alt Hacker NewsThe point they were trying to make was that if you take appreciation of assets into account, if your billion is appreciating by a relatively modest 5% per year, you are passively earning 50 million/year. Whereas someone with one million passively earns 50 thousand/year. One is enough to live in luxury anywhere in the world for several lifetimes, the other is enough to live comfortably in some parts of the US (or like a king in many parts of the world) but not enough to throw 6 figures at a programming language foundation for fun.
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Or to take an intermediate value, $10 million is 500k a year and most people will find it difficult to spend that much on themselves, so it’s going to grow on its own and compound. It will grow more rapidly if some is invested in the stock market.
Also, donating appreciated stock avoids taxes. This donation may have come out of a donor-advised fund.
Rich people can make substantial charitable donations rather easily and make a big difference. I suggest we encourage them.
Thanks, that is much clearer than my wording.
This is a common but silly claim; there is, generally speaking, no such thing as a safe rate of return that overcomes the inherent losses due to inflation. If you're getting a 5% rate of return on cash, that comes with both risk (someone with a billion dollars isn't going to benefit from FDIC insurance) and doesn't even overcome basic inflation.
That $50 million a year is also subject to income taxation and cannot be easily avoided. $50 million a year in interest on returns from cash will be hit at the 37% marginal rate, plus whatever the state assesses, so north of 50% in California.