Can you retire on $2M?

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schrute
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Can you retire on $2M?

Post by schrute » Thu Jun 21, 2018 9:17 pm

In doing the math, it seems like if you're 40 with $2M you could possibly retire.

$2M @ 8% interest annually for 40 years (die at 100 years old) yields you $161,000 annually. You may not draw $161,000 to start, maybe you draw $60,000 and therefore grow your overall pot over 40 years. Then again, if you need to reliably draw from it 8% might not be reasonable enough.

Does this seem sound?

tibbitts
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Re: Can you retire on $2M?

Post by tibbitts » Thu Jun 21, 2018 9:22 pm

schrute wrote:
Thu Jun 21, 2018 9:17 pm
In doing the math, it seems like if you're 40 with $2M you could possibly retire.

$2M @ 8% interest annually for 40 years (die at 100 years old) yields you $161,000 annually. You may not draw $161,000 to start, maybe you draw $60,000 and therefore grow your overall pot over 40 years. Then again, if you need to reliably draw from it 8% might not be reasonable enough.

Does this seem sound?
You can argue between a 2% and 3% SWR, and you have a reasonable chance of ending with nothing. Anything higher you have to use a lot of imagination to justify.

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TxAg
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Re: Can you retire on $2M?

Post by TxAg » Thu Jun 21, 2018 9:23 pm

How about $2MM at 3% = $60k? That's more reasonable. And yes, we could live on that if the house was paid for.

RudyS
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Re: Can you retire on $2M?

Post by RudyS » Thu Jun 21, 2018 9:24 pm

We need much more info. Pension - how stable? Social Security? That $160K will be taxable. Where do you live? HCOA or LCOA? Annual expenses? It does seem that you could make this work, but "it depends."

And as tibbitts said, that 8% is much more than many of us think possible/probable.

gouverneur
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Re: Can you retire on $2M?

Post by gouverneur » Thu Jun 21, 2018 9:25 pm

Yeah, 8 percent is a super-aggressive withdrawal rate.

Now, if you go by the standard 4 percent advice, that's $80,000 a year. Plenty of people can and do live on a lot less.

If you go by conservative/cautious forum wisdom, which does seem sound to me, then you need a lower withdrawal rate for retiring early and to account for the possibility of long-term returns being lower than past experience. 3 percent is $60,000. Again, plenty of people can and do live on a lot less. It just depends on your situation. A single person or a couple undoubtedly could retire on that. Could a family of four or five, if they wanted to live an upper middle class lifestyle and pay for the kids' college, etc.? No.

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Re: Can you retire on $2M?

Post by AlohaJoe » Thu Jun 21, 2018 9:27 pm

No, this analysis isn't sound. Among other things, if you start at 40 and draw for 40 years, you aren't 100, you are only 80.

There are lots of tools that have been built to help provide answers to the "how much do I need to retire" question. I'd use one of those instead of reinventing the wheel. Cfiresim, firecalc, iORP, and Financial Engines are some of the ones I've heard of.

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Re: Can you retire on $2M?

Post by radiowave » Thu Jun 21, 2018 9:32 pm

How much of the $2M will you be paying taxes on?
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AlwaysWannaLearn
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Re: Can you retire on $2M?

Post by AlwaysWannaLearn » Thu Jun 21, 2018 9:37 pm

.....
Last edited by AlwaysWannaLearn on Wed Jul 18, 2018 11:24 pm, edited 1 time in total.

totallystudly
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Re: Can you retire on $2M?

Post by totallystudly » Thu Jun 21, 2018 9:45 pm

Just move overseas for the win

delamer
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Re: Can you retire on $2M?

Post by delamer » Thu Jun 21, 2018 9:46 pm

You cannot get 8% interest today.

You might be able to get an average 8% total return on a portfolio that was heavily invested in stocks.

But that won’t be a consistent 8%. Some years you might lose 40% and other years you might gain 30%, and any result in between.

So no, it does not seem sound.

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Re: Can you retire on $2M?

Post by Grt2bOutdoors » Thu Jun 21, 2018 10:06 pm

Sure it’s sound until it’s not.
Your calculations fail to acknowledge a few key risks: inflation, market risk, sequence of returns risk, taxes. Run a few scenarios like starting out with $2 million, first year you withdraw $160k, account value declines by an additional 8% due to market fluctuations- value of account in year 2 starts out at $1.68 million. Still feel like withdrawing $160k? If you do, now you are down to $1.5 million, how confident are you now?
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CaliJim
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Re: Can you retire on $2M?

