5 million. Invested at a modest, low-risk 2% (which you used to be able to get from a standard savings account), that gives you $100,000/year: quite a decent baseline.
More accurately, $5m invested properly (low-fee index funds, real estate etc) will yield approximately %2-3 annually after inflation (assuming "normal" inflation in the %3-5 range). That works out to around $100k annually, again inflation adjusted. Nothing's certain in life but $100k/year, inflation-adjusted should probably be enough for most people.
The median income is ~$30,000. That means you have ~$70,000 to invest each year. If we assume a 5% rate of return, you'll have ~$2MM after 20 years. At the same rate, that will continue to provide you $100,000 each year in retirement. Bad luck can happen, but generally speaking retirement should have been quite easy with that kind of income.
Last time I crunched the numbers, $1M will provide security but probably not indefinitely sustainable income. If you manage 6-7% in the stock market, that's $60-70k/year, but 6-7% is the decade-over-decade average. Any one given year can be 1% (or even negative).
$10M on the other hand provides solidly middle-class income even in years of terrible market performance.
Probably 7 million after taxes. The first million will buy you a decent house. The next million will let you buy other materialistic goods and/or give away. The next 5 million can go into a very safe savings account which will net you 6 figures a year in interest.
With 7 million, you should be set for life with a decent lifestyle.
It wobbles around depending on my mood. At the most basic level, though, enough to pay off the mortgage, do a few fun things, and create a fund to draw down at 3.5% per year covering two good incomes – so somewhere in the $6-8m zone. If I were sick or had to stop working for some critical reason though, obviously that would drop pretty quick given lack of options.
If you put $5M in index funds, you’d grow it by about $400k a year (8%) on average, to start. It’s hard to imagine going broke with that by doing “normal middle class” things. For added security, one could add in a part-time job.
Good point. If you valued a residual income stream of $5,000 at 10% per year, that would be the equivalent of having $600,000 in the bank at the same rate of return. That buys nice lifestyle in most places in the world.
$1,500 invested yearly, at 7% interest, generates ~60k in 20 years. So even at your inflated income estimates, this is definitely worth thinking about.
If you have $5 million reasonably invested, you could pay yourself approximately $200k per year until you die (the average long-term expected return from the stock market is > 4% above inflation) and likely leave some cash to your kids.
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