this post was submitted on 05 Dec 2024
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We can put a number on the difference between "rich" and "filthy rich". It's about $10M.
I say this with regard to the Trinity Study, which backtested a retirement portfolio to see how long it would take for a given withdrawal rate (and adjusting for inflation each year) to fail. It went all the way back to 1925, which means it would have seen boom and bust, high inflation and low. What it comes out saying is that if you withdrawal 2.5% per year of a balanced portfolio, you can live on that indefinitely.
2.5% of $10M is $250k. That's enough to live very comfortably anywhere you want. Yes, even Manhattan and San Fransisco--lookup median household income for those areas and you'll see that $250k is far above it. Also, you can live basically anywhere if you do this, so maybe don't live in a high cost of living area. There's plenty of nice places to live that are cheaper. That said, if something is keeping you there, you can do it and still live pretty well.
So that's the limit. Anything above that is just hoarding wealth.
Thank you for coming to my TED talk.