Post by CaliJim » Thu Jun 21, 2018 10:16 pm

OP

You may benefit by doing a little bit of reading about Safe Withdrawal Rates. Wade Pfau has recently published several academic papers updating previous thinking on this subject. Look into his writings, and also read the wiki page here: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

Currently many bogleheads are pretty conservative (pessimistic) with regard to future stock and bond returns. I am among them. 8% strikes me as VERY OPTIMISTIC bordering on FANTASY.

A 2.5% withdrawal rate should safely last a long time. Much more than that and you may run into trouble.

Also explore the various retirement calculators. https://www.bogleheads.org/wiki/Retirem ... d_spending
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runner3081
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Re: Can you retire on $2M?

Post by runner3081 » Thu Jun 21, 2018 10:22 pm

Yes, absolutely I could and never worry about money again.

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Hawaiishrimp
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Re: Can you retire on $2M?

Post by Hawaiishrimp » Thu Jun 21, 2018 10:25 pm

At 3.5% withdraw rate, at $2MM, if you can live within $70k pre-tax annually, you should be fine to retire.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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CaliJim
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Re: Can you retire on $2M?

Post by CaliJim » Thu Jun 21, 2018 10:38 pm

Is $2m total net worth or retirement portfolio value?
Do you own or rent (renters are subject to greater inflation risk than home owners?)
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schrute
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Re: Can you retire on $2M?

Post by schrute » Thu Jun 21, 2018 10:41 pm

CaliJim wrote:
Thu Jun 21, 2018 10:38 pm
Is $2m total net worth or retirement portfolio value?
Do you own or rent (renters are subject to greater inflation risk than home owners?)
Portfolio value. Not including retirement accounts. Hypothetical.

golfCaddy
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Re: Can you retire on $2M?

Post by golfCaddy » Thu Jun 21, 2018 11:17 pm

Yes, I could retire on $2M at 40. 3% real is a more realistic SWR for 40+ year retirements.

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TierArtz
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Re: Can you retire on $2M?

Post by TierArtz » Thu Jun 21, 2018 11:26 pm

Yes. I'd need about 80K (4% growth) above other passive income for the next 10 years (paying off house and saving for kids' college). After FRA, and ending the mortgage and college saving, I'd need about 20K (1%). Right now my target for pulling the trigger is 3.1M / 40X.

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Re: Can you retire on $2M?

Post by DesertGator » Thu Jun 21, 2018 11:40 pm

So are you taking into account that you will likely want to reduce your equity market exposure over that long time period? If your portfolio at age 40 is say 100% equities with a 1.2 beta, will you be comfortable with the same at age 75?

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Re: Can you retire on $2M?

Post by Always passive » Fri Jun 22, 2018 12:17 am

totallystudly wrote:
Thu Jun 21, 2018 9:45 pm
Just move overseas for the win
The moving overseas idea to reduce costs is an illusion, Most countries are more expensive than the US. I live in Tel Aviv, a very expensive proposition, certainly much more than my original LA (and I lived in BH). Although having a national health system (by the way, vastly superior than what I remember from LA, not only in cost, but also in quality), everything else including real estate is absurd.

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peterinjapan
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Re: Can you retire on $2M?

Post by peterinjapan » Fri Jun 22, 2018 12:50 am

I can say that Japan is actually cheap. Even in Tokyo, you can get a decent "mansion" (what they call an apartment in a high-end building made of steel instead of wood) for $1200-$1500 easily, and where I live, 100 km north, it'd be half that. Food is similarly cheap, or rather, prices all seem "frozen in time" at 1991 levels due to the lack of real inflation since then.

Of course you can't just come to live in a place like Japan without some connection to the place, you'd be miserable, but it's something to consider for those who have that connection.

Note that these numbers are in USD and at the current exchange rate. But if the dollar gets stronger, as it has been doing of late, Japan gets even cheaper in dollar terms.

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FiveK
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Re: Can you retire on $2M?

