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Thread: Sudden Wealth

  1. #21
    Member Llenyd's Avatar
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    Quote Originally Posted by nottaprettygal View Post
    Way to kill the dream, man. Did I ruin your fantasies by bringing in a strong dose of reality? I don't think I did!!
    That's why most lotto winners are bankrupt again within a decade or two.

    Yeah, I'm a frugal bastard.

  2. #22
    Senior Member 563 740's Avatar
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    Quote Originally Posted by Llenyd View Post
    Unless you account for taxes and inflation. :P

    At 3% inflation and 40% taxrate, your account would be drained in 20 years.
    Let's assume I use some of my "all the free time in the world" to stay ahead of inflation

    As far as taxes - would I only be paying taxes (assuming the $4.4mil windfall is already paid for) on my interest income? And probably at a lower rate than if I went out and actually earned the $200K a year!

    And realistically - I doubt I'd even spend $200K a year - I'm a pretty frugal bastard myself!

  3. #23
    Pareo cattus Natrushka's Avatar
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    To clarify: the $4.4 is what you get before taxes. I guess in the US that makes a huge difference, eh?

    P.S. Duly noted, PT

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  4. #24
    Strongly Ambivalent Ivy's Avatar
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    Quote Originally Posted by Natrushka View Post
    To clarify: the $4.4 is what you get before taxes. I guess in the US that makes a huge difference, eh?

    P.S. Duly noted, PT
    Well, shit. I assumed "4.4 million dollars richer" meant after taxes. PROTEST!
    The one who buggers a fire burns his penis
    -anonymous graffiti in the basilica at Pompeii

  5. #25
    Senior Member 563 740's Avatar
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    Quote Originally Posted by Ivy View Post
    Well, shit. I assumed "4.4 million dollars richer" meant after taxes. PROTEST!
    Agreed - if we're pulling a number out of thin air, why the hell are we paying taxes on it too??



    What kind of a fairy godmother makes an oversight like that?!?

  6. #26
    Pareo cattus Natrushka's Avatar
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    I'm Canadian, things is different here. You don't get taxed on your winnings, and if you give a gift of the winnings (say 500K from 4.4 million to your parents) they don't pay tax on it either. I believe you have to pay taxes on the interest after the first year, however.

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  7. #27
    Pareo cattus Natrushka's Avatar
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    Quote Originally Posted by 563 740 View Post
    Agreed - if we're pulling a number out of thin air, why the hell are we paying taxes on it too??
    Who said it was out of thin air? I suppose for sake of argument you can assume 4.4 million after taxes since that is the number suggested. Carry on.

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  8. #28
    Strongly Ambivalent Ivy's Avatar
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    Did you win the lottery, Natrushka?
    The one who buggers a fire burns his penis
    -anonymous graffiti in the basilica at Pompeii

  9. #29
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by 563 740 View Post
    As far as taxes - would I only be paying taxes (assuming the $4.4mil windfall is already paid for) on my interest income? And probably at a lower rate than if I went out and actually earned the $200K a year!
    Actually, he would be correct, in a sense. The problem is that inflation works on the principle - meaning, that 4.4 million is shrinking at 3% per year. You'd need to reinvest at least 3% of your interest simply to retain the value of your funds.

    So, IOW, you'd be earning only about (if you cared about security and consistent payments) about 1.5% on the 4.4 million, or about 66,000 a year. Investment income is fully taxed in the US, so even so, your take home pay would be roughly $4,000/month.

    And of course, that ignores that you'd lose about 1/3 of it upfront if you won - the real numbers would be about $2900/month, following all of those assumptions.

    (Based upon current market settings, blah blah.)

    The correct strategy would be to split the money and consume some of the capital early in the life (say, 200,000 a year) while investing the remainder in escalating return situations. The difference between a real return of 1-2% and 5-7% is gigantic and consuming part of the original amount is well worth it to avoid the "safe and secure" barely above inflation amount. (ie: consuming 200,000 at the capital but then earning the average 9% on the remainder actually increases your amount above investing it all and earning the 5%, in part because of taxes, but mostly due to inflation.)

  10. #30
    Pareo cattus Natrushka's Avatar
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    Quote Originally Posted by Ivy View Post
    Did you win the lottery, Natrushka?
    My lawyers have advised me not to answer that, Ivy

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