Think $3 million is a solid retirement fund? Suze Orman has a reality check for you.
Speaking on the “Afford Anything” podcast, she explained why even this seemingly hefty amount might leave you struggling in retirement – especially if life throws a few curveballs your way.
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Orman was asked whether $3 million, paired with a conservative 3% withdrawal rate, could fund a secure early retirement. Her response? A flat-out no. She didn’t even hesitate to poke holes in the idea, calling $3 million “far from enough” for the unexpected costs life can throw at you.
The host, Paula Pant, asked Orman, “What would be a safe amount at which a person can say, ‘All right, at this point, given the size of my portfolio, I’m comfortable enough that if I did get hit by a bus, I would be fine.’?”
Orman answered, “It would have to be in the millions.” Pant, wanting a clearer answer, pressed further: “How many million?” That’s when Orman started doing the math – it wasn’t pretty.
“It depends where you live, what your expenses are,” Orman said. “Do you own your home outright? So, what are your expenses? But just think about it logically.”
And then she did exactly that: broke it down, line by line.
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“Let’s say you need help. Remember, I took care of my mother and it cost me, like I said, $30,000 a month. $30,000 a month,” Orman emphasized. “So, you’re talking about, very possibly, for full-time help and everything – because good luck getting insurance and things to pay for it now – you’re talking about maybe $300,000, $400,000 a year.”
If that wasn’t sobering enough, she added: “Now you have other expenses – food and everything. Let’s just say you need another $100,000 a year to live. So now you’re at $350,000 a year after taxes.”
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To generate $350,000 annually after taxes without touching your principal, Orman said you’d need a portfolio yielding at least 5%. That means a whopping $10 million in assets, if not more.