Post by FiveK » Fri Jun 22, 2018 1:10 am

schrute wrote:
Thu Jun 21, 2018 9:17 pm
In doing the math, it seems like if you're 40 with $2M you could possibly retire.
schrute wrote:
Thu Jun 21, 2018 10:41 pm
Portfolio value. Not including retirement accounts. Hypothetical.
Sure. "Could possibly" covers a lot. Even a 4% WR is "likely to be" successful; where the boundary between "likely to be" and "may safely be assumed" lies, however, is debatable and perhaps in the eye of the beholder.

TravelGeek
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Re: Can you retire on $2M?

Post by TravelGeek » Fri Jun 22, 2018 1:15 am

Always passive wrote:
Fri Jun 22, 2018 12:17 am
totallystudly wrote:
Thu Jun 21, 2018 9:45 pm
Just move overseas for the win
The moving overseas idea to reduce costs is an illusion, Most countries are more expensive than the US.
Most countries? I think the majority of the countries on this planet allow for a good standard of living at a lower cost than the US (unfortunately in many cases that standard of living it out of reach for many residents). Perhaps if you insist on buying the same products/brands as in the US, you might face higher cost.

Of course, there is also no guarantee that your cheap retirement paradise remains cheap or livable/stable. Or allows you to stay there forever. But there are no guarantees in life anyway.

Snowjob
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Re: Can you retire on $2M?

Post by Snowjob » Fri Jun 22, 2018 2:49 am

That's actually what I'm shooting for so I'll say yes.

Figure a 4% withdrawal rate to start, targeting 80k per year income. Social Security will come down the road at another 20k and is a really nice insurance policy if things going wrong. I don't expect to inherit anything but you never know, that could be some additional help also. Throw in a little bit of annuities and I'd be quite comfortable I suspect.

All depends on what your expenses are. I'll have a significant portion of my savings as roth and taxable with the ability to adjust where I'm pulling from my tax rates will be really low. I'll probably end up looking at something like 6k per month after taxes. That is the equivalent of earning 100k per year in my state only I won't need to save for retirement or pay a mortgage so it will feel like even more.

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Re: Can you retire on $2M?

Post by gotester2000 » Fri Jun 22, 2018 3:19 am

Always passive wrote:
Fri Jun 22, 2018 12:17 am
totallystudly wrote:
Thu Jun 21, 2018 9:45 pm
Just move overseas for the win
The moving overseas idea to reduce costs is an illusion, Most countries are more expensive than the US. I live in Tel Aviv, a very expensive proposition, certainly much more than my original LA (and I lived in BH). Although having a national health system (by the way, vastly superior than what I remember from LA, not only in cost, but also in quality), everything else including real estate is absurd.
There are many countries where one can live decently on < 20 k USD / year.

amitb00
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Re: Can you retire on $2M?

Post by amitb00 » Fri Jun 22, 2018 4:27 am

If you are in US and want to retire at 49, 5 million is better. Of course amount needed depends on your expenses. I am thinking you want to travel and have fun money. I won’t retire with 2 m at age 40.

Admiral
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Re: Can you retire on $2M?

Post by Admiral » Fri Jun 22, 2018 6:27 am

This "hypothetical" does not include "hypothetical" expenses, nor "hypothetical" SS.

If you can live on 40k a year, then yes, a 2% SWR is fine. If you require 60k a year but will have 30k in SS benefits, then yes. If you require 80k a year and have only $2m with no SS, then very likely not.

What's the point if the question? If this is for you, post up some of your details for a real answer.

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ClevrChico
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Re: Can you retire on $2M?

Post by ClevrChico » Fri Jun 22, 2018 7:10 am

I've done the math in a LCOL area and it works out. I've considered a swr of 3.5% for early retirement, based on this:

https://www.madfientist.com/safe-withdrawal-rate/

I am waiting until I'm a bit older and watching what happens with health care before making any moves.

stoptothink
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Re: Can you retire on $2M?

Post by stoptothink » Fri Jun 22, 2018 7:42 am

runner3081 wrote:
Thu Jun 21, 2018 10:22 pm
Yes, absolutely I could and never worry about money again.
As could I, totally depends on your lifestyle expectations. I suspect most, even on this board, would totally balk at the idea off living off of $40k/yr or suggest that it isn't even possible, but I disagree. With a pair of children in daycare, a wife in school full-time, and a 15yr mortgage, our total household expenditures are <$45k/yr. Those things will all be gone within the next 5yrs and there is no reason our current happy life would change at all and total household expenses should be ~$25k/yr. That being said, I could, but I wouldn't.

