One-third of Americans with at least $1M in investable assets say they worry about outliving their savings — how you can improve your odds and avoid overplaying your hand (2024)

FAQs

How to live off interest of 1 million dollars? ›

Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.

A $2 million nest egg can provide $80,000 of annual income when the principal gives a return of 4%. This estimate is on the conservative side, making $80,000 a solid benchmark for retirement income with this sum of money.

According to a recent Charles Schwab survey, Americans believe it takes a net worth of $2.2 million to be considered wealthy — “But among the 48% of Americans who feel wealthy today, the average net worth is $560,000.”

Key takeaways: The typical American making $40,480 a year needs at least $826k invested with a 4.9% annual return to live off interest alone. Estimate how much you need invested to live off interest with the formula: Annual income / Annual interest rate = Savings goal.

Will $1 million still be enough to have a comfortable retirement then? It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.

Achieving retirement before 50 may seem unreachable, but it's entirely doable if you can save $1 million over your career. The keys to making this happen within a little more than two decades are a rigorous budget and a comprehensive retirement plan.

The Bottom Line. At age 55 with $2 million in the bank, you are well positioned to retire early. Just make sure that you anticipate the complicated issues around early retirement, including long-term inflation hedges and health insurance.

It all depends on your lifestyle and the strategies you follow. If you have $2 million and want to retire at age 60, it is important to start with your desired lifestyle and how much that lifestyle will cost you. This will help determine the amount of money you should have in your accounts.

Retiring at 40 with $2 million is possible, though it is a lofty goal, especially if you don't have a large inheritance or some other windfall. But it can be done if your income is high sufficient and if you are aggressive with your savings strategy.

$1 million

“It doesn't mean your life is easy or that you're Jeff Bezos or Bill Gates, but it does mean that you have a level of wealth that most people can only dream of attaining.” Vanguard, the investment management company, defines $1 million in investments as high net worth.

What is a good net worth for a person? ›

Net worth is the difference between the values of your assets and liabilities. The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.

If you're planning to live frugally in retirement, spending under $50,000 a year may sound achievable, but it's not a realistic target for every couple. For one thing, it's all too easy to underestimate what you'll spend in retirement if you're not making a detailed budget.

About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more. Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.

Here's how much $1,000,000 will earn in one year in different scenarios: In a 4% high-yield savings account: $40,000 in interest. In the stock market: $96,352 in returns. In real estate: $108,000 in returns.

Living off a $1 million portfolio requires a strategic balance between securing steady income and managing investment risks. While some may find comfort in the lower returns yet higher security of Treasury bills, others might lean toward the potentially higher but more variable returns of index funds.

Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.

As an example, with an interest-focused investment of R1 million, generating a return of 6.7% over 12 months will mean a return of R67 000 for the year. But, consumer price inflation is at 6.3% during that same period. Living off the interest means your capital amount will remain relatively fixed.