The people saying that Biggie Smalls planned correctly with 1.5 million are completely correct. If your plan is to die at 25 then retirement planning becomes much easier.

Most of the erroneous calculations in this thread are occurring because people are assuming a fixed date that they will live to. Planning to live to 85 and spending your principle down to zero becomes a problem if you are still alive.

It's the unknowing that is the problem. The use of averages for inflation (particularly in times of the Fed holding rates artificially low on a historical basis), tax rates (When do we raise taxes to begin paying off the debt?) and rising medical costs, etc., are dangerously short sided when it comes to long term planning.

Cotton, you are talking about "untold" millions without understanding the time value of money. To retire today at 25 and be "set for life" is very difficult to achieve. I've been comfortably retired for more than eleven years and I'm not really sure how much I will need twenty years from today, there are hundreds of variables to account for. (And again, I'm not talking about merely surviving, set to me means having the "good"life.)

The model assumes a diversified portfolio of stocks and bonds which has historically beat inflation by 3-4%

people can become accustomed to all sorts of pointless luxuries and genuinely need them to be as happy as an african villager when he gets served a bowl of gruel.

2m is more than 90% of the worlds population will ever see. i'd still WANT more, and if the opportunity to make more doing something i didn't find too objectionable was on the table i'd do it, but if you can't make life work on that kind of a budget (60k/y @ 3% conservatively... and that's assuming you're leaving the principle completely in tact, which you obviously wouldnt as you get older) lack of money probably isn't your biggest problem.

I was trying to ad a little humor to the thread, although his calculation probably does reflect what he truly felt he needed in his life. His lyrics are some of the most raw, honest, ghetto poetry and story telling to ever exist, fluid, flowing pure lyrical genius all day long.

Did Biggie plan on dying? I wasn't aware of this revelation? I think his assessment of $1.5 was founded on the assumption that his life had improved and he would live much longer than 24+ years (it wasn't 25 btw) .

If I got $50k passive income, I'd have no problem not working. Is this "set for life"? No. And I think this is where we all differ.

Being able to gain 3% on average over a 50 to 60 year span does not mean you can withdraw 3% yearly while still having principle at the end with a lower than 1% risk of ruin.

People seem to be forgetting that due to the fact that you don't have a job anymore, you now suddenly have an abundance of free time where you're going to be spending more money than you used to. For the average 9-5 working guy, you're now going to be filling those free hours consuming more goods and services. Now all of a sudden your yearly wage is not going to be enough to sustain your current costs of living.

I think where we differ is how much 50k inflation adjusted from now to when you die with lower than 1% risk of ruin actually amounts to in lump sum format.

I was joking as well and I do like his music. (Which is somewhat odd, considering) But, with his lifestyle and tastes, one and a half million wouldn't have lasted him long at all. I've seen some of those young guys partying in LA and they're dropping $30,000 in one night, lol.

Don't discount the fact that enterprising hustlers can make money in their free time as a hobby. Getting away from a bland 9-5 may open up people's eyes to the possibilities of running a business or some other more fulfilling endeavor that will also lead to income and fun.

This might interest some of you.

http://www.pbs.org/newshour/business...is-enough.html

No doubt, I lived in South Beach for years and the disgusting excess can be sickening, despite the natural beauty of the place. I moved to a much poorer country and can identify with the people and their plight much more the Sofi neighborhood.

You are right though, in the lyric of his that I quoted he is already talking about buying a 6 series Mercedes and a house on the beach in Miami, where beachfront property is generally over a million just for the lot, lol.

"Enough to cop a six, buy the house on the beach"

What improvement? He was pushing 400 lbs at 24 and already relying on a cane from an auto accident. I'd set the o/u on his life expectancy at 53, and that's only taking into consideration death from natural causes.

I need a decent amount of cushion with 60+ more years that I need to not fudge up. Would be interesting to see what percentage of the people taking ~2M end up busto before 32.

I think to be "set" you need 10mil+

Lets assume you want to have 150K a year. Which is a nice lifestyle, but not enough to go crazy. You won't be able to have a crazy home or super fancy cars. But you can drive a respectable car and live in a nice 1 bedroom in Manhattan. You will also spend $20K a year on travel.

This is a Present value problem

Variables
R = rate of return you will earn (lets assume a conservative portfolio that will make 3%, we can argue about whether it should be 2% or 5% or 8%, but I think 3% is fairly conservative)
T = time (lets assume 75 years) you die when you get to 97
FV = Future value (we will assume 0 as you will not leave an inheritance)
Pmt = $150,000 (assume tax-free)

Then we solve for the Present value and we get roughly $4.5 million

I think its reasonable assuming you are strict and never spend more than $150K a year and can earn 3% on your portfolio.

