Author Topic: Can You Retire With 5 Million Dollars?  (Read 8714 times)

imolina

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Can You Retire With 5 Million Dollars?
« on: March 26, 2018, 09:06:49 PM »
I cant believe most of people think you need more than 5 million dollars to retire!. Are people too pessimistic or realistic?.
Only 6% think you need a million, and 10% 2 million. If I think the same as the rest 84% I would never retire.

http://retireby40.org/can-retire-5-million-dollars/

sokoloff

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Re: Can You Retire With 5 Million Dollars?
« Reply #1 on: March 26, 2018, 09:27:34 PM »
Our net worth target to retire is slightly over $5MM. (This is in a HCoL area where our family home is $2MMą and the remaining $3MM would provide a slightly over median income.)

Could one retire on less, perhaps much less? Of course.

2Birds1Stone

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Re: Can You Retire With 5 Million Dollars?
« Reply #2 on: March 27, 2018, 08:16:32 AM »
Yea, we would need $40k/yr* to maintain our very middle class lifestyle.

DINK's in HCOL area with below market rent.

*excluding health insurance

To support that spending would require $1M portfolio

Vertical Mode

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Re: Can You Retire With 5 Million Dollars?
« Reply #3 on: March 27, 2018, 08:53:16 AM »
Most people could probably retire on $5MM, although if one were committed to staying in a HCOL area AND wanted to use a more conservative withdrawal rate than the standard 4%, that might not be an outlandish number to have saved. Going from 4% to 3% WR makes a HUGE difference.

ETA: I suppose we should define what "having $5MM" means here - is that total NW, or invested assets? Owning a home that has significantly appreciated in a HCOL area can inflate one's NW numbers, but is an illiquid asset that doesn't produce anything unless you rent part of it out, or sell to unlock the equity.

Even at a VERY conservative 2% withdrawal rate, $5MM invested could be expected to support an annual budget of $100k, which is more than enough to live on if you're frugal.
« Last Edit: March 27, 2018, 10:04:47 AM by Vertical Mode »

boarder42

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Re: Can You Retire With 5 Million Dollars?
« Reply #4 on: March 27, 2018, 09:08:35 AM »
5MM was my goal prior to finding this site.  when you dont understand that your taxes will be lower, and you wont pay FICA, and you dont really understand withdrawal strategies.  and your projections have you hitting 5MM by 45 then its pretty easy to think you will need that much and it wont cost you much extra life effort to get -  that is til you discover this site.  and realize thats 200k in income annually.  and you've reduced your non mortgage costs to 40-50k .. then you move that retirement date down to 37 and shoot for 2MM

jengod

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Re: Can You Retire With 5 Million Dollars?
« Reply #5 on: March 29, 2018, 01:30:02 PM »
We live in a HCOL area, and have three kids. We are doing well and have a huge margin for error no matter what, but I think $5m is the number where we start to feel truly financial secure.

Abe

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Re: Can You Retire With 5 Million Dollars?
« Reply #6 on: March 29, 2018, 09:29:36 PM »
Our goal is $3.6m, giving us $100-$140k per year with a withdrawal rate of 3-3.5%.

We're planning on staying in California, so we have two different scenarios:

Keep mortgage: mortgage & taxes of around $60k per year, $18k in capital gains taxes and $40-60k left over for everything else. Seems reasonable, could always sell and move somewhere way cheaper if needed.

Pay off mortgage: estimate $600k deducted from account, have $120k left to spend per year. $10k in property taxes and $18k in capital gains leaves $92k for everything else. Seems like a winner!

Mesmoiselle

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Re: Can You Retire With 5 Million Dollars?
« Reply #7 on: March 30, 2018, 02:04:25 AM »
Response to OP title: I don't think I need to?

$85 in the old people savings and $350,000 in the young people savings. I'll be good by 40, 9 years from now.

Michael in ABQ

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Re: Can You Retire With 5 Million Dollars?
« Reply #8 on: March 30, 2018, 02:13:35 AM »
I listen to a podcast about eCommerce and most of the people interviewed have their own business, many of which have revenues in the millions. The host asks a set of common questions to everyone including what their number would be where the would feel like they never had to work again (FIRE basically). Almost all of them say $5 million or more.

Personally at $1,000,000 or so even with a family of 7 I think we'd be fine. After all, I could always earn some extra money on the side to supplement that. To be totally FIREd and never work another day in my life it would probably be a bit higher, maybe $1.3-$1.5 million. I haven't spent too much time trying to nail it down exactly as it's going to be a long ways off with a single income and lots of mouths to feed (and house, and clothe, and educate, etc.)

