For so many on here that is not too much money, but for me and my bg, I feel more fortunate than I ever could have dreamed of being.
I like my job, but it’s stressful. My dream is to use this nest egg to make investments that will grow the capital and allow me to live off of it.
Am I jumping the gun? Is $1M not enough? I’m sure I could get way more money if I endure more years of my job, but I so want a break. What are the chances of taking $1M and investing so that I don’t have to work anymore?
First crucial advice: don’t take financial advice off the internet from a group mostly made up of people who have never had a million dollars or more to invest. Ask people who can show you they’ve got millions more than you and have had them for years through ups and downs..
Second: there are a gazillion factors that goes into making solid investing advice; what’s your current living situation, what’s your 5 year outlook, 10 year outlook, ambitions in life (wanna retire soon or you’re planning to work and just have this as a long term nest egg), what’s your appetite for risk, do you need the money in the next 10 years (at all!), if you invested in something and markets suddenly crashes and your invest was suddenly worth 500k, what would you do, hang on and ride it out or sell? .. and on and on.
What matters is simple long term low cost investments, and then not touching shit no matter what happens. Hell, just buy cheapest sp500 index etf (vanguard or ishares or similar) and hang on for 20 years and you’ll be in extremely good shape.
I'd also recommend looking up the "Trinity Study" which gives the guidance of a 3-4% "safe withdrawal rate" - eg, if you should be able to retire if you can keep your cost of living under $40K - there's a lot of bikeshedding about the exact number and various strategies you can use to minimize risk during downturns. Personally, I'd make sure your fixed living expenses are <3% of your net investible so you have some flexibility.
A while back I wrote a short guide for a friend that lays out my personal financial perspective in a bit more detail: https://www.notion.so/lhl/Basic-Financial-Literacy-Guide-386...
Before making any rash decisions, I'd make sure you get your finances sorted (cash buffer, asset allocation sorted, comfort with market volatility, etc), but also think about what you want to do after quitting your current job. One thing that seems to happen a lot is that people quit their job but really haven't thought about what they want to do afterwards. Taking some time off/a sabbatical isn't a bad way to try to figure that out.
If you're in tech and you don't like your current job btw, just find a new one (or better yet, learn to de-stress at your current job - stress is as much a state of mind as extrinsic factors). Good luck!
Also - this is just an observation of mine: Retirement, especially if you're not honing your skills or keeping busy with learning, can be absolutely a killer on your acumen.
I've seen very skilled people enter early retirement, only to quit their profession all-together, instead just focusing on doing...nothing. Or rather, nothing very productive. After a couple of years they just seem more dull, intellectually speaking. Unless you have an iron will and very self-driven, it can be hard to motivate yourself to do something at the same level as when you're employed, or there's lots of risk involved.
It's really no problem if you're in your sixties, and will likely never work again - but retiring at a very young age, there's lots of risk and uncertainty involved. Doesn't mater how well you plan, you could get forced back into employment.
So with that said - I wouldn't retire entirely. Rather, become more selective on the work you take, work part-time on projects. Try to become highly competent in some specialized skill, just to keep yourself up to date and motivated.
As for money:
- Move somewhere cheap - Invest enough that you'll go in plus after all expenses - Live frugally. Lifestyle creep is real, and can obliterate retirement savings.
Of course, investments are inherently risky - but speak to some professional about this.
> I like my job, but it’s stressful.
> Am I jumping the gun?
I think so. I'd work on reducing stress on the job. If there are specific causes, a decent manager should be able to help. If that doesn't work, try something else! If you've worked in tech for 8 years, you're pretty hireable, so there are lots of other opportunities. Part-time work is also an option.
It's also not the best time to retire like that. Interest rates are historically low, stock prices are nominally high, the way covid plays out is up in the air, and the impact of monetary and fiscal policy on the value of the dollar isn't clear.
