How to Retire at $1M, $2M, $3M, and $5M

What Does a $1M–$5M Retirement Look Like? (0:00)

Brian: Have you ever wondered what it would look like to retire with $1 million? How about $5 million?

Bo: And Brian, I am so excited because today we get to talk about what kind of lifestyle that you can realistically afford with $1 million, $2 million, $3 million, and $5 million in your investment portfolio. And not only that, we’re also going to show you the path to reach each one of those milestones.

Brian: I’m Brian. He’s Bo, and we’re the Money Guy Show where two financial advisers walk you through wealth building. Let’s get right into it.

Bo: All right, Brian. So, let’s level set on where we are presently as a country, the current state of retirement, because according to the US Census Bureau, the median retirement savings balance for Americans that are 65 and older, so these are folks that are retired or at retirement age, is only about $198,000.

Brian: Yeah. And look, six figures is a decent sum of money, but it’s a completely different context when we’re facing retirement at 65 years of age. Take it a little deeper: 21% of Americans feel very confident that they have enough. I would actually refocus this to say what this means to me is four out of five Americans don’t feel comfortable with what’s going on in their retirement lives.

Bo: Yeah. And when they’re asked, workers are saying that debt is a problem. And because debt’s a problem, they are less confident and obviously they have smaller retirement balances. So, they’re not going into this phase of life where you should have an extreme level of confidence because now you’re going to count on your hard-earned dollars, your savings, to work for you instead of you having to work. It creates a real precarious position. And when we look at the actual data, when we ask retirees, okay, well, how are you paying for your living expenses? What are the sources that are providing for you at this age and stage of life? It’s really interesting that Social Security, the what we often call the social safety net, still remains one of the top sources of income for nine out of 10 retirees. It’s not a tangential tertiary source. It’s one of the main sources for how they’re paying their living expenses. And then you could say, look, a lot of these are going to be a combination of multiple, but it is interesting to see that close to seven out of 10 people are using personal retirement savings.

Brian: I think this number will probably continue to go down: close to five to six out of 10 are using pensions, and then retirement work savings is around 45%. I would just assume everybody had 401(k)s at this point, but this stat shows that for retirees specifically, currently it’s somewhere around 45%.

Bo: And so what we want to do on today’s show is show you, okay, what if you don’t want that to be the reality? What if you want the major source of your retirement income to actually be the portfolio that you’ve built up? And what might that retirement lifestyle look like at different sizes of portfolio? What’s a million-dollar retirement look like? What’s a three million? What’s a $5 million retirement look like? So, we’re going to walk you through behaviorally what those might look like, what you can expect from a standard of living, and then we’re also going to talk about the things you ought to pay attention to. But before we do that, I want to walk you through the math that we’re going to use to permeate throughout this episode.

The 4% Rule and Social Security Assumptions (3:29)

Bo: So, for each retirement benchmark, we’re going to take the retirement savings balance, and we’re just going to assume a flat 4% withdrawal rate. And we’re going to assume that’s going to be sustainable over the long term. And then we’re going to add Social Security to that. Brian, when we say a 4% withdrawal, why are we doing that?

Brian: Well, this is a good guideline. You know, a lot of the 4% rule is, especially if you’re decades from retirement, we think that this is probably a very conservative thing you can do. And just to give you kind of the rule defined, it’s a retirement guideline that suggests withdrawing 4% of your portfolio in your first year of retirement and then adjusting that amount every year for inflation can give you a good baseline. Now look, the 4% is not a good replacement for a financial plan. That’s right. And as we’re going to show you on the next slide here, the 4% rule is not even always the 4% rule. If you adjust it for if you’re part of the FIRE movement, you’re going to retire early, or maybe you’re one of these people who decides, hey, I love work or maybe I’m behind in what I should be saving so I’m going to retire much later, the 4% actually adjusts up or down depending upon where you are.

Bo: Yeah, the 4% rule was for a standard retirement timeline, but some people retire much later. If you’re someone who’s retiring at age 75 or older, perhaps you can have a higher withdrawal rate, like 5 to 12%. But if you’re someone who’s going to retire really early, like between ages 45 and 55, rather than having a sustainable 4% withdrawal rate, you might need to have a 3.5% withdrawal rate because it’s a longer retirement timeline. So, as we’re walking through our illustrations today, we’re just going to assume that every one of these individuals retires at age 65. So, we’re going to use a 4% withdrawal rate, but just know when it comes to your retirement and what a sustainable withdrawal rate for you might look like, it’s going to vary based on your unique situation. And another thing that’s going to vary is what your true Social Security benefit is going to look like. As of July 2026, the average monthly Social Security benefit for retired workers is just over $2,000 a month or right at $24,000 a year. Now, obviously the more that you earn during your working career, the higher your Social Security benefit, or the fewer years you work, the lower your benefit. But again, for illustrative purposes today, we’re just going to assume a flat $25,000 individual Social Security benefit, or if it’s a couple, a $50,000 household Social Security benefit at age 65.

