"A million may look like a lot, but it is actually the minimum amount today. Retiring with anything below that will require you to cut corners and is quite risky. If you retire with, say, $700k and pull out 4%, that's $28k a year before Uncle Sam takes his slice. After tax, you're looking at less than $2k a month. There's health insurance, car insurance, and you're unlikely to have enough for the nitty-gritty."
"Now $1 million gets you $40k a year, but it's still not future-proof. Can that $40k survive an inflation wave like the one in 2022? In the next few decades, you're looking at multiple such inflation waves. You need to invest and wait, preferably in exchange-traded funds (ETFs) and stocks. Holding cash alone will erode your purchasing power. Thankfully, the Redditor has one more decade on hand, and this gives them the leeway to a much more comfortable retirement."
Median net worth for a 50-year-old is roughly $247,200, so a $1 million balance provides a substantial head start toward early retirement. Holding cash alone is risky because inflation and taxes erode purchasing power; withdrawing 4% from less than $1 million yields limited after-tax income that may not cover essentials like health and car insurance. Investing in a blended portfolio of low-cost ETFs and proven companies improves growth prospects over the next decade. A ten-year investment horizon allows more leeway to grow assets while gradually shifting allocation to reduce risk approaching retirement.
Read at 24/7 Wall St.
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