Grant Cardone: $5 Million Is Now the Magic Number for Retirement Savings
Grant Cardone, a private equity fund manager and real estate investor, is proposing a new federal financial education program that would improve financial literacy across the U.S. Cardone’s Financial Freedom for All program would focus on teaching a number of important money lessons, including how much you need to have saved for retirement and how to get there.
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According to Cardone, the traditional $1 million nest egg goal is now grossly insufficient. Instead, he believes every household should have a target of $5 million of assets under management to retire.
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Longer Life Spans Require More Money in Retirement
Americans can now spend multiple decades of their life in retirement, which means they need sufficient funds to pay for this longer time out of the workforce.
“The time of death is now extended to about 84 years old and unless you’re a millionaire and above, you have no chance of even funding retirement,” Cardone told GOBankingRates. “Even a millionaire won’t be able to fund retirement based on those numbers.”
If you retire at 63 with $1 million in savings, you will run out of money.
“The old guidance was at 63 you would start your retirement, and you would start withdrawing 4% a year,” Cardone said. “Well, based on that, you only have 25 years to withdraw. You literally won’t have anything to pass on to your heirs. So you will have saved for a lifetime, invested for a lifetime, only to end up with zero when you die.”
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Cost of Living Has Also Increased
In addition to living longer, retirees now have higher costs to contend with.
“If you have to pull 4% out of the million dollars, that’s only $40,000 a year to live on,” Cardone said. “With the cost of living, you can’t live on $4,000 a month, even in retirement. Just food and rent is going to consume that four grand.”
A $5 million nest egg would allow retirees to live comfortably and have money left over to pass on to future generations. As Cardone explained, if your $5 million in investment assets paid returns of 5%, that’s $20,000 a month in passive income.
“The cost of living is probably $80,000 a year,” Cardone said. “Five million dollars would be the target of money invested that is paying you on a monthly basis. That money paying them at 5% would pay somebody enough money to fund all their problems, all the assistance, all the food, all their expenses without them ever having to tap into the failing government programs.”
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This article originally appeared on GOBankingRates.com: Grant Cardone: $5 Million Is Now the Magic Number for Retirement Savings