Bo: Yeah. I mean, Social Security, look, we could have done an entire show on just this, 62 versus 70, but we wanted to keep this simple. I think you can sense we wanted to put some base assumptions in here: 4% safe withdrawal rate, $25,000 or $50,000 for a couple on Social Security. Now, let’s start going through the data.

Retiring With $1 Million (6:17)

Bo: What does a $1 million retirement look like? Yeah. For a long time, a million dollars was sort of like the gold standard. It was the benchmark for most Americans. But the question becomes, is a million dollars today still really enough to be able to retire on?

Brian: Well, I think a lot of people are shocked, especially with such a conservative assumption. If you take a million dollars and divide it by the 4% safe withdrawal rate, we’re only talking about $40,000 a year consistently. Now, look, we are going to adjust this for inflation. That’s one of the benefits of using a safe withdrawal rate. But this is where it gets a little bit better. You stack on there the Social Security we’re talking about for a couple, $25,000 times two, now we’re talking about $50,000. $50,000 plus the $40,000 safe withdrawal rate: we’re talking about annual retirement income of around $90,000 a year or a monthly retirement budget of $7,500. Bo, if you gross that up, we are talking about somebody who, assuming this is 80% income replacement, this is a decent sum of money. This is somebody who’s making around $112,500.

Bo: Yeah, this size portfolio would give you an 80% income replacement of $112,000 income. So that’s not too shabby. So then the question becomes, okay, if I’m 65 and I’m retiring today with a million dollars, what might that lifestyle look like? And we thought it’d be helpful to look across the areas that most people spend money on that tend to be the places where people feel the most anxiety. So, let’s start with housing. If you have a million-dollar portfolio and that’s what you’re retiring with, odds are you’ve been in your home for a while and you’re likely going to have a paid-for home or be near being completely debt-free in a relatively low cost of living area.

Brian: See, I don’t want to, because I think it’s great. I mean, this is still aspirational because most Americans don’t reach a million dollars by retirement. But still, even at this threshold, there is going to be a high sensitivity to property taxes, maintenance costs. I mean, you have to put a roof on the house. You’re going to know that you have to replace the HVAC. This is going to cause some stress in your financial life. That is going to have an impact on your lifestyle.

Bo: Yeah. And then when we think about what you actually do with the money, a million dollars is a lot of money, but it’s not so much money that you can do anything you want. So, when it comes to the things and the experiences that you have in retirement, you will likely still be able to travel, but it’s going to be more budget-conscious travel. And perhaps it’s going to be more domestic and less international travel. It’s not going to be flying business class. It’s going to be flying economy, but that’s okay. You’re still going to be able to have the experiences. You’re still going to be able to create those memories with your loved ones.

Brian: I feel like, because I watch a lot of travel content, a lot of the channels I watch where they love the cruising lifestyle, because I’m a big, we love going on cruises, a lot of the family cruises. I feel like this is because you can still get a lot of bang for your buck with the cruising. Especially for a retired couple, I think for four or $5,000 you can get a really great cruise on Royal Caribbean. So that’s what I think of when I think of $1 million. It’s a great life, but it’s not as bougie or it doesn’t have as much flex in the system as somebody who has more money like two or three, even $5 million.

Bo: Sure. But again, it is a comfortable retirement. Even when we think about daily expenses, you probably still have to live on some sort of budget. You have to make sure that you recognize, okay, have I planned for the unknown unknowns and have I done as good as I can? If there are substantial unknowns, it could cause some need to tighten down, some need to restrict the budget. There’s a good chance you’re making decisions like, “Hey, we’re going to eat at home. We’re not going to eat out every single meal. We’re not going to have every single subscription. We’re not going to take on the most expensive hobbies.” We can do a number of those things, but we’re probably not in the position to be able to do all of those things and not have to worry about where the dollars are coming from.

