Yes it does. That was my point.
For starters, you're assuming I'd want to live off the investment, instead of continuing to work.
Regardless, I shouldn't have mentioned the arbitrary figure of $100K, which has made it so much easier for people to ignore my point, that many people are comfortable with much less than $10M.
$10M means you don't have to work, even when you can't.
I would still maintain that it is possible to live on much less than $10M, although some may not enjoy the change in lifestyle.
And I could spend 10% of the 1 million on just maxing out my unused pension allowance for the last three years, and probably I should do the same for my sisters.
Okay, fine. You mentioned that you're a student, so I'll assume that means you're 22: if you're a man, that means you have another 55 years. That $100,000 thus works out to an extra $1,818/year for the rest of your life, which is roughly a month's rent or a dozen or two really good meals a year. Is that a nice supplement to your wealth? Sure. Is it enough to make your life significantly better? No, not really.
Ah, but perhaps you're investing it, too. Let's say that you get 6% a year (optimistic), and withdraw 1/55th of the principal + interest each year. So this year you'll get $1,927, next year you'll get $2,006 &c. Is it nice to have that extra money? Sure! Is it going to be life-altering? No, not really.
Your general point is right, but the situation is even worse than you say since you are misinterpreting the 4% rule. It isn’t that you can live “ indefinitely” - it is that using historical returns, you could live about 30 years taking 4% (allowing for increases due to inflation) off an investment before it is zero. People seem to think that taking 4% means you won’t have to touch your capital - that isn’t the case.
>...What we now call the 4% rule comes out of research by financial planner William Bengen in the early 1990s. Essentially, Bengen tested a variety of withdrawal rates on several different allocations of stocks and bonds using inflation data and investment returns going back to 1926. After crunching the numbers, he concluded: "Assuming a minimum requirement of 30 years of portfolio longevity, a first-year withdrawal of 4%, followed by inflation-adjusted withdrawals in subsequent years, should be safe.”
https://money.cnn.com/2018/02/07/retirement/4-percent-rule/i...
Why would you not work doing whatever it is you do as an avocation, or if you like, a hobby or dream job? If it's what you love and what fascinates you, why would that not lead to income across your whole life? Granted, it'd take years to get to the point where it's sustainable, but surely there is tangible value in this?
I do not understand a mindset of 'My only purpose is to amass a pile of wealth so large that I don't spend any of it or do anything else ever, merely use the mechanisms of finance to subsist unproductively off the leakage from my giant pile of wealth, literally forever'.
How is this plan in any way good, ethical or beneficial to either the person or the society they're in? You're going to die having made no use of the hoard you seized, despite having taken it from others who need wealth of their own to survive. Rethink these assumptions.
> You're going to die having made no use of the hoard you seized, despite having taken it from others who need wealth of their own to survive. Rethink these assumptions.
I would encourage you to rethink your assumptions. What you wrote goes completely against how economics actually works.
You are not "seizing" a hoard, and definitely not taking it from others. Unless you are literally a thief, that's just not how things work - you are making it seem like the economy is zero-sum, whereas it absolutely is not.
Also, having a pile of wealth that you don't spend is something that no one actually does - almost everyone invests their money, which means it is put to good use, as an investment - the wealth that someone created out of thin air, is turned into the building blocks for new people to create their own wealth.
I highly recommend you read a little about economics, it's one of the most rewarding and eye-opening things I've ever studied (only as an amateur, I'm not a professional economist or anything.)
Can you suggest some resources?
A good book for getting started, IMO, is Charles Wheelan's "Naked Economics".
The first thing that I read was "Basic Economics" by Thomas Sowell, which I liked a lot and highly recommend - however, keep in mind that Thomas Sowell is very capitalist/right leaning, and the book is quite "biased".
A great textbook, if you really want to get further into economics, is Greg Mankiw's Principles of Economics (almost all undergrad economics textbooks are called "Principles of Economics", for some reason, so you have to search by author.) That's definitely the place to go if you want to have a more sophisticated understanding of economics than you'll just get by reading books.
This shows a pretty big disconnect. And is something no one in their 30s+ would say.
The common rule of thumb is you can live off of an investment at 4% indefinitely(assuming 6% return and 2% inflation). This gives you $4,000 a year. Crappy insurance: $4,200 a year. Crappy 300 sq ft efficiency in cheaper town: $5,400 a year. Cost of owning a car: $5,000 a year(you could skip this expense, but you'll be spending most of it in increased cost of living in area with great public transit. You could also bike but not everyone's knees last forever)
And this doesn't include food/entertainment/travel/internet/phone/medical bills etc.