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Old 01-06-2010, 12:53 AM   #1
halperin
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If you had 1M dollars to live off forever could it be done and how?

Lets say you have you have no other assets but are just given 1 million dollars to get through life on. The only other money you can make is off investments of that million. Is this doable if you had to start at age 25? What would be the best strategy? I think 5% a year in a CD is 50k a year might be doable but that would probably be cutting it close with inflation. Maybe just put it all on black?
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Old 01-06-2010, 12:57 AM   #2
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Re: If you had 1M dollars to live off forever could it be done and how?

live in a 3rd world country.
if your single you can live comfortably with $500-$1k per month here in the Philippines.
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Old 01-06-2010, 01:01 AM   #3
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Re: If you had 1M dollars to live off forever could it be done and how?

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live in a 3rd world country.
if your single you can live comfortably with $500-$1k per month here in the Philippines.
Easily doable in the U.S. with even less than $500k. Not a life of luxury but more than comfortable.

EDIT: $500k = ~$20,000 inflation adjusted to live off of. $1M invested earns you as much as the average/median job (maybe a tad low) for the rest of your life. Not bad for being able to sit on your ass all day. But then again, most people who would sit on their ass would just end up blowing it anyways.

Last edited by Shoe; 01-06-2010 at 01:07 AM.
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Old 01-06-2010, 01:02 AM   #4
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Re: If you had 1M dollars to live off forever could it be done and how?

cd's aren't exactly paying 5% right now.
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Old 01-06-2010, 01:06 AM   #5
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Re: If you had 1M dollars to live off forever could it be done and how?

ginnie maes are yielding reasonably.
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Old 01-06-2010, 01:34 AM   #6
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Re: If you had 1M dollars to live off forever could it be done and how?

Wouldnt your best bet be to invest in munincipal bonds since they are tax free?
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Old 01-06-2010, 02:09 AM   #7
halperin
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Re: If you had 1M dollars to live off forever could it be done and how?

I was thinking real estate. Take 200k or w/e for personal expenses to start living on then the other 800k into various properties that yield positive cash flow. With enough properties you can probably live off the cash flows as income for the year while paying down equity and eventually selling off properties for gains.
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Old 01-06-2010, 02:18 AM   #8
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Re: If you had 1M dollars to live off forever could it be done and how?

1. Go to malaysia
2. Buy like 4 houses for 500k there- can be easily done
3. Live off the rent
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Old 01-06-2010, 02:58 AM   #9
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Re: If you had 1M dollars to live off forever could it be done and how?

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Wouldnt your best bet be to invest in munincipal bonds since they are tax free?
AMT, everybody's favorite tax.
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Old 01-06-2010, 03:02 AM   #10
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Re: If you had 1M dollars to live off forever could it be done and how?

By a 4 unit for <$700k, live in 1 and rent the other 3. Don't tell the renters you own the place.

Their rent should pay you a decent income, plus you will have $300k+ to invest/drawdown.
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Old 01-06-2010, 05:41 AM   #11
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Re: If you had 1M dollars to live off forever could it be done and how?

buy a house somewhere in the us that is cheap to live. invest the remaining 800k or so. live cheap. still not enough? get a roommate. still not enough? become a chain smoker.

a lot of people in their calculations often assume you can only live off the interest. but its not like you need to have the 1 million when you die. of course when you draw down an amount greater than the interest you earn your principle is reduced exponentially per year. also you don't know exactly when you die but if you are 95 you can probably start dipping into that nest egg.

it may be best to have a strategy where you consume less than the amount you earn in interest per year at first and slowly ramp up your consumption as you approach death.
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Old 01-06-2010, 06:58 AM   #12
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Re: If you had 1M dollars to live off forever could it be done and how?

Like a year or two we debated this on the HU forum LC thread.

While it depends a lot on who you are and where you live, assuming you are 20 we concluded that you needed like $5M pre-tax to live on $50k/year in 2008 dollars (meaning it will increase with inflation so that your effective salary is always what 50k is today).