2Birds1Stone

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Re: Can You Retire With 5 Million Dollars?
« Reply #9 on: March 30, 2018, 04:58:41 AM »
Response to OP title: I don't think I need to?

$85 in the old people savings and $350,000 in the young people savings. I'll be good by 40, 9 years from now.

A whole $85?

boarder42

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Re: Can You Retire With 5 Million Dollars?
« Reply #10 on: March 30, 2018, 06:51:28 AM »
Our goal is $3.6m, giving us $100-$140k per year with a withdrawal rate of 3-3.5%.

We're planning on staying in California, so we have two different scenarios:

Keep mortgage: mortgage & taxes of around $60k per year, $18k in capital gains taxes and $40-60k left over for everything else. Seems reasonable, could always sell and move somewhere way cheaper if needed.

Pay off mortgage: estimate $600k deducted from account, have $120k left to spend per year. $10k in property taxes and $18k in capital gains leaves $92k for everything else. Seems like a winner!

Statistics would say keeping the mortgage is the winner. You don't need 25x your mortgage payment you just need the remaining balance left on your mortgage in your investment account.

alanB

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Re: Can You Retire With 5 Million Dollars?
« Reply #11 on: April 04, 2018, 01:38:42 PM »
I keep trying to convince my parents to retire.  I finally asked my dad how much he would need to feel secure.  His response, "10 million dollars."  Wow!  How much does he spend per year?  His answer, "$30-40,000."  I should note that I once saw him trying to find a gas leak with a lit candle, so he doesn't exactly always think things through...

GuitarStv

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Re: Can You Retire With 5 Million Dollars?
« Reply #12 on: April 04, 2018, 01:41:53 PM »
No, I can't.  I'd have to give away at least three million or would feel really selfish.

Dragonswan

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Re: Can You Retire With 5 Million Dollars?
« Reply #13 on: April 05, 2018, 12:49:06 PM »
I'm ok with being selfish.  Pass your extra to me s'il vous plait.

BlueMR2

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Re: Can You Retire With 5 Million Dollars?
« Reply #14 on: April 06, 2018, 08:17:18 AM »
Let's see, 1 million to cover everything I want to do with my life.  Then only another 4 million to cover healthcare.  Might be kind of close at the rate that healthcare costs continue to skyrocket!

Astreja

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Re: Can You Retire With 5 Million Dollars?
« Reply #15 on: May 08, 2018, 10:41:34 PM »
Based on take-home pay of about $1100 bi-weekly, if I spent $1100 every two weeks I would only need about $1.4 million CDN to get me to age 100.  5 million would translate into an awesome lifestyle.

GuitarStv

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Re: Can You Retire With 5 Million Dollars?
« Reply #16 on: May 09, 2018, 07:27:20 AM »
Based on take-home pay of about $1100 bi-weekly, if I spent $1100 every two weeks I would only need about $1.4 million CDN to get me to age 100.  5 million would translate into an awesome lifestyle.

If an 'awesome lifestyle' for you is dependent upon having more money in the bank, then you shouldn't retire.  When I hit my retirement numbers, getting extra money isn't going to change my life at all.  That's why I'd give away all the excess.

Astreja

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Re: Can You Retire With 5 Million Dollars?
« Reply #17 on: May 09, 2018, 09:22:02 AM »
If an 'awesome lifestyle' for you is dependent upon having more money in the bank, then you shouldn't retire.  When I hit my retirement numbers, getting extra money isn't going to change my life at all.  That's why I'd give away all the excess.

My current lifestyle is already pretty solid; that extra money would enable me to travel a bit more and attend more cultural events -- if, of course, I can actually find the time to go to all those things.

I'm five years out from retirement now, and technically am only spending about $800 biweekly because the other $300 is going into savings and investments.

FireHiker

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Re: Can You Retire With 5 Million Dollars?
« Reply #18 on: May 09, 2018, 10:16:56 AM »
My husband was in the 5 million for retirement category until we started tracking everything. Now he's down to 2.5 million, not including home equity (since we plan to cash out and buy something smaller in a lower COL area that we like better). We probably need less than that, but between health care uncertainty and our travel plans, I can live with the 2.5 number. That leaves plenty of buffer for unknowns, and includes the ability to get all the kids through college without debt.

Acastus

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Re: Can You Retire With 5 Million Dollars?
« Reply #19 on: May 17, 2018, 12:56:34 PM »
If you are 25 years old and plan to retire 40 years from now at age 65, I can easily see having a target of $ 5 million. At 3% inflation, it will only be worth $ 1.5 million in today's money. That is only well off, not rich.

talltexan

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Re: Can You Retire With 5 Million Dollars?
« Reply #20 on: May 31, 2018, 08:12:54 AM »
I'd like to know more about the $2,000,000 house: do you owe anything on it? Do you think you'd down-size? If you live in Southern California, my guess is that you could get an equivalent house in many parts of the country for 1/3 of that price.

