Living On A Million Dollars
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    Senior Member tygrus's Avatar
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    Living On A Million Dollars

    I see more and more of these news stories about people who have got to a million either by extreme saving, maybe a house sale etc., then they quit work in their late 30s and say they are going to live on $40k per yr passive income forever. While am sure it can be done, $40k would be about the amount to rent or pay a mortgage, eat, utilities, bit of entertainment and thats about it afterwards, no account for inflation etc.

    While I am all for frugality, that seems not enough to rely on, especially if a family is in your future.


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    If you have a million you would get about 40K plus 10-15 in OAS and CPP (caveats with that). 55K a year is pretty decent to live on if you're living paycheck to pay check.

    To get to a million you don't really need to do extreme savings. I'm more less on track to hit a million at 65 and all I have to do is save $450 a month until then. That's not too much of a burden. Although saving is still less fun than spending!

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    If it's heavy on the dividends, then the 40K per year will feel more like 50 or 55K per year due to preferential taxation on dividends. Plus over the long term, dividends generally grow at a rate similar to inflation.

    A lot of people raise normal families on incomes of 50K a year, so it's certainly doable.
    If the house was paid off (no rent, just upkeep and taxes), then i could see it being a decent life.

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    Hi:

    My area is reputed to be the poorest in Ontario except for the misery found on reservations. Likely half or more residents would be delighted to get their incomes up to $40K.

    Is it possible? Sure. Many going to choose to permanently live on that much if they have the means to obtain more? Not likely many takers.

    Hboy54

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    One million is pretty modest and doesn't leave a buffer for problems that life is great at creating. Still, I think my wife and I could easily live on it.

    For someone who has averaged 8~10% returns over the last 20 years, as many investors have, one million dollars will provide a lot more comfort and adventure.

    I agree with Tygrus. $1M is too little for an index investor to live on for 30 years. Index investors should be thinking about $1.5M of today's money as a bare minimum, unless they have a plan that involves extreme frugality. Moving to Mexico, for example, would enable a couple to easily live off $1M or even less.

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    Quote Originally Posted by TomB16 View Post
    One million is pretty modest and doesn't leave a buffer for problems that life is great at creating. Still, I think my wife and I could easily live on it.

    For someone who has averaged 8~10% returns over the last 20 years, as many investors have, one million dollars will provide a lot more comfort and adventure.

    I agree with Tygrus. $1M is too little for an index investor to live on for 30 years. Index investors should be thinking about $1.5M of today's money as a bare minimum, unless they have a plan that involves extreme frugality. Moving to Mexico, for example, would enable a couple to easily live off $1M or even less.
    ^ This is credulous and has no basis is reality.

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    Can easily be done. If you track expenses and live even modestly frugal its not that hard. Most of the people that track their expenses are within a couple thousand each year, so not much fluctuation. I find most people only dwell on the negative what ifs, and not the positive. What if the stock market crashes? What if a major expense comes up? Ya well, you're not working anymore. What if you discover a passion project that ends up generating money? The people that are retiring in their late 30's are motivated individuals. They are not gonna sit around all day. Its too easy to make money.

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    Quote Originally Posted by tygrus View Post
    I see more and more of these news stories about people who have got to a million either by extreme saving, maybe a house sale etc., then they quit work in their late 30s and say they are going to live on $40k per yr passive income forever. While am sure it can be done, $40k would be about the amount to rent or pay a mortgage, eat, utilities, bit of entertainment and thats about it afterwards, no account for inflation etc.

    While I am all for frugality, that seems not enough to rely on, especially if a family is in your future.
    I agree . Even with grown up kids, 1M is not enough for comfortable living. It will be enough for food, utilities, property tax etc,. but not enough if you want to travel around the world.
    I'd estimate that we need at least 1.7-2M for comfortable living from dividends/interest

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    Quote Originally Posted by tygrus View Post
    I see more and more of these news stories about people who have got to a million either by extreme saving, maybe a house sale etc., then they quit work in their late 30s and say they are going to live on $40k per yr passive income forever. While am sure it can be done, $40k would be about the amount to rent or pay a mortgage, eat, utilities, bit of entertainment and thats about it afterwards, no account for inflation etc.

    While I am all for frugality, that seems not enough to rely on, especially if a family is in your future.
    Whether or not it's enough depends on how much you'll be spending For my lifestyle, I think I would need 1.5 M in today's dollars to retire. You may find this simulator useful:
    https://www.portfoliovisualizer.com/...rlo-simulation

    For example, enter 1 M capital, fixed annual $35,000 withdrawals, with inflation adjustment, boost it to 50 year simulation. Enter 50/50 US stock and bond exposure. The results show probability of success for the 50 years at over 90% with this balanced exposure. So yeah, maybe 1M is enough to retire with 35k + inflation withdrawals.

    Assuming you only need 35k

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    Well first it sounds like you are only talking about the case where the person in question has sold any property they have and are solely living off of the million dollars and have to afford rent within that. Because if the person has a fully paid off home, it can make a clearly big difference to the monthly costs.

    Second you have to remember many in Canada don't make that much to begin with. If a person makes $30/hour which is considered quite a good income, that is $60K/year. Out of that they are going to pay CPP/EI & Income taxes. On top of that they save a few thousand per year to get to their million of savings in the first place. The amount they were living off of, isn't that far different from the $40k/year to begin with. And that is not taking into account they may now have a paid off home, they may have been paying for children who are now out of the house, and they may be reducing their commute expenses.

    I'm not great at the whole frugal living thing personally, I like to enjoy some of the finer things in life, particularly travel. I would struggle to live off of $40K/year. But it is hardly a ridiculous figure.


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