# How to live long-term on a million dollars **URL:** \ **Category:** In My Humble Opinion\ **Created:** [August 26, 2012, 11:11pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760 "2012-08-26T23:11:28Z")\ **Posts on this page:** 13\ **Page:** 2
**Author:** ![Zsofia](https://avatars.discourse-cdn.com/v4/letter/z/7bcc69/32.png) [@Zsofia](https://boards.straightdope.com/u/Zsofia)\ **Post date:** [August 28, 2012, 1:45pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/21 "2012-08-28T13:45:45Z")
> [@Chessic\_Sense](#): > > Let’s assume you’re 30 and you want to live to be 80. That’s 50 years. I suggest you pack up and move to Laos or Thailand. In fact, just pick a country from [Estonia on down](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita). I hear Malta’s nice. You’d live an average (OK, median) lifestyle for just your principal, and your interest is icing on the cake. This seems by far the best way to me. ---
**Author:** ![TokyoBayer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tokyobayer/32/13989_2.png) [@TokyoBayer](https://boards.straightdope.com/u/TokyoBayer)\ **Post date:** [August 28, 2012, 2:06pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/22 "2012-08-28T14:06:18Z")
Use it to attract someone with real money, and marry her. My wife may object, but hey, 50 years is 50 years. ---
**Author:** ![chela](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chela/32/21582_2.png) [@chela](https://boards.straightdope.com/u/chela)\ **Post date:** [August 28, 2012, 2:42pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/23 "2012-08-28T14:42:41Z")
> [@jasg](#): > > Boy, life as a millionaire sure ain’t what it used to be… That’s fo sure, consider that a million dollar pension invested in corporate bonds may yield you 50-80k yearly. THat’s a middle class income! But not a bad living, esp if you supplement with the odd part time job. ---
**Author:** ![Enderw24](https://avatars.discourse-cdn.com/v4/letter/e/ba9def/32.png) [@Enderw24](https://boards.straightdope.com/u/Enderw24)\ **Post date:** [August 28, 2012, 3:22pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/24 "2012-08-28T15:22:25Z")
Just as a marker if you earned a consistent 2% interest on your money, you could spend $32,000 annually and if would take 50 years for you to go through that million dollars. So could you live on $32,000 today? Probably. In 50 years? That would be like trying to live on $4,200 a year today. Good luck. ---
**Author:** ![Dr.Love](https://avatars.discourse-cdn.com/v4/letter/d/e8c25b/32.png) [@Dr.Love](https://boards.straightdope.com/u/Dr.Love)\ **Post date:** [August 28, 2012, 4:15pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/25 "2012-08-28T16:15:03Z")
Living safely off $1 million over the long term is going to require making more money, and the usual way to do this is with financial investments. Then the question is: how much can you live on per year without running out of money before running out of time? This is called the “safe withdrawal rate” (SWR), i.e., what percentage of the initial investment ($1 million here) can you take out each year without running out of money too soon. There has been research on SWRs for investments made up of stocks and bonds. The most famous study, a 1998 study colloquially called [“The Trinity Study” (pdf)](http://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable) because the three authors are from Trinity University, found that an inflation-adjusted withdrawal rate of 4% from an investment of 75% stocks and 25% bonds was historically successful 98% of the time for a 30 year retirement (see Table 3). A withdrawal rate of 3% had a 100% success rate under the same circumstances. The Trinity Study is based on historical returns of the US stock market (represented by the S&P 500) and high-grade corporate bonds from 1926 to 1995. There were 41 possible 30-year retirement periods in this data (1926-1955 through 1966-1995). Only during one of those 41 periods did a retiree withdrawing 4% run out of money before the 30 years was up. Table 4 shows the terminal value of the investment for various (non inflation adjusted) withdrawal rates and allocations. After 30 years of taking $40,000/year from the initial $1 million, the investment would have been worth at least $1.497 million for 75% stocks. The median investment was worth $8.5 million after 30 years. Of course there has been other research since 1998. In particular, the Trinity Study authors [updated their findings through 2009](http://www.fpanet.org/journal/CurrentIssue/TableofContents/PortfolioSuccessRates/). In