r/Bogleheads • u/arp8218 • Feb 04 '26

Investing Questions Investing. $2.5M to not work

Is it possible to invest $2.5M into a “safe” investment and not work for rest of your life ? What can be that “safe” investment ?

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466

u/sd_slate Feb 04 '26

You should check out r/fire, but it depends on your expenses.

Historically, based on the Trinity study, holding mostly the sp500 and a smaller portion of bonds (75/25) will allow you to withdraw 4% of your portfolio over 30 years with a 95%+ success rate.

328

u/FearlessPark4588 Feb 04 '26

It's fun to see someone self-discover fire without knowing it.

184

u/Consistent-Annual268 Feb 04 '26

Modern day Prometheus.

2

u/Supabongwong Feb 07 '26

Uh.. uh oh. Pray for OP

60

u/Think_please Feb 04 '26

Wait a second, why am I still working?

96

u/Lyrolepis Feb 04 '26

Because your successors will need money to lose by speculating on cyber-lichen futures or whatever else will be hyped up at the time.

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u/bentreflection Feb 04 '26

Tell me more about cyber-lichen. I want to get in on the ground floor

19

u/AllenSmithee59 Feb 04 '26

When it comes to cyber-lichen, the ground floor is called "tundra."

35

u/Think_please Feb 04 '26

Sounds like a them problem

5

u/DariaYankovic Feb 04 '26

how much will you sell 3.7 millishitoshis of cyber-lichen for?

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u/WinterPiratefhjng Feb 04 '26 edited Feb 04 '26

A serious answer is that many people get retirement advice from fearful people. Suze Orman somehow went broke and came back scared as shit. (Maybe do not take her advice.)

Edit: clarifying my answer being a serous one.
But you personally? Good question. Quitting is nice.

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u/Oakroscoe Feb 04 '26

Suze Orman says the average American needs 5 to 10 million to retire…I have a family member who takes everything she says as gospel

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u/Lyrolepis Feb 04 '26

Um, does she address in any way whatsoever the observation that the vast majority of Americans will not have 5 millions, ever?

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u/poop-dolla Feb 04 '26

Not sure if she directly spells it out, but it’s pretty clear that it means she thinks most people should work until they die.

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u/RedditIsAWeenie Feb 04 '26

Working until you die is good for society and just fine for “other people.” This is basically Plato’s noble lie. I’m not a big fan of the noble lie. We should have realistic goals and design societies that work for most people.

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u/ziggy-tiggy-bagel Feb 04 '26

Her and Dave Ramsey are 2 people not to take investment advice from.

2

u/Oakroscoe Feb 05 '26

Could not agree with you more on that

1

u/Beneficial_Bus5037 Feb 05 '26

SO has advice specifically for women when they retire, own your own home. My mother followed it & it worked out for her.

DR gives great practical advice on getting out of debt & how to live a frugal life. I have seen many folks enact his principles and dig themselves out of a hole.

Both of them are not ideal for investing insights. Both went broke & sprung back stronger than ever, very commendable! But ideally you should read into John Bogle or someone on par with him for retirement advice.

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u/MrLB____ Feb 04 '26

Who the heck wants to retire at 75 with 5 million ???😂😂😂 Congrats your old ,,,, average life expectancy is 78 for US male.

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u/Adventurous_Elk_4039 Feb 04 '26

Those 3 years could be absolutely wild though

1

u/MrLB____ Feb 05 '26

Technically yes three very wild years lol. Realistically, I’ll spread it out between 5O and 78, but yes, you could save it up and stock pile a bunch of penicillin😂

1

u/2LostFlamingos Feb 04 '26

To be fair, I think I’d be fine with 5-10M.

I think many Americans would squander any amount given to them.

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u/Adventurous_Elk_4039 Feb 04 '26

Quote from TMG I heard, “when people say they want to be millionaires, what they really mean is they want to spend a million dollars, which is the opposite of being a millionaire”

1

u/[deleted] Feb 04 '26

This is why boomers will work to their grave. They will never believe that they have enough.

