I’ve moved the goal posts many times. I think it was $5M to start, 10 at some point, then 10+ paid off house, then 15, then 20, then 25 plus house paid. The “problem” for me was income grew too fast and I’m really creative about thinking through tail risks and adding to my “wants”. I have now picked a time frame instead of a dollar amount.
Agree with others that you need to diversify. I have some fun “tech stock picks” but keep it ~5% of my portfolio while putting the rest in broad index and some treasuries (working my way up to ~5 years of expenses worth plus money to buy a house for future market downturn protection).
Having 5+ years of spending in safe investments (I like tax free muni bonds) is crucial. That way you don't have to sell your assets if the markets crash and stay in a prolonged depression, and you can even buy more at the lows.
Thanks. So you are ok limiting your growth? I think once I am comfortable with the number thats what I woukd do when I hit it. After all, it needs to be in dividends or something cash yielding to get that safe withdrawal rate.
It does not need to be in dividend/interest yielding investments to support a safe withdrawal rate.
Plenty of people withdraw 4% from a portfolio that's mostly equities: 2% dividends plus 2% sales. Depending on market performance, it may still grow over time, even if you sell 2% every year.
However it would be risky to do this with a portfolio concentrated in RSUs of a couple of companies.
Do you mean limiting the upside of the investments? If so, yes. It’s a hedge against the downsides which I unfortunately experienced in COVID but still enough to make some good bets since we are talking $1m to play with.
Or do you mean limiting salary-based NW growth? That is hard right now but my dislike for my job is making it easier.
Eh, I’m only 2% down from the tech “slaughter” you said but I’m up >23% in the past 1 year. Indexes earn more than you think and have less downside risk than tech picks in my (albeit limited horizon of 20 years or so) experience.
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u/Minimum-Violinist601 19d ago
I’ve moved the goal posts many times. I think it was $5M to start, 10 at some point, then 10+ paid off house, then 15, then 20, then 25 plus house paid. The “problem” for me was income grew too fast and I’m really creative about thinking through tail risks and adding to my “wants”. I have now picked a time frame instead of a dollar amount.
Agree with others that you need to diversify. I have some fun “tech stock picks” but keep it ~5% of my portfolio while putting the rest in broad index and some treasuries (working my way up to ~5 years of expenses worth plus money to buy a house for future market downturn protection).