Is $10 Million the New Baseline for a Care-Free Retirement in America?

"Traditionally, achieving millionaire status was considered to be wealthy, and many people felt that if they had $1 million, they'd be in really good shape to retire. Today, however, we know that a million-dollar nest egg isn't really enough for most people to have financial security as a senior. At a safe 3.7% withdrawal rate, a nest egg of $1 million would provide only $37K to live on - which isn't exactly going to buy a care-free retirement even with Social Security to supplement it."

"When you're searching for retirement security, the key number that you must look at is the income your investments can produce at a safe withdrawal rate. The withdrawal rate is the rate at which you take funds out of your investment accounts. You don't want to take money out too soon or too fast. Otherwise, you'd risk not having enough invested to continue earning returns and to keep your account from dwindling to $0."

A $1 million nest egg at a 3.7% withdrawal rate provides about $37,000 annually, which is insufficient for most retirees even with Social Security. Financial planners have moved from a 4% rule to a safer 3.7% withdrawal rate because expected future returns are lower and lifespans are longer. A $10 million portfolio using a 3.7% withdrawal rate would generate roughly $370,000 in pre-tax income, substantially increasing retirement cash flow. Taxes will reduce spendable income, and Social Security can supplement investment income. Members of the FIRE movement often target $10 million, but individual needs and tax considerations still determine adequacy.

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