One for the filthy rich guys :)

So you have paid for your massive house, you have 5 cars in the garage, you go on holiday a few times a year. What else would you waste your money on?

Building Fembots!!

Male enhancement surgery??

Building Fembots WITH male enhancement surgery... No! Wait!

hmmmmmmmmmmm.......................... i would just enjoy life........why kill yourself? you know everyday that you are living, you are dying........

A bigger garage with more cars. What else is there?

I would donate my Porsche to charity every year, and pick up my NEW one in Germany!

That's the answer. In the process of building another garage now.

http://en.wikipedia.org/wiki/Michael...tery_winner%29 This guy is admirable through his stupidty. Blew nearly 10 million pounds ( nearly $20 mil US) in a couple of years.

what an idiot.... but he had fun being one........

Navy Corsair in mint condition. The ultimate toy.

Invest as a prime Proprietor in a "Gentleman's Club"

boats

If I had really made it to where money really no longer had any sort of value to me I would buy a winery in Napa and try and make the very best Napa cabernet and maybe pinot that I could possibly make. If I had made it to the point where I had just a fantastic amount of money them I likely would buy a small place in Austin, Tx and live there during football season so I could watch my Longhorns every week. I would likely buy a small place in Park City, Utah so I could ski and maybe even teach ski lessons during ski season. The rest of the time I would probably split between San Fran and Houston (Houston is home for me). Other things might be a restaurant, bar, maybe if I had the money to do the winery I would also do a golf course for me and my buddies just for the hell of it. More cars. Hell I don't know.

Man... somebody had time to think about this one... I LOVE IT.........

I always laugh when someone says something like "I don't know what I would do with $20 Million"... oh I could spend it easily. Let's start with that $1.7 million Veyron and building a track with a 5 mile long main straight to allow me to hit 153MPH!!! All joking aside. If I ever hit $5 Million I would retire from my primary job and live off the returns. Any returns in excess of $250,000 would go to charitable contributions. I bought the Christmas gifts for 14 needy children this past December, and while driving the Porsche makes me feel great, it just doesn't compare to the smile you can put on a kid's face when you made a seemingly impossible wish become reality. Just speaking from the heart.

This one is easy. Fastest way to turn a lot of money into a little money is aviation!

20 mil? ..... buy myself a season in ALMS?

no seriously...... what would you do?

I would set up a self-sustaining trust to fund grants to the brightest minds in cancer research to cure that AWFUL disease that takes way to many people every year before their time. You can't take your toys with you but you can sure make a difference while you are here!

research is the way to go... just make sure it's not against the human race.......... you hear that Bill........

My question is, why would anyone payoff their house, no matter how much they are worth. Just makes no financial scense.

i agree... you need that tax write off...... i say debt is great if you know how to use it to your advantage....

Rob you don't need a Veyron to do that, in fact we can even leave our 911's at home. You find a private 5 mile straight we can use and I'll take you to 153 in my Boxster.....

cancer is a terrible dieseae but i really think altzhimers is worse

Well, that too. But I can't sent up trust to fund research grants for all the research can I? I'll take care of cancer and you grab Alzhiemer's and Parkinson's and we should be off to a good start

i'm guessing the OP defines filthy rich as 30+ million or so with just retarded disposability of income. in no particular order i would 1) buy all the cars i've dreamt about owning (all three gens of RX-7s, an RX-2, 1968 911, and a lambo or 2) 2) take care of my family, make sure each associated family cluster has at least a million dollars in the bank 3) set up a scholarship type thing in my parents names..they always wanted to help poor kids goto skool 4) give money to help poor people in foreign countries...doesn't matter where..as long as it's being used effectivly. 5) get saudi arabian citizenship so i can get a couple of those retardedly hot arab wives i've always wanted.

I was gonna say, I hit that coming out of my driveway on my skateboard...

the funniest thing is that now he's gonna have a movie/book deal which means more money to blow... any guesses on how long it takes to blow those royalties? it's good to see a real-life story of someone doing what we all say we would if we won the lottery... although I would hope that I could stay away from the obviously terrible financial/personal decision of wasting money on drugs/alcohol.... you know maybe a lil' bit of the finest herb but even that stuff isn't a big deal to me and alcohol is something that doesn't appeal too much to me either... the biggest problem when someone wins the lotto is that they suddenly have more money than they know what to do with and ultimately figure out how to blow it all just as quick as they got it... drugs is usually a very easy way to blow money... literally... for me the money would be blown on cars/motorcycles with these as my main targets: 1) C-GT 2) 997 GT3 3) 997 GT2 4) RS 5) Enzo 6) Murcielago 7) Veyron(not the biggest fan of how it looks, it's just so awesome) 8) M6 9) '70 Challenger or Super-bird 10) etc, etc, etc For bikes.... 1) that turbine powered bike that Jay Leno has 2) Aprilla RS-Mille 3) some type of cruiser... preferably NOT a harley 4) etc, etc

