How much do I need to retire?

First, ask yourself?  How much is enough for me?  Would a net worth of $1million be enough?   How about $2.5 million?  Maybe $5.5 million?  Or how about $10 million?  Let break down more about what lifestyle you can live with each net egg.

1 Million Dollars in net worth!

A million dollars earning 10 percent yields $100,000 in annual income.  Take away about $35,000 for federal, state, and local taxes.  That leaves you with $65,000 in cash.  This amount will vary based on your state and local taxes, and the current federal income tax rates and deductions.  But wherever you live and whoever your accountant is you should be able to achieve $65,000 in take home with a $100,000 salary.

What kind of lifestyle can you buy with $65,000?

Let’s look at housing first.  To make things easy we will assume you stick to a good rule of thumb and stick to a 25% rule for housing expenses.  25% of $65,000 is about $1,350 per month.  Depending on where you live this could either be a decent rental unit or a home.

After housing, you have about 4,000 left over for other expenses.  You should figure in about 30% for utilities, upkeep, and maintenance.  That’s 400 dollars. Allocate another $900 for food.  This could be larger based on the size of your family.  Transportation is another expense figure in around $600 a month for two reasonably priced vehicles.

After these expenses, you have about $2,000 left over for things like travel, entertainment, dinners out, and other miscellaneous expenses.

So a million can get you pretty far, but not as far as it used to.  So what about the next level?

2.5 Million Dollars in net worth!

So you are not satisfied with the just a million dollar lifestyle.  Maybe your family is larger or planning on growing soon.  Maybe you want to be a local big shot.  Well if you target a net worth of the $2.5 million dollar range and assume the 10 percent ROI and the same 35% tax bracket.  You would have 160,000 in after-tax disposable income.

If you continue to allocate 25% to housing, that’s about $3,300 a month.  Now we are talking a nicer house in the suburbs in most of the country.  You might want to live in the Midwest to stretch those housing dollars a little farther.  A place in Michigan or Indiana would be at the higher end of the housing spectrum.

We would still assume 30% on utilities, upkeep, repairs, and maintenance which is $12,000 a year.  For food, clothing, and other miscellaneous spending would be in the $13,000 a year.  The more you pay for your home the more you will pay for other items.  It’s human psychology, keeping up with the Jones.  There are a lot of names for it, but it’s been true for the last forever.

After all of the above we have about $95,000 left to spend on the finer or more fun things in life.   Let’s look at what some of those things might be.

  • 10-day Hawaiin vacation for two:                             $11,000
  • 10-day London Vacation for two:                              $11,000
  • 52 upscale dinners at $200 each:                             $10,400
  • 52 dinners at a local restaurant at $100 each              $5,200
  • Lease Upgrade on two BMW:                                    $14,400
  • Country Club Party for 50 Friends:                              $7,500
  • Christmas Shopping Spree:                                        $3,000
  • Golf Club Memberships for two:                                  $5,000
  • Presents for friends and relatives                                $4,000
  • 52 Spa Treatments                                                    $5,200
  • 10% Donations to Charity                                          $9,500
  • Miscellaneous “Where did the money go”                     $8,800

 

Total                                                                                      $95,000

These expenditures are just to give you an idea of what you can actually get for the money.  Overall you can do a lot with 2.5 million dollars and a return of 10 percent per year.  This income will let you live anywhere you want and have the lifestyle that is truly spectacular.  If you are like me though and have little kids at home you will need to cut out some of the vacations and apply that to private education.  You would need to budget anywhere from $5,000 to $30,000 a year per kid depending on what your area of the country has for options.  Or if College is on the horizon $30,000 a year might just be the beginning.

 

Let’s step it up a notch and talk about 5.5 Million Dollar Nest Egg!

In the 5 to 6 million dollar range of net worth, what could your lifestyle look like?

At a 10% per year return, you would have $550,000 a year or $357,500 after-tax disposable income.  At this level, we would deduct $90,000 a year for housing plus another $30,000 for upkeep and utilities.  We are talking a nice house with that kind of cash.

 

We would allocate $27,500 a year for food, clothing, and miscellaneous expenditures.  That leaves us with $210,000 a year to spend on discretionary items.

How could you spend that?

