Future Wolf wrote:
Image if you'd just graduated college, you now have a BS in some engineering field and a MS in either engineering or computer science, both from reputable schools; and/or possibly a Ph.D in a similar field. You've already established yourself in a few reputable engineering organizations via internships during undergrad. You accepted a job with an engineering company at age 23 with a starting salary of $80k-90k. You've produced multiple independent projects in the past showcasing your aptitude for engineering and programming to develop your portfolio, and you plan to pursue similar projects or freelancing in free time for profit (apps, websites, etc.) Now you've just acquired a lump sum of $400k.
What do you do? What options do you have? What are the technical implications?
Man. That's quite a thing.
So many ways to go about this. You could buy a house outright and then just have that done so that your income is used to build wealth through investing (sounds like a good idea, but I'm not sure that's what I would do). OR, you could invest in some non-retirement mutual funds (and plan not to use the money until retiring).
Let's look at milestones if you NEVER invested another penny.
If you got just 6% annual average return:
Age 30 - $601,452.10
Age 40 - $1,077,109.11
Age 50 - $1,928,938.37
Age 55 - $2,581,354.67
Age 60 - $3,454,434.84
Age 65 - $4,622,813.07
Without adding to it, you could EASILY retire at age 55 (assuming you managed to be debt free by then including owning your house outright). Take 4% of 2,581,354.67 and that is $103,254 in income a year, and then as early as age 62 you can take Social Security if you want. Pretty good.
Let's see what 9% annual return would get you:
Age 30 - $7,312,15.64
Age 40 - $1,731,053.36
Age 50 - $4,098,032.85
Age 55 - $6,305,331.51
Age 60 - $9,701,534.11
Age 65 - $14,927,012.79
Crazy. At age 50 if you took 4% that would be $163,921 annually.
I realize just hypothetical, but that's a good situation. Too many people would waste that money.