At what networth is it not worth working at X salary?

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At what networth is it not worth working at X salary?

Postby techcrium » Thu Jul 11, 2013 12:07 am

Let's say you are working at a company paying you $40K per year. e.g. you are a accountant or help desk associate or something of that sort.

Let's say you managed to save $50K over the years and got lucky with some stock call options (Tesla, Netflix, whatever) and your $50K ballooned to $500K.


With a networth of 500K in liquid stocks, is it still worth going to your day job, busting your arse everyday for a mere 40K a year when 8% returns generates that amount anyways?

Clearly 500K is still not quite enough to retire on, but makes going to your day job feel like a waste...

This is obviously a fake example but I can't help wondering, if your portfolio got really lucky and really big, at what point is it not worth doing your day job and look for raises or do something else?
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Re: At what networth is it not worth working at X salary?

Postby livesoft » Thu Jul 11, 2013 12:16 am

It's never worth busting your arse for $40K a year no matter what your networth is. One should work hard finding a job they enjoy. OTOH, I suppose that is not possible for many people. Sad.
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Re: At what networth is it not worth working at X salary?

Postby BrandonBogle » Thu Jul 11, 2013 12:28 am

livesoft wrote:It's never worth busting your arse for $40K a year no matter what your networth is. One should work hard finding a job they enjoy. OTOH, I suppose that is not possible for many people. Sad.


+1

I personally feel I'm underpaid in my current position and I know I am in the marketplace. But I love my job and the people I work with. I haven't hit my number yet though, so maybe someday I will make the switch to a job that pays mre towards market rate for the position and skillset I bring.

But in any event, finding a job you love (or at least like and enjoy) makes a huge difference and makes whatever it's pay is more bareably since you don't feel like you are "slaving away".
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Re: At what networth is it not worth working at X salary?

Postby NightOwl » Thu Jul 11, 2013 12:50 am

techcrium wrote:With a networth of 500K in liquid stocks, is it still worth going to your day job, busting your arse everyday for a mere 40K a year when 8% returns generates that amount anyways?

Clearly 500K is still not quite enough to retire on, but makes going to your day job feel like a waste...

This is obviously a fake example but I can't help wondering, if your portfolio got really lucky and really big, at what point is it not worth doing your day job and look for raises or do something else?

Hi Techcrium,

I get what you're saying, but that portfolio threshold (or at least my version of that threshold) is way above $500k. At that portfolio size, the important thing is that your portfolio returns are being reinvested so that your portfolio can grow. After all, if the portfolio's value drops by 30%, you don't have the option to live on -150K rather than busting your arse -- in fact, you now have to bust your arse a lot harder.

There is a portfolio size where I'd feel silly trying to save more, but the portfolio would have to be pretty big for me to transition from saving to spending. Here's a concrete example near and dear to me. Let's say you have a parent who has $800k but is trying to work to the age of 70 to maximize SS benefits. A $60k job doesn't mean anything additional is being saved, but it also means that nothing from the portfolio is being spent, and that's a big deal. It's still worthwhile going to the day job for sure, even at portfolio amounts far higher than $800k.

When I think about my own retirement, I play around with scenarios involving getting to a portfolio size where I feel comfortable downsizing to a job that just breaks even so that the portfolio can do what it does without the drag of withdrawals. I myself wouldn't use anything like an 8% number (or really any nominal number for that matter), but at a certain point I'd be willing to take the risk of stopping portfolio accumulation. Not at $500k, though.

Oh, and never in "liquid stocks," unless you mean "held in a total market index fund." :wink:

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Re: At what networth is it not worth working at X salary?

Postby reason-logic » Thu Jul 11, 2013 12:54 am

I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?
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Re: At what networth is it not worth working at X salary?

Postby NightOwl » Thu Jul 11, 2013 1:02 am

reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?

Hi reason-logic,
That's a ton of money for 12 hours a week, so I certainly don't think you're nuts! I think in your place I would probably get very excited about the amount of money I could afford to give to causes that I love. But you do provide an example of a portfolio size where I'd be more than comfortable no longer saving. As I recall, Bill Bernstein has said that a 2% portfolio withdrawal is "bulletproof" (it is roughly equivalent to dividend yield), so as long as you can live on $480,000 per year you will do just fine.

If I were you, I might well keep working, if I loved the work, and enjoy giving the money away, but if I didn't love the work I'd quit in a heartbeat without a qualm.

