This could be clickbait if the United States doesn't collapse in your lifetime. If it doesn't, you'll need at about $2.5 million to retire comfortably at about 55 to 60 years old assuming you are 25 years old now. If the country does collapse... good luck to everyone.
Erin got to your clickbait w/in the first #56 seconds --- 👍🤣 good point!! the next 10 min was a nice meditation on the balance between security and using money as a tool ... and the wisdom to know which to prioritize. I'm looking forward to more ---- as always well-phrased.
Great video. It's a high number but I think Kevin's qualifier, survive "no matter what," is also key. And he says you can take care of your family and lots of people with that money. To me, $5m is clearly a number that's more like *_you've got it made in shade_* as they used to say. I heard his explanation as a set-for-life-no-matter-what type of thing.
Love the analysis here. $5M is just the number that supports his family without consuming the principal. Mine will be less, but still working towards the same end game.
Thank you Erin for this great video! I really like your continuing message of everyone's financial freedom numbers are different. I'm nearing 60 and unless I strike gold in my back yard, I will not hit Mr O'Leary's $5M "survivability" number by the time I retire. But my wife and I have done well saving/investing over the years and will have enough money to not only survive, but thrive.
A household with $5 million in assets is in the 97th percentile. So there are about 4 million households with financial assets of $5 million or more. Some of them are standing pat, and some of them are risking this capital to make even more money. It depends on your circumstances. If you are retired, and have $5 million, you can live a nice life without taking any risks.
My financial planner told me years ago he had a client who received over $800K due to a workplace injury settlement. This induvial was in his late 20's when he received the cash settlement. My financial advisor strongly encouraged him to set aside $200K as a basis for a retirement fund; the rest of the cash - $600K could be spent in whatever way he wanted. Well, this person wanted to invest in his friends business instead. Within 2 years all of the money was gone, along with any chance of building an awesome retirement nest egg. My financial advisor said that person left his services shortly after that. If I came into $800K in my twenties, I probably would have invested most of it for the long-term. Erin - I would most likely click on any video you send out regardless of the title!
Yeah, but this falls into if I only knew then what I know now. I inherited a descent but small amount of money in my 20's. If saved and invested it would be quite large now. But I was making $10.00/hr with three kids back then. The next opportunity that happened much later I knew better and invested 100%. I wish I had this wisdom , discipline and current income 40 years ago.
"Yeah, but this falls into if I only knew then what I know now" But some of us knew about investing most of their lives. I started when I was 18 investing so I, and many others, would have invested that $800K and maybe skimmed some dividends while letting the capital appreciate.
My wife and I have a little over $3 million in all of our retirement accounts all invested in the S&P500. 26% return in 2023 means our net worth went up $780,000 dollars. As regular working class family who earns about $150k a year: THAT'S A LOT OF MONEY from growth! (Let's forget about 2022--LOL)
@@bigjohnson7415 Well, 2020 went down too fast and went up too fast(V)....in my case it was my luck that we had $100k in extra cash and threw it into FAANG stocks and it easily doubled!
@@kevinedward4195 Ya forgot about the 8 Trillion from January 2017 thru January 2021. But that was when that other guy was in office, so a lot of people tend to forget about what he did.
Kevin (and Erin) are exactly right. $1M was brutal and took what seemed like a long time. The middle phase where not much happened was painful. All pain and little visible gain. And, these were in dollars that were commensurate with earnings/norms of the 80/90/2000's - much smaller, less inflated numbers. But it happened. Then $2M came relatively quickly, or at least it felt that way compared to the first $1M. $5M felt easier, and yes, incredibly, $10M+ felt like it happened very quickly. But very quickly wasn't overnight. It was still a number of years. Those years were underpinned by the same strategies, tactics and disciplines, and of course luck, that created the first $1M and $2M. The same elements + time and staying power were absolutely necessary to get to $5M and then to $10M+. Tax planning at these levels is critical. Earning it and saving it is pointless if you can't keep it and use it for whatever you choose. And you must protect it. Thank Erin, well done.
Great video. I like it when you give examples or comparisons that are relatable. $5M might not be relatable but the climb to build your wealth is. Keep up the good work.
