Curious to know the ideal net worth for retirement? As someone retired in 2012 at age 34 with $3 million, let me tell you.
I was talking to a tennis friend of mine who said his sister checked out once she cleared 10 million dollars. She was 37 when she decided to quit her job and go on an Eat, Pray, Love journey to Southeast Asia. She had made a bulk of her fortune as an early investor in an internet consumer company.
My friend and I then got to talking about other people we knew who checked out in their 30s and 40s. They too, had cleared over 10 million dollars in net worth or investable assets. They had all been early employees at successful startups. Or they had risen up the ranks at a big tech company while holding a lot of shares.
Even a 30-year-old softball buddy of mine who worked at Uber said he’s shooting to have a $10 million net worth before he retires.
As a personal finance blogger, I subsequently got to thinking: Is 10 million dollars the ideal net worth amount for retirement? Is 10 million actually the new one million due to inflation? It seems to me that a net worth of $10 million or greater is ideal before leaving work behind.
$10 Million Is A Top One Percent Net Worth
10 million dollars is a lot of millions. If you have a 10 million dollar net worth or higher, you have a top one percent net worth in America. Therefore, if you can’t retire off 10 million dollars comfortably, you’ve got some serious problems!
The sad part about wondering whether 10 million dollars is enough to retire comfortably is that plenty of people who make a lot of money still go broke. Just look at so many ex-NFL players who end up with very little soon after their careers are over. The reason why they end up broke is due to a lack of financial education.
Good financial education will compound on itself. It will pay dividends for years to come. One of the main reasons why I’ve consistently been publishing on Financial Samurai since 2009 is to help people reach financial freedom sooner. We’ve only got one life to live and schools aren’t willing to impart any personal finance wisdom.
For fun, because this is what personal finance enthusiasts do, let’s discuss whether 10 million dollars is the ideal net worth for retirement. Of course, we can always retire with less. Most have. But where’s the fun in that?
Retiring With 10 Million Dollars: The Ideal Net Worth
Intuitively, we know that retiring on 10 million dollars should be no problem. But let’s look at the numbers.
The composition of the 10 million dollars is important. After all, you might have a 10 million dollar net worth, but six million of that may be tied up in your mega-mansion!
Ideally, you want your entire 10 million dollars to be invested in income-producing assets. Therefore, let’s take a look at how much 10 million dollars can produce in this low interest rate environment.
Back in 2007, when the 10-year bond yield was at 5%, 10 million dollars could have generated $500,000 a year in risk-free passive income.
Living off $500,000 a year will provide for a very fine life. Of course, some households might still feel like they are scraping by. But not you!
You can live in a big fancy house, pay private school tuition, eat whatever you want, fly first class, and even fly private on occasion. You can also eat all the toro sashimi and Kobe beef you want. Yum!
Unfortunately, 10 million dollars today generates a lot less. Since the 10-year bond yield is around 1.6%, it canonly generate ~$160,000 a year in risk-free income. Not bad, but exactly living the high life.
Although a decline in interest rates has helped support the U.S. economy by making borrowing costs cheaper, it has hurt the average retiree’s ability to generate retirement income.
Therefore, even with 10 million dollars in investable assets, you’ve still got to pay careful attention to how your capital is allocated.
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More Risk Required To Produce More Income And Wealth
$160,000 a year is a healthy amount of risk-free retirement income, especially if you don’t have any debt. However, if there’s more than one of you to support and if you have surprise costs, such as a big medical bill, perhaps it might not be enough.
What’s the solution? Take more risk with your 10 million dollars by trying to earn a higher return. I don’t recommend reaching too far for yield. Reaching for 3% – 4% yields or returns is the most I’d go for. Remember, with 10 million dollars, you’ve already won the game! Further, with stock market valuations so high, returns could come down in the future.
Just imagine being all-in on dividend stocks before the March 2020 sell-off. You would be pooping bricks if your portfolio declined by $3.2 million in just one month! As a result, most multi-millionaires are highly diversified.
Sure, things are fantastic now. However, when you are retired, you should have no desire to create unnecessary heart attacks. Your goal is to live as long and as healthy a life as possible.
