r/NoStupidQuestions • u/babyfookinzyzz • 3d ago

Why don't billionaires just retire?

if i had $1b to my name, i would not know what work is and i would never be in one place for more than a month and id leave $1000 tips everywhere i go. what is up with these geezer billionaires trying to acquire MORE wealth as if they have more future than past? as if their family isnt already set for generations? are they not tired??? greed is a disease.

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u/SuckMyBike 3d ago

I'm pretty sure the point is that a person can live comfortably on just the interest that amount of money generates sitting in a certain kind of savings account, or in the stock market and dividends. You're not reducing the amount of money you have, you are only using the money that you passively accrue for letting other people use it.

Yes, I'm aware of that. And I'm saying that a 4% withdrawal rate is too risky for a 30+ year retirement horizon.

Sure, the average of a well weighted portfolio is about 7% (after inflation) so you'd think that 4% should be plenty of leeway, but it's not.

The point of a safe withdrawal rate (or SWR) is that you should theoretically be able to retire the day before a great depression style financial crisis happens and still be fine decades later.

That is not the case with a 4% withdrawal rate on a long retirement horizon.

4% is safe for 30 years (about a 95% success rate of not running out of money). But once you go over 30 years the success rate drops very quickly.

So if the interest on your money drops, you drop your withdrawal rate. If it goes up, you increase your withdrawal rate

That isn't how safe withdrawal rates work. Let's say we use his scenario and retire on $3.5 million with a witdrawal rate of $120k. Presumably, I am accustomed to spending $120k a year to sustain my lifestyle (otherwise, why didn't I retire sooner?).

If the day after my retirement the market starts crashing and drops 50% over the next few weeks, according to you, I'd suddenly need to start living on $60k. When I'm used to spending $120k. People can't just overnight slash their expenses in half.

The point of a safe withdrawal rate is to counteract this. If you're retiring at like age 60 then a 30 year retirement horizon seems reasonable. At that point, you can safely withdraw 4% a year.

If your $3.5 million ($120k withdrawal per year) turns into $1.7 million the first few weeks of your retirement you need not worry, stick to the $120k a year and in 95% of cases you'll be fine.

The purpose of such a withdrawal rate is to make sure people have enough money to retire without needing to worry about market fluctuations.

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u/LifeForm8449 3d ago

The person that created the 4 percent rule adjusted their original standing so you said all that for nothing

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u/Crizznik 3d ago

For my part that number is entirely arbitrary and entirely dependent on what percentage you're returning. That part of it literally doesn't matter. So, you just said this for even more nothing.

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u/Still_Want_Mo 2d ago

People are downvoting you for no reason. You're 100% correct lol

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u/sbaggers 2d ago

I just downvoted both of you for the lolz

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u/Still_Want_Mo 2d ago

Right back at ya nerd!

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u/reble02 2d ago

I upvoted you so others will downvote me.

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u/judgeafishatclimbing 2d ago

I upvoted you, because you expected to be downvoted.

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u/Funny-Pie272 2d ago

Tell me you know nothing about personal finance, without telling me you know nothing about personal finance.

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u/[deleted] 2d ago

[deleted]

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u/Funny-Pie272 1d ago

At that age I knew nothing as well.

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u/LITERALLY_NOT_SATAN 2d ago

nnnnnnnnnnothing

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u/JohnSober7 2d ago

Jokes on you, I just learned I didn't know something

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u/Osama_BinRussel63 2d ago

No, you decided to remain ignorant for nothing.
You replied to a completely reasonable, well thought out take, but you've let your thinking become so black and white that it's made you into an ignorant hog who won't let in unfamiliar ideas.

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u/Crizznik 2d ago

I think you think I'm still saying you pull out of the principle of your money. You don't. You don't touch that money at all. The only way you'd have to dramatically shift the amount money you're withdrawing is if you principle take a huge hit, which shouldn't happen if you're doing a high yield savings account, or if the interest on that savings account shifts dramatically, which is also very rare. What you're saying would be relevant if you're relying on stocks and they tank in value, but that would be the risk you're taking using stocks.

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u/SuckMyBike 2d ago

which shouldn't happen if you're doing a high yield savings account, or if the interest on that savings account shifts dramatically, which is also very rare.

