If I had a million dollars

[kate_nepveu]

I wouldn't be rich.

Chad pointed out a Cognitive Daily survey on what it means to be rich, which had questions about both income and net worth. It's interesting reading, and I recommend all of it, but one thing in particular caught my eye.

The survey creators asked how much people would give away if they won a tax-free million dollars. The answer was roughly $200K, which prompted at least one person to express digust at the lack of generosity.

If someone wanted to give away most or all of a tax-free million, I would applaud them. But it's not what I'd do, and I think that "digust" is a bit of a strong reaction.

Here's what I'd do, at least my immediate reaction:

First, I'd figure out how to get full health coverage for our parents for the rest of their lives, everything from annual checkups to the less happy possibilities like nursing homes or hospice care. This would probably be very expensive, since I'd want to set things up to cover every possibility (buy an annuity to pay the insurance premiums, maybe? Something like that.).

Then I'd set up a college trust fund for our child(ren) and the child(ren) of our siblings, which would itself be a substantial chunk of change.

Whatever is left, either we'd renovate the kitchen or just sock it away as a vacation-and-treats fund.

And with the money freed up by not having to save for FutureBaby's college, I could increase my monthly charity budget. That's the thing with a million bucks, it's not enough to retire on, but it would give me the opportunity to provide for later contingencies and incrementally increase my standard of living and peace of mind today.

Anyway. What would you do with a tax-free million dollars?

Oh, and yes, some of you live in places where you wouldn't have to fund these contingencies personally, congratulations, I'm very happy for you, you don't have to comment just to say that. If I didn't have those things . . . probably new house, dream vacation, and yeah, an up-front chunk to charity.

(On the other hand, I definitely don't understand the people who answered the survey who said that they couldn't have enough annual income, that no amount would maximize their personal satisfaction and happiness. Seriously? The best spin I can put on that is that they have much better imaginations than I do.)

Comments

[janni.livejournal.com]

I'd get together with a trustworthy investment counselor, and work out ways to invest it so that some portion could serve as part of a yearly income and some could go toward part of something resembling retirement. And then I'd give to charity and do other worthwhile things out of the yearly income part.

Probably, unless the investment counselor convinced me it was a really bad idea, I'd pay off our house before doing all the rest.

[montoya.livejournal.com]

A million dollars is really not enough to retire on, unless you want to live rather austerely. If you're not retirement age, so need it to last indefinitely, you can get a withdrawal rate of 2-3%, which amounts to something like $25K a year. Which you have to pay taxes on (though if that was your only income, I think just 5%).

But it's a heck of a nest egg...

[kodi]

It really depends on where you want to live. If you can buy a house for $150k, then $20k a year isn't austere at all. If a million dollars won't buy a house at all, then yeah.

[kate_nepveu]

Umm, we bought our house for $150K and we coudn't live on $20K a year, even one of us; just property & school taxes would be at least a quarter of that.

[kodi]

Well, in the DFW area it's closer to $3k than $5k, but point taken - it's doable, but it certainly is more austere than most people would prefer to deal with.

[kate_nepveu]

Yeah. This gets into class markers, but we like our jobs and our travel, etc., enough that we'd almost certainly prefer to keep working.

[kate_nepveu]

I've never done the math to see how the tax break on mortgage interest works on, because one of my student loans wants paying off faster, but there is something very appealing about a paid-off house, isn't there?

[montoya.livejournal.com]

It's not that great a deal, really. If you're in the 25% tax bracket, then you're paying an interest rate 25% lower, so your 6% mortgage is effectively a 4.5% mortgage. That's not nothing, but it's not the game-changing thing people treat it as a lot of the time.