You do realize that any "write off" you get is substantially less than the interest you are paying on the mortgage? In simpler terms, why don't you send me $100 (the interest) and I'll send you back $30 (the deduction). How does that deal sound?

oh hamilton, you really don't understand the tax code do you??? Most of us have mortgages that are in the 5% range (which is even lower after the tax shelter) and that is some of the cheapest money you can borrow. To have that mortgage will free up $$$ that you can use in investments. And those my friend if you are even conservative can easily bringback 10-15%. Do the math.

All toys. 1. Gulfstream G200 2. Sunseeker Superhawk 43 3. Bell 206B-3 4. Ducati 1098 Tricolore 5. MV Agusta F4 Tamburini Ciao, J.

I guess there is not a chance in hell that you'll ever be independently wealthy unless you marry or hire someone who knows about money.

I would probably blow it all on nachos.

Gentlemans Club with my own private pole. Make that 2 poles!

I like how they call them "gentleman's clubs" when most of the men who frequent such places are anything but... I think the only "gentlemanly" thing about the club is the unwritten rule that they can touch you but you can't touch them, but that's not to be a gentleman, that's so you don't get a) beaten to a bloody pulp, b) thrown in jail, c) embarrassed in front of your friends just an example of politically correct gone wrong... i'd be happy to own a "gentleman's club" and call it "Perv Depot" or "*** N See *******"... well actually "See ******* N ***" would probably make more sense

Dell, You are talking about something entirely different. Sure, if you can get cheap money and want to invest it, have at it. However, when faced with taking equity out of their homes, most people are blowing it on a plasma TV or a trip to the Bahamas. I was referring to the mass hypnosis that everyone seems to have fallen for where they think that deducting the mortgage interest is some sort of "free lunch" that makes the morgage worthwhile. BTW, if you can "easily" make 10-15% in a "conservative" year, you must be running a Ponzi scheme because you are outperforming 99% of professional money managers. Or you are fibbing.

ok, fine... just paypal them to me and i'll figure out how to spend it on your behalf.

Please describe to me the part where I am wrong. When you deduct your mortgage interest, it is only deducted from your taxable income. So if you are in the 28% tax bracket, you are still down the 72% that you paid in interest and won't be getting back. And another thing, in case you haven't been paying attention, home values are "correcting." So if you have no equity in your home and ever decide to move, you are going to need to write a big, fat check to cover the amount that you are upside-down on your home. So if you borrowed $500K and your home is now worth $350K, if you only have $10K in equity you are going to have to cough up $140K for the privilege of moving. Doesn't sound like a financial-genius move to me.

I'm happy to have my home paid for. If anything happened to me and I couldn't make a mortgage payment I don't have to worry about where I'll be living in 10 years.

right... paying off your house is a HUGE security knowing that you will always have a place to live. considering that i grew up in a society (USSR) where bank was your shoebox under the bed, i have a lot of "anti-credit/anti-loan" tendencies in me. in fact, both of my cars were paid cash for.

From the movie "Office Space" "2 chicks at the same time" "Girls don't always dig guys with money" "The kind of girls that would double up on a guy like me do" just kidding. I would buy more cars, travel, and do something that benfits the next generation.

lol, the best part about that is that he has a dead-serious look on his face... btw for some reason I was thinking about that movie last night since the walls in my dorm here in Vienna are so thin I always have the urge to yell to the next room "Hey Peter check out this chick on channel 9, it's the breast exam!" And I started to think since it's made by the guy who did Beavis and Butthead, is the neighbor supposed to be a grown-up, real-life version of Butthead?

It has nothing to do with the tax break since after a specific amount of income level you lose most of it, it has to do with the low rate of borrowing costs compared to what you can do with the free cash. For those who do receive a duduction for interest, it is and additional big benefit. There is an inflation factor also. Your payment is a fixed amount, not subject to any inflation increases. Each year, your payments consist of cheaper dollars. For example, beginning in year 15, with and annual inflation rate of 2%, the inflation factor lowers your payment by 30%. There is a whole list of arguments justifying that a mortgage is part of a good financial plan, but it's too involved to go into here. As far as the value of your home dropping, I fail to see what this has to do with a mortgage. Either way, the value will drop, you just have to decided whether you want to risk your money, or the bank's. If you were to reverse your senerio and have your home double in price, you have increased your net worth using someone elses money.

I'd go vintage racing.

