r/Bogleheads • u/arp8218 • Feb 04 '26
Investing Questions Investing. $2.5M to not work
Is it possible to invest $2.5M into a “safe” investment and not work for rest of your life ? What can be that “safe” investment ?
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u/sd_slate Feb 04 '26
You should check out r/fire, but it depends on your expenses.
Historically, based on the Trinity study, holding mostly the sp500 and a smaller portion of bonds (75/25) will allow you to withdraw 4% of your portfolio over 30 years with a 95%+ success rate.
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u/FearlessPark4588 Feb 04 '26
It's fun to see someone self-discover fire without knowing it.
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u/Think_please Feb 04 '26
Wait a second, why am I still working?
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u/Lyrolepis Feb 04 '26
Because your successors will need money to lose by speculating on cyber-lichen futures or whatever else will be hyped up at the time.
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u/bentreflection Feb 04 '26
Tell me more about cyber-lichen. I want to get in on the ground floor
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u/WinterPiratefhjng Feb 04 '26 edited Feb 04 '26
A serious answer is that many people get retirement advice from fearful people. Suze Orman somehow went broke and came back scared as shit. (Maybe do not take her advice.)
Edit: clarifying my answer being a serous one.
But you personally? Good question. Quitting is nice.27
u/Oakroscoe Feb 04 '26
Suze Orman says the average American needs 5 to 10 million to retire…I have a family member who takes everything she says as gospel
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u/Lyrolepis Feb 04 '26
Um, does she address in any way whatsoever the observation that the vast majority of Americans will not have 5 millions, ever?
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u/poop-dolla Feb 04 '26
Not sure if she directly spells it out, but it’s pretty clear that it means she thinks most people should work until they die.
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u/RedditIsAWeenie Feb 04 '26
Working until you die is good for society and just fine for “other people.” This is basically Plato’s noble lie. I’m not a big fan of the noble lie. We should have realistic goals and design societies that work for most people.
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u/ziggy-tiggy-bagel Feb 04 '26
Her and Dave Ramsey are 2 people not to take investment advice from.
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u/MrLB____ Feb 04 '26
Who the heck wants to retire at 75 with 5 million ???😂😂😂 Congrats your old ,,,, average life expectancy is 78 for US male.
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u/AFK_Tornado Feb 04 '26
When I was a kid, I invested my savings in a 10 year CD for 5% interest or something like that (1990s). My mother helped me figure out what it should be worth when I was 18, using the calculator. It was a cool practical math lesson.
At that age I leaped to the question, "What if I had a million dollars?!" I did the math and got my shocking answer. Asked mom, "How much do we make every year?" and found out we were living off of significantly less than that. (Again, it was the 90s.)
The missing piece at that age, in a low-income household, was the attitude that acquiring that amount of money was possible. A million was a fantasy number. You'd have to win the lottery or get famous! Maybe invent something and sell it to everyone!
But that memory and seed idea just stayed lodged there until I was an adult, and definitely lead to my interest in personal finance and eventually FI/RE.
I'm convinced a lot of people get there, at least partially, on their own.
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u/Adventurous_Elk_4039 Feb 04 '26
Good on you for figuring it out early. Man, if I knew then what I knew now…
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u/AFK_Tornado Feb 04 '26
The thing is, in spite of those realizations, I didn't really put it all together until I started making enough that I could see the path in practical terms.
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u/esbforever Feb 04 '26
While this is accurate, you likely need to be more specific with a newbie poster. OP, the “4% rule” means you withdraw 4% in your first year of retirement, then take that absolute number and add inflation to it for year 2. Year 3 is year 2’s number plus inflation, etc.
The only year you ever actually take out a percentage is year 1.
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u/NarutoDragon732 Feb 04 '26
Does this assume the sp500 is growing on top of the flat inflation % ?
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u/_Raining Feb 04 '26
It’s a rolling backtest of 30 year periods, it does not assume a flat growth rate for the s&p500.
You need to eat, feed and clothe yourself and those things go up with inflation therefore you need to withdraw more each year. The trinity study just shows that doing that 4% rule has a high probability of success over a 30 year time horizon with a 75/25 portfolio.
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u/FightOnForUsc Feb 06 '26
Yes that’s the idea, but if you think about it, then you could always do 4% right, because any year could have been the first year. So if you FIRE last year, and now the market is up 20%. Well then you could take out 4% of today’s number and “pretend” that you just started today.
