Do you think $3 million is a solid retirement fund? Suze Orman has a reality check for you.
Speaking on the ‘Afford Anything’ podcast, she explained why even this seemingly hefty amount of money can get you into trouble in retirement, especially if life throws a curveball at you a few times.
Don’t miss:
Orman was asked if $3 million, combined with a conservative 3% withdrawal rate, could fund a safe early retirement. Her response? An outright no. She didn’t even hesitate to poke holes in the idea, calling $3 million “far from enough” for the unexpected costs life can throw at you.
The host, Paula Pant, asked Orman, “What would be a safe amount where someone could say, ‘Okay, right now, given the size of my portfolio, I feel comfortable enough that if I were to get hit with and a bus, then everything will be fine.’?”
Orman replied, “It should be in the millions.” Pant, wanting a clearer answer, pressed further: “How many million?” Then Orman started doing the math – it wasn’t pretty.
“It depends on where you live and what your expenses are,” Orman said. “Do you own your home completely? So, what are your expenses? But just think about it logically.”
And then she did just that: she broke it down line by line.
Popular: Deloitte’s Fastest Growing Software Company Partners with Amazon, Walmart & Target – You can still get 4,000 of the pre-IPO shares for $1,000, for just $0.25/share
‘Suppose you need help. Remember, I was taking care of my mother and, like I said, it cost me $30,000 a month. $30,000 a month,” Orman pointed out. “So you’re probably talking about full-time help and stuff – because good luck getting insurance and things to pay for it now – you’re talking maybe $300,000, $400,000 a year.”
As if that wasn’t sobering enough, she added, “Now you have other expenses: food and stuff. Let’s say you need another $100,000 a year to live. So now you’re at $350,000 a year, after taxes.”
Trending: Can you guess how many people retire with $5,000,000 in savings? The percentage may shock you.
To generate $350,000 annually after taxes without sacrificing principal, Orman said you need a portfolio that yields at least 5%. That means as much as $10 million in assets, if not more.