The Biggest Risks With a $1M Portfolio (10:24)

Brian: I think the big thing is, let’s talk about what the focus areas are. I’m always looking for the teachable moments. For somebody who is aspiring to or maybe even is in the $1 million retirement, here’s what you ought to focus on. Managing that market risk, guys, this is the definition of sequence of return risk. Those first few years of retirement can blow up everything if you’re not careful. So, if somebody is running right close to the edge of, hey, maybe my retirement works or doesn’t work, you need to pay attention to where a downturn can be. And that’s why asset allocation and other things to mitigate that are going to be so important.

Bo: Yeah. Charles Schwab had a great example and they said, “Hey, if you have a million dollar portfolio and you had a poor sequence of returns in your first year of retirement, you experienced a 15% decline during the first two years, there’s a chance that because of that bad sequencing, you could deplete your funds just 18 years into retirement.” Well, if you had a 30 or 40-year retirement window, that’s obviously going to be problematic. But when you switch around the sequence of the returns, and if it doesn’t happen in the first two years, but perhaps you have a downturn that happens in the 10th and 11th years of the same gravity and same scope, that portfolio is still going to have a meaningful sum of dollars left 18 years in the future. So, if you are someone with a million-dollar portfolio and you’re close to that 4 to 5% safe withdrawal rate, there’s a chance that if you do have unfortunate or unlucky bad timing around your sequence of returns, you are going to have to make some concessions. Maybe you choose not to do the home renovation you thought you were, or maybe not to go on that trip you thought you were, or maybe not to replace the car on the timeline. At this level of assets and this level of retirement, you need to be willing and able to make those adjustments.

Brian: The next thing I think is important, and measure twice, cut once: timing of Social Security. Guys, this plays into it because look, I know y’all know I have an issue with Social Security. My father passed away in his 50s. My mom and dad made about the same amount of money. And the death benefit on Social Security for all the six figures you pay into it is just horrible. But just because I share that information in that context, I have learned don’t be the guy or the girl who, as soon as you cross into 62, assumes, hey, I’ve got to go get that money out because the government’s been taking for all these decades. There’s actually a delicate balance. You have to do the dance of doing the math to figure out when’s the appropriate time to take Social Security.

Bo: Yeah. A lot of people don’t realize that all of us have a full retirement age benefit where we can receive 100% of our Social Security if we wait till our full retirement age. For most folks today, that’s around age 67. But if you decide to claim early, if you decide to begin drawing at 62, while it is true you will draw for a longer period of time, you’re not going to receive the same benefit. You’re actually only going to receive 70% of what your full retirement benefit would be. And then every year that increases whether you draw at 63, 64, 65, all the way up until age 67 when you would draw 100% of your benefit. But if you’re someone who has the ability to wait and you can push your Social Security benefit all the way out until age 70, if you wait until 70, you can actually maximize your benefit and receive 124% of your normal retirement age benefit. So you can imagine for two individuals, one who begins claiming $1,400 at 62 versus one who begins claiming at 70 at $2,500, those are very different income streams. So you want to make sure you make that decision wisely as you begin approaching this threshold.

Brian: I think all this detail is that personal finance once again is very personal. You know, you have to take into account not only your medical health and how likely are you going to get this benefit, but also what type of working history does your spouse have. There are so many things that come in. This is one of those elements where maybe your simple life gets a little more complex with retirement. But that’s okay. We even have a resource for you, a completely free resource if you go out to moneyguy.com/resources. When should I claim Social Security? Now, look, it’s not going to be one-on-one advice, but at least it might give you a little more context that helps you figure out what you should do in your financial journey.

Bo: And the third thing that you ought to be thinking of if you’re retiring today and you have roughly a $1 million portfolio is that the viability of your plan is likely going to be very location and cost of living dependent. If you can live in a lower cost of living state, city, or area, and you can be in a lower tax situation, there’s a good chance that you might have less stress in retirement. For folks who retired with a million dollars but you live in a very high cost of living or a very tax-cumbersome state, it’s going to add stress that someone else in your situation in a different part of the country might not feel. This is why a lot of people say, “Okay, when I retire, I want to move somewhere else. I want to downsize. I want to move to a different geography.” It’s because it can relieve some of the anxiety associated with having to make ends meet month over month.

How to Reach $1 Million (15:35)

Brian: Yeah. Location, cost of living, where family members live because you definitely want to be hanging out with those grandkids when you’re in this stage. All that goes into it. Now, I get to talk about the fun part. What does this actually look like from a path standpoint? Look, it all depends upon when your starting age is because if you’re a 25-year-old, this could be as easy as just saving and investing $184 a month. However, if you’re a little behind and you don’t start this until you’re 40 years of age, you’re going to have to save and invest $1,532 a month. You get to choose where you are on your journey. This is what’s going to set you up for a million dollars.