I spent three years variously traveling, working low-wage jobs, taking classes, spending about 10K/yr (which was less than what I was making on my investments). I'm back in software now and maybe a bit behind my peers who stayed in, but happy I did what I did.
I anticipate most people who "retire" in their 30's end up coming back to work at some point. Not for money necessarily, but because we find ourselves missing the feeling of being productive.
https://www.cycleblaze.com/profile/nicroets/
The best way to make your money grow over the long term is a diversified equity portfolio of which a low cost index tracking fund should be your first choice.
If you want real value for your retirement savings, you should live abroad: South Asians countries don't have a lot of exports, making their currencies weak.
I think the conclusion you will come to is that it would be good to move to a LCoL location, keep your job or somehow stay in the industry but in a more flexible manner where you work far less and make a bit of living money so you don’t eat into your nest egg very much.
Also, word to the wise: inflation is unpredictable and current government estimates are likely massively underestimated for things that actually matter to you - healthcare, housing, etc. So be careful with the standard 4% withdrawal, equity market returns, and inflation expectations. Garbage in, garbage out!
The easy way: Consider $ARKK, $VTI, the ray dalio all weather portfolio, or the Harry Browne permanent portfolio. Use portfoliobacktester.com to analyze your investment choices.
Here is a reading resource for you to consider https://training.kalzumeus.com/newsletters/archive/investing...
He talks heavily about target date funds. Personally I don’t invest in TDFs because ETFs like ARKK and VTI give much higher long-term returns but for the highly risk adverse, they can be perfect.
If you have any questions, even if they’re newbie, feel free to ask!
I have a large family that is quite young. Six kids under the age of 15.
My annual expenses of $100k is definitely for a lifestyle that is nicer than we need. Most of that is on a big mortgage.
I’m surprised at how many people have joined in on this discussion. Thank you!
You can live comfortably in SE Asia on $1000/mo, with access to good healthcare, gigabit Internet, a nice apartment, etc. I think it’s crazy to spend your money in the US.
I do recommend immediately investing that money though. Sitting in a bank account does nothing for you.
0. Debt is a killer. Pay yours off.
1. Live below your means
2. Look up the 4% rule - can you live happily on 4% ($40k) per year? If not, you may need to save some more.
3. Implement a strategy to leverage the 4% rule. I usually try to avoid investment fees and invest directly in exchange traded funds. To learn more about ETF investing, read The Simple Path to Wealth.
4. Try to get a part-time, less stressful job. That way there is more room for error in your calculations. If you employ DRIP investing, your savings compound even effortlessly this way as you don’t withdraw as much.
There's also a series of books called "The Tightwad Gazette" with a similar theme of learning to spend less.
Successfully retiring from a tech job is highly likely to be equal parts investing well and learning to live on less. One or the other won't solve it.
Best of luck.
$1m invested correctly will net you $40k/yr, before taxes, in perpetual income. So you’ll need more than $2.5m to live off at your expected annual expenses of $100k.
I don't think it's enough in your case. A good chunk of that money is from your house which you no longer have. Once you buy another (or rent) those will be big drains on your cash. So you really don't have $1 million free and clear to retire on.
It sounds like you are still young, only working 8 years. Early 30's? Unless you move to a low cost area and live very frugally, $1 million might not last into old age.
Being a "millionaire" isn't what it used to be. It's a lot of money to be sure, but you are not rich. It may grant a lifetime of frugal retired living, not rich retired living.
For example, you could take a couple years to try to build a one-man startup. Working on building an MVP that would resolve a niche problem? You will be less stressed because you would know that in the worst case you can always go back to a comfy engineering job. With 1M$ you already did better than 99% of the people your age.
Not high.
I'm going to guess, based on the fact that you have 8 years in the tech industry, that you are probably in your late 20s or early 30s. Given modern life expectancy, that means you could be alive for at least 60 more years.
In order to make 1 million dollars last that long you are going to need to take on significant investment risk. "Normal" investment risk, e.g. from index funds, is not going to grow the money enough -- if you withdraw enough every year to live on, the money will run out. When it runs out, you will probably have been out of the job market for decades, and therefore unemployable.
