Living on $600K a Year in Retirement—Are We Truly Prepared?

Most people do not have an income anywhere near $600K, even when they are working — much less have dreams of being able to build a retirement nest egg that will produce so much money for them to spend each year.

One Redditor, however, really wants to be able to increase his spending to $50K per month. He’s aware this goal is pretty ambitious, but he’s also hoping that he can achieve it since he’s been very frugal throughout his life, and he wants to truly enjoy retirement while living in a very high-cost-of-living area.

So, is it feasible to generate $600K as a retired senior with no paychecks coming in, and is the original poster (OP) prepared to do it? Let’s find out. 

What would it take to create $600,000 in reliable retirement income? 

First things first: Let’s look at what’s involved in generating $600,000 in retirement income.

You’ll need to make sure you maintain a safe withdrawal rate to do it, so you have to have a very large nest egg. Exactly how large depends on what you want that withdrawal rate to be. Traditionally, the rule of thumb was that you could withdraw 4% of your account balance in the first year. While this amount has been revised down a bit by experts concerned about longer life spans, let’s stick with 4% just to keep things simple.

If you plan to follow the 4% rule, you’ll multiply your desired income amount by 25 to see how much you need invested. To produce $600K in income, this means you’d multiply $600,000 by 25 and would discover you need $15 million invested to live a lavish retirement with $50,000 per month to spend. 

Is the poster on track to hit his goal?

After you know your target number, figuring out whether you can achieve it is just a matter of simple math. You need to look at how much you have invested now, how long until you need your retirement income to start supporting you, and how much you must invest in order to reach your goal number by the desired date. 

In this case, the poster has $3.8 million in taxable liquid investments; $3 million in investment real estate; $1.3 million in a Roth account, private company investments valued at $2.7 million, a $10 million stake in a big private company, and $3.6 million in personal real estate. Since he’s not going to live off his personal real estate, he would need the rest of his holdings to add up to $15 million. 

If he can sell the investments he has in private companies, then he’s pretty much at his goal target already, and $600K in annual retirement income is his. If he can’t, then he’s going to have to work harder to build his liquid networth up — which could mean investing a significant amount each month, depending on how big his shortfall is and how fast he wants to retire. 

The OP may want to start looking into offloading these investments into something safer sooner rather than later, since he’s already pretty close to where he wants to be financially so there’s very little benefit to taking on such a huge amount of risk when he’s got himself in a position where he’s set up for life.

A financial advisor can help him make a strategic plan for how to rebalance his investments so he has his $15 million allocated appropriately. If it turns out his other assets fall short of what he’s expecting, his advisor can also help him regroup and ensure that he’s making the right choices to get on the path to his dream retirement. Since he’s off to a good start, his hopes are within reach — he just needs the right advice to get over the finish line and start enjoying his future.