Erin you are top notch, I can trust you won't throw junk at us simply to get the clicks. This is one reason you are one of the very very very very few people I recommend to my own kids as they set out in their young lives (college age), you know, the age where they ignore parents' advice?
This is kinda how I look at it. My monthly budget is $5k a month. That includes everything. But it’s easily doable and anything extra is fun money. There is no reason to save any of it as I’ve allocated it all to be used. As long as I don’t go over $5k a month, everything is fine. I developed that number based off a couple years of watching my expenses. That was in the U.S. and now I live in a cheaper country so $5k is much more than enough.
“My number” has been $5M or 55y/o for a long time. Will be 44 this year and will easily pass the 2M mark this year, even if it’s flat. Right on track to hit that number at age 55. This is a great video. Agree that $5M is not everyone’s number. You have to find out YOUR number and attack it! One big thing is are you going to leave your nest egg or are you going to try and use it all up yourself. That plays a huge part in what you need to accumulate as well.
Thanks Erin, for the helpful information and the manner in which you deliver it with superb articulation and clarity. Please keep up the excellent work, going forward ⏩ and lots of good fortune, on your journey of life.
The power of compound interest is amazing as one's account grows. Now that I'm in my 50s, I'm typically seeing much more growth from investment earnings than from what I contribute for a particular year. Another great video, Erin!
As a 38 year old, $5 million would be very impressive, and is NOT easy to achieve at my age. It would put me in the top 99 percentile. I think it depends on what your goals are. There is no point living on rice and beans and saving 80% of your paycheck and forget to live your life in your 20s 30s and 40s so you can reach $5 million then look back and say I wish I would have left the house and had fun once. You can't go back. If $5 million is your goal, fine but don't forget to live life along the way. Save enough so you are comfortable, but not soo much that you leave hundreds of millions behind (unless you want your kids to have that much). Money buys Kevin happiness, but it does not buy everyone happiness.
@@Gichie79 , I wouldn’t consider a C-suite executive at 38 to be working a job. Would you? Most would have to own there own successful business to have amassed 5 million by that time.
True. If the age target is 38. Real estate brokers in large markets can and certian people involved in the wall street finical sector can. A higer level doctor and lawyer could get there, but it likely wouldn't be until there later 40s to 50s. @@Dave-sw2dm
@@Dave-sw2dm My wife and I have regular jobs collecting paychecks (never in leadership or business owners) and our net worth is $3.8 today at age 46/48 in a very low cost state. $5 million before 60 is very doable. Yes we have two kids, travel annually, and have a pretty good life.
When I was first starting out in the late 80's my number was $1.3 million, had $50k by the time I was 28 but my number kept increasing as I got married, had kids, bought house etc... Now my number is probably around 3 million. However my net worth is north of 5 million...but a lifetime of worrying and saving is not easily left behind, so I still worry and save even though I know I am golden in 99+% of all scenarios.
I invested $320k over ten years. Cash flow is 204k a year from it. No clue what the net worth is now since it doesn’t matter. Helps I have the binder strategy. Where my tenants ask me to raise the rent.
I would say for most people protecting themselves against a layoff is the best strategy. Understanding what your fixed cost you have to cover on a monthly basis, how much cash + unemployment you'll have in your checking account. Access to credit in an emergency.
At $30,000 yr. It would only take 166.66 years to earn. Only 83.33 yrs. for the $60 000 annual achievers. Feferal minimum wage is less than $16,000 yr. Good Luck out there. Erin, you're THE BEST!!!
Any chance you have or could do a net worth video by state or region? Northeast, Southeast, Northwest, Southwest, Central. I feel like this would give a better idea to folks rather than the country at a whole. I know it’s a lot of work but would appreciate it very much. Thank you in advance.
This is similar to something Warren Buffet said, the first 1 mil is the hardest. And if Kevin's number is 5 mil, that is his number. My magic number is my current salary divide by 3%. Nobody's number is right nor wrong, its very personal, and what I think is good for me might be to conservative for another.