If you are living on a fixed income, predictability of expenses is key. Home ownership is one way to control your expenses -- get a fixed-rate mortgage and your monthly cost of living will be fairly predictable. Property tax and utility costs might fluctuate, but in most places the mortgage will be the largest cost, and you can lock that in at a known monthly amount. However, you just sold your house. If you are planning to rent, you won't have the predictability that you need in order to plan for future expenses. If you are planning to buy again, that $1 million is going to shrink by the amount that you pay for your next home.
You probably can't retire on $1 million. But you can take some time off, like a sabbatical. If you aren't happy in your work, you can look for another job, and having that money will let you coast for a while until you find it.
You can follow one of two stock-based strategies:
1. Invest 100% in an S&P500 index fund, returning 8%/year [1] and growing to $11M in 30 years [2], minus withdrawals.
2. Invest 100% in bonds, or a high yield savings account, yielding 0.6%/year [3] and growing to $1.2M in 30 years [2], minus withdrawals.
You want to do as much of (1) as possible, while doing (2) as little as possible in order to pay for things (mortgage, rent, food, kids, etc.). You can't rely on (1) for day to day expenses, since stock returns are super variable (recessions, depressions are inevitable over time).
To balance the two, you can think of it as: consider retirement when MIN(1, 2) > expenses. The exact mix of 1 and 2 depends on your personal risk tolerance.
EDIT: Numbers for (2) were off, as suggested by multiple people in the comments. Updated.
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[1] https://www.investopedia.com/ask/answers/042415/what-average...
[2] Calculate this with an online interest calculator (being sure to re-invest earnings), or remember the rule of 7 (your stocks will double in value every seven years).
[3] https://www.bankrate.com/banking/savings/best-high-yield-int...
Tbh, $1mil isn't enough to retire with at an early age. It's certainly a lot of money, but depending on your lifestyle, it won't exactly cut it til the end. $5 mil at 20 would be a "set for life" number for me factoring in I'd live another 60 years/720 mos. That's factoring in for inflation. This is why you need to tie up money in investments. You can be pretty risk averse too. But just as long as it's not sitting in a bank account.
Think about investing money in real estate. With a million dollars you could buy an apartment building live in one of the units and manage the others. Over time you will have enough money to retire. The one plus in this type of investing is that you have a lot of control over how successful your investment will be.
You'll need to educate yourself on the intricacies of apartment building rentals but the success is very likely. Also, Real Estate is a long term investment so once you get involved expect to have your money tied up for many years.
You did the hard part of saving the money now it's time to move on to the next step. Good luck!
Mutual funds on average the last couple years have returns of 13-14%, if that keeps up You could probably grow you million and draw enough to live off.
If the world goes into a depression, cash will be king, deflation will kick in and prices will drop. So your million will go a lot further.
If things cool off a bit and go back to a historical marketplace of 6% to 8% ROI, I think You have a way to go yet if You really want to not work at all. Of course if You are planning on checking out in the next 20 years You probably have enough.
It is a neat feeling when You see all that money in the bank though isn't it?
How old are you? Where do you live? What are expenses and costs where you live? Do you have other sources of income?
You should hire a financial advisor or planner versed in these matters. More than anything they are behavioral coaches who will tell you what you can and can't do.
You should build an annuity calculator in a spreadsheet and add conservative growth assumptions and agressive spending assumptions where you may have unexpected medical expenses for example.
On the other side if you moved to tech from somewhere else and you are actually older, the numbers start to become more reasonable.
You also said you recently sold a house, but what is your living situation now? What do you want it to be? Having $1M in the bank doesn't mean much if next year you need to turn around and buy another house for $1M
Diversity is good. You don't want to put all your eggs in one basket, and risk it all.