Here are some investment ideas that have the potential to generate higher yields with a reasonable amount of risk.
- A REIT ETF like VNQ, which has a yield of ~2.7%
- Investing in individual REITs like O, which has a yield of ~4.5%
- Private eREITs, which have historically returned high single-digit yields, even during stock market sell-offs
- Investing in individual dividend-paying stocks like AT&T with a forward yield of ~7%
- Investing in a dividend ETF like VYM with a ~3% yield
- Buying rental property
- Lending out hard money (not a fan)
- Buying an annuity (not a fan either)
By taking more risk, your 10 million dollars could conceivably generate $300,000 – $400,000 in retirement income. If so, you should be able to live well for the rest of your life.
The one thing I must caution is having a retirement withdrawal rate much higher than 3X the risk-free rate of return. As we’ve seen during previous periods where low interest rates stayed low for an extended period of time, asset bubbles can form and then burst.
Therefore, don’t just assume your risk assets will always go up. They may, over a long enough period of time. But in the long run, you might also be dead.
Further, I’m assuming all of us with 10 million dollars would like to leave some money to charities and people we care about. Every person I know with $10 million wants to create a perpetual giving machine after they are gone.
Ways To Make Your 10 Million Dollars Go Farther
If you don’t want to take on more risk, the next best way to make your ten million dollars go farther is to lower your cost of living. Since you’re no longer tied down to a job, you could relocate to the heartland of America to save on living costs.
Ten million dollars in New York City may be like having 30 million dollars in Des Moines. If you can bear the weather and the more hom*ogeneous environment, off you go to Iowa! Besides, the weather in New York City isn’t much better. But if you’re coming from San Diego, LA, or SF, then moving to the MidWest may be more difficult.
See the minimum net worth levels required to feel wealthy in various cities. The biggest surprise is how high of a net worth is required to feel wealthy in low-cost cities such as Dallas, Houston, and Chicago. The other surprise is how much more financially satisfied residents are in expensive San Francisco.
Just the other day, I was playing tennis in 64 degree sunny weather while supposedly another Nor’easter was happening. It’s during the winter months where California and Hawaii really outperform.
Once you’ve made your retirement fortune, it makes sense to geoarbitrage if you want to feel even richer. Some retirees have relocated to different countries like Mexico or Malaysia to save on living costs. Then again, if you have 10 million dollars, you probably don’t have to go anywhere to save.
I strongly believe investing in 18-hour cities through a platform like CrowdStreet, which specializes in 18-hour cities, is a smart way to boost income and wealth. If you can generate 8% – 10% returns with $10 million, we’re talking $800,000 – $1 million a year. Of course, there are no guarantees the greater you go on the risk curve.
More Ways To Stretch Your Money
Another way to get your 10 million dollars to last longer is to not touch it for longer. Instead of retiring before you’re 60, wait until your 60s or later. This way, you allow your 10 million dollars to compound for longer and potentially grow even bigger.
The earliest you can receive Social Security is age 62. If you’ve been able to amass 10 million dollars in net worth or investable assets, you likely paid the maximum FICA tax for at least a decade.
Therefore, you should be able to also receive the maximum Social Security benefit a month of $2,324 if you collect at age 62 or $3,895 if you elect at age 70 for 2021.
Of course, if you retire with a pension on top of your 10 million dollars, then you should be set for life. If you have a pension, please count your lucky stars. Its value has gone way up with a decline in interest rates.
Earn Side Income In Retirement
By now, we should all agree that 10 million dollars is enough to retire well. However, I still suggest generating additional side income in retirement to ensure your capital will last for another generation. Earning side income also brings about a sense of purpose.
When I “retired” in 2012, I experienced some negatives of early retirement nobody talked about. Thanks to Financial Samurai, I’ve found something fun to keep me busy, especially during this damn pandemic. This site has helped with my mental health and happiness.
This site generates a decent amount of supplement retirement income. However, only one source of online income is passive: my severance negotiation book, which gets updated every couple of years. Writing articles, responding to business development inquires, and doing interviews takes time.
