Wealth! How much is enough?

[Farm Boy]

I don't mean living like a hermit. I mean having a reasonable amount of money, minimal expenses and a decent house. My social circle is virtually non-existent and I have a very limited, if any, desire to find new friends. I just don't want to waste time and money into social investments that will likely just wither away.

Everything withers. No implication of your being a hermit intended. 2.5 million is a lot of house. If it makes you happy, cool, if not - that's a lot of house that could be a lot of other things. Skydiving, hobbies like shooting invasive boar from helicopters with AR15s, mountain climbing, an endowed chair for a full professor. You call it.

 

[Patine]

Weren't you the person advocating for the complete overthrowal of the current party system in the US? Thats a pretty unlikely hypothetical too.

I am fully aware. And I know it is just that - an IDEAL and a DREAM, and not at all likely to happen in my lifetime. It may be necessary to have even the remote possibility of the greatest problems in the United States be truly addressed with the chance of any productive solutions, and where anywhere close to real justice be brought to the nation - but I, myself, admit it's immensely unlikely in the foreseeable future.

 

[Aiken_Drumn]

Wealth, assets, income etc.

There is a lot of lifestyle creep. A lone bachelor arguably needs a lot less than a family with three children heading to long university courses.

I have read around and had a curiosity to the FIRE community. That is, Financially Independent, Retire Early. This community suggests gathering wealth until you can live on its interest alone.

I believe for me that value would be between £2-3mil in stock, before you talk actual property to live in etc.

I could live a cheap life, but I want the freedom to go for more if I want to, and not be humbled by quitting the race too early.

 

[Varde]

Enough.

Enough to play in the 'wealth game'.

If you want to live happily under the wealth game, £1,000,000 is enough if you play your cards right. If you want to play in the wealth game, competing for the wealthiest life you can achieve, £5,000,000.

Business and pleasure go hand in hand, but rarely a strike of luck is enough to go far in business.

You're going to need a lot of money, to really exhibit any skill you have.

 

[Harv]

I only read the OP and did not answer the survey question. The post makes me think of a question I am struggling with:

How does wealth transfer from "rich people" to "poor people?"

Using 10M as a working figure, a 3% (dividend) yield gets 300k, which is more than the vast majority of people. So people at that level will continue to accumulate wealth. Somebody earning 300k and saving 10% of that will never catch up.
I have to run now, but wanted to post something before I go. I will think about it and try to post something more well thought out and written.

 

[warpus]

So setting annual income aside and focusing on assets, how much is enough?

For me personally? I would be happy with $2 million in the bank CAD. The annual interest from that should allow me to live out my current lifestyle without having to work. That would free up a lot of time for me to do whatever I want, such as spending more time w/ my hobbies. In theory I should also be able to set aside some of the interest every month and set it aside for splurge buys. But now that I think about it, why not make that $2.5 mill. I'd keep $2M in a fund of some sort that pays out 5-10% every year, and $500k would sit in my chequing account, so I can buy new pants or socks or a car or whatever I need. I'm a bit of a minimalist so I don't really need a lot.

Personally it's really tough to say how much money would be enough. Now that I think about it, I would also want enough money to put my grandmother up in a nicer home than she is in now. I would also love to be able to pay off my mortgage, my parents' mortgage, and my sisters' as well. Aside from that though, and wiping out the whole family's debts, and helping out some friends and other family with some matters.. I would want enough money to be able to travel and fly first class, occasionally staying at nicer hotels. I wouldn't change how I travel that much, but I would probably spice it up a bit here and there. If I could afford to fly first class, I definitely would.

Would I want a yacht though? Probably not. 1. They are expensive to maintain, 2. I don't love being on the water that much 3. It seems only douchebags buy yachts

Socioeconomic inequality is a huge problem in the U.S., but I don't think limiting how much you can accumulate is the way to go. The answer is probably tighter regulations all over the place, higher taxes for the super rich, etc.

 

[Synobun]

How does wealth transfer from "rich people" to "poor people?"

It doesn't. That's the golden lie. The truth of trickle-down economics is that it isn't real. It's just clever phrasing from metaphorical dragons who get to hoard their treasures at an increasingly rapid pace.

 

[AmazonQueen]

I only read the OP and did not answer the survey question. The post makes me think of a question I am struggling with:

How does wealth transfer from "rich people" to "poor people?"