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Re: Can you retire on $2M?

Post by Admiral » Fri Jun 22, 2018 8:07 am

stoptothink wrote:
Fri Jun 22, 2018 7:42 am
runner3081 wrote:
Thu Jun 21, 2018 10:22 pm
Yes, absolutely I could and never worry about money again.
As could I, totally depends on your lifestyle expectations. I suspect most, even on this board, would totally balk at the idea off living off of $40k/yr or suggest that it isn't even possible, but I disagree. With a pair of children in daycare, a wife in school full-time, and a 15yr mortgage, our total household expenditures are <$45k/yr. Those things will all be gone within the next 5yrs and there is no reason our current happy life would change at all and total household expenses should be ~$25k/yr. That being said, I could, but I wouldn't.
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something? 3k a month after taxes is doable for some, particularly with very low housing costs. It just depends on one's lifestyle. However, my guess is that someone who accumulates $2m by age 40 is not living that lifestyle, and would thus be unlikely to do so in retirement.

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Re: Can you retire on $2M?

Post by bloom2708 » Fri Jun 22, 2018 8:11 am

If you retire at 40, then after 40 years, you are 80. Not 100.

Nothing will get you 8% interest. Assuming 8% on 100% stocks is not realistic.

Back to work unless your total expenses are in that $50k to $60k range. If so, yes you can retire at 40 with $2 million.
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indexonlyplease
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Re: Can you retire on $2M?

Post by indexonlyplease » Fri Jun 22, 2018 8:19 am

Many blogs have stated people retire at a young age. But many also have started a business that brings in additional income. Unless you have that potential, have a pension (which I dout at 40) there is so many additional cost that could ruin your retirment and than you have to go back to work.

So, work long and build up the portfolio. See what your portfolio will be at age 50,55,60. Remeber insurance cost alone is painful.

stoptothink
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Re: Can you retire on $2M?

Post by stoptothink » Fri Jun 22, 2018 8:51 am

Admiral wrote:
Fri Jun 22, 2018 8:07 am
stoptothink wrote:
Fri Jun 22, 2018 7:42 am
runner3081 wrote:
Thu Jun 21, 2018 10:22 pm
Yes, absolutely I could and never worry about money again.
As could I, totally depends on your lifestyle expectations. I suspect most, even on this board, would totally balk at the idea off living off of $40k/yr or suggest that it isn't even possible, but I disagree. With a pair of children in daycare, a wife in school full-time, and a 15yr mortgage, our total household expenditures are <$45k/yr. Those things will all be gone within the next 5yrs and there is no reason our current happy life would change at all and total household expenses should be ~$25k/yr. That being said, I could, but I wouldn't.
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something? 3k a month after taxes is doable for some, particularly with very low housing costs. It just depends on one's lifestyle. However, my guess is that someone who accumulates $2m by age 40 is not living that lifestyle, and would thus be unlikely to do so in retirement.
I suggest you check out other past similar threads, countless people will say it isn't even possible. FWIW, even after almost losing my entire life savings in real estate development investments in the crash and a divorce (and putting said ex-wife through undergrad and dental school), I will be in a fairly similar situation in 3yrs (currently 37). There are those of us out there who have been pretty decent accumulators of wealth who are pretty comfortable living the $40k/yr lifestyle. BUT, just me personally, my career actually brings some joy to my life (at least currently) so I have no desire to do what the OP is talking about.

LiterallyIronic
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Re: Can you retire on $2M?

Post by LiterallyIronic » Fri Jun 22, 2018 8:58 am

I mean, I absolutely could (and would without any hesitation). But it's unclear if you're asking if you could. And if you are asking that, 8% withdrawal is too high and we need information about expenses and taxes.

KlangFool
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Re: Can you retire on $2M?

Post by KlangFool » Fri Jun 22, 2018 9:00 am

OP,

I could. My annual expense including the mortgage is 60K per year.

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ryman554
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Re: Can you retire on $2M?