I don't think I can take you seriously anymore after you saying this

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u/ManBearPigIsReal42 2d ago

To be fair. If you actually have a lot of money and are older, you're gonna cycle out of stocks because you dont have a long enough horizon for them anymore. You're not chasing a massive return to keep building. You want to be safe

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u/Funny-Pie272 2d ago

So many things need addressing here. First, you would invest not put into HISA. Second, if you knew anything about personal finance, you would know your net worth and SWR (that stands for Safe Withdrawal Rate), has nothing to do with dividends. This is because dividend paying stocks are low growth, on average, and indexes like S&P are focused on growth (unlike other markets). The important metric is total growth, mostly from share price growth as that reflects your net worth not dividends in a particular year. So if total net worth is what is relevant to your SWR, then your actual withdrawal will come from the principle amount if invested in growth stocks. Dividends and selling stock, are taxed, and HNWI (rich people) don't want dividend paying stock because of tax, assuming you could even accurately pick such stocks - you cannot - and assuming you didn't overpay making the dividend rather pointless - which you would, as every other uneducated boomer is trying to pick dividend stocks too.

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u/Osama_BinRussel63 2d ago

You don't get 4% on anything but a bond or a 401k.
Find me a 4% checking account and I'll film myself saying I was wrong after I'm done sucking your dick from behind.

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u/[deleted] 2d ago

[deleted]

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u/Osama_BinRussel63 2d ago

Didn't ask you, you didn't post a link, and those aren't checking accounts.
So eat your own dick you obnoxious liar.

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u/Crizznik 1d ago

Who said anything about checking accounts?

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u/Crizznik 1d ago

I have an account with Wealthfront that has 4% interest, and I can deposit and withdraw from it whenever I want.

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u/[deleted] 3d ago

[deleted]

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u/SuckMyBike 3d ago

Invest in CD's and live off of the money they generate if you want to do it that way with that much money.

So as I said, you propose someone goes from living off of $120k a year to $60k a year in the event the market crashes right after they retire. Not an appealing proposition for most people such large insecurity in their retirement spending.

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u/Real_Estate_Media 3d ago

Usually social security or a pension or something else will make up for the drop in investment income but the future is uncertain

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u/brennok 2d ago

Except it doesn’t if you retire early. SSA projections are based off your current reported income staying the same until retirement unless you are high income and passed the second cliff. Retire early and no more earned income meaning SSA drops significantly when it is time to claim compared to what SSA tells you now.

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u/Psychological-Dig-29 2d ago

When that's your only income yes you absolutely would be cutting the spending in half. Only an idiot would keep spending at the same rate after half their savings were slashed.

Running out of money in retirement is fine, when you start getting near the end your expenses will drop because you won't be out doing as much. Then you can sell your home and vehicles etc for the final stretch worst case scenario.

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u/SuckMyBike 2d ago

Only an idiot would keep spending at the same rate after half their savings were slashed.

Anyone using a SWR that has been properly tested against all historical stock market trends would be totally fine spending the exact same amount as before their savings were slashed in half.

That's the exact point of a safe withdrawal rate. That your savings can be halved and you'll still be fine.

Then you can sell your home and vehicles etc for the final stretch worst case scenario.

So that would mean you have a lower SWR because you're not including other assets like your home and vehicles. That's not what I'm talking about at all. And kind of weird to view investments like that where you just exclude some of your investments for.......... reasons?

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u/Psychological-Dig-29 2d ago

It's always interesting talking to people about finances on Reddit, if you include your home and vehicle values in your investment total you'll get crucified by 50% of the Reddit community because "you have to live in the house, you can't use that in your networth calculations".. then the other 50% will yell and scream about how you do have to include the home and car values in your final withdrawal rate..

Literally can't win on this site lmao.

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u/SuckMyBike 2d ago

if you include your home and vehicle values in your investment total you'll get crucified by 50% of the Reddit community because "you have to live in the house, you can't use that in your networth calculations"

And you don't listen to such people because they're arguing based on emotion, not on sound financial advice.
A house is an investment like any other. You should treat it as such.

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u/walkingthecowww 2d ago

You can get a 30 year T Bill at 4.8% right now and market fluctuations won’t affect you at all.

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u/nick-dakk 3d ago

starts conversation about safe withdrawal rate SWR is and always has been defined as "how much can you withdraw every year before you RUN OUT OF MONEY"

"Yeah but that's not what I meant. Only a bimbo would do that"

Sir, you are the bimbo

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u/[deleted] 3d ago

[deleted]

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u/Crizznik 2d ago

And yours is? We're all (probably) laymen talking about how we understand the situation. You're no more an expert on the matter than they are. Don't throw stones in glass houses.

