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 might leave you struggling in retirement – especially if life throws a couple of curveballs your way.
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Orman was asked whether $3 million, paired with a conservative 3% withdrawal rate, could fund a secure early retirement. Her response? A flat-out no. She didn’t even hesitate to poke holes in the concept, calling $3 million “removed from enough” for the unexpected costs life can throw at you.
The host, Paula Pant, asked Orman, “What could be a protected amount at which an individual can say, ‘All right, at this point, given the dimensions of my portfolio, I’m comfortable enough that if I did get hit by a bus, I could be positive.’?”
Orman answered, “It will need to be within the hundreds of thousands.” Pant, wanting a clearer answer, pressed further: “What number of million?” That is when Orman began doing the maths – it wasn’t pretty.
“It depends where you reside, what your expenses are,” Orman said. “Do you own your own home outright? So, what are your expenses? But just give it some thought logically.”
After which she did exactly that: broke it down, line by line.
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“For example you wish 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, you are talking about, very possibly, for full-time help and every thing – because good luck getting insurance and things to pay for it now – you are talking about possibly $300,000, $400,000 a 12 months.”
If that wasn’t sobering enough, she added: “Now you’ve other expenses – food and every thing. Let’s just say you wish one other $100,000 a 12 months to live. So now you are at $350,000 a 12 months after taxes.”
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To generate $350,000 annually after taxes without touching your principal, Orman said you’d need a portfolio yielding a minimum of 5%. Meaning a whopping $10 million in assets, if no more.