Million Dollar Portfolio

This is one of the single most important questions you can ask yourself. Are you ready for retirement? I mean really ready, not just ready to stop working. Do you have everything in order such that if you could stop working today, you wouldn’t have to worry about anything financially until the day you leave this earth?

You know you can put a dollar figure on retirement? For the average American citizen, the cost of retirement is about $10 million dollars. Oh did that surprise you?

First of all, let’s consider if you had $10 million in the bank. With that much money you are going to be earning interest. Let’s say the money is in an average savings account which pays 2% annually. You now have a taxable income of $200,000.00 the first year. You owe taxes on $200k in income at the end of the year. Your tax rate at that income level is 38%. Your 200k is now only $124k. I know I said only…because maybe you still have a housing payment or car payment(s), medical, dental, life insurance premiums…you see where I’m going with this?

Depending on your lifestyle and how you have managed your money up to this point, that $10 million sitting in the bank has to be carefully managed so that you can live the kind of lifestyle you want. The earlier you retire, the more money you are going to need because unless you have other sources of income, your bread and butter is interest.

In this country, people tend to consider $1 million to be success. If you can attain $1 million in cash in the bank then you are successful. At my current salary, I’ll have earned over $1 million in 12 years. That doesn’t mean i’ve kept it…of course not, that’s merely living expense and the more you make the more you tend to spend. So the idea of retiring on the pension you get from work or your 401k just isn’t good enough anymore.

Setting a goal, and a monetary amount to have at retirement is important because it gives you an idea of what else you need to be doing to reach that goal. If you don’t want to have to work at all during retirement, living only off the interest of your money then you need A LOT of money to be able to do it and remember, the more you make, the more tax you have to pay. Anyone still against a flat tax?

I didn’t think so.

More information on federal tax rates (US only).

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