How much do you need to win before you can quit your job-- forever.

In My Humble Opinion
41

Yeah I’m young, but I get by fine with about 1000-1100/month, minus rare expenses. I think I could pull getting by with 300k if I outright owned a duplex in the midwest and only had to support myself since 300k would give me 10k+ a year or so in income after inflation & taxes and I’d have no house or car payments to spend that 10k on. I’m 26 though, not too young. But that figure is based on the assumption that I only support myself, own my own duplex and rent the other half out to someone, and manage to get my automobiles cheaply by buying and selling them correctly.

There is an entire subject on living cheaply to be free called voluntary simplicity. I can’t remember the name offhand but I’m sure I’ve read books on people getting by fine with a next egg of 200-400k or so. Just as long as you own your own place (preferably a place where you can rent some of it out) and know how to be cheap.

42

Wesley, your assumption must be that any rental income you might achieve would offset full maintenance and taxes on your property. That’s a fair enough assumption. However, I don’t see where you factor in purchasing your own duplex. You’ve just doubled your needed winnings (unless you already own). You also haven’t figured in future family needs - is the assumption that you’ll stay single and childless valid? $12,000 - $13,300 is very, very difficult to live on anywhere in this country, even if one is debt free.

sleestak, yielding 7% annually on income-bearing investments is not conservative. 7% annual yield would be conservative with a mixed stock/bond portfolio, but that would not provide a 7% annual income on your investments (It could, but it would require more active investment management, which is an expense we haven’t figured in - a trained investment manager managing an income-producing, capital preservation portfolio would take 1-2% of that 7%).

Atrael, your figuring is much like mine. The discount on the lump sum payments reduce the pot about 40-45% generally. NY taxes then take almost 1/2 the pot (around 47-48%). For me, $15 million should net me $4. That would be the bare minimum. I might work another ~5 years to take advantage of early compounding before I start relying on my investments for income.

43

Duplexes aren’t unaffordable in the midwest. My brother’s best friend bought one that used to be owned by a doctor for about 90k. Where I grew up 300k buys a 5 bedroom 3000-4000 sq ft home with 5 bedrooms. Housing is cheaper out here.

Again, the 300k figure is based on several assumptions. That I’d own my own duplex, that someone else would be a good renter and rent out half of it and that their rent would cover all taxes, maintenace & insurance costs, that I remain single & childless, that I live in the midwest and that I am able to get my cars cheaply and no major medical or legal issues come up that drain my bank account.

12-13k after taxes sounds like very little, and it is. But if you aren’t paying any rent/mortgage or any car payments and you are only supporting yourself it goes alot farther. Car payments (not including gas, insurance or maintenance) & household payments are about 40-45% of the average budget.

44

It is extremely little to start out with. It becomes completely unworkable when you figure in inflation 20 years from now. This money has to last you for life remember.

45

True, true. However I think 300k is possible. If you subtract taxes and adjust for inflation each year you can probably get 9k a year out of it. If you have no mortgage or car payments 9k isn’t unrealistic. Technically that rental income counts as ‘work’ and I would do things like find really good deals on cars (30% below NADA value), drive them for a year and resell them for about what I bought them for. So I’d still be working, I’d just be a landlord and someone who buys & sells used cars. So my whole premise is probably wrong as I’d still be working and making income.

If you are talking about no rental properties, no previous home ownership and no car deals I’d probably need closer to 700k-1 million.

46

I see one thing to question in the way most of you are figuring, and it’s making the amount you need seem way too large.

You don’t have to have all your money left when you cork off. There are plenty of calculators that will allow you to, for example, plug in $500,000, figure on it earning 4%, and the calculator will tell you how many months you can withdraw X dollars per month before your money’s all gone. It’s the same calculation as paying down a mortgage, but in reverse, as you’re paying yourself. Your lump-sum money will pay you much more, much longer than most of you seem to think.
If you should screw up and live longer than you thought, you can always sell your nice house and move to a smaller one or apartment. At an advanced age, that’s not a bad move anyway.

Plug in your life expectancy as per insurance acturial tables, convert that to months, figure the amount of $ you’ll want per month, and you’ll have your answer. In most cases, 1 Million net, plus whatever you want to spend on a house, should be plenty.

47

I’m fairly young, so I’m thinking of a few decades, but my tastes don’t really run to the overly expensive. 3-5 million ought to cover it, even if I surprise myself by living to ripe old age.

48

I could quite right now at some modest level of existence. This is thanks to having a nice nest egg and my Army pension. Still, what would I do? Shuffleboard?

With an additional million, I could no longer justify working.

49

It depends on what country you’re in. You could move overseas. That’s what I would do. I’d move to Portugal. I’d buy a 15th century crumbling-down villa in Coimbra.

50

My take has always been that you can count on $20K/year income per $1 million in headline jackpot amount.

In other words, if they advertise the jackpot is [Dr Evil voice]One Million Dollars[/Dr Evil voice], you can take the lump sum, pay all the taxes, invest the residue conservatively, leave enough earnings in there each year to have the principal stay stable against inflation + taxes on the earnings, and withdraw the then-current equivalent of $20K every year forever. That $20K figure is post-tax.

