If you put that $50 million in that same fixed rate investment you’d be getting $2.5 million a year. But wait, we want to keep up with inflation! Let’s assume 3% inflation year over year. Your leftover 2% to live on is a measly salary of the equivalent of a million dollars a year growing with (historically standard) inflation.
To the ultra wealthy that’s not much, and you certainly aren’t living like a greater member of the House of Saud or buying everything you could possibly want off of it, but you can live a life of great comfort, travel every year, have a nice home, have plenty of comfort and hobbies, and never work.
And to get back to this, this is an amount of money a billionaire can give someone every year without touching the principal. If the billionaire wants to continue growing with inflation it reduces to them getting 20 million a year which translates to 400 thousand a year both matching 3% inflation. That’s still a comfortable life in even very high cost of living cities.
If the billionaire wants to continue growing with inflation it reduces to them getting 20 million a year which translates to 400 thousand a year both matching 3% inflation.
5% investment returns keeping up with 3% inflation leaves 2% to do with as you please. 2% of 1 billion is 20 million, and 2% of 20 million is 400 thousand. In this scenario each of those dollar numbers increases by 3% each year to match the expected inflation of normal times
To show how ludicrous an amount of money it is. That sustainable harvesting of it gives an annual amount of money that any reasonable person would consider set for life, and then to show what that looks like, because it’s not a “well if you live within your means you can retire young” amount, it’s an annual amount that people who make it can budget wisely and retire young on. That vast fortune is every year’s return on investment for a billionaire.
To frame it differently, it’s to express just how ludicrous the amount of money you gave for the annual return is, because even that number is so big people don’t really get it.
If you put that $50 million in that same fixed rate investment you’d be getting $2.5 million a year. But wait, we want to keep up with inflation! Let’s assume 3% inflation year over year. Your leftover 2% to live on is a measly salary of the equivalent of a million dollars a year growing with (historically standard) inflation.
To the ultra wealthy that’s not much, and you certainly aren’t living like a greater member of the House of Saud or buying everything you could possibly want off of it, but you can live a life of great comfort, travel every year, have a nice home, have plenty of comfort and hobbies, and never work.
And to get back to this, this is an amount of money a billionaire can give someone every year without touching the principal. If the billionaire wants to continue growing with inflation it reduces to them getting 20 million a year which translates to 400 thousand a year both matching 3% inflation. That’s still a comfortable life in even very high cost of living cities.
I didn’t follow this part
5% investment returns keeping up with 3% inflation leaves 2% to do with as you please. 2% of 1 billion is 20 million, and 2% of 20 million is 400 thousand. In this scenario each of those dollar numbers increases by 3% each year to match the expected inflation of normal times
I must have lost the thread; why are we doing 2% of what a billion dollars’ earnings earn?
To show how ludicrous an amount of money it is. That sustainable harvesting of it gives an annual amount of money that any reasonable person would consider set for life, and then to show what that looks like, because it’s not a “well if you live within your means you can retire young” amount, it’s an annual amount that people who make it can budget wisely and retire young on. That vast fortune is every year’s return on investment for a billionaire.
To frame it differently, it’s to express just how ludicrous the amount of money you gave for the annual return is, because even that number is so big people don’t really get it.
Okay, gotcha. I mean, I got the overall point, I guess I just missed the extension of the theme.