Well, many of the people who have been speculating in real estate have ARMs or balloon payments that are going to erase any inflationary protection. I did mistakenly attribute another poster's comment about needing the "write-off" to you which is why I wrote the bit about the deduction. And you are right about what might happen if your house were to double in value but, at this stage, that is extremely unlikely. So what I am trying to say is that when the huge number of people with "creative" mortgages and no equity either can't aford their new payment and also can't move because they are upside-down on the loan, they are going to default and the bank will foreclose. I predict a huge economic slump once this starts to happen. I don't get why people don't realize that asset inflation is not generating real wealth. If your house increased in value by 20%, the only way to realize that gain is to sell it or to draw the money out in the form of a second mortgage. If you sell it, you still have to live somewhere else and any comparable place you are looking at is also going to cost more. If you take the second mortgage (now called a home-equity loan) then you can very quickly be upside-down on the loan and will be unable to move unless you can cover the gap with cash. All I'm trying to say is that the current real estate hysteria is not much different than tulip bulbs were several hundred years ago.

Dell, what you are doing is more accurately called speculating and not investing. There is a significant difference. When I went to Med school and had to borrow money, that was an investment in my future. Just like borrowing to build a factory would be. Borrowing against the equity in your home to stick it in the stock market is speculation that the equities and your house will continue to follow the trend of the last few years. Remember when the tech bubble popped?

And your thinking is exactly why the smart stock market traders will ALWAYS make money. Thank you very much. By definition, the stock market is not an investment...it is purely, 100%, speculation just as is whether you will wake up tomorrow or not.

hamilton....I am not going to get into a pissing contest with you since you assume that I am a speculator (which I am not) and as well somebody that is upside-down in my home. My wife graduated med school with ZERO student loan debt and I borrowed ZERO for my graduate work (Ph.D). We do not specualte nor invest with HIGH risk. We own a considerable portion of our home and are nowhere near upside down. By the way, I made a nice chunk of change on my house in Las Vegas before I moved out here last year (almost double). But you know what? I at no time SPECULATED in buying that home. That home was an investment and it just so happened that we made more than we thought we would. We hoped for enough to break even or even have some down payment money after the 4 years we owned it. So, there is NO specualting here. I invest. Thanks for playing.

997S (with X-51), 997TT, Carrera GT and a heated/air conditioned "house" with a "loft" (lift) for them to live in!

Simply put: You borrow $300k for your mortgage at 5% You inherit $300k when your rich uncle dies You invest the $300k in an array of mutual funds that return 9% a year You EARN 4% more than you would paying off your house!

Actually more than 4% since you have deducted the interest on your taxes. But nonetheless, good basic example to illustrate the point.

Or, as some doomsayers on this board like to think: You borrow $300k for your mortgage at 5% You inherit $300k when your rich uncle dies Your house value falls by 50% You invest the $300k in an array of mutual funds and lose it all You become homeless and pennyless, forever wandering the earth looking for direction.

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Why spoil this thread that could have been fun.

Actually less than 4% because although you get the deduction on the 5% you also have to pay taxes on the 9%.

If you want to be technical about it.....actually NOT. Capital gains have a more favorable tax treatment as well as much of the dividends. Mortgage tax deduction applies to your tax bracket and not just 15% as do much of the dividends and gains.

Oppps! Obviously I meant 253mph!!!

I was hoping someone could explain the effect of the Alternative Minimum Tax with respect to the Captial Gains on the investment income. A little time spent on the phase out of the itemized deductions would also be a lot of fun! I live in California so be sure to bring in those lovely taxes as well. I am sure there are a few folks from New York, so those taxes will be just as fun. We could then round that out by going over the various fund managers and how the conservative ones are getting a 10 to 15 percent return. If I could get a constant return any where in that range, I may be able to seriously consider the original question in the post.... Oh yea, that's right, how would I spend alot of money! I would start with about a 80 foot boat, that would certainly be a great way to reduce my bank account while having a great time. It would be big enough to strore plenty of water toys and accomodate several friends in comfort. It is also a size that you don't necessarily need a crew to enjoy, which would be my personal preference...at least for another 10 to 20 years. A couple houses in different climates would be great also, maybe throw in a jet. And certainly a few fun cars. Lastly, trusts for all the family members as well as some charitable trusts. Now let's get back to the tax discussions! Kris

I'm in the process of rebalancing my portfolio right now and note that for an S&P 500 Index fund the returns for 2006 were over 15%, approx 7% average over 5 years, 8% over 10 years and 12% since inception in 1976. 10-15% annual returns are not unrealistic. If I had crazy amounts of money, I would invest it in the stock market. Nothing sweeter than your money working for you to make more money. Oh, and maybe a few extra deer whistles, you can never be too careful

There are plenty of web sites that attempt to explain the AMT. It is basically unexplainable....you just have to do it to find out. It is like filling out a second tax return and applying the unique tax rates of the ATM to your income after plugging back in certain deductions taken on the first return. You pay the higher calculated amount. Jim

If you were that confident that you could make 10-15% each year in a fund, it would be a no brainer to borrow as much money as you possibly could, mortgaging everything you could and putting the money in that fund. Decisions tend to be slightly different when you play with real money, but dreaming is a good thing.

