What a Seven-Figure Nest Egg Really Means Once the Paychecks Stop

"To understand what a seven-figure nest egg means for you as a retiree, it's worth looking into the amount of income that you'd actually generate if this is the amount you had saved in your 401(k) or other retirement plans. If you have $1 million invested, and you follow the 4% rule, then you would end up being able to take out $40,000 from your investment account in the first year of retirement."

"While more recent recommendations advise choosing a 3.7% withdrawal rate instead of a 4% rate, the basic premise is the same. You want to limit how much you take out from your accounts at any one time to reduce the chances that the account balance falls so much that you can no longer earn returns, and you run out of money. With the 4% rule, the limit is 4% in year one, then you can adjust upward to account for inflation."

A $1 million retirement portfolio following the 4% rule produces a $40,000 initial annual withdrawal. More recent guidance suggests a slightly lower 3.7% withdrawal rate, but the goal remains protecting the portfolio from excessive drawdowns and ensuring longevity. Limiting annual withdrawals reduces the risk that market declines permanently erode the account and prevent future returns. The 4% rule sets a first-year withdrawal of 4%, with subsequent adjustments for inflation. Whether $40,000 plus Social Security provides sufficient retirement income depends on individual expenses, lifestyle, and the desire for conservative planning.

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