If you don’t want to make supplemental income online, you can always do some freelance consulting, gig economy work, tutoring, or coaching. The opportunities are endless to make extra income.
Retiring Early With 10 Million Dollars With A Family
Now that we know 10 million dollars can generate between $160,000 – $400,000 a year without the help from Social Security, let’s go through a budget. I’ve decided to compromise and say 10 million dollars can generate $250,000 a year in relatively low-risk retirement income.
This $250,000 budget is for a household of four with two young children living in big city like Los Angeles. Both parents have decided to retire early in their 40s to take care of their children until they never come back.
The couple made their money working at six-figure jobs for 20+ years. During their careers, they averaged a 40% after-tax saving rate. They invested the majority of it in various investments that produce income.
Budget Thoughts With $10 Million Of Investments
As you can see from the budget, $250,000 a year can go pretty quickly when you have two kids and a mortgage. Good thing their mortgage is only $500,000 on a $2,500,000 house.
If the couple paid off their mortgage, they would save $24,492 a year in cash flow. Having this extra breathing room would be nice because there’s not that much extra to cut.
If the couple decides to send their two kids to private grade school, their costs will increase by $30,000 – $110,000 a year for 13 years. And when you have a net worth of 10 million or 10 million dollars in investable assets, you will likely want to send your kids to private school.
Once their kids are done with college, they will free up another $30,000 in cash flow by not having to contribute to two 529 plans. If saved properly, the two 529 plans should be able to pay for most of their children’s college expenses.
Lest you think this $10 million / $250,000 budget is not based on reality, I’ve spoken to a handful of couples who have similar amounts of wealth and budgets.
In fact, my friend’s sister who checked out at 37 with 10 million dollars has budgeted to spend $175,000 a year. She’s focused on capital preservation after hitting it big. Here are some thoughts on what to do with $10 million if you so happen to have a nice windfall.
Retirement Will Be Different Than You Imagine
One of the great things about retirement is that you no longer need to save for retirement. Therefore, psychologically, your retirement income will go farther than you think.
For example, I saved 50% – 75% of my after tax-income from 1999 – 2012. Then I left the workplace for good in 2012. Once I left work behind, the income drop didn’t feel so bad. I was only spending less than half of my income for 13 years anyway.
Everything was going great in retirement from 2012 – 2017. My wife joined me in retirement in 2015 when she negotiated a severance as well. We travelled the world for 10 weeks a year. Then we decided to start a family.
We decided to buy a larger house, a safer car, and save for our children’s education. If our kids decide to go to college in 2036+, surely college tuition will be at least 100% higher.
As a result, the passive income that I thought was enough wasn’t. Therefore, I had to figure out ways to make more.
Don’t expect your lifestyle and your expenses to stay static once you retire. You might have kids late like we did. Or, god forbid, you might get into an accident or have an expensive recurring health issue.
$10 Million Should Be Enough To Retire Happy And Free
If you’ve been able to accumulate $10 million, congratulations! You should be able to retire with little-to-no financial concerns. Go ahead and enjoy life to the maximum today. You’re ahead of 99% of the American population.
If you’re still on your journey to financial independence, trying to accumulate a $10 million net worth or $10 million in investable assets is a worthwhile goal. Just know that even with so much money, you probably should continue to invest due to inflation.
With a top 1% net worth, I highly recommend you track your finances like a hawk with the free financial tool by Personal Capital. I’ve been using it since 2012 and have seen my net worth skyrocket during this time.
Think about yourself as a mama bird sitting on a golden egg. The last thing you want is some vulture swiping away your baby. The more money you have, the more you have to lose. Therefore, diligently tracking your net worth, especially if you have 10 million dollars or more, is important.
Spend Your Wealth With Joy!
One last thing. Retiring with $10 million is still under the estate tax exemption limit of $12.92 million per person in 2023. Therefore, you can feel comfort knowing your heirs don’t have to pay an onerous 40% death tax on capital you already paid taxes on. Further, you have plenty to donate more freely to charities you really care about.
I realize reaching a $10 million net worth or having $10 million in investable assets may sound like an unsurmountable goal. However, with so many investors making great fortunes from this bull market, maybe it’s much more feasible than we think.
