000dollars where to retire/live?
02-11-2017, 05:49 AM
Quote: (02-11-2017 02:26 AM)samsamsam Wrote:
I know I am bumping an old thread, but another thread mentioned something about 1k/month and had me thinking.
What would you need in capital to make 1k a month? How would it be invested? Just curious a bit of mental masturbation tonight.
300k at 4%, maybe dividend stocks. Not sure where yields are on company bonds, not sure if Uncle sam is paying anything close.
RE is a mixed bag. Have had my share of experiences. Even with the best planning and reserves.
samsamsam a lot of it depends on personal factors.
1. Where are you investing? In North America you can probably have a higher draw than if you invested heavily in equities in other developed countries.
2. Do you have a future inheritance? A not small percentage of the population will probably receive substantial inheritances at some point in their lives.
3. How long does the money need to last really? If it lasts 20 years is that enough? I mean in 20 years you'd have a ton of time to get something going business wise.
4. What do you invest in? If your invested heavily in North American equities the amount you can pull from it is higher than someone invested in something more modest like GICs.
I ran a few different calculations for myself on
http://www.firecalc.com/
I removed the 3.0% inflation rate and made it 0.0%. Yes, I realize inflation does exist. But I'd expect any additional source of income via remote work or business would more than cover this.
I figured out my time frame. (In my case I need to make my money last 20 years. Good chance less than that. No I'm not going to die in 20 years likely but external factors make it the amount of time I have to plan for.)
I figured out my portfolio and plugged it in. (100% equities) Yes I'll keep a minor amount of cash on hand. Right now I'm about 98% equities / reits and 2% cash.
I then plugged in various numbers.
My results were that with 1 million dollars I could spend 70,000 a year (Consistent no inflation increases in my spending for 20 years.) - There is a 92.9% my money would survive 20 years and the average after those is $2,149,781.00
Keep in mind that my odds would actually be likely better than that because during recessionary times I could easily curb spending. I wouldn't also let it dwindle to below a certain threshold. In my case probably 800k.
If I want to be even safer... $60,000 a year takes me to 96.8% and $50,000 a year to 98.4% with an average end portfolio of $3,388,496
With your numbers
I'm not sure about your personal factors but I'm going to assume you need it to last 20 years as well.
Using the same factors I plugged in as my calculations (100% equities, 0% inflation, 20 years)
$170,000 - 92.9% chance with an average at the end of $359,269.00
$190,000 - 96.8% chance with an average end amount of $488,975.00
$210,000 - 98.4% chance with an average at the end of $618,681.00
$265,000 - 99.2% chance with an average at the end of $975,371.00
$300,000 - 100.0% chance with an average at the end of $1,202,356.00
How much risk you are willing to take on will be a major driving factor. Keep in mind that you need a huge amount more money on a percentage basis to go from 98.4% to a 100% chance. The reason being in the shitty case you retired the year the great depression or some other once in a lifetime event occurred your portfolio would be smoked. Assuming you did retire in that time and that did happen, you are still able bodied though and probably wouldn't go fuck it, I'll just keep spending. You'd probably take on some work and let your portfolio grow again.
This calculation is based on historic values. Obviously something could go wrong but for me I'm happy with about a 97% chance of success.
In my case in order to go from 96.8% with $60,000 spending up to 100% my portfolio would have to go from $1,000,000.00 to $1,500,000.00. That is a somewhat ridiculous $ difference in order to get 3.2% better odds.
I'd rather make some changes during recessions to make it work then worry about saving hundreds of thousands more to get to 100%.