But anyways, what is your figure for FU money?
EDIT: I see people are putting down their early retirement number. For some people, "FU Money" is just a year.
-2: you must file bankruptcy -1: you may be able to repay your debt 0: you're living paycheck to paycheck 1: you can live for a year without working 2: you can live for the rest of your life without working maintaining the same lifestyle you have now 3: your kids (if any) can live their whole life without having to work 4: you can afford any luxury such as jets and yachts 5: you are in the same league with Gates, Buffet, Ellison, etc.
A few notes: You can find where you are on the scale using a decimal fraction between the integers.
Just because level 3 says your kids can live without working does not mean you should strive to achieve that. It is simply a measure of wealth, not a desired outcome for obvious reasons.
Just because level 4 affords you jets does not mean everyone should aspire to buy a jet. Again it is mentioned as a reference of what you could attain at that level.
In America in my view, amassing $5 million gets you to level 2. The figure could be argued and it fully depends on your style and standard of living. So for you it might be significantly less or perhaps much more. This figure assumes a monthly spend of $20K and a paid off house (paid out of the $5m)
Fortunately, my family's current lifestyle is nowhere near 20k/month! :) My level 2 number is 3M, not including the paid-off house (which unfortunately is rather more than 500k here...), which should afford 90k/year real (before taxes) at 3% withdrawal rate.
Parent implied the 20k/month was spending money. If you're reinvesting some of that money, then you're effectively reducing your withdrawal rate, in which case I agree. Also if you're willing to reduce your spending in the case of a downturn you could withstand a higher withdrawal rate. I'm just saying that a 5%+ real withdrawal rate is not sustainable indefinitely in a vacuum.
300k a year is about the right number to do everything you want to do if you are a family. Buy whatever cars you want (within reason) - travel when you want, eat what you want, live where you want. Thats the definition of FU money.
You can do it for less, but its not FU money if you have to worry about possibly losing your fortune.
Kids/family increases the number obviously, if they go to private school/college- Add 50k/yr per kid to that figure above.
20 million dollars, would generate 300k after taxes if invested in bonds. from the 20 million, you'd end up with 15 or 14 million dollars after paying taxes.
so 20 million dollars is what one would need to target for.
however, note that you'd need to live in a large mansion that's already paid for and maintenance and expenses, property taxations being paid, I'd put away 30~50k for upkeep. You will probably have two kids on average so it will be another 100,000 to support them.
21 million, seems to be the true 'FU' money. After that leave off 400,000 after tax a year in money.
21 million is a staggering figure for someone starting out. I don't even know if I will get to one million.
If you have no plans of ever liquidating, you can use leverage (and increase your exposure to interest rates, which is irrelevant if you will not liquidate) but get up to a 8-9% tax adjusted yield right now, so then your FU money drops to about 2.5-3M.
Look at it this way: even if you could borrow money at the risk-free rate (which you can't), anything you're earning on those leveraged funds is a risk premium (which by definition can't be diversified away). So you would certainly increase your odds of making more money, but you also increase the odds of a larger downturn, which again, could reach unsustainable levels.
I don't believe there exists a workaround to achieve a long-term (ie near indefinite) safe withdrawal rate of more than 3% or so in real dollars.
Bottom line is once you buy those bond funds you should only be spending your coupons/distributions. There's a chance your distributions might decrease if for example the yield curve flattens or interest rates decline and the fund has to roll over into lower yielding paper, but for the purposes of discussing FU money you should probably be buffered to withstand a moderate decrease in monthly interest payments anyway. Ie, in practice you're not going to spend your entire monthly distribution, so any cash leftover can be rolled back into your investments and likely moderate any of the risk incurred by not going with a full 'risk-free' portfolio.
That said, it's a lot easier to increase spending than to decrease it, so I'd want that risk to be small, or to have a desirable fallback for added income.
If I'm only taking one year off, I'd want $20-50k so I could travel, but ~$12k would be more than sufficient for me to drop a job without worry.
It was interesting -- if you'd asked me a couple years ago how I would've acted in that situation, I think I'd've told you that for that kind of money I'd be stupid not to stick out four years. But when it actually happened I barely even considered it.
It's much more likely than me magically getting $5mm+, so I'm going to go with that.