Table 2, you can see that an inflation-adjusted $30,000/year (3% withdrawal) has historically always lasted at least 30 years, provided at least 25% is invested in stocks. Table 4 shows the median value of the portfolio after inflation-adjusted withdrawals. Our $1 million invested in 75% stocks and 25% bonds and after inflation-adjusted withdrawals of $30,000/year had a median worth of over $8.5 million! Of course, all this research assumes only 30 years or retirement, rather than the 50 suggested by the OP. I haven’t found anything that projects out quite that far, but take a look at [this commentary on the updated Trinity study](http://wpfau.blogspot.com/2011/04/trinity-study-updates.html). In particular, look at the table at the very bottom of the blog post. This table shows the probability of success of inflation-adjusted withdrawal rates going out to 40 years. Once again, a 3% withdrawal rate was 100% historically successful even for a 40 year time period, provided at least 25% was invested in stocks. Finally, for some additional information on calculating SWRs, see [this blog post](http://www.kitces.com/blog/archives/387-What-Returns-Are-Safe-Withdrawal-Rates-REALLY-Based-Upon.html). All these pieces of information combined, I think that a 3% withdrawal rate has a good chance of lasting indefinitely. On the other hand, if you don’t want to invest all of it in the stock or bond market, you could take one financial guru’s advise and [go into debt in order to purchase rental properties](http://affordanything.com/2011/03/11/if-i-had-a-million-dollars-id-go-into-debt/) that will make you income for the rest of your days. ---
**Author:** ![clairobscur](https://avatars.discourse-cdn.com/v4/letter/c/839c29/32.png) [@clairobscur](https://boards.straightdope.com/u/clairobscur)\ **Post date:** [August 28, 2012, 5:44pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/26 "2012-08-28T17:44:52Z")
> [@billfish678](#): > > After a few decades of that your investment should have grown enough to provide a much larger annual income that you can now spend with a decent safety buffer. Probably not. Compound interests are overrated. Once you deduce inflation and taxes, and assuming a low risk (hence low return) investment, you won’t have much more money 20 years down the road than you had at the beginning. ---
**Author:** ![billfish678](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@billfish678](https://boards.straightdope.com/u/billfish678)\ **Post date:** [August 28, 2012, 6:01pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/27 "2012-08-28T18:01:11Z")
> [@clairobscur](#): > > Probably not. Compound interests are overrated. Once you deduce inflation and taxes, and assuming a low risk (hence low return) investment, you won’t have much more money 20 years down the road than you had at the beginning. True. But the point is, even if you don’t grow it, you want to slow the drain down to an acceptable level. See the other posts by other posters who apparently actually know about this stuff. One thing you might want to do is budget to buy a gold plated long term/elderly care policy. You know at some point you’ll be pretty damn old if you are lucky enough to live that long and moving into the old Sunset village is already paid for would provide nice piece of mind. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [August 28, 2012, 6:08pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/28 "2012-08-28T18:08:01Z")
I’d put the bulk of it in diversified index funds, and then maybe 10% each in something relatively guaranteed and liquid, and a set of stocks I’d hand-pick based on what technologies I think are emerging. Take maybe another 10-20% for an efficient, sustainable house. Then, I’d aim for a cost of living around $10-15k a year (yes, I know I can get by just fine on that), with all the rest of the dividends and interest re-invested. If I find the right woman and get married, up that to maybe $30k. Yes, I know that there are risks to the stock market, but my needs are humble enough that I should be able to weather most of them (at worst, dipping into the principle occasionally). And I figure that any downturn extreme enough to wipe me out is probably also going to wipe out nearly everyone, no matter how they plan, so there’s really nothing to lose. ---
