Anonymous
Anonymous asked in Business & FinanceInvesting · 1 month ago

Why do people say a million $ is not enough to retire on. Invest it in a diversified portfolio that grows at least 1 percent per month.?

If you do that, you'll make $120,000 a year off that million, without ever touching the principle.

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  • 1 month ago

    4% Rule ($40,000 income per year on 1 million not $120,000) and thanks to low interest rates that rule really should be a 3% Rule. 

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  • kswck2
    Lv 7
    1 month ago

    A 12% profit per year is better than most other investments. And if it is compounded, even better.

  • 1 month ago

    1. It's unusual for a portfolio to grow 1% a month (12% a year). Stock prices typically rise an average of about 5% per year; dividend yields currently average about 2% a year. So you shouldn't expect more than 7% (the often reported historical figures of about 11% are based on investments made back when dividend yields were around 4%). And it's not at all unusual for the portfolio to shrink for several years; it doesn't grow every year.

    2. Even it you do make $120,000, you'll have to pay tax on that $120,000.

    2. There will come a time, eventually (don't now how soon) when, due to inflation, $120,000 a year won't be enough to live on.

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  • Anonymous
    1 month ago

    Because it's not.

    I intend to live 30 years in retirement.   And in 30 years, that $120k/year will have the buying power of about $40k/year due to inflation.

    12%/year is unrealistic.   The market average over the past 100 years is 10% year and that's  if you're fully invested in stocks which many retired people aren't because they can't  handle the market volatility.

    If you'd been investing for several decades, you'd have the experience to know it's perfectly normal for one's investments to go down by 30% or 40% in one year.   Of course the market goes up more than down over time, but it does not go up in a straight line.    So when one's $1 million is now 600k and they have to take out 120k for two years in a row while waiting for the market to recover, their 600k is now 360k.    And when the market regains it's 40%, that 360k is now 504k.    So where's that million again?

    3-5 million to retire comfortably, dear.   And that's if you're over the age of 40.   If you're 25, plan on 5-7 million.  I'm seriously not kidding.

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  • Anonymous
    1 month ago

    Very few can grow money at 1% per month.  And it shows how little you know about the real world.  And, you have 30+ years of frugal saving and investing before you get anywhere near $1 million. And probably never.

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  • A.J.
    Lv 7
    1 month ago

    Investments go up and down in value. 1% per month is not likely at all.

    • Some of my investments increase at 1% per week, thats counting the ups and downs.

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  • Bryce
    Lv 7
    1 month ago

    The US stock market is down about 13% year-to-date, so it is not growing at 1% per month.  Many think the stock market will fall more.  Inflation is so low the stock market might not return what it has in the past.  But I think $1 million would be enough to retire on.  Withdrawing $120,000 per year would be too much, unless you expect to have a short life.  $60,000 per year would be better.

    • tiescore
      Lv 6
      1 month agoReport

      No $60,000 will deplete your capital, in a diversified portfolio its now more like 3%

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