I also think that with that amount of capital it would be more plausible to create a business that would then generate the much higher numbers others are suggesting here.
Plus as the upper class stays that way, it seems living in good spots starts costing as much as US cities. Even going to the movies, just my wife and I, can easily hit $100.
Assuming no need for work, I would say £2.5m to never work again. Tax free savings aren't much in the UK: you can put away £11k per year in an ISA and £40k total in Premium Bonds. For non UK people, ISAs are tax-free savings accounts that can either be cash only, stock only or half cash/stock (but stock only has a higher annual limit).
An initial £500k is used to clear any debts, clear the mortgage (or buy a new house) and buy whatever creature comforts are needed e.g. do up the house, buy a nice efficient car, etc. I would probably go and live in Spain and build an eco house, solar is actually decent there and living costs are pretty low (if you don't need to work!).
Let's assume a poor rate of return of 3% on the remaining £2m, or £60,000 before tax. The taxman will take 20% of that giving £48,000 to you. £11k of that should go straight back into tax free savings, so you've got £37,000 remaining. Some years you'll do better, some you'll do worse, but you could probably push for 5% without much trouble most years. I think my first port of call would be to hire a very good accountant.
That's not a bad salary at all, especially if you own your house, car, etc. It's also more than enough to support dependents, but if you start thinking about private schools then it eats into it a bit. You have plenty to live day to day and enough to go on a good holiday each year.
Let's assume you're fairly old when you get this magic windfall and have 40 years left to live. By the time you die, you'll have around a million in the ISA, by the power of compound interest. The bonds will pay out on average 1-2% a year leaving around £80k unless you win the jackpot. You'll also still have your starter £2m.
Remember that rich people stay rich because they don't spend money.
1 million dollars: doable but very hard. you can finally buy that crack shack in vancouver, bc
10 million dollars: could be doable depending how you got to your first million. if it's scalable operation, no problem.
100 million dollars: continued growth from previous operation with compounding returns or have been part of a successful startup that was sold.
1000 million dollars: founder/co-founder of a company that was sold previously to a very large search engine or social network.
10000 million dollars: own majority equity in a very well known public company, inherited.
100000 million dollars: run a country that produces oil or cocaine as it's most popular exports. You can't have any competition around. launder it excessively.
The safe withdrawal rate is between 2-3%, tbh. You've got to eat inflation, down turns, etc.
I could live off of 60-90k/year [depending on the market], and not worry too much.
However, if you throw in a wife [that brings you to 6 million] and the expectation of kids...its probably like 7-8 million.
Last time I checked, that didn't pay.
People are saying much lower amounts in these comments, but one or two million doesn't go nearly as far as people think. When I think about the people I've known that are truly free and are easily able to afford enviable lifestyles, $20M seems to be starting point.
However the reality is that people who are ok with cashing out and walking away from the table seem to seldom be the ones getting the payoff.
EDIT: I don't think a lot of you all know what FU money is. Its enough that you can say "FU" to anyone on the planet and not have any worries about doing so as you no longer need anything from anyone.
1 million: Takes the edge off, I could support a family, and live a reasonable lifestyle. I'd take up a hobby with the spouse, or work on personal projects to bring in some extra money and to keep busy.
2 million: Similar to above, but working is no longer necessary. I could life comfortably and be happy. Of course, I'd need to be careful with my spending, and not drop $1,000 on a bottle of wine. I'm not one for fancy toys, so this could easily be retirement money in my situation.
3 million+: Same as 2 million, but I'd just have the option to do everything a little bigger. Higher end cars, larger house, more expensive city, better downtown location, etc. Personally, not necessary, so I'd just bank it, or put it towards a startup.
In short, I'll say 2 million is FU money. It provides everything I need in life, it would support a family, and at that point I can leave the rat race.
8-10M for a house in a perfect location
10M at least for retirement
10M for living, house taxes, vacations, probably a boat.
10M for creating a company, funding it myself at first.
The 10M left I would probably share it with family. If I'm the only rich person around my family that would suck. And I have a big family.
If I had 5k BTC, I'd never need to make money again.
I literally would not need anything else. I could go wherever I wanted whenever I wanted. I wouldn't have to pay for gas. I'd use Uber to drive people around with zero expenses. I'd sleep in the spacious back seat.