I have no idea why youβre being down voted. Youβre absolutely right. You canβt live on back interest from $1M, so you have to invest it, and while some years youβll make more than 10% average invested in the stock market, over 10 years youβll average 8% because some years youβll not only make no returns but youβll lose some of your investment. Which means if youβre living off those returns, some years youβll have to eat into those investments, slowly eating down the money you have making money for you. Youβre paying taxes on those returns, and if youβre living off them, theyβre 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 arenβt living on the returns until they have far more money invested than $1M.
People down-voting you are morons.
Youβre paying taxes on those returns, and if youβre living off them, theyβre considered short term investments and you pay a higher tax rate
(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 arenβt 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 thatβs 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.
Yep, people acting like itβs 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 theyβre 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 βhealthyβ economy. And in the next, try to pretend cost of living isnβt sky rocketing and someone can live the rest of their long life on 40k/yr.
Thatβs lemmy for you, though. No point fighting the tide.
Edit - also, Iβm sure those studies probably included some amount of social security helping out, which youβre not getting if you retire in your 20s.
Actually, looking at the down votes for your comments, I think youβre being stalked. Someoneβs got it in for you.
I think they just mostly donβt understand economics, taxes, or have spent any time thinking about these things. Which isnβt surprising, because why waste time thinking about it when itβs increasingly unlikely to happen to you? Not understanding it is one thing, but thinking and then voting with your hormones is another.