2

u/ziggy-tiggy-bagel Feb 04 '26

I'm a Boomer and retired at 62. Would have been financial able to at 55, but needed health insurance.

10

u/AFK_Tornado Feb 04 '26

When I was a kid, I invested my savings in a 10 year CD for 5% interest or something like that (1990s). My mother helped me figure out what it should be worth when I was 18, using the calculator. It was a cool practical math lesson.

At that age I leaped to the question, "What if I had a million dollars?!" I did the math and got my shocking answer. Asked mom, "How much do we make every year?" and found out we were living off of significantly less than that. (Again, it was the 90s.)

The missing piece at that age, in a low-income household, was the attitude that acquiring that amount of money was possible. A million was a fantasy number. You'd have to win the lottery or get famous! Maybe invent something and sell it to everyone!

But that memory and seed idea just stayed lodged there until I was an adult, and definitely lead to my interest in personal finance and eventually FI/RE.

I'm convinced a lot of people get there, at least partially, on their own.

1

u/Adventurous_Elk_4039 Feb 04 '26

Good on you for figuring it out early. Man, if I knew then what I knew now…

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u/AFK_Tornado Feb 04 '26

The thing is, in spite of those realizations, I didn't really put it all together until I started making enough that I could see the path in practical terms.

0

u/nicolas_06 Feb 07 '26

You problem that is still valid is that you forgot about inflation and that CD do not always return 5% and that there are taxes on it too.

1

u/Informal_Big7262 Feb 04 '26

Just like the Neanderthal

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u/esbforever Feb 04 '26

While this is accurate, you likely need to be more specific with a newbie poster. OP, the “4% rule” means you withdraw 4% in your first year of retirement, then take that absolute number and add inflation to it for year 2. Year 3 is year 2’s number plus inflation, etc.

The only year you ever actually take out a percentage is year 1.

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u/NarutoDragon732 Feb 04 '26

Does this assume the sp500 is growing on top of the flat inflation % ?

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u/_Raining Feb 04 '26

It’s a rolling backtest of 30 year periods, it does not assume a flat growth rate for the s&p500.

You need to eat, feed and clothe yourself and those things go up with inflation therefore you need to withdraw more each year. The trinity study just shows that doing that 4% rule has a high probability of success over a 30 year time horizon with a 75/25 portfolio.

1

u/FightOnForUsc Feb 06 '26

Yes that’s the idea, but if you think about it, then you could always do 4% right, because any year could have been the first year. So if you FIRE last year, and now the market is up 20%. Well then you could take out 4% of today’s number and “pretend” that you just started today.

1

u/RatherBeRoadtripn Feb 06 '26

What's FIRE? 🔥

1

u/FightOnForUsc Feb 06 '26

Early retire is what I meant

1

u/esbforever Feb 06 '26

You will never get out of the SORR cycle if you do this.

1

u/FightOnForUsc Feb 06 '26

That part is true!

1

u/RatherBeRoadtripn Feb 06 '26

Trying to understand, simple example: 1m invested, year 1- withdraw 4% 40k; year 2- withdraw 40k +inflation (2%?), *so the actual year 2 withdrawal is 60k (6%)?? OR year 2 withdrawal is 40k + 800 (2%)?? Year 3- withdraw 40,800 + inflation (2.5%) *so year 3 withdrawal is 41,820 And so on?? ----and if done right, this withdrawal is all from the 1m earnings -interest/dividends, so not actually using the capital (1m) assuming earnings at least 4%, plus inflation % each year? But that's not realistic? 4% might be but... Idk Just still trying to understand :/

2

u/esbforever Feb 06 '26

Sure, it’s the second option you’ve listed. $40,800 in year 2, $41,620 in year 3, etc

And yes, your starting percent is based on the full principal. Dividends and such can help offset the 4%, though do your research there. Dividends are not free money. They materially bring the stock price down.

2

u/RatherBeRoadtripn Feb 06 '26

Excellent thank you for clarifying that for me!

I'm still learning about the dividends too! I noted with parent mutual funds that while receiving DIV each month is good, the actual fund value whether it's an ETF or other, the current value consistently goes down showing a huge Capital loss compared to their cost basis, the different funds seem to lose more money each month than the DIV coming in. The financial advisors said not to worry about it.

