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Advisor outlines return target for $1.25M retirement income plan
The advisor says a 5% return would support $50,000 annual income from $1 million, but inflation and estate goals could raise the required return.
Yahoo Finance’s financial advice column discusses how a retirement saver with $250,000 in cash and about $1 million to invest, with no debt, could target $50,000 in annual retirement income.
The column frames the problem as a required return calculation, noting that earning $50,000 per year from $1 million implies a 5% return, which it says could be possible through products such as a single-premium immediate annuity.
It also warns that if preserving principal is important, future inflation would likely require a higher return than 5.0%, and if the saver plans to leave an inheritance, the desired amount to pass on would further affect the return needed.
The piece emphasizes that investment decisions should start with the saver’s broader goals, including whether to preserve principal or spend it down over retirement.