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View Poll Results: How much money would you need to feel rich ?
500,000 2 1.55%
1,000,000 16 12.40%
2,000,000 29 22.48%
5,000,000 48 37.21%
10,000,000 34 26.36%
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Re: Feeling rich ?
Old 02-11-2007, 01:46 AM   #61
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Re: Feeling rich ?

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Originally Posted by Want2retire
Wahoo, I'm rich, rich, rich, I tell you, RICH!!!!
What are you doing friday night? :
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Re: Feeling rich ?
Old 02-11-2007, 07:42 AM   #62
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Re: Feeling rich ?

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Originally Posted by kjpliny
I was thinking not touching the principle unless necessary. Laddered CDs should do it...just the inflation thing ya gotta worry about. Then again, even adjusting the withdrawal for inflation, it would still take some time to draw down $5M to zero. A sum that large leaves lots of wiggle room for adjusting the withdrawal amount as things change.
Say you have it all in 6% CDs. $300,000 in interest. At 2006 rates you'll pay $75K in federal income tax - so $225K left over.

But you are doing NOTHING to grow the principal or help it keep up with inflation! Say the portfolio has to last 50 years? You can pull a little out of it each year to make up for inflation - but then you are earning interest on less and less principal.

[Darn it - I can't get FIRECALC to run - it brings up the donation page and won't go to the next step. Is there a bug?]

I just know that there is a limited term portfolio survival for a 6% inflation-adjusted withdrawal from an all fixed income portfolio. Firecalc could tell you exactly how long a portfolio would last.

If you think that you can really ignore inflation - well, after 24 years with your spending power cut in half, you might decide you were wrong.

Generally, people who wish to live off a "no-risk" fixed income portfolio are advised to only withdraw 3%! I.e. - have 33x your needs in the portfolio! If you really want "no-risk" investments, then the trick is to have a large enough portfolio such that you can withdraw only 3% and still have plenty left over for spending after paying taxes.

Interest income is the least tax efficient investment income there is.

Audrey
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Re: Feeling rich ?
Old 02-11-2007, 08:01 AM   #63
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Re: Feeling rich ?

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Originally Posted by CRABBY JERRY
What are you doing friday night? :
Going out with Frank, a dear man who wants to retire early too, and who is perfectly happy with my insistance on keeping our finances completely separate.

I'm sure you are joking, though, as I was! $185K isn't very much for someone with ER on their minds. At an SWR of 3.5%, that would only give me about $540/mo BEFORE taxes, assuming that I am renting so none of it is tied up in a house. Luckily, my net worth is greater than that (otherwise, I'd be cultivating a taste for dogfood).
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Re: Feeling rich ?
Old 02-11-2007, 10:15 AM   #64
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Re: Feeling rich ?

Quote:
Originally Posted by audreyh1
Say you have it all in 6% CDs. $300,000 in interest. At 2006 rates you'll pay $75K in federal income tax - so $225K left over.

But you are doing NOTHING to grow the principal or help it keep up with inflation! Say the portfolio has to last 50 years? You can pull a little out of it each year to make up for inflation - but then you are earning interest on less and less principal.

[Darn it - I can't get FIRECALC to run - it brings up the donation page and won't go to the next step. Is there a bug?]

I just know that there is a limited term portfolio survival for a 6% inflation-adjusted withdrawal from an all fixed income portfolio....
If you are earning 6% on your $5M investments, then the most you should withdraw is about 3%. So you can live safely on $150K to $175K (including taxes) over 50 years.
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Re: Feeling rich ?
Old 02-11-2007, 10:27 AM   #65
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Re: Feeling rich ?

Quote:
Originally Posted by Want2retire
Going out with Frank
So when you have your financial discussions, have you ever said "Lets be frank and earnest. You be frank, i'll be earnest." ?
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Re: Feeling rich ?
Old 02-11-2007, 10:31 AM   #66
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Re: Feeling rich ?

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Originally Posted by Cute Fuzzy Bunny
So when you have your financial discussions, have you ever said "Lets be frank and earnest. You be frank, i'll be earnest." ?
ROFL!! Frank is frank, it's true! I like that about him. I'm not Ernest, though... I'm (name edited out).

We don't compete in most areas, but I think we inspire each other with a friendly "size of nestegg" competition. So far, I'm winning but he's catching up fast so I'd better buckle down.
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Re: Feeling rich ?
Old 02-11-2007, 10:41 AM   #67
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Re: Feeling rich ?

