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ianhawes

>What I walk away with: $3,700,000 in cash

>practically speaking, never need to work again

Yikes, does someone want to tell him?

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A $3.7M windfall is enough for most Americans to never work again.

Assuming he keeps ~$3M after taxes and can earn a conservative return of 4%/yr in investments, that's $120k/yr just from his investments. Many Americans live on far less. Also, he lives in Alabama, where cost of living is quite low.

It’s highly likely he gets to keep all or most of the $3.7M under the Qualified Small Business Stock (QSBS) tax exemption.

Exactly. He will only pay state tax in Alabama on the capital gain. I think it's in the range of 3% to 4%, but I might be mistaken.

For reference, in California it is ~10%.

Let’s say you work for a respectable $80k/year (more than enough to live comfortably in most of the world). If you get the job at 25 and retire at 65, that’s $3.2m.

So yes, he can retire for life.

> Yikes, does someone want to tell him?

Someone should tell you that $85k/yr NET is top earnings in some parts of the country.

Average household income in my state is $50k/yr.

In most places of the world 20% of that are enough never needing to work again.

I'm with OP - $3.7M seems like a lot, but it really isn't enough to retire on. I assume he'll need to pay taxes on that, a 20% long-term capital gains tax. Brings it down to about $3M. Being generous and giving him 3.5% return (real return) a year in fixed income, that's only $105,000 a year in income, which he'll need to pay taxes on as well. He'll net out around $85k a year.

$85k a year is surely enough to live off without working?

I'm in the UK, if I could earn a guaranteed £40k a year without working I'd be set for life and would have a pretty great life! That's would give me close to twice the national average salary.

£80k a year would put you into the tiny percent of top earners.

I agree it is plenty but remembering it is a household income I suspect, so yes is a very nice life, without being silly.

Don’t forget in America he needs to spend $12k a year on health care. And that’s like a minimum, last time I checked Obamacare, those kind of plans had $8-10k max out of pocket too.

So even with health insurance deducted, that still works out, with current exchange rates, at £63k, which is quite a high income - 95th percentile in the UK income distribution after tax.

Even if he didn't earn any interest and never earned another penny, at an $85k/yr burn, that $3M will last 35 years. Seems alright?

What happens when he lives 36 years?

> Even if he didn't earn any interest

Hopefully he puts some of it in interest-earning stuff prior to that point.

That was more a rhetorical question. The real issue is you can’t predict how long you’ll live so it’s not correct to say “draw it all down evenly over X years”

It's probably a mistake to assume he'll never earn another penny in income outside this payment.

That’s what retirement means and it’s what he indicated in the story.

That's not necessarily what retirement means, and it's not what he indicated in the story.

> I don’t have any specific plans for what I’ll be doing next, other than not doing any kind of software for a while. I’m itching to create more tangible things, especially art and music, so I’ll likely put a lot of effort in to exploring those things more.

Nothing in there says the art/music can't make any money, nor does he rule out software again in the future. As he notes, "I absolutely love starting things..."

Retirement frequently means something different for a 30-something CEO who just exited ("I don't have to work") versus a 70-something year old ("I'm done working").

$85k budget a year without touching the $3m principal. I'd say he'd have a great chance of never needing to work again if he wishes, especially if he already has some retirement savings and/or assets such as housing.

I dont know how to tell you this, but 99% of the world population (and I am pretty sure at least 85-90% of Americans) WONT retire with anything even close to $3.7 MM.

He’s NOT 85% of Americans, he’s a tech entrepreneur who is capable of building and selling businesses with 7 figure exits. Personally I wouldn’t want to retire on only $85k if I had that kind of potential. At that income you still need to budget for food and travel - I’d prefer a life where I can eat out when I want, hop a plane with my wife and go somewhere whenever I want. Retirement is about freedom!

The federal reserve and treasury publish these tables. You’re actually very close to the cuttofs IIRC so kudos to you on good intuition.

He lives in Alabama

what, that's it's not enough? Sure if you plan on living in the Bay Area for the rest of your life but in most other places it's definitely true.

Invest in stocks that pay dividends. Get a 3-4% annual return. Move to Spain/Greece/Portugal. Enjoy life.

You seem pretty sure of yourself— you must know his existing savings and cost of living?

Tell him what?

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