"At a 4% withdrawal rate, $1.5 million generates $60,000 annually before taxes-roughly in line with $66,976 per capita disposable income nationally. That rate, historically supported by 30-year retirement horizons, assumes a balanced portfolio earning returns above inflation over time. Sequence-of-returns risk is where things get complicated. Retire into a bear market and start withdrawals immediately, and you lock in losses before the portfolio can recover."
"Taxes are the second factor. If your $1.5 million sits entirely in traditional IRAs or 401(k)s, every dollar withdrawn is taxed as ordinary income. A $60,000 withdrawal could push you into the 22% federal bracket, reducing your net to roughly $46,800 after federal taxes. Roth conversions before required minimum distributions begin at age 73 can reduce this drag, but the window closes quickly."
A $1.5 million portfolio can generate roughly $60,000 annually at a 4% withdrawal rate before taxes. The sustainability of that income depends on withdrawal rate, market sequence-of-returns, and tax treatment of accounts. Early withdrawals during market downturns lock in losses and undermine longevity of savings. Holdings concentrated in traditional IRAs or 401(k)s create higher taxable income when withdrawn, reducing net spending power. Roth conversions before required minimum distributions can lower future tax burdens. A diversified equity-and-fixed-income portfolio, a withdrawal target between 3.5% and 4%, and spending taxable assets first improve outcomes. Part-time work for a few years can ease early withdrawal pressure.
Read at 24/7 Wall St.
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