They are definitely in 'set for life if we make wise choices' territory. In another month I'm betting they will be in 'set for life even if we make foolish choices' territory. I'm really happy for them. They really stayed true to their passion and I'm happy to see them rewarded for this.
> In another month I'm betting they will be in 'set for life even if we make foolish choices' territory.
I hope so, but it is amazing how quickly one can burn through money by making foolish choices. Or just being unlucky. I can’t be the only one who remembers esr being worth tens of millions on paper, then losing basically all of it.
Why would someone with millions not at least have an ACA plan? Even the worst ACA plan has an out-of-pocket max of around $10K individual and $20K family.
Personally, I don't trust "words from an insurance company." My health insurance company has more money and lawyers than I do. If I get cancer or something and they want to drain my life savings, they probably have some words on page 561 of my insurance policy allowing them to do it. What am I going to do about it, hire an attorney with my $0 balance and sue them?
Can you pay some "insurance of insurance", where someone guarantees they will win your fight, otherwise they lose a big chunk of their money as collateral?
Out of pocket maximums and limits (or aggregate limits) are two different concepts. Once the insurance plan's limit has been reached, it doesn't matter how much you've paid out of pocket.
The ACA does prohibit these limits for certain "essential health benefits", but there's a lot of wiggle room that insurance providers will take advantage of.
ACA plans don’t have lifetime or yearly maximum payouts. As long as the services are covered services, they’re obligated to pay beyond your out of pocket maximum.
Along with several other supporting insurance plans that backstop your health insurance and potential healthcare costs in extreme scenarios, and so on.
Are they? 300,000 units * $30 = $9M - 30% Steam tax = $6.3M in a single year take out federal taxes (just gonna call it 36% and ignore SFJ/MFJ), leaves them about $2M each. I'm sure they're some sort of a legal entity in WA state and will owe the b&o tax too.
They deserve it absolutely but $2M each does not put them in a position of "fuck you" [1].
$2m in the bank is enough to easily draw $100k/yr from interest, which fits the GP’s “set for life if we make wise choices” IMO. That is way above median income in wealthy countries. Assuming you don’t try to live in SF!
Even in the US, $100K/yr puts you comfortably above median income. If I had $100K/yr of GUARANTEED income, I would stop working for money and do whatever I felt like for the rest of my life.
Up until recently (healthcare reasons) the Adams were basically doing just that. I guess they won’t need to sign/sell little dwarf artworks for DF donators anymore though
A 4 or even 3 percent withdrawal rate is more likely to be sustainable. Those are also rates I see suggested more commonly on retirement planning sites.
If you're assuming withdrawing at a safe withdrawal rate you're assuming you're not compounding. You're assuming a safe withdrawal rate from principal/dividends/interest that will, on average, leave the principal constant. Of course, if you're older and are not looking to pass down money you may be fine with drawing down principal to some degree.
So, yes, $2m should probably be modeled at about $80K income per year before taxes without touching principal but without building savings.
(May be somewhat higher with higher interest rates/inflation.)
I said an annuity. An annuity would draw the principal down as well, and you generally make a drawdown assumption that leaves you with some safe margin for extended life and maybe some inheritance.
That is not accurate. The 4% withdrawal rate is based on the Trinity Study[1], which showed that it was unlikely to exhaust retirement funds over a 30 year retirement. It already includes compounding and draw down calculations.
There's a whole active debate around exactly what numbers are sufficiently safe over what time horizons and what portfolio mixes. For a fun long read, see ERN's series on safe withdrawal rates https://earlyretirementnow.com/safe-withdrawal-rate-series/
LOL. Who is getting 5% risk free interest rate on USD? No one. I guess 1% after taxes is a more reasonable expected return. Remember that interest rates on retail deposits were pretty much zero for last 10 years. So, 20K USD per year. But if they can keep it up for next 5 years, then yeah, pretty much can retire on 1% interest rate forever.
Long term (~50 year) average stock market returns on reasonable indexes (like S&P500) is 10% per year.
The only real challenge is a portfolio mix and withdrawal strategy that minimizes the damage from withdrawing during downturns. That's where the 4% rule becomes relevant.
