Can I live off of interest on $100 Million for life?

[AgainstAllOdds]

Guys, please clear this up. One Quora answer first deducts inflation rate from the yearly interest rate and then applies 15% tax on the difference. Is that how it works?

No.

You pay taxes on the capital gains. The inflation rate is just how much less your money is worth.

You'd only deduct the interest rate if you were running a net present value calculation on the annuity.

 

[Scot]

Wasting time? There is no such thing as a dumb question.

You’re 27, not 7. “There are no stupid questions” only applies to elementary school.

Also, I have been pampered by my parents since birth, so I have very little real world tax experience. And yes, I never worked a day in my life.

I genuinely hope you’re being sarcastic here.

You’ve been a member of this forum for almost 5 years. You say you’re 27. You should know better by now...

And if you don’t... what are you going to do about that?

 

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[MJ DeMarco]

@FastLaner007 - You indicated you read Unscripted .

Did you not read Chapter 48?

Because it covers a lot of this discussion.

 

[lowtek]

Dear diary: the forums didn’t provide any concrete feedback on what to do regarding interest once I get to 100,000,000. I will try again tomorrow until the answer is clear and once solved start right away on my logo design and business name.

rofl

savage

 

[Merging Left]

My question must be silly if that is coming from a reputed old member like you unlike an amateur calling me an idiot above just for asking an innocent question. I have never done taxes on my own as all my business affairs are managed by my family's accountants. Also, I have been pampered by my parents since birth, so I have very little real world tax experience. And yes, I never worked a day in my life. All in all I am not ashamed that I had to ask this stupid question as it's been answered nicely by the lovely TMF community.

Biophase, in the $5 Million interest example above, how do you suggest I grow the principal to negate inflation? And will I still be paying 40% taxes if that interest comes from dividends or capital gains and not necessarily bank interest?

Here's the answer to end all answers:

Once you get your $100M, hire a damn accountant and attorney to figure it out for you.

Talk about putting the cart before the horse...

 

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[Roli]

If I earn $100Million after taxes via businesses in the USA and Europe, what taxes will I need to pay on yearly interest/dividends of 5% from investments of the $100Million principal after accounting for 3% inflation for example? I am 27 now BTW. And let's assume that I will live till 85. Can I live a luxurious lifestyle while simultaneously beating inflation and not touching the principal forever? In fact I want the principal to grow every year in proportion to inflation.

Appreciate your valuable replies, FastLaners.

You know what? I don't think your question is stupid, and I get why you didn't 'just Google it'.

The whole point of this forum is that there are people who have, or are close to making that kind of dough. So why not get answers from the horses mouth?

To answer your question, that's a clear yes. Especially if you've already bought the house(s) you want to buy and you're happy living below your rather vast means.

I personally know that with that kind of money, I probably wouldn't spend more than $200,000 per year.

So that's 500 years before my $100 mil runs out without any interest at all.

Basically as long as you don't have the mentality of a sidewalk millionaire, $100,000,000 will last you, your family and your descendants for a long time to come.

Good luck getting there, hope this motivates you that tiny little extra bit!

 

[Suzanne Bazemore]

I think calculating if you can live off future earnings can be extremely motivating and eye-opening. It was for me (unfortunately the figure I was using wasn't $100 mil).

 

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[Suzanne Bazemore]

There are people who live off $500,000 in savings. Granted they live in tents and call themselves minimalists, but it being totally FREE (subjective) can be done relatively inexpensively if you have your housing situation taken care of.

And think of how many people try to do just that. For people with jobs, like me, it's hard to even save $500K. It would be especially difficult for people with $100K of debt that they're actually paying someone else 10% interest on.
This Is How Much Debt the Average American Has Now—at Every Age
When I stumbled across TMF this past summer, I was actually trying to be frugal and save my way toward investing in properties. Then I read TMF and recognized myself in the definition of a Slowlaner trying to Scrooge my way to the Fastlane. What fun.