Bo: It is worth noting it’s almost five times harder to save at 40 than at 25 if your goal is to get to a million. So, the earlier you can figure this out, the more successful you can be. Now, you may have listened to that and said, “Okay, well, you know, a million was great, but it’s just not enough.” We want to remind you that you can’t get to $2 million unless you get to $1 million first, and you can’t get to $5 million unless you get to $1 million first.

Retiring With $2 Million (16:35)

Bo: So, the first million dollars in your investment portfolio is nothing to scoff at and nothing to sneeze at. But for you, it may just be a stop on your path. So, now let’s talk about, okay, what’s it look like if we are going to retire today at age 65 and instead of having a $1 million nest egg, now we’ve been able to save up a $2 million nest egg.

Brian: Yeah. And I’m hoping that this is motivating for a lot of you because we know that our key listening group is somewhere between that 25 to 45 years of age. Guys, you guys are young enough, you ought to watch this content and get really excited because there is a huge difference between a million-dollar retirement versus a $2 million retirement. And if you want to look at this, what does this look like? If you take into account the same 4% safe withdrawal rate, it’s $80,000 a year. Stack on top that same assumption we’re making with Social Security, $50,000. Guys, we are now getting into something that almost feels really cool because think about if you’re debt-free in retirement, an annual retirement income of $130,000 a year works out to be just under $11,000 a month. Bo, that’s starting to sound pretty good.

Bo: Yeah, if you think about income replacement, if you add Social Security to it, a $2 million portfolio would replace about 80% of a $163,000 annual income. That’s roughly double the median household income in this country right now. So at $2 million, you’re beginning to have a very, very comfortable retirement. So what does that look like across the practical areas where we spend our dollars? Well, when it comes to housing, there’s a really good chance that you’re going to be in a nicer home. You’re likely not in the starter home. You’ve likely upgraded at some place along the line. There’s a chance that you’re not having to focus on living in the lowest cost of living area. You get to choose the area that you want to live based on the amenities, based on the community, based on the surrounding things that you can do and hobbies you can pick up. You have a little bit more control over where you choose to live.

Brian: I like the fact that when you talk about housing, we have a dear client that lives in the Seattle area and one of the things I love is they send us pictures about every year when they’ve gone and they’ve rented condos or houses in other parts of the country where they live for a month or two. It’s just great. And this is one of the things I like: when you add additional resources, you get a little more flexibility. Remember though, if you’re somebody who’s in retirement right now, this is not to throw cold water. This is hopefully motivation for those 30-somethings, the 40-somethings. Think about where you begin with the end in mind. Where are you trying to take your retirement so you can plan accordingly? Because in a minute we’re going to show you what you need to save and invest to reach these goals so you can hopefully reach this and live your best life in retirement.

Bo: When it comes to how our retirees spend their time and what it looks like for our folks that have retired with $2 million, well, now even like they have more control of their housing, they also get to have more control over their travel. This is where again depending on lifestyle, depending on the individual decisions that you make, perhaps now you can do multi-week international vacations. You’re not having to just travel domestically or just doing weekend trips. You can also likely afford, if you’re going on a longer flight or taking a longer trip, you can now fly premium economy. You don’t have to get the lowest ticketed fare to be able to make sure that it fits inside your retirement budget. And this now at this level makes you more mobile. If you have different family members spread across different parts of the country, it’s probably not incredibly arduous to go visit them on a fairly regular cadence without having to worry about the dollars and cents of that decision.

Brian: Well, also I like to think about the daily lifestyle and the fact that you’re probably going out to eat without too much stress. You might even have some social membership clubs, you know, a country club or a personal trainer. These are the things you get a little more flex in the system that let you live a little better so that you can actually feel like those sacrifices and that discipline that went into those early years, you’re now seeing the fruit from that.

Healthcare, Inflation, and a $2M Retirement (21:25)

Bo: I think when we think about focus areas for folks that are retiring with $2 million, so often in our financial journey, it starts out we’re willing to trade our time for money, trade our time for money, trade our time for money. When you’ve amassed a portfolio of $2 million, now you really do get to trade your money for time. I’m willing to spend money to be able to do things the way that I want to do them on the cadence and schedule that I want to do them. So at this level of assets, you really need to spend time not just thinking about, okay, what am I retiring from? What am I moving away from? What are the things that I don’t want to do? And what are the things I actually want to do? If I have financial resources, if I have extra capacity, how am I actually going to spend my time? I do think at this asset level, you’re beginning to think and focus more attention there.