Not post-tax. I think that a fairly low risk real (i.e. after inflation) rate of return is around 1.5% after taxes (depends on where you live, of course). If you want a $100k/year in 2013 lifestyle forever, you'll need roughly $7M.

Depends on how awful that person is with money. Give me 2milly and I'm probably going to keep working and buy a bunch of ****. Give me 2 milly and tell me I can't ever work again and i'm going to be alot more frugal with that money. I think 2 mil is right around the number I would need.

Ah, but don't forget, if you're doing those right, there isn't a long run. Sort of like Leaving Las Vegas, only with cocaine.

For those people who are worrying about running out of money, don't forget, you control that too. Just make sure to take the last $500 or so down to the gun shop.

Seriously, though, thanks for the back-and-forth and ideas ITT. I actually fit the OP's profile (no kids, no wife) pretty well, although I'm on the back end of my career instead of just starting out.

Even with my really simple lifestyle, I still probably need about $2k/month, even after I have the mortgage paid off. Utilities, food, some spending money, etc. Also the stuff you don't think about on a monthly basis, since it doesn't come up that often like property taxes, auto insurance, et cetera.

So, I'm working toward a plan where I can get an income stream close to that amount. I'm hoping to (semi)retire early.

I have a neighbor who retired at 57-ish a while back. He said it was great for six weeks or so, but then you have to find something to keep busy.

So, I'm thinking some kind of part-time deal to keep busy and pull in some spending money, but get out of the stress-filled workplace. Hoping for doing that by 55, but that's probably a bit aggressive.

10 mill+ if you arent putting your money to work and just spending it

I've read through the thread and I still don't understand at all what is meant by "set for life."

Some people seem to be talking about the minimum amount to be able to live an ok life if you weren't allowed to ever earn any more money (except for interest on what you already have?). Others seem to be talking about the minimum amount where you would choose to stop working. Which one is it supposed to be?

And a third group is talking about what it would take to live a life of extreme luxury forever.

When you make drastic jumps in wealth there is a relatively short transitional period of novelty and excitement that dissipates as you grow more accustomed to your new surroundings and lifestyle, wealth is relative.

Even on a molecular level, your brain adapts to the excitement of new stimuli eventually by toning down your neurochemical reaction from that stimuli, usually by up or down regulating the genetic expression of neurochemical receptors, if I am not mistaken.

I live in the SF Bay area, but only because my job is here. If I didn't need a job, I'd be out of here in the blink of an eye. By coincidence the place I want to live has a much lower cost of living than the Bay area, even lower than Vegas (I assume the impetus for this thread is Farber's big cash). Basically, $50k a year would provide me with a very comfortable living, with disposable income for hobbies, and occasional vacations.

To generate the $50k, I have a friend that's a hedge fund manager. He can return 10% annually in his sleep. He's been averaging considerably more for the 7 year life of his fund. I've been in a chat room with him every day for the last 15 years, I know how he trades, and I have no concerns of him busting. So conservatively, I'd be set with $500k. If he performs to his average, and I have plenty of reason to believe he would, I would have money left over and above the $50k every year to add to my principal. Which adds to the income year after year. To provide plenty of cushion for inflation and possible bad years, a million bucks would make me feel very comfortable about being set for life.

I wouldn't have an Aston or Ferrari (I don't like Astons anyway, and yes, I've driven one), but after a good year or two I would splurge on a nice BMW or Porsche.

You're wrong. Traditional retirement planning states that you can withdraw around 4% of your portfolio every year if you want a high chance of not going broke.

Now, also take into consideration the incredibly poor bond market, and you should probably be looking at closer to 3%. (Also, retirement looks at 30 years, a 20 year could be looking at 70-80 years, but the concept is generally the same).

http://www.firecalc.com/

Here are 2 simulations. They assume $100k annual spending, and 70 years left to live off of it.

2mil: For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 44 cycles failed, for a success rate of 39.7%.

3mil: For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 1 cycles failed, for a success rate of 98.6%.

So you can see that 2 million would lead you to bankruptcy with that spending level the majority of the time, but 3 million would just about get you there.

In no way would 3 million give you a "a ton more spending".

Another example:

3million/120k per year/70 years: Odds of not going broke are now only 78%.