I've never understood why most millionaires don't use the money to do interesting things at all
Most Millionaires do all kinds of interesting things, it’s just that those things are in the same realm that ordinary people can. Eg they go to Aspen and ski, which lots of non-millionaires do, but unlike the plebes they stay in a super high-end hotel or condo, or just buy a vacation home there if they visit often enough.
Being a millionaire, < 10M net worth, is not actually that rare or exceptional.
In any case, a millionaire can technically have wealth spanning 3 orders of magnitude; no way this could be a homogeneous category regarding what's a "millionaire" is capable of financially.
Few hundred millionaires are passionate enough about something to spend their entire fortune on it.
Though it didn't break that down further by age. I suspect a good number of those are retirees with significant savings (and paid-off real estate) to be spent down over the next few decades.
Our funds have to last for the rest of our lives. There is no way we could suddenly use our 'wealth' to fund a 'millionaire' project.
If you earn no interest and expect to spend $6000 a month forever without ever gaining any passive money accumulation on your principal, you'd go for 27 years before you'd spent your two million.
There are also many things you can do with your life if you have $2M (or indeed $1M) that aren't available to pensioners. I'll grant you, they've got some pretty sweet pensions: that seems unusual, but hey, collective bargaining gets better terms for workers and that certainly qualifies.
They're not poor unless they're catastrophically bad at money management, but you are indeed a little out of touch: the idea of living off the interest on your wealth is pretty insane and unattainable to any remotely normal person.
Also I'm not sure why you say someone with $2M can achieve something that someone with $6000 pension a month can't...you can definitely borrow against your pension and grab a large lump sump...
The elephant in the room is that say you have $2MM in the bank and are living off that interest, or are a retired union/public service worker and then you look at how long it took at how long it took to achieve your financial success.
If you save 1/2 of salary in VTI (say 100k-150k range) coming out of a bachelors degree and work for 10-15 years at one of the large tech companies you will have 1.5-2MM USD, which is easily enough to retire on. And you'll be like 32-37years old and still be able to climb Mt. Everest, hike the PCT or AT and probably still have your health.
However if you are a teacher starting out in California, that would be a 44-50k year range https://www.cde.ca.gov/fg/fr/sa/cefavgsalaries.asp which yes is really low. Then you work for 40 years and hopefully are able to make enough pension contributions to be able to retire at age 62 and have a decent pension of that 5-6k/mo. By this time lots of people are starting to have health issues and will not be able to go on the adventures that a 32-37y/o would be able to. Also you kinda have to work an extra 30 years.
TL;DR: Incentive structure for being a teacher is not really there, also benefits are not really there. Maybe Scandinavian countries have a better compensation and work life balance?
Incentive to work in tech industry or similar high-paying jobs is there, as financial independence is readily obtainable within 10-15 years.
I can't speak for San Fran, but I'm on a pretty good (by UK standards) tech salary in London. The cost of living (rents mostly) still make putting a high % of salary away every month a challenge. If you have kids as well, it's almost a non-starter.
The marginal tax rate means the only mechanism to do this efficiently are via pension contributions (similar to a US 401k), and these are locked until age 55 (60 by the time i get there).
Financial independence in your 30s is an enormous privilege.
Also salary’s are much higher and taxes are a bit lower than uk/eu. Housing is not too expensive if you rent a room for a couple years, but this is different between a 22/yo and 35/yo.
After taxes (long-term capital gains, let's assume the 15% or 20% bracket, unless Biden gets his wish to increase that), most likely around $13,500 (@ 15%) per year, that would be reduced to $76,500/year, which is $6,375/month.
On the other hand, if you have a "safe withdrawal rate", as fma suggested, (and which seems to be very wise to protect against down years which could permanently reduce your nest egg) then that income would be halved, requiring approximately double the initial investment to result in a $6k post-tax income.
