$1 Million - What would you do?

[dragoncar]

What if we wanted to make this actionable...
If $1 million is your number, what do you wind your Asset Allocation to once you hit it?
If $2 million is your number, what's your new AA upon getting to $1 million (or pick any goal number, what's your AA once you get halfway there)?

Why would your asset allocation change?  My AA stays constant no matter what amount of money I have.

Having more money does make new allocations possible.  For example, some people might not even have the option to pay down a mortgage, and I do consider home equity and debt as part of my asset allocation.

Gotcha.  I tend to consider money for my home as not really an asset . . . because it doesn't exist until I sell the home, but I'm not planning on selling the home in the near term.

That's cool -- I don't consider money in my brokerage account as an asset because it doesn't exist until I sell the shares, but I'm not planning on selling the shares in the near term.

[JoeBlow]

What if we wanted to make this actionable...
If $1 million is your number, what do you wind your Asset Allocation to once you hit it?
If $2 million is your number, what's your new AA upon getting to $1 million (or pick any goal number, what's your AA once you get halfway there)?

Why would your asset allocation change?  My AA stays constant no matter what amount of money I have.

I could see going higher in bonds to be more conservative if you have already won the game and will spend less than a more conservative allocation will produce.

[Bateaux]

Probably the biggest reason I didn't retire at 1M NW or even 1M investment assets is that I don't want to draw down.    I want to watch my investments continue to grow for the rest of my life.  Could 4% sustain my lifestyle?   Most likely.  A 2% or 3% drawdown may allow for continued growth and not just income for life.  With a good charity who cares if you die with unspent millions.   

[Mmm_Donuts]

Not sure how to answer this poll, our house is worth more than 1MM so we can't retire just on that. But as we're approaching 1MM in investable assets, I would have to go with the semi retire option, because that's what I'm doing. There is definitely something about the 7 digit milestone that makes me feel more financially secure. Financial security means more freedom to take risks. I enjoy working at some capacity, so semi retirement suits me just fine.

[Leisured]

I have not voted, because my reply would depend on my age and circumstances.

I would pay down the mortgage to $200K, then invest the balance of the money into share funds, domestic and international, and property funds. I understand that mortgage interest for a private house is tax deductible in the US - it is not in Australia, where I live. A tax deductible mortgage is effectively an investment loan to allow another $200K to go into investment.

The background for this goes back to 1968. Alan Shepherd was at that time the largest individual investor in BHP, the giant Australian resources company. I mean individual investor as opposed to other companies investing in BHP. Broken Hill Proprietary, known then and now as a 'mums and dads' investment. Alan was interviewed on TV and said that in the fifties he had inherited 30,000 Australian pounds, (the currency was not decimal in the fifties), and he had borrowed another 50K pounds and dropped the combined 80K pounds into BHP. BHP grew, and paid more and more dividends, which it still does. In the fifties, a thousand pounds was about the average annual income. I imagine that Alan had an independent source of income to service the debt, but as BHP grew, the debt became easier to service and pay off.

Such a huge borrowing is absurdly risky, but some more modest borrowing is still a good idea.

[Leisured]

Some posters have raised the possibility of using the million dollars for legacy assets, to be passed on; a worthy idea. It depends on your age when you get the windfall, but if you are of an age when your children are at college, you could invest the million, wait until they graduate, then pay off the student loans. I know interest rates for student loans are low, but it frees up the young person's income for their own saving and investment. The trick is to put the money where you want it.

Some posters have raised the possibility of young  people squandering any largess they get, but one possibility is to open an index fund in the name of the young person, put $10K into it, give it and see what happens. If they cash it in and squander, give no more.

This particular train of thought may more properly be moved to MiniMustaches.

[Mrs. Healthywealth]

I agree with many of the people with kids that said they don't feel as comfortable with retiring with only 1MM b/c of of insurance and the expenses related to the kids. We are really frugal, but man the munchkins still need things that cost $$ i.e. a bed, car seats, etc. 1MM will make us FI, give us flexibility to do whatever we like, and we both plan to work PT and enjoy doing the work that brings us satisfaction vs. RE.  This will actually be our reality in 6yrs (43y/o), but we will do the PT work for perhaps another 5-10yrs just depending on circumstances. Then I have a pension that pays 100% of expenses at 65...so I have a suspicion we may be over-saving.

Funding your kids undergrad or buying them a car, etc. doesn't necessarily mean the kids going to be lazy and not be able to take care of themselves...but it also depends on the kid. I was given quite a bit, and still became a mustachian, however, my sibling is totally dependent still and is nearing 50 (WTH).

[big_slacker]

I'd definitely keep working. While the kids are still school age we'll still be in our HCOL area, and kids aren't cheap even if you're cheap. Broken bones, braces, possibly college and so on.

