Suze Orman Warns $3 Million Isn't Enough For Retirement, Even At A Mere 3% Withdrawal Rate – She Says You Need $10 Million Or More

Think $3 million is a solid retirement fund? Suze Orman has a reality check for you. 

Speaking on the "Afford Anything" podcast, she explained why even this seemingly hefty amount might leave you struggling in retirement – especially if life throws a few curveballs your way. 

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Orman was asked whether $3 million, paired with a conservative 3% withdrawal rate, could fund a secure early retirement. Her response? A flat-out no. She didn't even hesitate to poke holes in the idea, calling $3 million "far from enough" for the unexpected costs life can throw at you.

The host, Paula Pant, asked Orman, "What would be a safe amount at which a person can say, ‘All right, at this point, given the size of my portfolio, I’m comfortable enough that if I did get hit by a bus, I would be fine.'?"

Orman answered, "It would have to be in the millions." Pant, wanting a clearer answer, pressed further: "How many million?" That's when Orman started doing the math – it wasn't pretty.

"It depends where you live, what your expenses are," Orman said. "Do you own your home outright? So, what are your expenses? But just think about it logically."

And then she did exactly that: broke it down, line by line.

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"Let's say you need help. Remember, I took care of my mother and it cost me, like I said, $30,000 a month. $30,000 a month," Orman emphasized. "So, you're talking about, very possibly, for full-time help and everything – because good luck getting insurance and things to pay for it now – you're talking about maybe $300,000, $400,000 a year."

If that wasn't sobering enough, she added: "Now you have other expenses – food and everything. Let's just say you need another $100,000 a year to live. So now you're at $350,000 a year after taxes."

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To generate $350,000 annually after taxes without touching your principal, Orman said you'd need a portfolio yielding at least 5%. That means a whopping $10 million in assets, if not more.

"Even if you have $1 million right now and you're getting a 4% yield, that's $40,000," she pointed out. "So you need at least $5 million, $6 million. And that's before tax. So you need a 5% after-tax yield in municipal bonds to get you $300,000."

Orman's conclusion? "You might need $10 million, just so if you're making 5% on that money after tax, you'll be fine without touching your principal."

The famed financial guru's advice wasn't about scaring people but about being brutally realistic. She reminded listeners that unexpected costs, like long-term care, health crises or inflation, could quickly wipe out even a seemingly comfortable nest egg.

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Now, although Orman insists you'll be spending far more than you realize in retirement, the average retiree spends around $4,345 per month or about $52,141 annually, on living expenses, according to data. Her basis is a breakdown of her experience and the expenses she endured, which may not necessarily be what the "average" retiree encounters. 

While her comments sparked debate, particularly among those in the FIRE (Financial Independence, Retire Early) community, Orman's warning boiled down to this: Plan for the worst because running out of money in retirement isn't something you want to gamble with.

If you're banking on early retirement, her advice is clear – do the math and then do it again. As Orman sees it, underestimating your needs now could leave you with fewer choices later.

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