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Re: At what networth is it not worth working at X salary?

Postby reason-logic » Thu Jul 11, 2013 1:13 am

Nightowl,

Thanks, I guess I feel the same way but listening to yourself is often taking the worst advice.
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Re: At what networth is it not worth working at X salary?

Postby NightOwl » Thu Jul 11, 2013 1:18 am

reason-logic wrote:Nightowl,

Thanks, I guess I feel the same way but listening to yourself is often taking the worst advice.

Congratulations on your success! You've given yourself the flexibility to do lots of cool things with your life -- including continuing to work 12 hours a week if it suits you.

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Re: At what networth is it not worth working at X salary?

Postby LFKB » Thu Jul 11, 2013 2:24 am

reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?


You work 12 hours per week for $960,000 per year? Sounds like a good gig but at $24 million you don't have anything to worry about. If you like the work and it doesn't interfere with how you want to live your life then may as well keep doing it. Otherwise, quit. May I ask what you do?
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Re: At what networth is it not worth working at X salary?

Postby cjking » Thu Jul 11, 2013 4:28 am

If you are working age then life expectancy is probably more than 30 years. There's little difference in income achievable between planning to live off money for that long and planning to live off the same size pot forever. I reckon max. safe withdrawal rate for 100% US stocks is 3.4% at the moment. Will be lower if not 100% stocks. So $500,000 will support at most about $17,000 income, at current stock-market valuations.

I think the right approach is to live frugally, get your (realistically calculated) investment income up to whatever you can live on, then from that point regard yourself as living off investment income, and all employment earnings as additions to capital. Assuming you live frugally, a comfortable and safe level of investment income at which to stop working is probably approximately twice the minimum you can live on.
Last edited by cjking on Thu Jul 11, 2013 4:38 am, edited 5 times in total.
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Re: At what networth is it not worth working at X salary?

Postby mbenz1997 » Thu Jul 11, 2013 4:28 am

I am curious about what you do as well...

If you love what you do, then why quit? For myself, when my assets generate an income similar to my salary in monthly dividends, that's probably when I would think about quitting. But not because I want to do nothing all day; I want to take that time to try something new and maybe turn a hobby or something I would enjoy into a full time passion.

On the other hand, at 12 hours per week, you have ample time to do that anyways and more than enough income to pursue something to that end...Personally, I'd probably stay with the job and pursue some hobby/passion on the side.
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Re: At what networth is it not worth working at X salary?

Postby Methedras » Thu Jul 11, 2013 5:39 am

I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?


If I had your net worth, I work never do any work, that I didn't want to, again. If you feel that $24 million isn't enough saved, you may be insecure/nuts or have a very lavish lifestyle. Being insecure about it isn't your fault though if you feel that way, because I think it is human nature. You have to actively fight against this feeling. If you enjoy what you do for those 12 hours a week, why not keep doing it? If you don't like it, there is no reason to continue at this point.
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Re: At what networth is it not worth working at X salary?

Postby scrabbler1 » Thu Jul 11, 2013 7:22 am

mbenz1997 wrote:I am curious about what you do as well...

If you love what you do, then why quit? For myself, when my assets generate an income similar to my salary in monthly dividends, that's probably when I would think about quitting. But not because I want to do nothing all day; I want to take that time to try something new and maybe turn a hobby or something I would enjoy into a full time passion.

On the other hand, at 12 hours per week, you have ample time to do that anyways and more than enough income to pursue something to that end...Personally, I'd probably stay with the job and pursue some hobby/passion on the side.


While it was more of a coincidence, this is what happened to me when I pulled the plug and retired back in 2008. I did not base my ER on this but instead on generating a certain amount of monthly dividend income compared to my projected expenses. At the time, I was working only 12 hours per week so my wage income had dropped a lot compared to when I was working more hours in the years prior.
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Re: At what networth is it not worth working at X salary?

Postby lhl12 » Thu Jul 11, 2013 7:33 am

reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?


You are definitely not nuts. You are also not a workaholic, or you'd be working a lot more than 12 hours per week. You might be insecure (as lots of people are), but it might just be that you're afraid of what your life would be like if you were working zero hours per week. To me, the real question is what do you do with the other 28 (or 38, or 48) hours per week that you could be working but aren't. Your goal ought to be to fill that time with things you like sufficiently more than working so that you happily take your working hours from 12 down to zero.
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Re: At what networth is it not worth working at X salary?