Dicey

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Re: Can You Retire With 5 Million Dollars?
« Reply #21 on: June 04, 2018, 06:18:15 PM »
If you are 25 years old and plan to retire 40 years from now at age 65, I can easily see having a target of $ 5 million. At 3% inflation, it will only be worth $ 1.5 million in today's money. That is only well off, not rich.
No mustachian stuffs their money under a mattress. It will grow exponentially over the years, if invested properly.
This post just was intended to see if anyone's paying attention, right?

alanB

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Re: Can You Retire With 5 Million Dollars?
« Reply #22 on: June 05, 2018, 07:18:48 AM »
If you are 25 years old and plan to retire 40 years from now at age 65, I can easily see having a target of $ 5 million. At 3% inflation, it will only be worth $ 1.5 million in today's money. That is only well off, not rich.
No mustachian stuffs their money under a mattress. It will grow exponentially over the years, if invested properly.
This post just was intended to see if anyone's paying attention, right?

I assumed that the target of $5 million is after 40 years of exponential growth plus contributions.  However, $1.5 million in today's money is definitely rich, let's not kid ourselves ;)

sokoloff

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Re: Can You Retire With 5 Million Dollars?
« Reply #23 on: June 05, 2018, 07:54:37 AM »
At 3% inflation, it will only be worth $ 1.5 million in today's money. That is only well off, not rich.
However, $1.5 million in today's money is definitely rich, let's not kid ourselves ;)
That's been the topic of several past debates and will no doubt be the topic of future debates here and elsewhere.

At 4% SWR, that only provides the median US household income.

I personally come down on Acastus's side: that $1.5MM is well short of "rich" or "wealthy" and is more on the "comfortable" or "well-off" side of the spectrum. (This is particularly true in areas where that won't buy a 4BR free-standing house outright.)

2Birds1Stone

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Re: Can You Retire With 5 Million Dollars?
« Reply #24 on: June 05, 2018, 06:55:23 PM »
Sure, median HH income will not really fly in zip codes where the median home price is 5X the national median......

For anyone worth their mustachian salt, $60k goes a long way in most parts of the country. Hell we are currently averaging $36k/yr (albeit with employer sponsored health insurance) and living quite comfortably.

talltexan

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Re: Can You Retire With 5 Million Dollars?
« Reply #25 on: June 06, 2018, 11:19:48 AM »
The problem is that non-housing goods have to be more expensive in HCOL areas because the guys who sell them to you have to live there, too.

Acastus

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Re: Can You Retire With 5 Million Dollars?
« Reply #26 on: June 06, 2018, 11:49:10 AM »
I met with some college friends over the holiday and told them of my impending FIRE. They were concerned I am giving up my best earning years and not having enough money to enjoy retirement. The couple we stayed with earns probably double what we do, and they cannot seem to grasp that a disposable income of less than 100k is possible, let alone enjoyable. They may have a target of 3-4 million, but really they will work until they don't want to any more.They are happy working, and that is fine with me. They both enjoy their jobs more than I have the last couple years.

Even outside the HCOL cities, there will be plenty of people who need 5 million. Some will never have enough, no matter how much they have.

boarder42

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Re: Can You Retire With 5 Million Dollars?
« Reply #27 on: June 06, 2018, 01:19:53 PM »
The problem is that non-housing goods have to be more expensive in HCOL areas because the guys who sell them to you have to live there, too.

the internet was invented a bit ago and there are companies like amazon who will sell you stuff for the same price everywhere in america.  there are also some other retailers that make up 51% of online sales. 

outside of perishable foods just about everything can be purchased on line - now whether its cheaper or not depends on the deal you find.

GuitarStv

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Re: Can You Retire With 5 Million Dollars?
« Reply #28 on: June 11, 2018, 11:36:36 AM »
The problem is that non-housing goods have to be more expensive in HCOL areas because the guys who sell them to you have to live there, too.

the internet was invented a bit ago and there are companies like amazon who will sell you stuff for the same price everywhere in america.  there are also some other retailers that make up 51% of online sales. 

outside of perishable foods just about everything can be purchased on line - now whether its cheaper or not depends on the deal you find.

It will be interesting to see if this remains to be the case in the future.  The whole shop online phenomenon is based around the concept of cheap shipping everywhere, which requires cheap oil to work.