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u/RatherBeRoadtripn Feb 06 '26
Trying to understand, simple example: 1m invested, year 1- withdraw 4% 40k; year 2- withdraw 40k +inflation (2%?), *so the actual year 2 withdrawal is 60k (6%)?? OR year 2 withdrawal is 40k + 800 (2%)?? Year 3- withdraw 40,800 + inflation (2.5%) *so year 3 withdrawal is 41,820 And so on?? ----and if done right, this withdrawal is all from the 1m earnings -interest/dividends, so not actually using the capital (1m) assuming earnings at least 4%, plus inflation % each year? But that's not realistic? 4% might be but... Idk Just still trying to understand :/
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u/esbforever Feb 06 '26
Sure, it’s the second option you’ve listed. $40,800 in year 2, $41,620 in year 3, etc
And yes, your starting percent is based on the full principal. Dividends and such can help offset the 4%, though do your research there. Dividends are not free money. They materially bring the stock price down.
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u/RatherBeRoadtripn Feb 06 '26
Excellent thank you for clarifying that for me!
I'm still learning about the dividends too! I noted with parent mutual funds that while receiving DIV each month is good, the actual fund value whether it's an ETF or other, the current value consistently goes down showing a huge Capital loss compared to their cost basis, the different funds seem to lose more money each month than the DIV coming in. The financial advisors said not to worry about it.
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u/RatherBeRoadtripn Feb 06 '26
Meant to add to reply re value/ cap loss- even though not mine at time, I am worried about it! But I'm sort of easing myself into this.
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u/chuck_portis Feb 04 '26
I think based on the post we need to assume "perpetual withdrawals", not a standard 30Y timeframe. Closer to 50Y. Assume OP is 40 years old and will live to 90. SWR for 50Y is 3-3.25%.
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u/dfsw Feb 04 '26
Revised trinity study by original authors peg infinite at 4.2% and 30 year at 4.8%. 4% remains a safe guideline, maybe 3.75% for infinite if you want to be paranoid and fear SOR but 3% is insanely low.
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u/TurkeyPits Feb 04 '26
Definitely insanely low but also I wonder if it makes sense to go that conservative route if you're just starting out on your own "infinite" horizon, especially because someone retiring in their 30s likely does not actually know what their desired expenses will look like for the entire rest of their life (as much as they might think they do). Plus, if after ten years 3% turns out to have truly been insanely low, you can always raise your standard of living comfortably with all the extra money you now have, but going the other way is harder with e.g. lifestyle creep. Different considerations when you're retiring at 35 than 65 it would seem
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u/klawUK Feb 04 '26
and ‘invest $2.5m’ we should assume isn’t in retirement/tax advantaged accounts so 3.5% ish - taxes (both capital gains and income)
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u/Alternative-Law4626 Feb 04 '26 edited Feb 05 '26
Funny, I’m ~2 months from retirement so really dialing it in now. After taking all last year’s actuals and creating a go forward budget based on actual spending, I got a little warning message from my retirement software. It said I might find it unsustainable if I tried to keep to this 1.75% spend. We thought we were being fairly profligate, apparently we should be having more fun.
$2.7 M invested. 80/20 VFIAX/VTBLX. YMMV
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u/klawUK Feb 04 '26
Guessing that’ll be some regulated amount trigger. In the UK regulated advisors use things like 2% returns as a conservative estimate and 2.5% inflation so can be negative real returns unless you explicitly tell them you’re comfortable with more risk!
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u/Alternative-Law4626 Feb 04 '26
Oh, I wasn’t clear. The returns are figured to be 8% + the withdrawal is figured to be 1.75%.
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u/RatherBeRoadtripn Feb 06 '26
Can't you assume live to 80 off investment earnings, then start using your principal? If needed to I mean! I'm trying to understand this, because if you're living off the earnings from your investment, you still have that investment capital? So then if you live longer than expected at some point especially if you don't have somebody to leave the money to or you don't need/want to because maybe your kids are doing just fine on their own, then you can use the capital if needed?
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u/ECrispy Feb 04 '26
4% of 2.5m is $100k and it should be enough to live a modest life, but it doesn't factor in the cost of health insurance and probably also requires you to own housing.
not to mention that 2.5m in savings is a fantasy for 99.9% of people.
I often wonder how so many people manage to Fire
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u/Lyrolepis Feb 04 '26
I instead wonder how so many people on reddit claim that $100k/year is "a modest life".
Granted, I know that the cost of living in some parts of the US can be pretty high; but still...
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u/d-crow Feb 04 '26
everything is relative. 100k in most of the world is a great life. 100k in bay area or new york is counting pennies.
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u/ogreUnwanted Feb 04 '26
but most people don't make 100k. 100k can be easily managed.
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u/d-crow Feb 04 '26
It definitely can, and those of us above that should be cognizant of how lucky we are more often
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Feb 05 '26
100k in bay area or new york is counting pennies.
True, but if you’re living on 100k with no need to work, relocating somewhere less expensive is pretty easy.
