Is it possible to retire with a net worth of only $9.4 million dollars?

The Fear Of Running Out Of Wealth Doesn’t Go Away With A Larger Nest Egg

Photo by Luke Schobert on Unsplash

I saw a legitimately insane post on Reddit a few weeks ago that really illustrates the potentially crippling mental aspect of learning how to retire…even when the math seems obvious.

Looking At The Math

Anonymous is a 49 year old who has accumulated approximately $9.4 million in cash.

Let’s break down their situation:

1. $5.7 million in balanced low cost equity funds with US and large cap/S&P500.
2. $1.4 million is in money markets, cds, bonds and tresuries.
3. $500,000 in a rental property.
4. $1.8 million in primary residence equity.
5. Current expenses are about $160,000 per year.
6. They have 2 teenagers.
7. They are targeting a 3.25% withdrawal rate, after selling their home and downsizing to a 1 million dollar residence.

So, Why Are They Worried?

Photo by Michael Heise on Unsplash

Believe it or not, the title of the anonymous user’s post was “Can I retire?”

The short answer is: Yes, they absolutely can retire. But the more important question is: Why doesn’t it feel that way to them?

Now, after downsizing their home, they would have approximately $8.4 million in investable assets ($9.4M — $1M from home downsizing). At their very modest target of a 3.25% withdrawal rate, this would generate $273,000 annually — almost double their current expenses of $160,000.

Even in a worst-case scenario where:

• Both teenagers need full college funding
• Healthcare costs increase significantly
• They maintain their current lifestyle
• The market experiences several downturns

Their portfolio would likely (easily) sustain them comfortably for multiple decades…