It also assumes you give zero in the way of extravagant gifts to friends / family when you first win. That particular trick will eviscerate your winnings like nobody believes until it’s too late.

On that basis, given my current assets, etc., I could retire on a $5Mil jackpot but that’d be a pay cut. For $10Mil I could maintain my lifestyle plus a little for the extra spending caused by the extra free time. For $20Mil I’d have enough for totally carefree living within my current tastes. For $40Mil I can start to acquire bad habits like secret mistresses, Dom Perignon by the case, etc. For $80Mil I can support some really bad habits like 2nd wives, chartered personal jet travel, etc. More than $80Mil would be just a waste in my case, but I can hardly wait to try to waste it.
I’m basing my $20K/$1Mil ratio on fairly pessimistic investment returns vs inflation, and not much in the way of effective tax avoidance. Folks with large lumps of money can hire people who can usually achieve much better rates of return (& tax treatments) than I can now, so that may be unrealistically pessimistic.

OTOH, the folks here who think they can average 7% after inflation and taxes and transaction costs over their entire portfolio are probably smokin’ somethin’. Some years yes, but probably not every one.

Finally, my $20K figure assumes you want to die with the inflation-protected principal intact. A willingness to eat into principal improves the available outflow a bunch, particularly if you’re already middle aged or later.

51

Two or three million might do it, but I’d be a lot more comfortable with $5 million or more. My kids are nine and eleven years from college, respectively, and unfortunately the little buggers are currently on track to have expensive college educations. But at this point I’d be happy with any amount to help defer current costs, debts and expenses.

52

That’s a very good assumption. Of course, that means nothing in the end for the kids…BWAH HAH HA HA! Sorry, can’t control myself.

It’s important you don’t underestimate your monthly drawdowns with this method. Having to withdraw any investment earlier than planned severely impacts future earnings. If you are good at spreading a set sum over long periods, quarterly drawdowns will stretch your dollar further. And don’t outlive your assumptions! Plus, the younger one is, the more one needs. Younger gets a greater benefit of compounding but has to stretch the winnings further.

This might be a fun exercise when I have more time. If I am willing to reduce my capital by half over the remainder of my life, given the minimum lifestyle I’m willing to accept (not minimal, minimum I’m willing to accept, which would be higher than where I am now), how little could I retire on.

One other note: I personally would not buy a home outright. Instead, using my assets as leverage, get the lowest mortgage I could. As long as my interest income exceeds my interest expense on the amount of a loan, I am making money. That would be the basis of my buy/borrow decision.

53

File this under: I Really Should Be Doing What I’m Paid For

Looking at the annuity idea, I ran some numbers. First my assumptions:
40 year remaining lifespan
4% after-tax and transaction cost rate of return
All “winnings” are net numbers

If we win $3,000,000, and plan on using $2,000,000 and leaving $1,000,000 to my heirs, our annual after-tax earnings will increase approximately 33% over current levels. Given these assumptions, it is likely I would walk away.

At $3,500,000, leaving $1,500,000 to my heirs, our annual after-tax earnings would increase over 50%. Far, far more likely to “take this job and shove it, I ain’t workin’ here no more.”

If we win $3,000,000 and earn 4% after tax, but choose to work and live within our current budget for 5 more years, we earn a 70% premium on our current after-tax salaries. Much, much better, as we likely couldn’t leave NY for at least that long and probably closer to a decade.

I definitely would not quit if my calculations yielded less than a 33% after-tax increase in annual earnings. That increase accounts for increased insurance costs, increased entertainment costs and an inflationary hedge (my income would increase annually, as I would roll a portion of my funds back into income-generating investments). I would also continue to roll as much money as possible into retirement accounts, again as a hedge against possible long-term care and against outliving my annuity.

sigh Wish I had more time to really work in some nice numbers, such as: I want a future value of $1,500,000 40 years from now, and the remainder will go into an annuity. Of the annuity income, some will be rolled into the sum invested to reach the $1,500,000 future value. That allows me to put much more into the annuity up front.

54

If I won £1 million, I’d simply pay off the mortgage, treat myself a little, invest the rest, and get back to work. Now’s not the time to be buying housing in the U.K. With £2M, I’d do the same. Once I get to £4M, things become interesting.

55

Really? If you are 25, $12M (after tax) would provide you with $300K a year for the next 40 years, ignoring any investment return. Pre-tax, it provides you with, I dunno, $175K/year.

Think of it that way. Invest it in a money market fund (to offset inflation only) and you get this amount every year, same as if you were working–you can invest some of it, spend the rest. Is $175K or $300K a year to live until retirement the minimum you could live on? That’s a different definition of middle class than I have. And if not, then you need less than $12M to retire, especially if we factor in investment income and if you’re older than 25.

56

If I won $20K I could quit my job right now and never go back. Yeah, only 20K. The only reason I’m working (part time) right now is to pay down debt. When that debt is gone, I quit. Then I will be a full-time wifey.

For Mrtj to quit, I’m not sure. I don’t think he would quit his job. He loves it too much. If we won a large sum of money, he would probably personally hire an assistant (he works 60+ hours a week, but his employer has no budget to hire another person) or would quit and work for free.