Using 10M as a working figure, a 3% (dividend) yield gets 300k, which is more than the vast majority of people. So people at that level will continue to accumulate wealth. Somebody earning 300k and saving 10% of that will never catch up.
I have to run now, but wanted to post something before I go. I will think about it and try to post something more well thought out and written.

So why would you need that much? Security presumably which if was shared around a bit more wouldn't be such a concern.

 

[Birdjaguar]

@warpus
If you have a pension or SS payments of ~$20,000 a year that is equivalent to $700,000 portfolio paying 3% and you don't have to manage it at all.
For each $500,000 of your own portfolio over that that earns you 5% annually you can add about another $25,000 in income.
With a portfolio of $2 million and some SS benefits, you are somewhere around $120,000 per year pretax at the low end without any reduction is capital.

So why would you need that much? Security presumably which if was shared around a bit more wouldn't be such a concern.

For most people to get by quite comfortably you need far less. Life expectancy is one variable you shouldn't forget.

 

[warpus]

@warpus
If you have a pension or SS payments of ~$20,000 a year that is equivalent to $700,000 portfolio paying 3% and you don't have to manage it at all.
For each $500,000 of your own portfolio over that that earns you 5% annually you can add about another $25,000 in income.
With a portfolio of $2 million and some SS benefits, you are somewhere around $120,000 per year pretax at the low end without any reduction is capital.

I'd be able to get by on a lot less than $120k a year, but if we're allowed to ask for any amount, might as well pad it a bit in case of unexpected expenditures. So $2-3M is an amount I'd consider "enough". That's all in CAD as well

 

[Kyriakos]

Depends on where I live. Here I wouldn't need more than 30K a year (either dollars or euros).
Maybe if sometime any of the properties I partly own (and which don't pay much, or at all) are sold, I won't need to work at all.

 

[warpus]

Do you own a swanky bar somewhere in Greece @Kyriakos? Is it Civ themed or Kafka themed

 

[Birdjaguar]

Maybe if sometime any of the properties I partly own (and which don't pay much, or at all) are sold, I won't need to work at all.

There might be hope. You are young, be patient.

https://greekreporter.com/2021/04/13/greek-real-estate-market-post-pandemic-greece/

 

[Harv]

It doesn't. That's the golden lie. The truth of trickle-down economics is that it isn't real. It's just clever phrasing from metaphorical dragons who get to hoard their treasures at an increasingly rapid pace.

Here is my thought experiment so far:
I assume an investment yield of 10%, however, asset classes vary. It is also a simple number to work with.
3% inflation. 3% dividend. 4% growth. I simplified it on the idea of 7% return after inflation.

10k per year. 40 years. 7% yield. About 2M. So 10M is out of reach for most people. Somebody has to be very lucky investing or build a business to get there.
Also, whatever habits mentioned previously got to 2M do not change when you finally get there. So the person that does get there is unlikely to just quit working and investing.

Going back to the thought experiment and the person with 10M in invested assets living off of 300k, the growth after inflation is 4%. The person saving and investing is making 7%, so there is a point of catching up given enough time. However, we do not have infinite lifespans. This also means that these assets pass down somewhere, whether or not we reproduce. Assuming that we do, then I will work with a reproduction rate of 2%. This corresponds to a doubling (generation) in 35 years.

I am really sorry about having trouble composing a discussion that makes sense. The thoughts I am trying to compose are greater than my capacity to articulate them in the time I have given myself. The big issue is multiple subjects.

So why would you need that much? Security presumably which if was shared around a bit more wouldn't be such a concern.

It is interesting we both assumed the denomination was US dollars. The best response I can think of for you is uncertainty. The $10M I mentioned yields $300k. This pays for health coverage. Now where am I going to live and what am I going to eat?
So one uncertainty is the cost of health coverage, which is rising much faster than inflation. I think housing and rent are also rising much faster than inflation.

Another uncertainty is the (stock) market. The 3% is what I would pay myself if I was told to retire with a bunch of assets. I can also take a reciprocal of my current life expectancy. So in this case, I gave myself 33 years, which is slightly low given my current age. However 3% is a nice round figure to work with. It is possible the next year, the (stock) market goes down 60%, so the $10M portfolio is now worth only $4M, and the $300k in income is now only $120k. If I reduced the numbers by an order of magnitude, $1M becomes $400k and $30k becomes $12k and I go homeless and cold and starve.