My opinion is that a lot of wealthy people just put unrealistic financial advice out there, in order to flex about how well they've done. IMO Mr O'Leary is one of these.
It all only works if your spending doesn't follow your income. Establish your baseline spending goals, and always ensure your investments cover that (the 4% ).
Compound growth is great but it takes a long time to get there. When I was 48 I finally had enough there to see my portfolio earn as much as I did at my job. Now it feels like I have 2 of "me" working each year. Makes it way easier to understand how retirement will work. I kind of see it as the real me working for me to live this year and the portfolio "me" working for one year of $ I will use in retirement. Portfolio "me" will have put away 10-12 years of working with no expense at all that I will be able to use for retirement.
the question is how to invest 5m if you had it... what % is ok for a home? you'd have to have some % in voo, some % in cash, and the rest in bonds. I'd say 750k to 1m in house, 4-4.25m in voo, and 150-250k in cash. The logic would be that it affords you the risk of the occasional great recession here and there and otherwise keep your resources maximally productive.
the way o'leary said it applies more to investable assets of 5 million as he talks about living off the interest or growth. you can't really spend the appreciation in home equity. the allocation that works for you at a few hundred grand based on your age and risk tolerance shouldn't really change just because it is 5 million.
Just opened a ROTH IRA as a backup in addition to the 15% we stick in our 401K each year. The ROTH IRA is a Christmas present this year from me to the wife and I. Getting auto investments in it setup :). Spread over Large Cap, Mid Cap, Small Cap, Foreign, and a Growth and Income Mutual Fund in the IRA.
While I don't agree with Kevin's 5M, I do agree with your comment about the more you have the faster it grows. Very satisfying to look at 2023 total net worth growth and see a number greater than 150% of pre-tax annual salary even after paying income taxes for 2022 dividends and capital gains. It makes me smile to know my invested money is working just as hard as I am to get to my freedom number.
He's probably not too far off. I'd say ~2 million is required for early retirement. But that's a pretty normal retirement without extravagant spending. I do think it would take more like 5 to be able to take any vacation you want (within reason), pay for all kids' college as well as maybe grandkids, drive new nice cars, maybe own some fun toys like a boat or camper, a vacation home, and being able to afford the nicer assisted living facilities. Without really having to worry about anything or cutting back. I'd agree.
Its interesting reading the comments and seeing some consensus around 5 million for financial independence but about 3 million "number." I remember running my numbers some years ago and arriving at about 3.3 million as a retirement goal, but if I wanted to leave the workforce tomorrow a lá Johnny Paycheck, I'd feel a lot better at 5.
5mil, means 2.5 mil if you get cut in half, which will happen at some point, even in treasuries/cash. You only need to go back 100 years to see it. This is the basis of the statement. Understanding risk is paramount.
yup, $5m in investable assets has always been my bottom line savings goal. Allows for $200k/yr income from tax free munies. It do agree that the first $1m seems tough, but people do lots of counter productive things trying to get to that first $1m. Things like spending creep, but more likely people just try to get to that first $1m quick trying to beat the market rather than just letting the index do it for you over time. By the time you reach the first $1m, you tend to realize that slow and steady wins. I also think that people never get to $5m from $1m and actually find it more difficult to get to even $2m from $1m, because people go to the opposite end of the spectrum into preservation mode. People at the first $1m will tend to be closer to retirement, so preserving that $1m weighs pretty heavy in people's mind and works against them.
I can’t take Mr. Wonderful’s word as something to be trusted after his response to the FTX debacle. However, the second video you played of his does make sense.
I think it also has to do with where you live, how you live and how you aspire to live. If your goals is to upgrade your standard of living ie luxury cars, bigger home, designer clothes, expensive travel and you live in or near a major city then $5 million may not be enough. If you live out in the country and have zero desire for any of the high end items from the consumer culture and luxury world traveling isn't your thing than $5 million with a 4% return will last you likely your entire life without ever touching principle.