You bunch of dummies. In the Ukraine you get 12% on USD, yes 12! In foreign banks too. I am moving some of my savings there in the next month.

Then, like I said above. why not mortgage your life to the hilt and make that 12%. I mean it IS guaranteed, right?

all this talk of investments and returns brings me back to Office Space... remember when they asked Samir that question forgot exactly what he said but it was similar...

AYou wanna be rich. It's real simple on paper: Invest $0.01 (a penny) and double it every day for 30 days. You now have over $10,000,000. Start with a dollar and you will have more the $1,000,000,000 in 30 days. Start with $10,000 and you only have to double it 10 times and you would have almost $11,000,000. Better start now.

Charities, just kidding.

Well, slightly risky but it is guaranteed as long as the banks do not go bust. That is why I am going to an Austraian bank. BTW I bought my house cash, and my porsche too. I am a ***** when it comes to credit. Something my parents beat into me. I am willing to give it a go though if the investment is good.

And assuming that the value of the US dollar stays constant.

There is no free lunch folks! care4era: why should an Austrian Bank like "Erste Bank", "RZB" or "Bank Austria - Creditanstalt" pay you 12% on USD in the Ukraine when they can get it on the interbank market for Libor rate which is currently for 3-6 month Libor around 5.5%? Ever thought about this? I answer it for you: they transfer a risk to you that is marketed at 6.5%, so if you've luck, you make the 12% return and win but if you have bad luck, then your return might be 0% or negative. It would only be a free lunch if you'd have a guarantee from the Austrian mother-institute that guarantees you a return of at least USD Libor, so only upside, no downside - but again that's not existing in efficient financial markets.

Sure, no returns possible but tempting eh?I thought it was some dodgy local banks but did some research and it is owned by Raffeissen. That gives me some more confidence. I will not bet the farm so if I lose it I will eat.

Blah, blah blah, back to the topic: 1. Vacation home in Aspen 2. Vacation home in Scottland 3. Quit job, go back to school full time 4. Do a job I've always wanted to do, like teach high school or own a coffee house. Word to your mother.

care4era: that the local bank in the Ukraine is owned by Raffeissen (RZB) gives you the confidence that they will not let their subsidiary go bust without any severe reason. However, the Ukraine is still not a western country, so there are several investment risks involved. One risk is that the central bank might have a USD shortage and forces all banks to pay out investments in local currency (Hryvna) at their rate. You need to know these risks and if you want to take them, then do it. There is a good chance that you get 112% back in USD in 1 year.

[QUOTE=JC3D] "2 chicks at the same time" /QUOTE] You beat me to it! Travel Realestate School (without the grades of course)

[QUOTE=JC3D] "2 chicks at the same time" /QUOTE] You beat me to it! Travel Realestate School (without the grades of course) Oh... and save babies, etc...

That's the way I feel, as long as I work for someone for a living I'd prefer not to have a mortgage.

are you serious??? i am from there and would not do so myself. it is very risky. the country is very unstable. you got president and premier who hate each other, government and coalitions forming and breaking up every week and real estate prices has gone through the roof in the past two years. just be very careful. at least consider banks which have western or USA banking (for example, there is ING in ukraine and Citybank in russia) why not just invest your money into an index fund or S&P500? it gives you a historic 10%-12% return with less risk than Ukrainian bank.

open a top notch club so when i go to europe next time, i can say "oh yeah, i am flying into prague to chill VIP at my buddys club"

[QUOTE=UCrazyKid][QUOTE=JC3D] "2 chicks at the same time" /QUOTE] Did it twice, it is not what is cracked up to be. I would trade some of your guys money for that experience, trust me. Oh back to the subject, F-22 Raptor

I know an English guy that wanted to buy a bar or a business just so he could come to Prague to drink with his buddies and get away from his wife

Sorry for contributing to the hijacking of this thread. To answer the original question. I would buy a boat like this: http://www.wally.com/jumpCh.asp?idUs...l=44&idLang=IT Check out the video...