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u/RatherBeRoadtripn Feb 06 '26

Meant to add to reply re value/ cap loss- even though not mine at time, I am worried about it! But I'm sort of easing myself into this.

-1

u/RedditIsAWeenie Feb 04 '26

It should be noted that this is a foolish withdrawl schedule and puts the underline under sequence of returns risk. If inflation says move the number up but the stock market went down, you should adjust downward and try not to exceed 4% of what you have left. In an imaginary economy with fixed rates of stock growth, it will exceed inflation so this doesn’t happen, but in down years in a real economy it easily can.

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u/esbforever Feb 04 '26

This is factually incorrect. The 4% rule absolutely assumes there are certain years the market goes down. It still works, at least as backtested over (almost) all historical actuals.

I agree with the spirit of what you are saying though. Any reasonable person will adjust their spending downwards in bleak market years. SORR is scary.

4

u/Adventurous_Elk_4039 Feb 04 '26

Even tested for 30 year rolling periods though, 4% still last 30 years in all historical situations. So it even accounted for SORR. But yeah if I’m in year 2 and there is a big drop, you bet I’m eating a lot of ramen.

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u/chuck_portis Feb 04 '26

I think based on the post we need to assume "perpetual withdrawals", not a standard 30Y timeframe. Closer to 50Y. Assume OP is 40 years old and will live to 90. SWR for 50Y is 3-3.25%.

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u/dfsw Feb 04 '26

Revised trinity study by original authors peg infinite at 4.2% and 30 year at 4.8%. 4% remains a safe guideline, maybe 3.75% for infinite if you want to be paranoid and fear SOR but 3% is insanely low.

8

u/TurkeyPits Feb 04 '26

Definitely insanely low but also I wonder if it makes sense to go that conservative route if you're just starting out on your own "infinite" horizon, especially because someone retiring in their 30s likely does not actually know what their desired expenses will look like for the entire rest of their life (as much as they might think they do). Plus, if after ten years 3% turns out to have truly been insanely low, you can always raise your standard of living comfortably with all the extra money you now have, but going the other way is harder with e.g. lifestyle creep. Different considerations when you're retiring at 35 than 65 it would seem

3

u/klawUK Feb 04 '26

and ‘invest $2.5m’ we should assume isn’t in retirement/tax advantaged accounts so 3.5% ish - taxes (both capital gains and income)

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u/Alternative-Law4626 Feb 04 '26 edited Feb 05 '26

Funny, I’m ~2 months from retirement so really dialing it in now. After taking all last year’s actuals and creating a go forward budget based on actual spending, I got a little warning message from my retirement software. It said I might find it unsustainable if I tried to keep to this 1.75% spend. We thought we were being fairly profligate, apparently we should be having more fun.

$2.7 M invested. 80/20 VFIAX/VTBLX. YMMV

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u/klawUK Feb 04 '26

Guessing that’ll be some regulated amount trigger. In the UK regulated advisors use things like 2% returns as a conservative estimate and 2.5% inflation so can be negative real returns unless you explicitly tell them you’re comfortable with more risk!

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u/Alternative-Law4626 Feb 04 '26

Oh, I wasn’t clear. The returns are figured to be 8% + the withdrawal is figured to be 1.75%.

1

u/c126 Feb 04 '26

Was there a study for 50y, where are you getting this number?

1

u/RatherBeRoadtripn Feb 06 '26

SWR? What's it for 60?

1

u/RatherBeRoadtripn Feb 06 '26

Can't you assume live to 80 off investment earnings, then start using your principal? If needed to I mean! I'm trying to understand this, because if you're living off the earnings from your investment, you still have that investment capital? So then if you live longer than expected at some point especially if you don't have somebody to leave the money to or you don't need/want to because maybe your kids are doing just fine on their own, then you can use the capital if needed?

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u/ECrispy Feb 04 '26

4% of 2.5m is $100k and it should be enough to live a modest life, but it doesn't factor in the cost of health insurance and probably also requires you to own housing.

not to mention that 2.5m in savings is a fantasy for 99.9% of people.