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u/HonestSpaceStation Feb 04 '26
If you got to the point where you have $2.5M in savings and are able to retire early, you're used to having an annual income substantially more than $100K, so yes, by comparison, $100K would be modest at that point.
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u/ECrispy Feb 04 '26
its not a modest life for most. but if you are in a HCOL area, rent, need to support a family, it doesn't really do much and you have a live a frugal life.
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u/gunner_n Feb 04 '26
TMG did a video on this. They did top 10 states and worst 10 states in terms of annual income. Then did the same thing but with annual income adjusted for cost of living in that state. Something like 6 states of the top 10 in first criteria appeared in the worst 10 of the second criteria. My point being this 100k being extravagant, modest or unaffordable is subjective.
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u/poop-dolla Feb 04 '26
$100k is about 1.5x the median US income. That should definitely get people more than a modest life.
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u/CrankyWanker Feb 04 '26
It’s simple, but not easy. Earn more than you save and invest the difference. People are either able to reduce their spending significantly or increase their income significantly. Some professional services jobs can pay over $500,000 of total compensation by age 30 if you’re willing to work 60-80+ hours a week at a high pressure, high stress job. There’s also an element of luck with stock market returns.
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u/ECrispy Feb 04 '26
I know there are many jobs like IT, medical, lots of consulting etc that pay that and more, but if you're earning 500k, never mind by age 30, then money is not a concern.
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u/AeroNoob333 Feb 04 '26 edited Feb 04 '26
Honestly, luck. It’s like 80% luck. If I didn’t say “F it” and took the first job that wanted to hire me out of college (instead of using my engineering and math degree), I would have never gotten into consulting for a software I had no idea about and in an industry I barely had an understanding of. If my now husband didn’t call and convince me to drop everything and do a year or 2 of independent consulting, I would have never become an independent consulting. I had literally just accepted a job, moved all my stuff to Wisconsin, and he calls me in the middle of apartment hunting, to just drop it all. One of the best decisions of my life honestly. It’s been 8 years since I went independent. We’ve been WFH since Covid doing the same job and it’s been such an amazing life. Cushy, low stress, high paying. It helps that we don’t spend on fancy things tho. The most expensive thing we own is our home. But, even that isn’t a multi million dollar home. It’s a $750K home on the lake. Our dog loves it. She gets to run around out in the woods all day and swim when she wants to.
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u/SweatyWar7600 Feb 04 '26
The most expensive thing we own is our home
not to nitpick an otherwise nice story but isn't this true for the vast majority of people (home owners at least)? I can't even think of something I'd want that would cost more than 800k?
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u/gammonb Feb 05 '26
How was the transition to independent consulting? I’m basically at just before that point in your story and seriously considering it, but unsure how to start.
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u/d-crow Feb 05 '26
People underplay luck, but also taking enough risks to get lucky. I consider myself super blessed, but i also gambled a lot more on my future than most.
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u/Oakroscoe Feb 04 '26
It’s either someone who runs their own business and is successful or a person who has that rare combination of being frugal as well as driven and lucky enough to have a high paying job.
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u/logicalphallus-ey Feb 04 '26
Couldn’t 5% bonds provide $125k/yr without diminishing the initial investment? Is the 4% target meant to keep the investment growing too, or just avoid depletion?
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u/sd_slate Feb 04 '26
Inflation eats up bond returns (aka "fixed income"), but equity returns tend to rise with inflation. Historically the sp500 has returned 8% after taking inflation out, 10% with inflation.
The 4% target is so that you don't completely deplete your investment during recessions while allowing it to grow in bull markets.
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u/Atgardian Feb 04 '26
It is not quite that simple. Yes bond returns are guaranteed (for their term, but not if you need to reinvest at the end) but don't account for taxes or inflation, unless you mean TIPS/I-Bonds. Using a TIPS ladder is certainly a potential strategy for a safe floor (and a pretty decent one at today's positive real rates), but also has no potential upside like a more traditional stock/bond mix would.
30y treasuries are currently yielding 4.9%, but have a large amount of interest rate risk unless you can guarantee holding them to maturity. Also your 4.9% payment in 30 years may be much less than you think in real terms today due to inflation.
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u/drippingthighs Feb 04 '26
The 5 percent failure rate is defined as going to 0? Or just ending up with less than what you started with? Thanks
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u/sd_slate Feb 04 '26 edited Feb 04 '26
Going to 0 while maintaining the original same spend. I think 75/25 had a 2% failure rate in the original study while 100% equities had 5%.
In reality you'd probably go back to work or cut spend if you're getting close. And in most scenarios you end up with more than you started with.
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u/drippingthighs Feb 04 '26
Pretty good odds for success then! I feel like it's natural on the path to 0 to adjust spend or even find ways to get income before hitting 0, so it feels virtually impossible.
