D-Keine/E+ via Getty Images Co-authored with Hidden Opportunities. It is often considered a milestone to hit a liquid net worth of $1 million. Its sufficiency for retirement entirely depends on how you invest it.
The outdated 4% withdrawal rule, often considered the gold standard for retirement, will show that you can “sustainably” withdraw $40,000 annually from such a nest egg. But given today’s cost of living and projected inflation, this annual income may not be sufficient for your needs. Americans now believe $2 million would be a comfortable nest egg for retirement.
While our investment methods differ significantly from the famous 4% rule, we will entertain this target and discuss how it can be achieved with dividends. Yes, dividends. It is not just an investment technique for retirees, it can very well be used by individuals of all age groups.
Let us look at a scenario where a 30-year-old saves and invests $20,000 annually in a basket of dividend-paying securities with an average yield of 7.5%. Assuming the yield remains steady and 100% of the dividends are reinvested, this investor stands to achieve an ending value of $2.
1 million when they are 60 years old. But that isn’t the best part. Because the focus has been on passive income development, in the 61st year, the investor begins with an income of $149,000 that they can use towards their retirement expenses if they choose to.
Author's Calculations It isn’t all about retirement; the passive income stream pro.