And as far as it being "the idea of living off the interest on your wealth is pretty insane and unattainable", this is just categorically untrue; many mid- to upper-class families in the U.S. with two incomes make in the $300k to $1M range, so even if they only put away 4% to 10% in their 401(k) or other retirement plans for 30 years, they'd easily make that number.
If you have $1M returning 9% per year, and withdraw $90k/year, you're either going to be spending less in real money in each year -- as inflation reduces the value of $90k and the amount of tax increases each year-- or you're going to be withdrawing more each year and depleting the principal.
I'm not at all sure $300k will get you to that 'living on your interest' point in all places in the USA, either, and that makes it tougher on the argument. There are plenty of places where $300k will not let you put away a blessed thing in any retirement plan, and those are the places where people earn these 'insane' sums.
I'm not sure why you say that when this is now the dominant form of pension/retirement planning in countries like the US and the UK. People generally buy annuities with their pot, or keep it invested and go in to 'drawdown', living off the returns.
The couple with $6000/mo pension are probably guaranteed that income for life. It may even be inflation adjusted annually.
Someone aged around 60 who wants a inflation adjusted lifetime annuity here in the UK is going to start on around 2%/yr these days[0]. This isn't unreasonable given a 3% inflation expectation, 30 years of life expectancy, and 30 year UK gov gilts yielding just 1.2%[1]. So $6000/mo on equivalent terms could require a $3.6M pot
You can invest your lump sum more aggressively of course, but if you're not disciplined enough to keep withdrawals below a safe rate (widely believed to be 3-4% for a stock portfolio), and suffer a bad run of variance, you'll risk running out of money and dying in poverty.
[0] https://www.hl.co.uk/retirement/annuities/best-buy-rates
[1] https://www.marketwatch.com/investing/Bond/TMBMKGB-30Y?count...
If I were a millionaire, I would still be afraid to try out deep diving or rock climbing, even though I greatly enjoy reading about them or watching the videos. My experience is that I will panic in certain situations and that could easily be fatal.
Just yesterday we had a thread about the famous cave rescue here. Brrr, the very idea is attractive and repulsive at the same time.
Perhaps Branson has a lower than average threshold of risk aversion.
Edit since I’m getting downvoted: yes the ultra rich can and do live off debt with their stock as collateral, but that gets you to the “merely” living a luxury lifestyle point. It’s not a viable mechanism for funding SpaceX, Blue Origin, Virgin Galactic, etc, which is the kind of “interesting stuff” this thread was talking about.
They can deduct dept/interest payments from taxes and never actually have to sell a lot of their stock. That way their wealth can accumulate and they don‘t really generate income. Almost like the tax code is skewed in their favor.
The interest rates aren't particularly important in this concept. Just that you have enough collateral so that you can life off the loan while the collateral appreciates in value, so that you're not forced to sell it.
Maybe an accountant can chime in.
I like the idea of an undersea utopia, but I don't think I'd enjoy the reality of funding and developing it enough to want to spend my fortune on it. It sounds like a lot of work and more than a full time job, you can't just throw $100M at your cause and expect it to be done in a way that meets your vision, you need to be there to oversee and guide it and make sure your money is being spent wisely. (a good example is Disney's EPCOT -- Disney's vision was to make it a real living city, after his death it was turned into just another theme park)
A home in the Mediterranean and a yacht sound much more inviting, not to mention less risky than living in an undersea habitat that I just built.
(Also, a millionaire is technically someone with at least $1M net worth; thanks to inflation, this title is now more accessible than ever. Just owning a semi-decent house in the Valley affords you that.)
Of course, many of those people don't really own the house, the bank does... and for many of them, their million dollar equity in their house exists only on paper.
Not unless 2 (San Francisco and Santa Clara) is more than half of 9.
> That’s even outside SF and Silicon Valley.
Nope, its pretty much exactly SF and Silicon Valley.
https://cdn.nar.realtor/sites/default/files/documents/2021-q...
His wife’s commentary is the best part
Multibillionaires are a different story.