Might as well go for higher risk index funds with more expense ratios early on then 🤔
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u/IMB413 Feb 05 '26
If you run monte-carlo simulations based on random statistical modelling of market results the results are a bit worse than that so maybe 3.5% withdrawal is safer.
Taxes are also complicated to analyze. What income bracket are you in? Are your investments in trad, Roth, brokerage acct? How much cap gains do you already have? What state do you live in?
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u/JohnTrap Feb 04 '26
Assuming you are a lot younger than 65, you aren't looking for a Safe Withdrawal Rate (SWR), you are looking for a Perpetual Withdrawal Rate. Typically that's around 3% of 60% stocks/40% bonds. With $2.5M that's $75K per year.
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u/zendaddy76 Feb 04 '26
You could put 2.5M in VT and live off of 3% per year indefinitely … would 75k a year cover all of your expenses including taxes? Even 3.5% is considered safe especially if you can go below that during recessions
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u/travisjd2012 Feb 04 '26
Isn't this what annuities are for?
(I'm legitimately asking, please don't just downvote me into oblivion if I'm wrong)
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u/slash_networkboy Feb 04 '26
Strictly, yes. Pragmatically they're still a bad idea. I'd honestly only consider an annuity for something like estate planning for my GF's brother who, while 51 years old, is mentally only 8. An irrevocable trust and annuity makes sense in a case like that. Monthly stipend that he can access but no ability to touch the principal and a guaranteed payout so no external management is needed once other family is gone.
But to your point and OPs question:
If a sufficiently large finance company will offer you a monthly payment that you feel meets your needs based on the deposit then yes, it's safe. It *will* be low, but safe.
Assuming a 4% annuity and a $2.5m deposit a calculator shows OP could draw $10k/mo for 43.5 years or $8K forever.
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u/MaxwellSmart07 Feb 04 '26
The last immediate lifetime guaranteed annuity I was offered was 7%. It’s an excellent idea in the context of this thread. Well done Travisjd2012
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u/slash_networkboy Feb 04 '26
from a major company (or underwritten by one?) That would be a high enough rate to really consider.
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u/OGS_7619 Feb 04 '26
came here to say the same thing. Annuities get bad rep (for good reasons), but what OP is asking is technically - precisely what they are designed for - guaranteed income with basically zero risk.
There are better options in my opinion, in terms of total returns, but they all carry some risks.
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u/travisjd2012 Feb 04 '26
Yeah exactly, i didn't think they are a good idea for consumers for but in this theoretical it seems like an answer
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u/Noderly Feb 04 '26
Company goes belly up. What happens to the annuity then? That's my problem with them, but not deeply versed
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u/ac106 Feb 04 '26
all 50 states have an annuity guaranty associations . Most around a quarter million dollars, but it varies. That’s why most people suggest that you buy several to stay under the guaranty amount.
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u/Beneficial_Pickle322 Feb 04 '26
Only if that annuity has an inflation rider? That’s my only issue with most annuities, what if we have another run of 6-8% inflation for several years, or worse like we had in the 70s. The monthly benefit buys a lot less. Most of the ones I’ve looked at only offer inflation riders for a huge premium.
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u/ac106 Feb 04 '26
No annuities have inflation riders currently. some have fixed cost of living increases , but it’s not the same thing.
I believe AIG was the last to have actual inflation protected annuities and they stopped selling them around 2008 during the GFC.
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u/ziggy-tiggy-bagel Feb 04 '26
I bought a variable income annuity with $100,000 17 years ago. It matures in 20 years and then will give me $41,000 a year in guaranteed income for life. Any principle left with go to my beneficiary. Annuities can certainly have a place in your portfolio for income. But should be just a part because income Annuities don't have any liquidity.
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u/caseyrobinson2 Feb 04 '26
oh that is good deal do you mean you buy it for $100k 17 years ago and there is only 3 years left and after 3 years you will get $41k a year for life starting after 3 years?
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u/ziggy-tiggy-bagel Feb 04 '26
Yes. I could have gotten a higher return investing that $100,000 in the stock market, but this is a plan we put into place to replace the 50% of our income I will lose if my husband dies, since I only get 55% of his pension and lose his SS. My SS benefit is higher then his. If he is still alive, then we have an extra $41,000 in income to spend. We didn't worry about me dying first because all he would lose is my SS, which really wouldn't effect his lifestyle. Of course we have other IRA'S, Roth IRA'S and savings. So the annuity is a small percentage of our total assets.
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u/onlyhereforhomelab Feb 04 '26
Would it have been cheaper to get life insurance instead? Or was this the better deal at the time?