Brian: Well, you know, it’s the whole thing: having resources is now you get to buy the time. So money is time. And that’s really important when you think about health expenses because look, we don’t live forever. That’s why you have to understand we’ve got to work on building how do we make memories because these things blossom. How do we make sure we spend time with loved ones? But a really cold water moment is when you realize that for a 65-year-old retiree, they can expect to expend about $185,000 later in life for medical expenses. That’s daunting. So, you just need to plan accordingly and make sure that you have enough resources to where you not only get to build the memories, but you also can cover your expenses on the medical side.

Bo: Yeah. And I don’t want to be frank, but we start off the show by saying the median amount of retirement savings for folks 65 and older is $198,000. Well, if you have $198,000 saved up, and you can expect on average to spend $185,000 in medical expenses, those two numbers don’t add up. So, it’s something you certainly want to consider. And obviously, if you’re someone who’s young, if you’re someone who’s not 65, investing in your health now before you get to financial independence, before you get to retirement, likely makes a lot of sense. It doesn’t seem like it’s a financial metric, but if you can do things now and make decisions today to drive down those future medical costs, you’re likely going to set yourself up for success. Because another thing that’s going to happen that is a little bit outside of your control is inflation. We don’t know exactly what’s going to happen with inflation, but we can feel pretty confident that whatever a basket of goods costs us today, the loaf of bread, the gallon of milk, the gallon of gas, it’s likely going to cost us more in the future. And at $2 million, we want to make sure we understand how much that purchasing power is today. Are we making decisions and considering how do we maintain that purchasing power for the next 10, 20, 30, maybe even 40 years of retirement?

Brian: Well, the good news is the safe withdrawal rate kind of builds that in. And also a lot of you when you cross that threshold of retirement, you’re going to be working to do an annual stress test to make sure this all works. But it is important to understand that just inflation as a whole, even at a reasonable rate like 3%, the cost of goods are going to almost double over a 20-year retirement. That $400 grocery bill is going to be an $800 grocery bill. So, Bo is spot on that you need to plan accordingly. But I like to, when I get excited, and like I said, this is supposed to be motivation especially for those that are decades from retirement.

How to Reach $2 Million (24:02)

Brian: Let’s look at what the path to $2 million looks like. Bo has already shared with you, the earlier you start, the easier this is. So, set it early and do it often. And the early and often for a 30-year-old means you need to save about $680 a month. Compare and contrast that to a 45-year-old who just now realizes, “Aha, I need to be saving for the future.” You have to save and invest $3,612 a month. That’s somewhere between five to six times what the 30-year-old had. It’s almost 10 times more than the 25-year-old who’s just having to do $368. I want you to plan accordingly. You can control what your future life looks like. Don’t be like the typical American. Actually use discipline. You live on less than you make so you have margin, and then give it enough time so you have success.

Bo: And now keep in mind these numbers are assuming you start at zero. If you’re someone who’s 30, 35, 40 years old and maybe you’re not starting at zero, but you want to know, hey, am I on the path? Am I on track? We have a great calculator available for you. Go out to moneyguy.com/resources and check out our Know Your Number calculator. You can put in how much you have, how much you’re saving, what age you want to retire, what your current age is, and it will let you know, okay, am I on the path to $2 million, am I going to be able to hit this metric? And if not, what do I need to change in my situation to be able to get there?

Abound Wealth Ad (25:26

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Retiring With $3 Million (26:25)

Bo: Now, Brian, I already said this in the first part. You know, you can’t get to $2 million unless you get to $1 million. Well, you can’t get to $3 million unless you get to $2 million first. So $2 million again is not anything worth scoffing at, but there’s been a lot of studies, Brian. I know one of the most formative books in your financial life was The Millionaire Next Door. You said that in the late 90s it was this wonderful thing that if you hit the two comma club, it was this beautifully significant thing. Well, there’s been a lot of research and analytics done since The Millionaire Next Door, and they have determined that over the last roughly 25 to 30 years, the new million-dollar threshold, or the equivalent of what a million was in 1996, is probably closer to $3 million today. So, we’re going to talk about what is a $3 million portfolio.

Brian: Well, yeah. I mean, I think that this is, and look, you see it all over the comments where people say, “Do you guys talk about inflation?” Yeah. Inflation has caused what used to be aspirational at a million to now be three million where you’re starting to feel like you know Robin Leach, or Cribs, or whatever your generation’s version of wealthy people looks like. This is probably starting to feel a little plush. I mean, there’s no other way to put it because look at what happens when you just compare this to a safe withdrawal rate: $3 million at 4% is $120,000 a year. That’s $10,000 a month without even taking into account Social Security. You stack in Social Security, that $50,000, and likely if you have this much, your earning potential through the years is going to put it even higher than this. But just go with our conservative assumption here. That’s an annual retirement income of $170,000 or just under $15,000 a month. That’s $14,166 a month. That’s feeling really plush in retirement in my eyes.