[QUOTE=Tippy][QUOTE=UCrazyKid] yes and i'm the guy who once dated Carmen Electra and I dumped her!!! just playin... but yea i could see how it wouldn't be all it's cracked up to be... i had an opportunity once but like a fool passed, i'll take a "flavor of the week package" where I got a new delicacy every week... you know an asian this week, then a latina, then a blonde supermodel, etc, etc then again, I am in the wonderful country of Austria where prostitution is legal and supposedly it costs 80 Euro so does that mean that a three-some would be 160 Euro, so in that case you'd only need like $240 to do what would cost some ppl a million

[QUOTE=VR4 Playa][QUOTE=Tippy] caused a lot of drama because one of them was my girlfriend, needless to say what happened to the relationship afterwards

we call that the around the world tour...all i'm missin to complete the trip is a black chick...maybe i can goto austria for that?

[QUOTE=Tippy][QUOTE=VR4 Playa] that's why i'm glad that my gf doesn't really have any friends that are worth doing that with... well she's got a couple but they got bf's so i'd imagine if they were down for that that their bf's would want my gf too... no thanx as for the around the world... all i've done besides obviously white girls is 1 black girl and it's funny 'cause she's mild to dark in color but only hangs around w/ white and hispanic ppl so i'm not sure if she counts.... only other "race" i'd like to try would be hispanic... not a big fan of the asians or indians... but an "around europe" would probably suit me well and the first time i heard that phrase was in a George Carlin skit where he made fun of the "did you pack your own bags?" question that the airports always ask, but it was the "singular act" and it involved him, Carrot Top, Florence Henderson, and Martha Stewart... after they packed his bags for him of course

I like the original topic more than the invetment 101 topic. I used to race and Formula Atlantic, it beats the pants off any street car. I had to work really hard to keep it up and race it. If I had too much money I'd probably get back into real racing but have someone sweat keeping it going. I'd just show up with my helmet and drive. There are a couple of other things I'd do like make sure my family was taken care of, fund some research etc.

Back to the original question, for me it's all about enjoying life with friends and family. So I'd build an awesome road course in my back yard, and invite all of you guys to bring your Porshce's and tear it up to your hearts content - free of charge! I'd even have some loaner 997 turbos for those that wanted to try it out.

if its your club, why would you say "at my buddys club"?

i am telling the original poster to do that

My turn I think the message that a lot of people were not really acknowledging the way certain people wanted them to is that risk is real, and historical returns are not an indicator of future returns. Take me as a (counter)example. The cheapest condo I could buy in this area would take a mortgage payment equal to something like 80-90% of my take-home pay, even with an enormous downpayment. Should I buy one? A lot of people think I should (and don't get me wrong, I'd certainly *like* to). But that leaves me so little room for error. People then start to play up the mortgage interest deduction, but I really don't like that idea. What happens if I go on short-term disability for awhile? More importantly, without a gigantic tax rebate as I'd be "promised", I'd barely be able to afford to eat. I don't like the idea of relying on that tax break, but I know an enormous number of people who need it to live. And you can say "So what? They're ninnies" - and I wouldn't disagree. And for what it's worth, I am working on a house, it just involves saving, investing, and hard work rather than buying, starving, and praying. But, as for the original question, here goes nothing: 1) House w/ garage and home theatre 2) 996TT + BMW E24, maybe a McLaren F1 and a CGT if I'm dreaming Assuming I had those, I'd probably just look for jobs I liked, work those, and take some sweet vacations in between (nothing fancy, just visit the cities I want to visit, probably really only drop $$ on good dining experiences). Someone mentioned giving presents to children less fortunate, and I have to say, that sounds like a really good idea. Plus, being able to afford my own health insurance if needed would be fun. Oh, and one last thing: Gumball 3000 Justin

YESSSSSS GUMBALL...... that would be too cool....but i want 5-6 cars as back up just in case they impound my other ones for excess of 200 mph.......

Upgrade the sailboat to this: http://www.duboisyachts.com/Yachts/W...ay/default.asp

that is pretty amazing. has nobody looked at the video I linked to? Some of these boats are incredible...

Watched the vid, power boats aren't my thing and that Wallyboat is Fugly - pretty amazing performance though.

If you think you can return 10-15% with very low risk, whatever you do you are in the wrong business, forget everything else and raise some money Seriously, for long term retirement, no one should look at more than 2.5% aftertax with preservation of capital on liquid assets. More would be foolish. And BTW the really smart people are using 1.5% (ie 20mio of liquid assets for 300k anually spending money). Most people don't want to believe it because it is such a high number to reach. But when you have a shot at it, you won't stop short of it. Just to throw it out there, $50mio is the minimum for a private yacht (80 feet+ with crew) and $200mio is the minimum for owning a plane when no extra income comes in. A few fact for you: long term, housing cost and stock market valuation cannot exceed growth. Baby boomers will retire at some point. Luxury goods inflation far exceeds the official inflation numbers.

