Re:How I got wealthy without working too hard
by FpUser on Thursday November 18, 2021 @05:17PM
(#29271348)
>"We have a hundred years of investment data in the United States that says this isn’t true."
An average over extended period of time. Maybe my fried is lucky and it's only been 3-4 years of such return for him
Re:How I got wealthy without working too hard
by icedchai on Thursday November 18, 2021 @07:28PM
(#29272391)
The last 4 years have been outliers, and lucky for everyone (except those folks who sold at the bottom and moved to bonds in 2020.)
Re:How I got wealthy without working too hard
by nightski on Thursday November 18, 2021 @01:19PM
(#29268639)
On average. But if you are lucky enough to invest your first few years with extraordinary returns (say the past two years with 40%+ in index funds) that can greatly skew the outcome due to compounding.
We have a hundred years of investment data in the United States that says this isn’t true.
A 10% withdrawal rate will lead to portfolio failure 50% of the time after about 14 years. You can calculate using historical data here: https://engaging-data.com/will-money-last-retire-early/
There are mountains of research showing the safe withdrawal rate for retirement is around 3.5-4%. A million dollars gets you $40K per year at most, not $100K per year.
Anyone expecting to live off of $100K/year with only $1m invested is in trouble in about a decade, even if they could get a mythical reliable 10% return.
Note that due to inflation and downturns, you cannot withdraw an amount equal to the interest you earn. You have to withdraw significantly less than the interest you accumulate.