Sun Dec 01 2024, by Tyler Gardner

How to Retire Comfortably with $3 Million

I'm Tyler, a former financial advisor and portfolio manager. In this guide, I will share how I would live off of $3 million in retirement without ever running out of money.

Step 1: Invest in an Index Fund

I would begin by investing $2 million in an index fund that tracks the S&P 500, which would yield approximately $24,000 a year based on its small dividend of pre-tax income.

Step 2: Invest in Blue Chip Dividends

Next, I would invest $500,000 in a blue chip dividend stock, aiming for a return of 4% to 5% per year, generating an additional $20,000 to $25,000 a year pre-tax.

Step 3: Money Market Funds

The remaining $500,000 would be distributed across money market funds, expecting to receive another $20,000 to $25,000 a year pre-tax.

Step 4: Monthly Withdrawals

I wouldn't want to live off of only $75,000 a year. Therefore, each year on the third day of each month, I would sell 0.5% of the S&P fund, providing an additional $10,000 a month.

Step 5: Dollar Cost Averaging

Why sell each month? Statistically, 75% of the time, markets are higher at year's end than at the beginning. This approach allows me to dollar cost average out of my holdings.

Step 6: Sustainable Withdrawals

This strategy would draw down my S&P fund by about 6% per year, while knowing that the stock market has historically returned 7% per year post-inflation. This means my principal could continue to appreciate while I lived off of approximately $200,000 a year.

If you found this information helpful, please like and follow for more tips on achieving your financial goals.

Source