A million dollars is still a LOT of money, folks. If we're talkin' retirement age (i.e. >50 years old), let's assume a couple of things. 1. Personal debt of <50K, including house, car, credit cards, etc. 2. Kids are out of the house. 3. Assets on hand that at least equal personal debt, probably exceed it (home equity, mutual funds, etc). Hell - even if you owed $200K on a home loan, this would still work, just not as comfortably. Assuming that very realistic scenario (for the vast majority of retirement age middle and lower middle class folks), it would be very reasonable for a couple to live comfortably on about 50K a year. So. If you put the million in an ammo can in the back yard, and took out 50K a year, you'd be able to live 20 years on that. Now - if you weren't so miserly and invested very conservatively so that you averaged a 5% return on that money annually - you'd always have a million dollars. 5% is easy. Even right now. People aren't losing money because their 5% investments tanked. They're losing money because they were taking risk (which is the only way to make real money) and got caught up. Anyway - $1M cash? I hate the plan. I think it's counter to every capitalist and free market ideal that I stand for. But if the socialists were to pass it? I'd retire instantly (as in today, right now, at 43) and I'd never work another day in my life. And I have 3 very young kids. But I'd feel dirty...and unAmerican... :grin:
I don't think a mil is enough to retire, if that's all you are retiring on. If you're 50, you have to plan to live another 50 years, well lets be easy and say 40 years. You have to plan on inflation. In the last 40 years, what happened to the price of a new car, a dr. visit, a prescription, a gallon of gas, electricity, etc. You better plan on needing twice the income in 40 years (hopefully you will be out of the housing market by then, own your own home). So, include saving some money each year so you can produce more income each year to keep up with inflation. I'm conservative and don't want to spend my principal in retirement (got kids).
I have virtually no debt. I could pay it all off including the house and still invest about 850,000. If I invested that and worked a year to qualify my investments for LTCG I could retire and live on a return of about 8 percent with no problems at all. I live very modestly. I don't borrow money for any reason. I shop off clearance racks and save for pleasure items. With 850 K and no house note I could live as comfortably as I live now, maybe even a little better. Plus I have been maxing out a Roth IRA since I was 22, so that should grow into more than enough to cover me in old age.
A million bucks is not what it used to be and it will be even less when you 20-somethings turn 60. The key to retiring on a million dollar investment portfolio today is: 1. Have your house paid for. 2. Have all your other major loans paid for. 3. Have a retirement income like a pension, rental property, farm income, or consulting work so that you don't ever have to touch your principle. 4. The whole million needs to be liquid and invested and working for you, not tied up in assets that don't produce money--like vacation homes, fishing camps, inventory, pleasure boats, etc. 5. The entire million must be well diversified with moderate risk--not too risky, not too conservative. Even then, frugality is a virtue. You never know when unexpected disaster like a fire or a heart/lung transplant will eat up a huge chunk of your pile.
Here's an article that discusses this exact topic. is-1-million-enough-retire.html: Personal Finance News from Yahoo! Finance
