this post was submitted on 26 Nov 2023
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If you're only going to live another 10 or 20 years but you have $1M stashed... do you take the $1M now and buy a fancy house? Or do you keep that $1M going for the... checks math ... few tens of thousands of dollars it'll earn in yearly dividends? Meanwhile your daughter needs a new hair-do, your son is living in your basement again, and your wife... well she's your wife. And she wants that new car that you promised you'd get her when you retire.
I guess it's back to the grind instead.
First: Don't take financial advice from randos on the internet. Second: What you said is not a person who is financially ready to retire. It's a number, not an age, as they say. You should not be retiring with $1M solely in stocks. That's bad planning (and too low of a number these days). You need multiple millions spread out over stocks, bonds, your residence, and retirement accounts like 401Ks and IRAs. A million dollars is a number we need to have a conversation about in this country, because everyone wants to hate on millionaires. Want to know what a million dollars is? $430k house that you bought when it was $250k. ~$270k in retirement savings, each, for 2 people. 2 paid off 10 year old cars. How rich does that sound? They're technically millionaires with their assets. Not so rich when you put it like that.
No, you don't buy a fancy house when you are retiring, that's when you downsize so you don't have a huge tax/utilities overhead, a big yard to take care of, and a huge house to maintain that you may have a hard time getting around in as you age. Your daughter is an adult, she needs to get her shit together. Son needs to pay a share of all utilities and whatever other expenses he's costing if he's not disabled. Wife needs to be on board with the finances or everyone in this scenario is a dumbass.
If you have a straight million dollars invested and earning 5% you'll make $50k a year to cover all your bills. $50K someplace really cheap to live (which probably won't be desirable or near qualty services like hospitals as you age) will get you by with no frills. 5% is conservative, a lot of optimists choose higher numbers or historic averages, but this is when you hae no job and are getting old, you need to be very conservative with estimates. $1.5M in straight interest bearing accounts at 5% gets you $75k, a much more reasonable number with a paid off house in a decent area. Got house payments still? Might want to grab that WalMart greeter job to keep that expense at bay. $2.0M will let you live a nice lifestyle, fly to visit the grandkids once in a while, have a small bass boat or whatever to go fish in you spare time, and live in a pretty nice place.
These are my numbers. There are boing to be plenty of people with different opinions and targets, but I thing $2.0M+ is a safer number that will still cover you even if the market rolls back on you for a while.
Tell the girl to pay for her own haircut, get her a salon gift card for her birthday. Tell the son to get a job at Starbucks.
Just a conversation, man :)
I didn't even know someone could borrow against securities. Sounds like I need to have a discussion with my finance guy...
... speaking of finance guys, I should find one.
Sure, let's talk about that.
People who hate on millionaires are making arguments a million hours too late (for many of the reasons you stated). The rage these days is to hate on billionaires.
Nah I think if you took a short holiday stay camping you might think of a good middle ground. People are often not as short sighted as you would expect them to be, otherwise society would not have become as gloriously complex and full of unsustainable systems as today
Borrow against the value of the securities, obviously, like people with actual money do.
Sometimes it's so obvious that only poors use the internet.
Yeah, borrow against the value of the securities!
Who will pay the debt when I die? My children via the estate? My children via the bank's increasingly higher fees? My children via taxpayer-funded loan "forgiveness"? Sounds like a Bernie Madoff scheme to me. Best keep my money under the mattress.
Your estate, via the value of the securities at sale, whose value will have increased in the intervening time. What do you think is the downside, here?
You're trying to tell me that borrowing against securities solves the problem. But it only moves the problem.
If I borrow against the securities, I get cash. I use that cash. I now have zero cash (again). Then I die a horribly quiet death with megabucks owed for loans against the securities. The estate does not have cash to pay back those loans. You're saying those securities would be sold... for more profit than what I borrowed against? Then it sounds like I didn't borrow against their full value. And if I did borrow against their full value, then the loan cannot be paid back because the cash is spent.
Yes, it moves the problem until after you're dead, and it moves the problem into the future when the value of your securities will have substantially grown, thereby reducing the real cost of your house. Both of those things are good!
You have zero cash plus a property asset. The value of that asset will grow as well. Both the asset and your securities are, in fact, growing in value at an interest rate that's greater than the interest you're paying on the loan.
So you're getting free money. It doesn't come from nowhere, of course; it comes from the future people who buy your securities. They essentially paid you in the past to buy a house, and they'll be paid to have done so by people who need to enter the securities market later on (by buying securities.)
Well okay I did ask about buying a fancy house so I think it's a reasonable assumption.
But I want to change the argument ~~move the goalpost~~. Let's suppose I bought a fancy house and the housing market bubble finally burst... and that the house is now worth 1/3 of what I bought it for. That loss of value caused a massive heart attack and definitely caused death.
Or let's say I spent the money on hookers and blow. Might as well go out with a bang, after all.
Now all of that value truly is gone. Sucks to be my kids I guess. But at least I had a fun time, right?
Why do you think it sucks to be your kids? They inherit a free fancy house and any of your securities that weren't sold to pay the note.
I mean, it sucks for them that their cool dad is dead, but maybe they take comfort in the fact that you went out doing what you loved (raw dog nutting into bitches.)