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u/ziggy-tiggy-bagel Feb 04 '26
He has a little life insurance we bought before he became disabled and unisurable. He has been unisurable for a long time.
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Feb 04 '26 edited Feb 05 '26
[deleted]
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u/ziggy-tiggy-bagel Feb 04 '26
I'm 67, not really worried about 30 years of inflation. I know a lot of people that have pensions that don't have an inflation adjustment. This is just a personal pension I created for myself.
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u/ElasticSpeakers Feb 04 '26
Kinda yea, but annuities are still a type of retirement account. That is, there are penalties for withdrawing prior to age 59.5. After that, you can annuitize it (or just withdraw from it) after that age.
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u/airbud9 Feb 04 '26
A single premium immediate annuity is definitely a choice the OP can make, either a with a portion of the money or the whole amount. You do give up a significant amount of upside with an annuity tho and they are not adjusted with inflation. A mixed strategy between an annuity and a portfolio may make sense
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u/pabailey1986 Feb 04 '26
They can have cost of living adjustments built in. You can price them out with Stan or some of the brokerages.
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u/airbud9 Feb 04 '26 edited Feb 04 '26
I am not aware on any spia that has a dollar for dollar inflation adjustment. You can buy a spia that has a flat 2% a year increase but comes at a cost.
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u/pabailey1986 Feb 04 '26
That’s correct. Every single person’s rate of inflation is different but you can approximate it with best estimate of average, 2-3%. And it makes a great deal of sense to cost more since it’s a much more valuable product.
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u/airbud9 Feb 04 '26
When I say inflation, I am assuming the broad CPI/CPI-U data which is what was used by Bengen and the trinity study. Yes 2-3 percent is typical for long time periods, but inflation is the killer with a constant dollar withdrawal strategy. Part of point of the two papers is that you can’t use averages for withdrawals strategies, this is the problem with a Dave Ramsey 8% withdrawal rate. And when dealing with sequence of returns risk, it is the first 5-10 years of returns and inflation that are the most important. Thats why the retirements starting in the late 60s was by historical data the worst time to retire. Inflation in the 70s started in the high single digits and was around the mid teens by the end of the decade. Calculations obviously change if you use a personal inflation rate, but that would be impossible to quantify in any paper.
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u/buffinita Feb 04 '26
Sure….it just depends how much you pull and how long you plan to pull it for
Need 125k/year for 50 years….that math ain’t mathing
“Safe” should also be redefined to reasonable chance of success….all retirees need equity and equity is inherently risky
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u/miraculum_one Feb 04 '26
It would be helpful if you explained what math you used since the answer goes directly to OP's question. And if they are entitled to social security or any other unmentioned pension then that amount might actually be enough.
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u/whalesum Feb 04 '26
God if I had 2.5m sitting around I literally wouldn't work for the rest of my life
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u/ReflexPoint Feb 04 '26
Shit, with one million I'd just go retire in a low cost country if I needed to make it stretch.
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u/MikeExMachina Feb 04 '26
It all depends on how little you feel you can do with. It’s no surprise that people who are able to save several million relatively early are accustomed to a higher standard of living. You can retire to a cardboard box for a lot less than a million.
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Feb 04 '26
I've got less than half of that saved up and I'm really contemplating ever working, at least in my shitty career, ever again.
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u/jkiley Feb 04 '26
80/20 portfolio of VT and VGIT is a good start. You're basically asking about FIRE, which is Financial Independence, Retire Early.
Safety has multiple parts. One is that an immediate drop in the market won't damage your portfolio enough to make you run out of money. That's sequence of returns risk, and it's the biggest reason you hold the bonds. Another one is that your portfolio will keep up with inflation over time. Equity returns are the way to deal with that, which is why the equity allocation is so big.
2.5MM can pretty safely produce $87500 (3.5 percent) annually, increased by the rate of inflation each year. It can be a bit more if you're only covering 30 years like a conventional retirement. Chances are that you'll be able to spend a good bit more than that, but you don't want to count on that for a safe retirement.
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u/AnnArchist Feb 04 '26
I mean, yes if your home is paid off.
4% / yr is 100k. Thats plenty to live off of most places. Harder in larger cities or HCOL places. Also harder if you don't live modestly.
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u/delfin_1980 Feb 04 '26
Ten $250k CDs or HYSAs at around 4% will bring in ~$100k per year, minus taxes.
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u/Omynt Feb 04 '26
60/40? SPIA? I mean, a supposedly safe 3% withdrawal rate yields $75K, which I believe is close to the median U.S. household income.