So that's good enough for some, not enough for others. I think we can all agree that unless you live in a 3rd world country $1M pre or post tax is just not enough to never have to work again unless you are North of 35.
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Old 01-06-2010, 08:20 AM   #13
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Re: If you had 1M dollars to live off forever could it be done and how?

The hardest part for most people would probably be the discipline involved; disregarding the fact that you have a clear million in the bank and refraining from adjusting your standard of living upwards to meet it.

You could easily nickel and dime that million to death.

For me, it would be trivially easy. My end-goal is buying a rural home and watching the crops grow, so I'd just do that, lay in for a sick internet connection and be happy forever off easy-to-obtain, modest returns that paid for my living expenses. For people who wanted to spend their lives globetrotting and whoring, it might not happen via the fixed income thrown off from 1mm.
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Old 01-06-2010, 09:15 AM   #14
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Re: If you had 1M dollars to live off forever could it be done and how?

Without moving to a third world country it would be difficult but doable. You'd basically be living a $30-40k a year lifestyle which does not seem bad given people live on less except that the lack of employment would cause issues. One of the side effects of employment is that it consumes about three thousand hours that would now be empty and they require filling. Unless you are a hermit or think that sitting at home watching TV is a worthwhile activity filling those hours is going to greatly increase your burn rate.
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Old 01-06-2010, 10:15 AM   #15
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Re: If you had 1M dollars to live off forever could it be done and how?

Is not being allowed to work a mandatory part of the hypothetical? Because if so, yeah, that's going to present problems.

I'd still do precisely what I do now, only bootstrap all the earnings back into it rather than deduct any for life/living expenses. If I were *forced* to stop all productivity in exchange for a clear million, I'd probably not want that million.
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Old 01-06-2010, 10:59 AM   #16
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Re: If you had 1M dollars to live off forever could it be done and how?

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Originally Posted by Halukcan View Post
1. Go to malaysia
2. Buy like 4 houses for 500k there- can be easily done
3. Live off the rent
That's exactly what I would do. With 4 decent houses in good areas you could probably earn 6-9k RM per month which is enough for a pretty good living in KL. With poker on the side still you could live like a rich guy. A rich white guy in KL = the nuts.
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Old 01-06-2010, 12:53 PM   #17
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Re: If you had 1M dollars to live off forever could it be done and how?

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$500k = ~$20,000 inflation adjusted to live off of. $1M invested earns you as much as the average/median job (maybe a tad low) for the rest of your life. Not bad for being able to sit on your ass all day. But then again, most people who would sit on their ass would just end up blowing it anyways.
If I was going to do that, I would spend my free time trying to work on something that would allow me to potentially make an absolute killing without any downside. For example, maybe you could put a lot of energy into developing a business idea, but not be willing to put up much of your own money on it. You'd have so much free time to think about it, develop it, and pitch it to others. Essentially just be willing to put in tons of time, but not any money. Basically, you'd have huge upside but very little downside since you're pretty much guaranteed to earn $40K a year regardless. They key though, is it'd have to be something you're actually interested in, otherwise what's the point as you might as well just sit on your ass.

The idea of moving to a 3rd world country is also good.
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Old 01-06-2010, 12:59 PM   #18
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Re: If you had 1M dollars to live off forever could it be done and how?

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Without moving to a third world country it would be difficult but doable. You'd basically be living a $30-40k a year lifestyle which does not seem bad given people live on less except that the lack of employment would cause issues. One of the side effects of employment is that it consumes about three thousand hours that would now be empty and they require filling. Unless you are a hermit or think that sitting at home watching TV is a worthwhile activity filling those hours is going to greatly increase your burn rate.
Agreed. Keeping yourself busy without a job is not that easy. A lot of college students forget this, because when they skip class it's easy to find people to hang out with and stuff to do (since their friends are college students and they have tons of free time). When all your peers start working 9-5, it's not so easy to find people to interact with during the day, so unless you're a hermit, it'd really start to rub you the wrong way.
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Old 01-06-2010, 01:07 PM   #19
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Re: If you had 1M dollars to live off forever could it be done and how?

