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.
To add to the argument about security, the average stock market return after inflation is around 7%. With investable assets of $1 million, that means you're being paid $70k/year, just for already being wealthy. I imagine that no matter how low stress a job can be, it can be even lower stress knowing that no matter what happens, even if you never work again, you would have sufficient income to live.
(This glosses over the variability of the market, but that just adjusts the amount of wealth needed relative to the yearly expenditures in order to continue indefinitely, and the principle still holds.)
If you have $1M and have it invested in a no-load S&P tracking fund (historically approx 9%, and hope you don't have a down year), then you'd have $90k/year income on the interest alone.
After taxes (long-term capital gains, let's assume the 15% or 20% bracket, unless Biden gets his wish to increase that), most likely around $13,500 (@ 15%) per year, that would be reduced to $76,500/year, which is $6,375/month.
On the other hand, if you have a "safe withdrawal rate", as fma suggested, (and which seems to be very wise to protect against down years which could permanently reduce your nest egg) then that income would be halved, requiring approximately double the initial investment to result in a $6k post-tax income.
And as far as it being "the idea of living off the interest on your wealth is pretty insane and unattainable", this is just categorically untrue; many mid- to upper-class families in the U.S. with two incomes make in the $300k to $1M range, so even if they only put away 4% to 10% in their 401(k) or other retirement plans for 30 years, they'd easily make that number.
$1m invested correctly will net you $40k/yr, before taxes, in perpetual income. So you’ll need more than $2.5m to live off at your expected annual expenses of $100k.
$1M in investments, drawing down at a moderate rate of 4% per year, gives you $40k/year income. Not poverty level in the USA (unless you’re in a high COL city), but not fabulously comfortable either. And only 10% of retirees have even that? Ouch.
Back in the ‘80s, “retiring a millionaire” was awesome: you won. Not so much, today. People are living longer now, too. $1M is not going to stretch as far as many would believe. I’m planning to significantly dial down my lifestyle when I retire—most of us will have to.
The person who accumulated $1M (above real estate equity) likely did so by having a larger than median income over their working life (and likely has an associated higher expense profile).
For me, I think a 4% safe-withdraw-rate feels about right. Some argue for 3.5%. Others for 5 or 6%. Each of those has an impact on the cashflow in retirement, but $1M is probably not going to provide a replacement income for the typical folks who accumulated $1M. (Median household income in my state is $87K/yr before taxes.)
$1M should provide you some $30-40k a year in perpetuity. That's actually pretty decent retirement money in most parts of the world, somewhere in the top few percent of the world population by income.
But of course, $2M would be better, provide more buffer against the uncertainty and allow you to retire even in the US.
Edited my comment. The $1M is essentially on top of whatever you’d normally be able to save. If that is a lot more than $0 then most people would be in a pretty good position to take a lower paying job for as long as they want then retire comfortably.
Investing $10k a year at 6% (average stock market returns are 6-8%) gives you $368k after 20 years (net increase of $297k over inflation at 2%). Even if you just saved it for ten years that's $100k. Neither are enough to retire on, but it gives you a lot more options. Even if housing increases faster than the stock market, that $10k is $800/month which could be going towards a mortgage (in addition to the rent they are already paying).
A quick search shows average returns across the market sit around 8-11%. If we say 5% to be conservative, 1M returns $50'000 each year. That's not bad. That's a house in a quiet neighborhood with no worries about food, or debt. You're not living without a budget, but you could live without working.
Many people end up in the 1% for a single year via sale of business, stock, etc.
There's a huge difference between that type of 1% for a year and age 30-40 dual (or very high single) annual income earners.
The former may retire with a $1-5M net worth, the latter is either spending heavily or retiring with a $10M+ (and likely $20M+ with reasonableiinvestment returns) nest egg.
I think $1M would qualify much better than lower middle class retirement. I'd bet a good chunk of the middle class is going to end up retiring on social security.
Think about it this way, if you ballbark their maximum exit at $30M, and you own 1%, you end up with $300,000. But the chance of that happening are slim. You already make good money, at $85K per year you can save and invest more than $300K in a few years without too much trouble.
Other considerations aside, why take any risk when you already have a sure thing? Whether they offer 1% or even 10% doesn't make much of a difference.
$10M on the other hand provides solidly middle-class income even in years of terrible market performance.
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