# Make 2 million dollars last **URL:** \ **Category:** In My Humble Opinion\ **Created:** [July 3, 2011, 5:40pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735 "2011-07-03T17:40:31Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [July 3, 2011, 11:11pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/21 "2011-07-03T23:11:13Z")
> [@GuanoLad](#): > > I thought he meant the mortgage only has $230,000 left on it. > > By the way, if you can’t find a way to live off over $2m, you’re not doing it right. That’s plenty for a decent, if unspectacular, life. OK, that makes sense. I still think it’s better not to pay off the mortgage, partly because of the tax deductibility of the mortgage interest. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [July 3, 2011, 11:11pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/22 "2011-07-03T23:11:40Z")
> [@dauerbach](#): > > can you suggest a website where there may be greater interest? Try the [Bogleheads](http://www.bogleheads.org/forum/index.php). ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [July 3, 2011, 11:21pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/23 "2011-07-03T23:21:26Z")
> [@GuanoLad](#): > > By the way, if you can’t find a way to live off over $2m, you’re not doing it right. That’s plenty for a decent, if unspectacular, life. That simply isn’t true even for someone who is fairly frugal to begin with. $2.5 million at 48 years old is extremely borderline for lasting the rest of your life even if you don’t go crazy. That is about the recommended retirement portfolio amount for upper-middle class people that are much older than that. It can be done you but have to be really careful. People always say that it takes money but the opposite is also true. It costs a great deal in real cash to have money and maintain it. There are investment fees, attorney’s fees, and increased tax rates if you don’t structure it properly. One of the biggest hits comes from dropping out of the workforce. You have to pay for your own medical insurance on the private market and you may take a huge hit in social security payments later. Having a lot of cash on hand means that your children won’t qualify for need based aid to college and you may have to foot the whole bill yourself. I am not saying this isn’t fair but many people, even middle-class ones, get government help that they take for granted. You run the risk of paying increased taxes and getting little for it if you don’t make good decisions early on. Making a big mistake in the beginning has an effect that will ripple throughout through the rest of your life so it is worth the time, research, and thought to make sure you get it right. ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [July 3, 2011, 11:27pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/24 "2011-07-03T23:27:05Z")
> [@Dewey\_Finn](#): > > OK, that makes sense. I still think it’s better not to pay off the mortgage, partly because of the tax deductibility of the mortgage interest. A tax deduction still means your are paying 2/3rds or so of that to the bank for nothing. It isn’t free. People often say that it isn’t wise to pay off your mortgage because the deduction makes a mortgage cheap enough that you can put the money elsewhere and come out ahead in by putting your money in other safe investments. If anyone knows how to do that safely right now, post where and how with a specific breakdown of the numbers. As far as I can tell, there aren’t any safe investments that beat paying off a mortgage and I have run the calculations myself dozens of times trying. Even 3% is difficult to come by for safe investments right now and I don’t know when that will change. ---
**Author:** ![TruCelt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/trucelt/32/523_2.png) [@TruCelt](https://boards.straightdope.com/u/TruCelt)\ **Post date:** [July 4, 2011, 12:04am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/25 "2011-07-04T00:04:14Z")
OK, so what I meant was that there are many areas of the country - probably some near to where you want to be - where a lovely home can be purchased for insanely low amounts, often under $100,000.00. So if you don’t have to work, why wouldn’t you move to a place where you can get what you want for less? These also tend to coincide with the areas where, say, a live-in housekeeper can be hired for very little. You may not want this now, but the day will come when it’s the only thing allowing you to stay in your home. Think ahead, \*decide \*where to live, don’t just stay put as a default. ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [July 4, 2011, 12:38am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/26 "2011-07-04T00:38:09Z")
> [@TruCelt](#): > > OK, so what I meant was that there are many areas of the country - probably some near to where you want to be - where a lovely home can be purchased for insanely low amounts, often under $100,000.00. So if you don’t have to work, why wouldn’t you move to a place where you can get what you want for less? > > These also tend to coincide with the areas where, say, a live-in housekeeper can be hired for very little. You may not want this now, but the day will come when it’s the only thing allowing you to stay in your home. > > Think ahead, \*decide \*where to live, don’t just stay put as a default. That is good advise in general. Even within the U.S., cost of living varies wildly depending on location. You can’t retire with $2.5 in New York or San Francisco at 48 and expect the money to last for your life. If you were willing to make a bold move however, Costa Rica is a good option for American ex-pats financially speaking. You could just go there and probably live really well on that amount of money for the rest of your life. I have been there. It isn’t a true 3rd world country. There are Americans everywhere and the health care system is quite good even by American standards, they don’t have a military, and it is quite safe. Malaysia has even better incentives for American ex-pats than that if you want to live a truly rich lifestyle with servants but that type of move isn’t for everyone. A nice house in Texas may be a better fit. DO NOT forget to take inflation into account. It is low now but it may not always be. You can easily expect to live another 30 years and maybe much, much more. Inflation compounded over time will eat up much of your investment gains besides the other fees like taxes and money management costs. Don’t think you are instantly rich because you aren’t. I have personally known people that have gone destitute with much more than that because because they were stupid in the estimate of their “wealth” and what it would actually bring to them. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [July 4, 2011, 4:05am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/27 "2011-07-04T04:05:53Z")