Sorry. Thats one of my dads favorite jokes. Usually followed in short order by "Whats a honeymoon salad? Lettuce alone!" and frequently after that one "What does the mayonnaise say to the refrigerator? Close the door...I'm dressing!".

Sometimes when he's feeling frisky, its "How do you do the hula? Put on a grass skirt and rotate your crops!"

So its probably this sort of indoctrination during my youth that caused these problems...

The really sad part is that my son is due much the same treatment
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Re: Feeling rich ?
Old 02-11-2007, 11:51 AM   #68
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Re: Feeling rich ?

Quote:
Originally Posted by retire@40
If you are earning 6% on your $5M investments, then the most you should withdraw is about 3%. So you can live safely on $150K to $175K (including taxes) over 50 years.
Right.

Say all that money is in CDs in a taxable account. You withdraw 3% to live on, and return 3% to the portfolio - that's good, you'll keep the principle up with 3% inflation. But still have to pay taxes on the 6% of interest income your CDs earned. That'll be about 75K.

So you withdraw 150K, but 75K of it goes for taxes.

You're left with 75K spending money - not so hot for a $5M portfolio. Because you're paying 1.5% of your portfolio every year in taxes. Ouch! Half your withdrawal is going to income taxes!

Of course this wouldn't happen if the CDs were all in an IRA or 401K. Then you would only be taxed on your 3% withdrawal. Probably about $26K in federal income taxes - about $124K spending money - much better.

You can create a much more tax efficient portfolio than that and probably keep the tax rate to 0.5% or less of your total portfolio if you're wiling to hold at least 50% in equities and thus take a large portion of your distributions in qualified dividends and capital gains. And guess what - you can withdraw 4% instead of 3%. But, egad, that requires you to live with volatility!

Assuming you withdraw 4% and 0.5% goes to pay taxes, you are left with $175K after tax spending on a $5M portfolio - much better!

Interestingly the IRA/401K case has a higher tax rate for this scenario. You withdraw $200K, but $40K goes to income taxes because you're at the higher tax rates again. $160K spending.

Audrey
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Re: Feeling rich ?
Old 02-11-2007, 02:33 PM   #69
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Re: Feeling rich ?

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Originally Posted by Texas Proud
Your definition of rich would need a few zeros after the numbers listed... I would not think you would be there with less than $100 mill... and even then you would have to be careful if you owned your own jet and 100 ft or 150 ft yacht.. you can burn through money quickly
Yes, if the original question is framed as what will it take to feel that one has joined the ranks of "the rich", some options with more zeros could be in order. It was in that spirit that I offered my prior observations. The etymology of "rich" is associated with nobility, power, priviilege and the associated abundance that comes with the same. For me the idea of "the rich" today still has something of that connotation - a very wealthy and subsequently privileged class. Think "Lifestyles of the Rich and Famous". Not that I have aspirations of joining them, it's just the connotation it carries.

Private jets, for me, would fall under "pathalogical extravagance". Flying first class without a second thought would be more reasonably rich in my book. I guess it's whatever floats your (15 or 150ft) boat.
Quote:
And as others have mentioned... if you were in NY or London, a $10 million penthouse might not seem very big to you... so there is 10% of your money just for a place to live...
Yes, counting oneself among the "rich" in NY or London seems a pricey affair.

On the other hand, if the poll is asking "how much would it take for you to feel you had
more than enough to meet any anticipated needs in your life?", an idea that I'd equate with "financial independence" as opposed to "rich", then the existing scale should suffice for most. But I'm sure there also are many folks in the world of an appreciative nature who could answer that question with a very low number - "rich in spirit" I suppose. That may or may not be what the pollster was after.

Mostly just playing with words.
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Re: Feeling rich ?
Old 02-11-2007, 03:25 PM   #70
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Re: Feeling rich ?

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Originally Posted by stw
Private jets, for me, would fall under "pathalogical extravagance". Flying first class without a second thought would be more reasonably rich in my book. I guess it's whatever floats your (15 or 150ft) boat.Yes, counting oneself among the "rich" in NY or London seems a pricey affair.
As a small hijack of this thread... I saw the broo ha ha over Nancy Pelosi (sp??) asking for a larger plane... seems that a G5 that can hold 12 people and fly 4,000 nm is not big enough.... and she is #3 in the American system..