Now wasn’t this retirement exercise fun? Good luck building your fortune! And if you just can’t get your head around accumulating $10 million, then shoot for $5 million. It’s amazing how much easier a challenge gets once you make a very big stretch goal.
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Build Wealth Through Real Estate
Every person I know with a $10 million net worth or more is heavily invested in real estate. Real estate is my favorite way to achieving financial freedom. It is a tangible asset that is less volatile, provides utility, and generates income. High inflation also acts as a tailwind for rent and property prices.
Take a look at my two favorite real estate crowdfunding platforms. They are free to sign up and explore.
Fundrise: A way for all investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the most appropriate way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. They also have higher growth due to job growth and demographic trends. For those with a lot of capital, you can build your own select fund with CrowdStreet.
I’ve personally invested $810,000 in 18 commercial real estate projects across the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.Real estate is the ultimate inflation hedge, and will help you reach the ideal net worth.
Track Your Wealth Wisely
The rich stay on top of their finances like a hawk. Therefore, do the same by signing up withPersonal Capital. PC is a free online tool I’ve used since 2012 to help build wealth. Reaching the ideal net worth figure for retirement of $10 million requires diligent tracking.
Before Personal Capital, I had to log into eight different systems to track 35 different accounts. Now I can just log into Personal Capital to see how my stock accounts are doing. I can easily track my net worth and spending as well.
Personal Capital’s 401(k) Fee Analyzer tool is saving me over $1,700 a year in fees. Finally, there is a fantasticRetirement Planning Calculatorto help you manage your financial future as well.
Related posts on becoming a millionaire and retirement:
How To Become A Millionaire By 30 – My financial journey in my 20s.
How To Become A Millionaire By 20 – If you want to instill in your children a strong work ethic and make them financially independent sooner.
Your Wealth Is Mostly Due To Luck: Be Grateful! – You know it’s true.
Buy The Best-Selling Personal Finance Book
If you want to become a millionaire, purchase a hardcopy of my new bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. The book is jam packed with unique strategies to help you build your fortune while living your best life.
Buy This, Not That is a #1 new release Amazon. By the time you finish BTNT you will gain at least 100X more value than its cost.
After spending 30 years working in finance, writing about finance, and studying finance, I’m certain you will love Buy This, Not That. Whether it’s wanting to retire early or decide on a big decisions, my book will help you make more optimal choices. Thanks for your purchase!
For more nuanced personal finance tips and advice, join 50,000+ others and subscribe to my free weekly newsletter. I’ve been helping people achieve financial freedom since 2009.
Comments
Jim McCrorie saysPlease sign me up for your newsletter. Thank you.
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- Financial Samurai says
You can sign up for my newsletter by clicking here. I can’t do it for you.
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- Steph says
Hello,
10 millions it’s good, but don’t forget than for the moment it’s a chance to United States, that there isn’t of “Wealth Tax” on your Patrimony, I saw recently maybe a day the UHNWI will pay this.
It’s really different in Europe : France, Spain,…, Swiss, the “high patrimonies” pay the “Wealth Tax” who added at the “Incomes Tax” (idem concerning the succesions “inheritances”), it’s the double or triple penality.
By example, in France for only 1,35 million dollars of patrimony, you must payed this “Wealth tax”.
Hope than this tax don’t arrive never in your country.
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- Financial Samurai says
The first $12.06 million of your net worth / estate is tax free upon death PER PERSON. The threshold might go up or down over time. But it’s pretty darn high!
I hear you on France though. But at least you guys have affordable healthcare and some happier!
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- Steph says
Thanks SAM for your reply.
You’re right, no country or governance is perfect, they all have their flaws.
I’m not against pay this tax and wish the sharing of wealth, but really since 10 years now, many wealth people have left the France and his arrogance, I plan to do it myself.
Who knows maybe to join Monaco, the United States or others…
Thanl you still for your interesting article.