Bo: It’s really interesting. If you have $3 million of liquid assets in your investment portfolio right now today, that puts you in the top 3 to 5% of American wealth. It is, as Brian said, fairly elite company. But what it allows you to do is it allows you to now begin to have much more control over what your day-to-day, month-to-month, year-to-year lifestyle looks like. And it allows you to be much less afraid of the unknown unknown events that could come your way. So, when we think about housing and where you live, there’s a really good chance at this level of assets that you have a paid-for home and you likely have a nicer home. This is probably not the home that you started your life in and it’s not a starter home. And there’s a good chance at this level of assets you’ve been able to choose where you want to live. Perhaps you’re in a medium or maybe even a high cost of living area because you have a portfolio that can sustain that.

Brian: I think if you go beyond housing to actually the travel, you know what’s interesting is that I said once you get to $2 million, you don’t have to really worry about eating out. I think when you start crossing into $3 million territory, the same type of thing happens for you with travel. Now you can go on more luxurious vacations. You can take the entire family. Maybe your dream is, hey, I want to take my kids and grandkids to the Grand Canyon or to Disney World.

Bo: Maybe that’s a little too far a bridge. There are limits to what $3 million can do. But still, this is an exciting time where you can really kind of unleash your retirement to enjoy vacation and making those blossoming memories. And again, the thing that’s happening here is it’s about control. We think about your daily expenses. You’re rarely worried about making sure the bills get paid. You’re not worried about the grocery bills. You’re not worried about running out of money. If you get invited to a high-end dinner, you’re likely not thinking about, okay, how do I fit this in the budget? How do I make this work? And you can even pick up hobbies that aren’t just one-time hobbies, but even hobbies that might have ongoing costs. Maybe this is a club membership or an expensive gym or some other organization that you want to be a part of. At this level of assets, you’re beginning to be able to make those decisions and not have to worry about, oh, can I afford this? Am I going to be okay?

RMDs, Taxes, and Finding Purpose (30:27)

Brian: So, let’s talk about what you’ve got to focus on for a $3 million area. Look, you’re wealthy. Tax management is going to be super important for a lot of you. You literally could have a required minimum distribution bomb sitting there waiting to blow up on you. When you get into your mid-70s, when you have those required minimum distributions, you need to plan accordingly.

Bo: Yeah. Think about this. If you had $3 million in a traditional IRA or in a 401(k) and you were age 73 this year right now, your required minimum distribution would be $113,000 that you would need to pull out of that portfolio. Well, maybe you’ve done a good job of building and you’ve built up your three tax buckets and you have resources, or you have Social Security, you have other means that are coming in and you don’t want to pull out $113,000. The government says, “Too bad. You have to. We’re going to make you pull out that money. We’re going to make you pay tax on that.” You begin to lose some control. So, if you’re someone who has a multi-million dollar, multiple seven-figure portfolio and you’re in retirement, thinking about how you’re going to navigate required minimum distributions and those tax bombs that could hit is going to be important to make sure you don’t lose control of your tax situation.

Brian: Another area to focus on is, man, find your purpose. Look, one of the saddest things for me is Financial Mutants that go into financial miser territory where they think, hey, you know what I need to create happiness is if I had $3 million in the bank without a why attached to it. You know, when I was writing Millionaire Mission, if you go read the last two or three chapters where I get into my why, I do talk about what I did with my money. You’ll see a lot of extra effort goes into thinking about, hey, what wakes me up in the morning where I feel like, hey, I’m part of something bigger than me. And that’s why we say generosity is rewarding. But you also have to know what are the things you’re going to do away from work. What are your hobbies? What are the things? Find your purpose. Know your why. So you can live your best life, not only financially, but also in the memory making and waking up every day feeling like you’ve got something really exciting going on.

Bo: Now, another thing that we want you to think of, and this is going to be unique, and a lot of people are going to kind of scoff at this, but we think it’s really important, especially at this asset level, to think about how you’re building your community. Not just do you have enough money and can you spend money, but who are you actually spending your time with? Who are you surrounding yourself with? Do you have other people? Because frankly, it can be isolating. Just because you can afford to go on a trip and just because you can afford international travel doesn’t mean that your close friends can. Doesn’t mean that they’ve made the decision. So, do you have people in your life that are in a similar position that can do those things? Or are you in the place where if you have family, you can create environments and opportunities to make those memories?