Postby EternalOptimist » Thu Jul 11, 2013 8:38 am

I bailed from a six figure job I hated at 61. I don't have the "million" recommended but 2+ years out things are good. Life's way too short to worry about money, believe in yourself that things will work out. :happy
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Re: At what networth is it not worth working at X salary?

Postby RobInCT » Thu Jul 11, 2013 9:23 am

techcrium wrote:With a networth of 500K in liquid stocks, is it still worth going to your day job, busting your arse everyday for a mere 40K a year when 8% returns generates that amount anyways?

Clearly 500K is still not quite enough to retire on, but makes going to your day job feel like a waste...

This is obviously a fake example but I can't help wondering, if your portfolio got really lucky and really big, at what point is it not worth doing your day job and look for raises or do something else?

It's still worth working because it allows you to spend your income, not your investments and letting those investments compound. Due to abnormally high returns this year, it's possible the value of my total portfolio will go up this year by an amount greater than my salary. My response: so what? It doesn't even take a very large portfolio to make that true in years like 2009 (S&P up > 25%).

I don't see the relationship between size of portfolio and whether the job is "worth it" at any point below safe retirement amount, which as you note $500k is definitely not.

As for what point it's worth looking for raises--I don't see why anyone would avoid looking for a raise because their portfolio is small? Or seek one out solely on the basis that their portfolio is bigger? Does not compute.
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Re: At what networth is it not worth working at X salary?

Postby azanon » Thu Jul 11, 2013 9:30 am

EternalOptimist wrote:I bailed from a six figure job I hated at 61. I don't have the "million" recommended but 2+ years out things are good. Life's way too short to worry about money, believe in yourself that things will work out. :happy


Nor does one necessarly need 1mil in cash, but they do need a sum total of income that's good for 30 years or so at age 61 with overall SWR at 4% or preferrably less. If you've got that, then I agree, why worry? If not, I'd still not worry, but I'd certainly be looking for a job that I wouldn't hate.
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Re: At what networth is it not worth working at X salary?

Postby G-Money » Thu Jul 11, 2013 10:37 am

I wouldn't count on 8% annual returns, real or nominal.

A sufficiently large portfolio gives you flexibility. If you don't like your job, having sufficient savings may give you the courage to set out on a new career, perhaps quitting without having a new job lined up. But the best case scenario is finding work you enjoy.
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Re: At what networth is it not worth working at X salary?

Postby Rodc » Thu Jul 11, 2013 11:03 am

This seems so simple to me.

Do you have enough to retire?

If the answer is no, then you need to work.

Unless you can live on $20K or less, you need to keep working as at best you might take out $20K a year indexed to inflation (that may be too much, just a ball park). Certainly 8% is too much, even if you manage to get an 8% return (likely on a typical stock/bond fund you won't). You can only take part of the gains as you need to reinvest some to keep up with inflation.

Perhaps a more interesting question is can you change to a lower paying job you like better if it means you no longer can continue to put away retirement savings. That would take a closer look at the details of your life and some calculations, but might be doable of you can live on a reduced salary.
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Re: At what networth is it not worth working at X salary?

Postby EternalOptimist » Thu Jul 11, 2013 11:24 am

Isn't a key question here what are you expenses. You only need money if you have expenses, no?
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Re: At what networth is it not worth working at X salary?

Postby InvestorNewb » Thu Jul 11, 2013 12:12 pm

I would consider leaving work if I could get paid the same salary in dividends. On top of my existing portfolio, I will need an additional $2m based on my current holdings. Factor in taxes and I probably need more than that.
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Re: At what networth is it not worth working at X salary?

Postby tyrion » Thu Jul 11, 2013 12:38 pm

This is going to be very subjective based on age and net worth. And expenses vs salary.

If you are 80 years old, you are probably going to be happy to leave your job even if it pays 8% of your net worth per year. Unless you really love doing what you're doing, of course.

If you're 25, no way can you afford to leave your job under the same conditions.

My guess is most people are in the 2-4% range when they would consider it no longer 'worth it' to work at that salary level. If I have $2 million in the bank, I'm probably not going to keep a $40k/year job, but may consider the $80k/year job. All the normal early retirement concerns apply for those under regular retirement age - health care, longevity, etc.
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Re: At what networth is it not worth working at X salary?