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- JC says
I’m 51 years old and my annual income from my job is about 150K. My net worth varies quite a bit because almost all of my money is in the market. A few lucky buys into some tech stocks over a decade ago, as well as the Fed’s irresponsible money printing, has done me well. Last November, NW was 17.5M, but after the recent market fall, it’s now a little over 13.5M.
I’ve been frugal, saving, and investing since my teenage years and these habits have done me well, but I also feel like it turned into a mini penny-pinching scrooge. It is like a hard-to-break habit. Lots of financial books and sites are good at describing how to make/save/invest money and how to generate money from your assets. But there’s not a lot of info on how to do responsible/conscious spending or break out of the frugal mindset to enjoy what I’ve created.
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- Financial Samurai says
It is hard to break the habit. I’ve written about this subject in my new book, Buy This, Not That.
Here are some other posts:
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- Mark says
Interesting post – 10 million ouch. I will be 69 this year. unfortunately had to retire early because of a disability. Wife will retire next year – she will be 67. I do collect 24k in social security – wife will collect 44 k she will wait until age 70 but our assets (not including home) is 4.3 million all invested in stocks bonds and cash 40/50/10. Our expenses are about 100k a year.
So we will need to draw 80k a year until wife reaches age 70 (3 years )
Now to make the money last – glad the withdrawal rate is up
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- CityConfused says
Hi folks, actively debating something and would love your POV. Just sold a company to FAANG, will be vesting over next two years. At current stock prices (big if), in two years, NW would be 5M in NYC or 5.7M in Miami. I’d be 31 then.
I’m debating whether to move to Miami or NYC. If taxes were no object I’d do NYC. However, taxes are obviously an object and I’m not to keen to work at FAANG for another 2 years after.
How should I think about this?
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- Financial Samurai says
It sure is nice not to pay so much in taxes. If you enjoy Miami, I’d go on the adventure!
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- Daniel C says
Hello,
Love this website. I am very grateful for what I have so there is no complaint whatsoever here. I simply want to get an opinion of my situation. I just turned 50; my wife and I have no kids. We roughy have a $6.5mm stock portfolio and a $10mm property portfolio (including my own residence of $3.7mm). Our mortgages all together are about $5mm.
I have a job that pays me $1.2mm and I like my team and the day to day work. But it’s a large company and I hate the politics and direction it is going. I can stay for a few more years and retire. Or I can quit now and find something that may pay less but I have more enjoyment, adventurous and freedom.
Our lifestyle is comfortable with a few luxury items once in a while. We certainly don’t need to fly private or have Gucci or Hermes everywhere. All the rental incomes roughly cover mortgages expenses and real estates taxes, so I can’t imagine I need to spend $300k pretax or $200k after tax a year.
So if you were me, 1) stay in this comfortable job or 2) retire from the corporate life and do something fun.
Many thanks,
Daniel CReply
- Financial Samurai says
At 50, time is getting much more valuable. Life is too short to not enjoy what you do. I say find joy and spend more of your wealth!
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- Daniel says
Many thanks, Sam! I will keep you posted.
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- Urs says
Daniel… myself 54, similar financial position ans spending as you have. I jumped the ship 2 years ago, launched a small start up with and idea I had… work maybe 50% on it. Other than that…enjoy live more… I go skiing when there is fresh snow and sun etc,,
Also recently lost my mother but I was able to spend a lot of time with her during her last month… invaluable.
So my advise…leave the “comfortable” job behind… I haven not regretted a day “out of the office” yet.
Best
UReply
- JB says
Be done with the stress and frustration of your current job. Freedom of time is real wealth. You are a productive hard working individual. Once you have some time to rest and recover you will be revitalized. Rediscover who you are; eat well, sleep well, exercise and learn. You will open a new chapter and, it may be the best most rewarding of your life. Andrew Carnegie believed that a man’s most powerful, productive decade was 50-60 years of age. You are 50, go for it!!
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- Financial Samurai says
Thanks for the reminder about age 50!
I’m planning on re-retiring or at least taking things way easier this year. I’m turning 45 and need a break.
Maybe I’ll do a 5-year break and come back at 50!
Let’s enjoy the YOLO economy while it lasts.