They were talking about other countries and their envy of America... seems that Tony Blair has to fly commercial to get over here... and so does the Prince of Wales... they even said that one time when he bought the tickets he bought coach tickets hoping to get upgraded!!!!

They talked about the leaders of a number of different countries and nobody has anything approaching the US... much less what Nancy has or is asking for..
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Re: Feeling rich ?
Old 02-11-2007, 03:31 PM   #71
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Re: Feeling rich ?

Quote:
Originally Posted by Texas Proud
As a small hijack of this thread... I saw the broo ha ha over Nancy Pelosi (sp??) asking for a larger plane... seems that a G5 that can hold 12 people and fly 4,000 nm is not big enough.... and she is #3 in the American system..

They were talking about other countries and their envy of America... seems that Tony Blair has to fly commercial to get over here... and so does the Prince of Wales... they even said that one time when he bought the tickets he bought coach tickets hoping to get upgraded!!!!

They talked about the leaders of a number of different countries and nobody has anything approaching the US... much less what Nancy has or is asking for..
Nancy Pelosi did not ask for a bigger plane.
Bill Livingood, the House's sergeant at arms asked for a bigger plane.
http://www.allheadlinenews.com/articles/7006412335
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Re: Feeling rich ?
Old 02-11-2007, 04:29 PM   #72
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Re: Feeling rich ?

I know some folks who are worth >$100M. Now THAT is RICH!

Audrey
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Re: Feeling rich ?
Old 02-11-2007, 04:31 PM   #73
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Re: Feeling rich ?

Quote:
Originally Posted by stw
Private jets, for me, would fall under "pathalogical extravagance". Flying first class without a second thought would be more reasonably rich in my book. I guess it's whatever floats your (15 or 150ft) boat.
Owning a private jet is not very practical. The "super wealthy" I know simply charter one when they wish to travel. Why own when you can rent?

One of the many benefits of chartering a jet (besides the obvious) is that you completely bypass airport security and any hassles with getting to/from the airport. They bring your rental car or limousine directly to the plane!

Audrey
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Re: Feeling rich ?
Old 02-11-2007, 07:43 PM   #74
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Re: Feeling rich ?

Quote:
Originally Posted by Want2retire
Going out with Frank, a dear man who wants to retire early too, and who is perfectly happy with my insistance on keeping our finances completely separate.

I'm sure you are joking, though, as I was! $185K isn't very much for someone with ER on their minds. At an SWR of 3.5%, that would only give me about $540/mo BEFORE taxes, assuming that I am renting so none of it is tied up in a house. Luckily, my net worth is greater than that (otherwise, I'd be cultivating a taste for dogfood).
Of course I was! : Who's this Frank guy anyway?
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Re: Feeling rich ?
Old 02-12-2007, 01:03 AM   #75
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Re: Feeling rich ?

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Originally Posted by audreyh1
Owning a private jet is not very practical. The "super wealthy" I know simply charter one when they wish to travel. Why own when you can rent?

One of the many benefits of chartering a jet (besides the obvious) is that you completely bypass airport security and any hassles with getting to/from the airport. They bring your rental car or limousine directly to the plane!

Audrey
From what I have seen on the TV shows, you still have to go through security if you charter... maybe I will ask someone at work who has flown on our mega corp jet...
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Re: Feeling rich ?
Old 02-12-2007, 01:13 AM   #76
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Re: Feeling rich ?

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Originally Posted by Khan
Nancy Pelosi did not ask for a bigger plane.
Bill Livingood, the House's sergeant at arms asked for a bigger plane.
http://www.allheadlinenews.com/articles/7006412335
Yea right....

I had heard it was a G5 (on one of the Sunday shows...) .... and it can make it across country

Designated C-37A in U.S. Air Force service, the Gulfstream V fulfills worldwide special air missions for high-ranking government and Defense Department officials.

The Gulfstream V (also referred to as the G5) originally flew in 1995, was certified in 1997, and was one of the first "ultra-long range" (~6000 nautical miles) business aircraft. Capable of carrying up to 16 people in standard seating configurations, and able to fly up to 6,500 nautical miles (12,038 km), the GV became the longest range business jet ever made at the time of its introduction.