 

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[GoGetter24]

How do these threads make it to 3 pages? Just tell systemic losers like these to F*ck off and hit the ignore button.

Loser's been here since 2014 too. Done anything except wank since then OP? There should be an automatic ban on douchebaggery like this.

 

[FastLaner007]

If I earn $100Million after taxes via businesses in the USA and Europe, what taxes will I need to pay on yearly interest/dividends of 5% from investments of the $100Million principal after accounting for 3% inflation for example? I am 27 now BTW. And let's assume that I will live till 85. Can I live a luxurious lifestyle while simultaneously beating inflation and not touching the principal forever? In fact I want the principal to grow every year in proportion to inflation.

Appreciate your valuable replies, FastLaners.

 

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[FastLaner007]

Thanks for the replies so far guys. I have not earned the 100 Mil yet. I wanted to ask the question for motivation as I am on track to starting some high growth ventures. Many guys in my markets have made hundreds of millions and even billions.

So, coming back to my question. Can someone clear my doubt with some numbers? Let's say:

5% dividends and interest from investments => $5 Million
Inflation => 3% ($3 Million)
Taxes => 15% to 40% approx? (Not sure how much would the capital gains tax is be).

Will I be paying taxes on the whole of 5% interest/dividend income or on 2% (after deducting the 3% inflation rate from the 5% interest)?

Please kindly answer my question above guys as I have not yet found an answer online for many days.

 

[MidwestLandlord]

This is what he's saying, but that's not how you factor in inflation.
Just poor methodology all around.

Yep. But I didn't want to spend that much time on it haha

 

[Raoul Duke]

"if"


in the meantime.... Enjoy a woman snoring with a airplane. @Kak

 

[Ayanle Farah]

This is a good thread to ask the question, suppose you have millions of dollars and for whatever reason you don't feel like living off the interest, how else do you invest the money? Maybe put it all toward buying real estate or something else?

Btw I get where you're coming from with your question OP, I think it's important to feel inspired.

 

[Xeon]

What color is your lambo??

I was lying in bed reading the more serious post above yours, then I saw your one liner, and I choked.

 

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[AgainstAllOdds]

Inflation | Finance and capital markets | Khan Academy

Interest and debt | Finance and capital markets | Khan Academy

Taxes | Finance and capital markets | Economics and finance | Khan Academy

@FastLaner007 -- here are three links to help you understand the math to your question.

 

[advantagecp]

It takes at least ONE BILLION DOLLARSS to eke out survival on the interest.

Small timer...

 

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[Nigel B]

Dear diary: the forums didn’t provide any concrete feedback on what to do regarding interest once I get to 100,000,000. I will try again tomorrow until the answer is clear and once solved start right away on my logo design and business name.

I don't think I ever used LMAO in a post anywhere - but this one gets it!

 

[GoGetter24]

What percentage of that sum do you currently have, OP?

Why people entertain these time wasters is beyond me.

 

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[RichieG]

Thanks for the replies so far guys. I have not earned the 100 Mil yet. I wanted to ask the question for motivation as I am on track to starting some high growth ventures. Many guys in my markets have made hundreds of millions and even billions.

s.

Kanye West, Jay Z..........
Lebron James, Kobe Bryant
Mark Zucherberg, Bill Gates

These make millions and billions but can you break into their field?

What is your field? Affiliate Marketing?

 

[ChrisV]

This question is absurd. Of course you can live off the interest. You can live off $5/day if you want. And this is so lazy. Pull out a calculator and sere how much that will be per year. Can you live off it? WE DON’T KNOW YOU. You can live off $0 if you go live with your parents. It depends on your spending habits and interest. What the f***.

 

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[FastLaner007]

You missed the entire point and now you are wasting everyone’s time.

By your own words, you have spends days researching this without an answer. What a waste of energy.

