Pick your salary

[Nicholasp27]

this question also divides people into groups of those who will sacrifice long-term gain for short-term gains and those who are willing to sacrifice short-term for long-term rewards

thus why many save hardly any of their income each year, while others will save 10-50% of their income each year

[jschaud]

[ QUOTE ]
I'm stunned at the amount of people who think you could retire in your 20s to a decent standard of living. Some basic questions:

1) What type of inflation adjusted ROI will you be able to achieve?
2) What type of RoR would be acceptable for your retirement? What type of SD do your investments have? If you think you can generate 7-8% ROI after inflation you like have a good chance to busto.
3) College, children, etc. You want to try to manage this while trying to keep a fixed income?


There is no doubt that you'd be able to do this, but to have any decent semblance of life or be able to do much of anything is going to require greater than 1.4mil I'm very stunned at the amt of young people who think that if they found 1.4mil they could just sit around forever. You can easily retire on this if you are comfortable living on <40k forever.

[/ QUOTE ]

I feel fairly comfortable that with that kind of liquid cash I can find 5% post-tax investments. I also feel very comfortable knowing that if i was making 70k a year doing nothing that I would be just fine. I would be struggling in mid-town manhattan, but would be reinvesting a portion of that money every year in smaller cities like atlanta. 70k a year puts you very high up on the US income graph i found.

We must remember that for the last 7 years we have been a very well paid person and we get all the benefits of that. Flawless credit, thus ensuring premium loan rates. Additionally, if we are still young, our health insurance will be far lower than a person in a similar position that is 60. If you can handle not owning a lambo, you will be just fine.

[econophile]

[ QUOTE ]
I'm stunned at the amount of people who think you could retire in your 20s to a decent standard of living. Some basic questions:

1) What type of inflation adjusted ROI will you be able to achieve?
2) What type of RoR would be acceptable for your retirement? What type of SD do your investments have? If you think you can generate 7-8% ROI after inflation you like have a good chance to busto.
3) College, children, etc. You want to try to manage this while trying to keep a fixed income?


There is no doubt that you'd be able to do this, but to have any decent semblance of life or be able to do much of anything is going to require greater than 1.4mil I'm very stunned at the amt of young people who think that if they found 1.4mil they could just sit around forever. You can easily retire on this if you are comfortable living on <40k forever.

[/ QUOTE ]

you seem to be pretty out of touch. do you live in an affluent community like beverly hills? many people go through life never making more than 50k in a year. these people marry, have children and send them to college. they do not lead an extravagent lifestyle, but they can certainly be comfortable.

[Thremp]

econophile,

Yes, they have jobs that happen to easily adjust for inflation which removes 40 years of variance you have to protect from. You still do not address my questions and instead persist with a personal attack. Why?

[ThaSaltCracka]

jesus those first three years would be VERY VERY HARD. If you guys think it would be easy then you have never been broke while not living with your folks. $2500 a year would be absolutely horrid. You would definitely be homeless.

edited to add: the 200k a year would probably be my choice because I don't think I would survive the first two years. Seriously.

[econophile]

[ QUOTE ]
econophile,

Yes, they have jobs that happen to easily adjust for inflation which removes 40 years of variance you have to protect from. You still do not address my questions and instead persist with a personal attack. Why?

[/ QUOTE ]

One simple solution is to take your 1.4m and buy an annuity. You should be able to get an annuity that pays between $60k and $70k the first year and increases with inflation each year for as long as you live. Basically, you let the insurance company take on the inflation risk, while you get a lower expected return than you would investing yourself.

More info for the curious may be found here: Wiki annuity

[dknightx]

i'd probably take the 2500 ... here would be my plan:

1. Get a gym membership for $15 a month (what I am currently paying actually). A 24 hr place is preferred, cause you can use it to shower, get out from the cold/weather, take a nap, kill some time, or whatever.

2. Food shouldn't be TOO much of a concern. We will be getting about $7 a day, and can probably survive by dumpster diving, or spending $1-2 a day. Occasionally sneak into costco for some tasty, hot samples.

3. At about the 7 month mark in the first year, take your savings and purchase a car (I can find a decent car for $800), this will be your new home. Park it in the gym's parking lot (or some other public free 24hr parking lot (like a park and ride), and take naps right after work till about midnight/1AM (if you are worried about cops). Then during the night, just chill at the gym, or do whatever.

4. For the first 7 months, finding shelter will be pretty tough. Probably save up to buy a cheap sleeping bag, and then sleep in people's backyards or toolsheds or whatever. (i'd have to make sure they were on vacation or something). If we can't do something like that, then I would have to pick a warm place, schedule my work hours from 7AM -> 3PM, then right after work, head to the park or beach, and take a 4-5 hour nap in under a shady tree. Then sometime during the night, take another short nap, either at the gym, or in some alley somewhere.

[Thremp]

econophile,

You think you can get an annuity for ~60-80 years like that? GL then.

[Toro]

Anyone who chose the 200K would as early as year 5, when they could have been making 80K, begin to seriously regret their decision and then after year 7 when they could be making 320K think about what could have been for the rest of their lives.

But I am in agreement with those who said this would have to be age dependment. For me, I know that in my early 20's I could have managed to somehow survive on the $2500, $5000, $10,000 for the first 3 years.

I remember when I was about 24 we were at summer camp at Fort Drum for the National Guard and decided to go Saratoga races for the middle weekend. We rented a car and all brought our sleeping bags since we knew it was doubtful we could find a hotel room in August in Saratoga Springs.

We couldn't so no big deal, we drove to the track, parked in one of those grass field parking lots and slept under the stars. Next morning, got up, snuck in and washed up in the rest rooms and watched the morning work outs. It was fun not a hardship. Doubt if I would feel the same way at age 34.

[scotchnrocks]

Does the magnitude of inflation and the magnitude of the ROI on 1.4 mil matter?

If the ROI is a meager 3% in the first year ($42k) and it's not beating 4% inflation, it is still beating the magnitude of the inflation since the actual increase of the cost of electricity, gas, health insurance, etc. doesn't increase that much in magnitude.

Also if you own a home outright, which I assume you would if you had $1.4 mil, your required annual income has decreased dramatically.