My Parents Give Me $28,000 a Year

https://www.ejroller.com/2018/10/25/my-parents-give-me-28000-a-year/

by blopeur • 8 years ago

7 2 8 years ago

nhkssol• 8 years ago

Say a couple has $10 million in the bank. With $10,000,000, they consistently make $400,000 a year from investments managed by an investment banker. They pay 15% taxes on those gains. So they bring home $340,000 a year, without working a minute. That’s a big chunk of money.

Yes it is, but not in the context.

Inflation is currently 2.3%. To keep the value of a $10,000,000 lump sum, you need to earn $230,000 a year from your investments. If you bring home $340,000 after tax and give your child $28,000 a year, that's $82,000 left over for you to live on if you don't want your fortune to dwindle in real terms.

$82,000 would disappear relatively quick if you're a couple adjusted to the millionaire lifestyle.

CompelTechnic• 8 years ago

A bit late, but-

The 4% rule that was (likely, because author did not cite references) used to determine the $400,000 number comes from the Trinity Study, where the study authors made a determination of a safe withdrawal rate that is likely to leave the principal intact in a 30 year retirement, after adjusting for inflation. A 3.5% withdrawal rate will similarly have a >95% chance of lasting for perpituity if we assume the future acts similarly to the last 100+ years of historical data. These both assume your spending is indexed to inflation.

So the $230,000 you provided is zero. Starting with $10,000,000 at 3.5%, taxed 15%, we are left with $297,500 for the parents to spend as they wish. Giving $28k to the kids is a small fraction of this that leaves lots left.

There's also a couple thousand to add to this due to standard deduction, other tax strategies, etc.

My Parents Give Me $28,000 a Year

Related Stories