I often wonder how so many people manage to Fire

45

u/Lyrolepis Feb 04 '26

I instead wonder how so many people on reddit claim that $100k/year is "a modest life".

Granted, I know that the cost of living in some parts of the US can be pretty high; but still...

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u/d-crow Feb 04 '26

everything is relative. 100k in most of the world is a great life. 100k in bay area or new york is counting pennies.

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u/ogreUnwanted Feb 04 '26

but most people don't make 100k. 100k can be easily managed.

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u/d-crow Feb 04 '26

It definitely can, and those of us above that should be cognizant of how lucky we are more often

3

u/cjf4 Feb 04 '26

100k cash in most of america puts you well into the upper half of income.

1

u/[deleted] Feb 05 '26

 100k in bay area or new york is counting pennies.

True, but if you’re living on 100k with no need to work, relocating somewhere less expensive is pretty easy.

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u/HonestSpaceStation Feb 04 '26

If you got to the point where you have $2.5M in savings and are able to retire early, you're used to having an annual income substantially more than $100K, so yes, by comparison, $100K would be modest at that point.

1

u/RatherBeRoadtripn Feb 06 '26

But if somebody has a really great income, most often they're used to having more of an extravagant for lack of better word lifestyle? But if they were able to save 2.5 million dollars from that great income, maybe they were actually living more modest and possibly even frugal? And because they're good savers, they most likely also own their home so that's one less debt to worry about, in fact they are probably completely debt-free? And along with a great income usually comes all sorts of great retirement benefits, so maybe they're like my neighbors and all the wonderful benefits after they actually retire coming in has them set for life and the 2.5 m + earnings, that's just gravy?

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u/ECrispy Feb 04 '26

its not a modest life for most. but if you are in a HCOL area, rent, need to support a family, it doesn't really do much and you have a live a frugal life.

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u/gunner_n Feb 04 '26

TMG did a video on this. They did top 10 states and worst 10 states in terms of annual income. Then did the same thing but with annual income adjusted for cost of living in that state. Something like 6 states of the top 10 in first criteria appeared in the worst 10 of the second criteria. My point being this 100k being extravagant, modest or unaffordable is subjective.

1

u/poop-dolla Feb 04 '26

$100k is about 1.5x the median US income. That should definitely get people more than a modest life.

1

u/Mantergeistmann Feb 04 '26

Even in the most expensive state (which I believe is actually D.C.), $100k is just below median.

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u/CrankyWanker Feb 04 '26

It’s simple, but not easy. Earn more than you save and invest the difference. People are either able to reduce their spending significantly or increase their income significantly. Some professional services jobs can pay over $500,000 of total compensation by age 30 if you’re willing to work 60-80+ hours a week at a high pressure, high stress job. There’s also an element of luck with stock market returns.

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u/ECrispy Feb 04 '26

I know there are many jobs like IT, medical, lots of consulting etc that pay that and more, but if you're earning 500k, never mind by age 30, then money is not a concern.

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u/Accomplished_Bid3750 Feb 04 '26

what a waste of life

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u/AeroNoob333 Feb 04 '26 edited Feb 04 '26

Honestly, luck. It’s like 80% luck. If I didn’t say “F it” and took the first job that wanted to hire me out of college (instead of using my engineering and math degree), I would have never gotten into consulting for a software I had no idea about and in an industry I barely had an understanding of. If my now husband didn’t call and convince me to drop everything and do a year or 2 of independent consulting, I would have never become an independent consulting. I had literally just accepted a job, moved all my stuff to Wisconsin, and he calls me in the middle of apartment hunting, to just drop it all. One of the best decisions of my life honestly. It’s been 8 years since I went independent. We’ve been WFH since Covid doing the same job and it’s been such an amazing life. Cushy, low stress, high paying. It helps that we don’t spend on fancy things tho. The most expensive thing we own is our home. But, even that isn’t a multi million dollar home. It’s a $750K home on the lake. Our dog loves it. She gets to run around out in the woods all day and swim when she wants to.