Theoretically if someone handed me $1M I wouldn't mind buying a $500k place cash (that's a 1200 sq foot rambler in these parts) stick the rest in investments and keep at it. Give them a good launch. $1.5M + the house is a good number for once the kids are off to college. At that point pull the chute and move back to the mountains and enjoy as much snowboarding, beach and biking as we can till we can't. :D

[PAstash]

Dragoncar only 1/3 would compelety stop work at 1M.  It's not that i want more money to spend.  I want legacy funds.  Making money is easy for me now and I'm addicted.

How easy? what do you do? how can i do it?

[Money Badger]

Interesting very few mentions of charitable giving if $1M dropped from the heavens...   I'm not a holy roller by any means but do see tangible community benefits of my church so 10% (100k) first goes there...   That allows us to free up resources spent on the mortgage every month that go straight to local outreach and pastoral care...

The remainder at 6% return finishes our FIRE plan easily.    But strangely, in my late 40's,  I have no intentions of sitting around looking at my net worth statements...   After seeing how woefully inefficient the utility industry is,  I want to start a PV solar / battery storage installation and service business...    This is really taking off in the rest of the world (Elon Musk didnt invent it either btw) so improving my family's community would be an awesome way to start each day!   The trick is not getting consumed again in 60 hour week mode again though.

[big_owl]

Two girls at the same time....  (really nobody has thought of this one yet?)

Seriously though, we're already there but a decent portion of it is 401k so I don't count that.  If someone plopped an extra million in cash in my lap today I'd probably do the following:

1. Buy a Ducati Desmosedici, a 998R and a Superleggera (the Panigale, not the candy-assed lambo)
2. Pay off my mortgage
3. Invest the rest

[dude]

Two girls at the same time....  (really nobody has thought of this one yet?)

Yep, SirDoug, at about the 11th post in (first page).

[big_owl]

Two girls at the same time....  (really nobody has thought of this one yet?)

Yep, SirDoug, at about the 11th post in (first page).

Sigh

[dragoncar]

Two girls at the same time....  (really nobody has thought of this one yet?)

Yep, SirDoug, at about the 11th post in (first page).

There was already an office space reference

[Bateaux]

Dragoncar only 1/3 would compelety stop work at 1M.  It's not that i want more money to spend.  I want legacy funds.  Making money is easy for me now and I'm addicted.

How easy? what do you do? how can i do it?

I have a blue collar job that earns a little over 100k.  Spouse makes 75k doing inside industrial sales.  We are debt free.  Making our 2nd million is child's play at this rate.  The 3rd, 4th or 5th million would likely come if we retired in our 60's but that's not the plan.  FIRE AT 50 is my plan now and we'll be close to the 2nd million by then unless the market tanks. I'm only 47 so if it does we wait it out buying cheap for a few more years.  About 65% of investment assets is now in VTSAX and VFINX.  Also have 15% in International funds, 10% in REITs 10% in balanced 2040 fund.  Real Estate 100k rental that I don't rent, 200k home and 75k undeveloped property.    Add it all up and total NW about 1.75M. 

[Bateaux]

Interesting very few mentions of charitable giving if $1M dropped from the heavens...   I'm not a holy roller by any means but do see tangible community benefits of my church so 10% (100k) first goes there...   That allows us to free up resources spent on the mortgage every month that go straight to local outreach and pastoral care...

The remainder at 6% return finishes our FIRE plan easily.    But strangely, in my late 40's,  I have no intentions of sitting around looking at my net worth statements...   After seeing how woefully inefficient the utility industry is,  I want to start a PV solar / battery storage installation and service business...    This is really taking off in the rest of the world (Elon Musk didnt invent it either btw) so improving my family's community would be an awesome way to start each day!   The trick is not getting consumed again in 60 hour week mode again though.

I like your post.  I hope to ramble like a Nomad for 20 years.  Sailboat and RV travels for our 50s and 60s.  By the 70s I want to build a bad ass little off the grid place with solar and a big garden.  I may even buy the property before I retire so that I can use it as an RV base.  Build a big metal shed for the RV to sit under and put solar on the roof.  I want little or no maintenance.
Charitable giving once you can afford it is important.   I hope most of what we have goes to charity.

[GuitarStv]

Interesting very few mentions of charitable giving if $1M dropped from the heavens...   I'm not a holy roller by any means but do see tangible community benefits of my church so 10% (100k) first goes there...   That allows us to free up resources spent on the mortgage every month that go straight to local outreach and pastoral care...

The remainder at 6% return finishes our FIRE plan easily.    But strangely, in my late 40's,  I have no intentions of sitting around looking at my net worth statements...   After seeing how woefully inefficient the utility industry is,  I want to start a PV solar / battery storage installation and service business...    This is really taking off in the rest of the world (Elon Musk didnt invent it either btw) so improving my family's community would be an awesome way to start each day!   The trick is not getting consumed again in 60 hour week mode again though.