Post by ryman554 » Fri Jun 22, 2018 9:03 am

tibbitts wrote:
Thu Jun 21, 2018 9:22 pm
You can argue between a 2% and 3% SWR, and you have a reasonable chance of ending with nothing. Anything higher you have to use a lot of imagination to justify.
What data do you use to justify such small withdrawal rates?

3.3+% (or thereabouts) seems to be a perpetual withdrawal rate that takes you to, well, way past your death. I would have to use a lot of imagination to require a 2% WR. Trinity/et.al. supplies a lot of the data here.

Texanbybirth
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Re: Can you retire on $2M?

Post by Texanbybirth » Fri Jun 22, 2018 9:10 am

Yep, I could retire yesterday. 8-)

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Re: Can you retire on $2M?

Post by dabblingeconomist » Fri Jun 22, 2018 9:13 am

Admiral wrote:
Fri Jun 22, 2018 8:07 am
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something?
A good reference for this is Table 1 on page 6 of this annual Census publication (for 2016).

This table indicates that in 2016, median household income in the United States was $59k per year. But median income for family households, defined as households where two or more related people (by blood, adoption, or marriage) live together, was $75k. And median income for married couple households was $87k. From 2016 to present-day 2018, this number will surely have grown to over $90k, let's say most likely 2.75% per year to around $92k.

I suspect that the figure for married couple households is closer to what most people on this forum would regard as the relevant norm. So it's not crazy to say that numbers below $92k feel "low" in the sense that they're below-median, and many people aspire to an above-median lifestyle. I don't want to go overboard here: for a disciplined person in a LCOL area, $80k is plenty of money, and indeed people can do very well on much less. But median household stats can be very misleading in that they include single 28-year-olds living alone, widows, single mothers, etc. - not necessarily what comes to mind when people imagine what the median household income refers to.

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teen persuasion
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Re: Can you retire on $2M?

Post by teen persuasion » Fri Jun 22, 2018 9:23 am

Could I retire on $2M? Definitely!

Having all of it outside of retirement accounts would mean we likely lose most financial aid, but the increase in annual income would more than cover the additional expense for DS4 currently in college. If I were back at age 40 again, just before the oldest was starting college, it would be a different calculation. Her school was more expensive, and a few years later DS2 joined her in college, at a different but also expensive school. I'm not sure how much of their FA was merit scholarships, definitely some but I didn't distinguish between merit and need then. Covering one @ $25k is much different than covering one at $55k + one at $45k simultaneously (and ultimately covering 5 kids * 4 years).

Why is none of this hypothetical $2M in retirement accounts?

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Re: Can you retire on $2M?

Post by KlangFool » Fri Jun 22, 2018 9:27 am

dabblingeconomist wrote:
Fri Jun 22, 2018 9:13 am
Admiral wrote:
Fri Jun 22, 2018 8:07 am
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something?
A good reference for this is Table 1 on page 6 of this annual Census publication (for 2016).

This table indicates that in 2016, median household income in the United States was $59k per year. But median income for family households, defined as households where two or more related people (by blood, adoption, or marriage) live together, was $75k. And median income for married couple households was $87k. From 2016 to present-day 2018, this number will surely have grown to over $90k, let's say most likely 2.75% per year to around $92k.

I suspect that the figure for married couple households is closer to what most people on this forum would regard as the relevant norm. So it's not crazy to say that numbers below $92k feel "low" in the sense that they're below-median, and many people aspire to an above-median lifestyle. I don't want to go overboard here: for a disciplined person in a LCOL area, $80k is plenty of money, and indeed people can do very well on much less. But median household stats can be very misleading in that they include single 28-year-olds living alone, widows, single mothers, etc. - not necessarily what comes to mind when people imagine what the median household income refers to.
dabblingeconomist,

And, those numbers are the income. The expense would have to be at least 20% to 30% lowered than that due to taxes.

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smitcat
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Re: Can you retire on $2M?

Post by smitcat » Fri Jun 22, 2018 9:28 am

dabblingeconomist wrote:
Fri Jun 22, 2018 9:13 am
Admiral wrote:
Fri Jun 22, 2018 8:07 am
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something?
A good reference for this is Table 1 on page 6 of this annual Census publication (for 2016).

