A million bucks sounds like a fortune.
Withdrawing $40K/year in a 5% inflation environment, while making 0.3% in a government-insured savings account, it lasts 18 years. Add in his Social Security check, and he's probably good for life. Why risk anything?
Because, if he put it in a "balanced" portfolio like RetiredGuy123, he probably wouldn't even touch the principal, and his kids get rich some day.
Of course, that assumes there's not another crash like the four we've all seen in our own lifetimes that took 50% off the table. I had a widely diversified bond portfolio during the Covid crash just last year. It lost 15% IN ONE DAY. So much for "bonds are safe". No matter where you put your money, you're exposed to the dumbassitude of the dumb masses.
Let's say you've got a balanced portfolio making 7% overall, and there's a 50% crash in 2022. That 4% you can't stop withdrawing will eat up that nest egg in 20 years -- about the same as if you didn't risk anything.
Of course, this all assumes that the FED is successful at holding their new inflation target of 5%. Most of us are old enough to remember the last time inflation hit 5%. It went to 20%. I bought my first house at the end of the Johnson-Nixon-Carter inflation. It cost me an 18% mortgage for Reagan to put an end it.
What does 20% inflation do to your million dollars if it takes 20 years to find a man with the guts to end it? Invested, it's gone in 11 years, or 8 years in cash.
So the answer is gold, right? Really? How safe is a million dollars worth of gold stacked in your closet? OK, so buy stock in a company that claims to stack GLD in a bank. Now we're back to the dumbassitude of dumb masses problem.
Crypto? Seriously? You'd put your life savings in a made-up currency backed by imaginary numbers in a computer, that's not recognized as currency anywhere in the world, and can swing 50% in a month? Have you considered the "red/black" option at Vegas? Less risky and more fun!
The only thing I know of that holds value in an inflation is THINGS. Like REAL ESTATE.
Put a third of that million in real estate and leave the rest in cash. In 11 years, when the cash is almost gone, sell the real estate for 3 million. If nobody fixes inflation, you're good for another 8 years, which is probably enough. On the other hand, if inflation never gets out of hand, cash in your real estate in 15 years and it'll last another 10. More than enough. And if we ever again see 2% inflation, it lasts forever, as far as you're concerned.
But if you're like most of us who don't have a million bucks in the bank... good luck with that! If this country ever sees 20% inflation again, it'll probably go to 2000% in no time, and a stack of bullets in your safe will do you more good than a million in gold. But under that scenario, you could probably save yourself a lot of trouble by just buying one for yourself and one for the missus.
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