Postby bkslainte » Thu Jul 11, 2013 12:56 pm

Let's say you managed to save $50K over the years and got lucky with some stock call options (Tesla, Netflix, whatever) and your $50K ballooned to $500K.


My angle on this relates to how you acquired the net worth in the first place. If you acquire it quickly, I would be more catious about quitting the day job. I think that emotionally, you might be lured into trying those bets to get luckly again. Also, if you are on the younger side and have not experienced several booms/busts then you might be tempted to try the bets again. On the other hand, if the net worth was acquired more slowly then I think that you would be more emotionally ready for quitting the job.
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Re: At what networth is it not worth working at X salary?

Postby IlliniDave » Thu Jul 11, 2013 1:26 pm

techcrium wrote:Let's say you are working at a company paying you $40K per year. e.g. you are a accountant or help desk associate or something of that sort.

Let's say you managed to save $50K over the years and got lucky with some stock call options (Tesla, Netflix, whatever) and your $50K ballooned to $500K.


With a networth of 500K in liquid stocks, is it still worth going to your day job, busting your arse everyday for a mere 40K a year when 8% returns generates that amount anyways?

Clearly 500K is still not quite enough to retire on, but makes going to your day job feel like a waste...

This is obviously a fake example but I can't help wondering, if your portfolio got really lucky and really big, at what point is it not worth doing your day job and look for raises or do something else?


My take is that once I achieve a reasonable degree of financial independence, salary has nothing to do with it any more. Only my personal satisfaction would make it "worth it" for me to be employed in any way.
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Re: At what networth is it not worth working at X salary?

Postby Bacchus01 » Thu Jul 11, 2013 2:08 pm

What happens in that year when 8% is just -5%?

How much are you budgeting for health insurance?

What if you have kids and they want to go to college?

10X current wages would probably be enough if you're 75. But if you're 35? Not a chance.
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Re: At what networth is it not worth working at X salary?

Postby Mill » Thu Jul 11, 2013 11:52 pm

techcrium wrote:Let's say you are working at a company paying you $40K per year. e.g. you are a accountant or help desk associate or something of that sort.

Let's say you managed to save $50K over the years and got lucky with some stock call options (Tesla, Netflix, whatever) and your $50K ballooned to $500K.


With a networth of 500K in liquid stocks, is it still worth going to your day job, busting your arse everyday for a mere 40K a year when 8% returns generates that amount anyways?

Clearly 500K is still not quite enough to retire on, but makes going to your day job feel like a waste...

This is obviously a fake example but I can't help wondering, if your portfolio got really lucky and really big, at what point is it not worth doing your day job and look for raises or do something else?



Most Bogleheads are pretty conservative with money, as defined in previous answers. Personally, I would say that this particular example is getting to the point where its not worth it. If this scenario is to be believed, then you would think that COL would be 40K or less, as 40K is a base salary to cover expenses before getting lucky with investments (also assumes no lifestyle creep). With a 500K cushion and a COL of 40K, you have some options. Worst Case scenario, you can be unemployed for 12 years, living expenses paid, all nominal of course.

Factors are the following:
-Do you like your job?
-How old are you?
-What are your expenses?
-What other job opportunities are there?

Answers vary by opinion, but worst case scenario, you have some F-U money if the 40K job becomes tiresome/tedious/PITA, then do something else.

Interesting.
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Re: At what networth is it not worth working at X salary?

Postby reason-logic » Fri Jul 12, 2013 12:28 am

LFKB wrote:
reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?


You work 12 hours per week for $960,000 per year? Sounds like a good gig but at $24 million you don't have anything to worry about. If you like the work and it doesn't interfere with how you want to live your life then may as well keep doing it. Otherwise, quit. May I ask what you do?



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Re: At what networth is it not worth working at X salary?

Postby travellight » Fri Jul 12, 2013 12:53 am

I think the higher the salary, the higher the net worth would have to be to walk away from it.

e.g.- if salary was 400K+, I would want a net worth of 10 million to leave that salary behind.... assuming that I generally like my job/work. If I did not like the job, 2 million would be the trigger point. If I hated the job and it was toxic, I would leave right away.
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Re: At what networth is it not worth working at X salary?

Postby Swampy » Fri Jul 12, 2013 6:32 am

At what networth is it not worth working at X salary?


This is not really the question to answer.

