Saturday, January 27

Which way to $1 million?

Even though a million isn't what it used to be, I'd still rather be a millionaire than not and I think it will be a rather momentous day when my net worth hits $1 million.

There are two options that I am considering for reaching this goal:

1. Work really hard for the next 4-5 years and save aggressively. With average returns for each asset class I can project reaching $1 million by 1/1/2011.

2. Work hard this year, then semi-retire, still working enough that I am not drawing down my investments by more than 2% annually. Since 4% is considered a safe retirement withdrawal rate, I figure that 2% should guarantee continued (albeit slower) growth. I will get there much slower under this scenario of course. For example, If my net worth is about $650,000 by 1/1/2008, then I could withdraw $12,000 per year and still reach $1 million by 1/1/2015.

Of course there can also be several variations in each of the above options. ..

I have a slight leaning toward option 2, for obvious reasons. I am thinking that if I give my investments enough momentum (i.e., they get large enough) then so long as I don't interfere by withdrawing too much they should take care of getting me there without needing my input. The real question is do I need to reach $1 million by a certain age. If my ego doesn't need it, then there is no need to kill myself with crazy amounts of work to get there a few years sooner.