[dbingham]

It also matters whether we are considering it a static $10 million or considering reality.

In reality, if you have $10 million, you put it in the S&P500 and make an average of 10% ($1 million) per year. Far more than inflation and more than enough to cover those things you're talking about unless you have a pretty extreme medical condition or very expensive hobbies.

[dkural]

I agree with this directionally, however I think you'll make more like 7.2% per year, and inflation will be about 2.5% per year. You'll also likely pay about 30% in federal and local taxes in the USA on it since you're actually selling it to live on it (more on taxes later). So you'll pay 2.2% in taxes. So on average you'll get 7.2 - (2.5 + 2.2) = 2.5% of income. If you have $10M, you can withdraw about 250K a year in today's dollars every year. i.e next year you can withdraw 256.3K or so, and keep doing this to keep your current standard of living. In down years you may want to adjust / tighten belt a tiny bit to not veer off track too much. And you can get cute with taxes but not recommended. That loan interest will add up over time, and when it's time to actually pay those loans, you'll still sell stock and pay taxes on it, unless your offspring inherit both.. and who knows what the laws will be then.

[bakkoting]

The 7.2% number is already adjusted for inflation. Historically the stock market has gotten about 10% nominal return, 6.5-7% real.

[rurp]

Agreed, but would caveat that the historical market returns happened as the world's dominant economic and technical powerhouse. The current trajectory is looking different, to put it mildly. The US is undermining nearly every advantage that led to such strong growth. Barring some massive pivot in the near future, medium term economic growth will most likely be lower.

[stripe_away]

inflation was double-digits in the 70s.

and the S&P was flat at 1.6% for the decade

despite some pretty amazing technical innovations pocket calculator and microcomputer (Altair 8800), first email, pong, floppy disks (they were the standard for 20 years), VCR, cell phone (1973 Motorola), barcode scanners, rubiks cube, ...

https://www.modwm.com/lost-decade-of-the-1970s/

[NoLinkToMe]

> and the S&P was flat at 1.6% for the decade

Nah not really.

Nominally S&P500 did 23% in the 70s, and 2.08% annualised, but financial returns are not just the stock prices, they're also dividends.

If you include and reinvest dividends, you'd have made 83% in the decade and 6.2% per year.

Its true inflation was high though, and an investment in Jan 1970 would've in real terms returned -1.1% a year after adjusting for inflation. If you continued investing equal amounts each year from 1970 to 1980, it'd actually be about -0.5%.

But no investment would've meant you lost half of all your money due to 7% average inflation, so investing would've been a pretty good idea, offsetting almost all inflation in the worst decade 50 years ago.

Also it's common knowledge to do a stock/bond split. Bond returns fared a bit better. -- and it should be said, the following decade inflation came way down and in nominal terms the S&P500 did +364% with dividends reinvested.

I do agree with your general point though, you can't just rely on a 10% annual average and spend that amount. The commonly referenced safe withdrawal rate (WR) of 4% is 2.5x less than the average S&P500 return for a good reason (based on a ton of monte carlo sims that indeed would lead to disastrous results at 10% WR in the 1970s).

[phkahler]

Except the market is a bubble. It's going to pop within 10 years as the boomers retire and die. Thats assuming low inflation. With significant inflation the younger folks might afford to prop it up.

[jama211]

Even if that’s the case, with 10 million you have 100 years of 100k+ a year even if you can only barely stave off the rate of inflation.

[misja111]

Can you elaborate? Why is the market going to pop "as the boomers retire and die"?