If God wanted the money to go to charity, I figure He would have dropped it on his charity of choice.  Since he dropped the million bucks on me, he clearly wanted me to blow it all partying hard with prostitutes.  Did you even read the parable of the prodigal son?  :P

[Northwestie]

Interesting very few mentions of charitable giving if $1M dropped from the heavens...   I'm not a holy roller by any means but do see tangible community benefits of my church so 10% (100k) first goes there...   That allows us to free up resources spent on the mortgage every month that go straight to local outreach and pastoral care...

The remainder at 6% return finishes our FIRE plan easily.    But strangely, in my late 40's,  I have no intentions of sitting around looking at my net worth statements...   After seeing how woefully inefficient the utility industry is,  I want to start a PV solar / battery storage installation and service business...    This is really taking off in the rest of the world (Elon Musk didnt invent it either btw) so improving my family's community would be an awesome way to start each day!   The trick is not getting consumed again in 60 hour week mode again though.

I like your post.  I hope to ramble like a Nomad for 20 years.  Sailboat and RV travels for our 50s and 60s.  By the 70s I want to build a bad ass little off the grid place with solar and a big garden.  I may even buy the property before I retire so that I can use it as an RV base.  Build a big metal shed for the RV to sit under and put solar on the roof.  I want little or no maintenance.
Charitable giving once you can afford it is important.   I hope most of what we have goes to charity.

thumbs up on the charitable giving -

[Vertical Mode]

I read the prompt as "what if $1MM (post-tax) just sorta dropped into your lap", not necessarily thinking of this as a net-worth milestone. Voted "Semi-retire" just because it would probably take me some time to get adjusted to the new condition; scale back to part-time hours and use the newfound time to figure out the brass tacks of what FIRE looks like. I'm still far enough out from FI that I haven't baked all the details yet.

So yeah, I'd probably VTSAX/VBINX the cash immediately and keep on keepin' on.

[Slee_stack]

As others have mentioned, there is more than the number to be met.  For some of us there is a defined benefit (pension) which waits for us in a reasonable few years, maybe even with healthcare benefits.

I've come to accept this as both a blessing and a curse.  We are currently waiting on the pension, but only in hindsight will we know if it was the right decision.

If we do collect, the answer to the thread question will have become 'no amount' was the right amount to retire with.

PT isn't an option, pension wise.  What a dream THAT would be!

One of us could retire, but PT still would be challenging to find in either of our fields.  We probably would have to do something different.  That's moot as we have decided to stay or go together anyway.

[Money Badger]

Interesting very few mentions of charitable giving if $1M dropped from the heavens...   

I like your post.  I hope to ramble like a Nomad for 20 years.  Sailboat and RV travels for our 50s and 60s.  By the 70s I want to build a bad ass little off the grid place with solar and a big garden.  I may even buy the property before I retire so that I can use it as an RV base.  Build a big metal shed for the RV to sit under and put solar on the roof.  I want little or no maintenance.
Charitable giving once you can afford it is important.   I hope most of what we have goes to charity.

thumbs up on the charitable giving -

Thanks Bateaux & Northwestie...   Keep on MMM'ing and we'll get our chances!    Money's a tool if used well, and it's a weapon of destruction if not...    Certainly, it's not the end game.

[PAstash]

Dragoncar only 1/3 would compelety stop work at 1M.  It's not that i want more money to spend.  I want legacy funds.  Making money is easy for me now and I'm addicted.

How easy? what do you do? how can i do it?

I have a blue collar job that earns a little over 100k.  Spouse makes 75k doing inside industrial sales.  We are debt free.  Making our 2nd million is child's play at this rate.  The 3rd, 4th or 5th million would likely come if we retired in our 60's but that's not the plan.  FIRE AT 50 is my plan now and we'll be close to the 2nd million by then unless the market tanks. I'm only 47 so if it does we wait it out buying cheap for a few more years.  About 65% of investment assets is now in VTSAX and VFINX.  Also have 15% in International funds, 10% in REITs 10% in balanced 2040 fund.  Real Estate 100k rental that I don't rent, 200k home and 75k undeveloped property.    Add it all up and total NW about 1.75M.

the money you earn is it pre or post tax?

Why don't you rent your property?

[Bateaux]

Dragoncar only 1/3 would compelety stop work at 1M.  It's not that i want more money to spend.  I want legacy funds.  Making money is easy for me now and I'm addicted.

How easy? what do you do? how can i do it?