How to Reach $3 Million (33:19)

Bo: There is no value in leaving this earth with a giant bucket of money left behind, not having actually used that money to focus on the things in your life that truly matter to you.

Brian: Yeah. So, let’s create the excitement, the motivation, and actually create a path to $3 million. You know, this past weekend my wife and I were shopping. We were at the local Nordstrom Rack, okay? Because if you want Nordstrom stuff but you only want to pay the rack prices, you know, 40 to 60% of what you’d have to pay at Nordstrom, after we had paid and we were walking out, by the way, the alarm went off because I bought this new sports coat for going on this trip to Scotland that we’re going on, and this young guy, couldn’t have been older than 22 or 23 years of age, came running up. He said, “Hey, you are the reason that I’ve started saving and investing.” And I told him just dead out of my mouth, it was like, “Dude, if you are already saving and investing because you watch our show, you are literally going to be loaded based upon your age.” And I see that when you say the path to wealth, look, for a 25-year-old, you only need to save $552 a month. For a lot of you, especially when we say we want you to save 20 to 25% of your gross income in your 20s, that’s aspirational. But for those of you who discover this content early enough, you might only need to do your employer match plus your Roth IRA already in this. Yeah, that’s less than the Roth with $552. Act accordingly. The typical American at $1,000 a month will get it done at 30 years of age. Guys, this is exciting stuff. You do not have to be the statistic like the typical American where you have a little under $200,000. You can be a multi-millionaire if you set it and forget it. Early and often will get it done.

Bo: I have to ask a question and I’m sorry, but I’ve got to ask this. What did setting off the store alarm have to do with the guy running up to you?

Brian: It was just embarrassing because I didn’t want to look like we shoplifted. I thought he was a security guard. We were talking to this chatty cashier who for some reason was telling us he was moving from Tennessee to Virginia to open up a new store. And we got his whole life story, but he didn’t take off the sensor. He had just bragged that he was really good at taking off the sensors, but it was just one of those, I was giving the context. A good storyteller gives you, or I just give you random.

Bo: No, no, that was great. That was okay. So, the alarm goes off, the guy runs up to you and he tells you.

Brian: I was just trying to say it makes me excited when I see young people saving and investing for the future because that is going to set you up for this next one.

What a $5 Million Retirement Looks Like (36:00)

Brian: This is definitely aspirational because we’re going to give you the demographic stats on this for the typical American. But what is it like to retire with $5 million? Ka-chow.

Brian: Like here’s the deal. No amount of money is completely worry-free. There’s not a sum where you’re going to remove all your worries. But at $5 million, you start getting close, honestly. Because at $5 million, you’re pretty much in the position where there’s not a whole lot of stuff that you can’t do. There’s not a whole lot of contingency that you don’t have built in. Because when you just run through the simple math, a $5 million portfolio with a 4% withdrawal rate is $200,000. If you then add a $50,000 household Social Security benefit, you’re now pulling in a quarter of a million dollars a year every single year in retirement. That’s almost $21,000 a month. It is difficult and it is unusual and it is uncommon to be able to spend $21,000 a month. This is a robust retirement lifestyle.

Bo: Well, let’s talk about how rare this is, though. But it is definitely something. Be aspirational. Shoot for this. I think definitely if you’re young enough, you can make this happen. A lot of our audience, we see the demographics, we see your incomes, we see what your potential is. Because this is a sad stat that sets the context: 49.5% of Americans have literally zero saved for retirement. One in two. If you want to know who has a dollar to a million dollars, man, is that a broad, broad swath, because there’s a big difference between a million less a dollar versus a dollar. But that’s 47.3% of America. And if you look at who’s at a million dollars to $5 million, that’s 3.1%. To say somebody has over $5 million, we are talking this is not 1%. This is one-tenth of 1%. That’s an amazing feat to have this. So this is aspirational, but let’s still go through the numbers and say what is it like to live this type of lifestyle.

Brian: Yeah. When you think about housing, this is the level of wealth where you likely own multiple properties. You may have your primary residence and you may have some sort of secondary residence or a vacation home. Cost of living areas are not really a concern. If you want to live close to water, if you want to live close to mountains, if you want to live close to a major metropolitan city, you can choose that. And even the costs associated with that, whether it be renovation projects or maintenance costs or association dues, you are likely in the position where you can pay those expenses and not have a ton of anxiety around it.