The question should be At what net worth is it not worth working at salary X when my living expenses are Y?

There are a lot of people that earn $40K a year and have a net worth of $1 million. They've kept their annual expenses within acceptable limits and they can quit.

There are others who earn $300K a year and have a net worth of the same $1 million. Their annual expenses are high and they cannot quit.

Probably the purest question is At what net worth is it not worth working when my expenses are X?

This depends on whether you like, hate or are just putting in time on your job. People evolve over time. I loved my work early on, I made a lot of money and it was exciting. Over years, as I got married and had kids, the excitement gave way to a realization that it was very dangerous with potentially lethal results. Priorities changed. I eventually hated my work and dreaded it. As soon as I was able to sell a property that had been a disastrous lifestyle and investment choice, I was out last year.

If you like your work, you can bide your time till you reach a higher strata as listed below.

The answer is a multiple of expenses (or income if you prefer).

With a net worth that is 25 times your annual expenses, you can reasonably look forward to having enough money for 25-30 years without having to toil during that time.


With a net worth of 33 times your annual expenses, you can reasonable look forward to having enough money for 30-40 years without labor.


Once you break about 40 times annual expenses, you can be work free indefinitely.


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Re: At what networth is it not worth working at X salary?

Postby madbrain » Sat Jul 13, 2013 5:12 am

EternalOptimist wrote:Isn't a key question here what are you expenses. You only need money if you have expenses, no?


Yes, that's what I was thinking too.

However, net worth is also the wrong thing to measure.

If your net worth is all in your home for example, you would need to either exclude it from your net worth, or sell it and convert it to an income-producing asset, and become a renter. All non-income producing assets should be either excluded or sold.

In practice, you can retire when your portfolio is approximately 25 times your annual expenses.
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Re: At what networth is it not worth working at X salary?

Postby travellight » Sat Jul 13, 2013 12:52 pm

I would count net worth to make it an apples to apples comparison with renters. Yes, I do plan to sell my home and have that lump sum be part of my portfolio.
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Re: At what networth is it not worth working at X salary?

Postby Ged » Sat Jul 13, 2013 1:40 pm

reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?


Do you enjoy your work? If so then you are not nuts. On the other hand if you hate your work then you should quit and find something to do that you enjoy.
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Re: At what networth is it not worth working at X salary?

Postby Greatness » Sat Jul 13, 2013 3:30 pm

reason-logic wrote:I really struggle with this. I am 54, net worth $24 million, but I am still insecure about running out of money. My old firm pays me 80k a month for 12 hours a week. Am I insecure, a workaholic or just nuts?



Tell me about it. I work 60 hours + a week with a net worth of 198 gazillon and I still worry. What to do... The problems us commoners have to deal with these days...
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Re: At what networth is it not worth working at X salary?

Postby mac808 » Sat Jul 13, 2013 5:35 pm

I struggle with this (mental) challenge also, in a similar situation as reason-logic (with lower absolute #s) - more than enough to retire, and half way out the door already, but significant golden handcuffs make it hard to exit completely.

After-tax savings from my salary in 2013 will be a little over 5% of net worth, plus figure another 2% to cover spending that would otherwise come out of investment accounts. For me, this is enough to justify staying on the job. I enjoy the work and the social interactions, but like almost every high compensation job I know, it comes with periods of significant stress due to significant responsibilities.

I think if that combined 7% of net worth fell to around 3 or 4%, I would throw in the towel and just quit. I am younger so I use a SWR of 3% in my calculations.
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Re: At what networth is it not worth working at X salary?

Postby lostInFinance » Sat Jul 13, 2013 7:38 pm

livesoft wrote:It's never worth busting your arse for $40K a year no matter what your networth is. One should work hard finding a job they enjoy. OTOH, I suppose that is not possible for many people. Sad.


What a ridiculous comment, the median income of a full-time worker in the US is only about $40k. By that standard, half the US population should quit their jobs.

Back to the OP's question, 8% is a high real rate of return. I think trusts tend to use 2-3% as an indefinite swr. However, I'll assume the $500k provides $40k indefinitely for the scenario. If you're young, I think you should still take the $40k job. My rationale is that $40k from your investments is just enough to pay your bills, but not enough to really do anything. If it was say an inheritance at 25, and I had nothing to do for the next 50+ years except watch law and order reruns during the day, I'ld probably shoot myself.
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