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- TradFiGuy says
NEED ADVICE
Background:
I am a 39 year old, white male, married no kids, living in New York city. I have been in finance for 16 years working on an equities trading desk at an investment bank. I am thinking of quitting my job to try something new (either in Tech or Crypto)Between 2013-2019 I averaged $1 million per year in W2 income (pre-tax). I saved the vast majority. I purchased 3 properties + invested in a handful of startups and maxed out my 401k since 2006. I have a net worth of ~$10M after debt. Asset base is mostly real estate with low interest rate debt + multiple 401ks and private equity exposure. Our burn rate is about $180k per year (i feel like we live a very comfortable lifestyle)
i have two side hustles: 1 real estate and 2 crypto. We have 3 homes (2 rentals + 1 primary). The two rentals generate about $400k in gross rental annually and $200-$250k after expenses.. I have been a crypto hobbiest since 2016. Have made decent money in the space (About $1M-$1.5M) but want to focus on it more.
PROBLEM
I have HATED my job for the past 6 years but stuck with it because it was paying so well. That recently changed.The last two years my W2 salary has dropped from $1M to $600k largely due to automation. After tax and including inflation, my W2 is down over 50% compared to 2017. However, the hours worked havent changed. I still work 60-70 hours per week doing something i hate and Im getting paid less than half what i used to make.
Furthermore, my W2 as a percentage of net worth has dropped considerably. (after tax W2 / NI = 3-4%). Back in the day when i was just starting out, a $400k bonus (after tax) was life changing. At this stage in my life, that bonus of $200k makes less of an impact. Plus I am missing the boat in tech + crypto as that is just my side hustle.
The last 3 years, my assets grew and real estate hustles have generated more than my full time job. The rental income along is 70-80% of my W2 income after adjusting for taxes.
I have two options
1) Stay in a job i hate making $250-300k after tax in an industry that is a melting ice cube and eventually get laid off in 2-3 years
2) Take a 40-50% pay cut to roll the dice and enter the crypto space full time. Might not make money the first 1-3 years but long-term believer.My wife supports me leaving my W2 but demands i have something lined up before pulling the trigger. However, that is extremely difficult working 70 hours a week + multiple side hustles.
What do you guys think is should do!??!
Thanks in advance!
I AM A HUGE FAN of this website and the COMMUNITY around it. Wishing everyone a happy and healthy new year!
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- Financial Samurai says
With a $10M net worth at 39, I would for sure roll the dice! Life is too short to hate what you do with that level of net worth.
If you negotiate a severance, like I did, it makes taking a leap of a faith so much easier.
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- TradFiGuy says
Thanks Sam! i already downloaded your book and read it. great advice. however, i think its going to be harder for me. The good news is, i would be leaving less money on the table if i leave bc defferred comp has gone down a lot.
Thanks for the reply!
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- Moneyfriend says
We’ve got a very similar path, except I love my job in trading. I can see myself staying for years, especially if I continue to make a few million a year. I quit when I was 33, thinking I’d get deeper into real estate and crypto, but realized I really missed working on something that I can actually add a lot of value and command respect. I returned after a 1 year break, admitting that it taught me a lot about how I’m not looking forward to retirement and being past my prime. However, I’d leave the second I ever say I hate the job.
You have one life. Do not spend it doing something that you, in the presence of a community that you respect, say boldly that you “HATE”. Frankly, your wife is completely wrong here. It’s impossible to focus on the next step when you’re spending 70hr with your head underwater doing something you can’t stand. It’s different if you needed the money, but come on, your withdrawal rate is sub 2%, you’re clearly capable having had success in your career/RE/crypto, and, perhaps above all, you do not have kids.
Good luck!
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- Ranger says
You have many choices and you are still young. While I am 56, we have a net worth (investable assets) of over 10.2 million. Still working at a job I don’t mind toooo much. I keep on doing it so my assists can grow. They should grow about a million more in 3.5 years. Sure you are making less then you did, but are still making great money. I am very conservative now, sold all my rentals and company. If I get a return over 3 percent it works for me. Good luck
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- Jc says
What are the ways your friends are creating perpetual giving machines to improve their families?
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- Jack says
I really love the content on your site! Thank you.
