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- Jan 28, 2014
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Dear Fastlaners,
I have a genuine question. MJ says in TMF and UnScripted that you can live off of interest from a large sum of money all your life without working. But I have a doubt.
Suppose you have $10 million invested in municipal bonds, and you earn 3.5% interest per year. That's $350,000 in yearly income. Now this would be tax free. How can you live off of on interest like this if there is an average inflation of 2.5%. I mean the principal will lose its value at some point if we spend all the interest from bonds to fund our lifestyle without offsetting for the inflation by ploughing back 2.5% into the principal every year. So, how do you keep withdrawing the 3.5% interest and also keep up with the inflation (i.e. not eat your principal).
Sorry if my question is dumb or doesn't make sense, but I wish you understand my genuine question guys.
Thanks.
I have a genuine question. MJ says in TMF and UnScripted that you can live off of interest from a large sum of money all your life without working. But I have a doubt.
Suppose you have $10 million invested in municipal bonds, and you earn 3.5% interest per year. That's $350,000 in yearly income. Now this would be tax free. How can you live off of on interest like this if there is an average inflation of 2.5%. I mean the principal will lose its value at some point if we spend all the interest from bonds to fund our lifestyle without offsetting for the inflation by ploughing back 2.5% into the principal every year. So, how do you keep withdrawing the 3.5% interest and also keep up with the inflation (i.e. not eat your principal).
Sorry if my question is dumb or doesn't make sense, but I wish you understand my genuine question guys.
Thanks.
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