Crossover point

elephantrosie

At what age did you reach or intend to reach the crossover point where your investment income exceeds your living expenses?

Also how should i calculate this? investment income pre or post tax?

bowlhead99

elephantrosie wrote: »

At what age did you reach or intend to reach the crossover point where your investment income exceeds your living expenses?

I don't know if my investment income will ever exceed my consumption other than over some short term time periods where I happen not to be spending very much over a particular week or month.

I intend to build my assets, and then use them up - i.e. consume the income from the assets and the assets themselves. So there will be a 'building up' (accumulation) phase and a 'using up' (decumulation) phase. During accumulation most of my income will likely be earned rather than unearned and so investment income isn't going to be as much as I spend. During decumulation the investment income element of my investment total return from year to year will not be the entire total return, and the total return may or may not be as much as I want to spend.

Also how should i calculate this? investment income pre or post tax?

If having more income than you need to use, is important to you, then obviously your measure should be 'post tax' income. Otherwise once you have paid the tax bill on the pre-tax income, you may not actually have more income than you need to use after all, which was your goal, and you will have failed.

AnotherJoe

elephantrosie wrote: »

At what age did you reach or intend to reach the crossover point where your investment income exceeds your living expenses?

Also how should i calculate this? investment income pre or post tax?

Never, I'm burning down my investments (which includes income of course) with a big enough safety gap that should I ever breach it I'll have enough supplementary income from appearances as the worlds oldest man, to cover any shortfall.

If you do wish to leave a whacking big amount of money for your descendants, and only live on investment income, you should at least make a stab at that being post tax, there's no point in saying your "income" at say £50k is sufficient when after tax its actually £40k. Obviously all you can do is guesstimate what tax will be.

elephantrosie

AnotherJoe wrote: »

Never, I'm burning down my investments (which includes income of course) with a big enough safety gap that should I ever breach it I'll have enough supplementary income from appearances as the worlds oldest man, to cover any shortfall.

If you do wish to leave a whacking big amount of money for your descendants, and only live on investment income, you should at least make a stab at that being post tax, there's no point in saying your "income" at say £50k is sufficient when after tax its actually £40k. Obviously all you can do is guesstimate what tax will be.

no, i dont believe in leaving anything for the coming generations; but if that happens, then it happens. everyone above 27 should be independent. like Jack Ma has said if you are still poor at 35, you have only got yourself to blame.

bowlhead99

elephantrosie wrote: »

. everyone above 27 should be independent. like Jack Ma has said if you are still poor at 35, you have only got yourself to blame.

'above 27' seems about the most arbitrary figure ever bandied about for the age at which an adult should become an independent adult.

I can't see 35 is particularly meaningful either. At 35 some people will have founded and IPO'd Amazon or Facebook. Or launched Alibaba like Jack did. Others may be unemployed or still be working for a smidge above minimum wage following a series of choices or events largely beyond their direct control.

Unlikely that many 35-yr-olds in the UK are 'poor' by global standards but I expect the poorest few million UK residents feel pretty poor in comparison to the richest tens of millions. Saying they all only have themselves to blame is not very compassionate as there will be some who could not have practically done things much differently and had to play the hand they were dealt. We should always expect some people to be poor though, as it is a relative measure, like height. The fact that someone will be short or tall helps to define you as someone who is 'normal range'.

economic

bowlhead99 wrote: »

'above 27' seems about the most arbitrary figure ever bandied about for the age at which an adult should become an independent adult.

I can't see 35 is particularly meaningful either. At 35 some people will have founded and IPO'd Amazon or Facebook. Or launched Alibaba like Jack did. Others may be unemployed or still be working for a smidge above minimum wage following a series of choices or events largely beyond their direct control.

Unlikely that many 35-yr-olds in the UK are 'poor' by global standards but I expect the poorest few million UK residents feel pretty poor in comparison to the richest tens of millions. Saying they all only have themselves to blame is not very compassionate as there will be some who could not have practically done things much differently and had to play the hand they were dealt. We should always expect some people to be poor though, as it is a relative measure, like height. The fact that someone will be short or tall helps to define you as someone who is 'normal range'.

I think wealth and income are largely correlated with IQ and mental stability. Of course many other factors involved, but if you don't have a certain level of IQ and mental stability, chances are you will remain relatively poor. So in that sense its no ones fault but the genetics (and some environment) of the person.

That said, we live in the UK where we can afford (for now) state benefits for the poorest. No one is starving, nearly everyone has a home so there is no poverty in this country.

Glen_Clark

economic wrote: »

I think wealth and income are largely correlated with IQ and mental stability. Of course many other factors involved, but if you don't have a certain level of IQ and mental stability, chances are you will remain relatively poor. So in that sense its no ones fault but the genetics (and some environment) of the person.

That said, we live in the UK where we can afford (for now) state benefits for the poorest. No one is starving, nearly everyone has a home so there is no poverty in this country.

What evidence I have seen suggests the biggest factor in wealth and income is parentage. This must be set to increase as more wealth is tied up in property.
Her Unelected Majesty the Queen stands as an example to us all - that however clever and hard working you are, you can't get the top job unless you are born into it.

Alexland

elephantrosie wrote: »

At what age did you reach or intend to reach the crossover point where your investment income exceeds your living expenses?

Also how should i calculate this? investment income pre or post tax?

We average mid 30s, have low living expenses (mortgage mostly paid so invest circa 2/3rd of our income for early retirement, to help son, etc) and markets have been generous recently so our total YTD return (we are investing for accumulation not income) probably exceeded expenses for the first time earlier this year.

However I don't see it as a crossover point as there will be other years in future, when market corrections occur, where we will be in negative YTD return position.

You can calculate things however you want.

Alex

Eco_Miser

economic wrote: »

I think wealth and income are largely correlated with IQ and mental stability. Of course many other factors involved, but if you don't have a certain level of IQ and mental stability, chances are you will remain relatively poor. So in that sense its no ones fault but the genetics (and some environment) of the person.

Certainly those with low IQs or unstable mentality are unlikely to get rich, but there are plenty of other reasons for remaining relatively poor, such as preferring to have a life rather than working overtime (or even full-time).

economic wrote: »

That said, we live in the UK where we can afford (for now) state benefits for the poorest. No one is starving, nearly everyone has a home so there is no poverty in this country.

Except that some slip through the safety-net, so don't get the state benefits.

A_T

economic wrote: »

I think wealth and income are largely correlated with IQ and mental stability. Of course many other factors involved, but if you don't have a certain level of IQ and mental stability, chances are you will remain relatively poor. So in that sense its no ones fault but the genetics (and some environment) of the person.

That said, we live in the UK where we can afford (for now) state benefits for the poorest. No one is starving, nearly everyone has a home so there is no poverty in this country.

Being born into wealth (or not) is by far the biggest factor in whether a person is wealthy or not.

Eco_Miser

elephantrosie wrote: »

At what age did you reach or intend to reach the crossover point where your investment income exceeds your living expenses?

I don't know, that isn't something I measure.
However when I was 59 my only income was from investments, and my net worth increased, so investment income must have exceeded expenditure that year.

elephantrosie wrote: »

Also how should i calculate this? investment income pre or post tax?

Post tax. There's no point in comparing your expenses to a figure that's bigger than you actually get.