While I did invest most of it, raising means is only half the job. The other half is lowering needs. This is already how I managed to save most of my pay each month, but the older I get, the more extreme I take it. Not only does it ensure my stash will last as long as it needs, but I acquire lot of new skills on the way (by learning how to build rather than buying). Oh, and I don't have a family, it probably helps a lot.
In my current situation I could do it with less than half of what you have. But I'd personally get bored. Good luck with the retirement.
What's the most efficient rental properties that generate highest percentage of return after recurring expenses?
The reason I like real estate is that because it's something tangible, real and physical (compare to stocks, cryptos, papers and government promises) and can provides excellent inflation hedge as well as real place to live.
And $1M can afford to invest into high quality, waterfront properties that can be carrying many benefits for years to come.
Also, if your current work situation is carving at your self-esteem or general life satisfaction then you might not have any other choice than to get out before crash landing, and then that money in the bank will give at least give you some time to evaluate your options.
But, I would only suggest this if you have a clear plan for what you’re going to do when you retire. Write novels? Work on open source? Become a world-famous painter? The world is at your fingertips, but if you don’t have a plan, you’ll be bored of retirement within 2 years. If you don’t have that yet, I suggest keeping your job for another year while you plan you escape.
If all else fail, you still have the land to sell. You can’t print land. It will always be in demand.
Buy productive land you can steward. One acre of fertile land with water is much better than 500 acres of scenic acreage.
Where can you find that in America? I have a rough rule. Follow the Amish. Can’t go wrong.
(This is not investment advice. Just my thoughts.)
Then re-evaluate.
A lot of people think they want to retire when in reality they want a break.
You can easily live on 50k/year if you don't have a family. That's 20 years if you don't make another penny so you really don't need to do anything. If you don't spontaneously find a way to make money in the next 20 years that you enjoy, something has gone terribly wrong :)
Dividend + buyback yield is around 4% on s&p 500. So you could reasonably safely take out 4% / year (assuming you dividend reinvest).
Spending is the real issue. If you can get your spending down you could actually pull it off.
There are parts of Florida where 3 bedroom existing homes (i.e. not new) are $100,000, but monthly rent for that same house is $1,000+ per month.
Based on discounted cash flow, you can determine the value of any revenue stream. In some parts of the country, you'll find homes are undervalued compared to rents.
Stocks are good, but they're not good for steady withdrawals. For example, during a bear market your withdrawals are very costly.
To retire, you need predictable income streams, and rental property is one of the best.
Plus, it's easy for a regular person to leverage money for real estate. For example, with $1 million, you can buy $3 million worth of property with 33% down -- not counting transaction fees, though).
33% down should give you immediate profits from most of your properties.
$3 million could get you as many as 30 condos/homes in the right areas.
If monthly profit on each of those 30 condos/homes can average $200 per month, that's $6,000 per month right there.
You might still want to continue working for a few years to give you capital to deal with hiccups and allow some time for those mortgages to pay down further.
In a nutshell, rental property is one of the faster ways to generate income without working.
The other, simpler way is to move to a country like the Philippines.
Also most advice here is going to be wrong or not applicable to your specific situation.
$1m won't go far in some places.
Wait until it's 2 or 3m, then live frugally. There is no clear indication on the future value of the dollar or other currencies for that matter.
Save and spend as little as possible. If you don't have a kids and wife, don't spend on useless things. You don't have any responsibilities so just be happy.
Then why ask this question here? Proceed at once to Bogleheads.org, and prosper.
- How much per year do you want in your pocket? - Where do you want to live? (think climate, cost of living) - What will you do with your time? (take a year or two off, you may get bored) - How much will your retirement activities cost?
You get the idea.
Also consider part time remote work. If you're skilled I'm sure you can find a company that you can put in 10 hours per week at and it doesn't even have to be programming.
Rent and pay 6-12 months in advance, try to get a discount.
Give yourself a 1 year budget and make it on the low end.
Everytime Bitcoin doubles take out 10% (Rake Method).
Wait one year and re-evaluate.