One thing I don’t get – it seems that you’re leaving inflation (3%) out of the target yield calculation. For instance – yes, with $10M and 1.5% risk-free yield, you do get 150K a year, but after 20 years you’d need to spend $263K per year to maintain the same life style. You’d in fact need a 4.5% yield investment to balance out.
Obviously, you know all of that – so what am I missing??
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- jeff says
If you had 10m in investable assets, you would just borrow 400K per year against that portfolio at approx 3%. Loans are not taxable, so you avoid income or cap gain tax and you let your portfolio continue to compound at 5%+
There are other benefits as well, step up for estate etc.
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- Ramon says
So when do you repay the $400K loan? Do you repay it each year? Then take out another $400K loan? Or do you not repay the loan each year and just let the loan balance grow? If you repay it each year, won’t you have to cash out of investments thus causing a possible taxable transaction?
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- EB says
Hey Ramon, I’m currently doing almost exactly that. Home value ~$2.4M paid off, just took a $400k 30 yr mortgage at 2.99%. Wanted an easy monthly repay of ~$1,600 mo as I’m repaying with income (not gains) but wanted the mortgage benefits and some additional investable capital/dry powder.
Not a retirement strategy yet but would repeat in retirement depending on rates for a tax free lump sum. You’re correct though that the repay will create a taxable event but it should be from long term gains or lower income tax levels. The interest rate is the key here.
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- ck says
One thought is that as your “risk free” rate drops, the need to analyze expenses increases. At a 1.5% risk free rate, If you can cut 15k from the budget that is 1 million less needed. With less income needed there is also less tax impact, so it can snowball for you.
These expenses don’t even need to impact your quality of life, refinancing, energy efficiency, solar, are all things that can reduce or eliminate after tax expenses.
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- mark says
What do you think on the Fundrise IPO? Worths doing? What’s your opinion?
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- Joe says
Bro I am 35 with all negative, unpaid cars, unpaid student loan, unpaid house. And some people complaining about only having few million at my age.
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- Dawn Menon says
I am getting rattled here reading all these articles. My husband and I have around 1 Million in all Vanguard funds and we are 72 years Old. We have to draw our first RMD this year. We have about 90K left in our mortgage. He is still working as a teacher and has only 12 years of service for retirement pension. I have 27 years of service as a teacher and will have pension. No Social security for both of us. You think we can survive with pension and our Retirement funds in Vanguard?
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- Financial Samurai says
How big is your pension? Folks with pensions your age generally have generous ones. How are you guys not eligible for SS?
Most folks under 40 won’t ever get a pension or a pension large enough to cover general living expenses.
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- Ray says
You’re a financial samurai and you don’t know that many teachers cannot qualify for both a pension and SS?
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- Financial Samurai says
I did not know that. Perhaps because I’m not a full-time teacher but a part-time seasonal high school tennis coach.
But I know several people who have pensions and who can also collect Social Security, including my own parents.
Here’s a relevant article as well: https://www.aarp.org/retirement/social-security/questions-answers/pensions-and-social-security.html
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- GEORGE NIRAPPUKANDATHIL says
In your case, without SS and Pension, it will be difficult to have a decent life from the interest only IRA. You may have to draw down from the Principal to meet your expenses.
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- Paul Dos Santos says
Easy to retire, assuming you are the “normal” educator, you also probably have a tax deferred employer program. If you teach in states like CT you not only don’t get SS but you can’t even qualify for 50% of the other spouse, although that won’t apply to you because you both teach… however YOU MAY HAVE YEARS OF ss CONTRIBUTION WHEN YOU WERE NOT A TEACHER AND THAT YOU CAN COLECT ALTHOUGH IT WILL PROBABLY GENERATE A REDUCTION IN PENSION.
A million may not be what it used to be, but it is still a million, with proper financial planning it can be done and you can enjoy a very nice retirement.
Listening to people here, you would think you have to be in the top 1% to be able to retire well, that is not at all true.
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- Mark says
My brother a teacher in the alum rock school district retired and cannot collect social security and a friend who was a teacher in Southern California also cannot collect social security
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