Great content as always Erin! You are absolutely correct. This year was the first year I made more in my investments than what my income is. And I am considered high income. Once you break that threshold where you earn more passively than you do with your w2 job, it feels REALLY good. That first hundred thousand is a struggle, then in a good stock year you really see how that $100k can grow
Unless you are exclusively in the S&P 500 (which is a bad idea), you didn't see the full 26%. I only saw about 8% because I went ultra-conservative. Knowing that interest rates are eventually going to fall, I've been slowly buying TLT. The 52-week treasury auction in January looks like it will only give us 4.8%. This has me looking at 13-week and 26-week treasury purchases to stay above a 5% return as long as I can. When treasuries finally drop below 4%, I'll likely be slowly going back into equity ETFs again, such as VTI and VXUS. I likely won't do BND and may continue to buy treasuries in smaller amounts. Maybe I-Bonds too, but only if the fixed rate is good.
That is a very interesting expression of your conservative mindset --- great. I also looked at some of the yields months back of TLT/EDV/VGLT and put in small amounts but i am along w/ you on the ride of getting 5% w/in a year, just as we were able to get >5% on 2yr treasuries a year ago. You take what the FED and the market give ya' .... 👍... 1 thing though about at least looking at the message vs the messenger is that O'Leary does do tech stocks as well, though that is not his strength. It leads to your point that a diversified porrtolio can sample larger gains across the various indices (and don't get me started on sectors or themes --😳😱) ... S&P 24.23% return (26.44% with dividends) DOW DJIA 13.70% return (16.18% w/dividend reinvestment) NASDAQ 54% return Perhaps non - S&P might be useful......
The $5,000,000 number is based on the 4% guidance for withdrawals. 4% of $5M is $200K/year. That is a very comfortable amount to live on, particularly in retirement, and a 4% annual withdrawals even in a conservative portfolio will generally still increase in value beyond the amount taken out each year. If you follow Bill Perkins advice you could easily double that withdrawal amount to $400K/year and have enough to live well past typical lifespan ages. I also have to mention, the chart you show at 8:30 is inaccurate by a factor of 10x. It says it shows the time needed to reach $1M and each subsequent $1M by investing $10K/year at 8%. What it actually shows is how long to earn your first $100K, and each subsequent $100K by investing $10K/year. To earn $1M on this time scale would require about $100K invested per year at 8%.
Your retirement plan should be: 75 years old less current age multiplied by annual expenses needed to afford your desired lifestyle. Then add 15 years of a basic lifestyle (if you are alive 75-90). For example: I am 55 and my desired lifestyle is $60k/year. 20 times $60k is $1.2M. Plus $24k times 15 years for basic = $360K = $1.56M total nest egg needed needed needed
The making 6 or 7% line...that wont last forever. Int rates change. And it all depends on your lifetyle and spending rate and invs anyway. The amt needed is dependent on what you do and also your health..size of family. You can adjust. The less u spend...the more you have. Make sense?
I do not respect Kevin OLeary for multiple reasons, but in this particular case, the idea of having a certain number that you take somewhat off the table makes sense. At that point you can decide whether you want to keep playing the game - which he obviously does (gambling/playing the odds is not surprising given how he has failed up over his life). But that other number is like a meta/next level emergency fund.
Hey Erin, have you done a vid on "buffered ETFs"? As I get closer to retirement, my financial advisor mentioned wanting to move some of my funds to a buffered ETF, and I hadn't heard that phrase before... I think he is thinking it is a better option than bonds as I get ready to retire... Thoughts?
The reason financiers want you to keep more money in their institutions is because they themselves make more money from it. I have the bulk (not all) of my investments in real estate.
Everyone has a differnent number. Assuming I have a paid house, paid vehicles, and Medicare, I'm good with about $10k a month. Social Security will cover about a third of that. So, by the 4% rule, somewhere in the $1.7 - $2.0 million should suffice. Gotta know your number though.
You can stay 100% in CD's and not worry about inflation eating away at your earnings if the amount of principle is high enough and you cost of living is low enough because you are no longer carrying debt. Your retirement can be risk free from the investment standpoint. You can not buy anything you want and if you loss your health all this does not matter anyway.