Wasting time? There is no such thing as a dumb question. I wanted to research the same after finding some conflicting numbers in some examples on Quora.

Guys, please clear this up. One Quora answer first deducts inflation rate from the yearly interest rate and then applies 15% tax on the difference. Is that how it works?

 

[FastLaner007]

No.

You pay taxes on the capital gains. The inflation rate is just how much less your money is worth.

You'd only deduct the interest rate if you were running a net present value calculation on the annuity.

Thanks for your useful answer bro. Let me paste a Quora answer with some numbers below and tell me if he is right. I am assuming his calculations are wrong judging by your answer.

Quora answer:

You have an equation that looks like this:
income = (principal) * (1 + interest) / (1 + inflation) - (principal)

Let's say principal = $1M, interest = 5% (to be safe), inflation = 3%

Then what you have each year to live off of - in 2015 dollars - is $20,000, the equivalent of a full-time job at $9.60 / hr. That leaves you with $17,200 after taxes. If you're supporting a spouse and one child, you're below the poverty line.

So the guy is applying taxes on the difference between the interest rate and inflation rate. Is he right or wrong?

 

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[FastLaner007]

That's not what he's doing.

He's saying that you'd have $50,000 from the interest, and after adjusting for a 3% inflation rate you have $17,200 equivalent spending power after taxes.

You would physically have the $50,000 to subtract tax from.

But you'd have the spending power of $20,000 to subtract tax from.

Let's say I have $100 and Snickers bars cost exactly $1

$100 = 100 Snickers Bars

Next year I have $100, but Snickers Bars have inflated to $2

$100 = 50 Snickers Bars

Same $100...less Snickers Bars for me.

Inflation = less Snickers Bars

The same money can buy less stuff

Thanks a ton for clearing this for me brother. So from the $50000 interest example above, can a person beat inflation by reinvesting 3% from the interest back into the principal after paying taxes on the 5% interest and live off of whatever's left from the interest after paying taxes and reinvesting the inflation rate?

 

[FastLaner007]

Here you go. If you had $100M in a bank account at 5%, you'd likely pay 40% taxes on it. So, $5M income @60% is what you have left. $3M a year. Now you have to decide if you can live on that.

Of course principal is not growing this way. And you don't realize this yet, but yes your question is stupid. You will come back in 5 years and agree.

How close are you to $100M, I'm assuming you must be at least over 1M?

My question must be silly if that is coming from a reputed old member like you unlike an amateur calling me an idiot above just for asking an innocent question. I have never done taxes on my own as all my business affairs are managed by my family's accountants. Also, I have been pampered by my parents since birth, so I have very little real world tax experience. And yes, I never worked a day in my life. All in all I am not ashamed that I had to ask this stupid question as it's been answered nicely by the lovely TMF community.

Biophase, in the $5 Million interest example above, how do you suggest I grow the principal to negate inflation? And will I still be paying 40% taxes if that interest comes from dividends or capital gains and not necessarily bank interest?

 

[TonyStark]

Next

 

[rollerskates]

What a fun little read this was.

 

[fhs8]

5% dividends and interest from investments => $5 Million
Inflation => 3% ($3 Million)
Taxes => 15% to 40% approx? (Not sure how much would the capital gains tax is be).

Will I be paying taxes on the whole of 5% interest/dividend income or on 2% (after deducting the 3% inflation rate from the 5% interest)?

Please kindly answer my question above guys as I have not yet found an answer online for many days.

Many days and you still haven't found the answer? You're 27! Of course you can't deduct the inflation rate! Capital gains also deals with selling securities such as stocks. It has nothing to do with dividends or interest.

 

[SEBASTlAN]

Dear diary: the forums didn’t provide any concrete feedback on what to do regarding interest once I get to 100,000,000. I will try again tomorrow until the answer is clear and once solved start right away on my logo design and business name.

lmao

 

[100k]

I feel like punching the OP.... but..... wooooosaaaaaaa.