Can I Retire with $4 Million?

• A $4 million nest egg might sound like a lot of money, but it might be insufficient to really provide the kind of retirement lifestyle you want.
• Your portfolio need to take into account your lifestyle, what you're spending today, the taxes you'll pay, and the kind of retirement lifestyle you want.
• A $4 million nest egg might sound like a lot of money, but it may not be enough to provide the kind of retirement lifestyle you want.

A $4 million nest egg might sound like a lot of money, but it might be insufficient to really provide the kind of retirement lifestyle you want. Your portfolio need to take into account your lifestyle, what you're spending today, the taxes you'll pay, and the kind of retirement lifestyle you want.

How Much Money Do You Need to Retire?

It's often said that money can't buy happiness, and that's particularly true of retirement.
However, financial security does give you the freedom to do what you want, when you want. Financial freedom allows you to pursue your passions while providing you with peace of mind.
If you're like most Americans, you're likely underestimating your retirement needs. According to the 2019 Retirement Confidence Survey, 59% of respondents said they'll need $1 million or more to retire.
The $1 million figure is nearly twice what most financial advisers would recommend. For example, most financial advisers consider 25 times your annual expenses as the minimum needed to retire comfortably.
According to the 2019 Retirement Confidence Survey, the median amount of retirement savings among U.S. households is $120,000.

How Much Money Do You Need to Retire on $4 Million?

The answer to this question is complex, but let's start with the basics.
If you withdraw $4 million over 30 years, and you live to age 100, you will have about $1.3 million in savings left over. If you withdraw $4 million over 40 years, you will have about $1.6 million left over.
If your risk tolerance is higher, you could withdraw $4 million over 10 years, leaving yourself with about $9.4 million.

Income and Expenses

The first thing you must determine is how much income you need, and then how much you need to save each month to get there. This calculation is based on your desired lifestyle in retirement.
Let's assume that your $4 million nest egg will produce $100,000 of income per year. You also assume that your annual living expenses in retirement will be $80,000.
You will still need to save $40,000 per year in addition to your investment income. This $40,000 represents the gap between your income and your expenses.

Lifestyle Choices

You can retire with a $4 million nest egg by spending $50,000 a year, or $3,333 a month. However, that is a large amount, and you may need to adjust your lifestyle.
Let's say, for example, that you only desire $2,000 a month to live on in retirement. That leaves you $2.5 million to reinvest, grow, or spend.

Taxes

The $4 million, or $40,000 per month, figure assumes that the investor doesn't have to pay any taxes, which is unrealistic. You could, however, avoid income tax by converting the $4 million into qualifying long-term capital gains, which are taxed at 15%.

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Inflation

To determine how much money you need to retire, you need to know two things:
The rate of return you expect to earn on your money

Inflation

Let's say you're 25 and plan to retire at 65. You earn a solid 3% annual return and plan to live in Hawaii, where inflation has averaged 3.2% per year since 1990.
You live in the lower-48 states and plan to retire in Hawaii. You earn a solid 3% annual return and plan to retire in Hawaii, where inflation has averaged 3.2% per year since 1990.