I have a blue collar job that earns a little over 100k.  Spouse makes 75k doing inside industrial sales.  We are debt free.  Making our 2nd million is child's play at this rate.  The 3rd, 4th or 5th million would likely come if we retired in our 60's but that's not the plan.  FIRE AT 50 is my plan now and we'll be close to the 2nd million by then unless the market tanks. I'm only 47 so if it does we wait it out buying cheap for a few more years.  About 65% of investment assets is now in VTSAX and VFINX.  Also have 15% in International funds, 10% in REITs 10% in balanced 2040 fund.  Real Estate 100k rental that I don't rent, 200k home and 75k undeveloped property.    Add it all up and total NW about 1.75M.

the money you earn is it pre or post tax?

Why don't you rent your property?

Those earnings estimates are pretax.  The rental isn't rented because I don't want the agitation of a renter.   It would make probably 10k or more a year if rented..  I put that much in savings some months and my stock market investments average more than that in a month.  With wealth increasing almost twice in a month what that house would make annually it's just not that big a deal.  I use it for storage and have had guests staying there in the past.  I do my own carpentry and I'm making improvements right now.  One of my children may want it and it's only 100 feet up the street from out home.   Both are waterfront and I'm in the process of upgrading the seawall and rebuilding the boat dock right now.  It's deep,water access to the Gulf so it's going to hold value.

[GuitarStv]

What if we wanted to make this actionable...
If $1 million is your number, what do you wind your Asset Allocation to once you hit it?
If $2 million is your number, what's your new AA upon getting to $1 million (or pick any goal number, what's your AA once you get halfway there)?

Why would your asset allocation change?  My AA stays constant no matter what amount of money I have.

Having more money does make new allocations possible.  For example, some people might not even have the option to pay down a mortgage, and I do consider home equity and debt as part of my asset allocation.

Gotcha.  I tend to consider money for my home as not really an asset . . . because it doesn't exist until I sell the home, but I'm not planning on selling the home in the near term.

That's cool -- I don't consider money in my brokerage account as an asset because it doesn't exist until I sell the shares, but I'm not planning on selling the shares in the near term.

I guess the difference is in liquidity.  It's an awful lot of work selling a house, and it's an all or nothing decision.  My investments are quite liquid.  If I needed two grand, I could have the two grand in my hands the day after tomorrow.

[lazysundays]

I calculated that if I wanted to retire on $80,000 adjusted annual income at age 65, I need $1.9million, and to retire early, i need a minimum of $3.3million to safely withdraw 4%.  so that 1 million is going straight to investments (ok, maybe a $10,000 trip first) and then I can grow it much faster to reach the $3.3 million goal.....

I really gotta move out of this HCOLA...

[JLee]

I calculated that if I wanted to retire on $80,000 adjusted annual income at age 65, I need $1.9million, and to retire early, i need a minimum of $3.3million to safely withdraw 4%.  so that 1 million is going straight to investments (ok, maybe a $10,000 trip first) and then I can grow it much faster to reach the $3.3 million goal.....

I really gotta move out of this HCOLA...

Does your anticipated FIRE income requirement factor the elimination of retirement savings from your budget?

[Leisured]

I had not thought of a place for charitable giving in my earlier post, but I have always thought that charitable donations should be funded out of recurring investment returns rather than a one off reduction in capital. That is, invest the $1M, and give a small part of the income from those investments to charity.

What you specify in your will is another matter.

[LuxuryIsADrug]

1M is enough for some.  I crossed that milestone somewhere in the past.  Not even sure what year.  The number looked big saving up to it and it looks too small looking back.  Even though the financial future of my wife and I may be secure going forward.  Now I'm working for my children.  They are young adults a 23 and almost 22 year old.   I can boost them into a.path of financial freedom with ease.  It would take them a decade to position themselves where I can help.them to be in just a year or two.  I'm covering them with health insurance as well.  They won't have to struggle if they follow along with my helping hand.  I can give them cars, homes and retirement account funding for the next few years and still FIRE at 50.  It's selfish for me to quit a well paying job now when I could be providing for their future as well as mine.  Plus I have seven figures working for me untouched for several more years.

Note: Canadian Dollars

You sound like my parents. They have enough to retire but they feel they have this obligation to my sister (25) and I (27) to leave us an inheritance. I've tried to talk to convince them they don't need to do this. My mom constantly tells me not to worry about my own retirement because of it.  I think it has to do with them growing up in a lower income households and they don't want us to struggle like they did.

I personally can't rely on an inheritance blindly since anything can happen in 30 years. I'm trying to save but it's difficult (luxury is a drug) to avoid spending when I grew up never learning how to save. My current, personal savings rate puts me at FIRE in 25 years, age 52. However, as I progress in my career I should be able to increase investment contributions.

Now, I honestly fear more for my sister since she has taken no interest in learning finances and somehow thinks she can afford to buy a $250,000 house when she only earns $35,000 a year. I hope she learns before she receives the inheritance or I can see it being squandered.