Well, I am glad I do not hang with the "smart" people who only plan on making 1.5% after tax in a safe investment. I guess they have never heard of US Treasuries, where, currently, their after tax return would be 3%. Doesn't sound like a big difference, but in your example above, the "smart" guy just found an extra $300,000 in spending money each year. There are many other conservative investment sfor liquid assets that consistantly return substantially more in after tax returns too. Anyone who has $20,000,000 and cannot average a 10%+ return a year in reletively safe investments did not earn that money, but had it given to him.

5% treasuries, minus 35% federal tax (ie 1.75%) minus 2% inflation (preservation of capital), leaves 1.25%. Account for low current int rates and long term you can do a little better, ie 2.5%. Of course you can spend the capital over some time, but what if you live until 100 years old because of medical advances? Of course you can do better than 5% a year, but it involves risk. Why do you think the US treasury can lend as much as they do at the rate they do? In your world, no one would buy these treasuries because they yield too little. Guess what, every auction is oversuscribed. The answer is because they have no risk, unlike other investments. Another point: if it is that easy to make over 5% a year whithout risk, why wouldn't everyone sell treasuries and invest the capital, no need to work then! If you think different, I suggest you try to talk to the right people or to read more about it. Of course you should invest some of your capital in more risky higher return assets like stocks. But what if you want (and can afford) to take zero risk. What if you want to be OK for the next 60+ years? Again, sorry you heard different from estate planner who want your money to invest, but think long and hard...

The returns in my retirement savings have been 15.7% in the last 1 year, and 14.3% in the last 3 years. But when I plan for retirement, I do not assume 8% returns as it seems so many "experts" and websites tell you to. If, through luck, I get 8% or more, I'll be a very happy man. I won't be surprised, but just because it's happened in the past doesn't mean it will happen in the future. (Obviously I am not saying this is the general case - there are tons of ways to invest money - just that there are so many assumptions taken for granted out there)

Problem is people only remember the recent past. Look back further at real estate and stocks, you will be very very surprised. 8% minimum for your retirement? Some people are in for some very rude awakening. And lets say you can make 8% a year for the next 30 years in stocks/bonds/real estate. So will everybody else. You really think inflation will be 2% in that scenario?

Well, I guess you'll never accumulate much wealth thinking that way. Better check your math, A 5% pretax return would have an after tax of 3.25% and reduce it by another 2.5% for inflation, you are left with 3.15% return not the 1.25% you stated. And why are assuming that all investments are taxable? Of course if you calculate you retirement return based on that kind of math, you won't be left with much. And, NO, you do not want to eliminate all risk in your investments just because you retire. I have learned by doing and not by reading books or running to a financial planner. Experience is the truth, not a text book.

Why do you assume EVERYONE ELSE would make the same. The investment market is balanced and for every buyer, there is a seller. There will always be losers and winners. I depend on the losers for my money. And there sure are a lot of them out there.

The math is fine, 3.25% - 2% = 1.25% real net return with NO RISK. I am not saying everybody should do just treasuries, I am just stating that without risk, this is the best you can do. All other strategies involve some degree of uncertainty. A timely CNN article: http://money.cnn.com/2007/02/20/maga...ex.htm?cnn=yes

You math IS NOT correct. What is 2% of 3.25%? If you need remedial math courses, Sylvan Learning offers them. Also, Treasuries ARE not the only investemnt with NO RISK. I sure hope you are not a money manager, or accountant or other job where number maniplulation is required..

Hint.....2.5% of the 3.5% In otherwords 3.5*.0975 or 3.16% (roughly the 3.15 that 1999 was illustrating for you).

I don't believe that's correct. The real ROI on investments is subtractive of the inflation rate. The rate at which your money is growing is directly impacted by the rate at which your money is losing purchasing power on a one-to-one basis -- over the same time frame. Therefore, a 3.25% annual yield with a corresponding 2% inflation results in a 1.25% real ROI.

Didn't anyone pay attention in 4th grade math? So, I guess if inflation rose to 4%, you would have to pay .75% out of your own pocket to the investment house?

No, you wouldn't be paying the investment house the difference. However, your money would be earning a negative return. ROI is a measure of money growth versus the loss of purchasing power.

