Unpopular Opinion
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You are correct and definitely using a conservative estimate, like you said. ETF/index funds have an average return of 7-10 percent according to a quick search. These are often considered one of the safest investments you can possibly make, too.
Returns aren't dividends. You can only capitalize those returns by selling your shares, which decreases the rate at which your portfolio grows and incurs additional tax liability.
Yea but the point is that you get 140,000 dollars of return per year on 2 million dollars principal. You can easily cover the taxes and live pretty comfortably from that. You don't need to grow your portfolio at that point if you don't want to.
You could go the route of investing in stocks with dividends, as well. Most people who live off of their investment returns do a mix of both.
You have to sell 140k worth of stock each year to get that much. That means that each year, you have fewer stock, so you see a diminishing return on that.
What? Maybe I am missing something, but I don't think so.
You start with 2 million. You make 140,000 profit and have 2,140,000 total. You sell 140,000. You still have 2 million to make another 140k next year.
You are just using your profit immediately and keeping your portfolio the same as your initial investment. It doesn't diminish, it just doesn't grow because you are using the profits for expenses.
You have the same amount of money invested in the market, yes... but you have fewer shares. If you have 100 shares and the stock price goes up $5 per share, you made $500. Then, you sell 10 shares to access that money, and now, if the stock goes up $5 again, you only make $450. If you want to keep your income the same, you're gonna decrease your share amount each year...if you wanna maintain your actual spending power, it's gonna go down even faster.
I see what you are saying. I'm not saying that investing all of your money in index funds and then selling your profits every year is by any means the smartest way to invest money. It was more just to illustrate how easy it is to make profit with the kind of money that NFL players are given, even if their careers are short.