This table indicates that in 2016, median household income in the United States was $59k per year. But median income for family households, defined as households where two or more related people (by blood, adoption, or marriage) live together, was $75k. And median income for married couple households was $87k. From 2016 to present-day 2018, this number will surely have grown to over $90k, let's say most likely 2.75% per year to around $92k.

I suspect that the figure for married couple households is closer to what most people on this forum would regard as the relevant norm. So it's not crazy to say that numbers below $92k feel "low" in the sense that they're below-median, and many people aspire to an above-median lifestyle. I don't want to go overboard here: for a disciplined person in a LCOL area, $80k is plenty of money, and indeed people can do very well on much less. But median household stats can be very misleading in that they include single 28-year-olds living alone, widows, single mothers, etc. - not necessarily what comes to mind when people imagine what the median household income refers to.
Do you have stats on what the median household incomes are in retirement like the OP is considering here? That is the income when they are not paying payroll taxes, income taxes, and they tend to have much reduced expenses?

Admiral
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Re: Can you retire on $2M?

Post by Admiral » Fri Jun 22, 2018 9:29 am

dabblingeconomist wrote:
Fri Jun 22, 2018 9:13 am
Admiral wrote:
Fri Jun 22, 2018 8:07 am
I don't think that's true at all. Certainly it is possible. The median FAMILY income is what, 55k or something?
A good reference for this is Table 1 on page 6 of this annual Census publication (for 2016).

This table indicates that in 2016, median household income in the United States was $59k per year. But median income for family households, defined as households where two or more related people (by blood, adoption, or marriage) live together, was $75k. And median income for married couple households was $87k. From 2016 to present-day 2018, this number will surely have grown to over $90k, let's say most likely 2.75% per year to around $92k.

I suspect that the figure for married couple households is closer to what most people on this forum would regard as the relevant norm. So it's not crazy to say that numbers below $92k feel "low" in the sense that they're below-median, and many people aspire to an above-median lifestyle. I don't want to go overboard here: for a disciplined person in a LCOL area, $80k is plenty of money, and indeed people can do very well on much less. But median household stats can be very misleading in that they include single 28-year-olds living alone, widows, single mothers, etc. - not necessarily what comes to mind when people imagine what the median household income refers to.
Sure, I don't dispute that. However, the OP did not state it was for a family/household, OP said "could you" (which of course is unclear.)

My point was that a single person (or possibly a couple with no kids) COULD do it. Would I want to? Not a chance, but I don't live on 40-60k a year. Anything is possible in terms of a LCOL lifestyle, provided the necessities like food and shelter are small enough aspects of the budget. Also just because one COULD do something doesn't mean, from a financial perspective, that one SHOULD. It may be too risky.

There are plenty of single young people (or even not so young) who live on 40k salaries. Note, however, that there was a recent study that showed that someone earning the minimum wage could not afford to rent an apartment anywhere in the country.

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1210sda
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Re: Can you retire on $2M?

Post by 1210sda » Fri Jun 22, 2018 9:37 am

schrute wrote:
Thu Jun 21, 2018 10:41 pm
CaliJim wrote:
Thu Jun 21, 2018 10:38 pm
Is $2m total net worth or retirement portfolio value?
Do you own or rent (renters are subject to greater inflation risk than home owners?)
Portfolio value. Not including retirement accounts. Hypothetical.
This is interesting, "not including retirement accounts".

Many folks have the bulk of their nest egg in retirement accounts. So, are you saying that if you include retirement accounts you would have over $4million? Or are you saying that you have very little in your retirement accounts? Maybe nothing!

How you answer this could have a very big impact on your ability to retire as you desire.

1210

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Abe
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Re: Can you retire on $2M?

Post by Abe » Fri Jun 22, 2018 9:47 am

Could get a 2 million annuity (SPIA), 40 year old couple, pay out $87k a year for life for husband and wife. Of course this would not cover inflation. Another option, get a 1 million annuity, pay out $43,500 a year for life for husband and wife. Invest the remaining 1 million and withdraw 3% or $30k a year. Total income $73,500 a year.
Slow and steady wins the race.

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wander
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Re: Can you retire on $2M?

Post by wander » Fri Jun 22, 2018 9:51 am

schrute wrote:
Thu Jun 21, 2018 9:17 pm
In doing the math, it seems like if you're 40 with $2M you could possibly retire.