If you have any kids in grammar school. Give them this math problem. If you invest $100,000 and you earn an annual interest rate of 5% how much more money will you have at the end of what year? If you have to have to pay 35% of that amount to the government, how much will be left over? If this net amount is further reduced by 2%, how much is now left over? Have them take this number and divide it by the orginal $100,000 and have them tell you what the return is in percentage. $100,000 @ 5% for 1 year earned $5,000. Reduce the $5,000 by 35% for taxes and you have $3250 left over. Reduce the $3250 by another 2% and you have $3185 left over. Divide $3185 by $100,000 and how much percentage was your net return? I can't believe you have to explain such simple math to people on this forum. You must be SciFrog, using a different screen name cuz there is no way 2 people could have gotten out of 5th grade not knowing the correct answer. You guys better hope that there is some social security left over when you retire, because, based on your math, you won't be able to accumulate any wealth on your own.

Bingo.

That's the whole point. You have to take risk to get higher returns so that you can retire. Some very wealthy guys don't need to take as much risk to preserve capital. Social security? They have the same problem you do, but on a much much larger scale. Why do you think the politician are so worried right now about it? And, as mentionned in my first post in this thread, sorry this is not what you want to hear or what estate planners are saying. Because if you heard it from them, you wouldn't hire them.

You guys really need to take Econ101. ROI and Inflation are NOT additive or subtrative. ROI is affected by inflation and therefore must (or can) be adjust to reflect what you "really" earned. You do NOT reduce your ROI by the inflation rate but rather your ROI is reduced by that percentage as a measure of true ROI or the buying power of that ROI. You are trying to subtract the inflation percentage from the ROI percentage rather than reduce your ROI by the percentage. You need to do the math properly. Correct: ROI (whole dollar amount)*inflation (as a percent)=adjusted ROI (subtract the product from the original ROI amount) Incorrect: ROI as a percent of your investment (rather then a dollar amount) - inflation (as a percent)

I would drive the cars. At the Ring. Every day,

That's correct, but I tried to keep it simple so that he understands (ie over only one year where both formula are the same).

Yes, Dell is correct, which is absolutely contradicting what you are saying. I cannot believe you do not see your mistake. YOUR formula IS NOT the same. If inflation is 2%, why are you reducing the PERCETAGE RATE by 200 basis points rather than reducing the AMOUNT EARNED by 200 basis points? I do, however see part of your problem, you are relying on what you read and what you hear from what you call estate planners. Big mistake, but like I said before, there have to be losers in order to have winners when it comes to creating wealth.

Ever heard of present value? Of course you have to apply the 200bps on the whole capital and not just the amount earned. To put it simply, you buying power is reduced by the amount the inflation goes up every year. You haven't interpreted lvdell's formula correctly. Example: return 5% 35% taxes thus 3.25% inflation 2% 1$ amount after two years, the net present value is: (1$ * 1.0325 * 1.0325) / (1.02 * 1.02) = 1.024660 or roughly 1.2% per year net... Maybe you are talking about something completly different...

the problem is that you are looking at inflation as a percentage in direct relation to ROI percentage. It is not. Inflation is a percentage based on buying power. $100 Investment $5 Return (ie, 5% ROI) 2% inflation (5*.98)= $4.90 or the actual buying power (pre-tax) but you still have the $5 in your pocket. Time to go.....this is getting a bit insane.

You have to discount the capital. You $100 now will not be worth the same $100 buying power in 10 years... We must be talking about something different... Maybe reread the context above. Sorry but I stand by my numbers.

What you're failing to account for is the effect of inflation on the original investment. Let's say you start out with $100 that you earn 3.5% after tax or $3.50. So you end up with $103.50. However, the whole amount (not just the earnings) is subject to the effects of inflation. So really your $103.50 gets you the buying power of $100.98 after applying 2.5% inflation. So $100.98 on your original $100.00 is roughly a 1.0% real return or 3.5% less the 2.5% inflation. Typically subtracting your inflation rate from your nominal rate is going to get you pretty darn close to your real rate. I don't recall the actuall formula but this is a pretty good rule of thumb.

Oops, you guys have been discussing this while I typed out my response, but perhaps my example will shed some light.

996, we're talking about ROI not ROI as well as capital. Your math is "technically" correct but functionally incorrect. The discussion was about the ROI. You haven't touched the prinicial in either case. ROI is reported as the gain or loss on the principal NOT the entire balance. And that is what was being talked about here. oh dear God, whhy do I keep answering to this thread. It is like a train wreck. I really need to unsubscribe to this thread.

I know what you guys are doing. You are not preserving the capital, you let it erode at the inflation rate. It all depends what you want to leave to your children. I am taking the extremely conservative way.

OK, got the formula: (1 + Real Rate) = (1 + Nominal Rate) / (1 + Rate of Inflation) = (1.035) / (1.025) = 1.00976 Real Rate = .00976 or roughly 1%

Actually I was using ROI and capital of course.

