| Well, I'm just some guy on the internet. You really have no idea what I think is important in life, so withhold your judgement. You're probably right that I overestimated the amount. Since frugal investing isn't my goal in life, $5M was a made up figure. What I'm saying is that the number is higher than it might seem. It depends on how aggressive you are with your financial planning. Remember, this is the rest of your life you're planning for. Are you just going to get lattes and travel until you're dead, or do you want to raise a family? Do you want your children to go to good schools? Do your projects require capital investment to be successful? Do you want to be an angel investor? Are you interested in philanthropy? Counting on 6% interest in perpetuity is reasonable, but is probably more aggressive than I'd be willing to go. What happens if the stock market takes a dive? It's not out of the realm of possibility that your net worth could be cut by 30-40%. That means that your interest income would be cut by the same amount. Also, once you're out of the industry, it's hard to just come back and get another job. The software industry is pretty strong right now, but will it be in 10 or 20 years? Will you still have the skills you need to compete, after years of working on whatever you want to work on? Let's say your planning figure is 4% instead of 6%. Although $1M is a lot of money, if you're talking about living off the interest, each $1M yields $40K gross a year at 4%. After 20% in capital gains taxes, it's $32K. If you have to pay AMT (which you will, if you're an American making money off of investments), expect an effective tax rate closer to 30%. This means that you can expect a net yield of $28K in interest per $1M of capital. Also, remember, if you're spending every cent of interest that your investments earn, they will never compound, and you will be at the mercy of inflation (about 2%) and your risk exposure will be dramatically higher. You should try to plan to have net income that you can reinvest. $5M gives you $200K gross or $140K net. That's a very handsome income, but if you want money to reinvest and you want to keep a conservative risk profile, it's not Bugatti-Riviera money. If you're willing to burn down your initial capital, it's a lot easier, but then you have to consider your risk -- and whether you're interested in leaving an inheritance. Regardless of the actual amount you're talking about saving, my point is that it's probably more money than it seems like, and it takes a tremendous amount of time to save it working 9-5. |