Setting a finish line for your wealth

One of the more interesting concepts I've read involves a "finish line" for your net worth.

Larry Burkett wrote a series of books which imbedded this concept, which simply states that you should seriously consider how much money you need to live, choose a net worth that supports that (plus a buffer, naturally) then give away everything above and beyond that level.

As a personal example, I have been considering a finish line at $3,500,000 of investable assets, excluding the value of my home.

At a 3% withdrawal rate, this would yield just over $100,000 in year 1. At that level, I feel reasonably confident that I could increase my withdrawals for inflation each year without risk of depleting my portfolio.

Of course, this raises several questions: How much is enough? How do I take the impact of old age and potential sharp increases in health care expenses? Should I exclude the value of my house or see it as a (highly-concentrated, to be sure) real estate asset? Is a 3% withdrawal rate safe or too conservative?

The biggest question of course centers on the reasonability of this concept. I've heard of folks who have considered doing this with their finances, but don't actually know anyone who has done it so that I can compare The Number with them.

For now, $3.5 million sounds about right, if a bit high. I'm fairly certain that $3 million would still be plenty, although I'm waiting to see if my tastes change as my wife and I age. :)