> [@Shagnasty](#): > > A tax deduction still means your are paying 2/3rds or so of that to the bank for nothing. It isn’t free. People often say that it isn’t wise to pay off your mortgage because the deduction makes a mortgage cheap enough that you can put the money elsewhere and come out ahead in by putting your money in other safe investments. If anyone knows how to do that safely right now, post where and how with a specific breakdown of the numbers. As far as I can tell, there aren’t any safe investments that beat paying off a mortgage and I have run the calculations myself dozens of times trying. Even 3% is difficult to come by for safe investments right now and I don’t know when that will change. Well, depends on what you mean by “safe.” The broad US stock market has returned 10% in every rolling 20-year period. So, if you have a 20-year time horizon for an investment, it’s pretty “safe” that you’ll get something around 10%. ---
**Author:** ![pulykamell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pulykamell/32/3166_2.png) [@pulykamell](https://boards.straightdope.com/u/pulykamell)\ **Post date:** [July 4, 2011, 4:08am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/28 "2011-07-04T04:08:36Z")
> [@Rand\_Rover](#): > > Well, depends on what you mean by “safe.” The broad US stock market has returned 10% in every rolling 20-year period. So, if you have a 20-year time horizon for an investment, it’s pretty “safe” that you’ll get something around 10%. I’m with you on the stock market, but [that’s not quite true.](http://observationsandnotes.blogspot.com/2009/04/best-worst-20-years-in-stock-market.html) ---
**Author:** ![pulykamell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pulykamell/32/3166_2.png) [@pulykamell](https://boards.straightdope.com/u/pulykamell)\ **Post date:** [July 4, 2011, 4:12am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/29 "2011-07-04T04:12:14Z")
That’s the Dow numbers. You want something a little more broad, here’s [S&P500.](http://allfinancialmatters.com/2009/09/18/sp-20-year-rolling-period-returns-1926-2008/). It’s still a good bet, and what I’d do with a significant portion of that kind of money if I had a long investment horizon. ---
**Author:** ![dauerbach](https://avatars.discourse-cdn.com/v4/letter/d/c2a13f/32.png) [@dauerbach](https://boards.straightdope.com/u/dauerbach)\ **Post date:** [July 4, 2011, 1:04pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/30 "2011-07-04T13:04:26Z")
I did indeed mean pay off a 230,000 mortgage. I did mean property taxes rather than interest. And I do not think for a second that I can live like a millionaire. I was hoping to be able to live a solid middle class existence. Only one child is left in school, and she has a full scholarship. She may go to medical school afterwards, and while I wish I could pay for it, I think doing so would no fit into the plan for the money to last my lifetime. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [July 4, 2011, 2:44pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/31 "2011-07-04T14:44:54Z")
> [@pulykamell](#): > > I’m with you on the stock market, but [that’s not quite true.](http://observationsandnotes.blogspot.com/2009/04/best-worst-20-years-in-stock-market.html) That chart also assume you are reinvesting dividends. Which is a good assumption if you are in the growing wealth stage and aren’t living off your investments. And a less good assumption if you are living off investments. ---
**Author:** ![markdash](https://avatars.discourse-cdn.com/v4/letter/m/ba8739/32.png) [@markdash](https://boards.straightdope.com/u/markdash)\ **Post date:** [July 4, 2011, 3:47pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/32 "2011-07-04T15:47:41Z")
What is the property tax rate in you municipality? I’m just curious, as the $1300/month seemed really high for just insurance/property tax, but then again, I live in California, where we are fucking idiots and keep our property taxes artificially low. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [July 4, 2011, 4:24pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/33 "2011-07-04T16:24:31Z")
> [@Shagnasty](#): > > That simply isn’t true even for someone who is fairly frugal to begin with. $2.5 million at 48 years old is extremely borderline for lasting the rest of your life even if you don’t go crazy. That is about the recommended retirement portfolio amount for upper-middle class people that are much older than that. It can be done you but have to be really careful. > > People always say that it takes money but the opposite is also true. It costs a great deal in real cash to have money and maintain it. There are investment fees, attorney’s fees, and increased tax rates if you don’t structure it properly. One of the biggest hits comes from dropping out of the workforce. You have to pay for your own medical insurance on the private market and you may take a huge hit in social security payments later. Having a lot of cash on hand means that your children won’t qualify for need based aid to college and you may have to foot the whole bill yourself. > > I am not saying this isn’t fair but many people, even middle-class ones, get government help that they take for granted. You run the risk of paying increased taxes and getting little for it if you don’t make good decisions early on. Making a big mistake in the beginning has an effect that will ripple throughout through the rest of your life so it is worth the time, research, and thought to make sure you get it right. I have a friend who has saved very little for retirement, he has made $100,000+ for many years and was making $85,000 a year in the early 1980s (when that was very solid money.) However he is one of those people who looks at a pay check as a challenge to defeat, and having any left over when the next one comes a sign of failure. He could literally have retired at age 50 if he had smartly saved away for retirement. Instead he is 55 and has less saved than many civil servants who have usually made slightly under the national per capita average their entire lives. He recently told me that he thinks he could live on $40,000 a year in retirement and that he was wanting to retire “soon.” When I told him how much money he would need saved just to earn $40,000 a year for 20 years (which would be more than a 50% pay cut) he was a little upset…; especially since he could live another 30-40 years. ---