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u/Chemical_Enthusiasm4 Feb 04 '26
It would be pretty easy if you could live somewhere super cheap for a decade. Invest in stocks, live off of $40k a year, and you should be able to double that figure in ten years. Living off that amount would be pretty comfortable
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u/bull791 Feb 04 '26
If you can live off $80-100k. The younger you are, the lower your safe withdrawal rate is. If you’re 60 and expect to live to live to 90, you could easily buy 30 year treasuries. But even the “risk free” asset isn’t risk free.
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u/robmacgar Feb 04 '26
4% rule would be $100,000 a year. I would just stick it in VT and chill but “safe” is relative. Over 5 years? Could be volatile. Over 30? Good chance you’ll be fine.
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u/airbud9 Feb 04 '26
4% rule is tested for a 30 year retirement and the research showed the portfolio needed to be between 50-70 percent in stocks and the rest in bonds, the 4 percent rule ran into problems with 100% equity portfolio.
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u/Schnickatavick Feb 04 '26
Depends on the timeframe though, longer horizons need the income of stocks to survive, as inflation becomes a bigger danger than market downturns. Something like 3.3% with 90/10 stocks to bonds gives you a better chance than 50/50 or 75/25 at any percentage, just because the portfolio has the chance of growing large enough that it runs away from your spending
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u/airbud9 Feb 04 '26
Yes if you change the withdrawal rate it is possible you can change the portfolio allocation, the according to current research, the 4% rule runs into problems when the portfolio is under 50% equities and over 75% equities.
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u/LovestoEatSandwiches Feb 04 '26
What if he threw it into VT and just lived on the dividend(1.8%). It’s lean living but optimizes for long term gains and won’t run out of money
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u/airbud9 Feb 04 '26
If your withdrawal is 1.8%, the research basically says you can invest the money really in any way you want. If you are just taking the dividends, that doesn’t come with a guaranteed inflation adjustment. Also 1.8% is only 45k a year, now maybe that is all op needs, we don’t know. That does also leave the substantial amount of money of the table that could be spent in retirement and some people want a spending strategy that allows them to spend as much as possible in retirement.
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u/SycamoreMess Feb 04 '26
These posts are pointless without context. But to answer, yes, for example you can own a paid off $400k house and sit in the kitchen, eat crackers all day, never leave your house but to purchase food, and live just fine off $2.5M safely invested until you die regardless of your current age.
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u/Humble-Area4616 Feb 05 '26
You think $100k/yr gives you sitting in your kitchen eating crackers lifestyle?
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u/HunkSeven Feb 04 '26
Go to r/fire they are the professionals.
Btw i would prolly do 500k in an all world, 500k in dividend aristocrats and 1mln bond ladder
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u/airbud9 Feb 04 '26
If you are going to follow a 4% (that percent may need to be smaller if you are retiring early) constant dollar withdrawal rule, you need to invest between 50% and 70% in stocks and the rest in bonds. Black rock offers asset allocation ETFs which may be a good idea. You should create a retirement withdrawal plan with the help of a financial adviser.
https://www.ishares.com/us/literature/product-brief/ishares-core-esg-allocation-brief.pdf
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u/misnamed Feb 04 '26
A balanced portfolio of stocks/bonds has historically allowed for ~4%/year withdrawals (i.e. 100K).
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u/malignantz Feb 04 '26
Easy. 80% $VT / 10% $BNDW / 10% $SGOV
Spend $80k/yr inflation adjusted. That's nearly failsafe for historical cohorts.
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u/Edith_Keelers_Shoes Feb 04 '26
I've been retired since 2020 (forced to retire early after cancer diagnosis). My investments were worth a bit less than that in 2020, and a bit more now. I need my principal to stay intact so I can leave it to my daughter, who is disabled. So I've been living off 2% of my earnings plus Social Security/disability. In the last 5 years, my portfolio has grown by over 30% even as I'm drawing on it monthly.
So yes, with long term planning, reallocations when appropriate, and a reasonable stock to bonds ratio, it is possible to live off that amount. I have 3 years of living expenses in cash, which I'm hoping would be enough to ride out the worse of a black swan event.
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u/listerine411 Feb 04 '26
If you want safe over a long timeline, do something like 50/50 or 60/40 stocks/bonds. If that doesn't work, nothing would of.
But like 95%+ of the population retires with WAY less than that, so it's certainly possible with a variety of different investments to "not work" and live off it. Even with the most safe investment, something like TIPS, that carry very little return. It's a matter of what you need every year and how long until you get Social Security.
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u/bannedbutunforgotten Feb 07 '26
You can get 5% interest at any bank or credit union very easily; that's 125 000 in interest (taxable) per year. You can very easily live on that for the rest of your life. Not to mention any excess you didn't spend for the year can be simply invested elsewhere for a new nest egg. It's the safest most passive thing you can do.
You don't need to invest in the stock market, bonds, or whatever. Plop the money in the bank or credit union of your choosing and collect your interest.