So, it does NOT seem like the small jet is not capable of making it cross country... of course, maybe it is the G5

http://en.wikipedia.org/wiki/Gulfstream_V

And I did a little digging.... it might have been a GIII... but again.. it can make it over 4,000 miles... so no refueling from what I see...

http://en.wikipedia.org/wiki/C-20_Gulfstream_III

And who knows if this is true or not, but she had asked that it be equiped with a bed...
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Re: Feeling rich ?
Old 02-12-2007, 03:40 AM   #77
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Re: Feeling rich ?

In the 50s there was a TV program where a rich man gave away 1M dollars tax free. This was the accepted goal at that time for being rich. If you just use inflation to project that value from 1955 to today, you get a little under $7M. Adding in the "tax free" feature makes it over $10M. So, by yesterday's standard it takes $10M to be "rich". I'll settle for $5M easily, though. Projecting the $64K Question to today is about half-a-million which was considered quite a prize for the ordinary trivia expert during the same decade.
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Re: Feeling rich ?
Old 02-12-2007, 09:36 AM   #78
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Re: Feeling rich ?

Quote:
Originally Posted by Cute Fuzzy Bunny
So when you have your financial discussions, have you ever said "Lets be frank and earnest. You be frank, i'll be earnest." ?
looks like my mom has a more morbid sense of humour than your dad. her favourite joke is

Q "what did one worm say to the other?"

A "let's make love in dead Earnest.
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Re: Feeling rich ?
Old 02-12-2007, 09:45 AM   #79
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Re: Feeling rich ?

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Originally Posted by Texas Proud
From what I have seen on the TV shows, you still have to go through security if you charter... maybe I will ask someone at work who has flown on our mega corp jet...
I flew a lot of miles on my old mega corps jets. No security to speak of. The pilot came into the room we were hanging out in, checked his manifest against our company ID badges and on the plane we went.

As has been previously mentioned, someone not only gained access to my companys data center for a year with a stolen badge, I wore one with a photocopy of an ass with groucho marx glasses on it for several months. I did not, however, attempt to get on the plane with that one...
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Re: Feeling rich ?
Old 02-12-2007, 09:55 AM   #80
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Re: Feeling rich ?

Quote:
Originally Posted by Texas Proud
Yea right....

I had heard it was a G5 (on one of the Sunday shows...) .... and it can make it across country

Designated C-37A in U.S. Air Force service, the Gulfstream V fulfills worldwide special air missions for high-ranking government and Defense Department officials.

The Gulfstream V (also referred to as the G5) originally flew in 1995, was certified in 1997, and was one of the first "ultra-long range" (~6000 nautical miles) business aircraft. Capable of carrying up to 16 people in standard seating configurations, and able to fly up to 6,500 nautical miles (12,038 km), the GV became the longest range business jet ever made at the time of its introduction.

So, it does NOT seem like the small jet is not capable of making it cross country... of course, maybe it is the G5

http://en.wikipedia.org/wiki/Gulfstream_V

And I did a little digging.... it might have been a GIII... but again.. it can make it over 4,000 miles... so no refueling from what I see...

http://en.wikipedia.org/wiki/C-20_Gulfstream_III

And who knows if this is true or not, but she had asked that it be equiped with a bed...
So he quotes a news source, the White House itself defends Pelosi, but you say, "yeah, right I heard it on a talk show..." :

The people who loathe anyone with a "D" in front of their name on CSPAN will add this story to their bible on why libs are evil ( along with the Clinton killed his aide, it wasn't suicide and all the other stories).

When I was a kid, people got their news from the news, I miss those days. Now it's Rush Limbaugh and O'Rielly and Hannity and Colms and the Drudge Report and Neil Cavouto and that blowhard vapid-head on CNN Nancy Grace. And their method is all the same: Suck up to the viewership "You get it, my loyal viewership, you understand what it's all about!" play the victim, "That dirty commie rag the New York Times had the audacity to point out I couldn't point to Russia on a Map!", and then confidently tell their viewers what their opinion should be about an issue. Notice once everyone has gotten their licks in, and the reports come out that they were wrong, nobody does a top story of "I was wrong, I was an a** for running with a story without the facts!". They just trundle out a new story that fits their world view. Or maybe do an hour of coverage on a pretty white girl that went missing... :P

....[/end rant] Sorry Texas, you weren't the target of most of that, it just set me off.
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