Can a person retire with 500 000$?
Can someone retire with 500 000$ if it"s invested well?
Last edited by Savingmoney; 2010-06-06 at 04:10 PM.
I don't expect spelling perfection in a discussion forum, but if you are going to create your own website I suggest you get an editor who can spell:
Of course you can retire on $500,000 if you can live on $20-30K per year.
You should be able to retire somewhat comfortably abroad for sure. As for retiring in Canada with $500K, I don't think so.
A single 59 year-old retiree with 500K in the bank, a 5% return, 2% inflation, full CPP/OAS, dying broke at 95... can look to get by on just over $30K per year (after tax/after inflation)
Unless you have an expensive drug habit, $30K is do-able for some, IMHO.
I think it would depend on your lifestyle expectations. If you have a paid for home, that would help. But lots of working Canadians get by on less than 30,000 after tax, so it is doable.
[QUOTE=steve41;25160]A single 59 year-old retiree with 500K in the bank, a 5% return, 2% inflation, full CPP/OAS, dying broke at 95...QUOTE]
Don't forget that CPP and OAS (and/or GIS) will add up to $15,000 or so of inflation-adjusted lifetime income in retirement: so if you truly only needed $30K, you could save only $250K and have $30K in retirement (presuming you get full CPP).
$500K for a retired 59 yr-old will net $30.1K $250K will net $21.8K This includes full CPP&OAS. Maybe the discrepancy comes from taxation. Remember, I am talking about RRSP and the $30K is an after tax number.
If the nest egg quoted was outside the RRSP (nonreg say) and the income was gross instead of net.... it would make a difference.
Sorry: all the figures I gave were pre-tax values. I should have specified that.
Looking at this a different way, a retirement income plan which takes into account the probabilities of survival a 59-year-old male with $500K in pre-tax assets withdrawing $20K in pre-tax withdrawals from a portfolio which is 50/50 bonds/stocks has a 92% chance of sustainability.
Annuitizing a fraction of that wealth will increase the yearly spending without decreasing the sustainability (but decreasing the expected financial legacy). Annuitizing, for example, 30% (while maintaining the 50/50 stock allocation in the portfolio) increases the yearly spending to $25K at no effective decrease in sustainability.
Hence "pensionization" increases available spending at all ages. Delaying the decision to annuitize a fraction of wealth will increase the available yearly spending (as annuities become cheaper as you age, and 59 is not an optimal time to annuitize for this reason).
I realize I am typing out some pretty dense stuff here. However, these paragraphs sum in some ways the main ideas of my forthcoming book, called Pensionize Your Nest Egg. The underlying argument (demonstrated mathematically in the book at a layperson's level) is that pension annuities increase available retirement income spending while also increasing retirement income sustainability.
Since there are two professionals (or former FA's) here, let me ask a question, somewhat related.
How many of your clients / former clients go for the die broke option? and how many push well beyond what they need? This thread really has me thinking I should pack it in a retire even sooner than I originally planned.