  • 10-day Hawaiin vacation for two:                             $11,000
  • 10-day London Vacation for two:                              $11,000
  • 10-day Ireland Castle Trip for two:                            $15,000
  • 2 four-day weekends in New York:                            $12,000
  • 52 upscale dinners at $500 each:                              $26,000
  • 52 nice meals at $200 each:                                     $10,400
  • 104 dinners at a local restaurant at $100 each           $10,400
  • Lease Upgrade on two BMW:                                    $14,400
  • Country Club Party for 100 Friends:                           $14,000
  • Christmas Shopping Spree:                                        $5,400
  • Golf Club Memberships for two:                                 $5,000
  • Presents for friends and relatives                               $4,000
  • 100 Spa Treatments                                                 $10,000
  • 10% Donations to Charity                                        $21,000
  • 2 Season Tickets to NFL team:                                   $8,000
    • Tennis Club Membership rot two:                    $5,000
  • 2 used Snowmobiles/JetSki:                                       $6,000
  • 120 Sessions with a Personal Trainer:                       $11,400
  • Miscellaneous “Where did the money go”                   $10,000

 

Total                                                                                    $210,000

 

Living this way takes a lot of effort and planning.  You might need to hire an assistant just to handle all your reservations for travel and eating out.  To keep up this spending level you would need to be eating out at least four nights a week, and all your free time would be dedicated to golf, tennis, spa days, and sporting events.  A simple camping trip for the weekend probably would set back your spending habits and cause you to save more.  Good problems to have.  So when you are thinking about how much money you want or what kind of lifestyle you want to live.  Most people would be very well off at these levels, and would probably begin looking for more fulfilling pursuits instead of self-indulgence.  But it’s fun to think about what is possible.  Especially if you are now just trying to meet the payments on your credit card each month.

Most people at this point say yes a goal of between $2 and $6 million is a perfect lifestyle for me.  But let us look at 1 more level and start talking about what the top 1% lifestyle can look like.

 

$10 Million Dollar Lifestyle.

The ultimate I can do anything I want within the law money.  At 10% we have $1,000,000 in income and after 35% in taxes to our good friend Uncle Sam we have $650,000 to spend on our lavish lifestyle.

Continuing to spend 25% of our income on housing is more difficult.  $162,500 a year plus $47,500 for upkeep and utilities we are looking to spend 17,000 a month.  I think you could find a nice place to live anywhere in the country for that.

If we keep spending the same percentages per year on ourselves we would be spending $50,000 a year on food and clothing.  We are going to be spending a lot of money on custom suits and jewelry from Tiffanys.

We are left with $390,000 to get rid of and contribute back to the economy.

  • 10-day Hawaiin vacation for two:                             $11,000
  • 10-day London Vacation for two:                              $11,000
  • 10-day Ireland Castle Trip for two:                            $15,000
  • 2 four-day weekends in New York:                            $12,000
  • 52 upscale dinners at $500 each:                              $26,000
  • 52 nice meals at $200 each:                                     $10,400
  • 104 dinners at a local restaurant at $100 each:          $10,400
  • Lease Upgrade on two BMWs:                                   $14,400
  • Country Club Party for 100 Friends:                           $14,000
  • Christmas Shopping Spree:                                        $5,400
  • Golf Club Memberships for two:                                  $5,000
  • Presents for friends and relatives:                               $4,000
  • 100 Spa Treatments:                                               $10,000
  • 10% Donations to Charity:                                       $39,000
  • 52 Weeks of Fresh Flowers:                                       $5,000
  • TV in every room:                                                     $9,000
  • 2 Season Tickets to NFL team:                                   $8,000
  • 2 Season Tickets to MLB team:                                   $8,000
  • Smart Home Technology:                                          $10,000
  • Home Theatre System:                                             $11,400
  • High End Tablets/Notebook computers:                      $10,000
  • Matching Tiffany diamond earrings/necklace:              $20,000
  • Tennis Club Membership for two:                                $5,000
  • 2 used Snowmobiles/Jet Ski:                                      $6,000
  • 120 Sessions with a Personal Trainer:                        $11,400
  • Lease High End Sports Car:                                       $30,000
  • Weekend Vacation Home:                                          $40,000
  • Miscellaneous “Where did the money go”                    $28,600

 

Total                                                                                       $390,000

 

It’s a lot of work spending that much money.  You might want to start giving more of it away to take away some of the burdens of that much cash.

So what are you waiting for let’s get a piece of that pie.  You should look at my service to help you get started with a Blog to start bringing in some side money.

How To Start a Blog and Make Money Online

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