Bo: And let’s face it, it’s your travel. Let’s go ahead and get the pinky ready to start ordering the Grey Poupon. I mean, you’re doing this. This is where you actually get to ride business class when you go across the pond. You’re doing extended travel. I mean, look, blah blah blah. Everybody knows this is living your best life. At this level, it is definitely aspirational, but I’m excited. It’s back to my Mr. Morrow moment. I mean, if I can show somebody who’s in their 20s or 30s this, you don’t have to be the stats like the typical American. You get to shoot for this type of goal.

Brian: Yeah. What happens is at this level, you feel like you’re literally protected from almost all standard financial risks. I mean, there are certain cataclysmic things that could happen, but you’re able to make your decisions and you don’t have to worry about, is this going to be the thing that breaks me? If I have a medical thing, I can cover it. If I have an expensive hobby, I can cover it. If I want to help friends, want to help family, I can do that.

Bo: So, one of the things that really happens for folks that we see at this echelon is they actually have a really hard time spending money. They’ve been so good at accumulating. And so just because we tell you you can live this lifestyle, a lot of our folks that actually attain this level of wealth have a very, very difficult time flipping the switch and actually learning how to spend those dollars.

Spending, Legacy, and the Path to $5 Million (39:38)

Brian: Yeah. I want for these people, this is why you have to be careful of drifting into financial miser territory. If you’re one of those people, this is when I think reading something like Die With Zero makes a lot of sense, where you’re going out there making more memories. Because also you’re going to hit the realization, I’m in my 50s right now, and I saw an interview with Brad Pitt who’s in his 60s now. He’s like, “Man, I wish I could go tell my 50-something year old self to go do more.” Because he says, “I’m just not that same person.” And that’s something we hear from clients also. If you’re going to go do all the travel where you have to go up a gazillion stairs in Europe or Machu Picchu, you have to do all kinds of hiking for miles. Make sure you plan accordingly to do this. This is definitely aspirational, but you can live your best life. But you’ve got to learn to spend. Get out of the miser, stay in mutant territory so you can actually pay it forward because that’s where legacy mode, being generous, estate planning, all these things kind of go together.

Brian: Yeah, you want to make sure at this level you’re not focused just on the dollars, but you’re more focused on what can the dollars do. And maybe for you it’s not flying first class or buying the second home, but maybe it is leaving a legacy. What am I going to do with these dollars to positively impact the world around me, the people around me, the people that I care about? How can I use it? And how can I make sure that it’s structured as effectively and efficiently as possible?

Bo: And what I think is wild is $5 million is a lot of money. It’s so much money, but it’s not crazy if you think about it: a 25-year-old, if you could just save $1,000 a month, which is not easy, that’s not a simple thing to do, but it’s only $1,000 a month, $12,000 a year. That can get you to $5 million by the time that you retire. For a 35-year-old, it’s saving $3,000 a month. That’d be someone who’s maxing out their 401(k) and then maxing out two Roth IRAs. That would get you to that $5 million level. It’s a big number and it’s not going to be one that you get to by accident, but it doesn’t have to feel impossible. It is very much inside the realm of attainability if you’re willing to live on less than you make and save a little bit for tomorrow.

Brian: Think about this: if you did $920 a month times 12 divided by 0.25 to see what the income is, for a 25-year-old, that’s somebody who’s saving 25% who’s making $44,000. Now look, I know cost of living and housing makes that more aspirational. But still, it’s worth noting. At 30 years of age, $1,700 a month times 12 divided by 0.25, that’s somebody making a little under $82,000 a year who could do that. A 35-year-old at $3,300 a month times 12 divided by 0.25: that’s somebody making $145,000 a year. Guys, we see the demographics. We see you out there. Yes, I know that’s above what the typical American makes, but if you are in that situation, don’t be average. Be extra. Be somebody who actually creates something that goes beyond your life. Yes, I know you can’t take it with you, but man oh man, what if you can pay it forward to your children? What if you can pay it forward to live your best life, to create memories so that your children and grandchildren don’t have as much struggle? What about the charities that we want to support? All these things are understanding that money is nothing but a tool. But man oh man, if you plan accordingly, there is a better way to do this. And that’s why we work with clients all across the country. I invite you, if you have a simple situation in your life and you’re trying to figure out what the basics are, go to moneyguy.com/resources. We will load you up. But when life starts getting complex from success, please remember who planted the seed. Come become a client. I’m your host Brian, joined by Mr. Bo. Money Guy Team, out!