**Author:** ![VinylTurnip](https://avatars.discourse-cdn.com/v4/letter/v/b2d939/32.png) [@VinylTurnip](https://boards.straightdope.com/u/VinylTurnip)\ **Post date:** [August 28, 2012, 6:10pm UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/29 "2012-08-28T18:10:47Z")
You people are overthinking it. Duh, a million Powerball tickets? You might even win more than once! ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [August 29, 2012, 12:19am UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/30 "2012-08-29T00:19:58Z")
> [@Martin\_Hyde](#): > > You could invest in say, Proctor & Gamble your entire $1m and that’d bring you around $33.5k/year in dividend income. That’s without any capital appreciation and without any selling of those shares. > > Now you wouldn’t actually put your money all in P&G stock as that’d be insane. But P&G is just an example of a “Dividend Aristocrat.” Dividend Aristocrats are large blue chip companies that have paid a dividend _and increased it annually_ for 25 consecutive years or more. S&P maintains a list of them, and if you invested basically an equal portion of your money into each you’d have a very safe investment (as these are all blue chip stocks) that provide income without even having to touch the principal. > > Now we’re just talking about living off the dividends of these stocks, over the last 5 years (a very, very bad period for equities) the Dividend Aristocrats returned 3.6% annualized, so you would have gotten some capital appreciation as well. Over the long term these stocks have historically averaged over 10% annualized returns over long periods of time. > > So that being said, you could buy such a basket of stocks and hold it for ten years living off the $33.5-35k or so a year. After twenty years you’d have at least $2.5m or so that you could just invest in a fixed income annuity for the second half of the 50 years. Buy a fixed annuity at around 3% (still available especially at the amount of money you’re talking and signing up for 25 years) and that’s $11.8k/mo for the rest of the period so quite the raise over the $35k a year you had been living on. So 50 years ago you would have invested in Pennsylvania Railroad? The trouble is that it is exactly the companies you describe that see no need to do anything differently from what they have been doing. ---
**Author:** ![Siam\_Sam](https://avatars.discourse-cdn.com/v4/letter/s/d78d45/32.png) [@Siam\_Sam](https://boards.straightdope.com/u/Siam_Sam)\ **Post date:** [August 29, 2012, 2:52am UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/31 "2012-08-29T02:52:36Z")
Taking into account just the principle, I would not recommend Thailand. US$1 million for 50 years comes to $1667 a month. That’s only 52,200 baht a month at the current exchange rate. That would not net you much of an existence in Bangkok; I’d rather just move back to America and throw myself on the crappy welfare system. This does not take into account interest payments or other investments, so maybe it would work once that’s considered. You could also make some shrewd land investments … or you could lose your shirt on that. Upcountry Thailand would be somewhat better, but I think you’d get very tired of the limited lifestyle long before 50 years were up. You might try Cambodia, as it’s an up-and-comer, with cheaper living costs. I also like Nepal, but it can get cold. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [August 29, 2012, 2:58am UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/32 "2012-08-29T02:58:24Z")
> [@VinylTurnip](#): > > You people are overthinking it. Duh, a million Powerball tickets? You might even win more than once! You could be the next Powerball thousandaire! ---
**Author:** ![R.P.McMurphy](https://avatars.discourse-cdn.com/v4/letter/r/7993a0/32.png) [@R.P.McMurphy](https://boards.straightdope.com/u/R.P.McMurphy)\ **Post date:** [August 30, 2012, 4:00am UTC](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760/33 "2012-08-30T04:00:01Z")
I would probably go with a triple tax-free muni fund. It will pay far more that any bank or CD. It will probably be less than the blue chips but the yield is tax free. That’s the kicker. Currently the muni’s are priced high because of how attractive they are but they are probably as safe as the blue chips. When a municipality goes bankrupt they rarely default on their bonds. So, see what the investment is yielding and live within that number. That’s the hard part. Don’t think of yourself as rich, think of yourself as blessed and live within the blessing. It will still be a frugal existence. As said, a million dollars ain’t what it used to be. [Previous page](https://boards.straightdope.com/t/how-to-live-long-term-on-a-million-dollars/632760.md?page=1)