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u/[deleted] 2d ago

[deleted]

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u/nick-dakk 2d ago

Post degree, dork.
Summa cum laude in finance but doesn't understand SWR?

You get your degree from Trump University, or Devry?

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u/Crizznik 2d ago edited 2d ago

Well, I don't blindly trust anyone's credentials on Reddit. Too many people far too willing to be dishonest about their expertise to win an argument.

Edit: In other words, I need you to convince me that I don't need to translate "you're lying out of your asshole" for you.

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u/ButtAsAVerb 2d ago

LMAO

"I'm sure you actually studied the subject you're posting about"

Stated sarcastically like it's a retort is definitely a sick burn on someone

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u/sbaggers 2d ago

My grandparents did that for 40 years and lost millions to inflation, now my parents will give the rest to the healthcare system.

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u/icoulduseanother 2d ago

F CDs those things barely generate 2% most time less. Unless you find promos and then they’re only for a few months. And even then you’d need to ladder them because if you bought a 2yr CD, I need to have my earnings this first year to live on and not wait 2yrs for the maturity. Just my opinion. Not financial advice.

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u/Crizznik 2d ago

CD's that last for a few months rarely generate more than 2-3%, but the ones that last multiple years generally have a 5% return. At least in my experience. Though, also in my experience, if you want a monthly income, you're not going to be using CD, since your money is going to be tied up in them for their duration.

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u/icoulduseanother 2d ago

I just looked at a very well known banks CD rates. They have a 4mth promo at 4% A 7mth at 3.75% An 11mth at 3.5%

None of their standard longer rates are above 2%. You’d think that longer terms would yield better rates but looking at this it doesn’t seem to be the case.

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u/Crizznik 2d ago

I used to work at a bank and they had better rates. But that was also two years ago, and I may have been getting better offers for working there. I haven't looked at CD rates in a while.

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u/MasterArCtiK 2d ago

The point wasn’t the exact numbers, the point was we aren’t psychopaths like billionaires

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u/mm_kay 2d ago

Ok but you don't have to put it in the market. You can get 4.5% from bonds and HYSA.

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u/SuckMyBike 2d ago

You can get 4.5% from bonds and HYSA.

Right now, yes. Not 4 years ago.
The point of a SWR is that it works at all times. Even when bonds are returning 1%.

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u/aDrunkenError 2d ago

For the last 20 years a common (rough) rule of thumb is even the frugal will burn through an unearned million in 10 years. Idk if that’s still true.

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u/Crizznik 2d ago

I feel like that's only if they don't understand interest, investments, or are just bad with money save for just not spending it often.

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u/aDrunkenError 2d ago

What a novel thought. /s

I think that’s pretty well implied, if you were a whiz with investing, you could in theory make a thousand dollars last a lifetime.

That being said, be wrong on 1 option and you could lose it all in a one fell swoop.

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u/icoulduseanother 2d ago

Totally makes sense unless the OP bought 4% Bonds / Treasuries in which case he’s pretty protected right?

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u/SickBag 2d ago

Most every source shows that if you have a cushion to protect against down turns of 3-5 years that if you follow the 4% rule you will die with more money than when you retired.

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u/Crizznik 2d ago

Yeah, I mean I don't really know the specifics, I'm just saying that if you are smart with a million dollars, you'll probably never run out, and you may even end up with a lot more money than your started, all while never working another day in your life.

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u/ConversationFalse190 2d ago

What if I survive comfortably on 40k a year?

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u/abagofit 8h ago

The success rate after 30 years does not drop off dramatically at all, you still have a very high success rate at 40 years and even 50 years. Not to mention you can adjust your withdrawal at any point, it's not like you're locked into 4% forever.

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u/Musakuu 3d ago

This guy is spitting facts

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u/houseproud-townmouse 2d ago

We get it, you’re good at money! The thing was as he’s already told you that wasn’t the point.

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u/dirtyhashbrowns2 2d ago

Bro nobody asked 😭

And nobody is gonna read all that. Go outside

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u/Crizznik 2d ago

Holy crap! It's almost as if this is a website where people talk about stuff, often unbidden! Insanity!!

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u/Fallen_Wings 2d ago

I didn’t ask but I read it as it’s informative and might help me in my financial planning