You have $200,000 to live out the rest of your days w/o a job, how do you do it?

I explained this in another post, but blue chip stocks (Microsoft, AT&T, etc) pay dividends in cash each quarter. That is 100% cash in your account from the company. If I look at my Scottrade account, there are cash deposits each quarter from different companies. The amount and timing differs between all of them, but they're like clockwork and it is all in addition to the $200k I have in my account. If you're smart and don't need the money, you reinvest in the company which means the next quarter you get a dividend on the dividend you got the last quarter. Welcome to compound interest.

Now, if I'm sitting on $200k, I'm in a different stratosphere in terms of capital. So instead of opening a scottrade account, I could become a partner with a private equity firm or financial advisor. At this level you can start to dictate the terms of your investment. Part of those requirements could be that you'll be paid $X dollars each quarter.

Then there are a host of other financial engineering tricks that you can play. For example, the private equity firm that bought Red Lobster split the company up into two companies, one was brand "Red Lobster" and the other was a real estate investment trust (REIT) that owns the real estate that the Red Lobster brand operates on. The private equity firm then sells off the Red Lobster brand and makes the brand pay the REIT rent each month. So the equity firm can milk the company of money via rent payments.

Another popular way to get money out is through management fees. If you run a private equity firm, you can basically charge the company you invested in a "fee" for your management. Of course, you're not really doing anything other than taking money out of the company, but it can be written off for tax purposes and helps you steer clear of the higher capital gains taxes. Yay!

/r/AskReddit Thread Parent