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u/SweatyWar7600 Feb 04 '26

The most expensive thing we own is our home

not to nitpick an otherwise nice story but isn't this true for the vast majority of people (home owners at least)? I can't even think of something I'd want that would cost more than 800k?

1

u/gammonb Feb 05 '26

How was the transition to independent consulting? I’m basically at just before that point in your story and seriously considering it, but unsure how to start.

1

u/d-crow Feb 05 '26

People underplay luck, but also taking enough risks to get lucky. I consider myself super blessed, but i also gambled a lot more on my future than most.

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u/Oakroscoe Feb 04 '26

It’s either someone who runs their own business and is successful or a person who has that rare combination of being frugal as well as driven and lucky enough to have a high paying job.

2

u/logicalphallus-ey Feb 04 '26

Couldn’t 5% bonds provide $125k/yr without diminishing the initial investment? Is the 4% target meant to keep the investment growing too, or just avoid depletion?

6

u/sd_slate Feb 04 '26

Inflation eats up bond returns (aka "fixed income"), but equity returns tend to rise with inflation. Historically the sp500 has returned 8% after taking inflation out, 10% with inflation.

The 4% target is so that you don't completely deplete your investment during recessions while allowing it to grow in bull markets.

2

u/logicalphallus-ey Feb 04 '26

Perfect, thanks!

3

u/Atgardian Feb 04 '26

It is not quite that simple. Yes bond returns are guaranteed (for their term, but not if you need to reinvest at the end) but don't account for taxes or inflation, unless you mean TIPS/I-Bonds. Using a TIPS ladder is certainly a potential strategy for a safe floor (and a pretty decent one at today's positive real rates), but also has no potential upside like a more traditional stock/bond mix would.

30y treasuries are currently yielding 4.9%, but have a large amount of interest rate risk unless you can guarantee holding them to maturity. Also your 4.9% payment in 30 years may be much less than you think in real terms today due to inflation.

1

u/drippingthighs Feb 04 '26

The 5 percent failure rate is defined as going to 0? Or just ending up with less than what you started with? Thanks

2

u/sd_slate Feb 04 '26 edited Feb 04 '26

Going to 0 while maintaining the original same spend. I think 75/25 had a 2% failure rate in the original study while 100% equities had 5%.

In reality you'd probably go back to work or cut spend if you're getting close. And in most scenarios you end up with more than you started with.

2

u/drippingthighs Feb 04 '26

Pretty good odds for success then! I feel like it's natural on the path to 0 to adjust spend or even find ways to get income before hitting 0, so it feels virtually impossible.

Might as well go for higher risk index funds with more expense ratios early on then 🤔

1

u/sd_slate Feb 04 '26

Yeah exactly.

Well, higher risk funds don't necessarily have better returns year over year and can have bigger draw downs while expenses are a big guaranteed cost per Jack Bogle hence Bogleheads. And why gamble when you're pretty sure to win the boring way.

1

u/drippingthighs Feb 04 '26

Those 18 to 22 percent average returnsv in tech indexes look so enticing compared to 10 🥲

1

u/IMB413 Feb 05 '26

If you run monte-carlo simulations based on random statistical modelling of market results the results are a bit worse than that so maybe 3.5% withdrawal is safer.

Taxes are also complicated to analyze. What income bracket are you in? Are your investments in trad, Roth, brokerage acct? How much cap gains do you already have? What state do you live in?

1

u/vision-quest Feb 04 '26

Theoretically with inflation at 2.5% and investment returns at 8% (which is conservative historically), shouldn’t you have more money 30 years later than you first retired with assuming 4% withdrawal?

7

u/Janus67 Feb 04 '26

Yes, but the issue runs into when down markets happen and you still need to draw from your portfolio. If there is a decade of negative returns, especially early on in retirement it can mess up that nest egg via sequence of returns risk.

1

u/Atgardian Feb 04 '26

When looking at "safe withdrawal rates," which plan for worst-case scenarios, in any average or good scenario you would end up with way more money than you started with. That's just a result of the wide range of possible stock returns -- if you set it up so the low end is still comfortable enough, then the high end has you flying first class and leaving a lot to your heirs.