$2M @ 8% interest annually for 40 years (die at 100 years old) yields you $161,000 annually. You may not draw $161,000 to start, maybe you draw $60,000 and therefore grow your overall pot over 40 years. Then again, if you need to reliably draw from it 8% might not be reasonable enough.

Does this seem sound?
Yes I can as our expenses are about $50k annually with paid off house.

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HomerJ
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Re: Can you retire on $2M?

Post by HomerJ » Fri Jun 22, 2018 9:51 am

schrute wrote:
Thu Jun 21, 2018 9:17 pm
In doing the math, it seems like if you're 40 with $2M you could possibly retire.

$2M @ 8% interest annually for 40 years (die at 100 years old) yields you $161,000 annually. You may not draw $161,000 to start, maybe you draw $60,000 and therefore grow your overall pot over 40 years. Then again, if you need to reliably draw from it 8% might not be reasonable enough.

Does this seem sound?
8% is way too high an estimate.

4% of a 60/40 stocks/bonds portfolio is the standard safe withdrawal rate for 30 years (4% worked in the past during the WORST times, like Great Depression, the inflation of the 70s, etc).

Most of the time a 5% or 6% withdrawal rate worked as well. There were even a few periods where 8% worked. But I wouldn't count on 8%. Plan for 4%, and you're covered for the bad times, and if we get normal times or even good times, you can increase your spending.

Me, I plan to retire on $2 million. That will generate $80,000 a year (4%), and my house is paid for. That, along with Social Security) will be a ton of money.

If your expenses are $161,000 a year, you'll need to save more money or find a way to cut back on your expenses.
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HomerJ
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Re: Can you retire on $2M?

Post by HomerJ » Fri Jun 22, 2018 9:53 am

schrute wrote:
Thu Jun 21, 2018 10:41 pm
CaliJim wrote:
Thu Jun 21, 2018 10:38 pm
Is $2m total net worth or retirement portfolio value?
Do you own or rent (renters are subject to greater inflation risk than home owners?)
Portfolio value. Not including retirement accounts. Hypothetical.
I have no idea what you mean by not including retirement accounts. You want to retire, but not include retirement accounts?
Last edited by HomerJ on Fri Jun 22, 2018 9:59 am, edited 1 time in total.
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HomerJ
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Re: Can you retire on $2M?

Post by HomerJ » Fri Jun 22, 2018 9:59 am

ryman554 wrote:
Fri Jun 22, 2018 9:03 am
tibbitts wrote:
Thu Jun 21, 2018 9:22 pm
You can argue between a 2% and 3% SWR, and you have a reasonable chance of ending with nothing. Anything higher you have to use a lot of imagination to justify.
What data do you use to justify such small withdrawal rates?

3.3+% (or thereabouts) seems to be a perpetual withdrawal rate that takes you to, well, way past your death. I would have to use a lot of imagination to require a 2% WR. Trinity/et.al. supplies a lot of the data here.
This.

4% is a conservative number for 30 years. For longer than that, I'd probably agree 3.5% or 3.3% or even 3% might be more prudent.

2% is just crazy low. If one easily ended up with enough money to live off a 2% withdrawal, that's great. But there's no need to deprive one's self for years and years to achieve that goal.
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Always passive
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Re: Can you retire on $2M?

Post by Always passive » Fri Jun 22, 2018 10:04 am

gotester2000 wrote:
Fri Jun 22, 2018 3:19 am
Always passive wrote:
Fri Jun 22, 2018 12:17 am
totallystudly wrote:
Thu Jun 21, 2018 9:45 pm
Just move overseas for the win
The moving overseas idea to reduce costs is an illusion, Most countries are more expensive than the US. I live in Tel Aviv, a very expensive proposition, certainly much more than my original LA (and I lived in BH). Although having a national health system (by the way, vastly superior than what I remember from LA, not only in cost, but also in quality), everything else including real estate is absurd.
There are many countries where one can live decently on < 20 k USD / year.
Which countries would they be?
I suggest you use Vanguard FTSE Developed Markets ETF (VEA) to pick one.

TonyDAntonio
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Re: Can you retire on $2M?

Post by TonyDAntonio » Fri Jun 22, 2018 10:04 am

I hope one can cause that's what my wife and I are attempting in the SF Bay area. No debt, small pension, SS on the horizon all help. Can't go crazy though.

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