Americans are all interested in that little $1.5 million retirement nest egg: living comfortably with golf trips and luxury cars.
But “Shark Tank” tough guy Kevin O’Leary says you have to hold on tight: You can retire on just $500,000, which is a big difference from the average. $5 million he suggested it last August.
The key, Mr. Wonderful says, is to invest wisely and perhaps cut back on your spending once you’ve left work for good.
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“You can live with half a million dollars in the bank and do nothing else to make money,” O’Leary said. “Don’t invest in your brother’s bar. Or a bowling alley, or a bar, or any of that crap, you’ll lose your money.”
But it depends on what kind of lifestyle you want. According to a study by Northwestern Mutual, most Americans feel they need close to $1.5 million for retirementThis represents a 53% increase since 2020 and a 15% increase over last year.
By O’Leary’s logic, you can earn about 5% with fixed income without taking any risk, but if you only have $500,000, that’s $25,000 a year. If you’re willing to tolerate the volatility, you can invest in stocks, which will earn you up to 9%, or about $45,000 a year.
If you want a secure retirement, the 4% rule is widely used. This rule suggests that retirees can withdraw 4% of their retirement savings each year for 30 years, adjusting the amount each year to keep up with inflation. Developed by financial advisor Bill Bengen, it draws on historical data analyzing stock and bond returns, with the goal of ensuring retirees don’t run out of money.
Tendency: Can you guess how many people retire with a nest egg of $5,000,000? – How does it compare to the average?
Let’s take real-world spending as an example. According to the Bureau of Labor Statistics, the average retiree over the age of 65 spends about $52,141 per year. Rounding up to be safe, you’d need at least $1.3 million in savings to generate $53,000 per year using the 4% rule. That means if you had $500,000 in savings, as O’Leary suggested, withdrawing 4% per year for 30 years would only allow you to safely spend $20,000 per year.
No matter how much you have saved for retirement, consulting a financial advisor can be important to achieving your financial goals. A financial advisor can provide personalized advice that fits your situation, aspirations and risk tolerance. Whether it’s building an emergency fund, planning for retirement, investing in the stock market or saving for a home, a financial advisor can help you navigate the complexities of financial planning, ensuring you’re on track to achieve your personal version of financial success.
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This item Kevin O’Leary Says You Can Survive On $500,000 And “Do Nothing Else To Make Money” originally appeared on Benzinga.com
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