A Reddit user questions if a $2.5 million investment can sustain a $100,000 annual retirement income, factoring in withdrawal rates and taxes. Traditionally, a 4% withdrawal rate was recommended for longevity in retirement savings, allowing for a $100,000 income from the nest egg. However, experts are now suggesting a more conservative 3.7% due to lower projected returns and longer lifespans. The user must balance their comfort with risk and consider the implications of taxes, especially if they want to avoid tax burdens in retirement by using Roth accounts.
Is $2.5 million enough for a $100K annual retirement income? Before you even consider the impact of taxes, you need to make a decision on a safe withdrawal rate.
Experts traditionally recommended that you follow the 4% rule if you wanted the best chance of your money lasting for at least 30 years.
However, experts have now revised that downward to say you should limit withdrawals to 3.7%. There have also long been questions as to whether the 4% rule is conservative enough.
If you don't mind taking a greater chance of your money running short, you could still stick with the 4.00% rule and assume you'll be able to withdraw $100K from your $2.5 million account.
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