.
I would be happy to work "half time" though, about 20 hours/week. I'm aiming for $25k this year or next to achieve that.
But if I didn't want to work at all, it would be at least $2M. It would make me very anxious though, with inflation and all.
I agree in principle, but what motivates me to be financially independent is not having to deal with all the bullshit that comes along with work. Office politics, drama, having your priorities set by someone else, etc. I also find having to care about promotions and such extremely stressful.
During periods of high stress, I find myself dreaming of FI just to stay home reading books and going to the gym. But more realistically, I’d likely continue to work my current job, with some changes.
If I were to become financially independent overnight, I’d schedule a 1:1 with my manager and explain that either I’m now working 100% on my terms, or I quit. That would allow me to just contribute to the product we’re developing, without having to deal with the bullshit. I’d then be perfectly fine staying at my current position for the rest of my career (i.e. no promos).
Alternatively, a boostrapped SaaS with $4000 MRR (Monthly recurring revenue.)
The latter is easier to achieve.
I'd have to invest this 4.4 million at about 4% interest (this is as you can see very conservative and in general seems to be regarded as a very safe interest level) to stay at that level of wealth more or less for the rest of my life. I could then pass it on to my children, which was one of my requirements. If you do not have that, the number can probably be a lot lower. It's possible that investing part of it into a house (with stuff like solar panels and a heat exchanger) might make for a better return month to month (with lower risk, very important). I've not yet made serious calculations to that effect, but the napkin math suggests to me that this is the case. Obviously this would not be enough to cover everything, but it might make the final number lower also. This is complicated further by potential maintenance costs that you need to factor in.
EDIT: this approach assumes you maintain your current (and foreseeable) quality of life in terms of disposable income.
We run my "number" through a bunch of simulations. It includes two pensions, social security and tax-deferred savings. The total number today, if you runrate the pension & SS assumptions, is $3.5M and gives me a 95% chance of success going forward.
The only reason I haven't already quit is the chance of pocketing another chunk of change from my current startup. Then I'm gone.
Initially they helped us gather the info from >30 years of various accounts, then forcing us to make some assumptions - retirement dates, estimated budgets, and so on. It sounds rudimentary but was still very useful.
Longer term: prompt reinvestment of cash; advice on medical insurance planning (we were transitioning from Cobra coverage), whether to pay off selected debts early, and so on.
If we're talking not working for others, I guess that's more of a mindset thing. I never have and would rather not. Have enough to last ~10 years and wife is okay supporting me so I'm not particularly worried.