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this post was submitted on 19 Mar 2024
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I have no idea why you're being down voted. You're absolutely right. You can't live on back interest from $1M, so you have to invest it, and while some years you'll make more than 10% average invested in the stock market, over 10 years you'll average 8% because some years you'll not only make no returns but you'll lose some of your investment. Which means if you're living off those returns, some years you'll have to eat into those investments, slowly eating down the money you have making money for you. You're paying taxes on those returns, and if you're living off them, they're considered short term investments and you pay a higher tax rate - because you pay taxes on returns on your investments.
Rich people get richer because they have other income and can leave the money and the returns untouched; they aren't living on the returns until they have far more money invested than $1M.
People down-voting you are morons.
(US tax info) Investments are taxed as long term (the lower tax rate) if you hold them for at least a year. Meaning, after the very first year, there is no reason to every pay the higher short term capital gain rates. A solid strategy is to invest in index funds and hold them for decades. If you aren't retired, put the dividends back into more index funds. The long term trends earn you (conservatively) 8% per year average.
The capital gains which you are, supposedly, drawing off of to live on (this was the original premise) is short term capital gains. The amounts you draw in your loss years are, yes, long term, and taxed at a lower rate, but that's the hole in the boat causing your revenue stream to sink - the bigger problem is that what you draw from ROI is taxed at the higher rate.
You don't get taxed on losses, or on loss years, whatever that means tax-wise. You get taxed on gains, period, which is the increase over your basis. Less than a year held is short-term, more than a year is long.
Yep, people acting like it's plausible for someone to retire and live the rest of their life renting a room, at the same income as they got fresh out of college.
Plus they're citing studys aimed at 35-40 years life expectancy, for someone retiring in their 20s, maybe early 30s.
And in one breath will decry the inflation calculations being cited by the government to show we have a "healthy" economy. And in the next, try to pretend cost of living isn't sky rocketing and someone can live the rest of their long life on 40k/yr.
That's lemmy for you, though. No point fighting the tide.
Edit - also, I'm sure those studies probably included some amount of social security helping out, which you're not getting if you retire in your 20s.
Actually, looking at the down votes for your comments, I think you're being stalked. Someone's got it in for you.
Rofl, they're welcome to it. I guess everyone needs a hobby
I think they just mostly don't understand economics, taxes, or have spent any time thinking about these things. Which isn't surprising, because why waste time thinking about it when it's increasingly unlikely to happen to you? Not understanding it is one thing, but thinking and then voting with your hormones is another.