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Originally Posted by MasterLJ View Post
Like a year or two we debated this on the HU forum LC thread.

While it depends a lot on who you are and where you live, assuming you are 20 we concluded that you needed like $5M pre-tax to live on $50k/year in 2008 dollars (meaning it will increase with inflation so that your effective salary is always what 50k is today).

So that's good enough for some, not enough for others. I think we can all agree that unless you live in a 3rd world country $1M pre or post tax is just not enough to never have to work again unless you are North of 35.
If you can't live comfortably off of income from 3 rental properties + investing/drawing down $300k, with no mortgage/rental expense of your own, you got some issues.

And what are you going to do all day? Stare at the walls? I would imagine any sane person would want to preoccupy him/her self with something that has a $ return. This is not necessary to live comfortably, however.

$5M? Who needs to live like a sheik?
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Old 01-06-2010, 01:23 PM   #20
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Re: If you had 1M dollars to live off forever could it be done and how?

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AMT, everybody's favorite tax.
Are you sure AMT covers muni bonds? I thought the reason why you did not have to pay tax on them is so that you are encouraged to help the government out and make your city/state/country better.
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Old 01-06-2010, 01:33 PM   #21
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Re: If you had 1M dollars to live off forever could it be done and how?

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Agreed. Keeping yourself busy without a job is not that easy. A lot of college students forget this, because when they skip class it's easy to find people to hang out with and stuff to do (since their friends are college students and they have tons of free time). When all your peers start working 9-5, it's not so easy to find people to interact with during the day, so unless you're a hermit, it'd really start to rub you the wrong way.
Not really. I haven't worked since university and I have no issues entertaining myself and finding people to spend time with during the day. The issue is the costs. As soon as you leave the house you are spending money and the problem with these save money and retire at 35 programs is that they don't factor in that your entertainment budget si going to skyrocket.
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Old 01-06-2010, 01:39 PM   #22
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Re: If you had 1M dollars to live off forever could it be done and how?

Even something like purchasing books/movies/etc has costs. You could always pirate them online, but there is a certain level of joy I'd like have. Owning books and not furiously avoiding pron banners to find esoteric films rate rather highly in that regard.

Money tends to disappear at an ever increasing rate. I know someone who retired in their late 20s on ~700k. I'm unsure how he does it. But it can't be that great.
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Old 01-06-2010, 01:40 PM   #23
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Re: If you had 1M dollars to live off forever could it be done and how?

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Are you sure AMT covers muni bonds? I thought the reason why you did not have to pay tax on them is so that you are encouraged to help the government out and make your city/state/country better.
Some are exempt. But their rates reflect such.

Here is a link for more info.
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Old 01-06-2010, 01:42 PM   #24
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Re: If you had 1M dollars to live off forever could it be done and how?

Amusing how people cannot imagine others do not enjoy themselves with extra time, reduced stress, the opportunity to do basically whatever they want, educate themselves, etc.

Basically, time = money. The less you time you have, the less money you have.
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Old 01-06-2010, 01:49 PM   #25
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Re: If you had 1M dollars to live off forever could it be done and how?

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Not really. I haven't worked since university and I have no issues entertaining myself and finding people to spend time with during the day.
How do you do it?

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The issue is the costs. As soon as you leave the house you are spending money and the problem with these save money and retire at 35 programs is that they don't factor in that your entertainment budget si going to skyrocket.
Good points, I didn't consider the entertainment costs.

Quote:
Amusing how people cannot imagine others do not enjoy themselves with extra time, reduced stress, the opportunity to do basically whatever they want, educate themselves, etc.
Yeah, I forgot about educating yourself (which is something I love doing in my spare time). However, I'd also like to be able to apply some of my knowledge/skills for something that pays, I get enjoyment out of it but maybe that's just me.
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