Over the 18 years I ran Tatango, we were fortunate enough to sell some of our shares a few times before we sold the company outright in October 2025. So our money arrived in a few big lumps, every couple of years, rather than building up steadily over time the way it does for most people.
I'd liken this to non-business owners who came into money all at once: selling a home for a significant profit, a large bonus, an inheritance, company stock that finally created real value, winning the lottery, a big legal settlement, and so on.
We learned a lot of hard lessons going through it. Since then, I keep having the same conversation with friends and family who land in the same spot.
Here is how it always starts. They have the nut. A big pile of money that showed up all at once. And the question is always the same: how can I live off this pile of money, let it work for me, earn enough off it to cover my expenses?
Then we do the math. They put it in low-cost index funds, which have historically returned about 10% a year on average, and based on the 4% rule, you can safely draw down 4% a year (a conservative guideline that has historically let a portfolio survive a few decades of withdrawals without running dry), and let the rest compound.
Run the numbers
Say the lump sum is $1M (after taxes). Sounds like a lot.
4% of $1M is about $40K a year, and you still owe tax on those gains.
For a lot of the people I talk to, that is not enough to cover their living expenses. Not close. The lump sum felt like freedom, but in reality it's far from that.
So now they have a problem, and this is where I see most people I talk to get into trouble. In reality, there are two actual solutions to this issue, and one solution that ruins most lump sums.
Two actual solutions
Option one: grow the nut. Get more money invested until 4% of it actually covers your life. This is usually hard to imagine, especially if you won the lottery already. What are the chances of winning again?
Option two: cut the lifestyle. Shrink your spending until your life fits inside 4% of the nut. Most Americans can't even fathom cutting back on their spending, so this is off the table too.
That is it. Either the pile gets bigger or the spending gets smaller. Both are honest. Both work. Neither is fun.
What I watch people do instead is invent a third option that almost always leads to them losing most of their money, the complete opposite of their original goal.
We were not immune to this either. When we got our first lump sum, we did exactly this. We put a lot of money into private asset classes. Real estate syndications (multifamily, value-add, ground-up development, triple net, storage units), debt funds, crypto, startup and venture funds, private equity, art, you name it, we invested in it. All of it chasing higher returns, none of it accounting for the extra risk we were signing up for.
We got lucky: that first lump sum was not our last. More came after it, eventually culminating in the sale of the company. If that first lump sum had been the only money we ever got, we would have been royally screwed. We did not get the returns we were promised, which is why we no longer invest in private asset classes at all.
The third option that isn't one
The third option is to leave the lifestyle alone, leave the nut alone, and just make the money work harder. Earn a higher return.
So the hunt begins. If 4% on index funds will not cover the life, then go find something that pays more. And there is always something promising more:
Crypto
Real estate deals
Private credit and debt funds
Hard money lending
Hedge funds and private equity
Startup and venture funds
Derivatives and options
Oil and gas deals
Art and collectibles
Anything else promising a bigger number
Each one advertises a fatter number. 12%. 18%. "We did 30% last year."
And on a spreadsheet, the fatter number fixes everything. 12% on $1M is much better, but even better is 15% on $1M. Now the lifestyle is covered. Problem solved.
Except it isn't. Because of the one thing they refuse to look at.
Risk is not constant
Here is the error underneath this way of thinking.
When someone compares a 4% withdrawal rate on index funds to 15% somewhere else, they look at one number. The return. They quietly assume the risk is similar on both. Like risk is a fixed background condition and return is the only dial that moves.
If that were true, of course you would take 15% over 4%. You would be an idiot not to. Why would anyone ever accept 4% if 15% carried the same risk?
That is exactly the question to sit with. The reason the 15% deal pays 15% is that it has to, to get you to accept the risk. The extra return is the price of the extra risk. You are not getting a better deal. You are getting paid more because you are more likely to lose.
Risk is not a constant. It is the other half of the equation, and it is the half people delete, because it is the inconvenient half.
A year later
I have watched this play out enough times that I had to write this blog post to warn people.
Someone gets a sudden large sum of money, and they choose that third option above, the one that is promising higher returns. For a while it looks great. The statements show gains. They feel smart.
Then the deal goes sideways. The syndication misses. The token craters. The borrower stops paying. The options expire worthless. And they come back, genuinely shocked that they lost their money.
But what they don't understand is that it worked out exactly the way the risk priced it. They just never looked at the risk.
And now the math is worse than where they started. The whole point was to generate enough income to cover the lifestyle. Not only does the income not cover the lifestyle, the nut itself is smaller, or worse, gone. They went chasing income and lost capital.
The playbook
So if a windfall lands in your lap (lucky you), here is the unglamorous playbook:
Put it somewhere boring and low-risk. Low-cost index funds, maybe some bonds or dividend payers.
Work out whether 4% of it, after tax, actually covers your life.
If it doesn't, you do not have a returns problem. You have a math problem. Grow the nut, or shrink the life. Do not reach for the third option.
A windfall is a rare thing. Most people get one once, if they get one at all. Protect it like it is the only one you will ever see, because it probably is.
You're not going to listen anyway
I have given this exact advice to dozens of friends and family. Almost none of them took it. This is one of those lessons most people insist on learning for themselves, with their own money.
So here is my concession. If you are not going to follow the playbook, at least copy the one thing we accidentally did right. Do not chase higher returns with the whole lump sum. Chase them with a slice.
For us, that slice was about 30% of our net worth, and it was the only reason a bad run did not wipe us out. We did not plan it that way. We got lucky, and most people will not be. So if you really have to scratch the itch, cap it before you start. Take 25%, chase your higher returns, and see how it goes. I am not recommending this. But losing a quarter of your money beats losing all of it.
One more warning. You will not know if it worked for years. Do not make the rookie mistake of putting in a little, seeing a few good months, and then dumping the rest of your lump sum in on the strength of an early signal. These things take 3, 5, sometimes 10 years to show what they really are. You will have to wait that long to see the results you are actually after.