> 2m in the bank is enough to easily draw $100k/yr from interest
5% interest hasn’t been avail from a bank in a couple of decades, and the fact that we’re close to it again doesn’t mean it will stay that way…
You just can’t get a guaranteed risk-free return of that range indefinitely, which is why a lot of people shoot for 3-4% when they don’t have more capital to invest in riskier but higher return investments.
The article also mentioned money going to other people working on the game. Unclear how's much that is though.
Edit: this also touches on a grievance I have with progressive taxation and annualized retirement savings. These guys might have been in a Lowe tax bracket for many years and be back in a low tax bracket depending on how sales go over the years. The one time they hit it home they are in the top tax bracket and can only max out tax advantages from retirement contributions for that one year. They'd be in a much better position in this regard of their income was spread out. The entire system is build assuming people earn pretty much the same year to year. Same for other self-funded founders with exits.
They could easily set up a corporation and pay themselves over 10-20 years to avoid a windfall (and max out tax advantages over multiple years) if that’s the goal…
The corporation would actualize the income as profit at some <=1Yr period, where it would be subject to corporate tax. Not saying your idea wouldn't work out best tax-wise, but that you'd still need to run the numbers. I'm pretty amateur at accounting, so I don't know.
I do get a kick out of the idea that these guys basically revolve a lot of their life around developing DF. I wonder how much of their lifestyle could be legitimately expensed from a corporate account without any IRS hassle.
Would be nice if you earned a 401(k) credit/allowance each year so when you do hit it big you can rapidly play catch-up on the past 20 years or whatever.
> Would be nice if you earned a 401(k) credit/allowance each year so when you do hit it big you can rapidly play catch-up on the past 20 years or whatever.
No kidding. I spent most of my 20s and part of my 30s working for companies without a 401k (several small startups or video game studios). I'd love to put in more than the max now to make up for it, but have to make do with just buying stocks without the tax advantage.
I think that if you're considered 'behind' for your current salary and age, especially significantly so (I bet a bunch of people here, even those 10 years younger than me, probably have 5-10x more in their 401k than I do), there really shouldn't be much of a cap on what you can put into your 401k.
Like the cap should just be a max total you can have in there based on your age, not a cap per year.
That's 300 000 units in 7 days since launch if I understand it correctly. Even if we consider (I don't know if that's true or not), that theses 7 days are going to be the best ever for them that's still only 7 days.
They'll get a sale from me here before too long. I just know I don't have time for another addiction right now, at least not until the new year. Probably quite a few people being more frugal now because of the holidays that will buy it shortly after. Wouldn't be surprised if it's 500k+ sales by the end of January.
DF is quite special though. It has existed for two decades before being for sale on Steam. It's also a very niche-y game. I don't think normal rules apply to it. I'm afraid sales are going to drop much quicker than predictions say.
If they’re smart they hopefully have incorporated and will only need to take money out of the corporation to pay themselves to cover their expenses. So they won’t pay tax on the full amount up front and will have most of the money pretax for future business expenses
That's not how corporate income tax works though; the company pays taxes on all that sales income less expenses, and then they would likely take dividends at a preferential tax rate and pay yet some more tax. I doubt they've been carrying much of a loss over the past 20+ years to offset this.
It would take 20 years to pull it off, and tax legislation may change, but a married couple can earn next year ~$115k/yr federally tax-free ($89k long-term cap gains + $27k earned income). So that source of income would only be subject to the initial 20% corporate tax.
This blogpost [1] explains in detail but the gist is:
* Standard-deduction next year is $27,700 married ($13,850 single)
* Long-term-capital-gains is 0% on first $89,250 ($44,625 single)
Thus if you have the tooling to perfectly control your income, e.g. you take $27,700 in treasury bill payments and then sell off enough stock (or take qualified dividends from your corporation's bank account) in the total of $89,250, you'd end up with:
* Ordinary Income: $27,700 - standard deduction of $27,700 = $0 taxable income
* Long-Term-Capital-Gains of $89,250 = 0% ltcg tax bracket
= $116,950 ($58,427 single) of federally tax-free income
Then if you're in a no-income-tax state (such as WA, like the Adams brothers), you don't owe any taxes at all.