Thanks for bailing me out here. I thought I was going crazy for a second. It is not like I have a master of math applied to finance

Dell, you're correct with respects to ROI, but I don't think it was the intention of the original poster (at least for this part of the thread) to measure ROI, but rather real return. When I get my boatload of cash, real return is what will matter to me.

Since when does inflation factor in capital gains tax? In your example, you do NOT reduce the post-tax interest earnings by the 2% inflation rate. You'd reduce the $100,000 (the principal) by the 2% inflation rate. Inflation rate is the measure of the price increase in goods and services -- what your money can buy one year from now (in this example) regardless of whether you pay taxes or not. Capital gains tax -- or income taxes -- does not affect the value of your money. Forget taxes, 5% annual yield on $100K principal means you'll have $105,000 in one year. If inflation is 2% over the course of that same year, that means your investment is really worth $103,000, NOT $104,900 as you claim ($100,000 + $5,000 x .98). Inflation rate is NOT taken against the ROI as a percentage, but rather against the principal. Give this same math problem to your children: If you're earning 5% annually on $100,000 principal, how much in interests has your principal earned at the end of one year? Answer = $5,000 If over that same period, your money is losing 2% of its value, how much is your principal worth at the end of one year? Answer = $98,000 At the end of one year, how much money do you HAVE? Answer = $105,000 At the end of one year, how much is your money WORTH? Answer = $98,000 + $5,000 = $103,000 So what's the real ROI? Answer = $3,000/$100,000 = 3%. Please continue on and be as condescending as you can.

I guess I missed the boat on the OP intention. Time to go back to posting in threads that I am passionate about.......Porsche's

Same, sorry we got draged into this. But I can't let misinformation like this around.

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My private jet is economical and great on gas. That's me in the drivers seat (I was on the way to a wedding [or was that a duel])

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A timely Greenspan comment (ie today): He noted that investor appetite for risk has led to risk premiums on financial assets being "extraordinarily low," which could pose problems in the future. "We have extraordinarily low risk premiums now. Risk is no longer perceived as major risk, at least as it was in years past and that, I must say, I find disturbing," he said. "We do not and cannot look into history without being very concerned when you see the absence of awareness and concern about risk that we see today."

yikes guys... is calculating ROI what ya'll would be doing if you had massive amounts of money leftover to spend?

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I know I wrote this two years ago but I was just wondering if the borrow and "invest" guys wanted to chime in... How are you guys doing with that 10-15% annual return? FWIW, I made money in 2008 by being doom-and-gloom and apparently failing Econ 101.

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I am glad you are still here. I've enjoyed reading what you and some of the others posted back then. Well done!

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More travel - you never regret traveling - always good memories, and always worth whatever cash. Go to Germany, and get a nice 911 with international plates, and do the Nurburgring in the day and drink big cold beers in the evening - repeat.

I know it sounds very gay.....but I would have a ****load of kids.....love the little ones....and ofcourse a 20 car garage for 40 exotic cars....

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find the true meaning of happiness.

Simply put, I would retire...then do whatever I want. How about resurrecting the mortgage tangent again? Have perspectives changed in 2 years? I'll throw my 2 cents into the original debate and say that it really depends on your perspective. If you are an average person, intelligent "leveraging" may make sense. If you win $30 million in the lotto, keeping a mortgage for a tax write-off is no longer a good idea.

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[Image-only post; no author-written text. Original image references:] http://www.digitalsimple.com/gifs/rockon.gif

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Oh yeah!

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Oh hell yeah, that's better than 72 virgins right there!

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Maybe no financial sense, but it sure is nice not having a mortgage since '95, and at 46 yo being young enough to be able to cut back working hours, and stress (being self employed) Also having a very nice large home in a supurb area with greater than average appreciation, wonderful views, backing the mountains. I'm happy.

This thread reminds me of something way more important than money and material possessions that is often overlooked by those so sharply focused on personal success. Utah entrepreneur Larry Miller died at 64 yo of complications due to diabetes. He was the owner of the Utah Jazz, several car dealerships and one of finest Motorsports facilities in the world, the Miller Motorsports Park. A few weeks ago he had both lower legs amputated in a move to try to buy him more time. He has been ill for quite a while and little has been reported as to details. He was a very successful business man and workaholic, who thought more time at the office was more important than eating healthy and exercise. Never got to fully realize or enjoy the fruits of his labor. Your health is your wealth!

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I agree but some people really love what they do for a living so it might have been all worth it to him.

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I'm curious what you decided to delete 2 years later...

I agree with tiwh Health is Wealth... Have all the money in the world, but if you're dying...... it's no fun

Go to every F1 race one year...and squeeze in the 24 hours of LeMans.