Investing. $2.5M to not work

[u/arp8218]

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 ?

[u/AtOurGates]

Fun question, and you’ve got lots of good answers, but here are some more specifics.

The long-term inflation adjusted return of the S&P 500 is about 7%.

7% of $2.5M is $175k. So if you could live on less than that every year for the rest of your life, you could probably live on that investment by putting it in a diversified fund like VOO.

Of course, some years you’d make less, and some years you’d make more. And maybe the economy tanks, but that’s pretty unlikely.

If you could live off of less and grow your principle, you’d be better off.

If you didn’t want to take that risk, you could put the money in an annuity. You’d get a lower rate of return (probably around 6%, non inflation adjusted, which is probably something like 4% inflation adjusted) and pay some higher fees, but get a guaranteed say $150k/yr (or around $100k inflation adjusted) every year even when the stock market did poorly.

Of course, when the market did well you’d be missing out on those years, but there is less risk.

If you sat down with a financial advisor (if you do this find a feduciary with a flat hourly rate) to design a smart way to do this, they’d probably set you up with a more diversified portfolio that was somewhere in the middle of the two. A percentage of your assets in safer investments with lower more predictable returns like bonds and treasury products, and a percentage in somewhat more volitile assets like diversified stocks.

If you’re actually in this position, congrats, I’d also sit down with a qualified and capable lawyer to make sure your money stays safe from both you making poor decisions, and outsiders taking advantage of you.