**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:** [July 5, 2011, 1:23am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/34 "2011-07-05T01:23:38Z")
What would worry me is inflation. I am already worried about it even though I am 74 and have retirement income close to $100K/year. Yes, it is low now, but 30 years ago, it was getting up to maybe 15%. The disparity in housing prices is enormous. My house is 1300 Sq Ft (plus basement) and the guy two doors down just sold the identical house for nearly $750K. Now I understand there are places in the upper midwest where you can get a house for almost nothing. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [July 5, 2011, 3:52am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/35 "2011-07-05T03:52:17Z")
> [@Marine](#): > > Hmmm, an annuity. Sounds interesting. I will start searching around, but do you have any websites you might suggest? Shop carefully, understand what you buy and remember that the annuity is only as good as the insurance company behind it. Often, annuities are a better deal for the salesman… ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [July 5, 2011, 11:06am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/36 "2011-07-05T11:06:45Z")
> [@jasg](#): > > Shop carefully, understand what you buy and remember that the annuity is only as good as the insurance company behind it. > > Often, annuities are a better deal for the salesman… I would hope that the recommendation was for a single premium immediate annuity. For all other types, the salesman comes out best. An SPIA pays a guaranteed income for life. This can be level, or you can have it increasing by a set percentage or by inflation. With large amounts of money you should buy annuities from several different companies so that you do not lose everything if the company goes under. I just got some online quotes (I’d give you a link, but you would have to be a Vanguard client to use it) and an inflation-adjusted annuity for a 48-year old will initially pay about 6% The down side is that you have spent all the money. If you die the day after you take out the annuity, it is all gone - your heirs get nothing. An immediate annuity can be a sensible part of the picture, but I wouldn’t put all the money into it. ---
**Author:** ![C\_K\_Dexter\_Haven](https://avatars.discourse-cdn.com/v4/letter/c/b2d939/32.png) [@C\_K\_Dexter\_Haven](https://boards.straightdope.com/u/C_K_Dexter_Haven)\ **Post date:** [July 5, 2011, 11:55am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/37 "2011-07-05T11:55:04Z")
Paying off a mortgage may or may not be a good idea. It depends on the rate of return you can get on your capital, vs the rate of interest you’re paying on the mortgage. For instance, if you can refinance with a fairly low mortgage interest rate (say, 4.5%) then the expectation is that MOST years in the future your money will earn significantly more than that. Plus, of course, the interest on the mortgage is deductible on your taxes (I’m assuming you’re US-based.) So, paying off the mortgage is not necessarily the best thing to do financially. Second, I would avoid annuities. The interest rate tends to be very low, which means the purchase price is high. You would do better with secure investments. Remember that you’re not just talking about he next five years. At 48, you need to plan for the next 40 years (or longer.) You need NOT to be tied into something like an annuity, which may sound good now but over the long haul will not prove reasonable. ---
**Author:** ![flyboy](https://avatars.discourse-cdn.com/v4/letter/f/4da419/32.png) [@flyboy](https://boards.straightdope.com/u/flyboy)\ **Post date:** [July 7, 2011, 3:20pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/38 "2011-07-07T15:20:37Z")
> [@C\_K\_Dexter\_Haven](#): > > You need NOT to be tied into something like an annuity, which may sound good now but over the long haul will not prove reasonable. Could you provide the numbers that lead you to this conclusion? Not trying to debate it, just curious. ---
**Author:** ![Greg\_Charles](https://avatars.discourse-cdn.com/v4/letter/g/839c29/32.png) [@Greg\_Charles](https://boards.straightdope.com/u/Greg_Charles)\ **Post date:** [July 7, 2011, 8:05pm UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/39 "2011-07-07T20:05:17Z")
> [@Rand\_Rover](#): > > Well, depends on what you mean by “safe.” The broad US stock market has returned 10% in every rolling 20-year period. So, if you have a 20-year time horizon for an investment, it’s pretty “safe” that you’ll get something around 10%. Based on DJIA numbers, and if I’m doing my math right, that number is more like 6.3% per year for the 20 years ending yesterday … and most of that was growth during the 1990s. Going back 10 years gets you more like 2% per year, so unless we have a super decade ahead of us, we’re not going to get to that 10% rolling 20-year period average for a long, long time. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [July 8, 2011, 3:52am UTC](https://boards.straightdope.com/t/make-2-million-dollars-last/587735/40 "2011-07-08T03:52:11Z")
Convert it to cash and put it under the mattress or bury in the yard until September. Otherwise, if the US defaults on August 2nd, the amount you will have invested will take a critical hit. [Previous page](https://boards.straightdope.com/t/make-2-million-dollars-last/587735.md?page=1) [Next page](https://boards.straightdope.com/t/make-2-million-dollars-last/587735.md?page=3)