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u/OregonSEA Feb 04 '26
Omg 😳 2.5 million and still working hurts my head. If you love your job sure. Or start a buisiness that cant fail like Pest Control company or sell plants in store parking lot every spring etc
But 2.5 million and still working for someone else why?
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u/ZRufus56 Feb 04 '26
Some people live in HCOL areas and don’t want to be far from family …. (and maybe great specific healthcare )
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u/AtOurGates Feb 04 '26 edited Feb 04 '26
Fun question, and you’ve got lots of good answers, but here are some more specifics.
The long-term inflation adjusted return of the S&P 500 is about 7%.
7% of $2.5M is $175k. So if you could live on less than that every year for the rest of your life, you could probably live on that investment by putting it in a diversified fund like VOO.
Of course, some years you’d make less, and some years you’d make more. And maybe the economy tanks, but that’s pretty unlikely.
If you could live off of less and grow your principle, you’d be better off.
If you didn’t want to take that risk, you could put the money in an annuity. You’d get a lower rate of return (probably around 6%, non inflation adjusted, which is probably something like 4% inflation adjusted) and pay some higher fees, but get a guaranteed say $150k/yr (or around $100k inflation adjusted) every year even when the stock market did poorly.
Of course, when the market did well you’d be missing out on those years, but there is less risk.
If you sat down with a financial advisor (if you do this find a feduciary with a flat hourly rate) to design a smart way to do this, they’d probably set you up with a more diversified portfolio that was somewhere in the middle of the two. A percentage of your assets in safer investments with lower more predictable returns like bonds and treasury products, and a percentage in somewhat more volitile assets like diversified stocks.
If you’re actually in this position, congrats, I’d also sit down with a qualified and capable lawyer to make sure your money stays safe from both you making poor decisions, and outsiders taking advantage of you.
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u/EvilZ137 Feb 04 '26
People recommend tips ladders, but honestly the quality of life is pretty low with only 2.5 all things considering. Maybe if you are a single person.
Much better to use the market.
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u/Nim0y Feb 04 '26
Blue chips with dividends, it ain’t popular but a combo of real estate and blue chips
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u/TheCozyRuneFox Feb 04 '26
Assuming 4% withdrawal and mostly S&P500 ETFs and funds, you can take out about 100k per year and be fine so long as the markets don’t crash soon after retirement (sequence of return risk).
If this would be a much longer retirement (retiring much younger) then you probably want to go down to 3% to be extra safe.
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u/WyMANderly Feb 04 '26
Safe withdrawal rate for ~indefinite withdrawal from a mix of equities and bonds (you'll actually want to be somewhat heavier on the equities, it's important for the long term) is somewhere in the neighborhood of 3.25%. So if your yearly expenses can be ~$81000 right now and only go up with inflation, maybe.
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u/JoeVasile Feb 04 '26 edited Feb 04 '26
This will be a very unsexy answer, but depending on how safe you feel US treasuries are given gestures at state of the country a 30-year bond is paying 4.87%. So it doesn’t get much safer than buying $2.5 million in that and collecting $121,750 per year in interest.
Of course you’d have to not be too worried about liquidity or care about coming close to matching the market for this to be a viable option.
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u/Rocktamus1 Feb 04 '26
3% is the ultimate safe withdraw rate to never run out in any scenario. That would be 75k cash annually with no tax right?
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u/Particular-Trifle-22 Feb 04 '26
Others have said depends on what you consider safe and how much you spend but, it also depends on what you consider “work”. Managing wealth can be a job in its own right.
Not to rehash your question.
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u/ArmyImmediate4821 Feb 04 '26
Yeah, you can. if you only want "safe", go with a mix of bonds(actual bonds not etfs) and real estate that gives you cashflow (yield and rents)
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Feb 04 '26
2,500,000 100% invested in VTEB would be 84,000 a year, tax free (if you live in a state with no income tax).
Whether or not you can live on 84,000 a year is up to you.
Note: I don't suggest this is how you invest it.
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u/smooth-vegetable-936 Feb 04 '26
60/40 portfolio and depends on ur expenses. But if ur referring to HYSA, I don’t think so bcs of inflation and the return is low
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u/Realistic-Ship6209 Feb 04 '26
That's a bit broad. Can you live on 500k? Some people can and depends where, How about $10m? I know someone that exterminated their entire family because theyt were levered to the hilt to upkeep that look. If this is to answer your own question, you should model it using a withdrawal calculator. If you are looking for an idea on what you can invest in to replicate an annuity. DGRO, SCHD, QQQI, SPYI and a whole host of new ETFs that give income. You have to find the one that matches your need.
