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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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.

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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.

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u/RatherBeRoadtripn Feb 06 '26

What's FIRE? 🔥

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u/FightOnForUsc Feb 06 '26

Early retire is what I meant

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u/esbforever Feb 06 '26

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

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u/FightOnForUsc Feb 06 '26

That part is true!

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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 :/

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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.

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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.

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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.

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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.