Could you live 40 years on half a million in stocks?

Question

If you got 12 pecent return PA?

One person, renting a sh)tty apartment. No kids. Writer/blogger, bit of travel each year

Answer 1

If dividends were constant & guaranteed, that's about 60K per year, disregarding inflation.

Unrealistic, in my opinion.

Your minimum living cost as outlined may require about half that.

500K alone would give you about 12,500 K per year, without any interest.  Again inflation/buying power is the killer.

Most especially travel/fuel costs.

Medical is another killer.

I'm retired.  Medicare and supplement = $3,900 PA, increases every year.

We haven't considered SS when/if applicable.

Answer 2

What guarantees the 12% return for the next 40 years?

So, if you bought Google's stock at the IPO rate, then may be 400 years of spending if you have a very decent broker to watch after your porfolio;

or else, sorry to say, who knows for sure that you'll have enough money to spend during the next 4 years?

One great thing about your equation: you have LOW burning rate.

Other factor (s) is too uncertain to say.

Answer 3

You are most optimistic about getting the 12 percent. Its all about that percent isnt it?  I doubt anyone can answer but the way the US is going Im hoping that your stocks are foreign

Answer 4

you would have to sell the stock to actually have the money to spend - definitely wouldn't last 40 yrs, unless you lived like a hermit with no modern conveniences out in the wilderness-depends on what your standard of living is

Answer 5

If you have 500K and put it into CD's at 3% interest then you would make 15K per year on the interest.    If you divide the 500K by 40 years and take out the money each year without investing it, you would get 12.5K per year.  

I would dearly like to know where you can get a safe 12% return each year?  If you could get a safe, year over year 12% return then the money would double every 6 years.  If that were the case, I would leave the money in the investment and not touch it for 12 years because then I would have $2 million.

Answer 6

12%?  That seems rather high...

Regardless.  If you asked me that question, I would ask you if you can live on $20,000 a year for the next ten years...if the answer is "definiately," then my answer as an advisor is "yes."

My math would work like this:

10 years at $20,000 pre-tax income

10 years at $30,000 pre-tax income

20 years at a "retirement" income of $50,000.

If you need to suppliment your income the time to do it is now -- when you are younger and have the most flexibility.  This also gives you maximum time to accumulate a retirement nest egg.

(Retirement nest egg, here, means "money I can spend when I cannot earn income")

I am assuming a 12% annual return on investment; which is high, even before taxes.  Good financial planners tend to use 10%.  Conservative planners (like me) tend to use 8%.