I can get around this problem with diversification. However, interest rates are near zero, especially when factoring in inflation. I can get around this by keeping some cash, very similar to the previous sentence. The five-year volatility is much less than the one-year volatility.

I also did not mention real estate.

I sense..... that somebody here will give me a big education on investing and asset classes and diversification.

I still never addressed the OP question.

 

[warpus]

It is interesting we both assumed the denomination was US dollars. The best response I can think of for you is uncertainty. The $10M I mentioned yields $300k. This pays for health coverage.

In theory if you have assets worth $10 million, you could move to a country with universal healthcare and become a citizen there. Ireland might be an option. IIRC that's one European country with a relatively easy citizenship process, assuming you buy real estate there and spend some amount of time there per year. Portugal is similar, but you might have to learn the language as well, I'm not sure.

Do you really need $300k a year for healthcare though? That seems excessive.

 

[Hygro]

Here is my thought experiment so far:
I assume an investment yield of 10%, however, asset classes vary. It is also a simple number to work with.
3% inflation. 3% dividend. 4% growth. I simplified it on the idea of 7% return after inflation.

10k per year. 40 years. 7% yield. About 2M. So 10M is out of reach for most people. Somebody has to be very lucky investing or build a business to get there.
Also, whatever habits mentioned previously got to 2M do not change when you finally get there. So the person that does get there is unlikely to just quit working and investing.

Going back to the thought experiment and the person with 10M in invested assets living off of 300k, the growth after inflation is 4%. The person saving and investing is making 7%, so there is a point of catching up given enough time. However, we do not have infinite lifespans. This also means that these assets pass down somewhere, whether or not we reproduce. Assuming that we do, then I will work with a reproduction rate of 2%. This corresponds to a doubling (generation) in 35 years.

I am really sorry about having trouble composing a discussion that makes sense. The thoughts I am trying to compose are greater than my capacity to articulate them in the time I have given myself. The big issue is multiple subjects.



It is interesting we both assumed the denomination was US dollars. The best response I can think of for you is uncertainty. The $10M I mentioned yields $300k. This pays for health coverage. Now where am I going to live and what am I going to eat?
So one uncertainty is the cost of health coverage, which is rising much faster than inflation. I think housing and rent are also rising much faster than inflation.

Another uncertainty is the (stock) market. The 3% is what I would pay myself if I was told to retire with a bunch of assets. I can also take a reciprocal of my current life expectancy. So in this case, I gave myself 33 years, which is slightly low given my current age. However 3% is a nice round figure to work with. It is possible the next year, the (stock) market goes down 60%, so the $10M portfolio is now worth only $4M, and the $300k in income is now only $120k. If I reduced the numbers by an order of magnitude, $1M becomes $400k and $30k becomes $12k and I go homeless and cold and starve.

I can get around this problem with diversification. However, interest rates are near zero, especially when factoring in inflation. I can get around this by keeping some cash, very similar to the previous sentence. The five-year volatility is much less than the one-year volatility.

I also did not mention real estate.

I sense..... that somebody here will give me a big education on investing and asset classes and diversification.

I still never addressed the OP question.

The rich get richer.

 

[Birdjaguar]

As soon as your income exceeds what you spend annually, you will get richer. If that happens every year, then your wealth grows and compounds if your invest smartly.

@Harv

• $300k for healthcare is a ridiculous number for a person with normal aging illnesses. $20k insurance premiums plus full time nursing home care can be had for under $100k.
• 100% investment in stocks is 100% risky. A 50/50 split with bonds cuts the risk. If you have a $1M balanced portfolio (50/50) and the market goes down 50%, your portfolio would then be valued at $750,000. Only the stock portion loses value.
• In the 1929 crash the market went down 24% in two days. The decline continued slowly for 32 more months for a total decline of ~90%. Folks had over two years to make decisions before the market hit bottom. In 100 years of stock market history every sharp decline has been followed by a return to the previous high and typically goes higher. Market bottoms don't last.
• $2 million can be drained at a rate of $65,000 a year for 30 years without any accounting for return or inflation.
• 

 

[Kyriakos]

There might be hope. You are young, be patient.

https://greekreporter.com/2021/04/13/greek-real-estate-market-post-pandemic-greece/

I doubt it, but hope dies last.