Do you think $3 million is a solid retirement fund? Suze Orman has a reality check for you.
Speaking on the “Afford Anything” podcast, he explained why even this seemingly sizable amount could leave you struggling in retirement, especially if life throws you some curveballs.
Don’t miss:
Orman was asked if $3 million, combined with a conservative 3% withdrawal rate, could fund a secure early retirement. Your answer? A resounding no. He didn’t even hesitate to criticize the idea, saying that $3 million was “far from enough” for the unexpected costs that life can throw at him.
Host Paula Pant asked Orman: “What would be a safe amount that a person can say, ‘Okay, at this point, given the size of my portfolio, I feel comfortable enough that if I hit a bus, it would be fine.”
Orman replied: “It would have to be millions.” Pant, wanting a clearer answer, pressed further: “How many millions?” That’s when Orman started doing the math; It wasn’t pretty at all.
“It depends on where you live and what your expenses are,” Orman said. “Do you own your home outright? So what are your expenses? But think about it logically.”
And then he did exactly that: he broke it down line by line.
Trend: Deloitte’s fastest-growing software company partners with Amazon, Walmart and Target. You can still get 4,000 of your pre-IPO shares for $1,000 for just $0.25 per share.
“Let’s say you need help. Remember, I took care of my mother and it cost me, like I said, $30,000 a month. $30,000 a month,” Orman emphasized. “So we’re talking, quite possibly, full-time help and all that, because good luck getting insurance and things to pay for it now, we’re talking about maybe $300,000 or $400,000 a year.”
If that wasn’t sobering enough, he added, “Now you have other expenses: food and everything. Let’s say you need another $100,000 a year to live on. So now you have $350,000 a year after taxes.”
Trend: Can you guess how many retire with $5,000,000 in savings? The percentage may surprise you.
To generate $350,000 a year after taxes without touching equity, Orman said you would need a portfolio yielding at least 5%. That means a whopping $10 million in assets, if not more.