Having the skills to live beyond crazy frugally when necessary is in my opinion, the most important at the end of the day. Save 15% of your income, live, minimally, eat small amounts of very healthy food get exercise be good with God yourself your family and your neighbor. Understand completely that in reality, you don’t have ultimate control, but you are a fool to not control what you can control in the meantime
Hi just want ask if you would ever do a video on if you have a Pension.how that can effect on what you are saving and the how this can help or hurt the end game of Retirement financial Freedom
You could use me as a reference I have a Pension that I started getting when I was forty two of about Sixty eight thousand a year I now am working on a 2 one from a 2 Career witch I will get when Retire from the second job the 2 pension is set up like this the job puts in 5% of my Salarean every year and I put in 11% on top for a total of 16% of my salary the pension gets about a 5% Return a year guaranteed I also put money in to rouf Ira every month of 100 $ and have regular Ira of about 350 thousand with I start when I retire from the frist job from a 457 I roll over in to it the job o have not Makes 65 thousand a year so my goal is with the 2 pension and Social security I should be about 100% of my income at retirement when I am 67 with out my Ira they should be Fluff.
Would you consider moving your retirement assets to Robinhood? They’re offering a 3% match for Gold subscribers till April 30th. The match is tax advantaged. If you move over $100k, you’d get a $3k match. Over 40 yrs at 7% rate of return that $3k would turn into $45k, is it a no brainer?!
I think if it's supposed to be enough to cover every possible situation for a family $5 million might be on the low side. Not for normal everyday living, but if someone gets a disease that's expensive to treat at the same time as a market downturn or mother nature destroys everything you and everybody else in the vicinity owns or some other extremely expensive event occurs what once seemed like overkill now looks barely adequate.
Step 1: Choose a sensationalist quotation from a blow-hard like O'Charlie to title your video. Step 2: Use his statement as a springboard to share actual relevant and useful information with your audience. Keep up the great work Erin!
Using the 4% rule that's $200,000 a year. So to weather "ANY" storm he is probably right. Just imagine a 50% market crash. You now are able to spend $100,000, which is no longer a lot in some cities. Do i think 5M necessary, no. But a worst case scenario, belt and suspenders approach, ya i can see it.
$50k saved, no debt at all, and $1600/month CPP or SSA is enough. Cheap studio apartments, in off the beaten path cities, are $700 a month. You think everyone on earth has to have $3 mln or they are dead at age 60?
I have 200k in my deferred comp but it’s sitting on the side line. Seems like I’m frozen. I afraid to put it back on the market but now I’m missing so great gains 😩 idk what to do with 3 years left to retire
Sadly, you made your decision when you decided to stay out of the market. If you're retiring in 3 years, it may be best to park it in a HYSA/Money Market earning 4% or more. I'd split it and put $100k in stocks and $100k in a money market. Hard to say without knowing if that's all you have for retirement, mortgage, expenses, etc.
@@chuck5553 , Then you and are in the same position. I have a 26+ year military retirement and VA compensation. With the knowledge you will not go homeless - I'd be all in on investments. I am 100% stocks today and will be through retirement. My pension, coupled with my wife's Federal Employee pension, ensures we will live a much better life in retirement than 90% of the population. Get out of your head and start investing!!
I find it SO DIFFICULT to make financial videos as much as u do as we have all seen so many of them.. how can you keep making them without covering everything in a pretty short time ??? good for u trying it tho !!! keep them up..
I figured he said that because you could live off the dividends alone since in S&P at 1.44% this would be $72000 per year. That way if the stock market crashed 80 or 90% you wouldn’t need to eat into your capital and could ride it out as the dividends would generally stay the same but rise as a percentage of your portfolio.
@@TheMurrblake not necessarily. This happened in the Great Depression and people still kept going on with life. There was 25% unemployment and many people lost their savings in banks. The stock market dropped but the dividends rose to around 14% of the lowest values.
Anyone who puts 5 million in a bank before leaning how to invest is someone I would stop listening too. More than 90% of the people in the U.S. will never save 5 million. Learning how to invest your money will help you figure out your risk tolerance along with how much time you want to spend on investing.
Tell me you’re detached from actual society without actually telling me! 🤣. But, $5M is still my goal by the time I'm 65. I can ensure we will leave our son a healthy trust.
