Can a single 30 year old male retire and not have to work again with $600,000?

Question

My friend just inherited this amount of money after his mother passed away. It's all in his brokerage account, taxes paid already. Where would he have to move to and how would he have to live in order to retire and not have to work again and make this money last for the next 45 to 55 years. Do you think it's possible? Could he live a decent life?

Answer 1

The most basic rule-of-thumb would be that your friend can assume he'll generate a minimum income of about 5% per year from this lump sum over the next 30 years, if he invests it conservatively.

So: 5% x $600, 000 = $30,000/year income.

However, this assumes that he does not spend any of the capital (the original $600,000). Also, it does not take inflation into account, which will surely eat away at his money over the decades.

On the other hand, your friend may make far more than 5% per year if he invests more aggressively.

In summary, if your friend wants to play it safe with his money, then he will not have enough to live on for the rest of his life unless he moves abroad to a cheaper lifestyle.

However, if he is ready to play a little, he may build up his nest egg through active investing into a very comfortable sum .... but the trick is that takes work and it sounds like he's looking for ways not to work!

Here is a helpful article on the subject:

Answer 2

Sure your friend can retire. If your friend draws 6% off his investment, that is 36k a year. He can also set it up to increase that 36k by 5% every year to keep up with inflation. I would suggest he put it in a strong mutual fund. that is the only way he could do this. If he is getting 12% on his investment, that is 72k a year. If he is living off of 36k and the other half is being reinvested into the fund, that is like investing 36 thousand dollars a year on 6% interest. after 15 years or so that 600k will probably be doubled. Then he can draw 6 % off of $1.2 million, which is 72000 a year. Or he can draw 10% which is 120k a year. We've done this for numerous families. So if invested right he'll never have to work again unless he chooses to.

Answer 3

$600,000 principal and assuming x 5 % return = $30,000/year pretax or about $25,000 after tax. Sure a person could live on that, but its the equivalent of a job earning about $15/hour. Could he live a decent life? That depends on how you define "decent." Where could he live cheaply? A third world country...again depends if he would consider this decent. Or he could live in a rural area - the South or the Midwest or Michigan where the auto cutbacks have made housing cheap. Stay away from the coasts. He Probably can't retire if accustomed to the average American's standard of living. Therefore, he should NOT retire and expect to live on only this money AND expect to live a "decent" life. $600,000 aint what it used to be due to inflation.

Answer 4

He could retire anywhere he chooses...even where he is living today.

If the $600K was put into a simple savings - the return would be around $30 - $36K a year - that is a comfortable salary.

I would personally invest some of the funds to get a greater return - especially considering he is wanting to use this monies over a 45 - 50 year period.

Another perk to putting that much monies in a bank is that the bank will usually allow you to borrow against it paying only a % point more than you are earning. So, purchasing a house & autos - maintaining those payments and your friends credit would be very doable...

Hope this helps!!

Answer 5

No...He could live it up for a few years...but the money will go away real fast...

Its been said that a person that retires at the age of 65 will need at least 1 million dollars to retire to maintain a decent life style

That money probably could last about 15 years...tell him to keep working and invest it, or money market...Then in 10-20 years he maybe able to retire

Answer 6

If invested properly in CDs, bonds and other low risk investments, he could easily make 30k - 40k a year and live off that. He may consider moving to a cheaper part of the U.S. or even living in a country like New Zealand where the cost of living is about half what it is here in the U.S.

Realistically though, He will still need something to do or he'll start spending too much. This can give him the opportunity to work in something he may enjoy and not worry about how much it pays.

Answer 7

He'd make about 40,000$ a year before taxes, if he lived on the interest alone, in safer investments.

He could work part time, or he could wait ten-15 years and let the interest accrue. If I were him, I'd make sure my house was paid off first, with money from his current job before he retired. If you are living off of interest alone, you need to be able to cut your spending at a drop of a dime, because you don't want to touch your principal and the income could drop off temporarily at any time. Also keep in mind that inflation is about 3%, so if you make about the same amount of money every year, the value of that goes down 3%.

Answer 8

Probably not. Part of the reason is that he's only 30 years old. The other reason is that $600K is not what it used to be.

Now, perhaps if he'd move to some really cheap place....a state without income tax, like Texas or Nevada, he could make it. But, who wants to live out the next half century in a one bedroom apartment, with kids crying and dogs barking next door, thru the cardboard walls?

Answer 9

Assuming his lives the average life expectancy of 85, and including expected Social Security earnings later in life, your friend would have to live on approximately $22,000 a year for the rest of his life. And since he has no job, he would have to pay for his own health insurance.

Your question is excellent. I am not an investor. And I don't know diddly about money, but here is a website investment calculator which gave me that information. Your friend should definitely consult a financial adviser. (probably more than one since their advice can differ greatly)
http://moneycentral.msn.com/retire/planner.aspx

Answer 10

Look at it this way: in order to generate income of $150,000 per year, it would take $3,000,000 invested conservatively at 5%. Your friend already has $600,000, so he'd need to double that about 2 1/2 times. Invested a little more aggressively so as to return approx. 12%, your friend could grow that $600,000 into $3,000,000 in about 15 years. Then he could live pretty much anywhere in the U.S. that he wants to.