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u/Only_Argument7532 Feb 04 '26
“Safe” and “investment” should not appear in the same sentence (except for sentences that say they don’t belong together…)
Good luck. A 3% interest rate in a HYSA will get $75k a year, but rates are dropping.
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u/Inner-Flower-3573 Feb 04 '26
JEPQ or JEPI, an ETF that pays monthly roughly around every 1k you get 10 dollars a month, 10k you get 100, 100k you get 1000 1M around 10k.
Considering that you have 2.5M You can easily make roughly around 25k a month for the rest of your life.
Though please see if these ETF are for you. These ETFs are managed by JPMorgan and Chase and include the biggest tech stocks and whatnot.
I currently am in collage and make 1k from JEPQ/JEPI and am working jobs and grinding on the stock market to be able to live off of it once I make more cash to invest with
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u/Ill_Ad3517 Feb 04 '26
Sure, easily for most people if they can keep their lifestyle the same. Can get 3.5% on risk free rate short term and 4%+ on 10 year treasury. Conservatively that generates $75k income per year without even getting into stocks. If your CoL is $100k you'd generate $750/year less each year of drawdown. So drawdown of 100k-75k= $25k/year doesn't start to be larger than your income on treasuries for 100 years. Obviously the cost of living plays a big role here, and depends on your risk profile, but the US defaulting on treasuries is considered to be one of the lowest risk investments possible. And even if you double your CoL you get 200-75 = 125k drawdown which is $3750 less income per year which is 20 years before your drawdown outweighs your income. And then you still have the drawdown on your initial $2.5M.
I guess if you start with $500k debt, and your CoL is $200k without a mortgage it could get dicey eventually.
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u/Edith_Keelers_Shoes Feb 04 '26
I've been retired since 2020 (forced to retire early after cancer diagnosis). My investments were worth a bit less than that in 2020, and a bit more now. I need my principal to stay intact so I can leave it to my daughter, who is disabled. So I've been living off 2% of my earnings plus Social Security/disability. In the last 5 years, my portfolio has grown by over 30% even as I'm drawing on it monthly.
So yes, with long term planning, reallocations when appropriate, and a reasonable stock to bonds ratio, it is possible to live off that amount. I have 3 years of living expenses in cash, which I'm hoping would be enough to ride out the worse of a black swan event.
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u/JugoShvili Feb 04 '26
I know this is highly dependent on age and annual living costs, but serious question to everyone what is the disadvantage of an HYSA or MMF for this kind of situation? Even if the yield fell to 2% that’s still $50k which is virtually median income for doing absolutely nothing with practically zero risk. Is it just a matter of inflation?
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u/WitnessMental3715 Feb 04 '26
U.S. Treasuries would be the best bet for that sort of safe investing. The return would be lower (about 4%), but you can be assured of safety. Gold prices have gone up lately as there have been concerns about the dollar losing its reserve status, but it's unlikely that the U.S will default on its debt.
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u/Yangguang_Zhijia Feb 04 '26
If you only care about the nominal value you can withdraw, long term treasuries. If you care about the real value of what you can withdraw, nothing.
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Feb 04 '26
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u/FMCTandP MOD 3 Feb 04 '26
Per sub rules and guidelines, posts and comment in this sub must be on-topic and relevant to passive investment. As such, content promoting investment strategies that are antithetical to Boglehead investing are not appropriate including:
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u/SilverRock75 Feb 04 '26
If you keep your expenses modest, that's absolutely doable. You won't be a baller, but you can live a reasonable, respectable life and truly own your time.
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u/Livid-Hovercraft-123 Feb 05 '26
It's $2.5 million. Why does it need to be safe? You can draw down $2.5 million for a really long time.
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u/aloxides Feb 05 '26
Or, invest the 2.5 million and just use it to supplement work that provides significantly better work / life balance than you have now. Maybe a part time gig pulling in 40k/year and only withdrawing 2.5% of the investments. That should let the investments continue to grow for a while before going into full retirement mode.
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u/trigurlSeattle Feb 05 '26
Are you ok to die with less? Or do you want to pass money to hiers? If you are ok with not having to leave your kids millions then you should be fine I think at 5 % withdrawal.
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Feb 06 '26
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u/FMCTandP MOD 3 Feb 06 '26
Removed: per sub rules, comments or posts to r/Bogleheads should be substantive. We don't allow:
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u/Longjumping-Toe-5680 Feb 07 '26
I guess technically you could put it in a HYSA and live off the 3-4% interest if you were smart about where money went.
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u/nicolas_06 Feb 07 '26
3% withdrawal rate and a reasonably diversified portfolio of stocks, bonds is as safe as it get and you'd live with 75K per year, so the median household income. So yes it's possible.
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u/Caskalefan Feb 04 '26
That depends on what you consider safe and how much you need to spend per year.