"For most, it goes without question that $3 million is enough to fund a retirement that could span another five decades. However, for someone who spends every dollar that comes in (and then some), perhaps $3 million wouldn't be enough to keep up. Of course, the same could be said for just about any amount of money. If one is going to draw down well north of 4% (let's say 8% or more), there's a risk of running out of money."
"For the average American lifestyle, $3 million will more enough to get the job done, regardless of one's age if one goes by the standard "4% rule," which entails withdrawing 4% of the nest egg in any given year, or something more conservative (let's say the 2-3% rule). In this piece, we'll explore the best ways for a young overachiever to put a $3 million sum to work."
"Based on the 4% rule, one would be able to draw down $120,000 before taxes in any given year. That's a generous amount that can fund a fairly comfortable retirement. If, like many Americans, one's annual expenditures are far lower, a more conservative withdrawal rate of 2% could be adopted to allow one's invested principal to keep growing in any given year."
$3 million typically funds a comfortable early retirement if withdrawals follow conservative rules and lifestyle spending remains moderate. A 4% withdrawal yields $120,000 before taxes annually, which is generous for many households. Higher withdrawal rates like 8% increase the risk of depleting principal and may require a larger nest egg to sustain luxury spending. Adopting a lower withdrawal rate (2-3%) allows invested principal to grow and reduces longevity risk. Young retirees should position assets to balance income needs, growth potential, and risk tolerance to preserve capital across a multi-decade retirement.
Read at 24/7 Wall St.
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