If it’s a C-corp, then the corporation will have to pay income tax on its profit. If it’s an S-corp, then the owners will have to pay income tax of the corporate profits even if they do stay in the corporate coffers.
As far as I know you can do clever accounting with IP licensing but I don’t know the specifics well enough to know if it’s feasible at the scale the Adams are operating at
I also read, though who knows whether the source was at all accurate, that after the Steam cut, Kitfox takes a goodly chunk (north of 50% IIRC) out until their own expenses for development are paid, and then their cut ratchets down to 20% or so.
Oh, I didn't realize they had a publisher involved too. Yeah, this is a nice payday but it's just a start before it's life-changing for these two hackers. Let's see another 300k in sales!
2m each is not "Fuck you" money perhaps but it is enough to comfortably retire to the original post point. It depends on lifestyle you desire but if I could retire tomorrow, I would make that lifestyle work.
> 2m each is not "Fuck you" money perhaps but it is enough to comfortably retire
That is exactly what "fuck you" money means. It's not about having so much money you couldn't possibly want for anything. People will always want. It's about having enough that you're not beholden to anyone for your basic needs.
I always thought it meant something like "enough money to tell literally anybody to go fuck themselves without fear of the economic consequences". But I did a little googling and apparently "fuck you money" is one of those things that doesn't really have a clear-cut definition. Which is weird.
In theory there is some specific dollar that you earn which puts you over the line into "fuck you" money. If you're a dollar away from financial independence, are you worried about saying "fuck you" to your boss? Hell no! Which must mean that you're already safely in "fuck you" territory.
So that the magical greenback--the one with the serial number ending in "FU"--must come way earlier. Maybe it's the buck that puts your bank account into five figures for the first time. Or the one that tops off your 6-month emergency fund. Hell, if the dollar that puts you in the dos commas club doesn't send a surge of "fuck you" power running through your veins... you might just not be the "fuck you" type.
It really doesn't work that way, for several reasons.
First, you can't predict what will happen with the economy vis-a-vis your investments and cost-of-living. Sure there are rules of thumb, but depending your age and the current situation, assumptions like "I can perpetually do a 4% drawdown" may or may not be reliable.
Second, the ability to say FU to everyone is not a black and white decision. Perhaps you value earning more to live a higher lifestyle in the short-term, with some optionality to say FU if things go sideways. Other people might have been burnt and would rather live a life of poverty than be forced to capitulate to The Man one more time. In the immortal words of Lawrence from Office Space: "you don't need a million dollars to do nothing". Most people probably fall somewhere in between.
And last but not least, declaring financial independence raises new existential questions which people may not be ready to answer. Having a job gives a baseline social connection and sense of communal utility. To actually declare financial independence poses a risk of alienation, which may have no upside once the immediate threat of short-term dependence on one's employer is removed.
I'm not sure how that contradicts what I wrote. It's above US median income, albeit without benefits. So, it's of course reasonable for someone to decide they don't need to work any longer with that income stream while others may feel differently.
At least for what I'm saying, it's not that someone would "decide they don't need to work any longer". This is what contradicts what you're saying.
It is about significantly improving your economic baseline, your p90 negative outcome. You can be making a million dollars a year and still be needy as hell. You need to keep your job, need to your investments stay up, need interest rates to stay down. If you're leveraged, there's a decent chance you'll go broke on a long enough timeline. And you'll always be partly aware of it. Your baseline is getting a job you hate so you don't go homeless.
If you have 2 million in the bank and don't leverage too hard, your baseline is being the average American while working 0 hours a week. You can do that until you figure out whatever is next, instead of sending out resumes.
I saw "AskReddit", quickly skimmed and saw something along the lines of "Every lottery winner gets murdered by family", and jumped to the conclusion that this was your typical /r/AntiWork-esque "Mediocrity is good" viral post.
I think all the advice he posted about setting up trusts, buying index funds and treasuries, etc would fit in great here, on /r/fatfire, MMM or anywhere else.
