$10 is an incredible amount of money. It’s likely more than most of us will see at once at any time in our lives! I’m sure there are many questions that most of us would have with such a large sum. What can the $10 million lifestyle get you? How much passive income can you generate from $10 million dollars? How long will $10 million last in retirement?
It all depends on what the returns you generate from your investment portfolio, whether you’re generating any supplemental income, and the level of expenses your incur.
Let’s take a look at what you need to know.
How do I make $10 million?
There’s no fast track to a $10 million lifestyle. Many people make this kind of bank by carefully investing, buying and selling companies, or building on an inheritance. In fact, some of the richest people in the world are only so wealthy because of compounding and growing asset valuations.
You probably won’t make $10 million from a regular paycheck, but providing you save and invest wisely, there’s no ceiling on how much you could earn over a lifetime. If you’ve come into some serious money lately, why not look at the best ways to invest those millions and grow that income further?
Is $10 million considered rich?
Yes, having a net worth of $10 million is considered rich. According to the latest survey from the US Federal Reserve, a net worth of $10 million puts you in the top 2.5% of the households in the US by net worth. In fact, $10 million is considered high enough to be classified as very high net worth.
I’d say that’s rich!
Liquid Assets vs Total Net Worth
When talking about net worth, it’s important to consider whether we’re talking about liquid net worth or total net worth. If it’s total net worth, it includes the value of your home minus any mortgage. The obvious issue is that if most of your wealth is tied up in your primary home, it likely does not generate any cashflow for you. The true question then becomes how much liquid capital do you have that can generate returns for you.
If you have $10 million in liquid net worth, then it’s a different story, as it means the value of your investment portfolio, savings, rental properties (minus any mortgages) is worth $10 million. These assets generate returns for you which can be used to fund your lifestyle on an on-going basis. Alternatively, you can sell them down and generate big chunks of cash of which you can use to buy vacation homes or nice cars, or leave behind as a legacy in a charitable donation.
Can you retire off a $10 million?
The answer is a resounding Yes! A retiree with a moderate risk tolerance can plan for a long-term average return of at least 5% when invested in a balanced portfolio. The average annual income would be anywhere from $400k (with an $8M portfolio) to $500k (with a $10M portfolio).
I don’t think there should ever be any doubt about whether you could live comfortably with this level of cash. Even invested conservatively, there’s enough retirement income from your portfolio to live a very comfortable life for an indefinite period of time!
Of course market and economic conditions will cause the year-to-year values to differ, so please remember to plan accordingly. Let’s dig in to the details below.
Expected Return Ranges
Let’s assume that your liquid net worth is $10 million and let’s look at some ranges for how far that money will go. If you put the money in relatively secure savings account or money market funds, you can expect to generate an interest return of at least 3-5%. This of course varies over time. Given how high interest rates have climbed, currently even 5% could potentially be considered as nearly risk-free income.
If you step up a few risk levels and invest all the money in the stock market in a 100% equity fund, you could generate up to 8% on average, but with some volatility from year to year.
This puts your expected average annual pre-tax return on $10 million in the $300,000 to $800,000 range. This is equivalent to $25,000 to $66,666 per month of pre-tax income. Any additional income that you expect to generate – from employment, a pension, or your business – will of course be on top of this.
Now let’s look at the same figures assuming your total net worth is $10M. If your home is worth $2 to $3M, then your liquid net worth is between $7 million to $9 million. These liquid assets are what will generate income for you and what should be used to calculate the passive income generation.
The table below shows the passive income you can generate from a portfolio ranging in size from $7 million to $10 million.
As you can see, the range of income is quite wide, so what you can do really depends on both how you have invested the money and how you spend the money.
It’s worth mentioning that even at $300,000 of annual income – essentially just living off the interest on $10 million dollars – you’re already in the top 10% range of household income. Not bad at all for a very secure income stream coming from interest on a savings account!
If you want much more detailed calculations, please use our retirement calculator to help plot out your specific situation. You financial advisor can also help you build a portfolio with the correct asset allocation for your target needs.
Looking at the stats, an average family of four (two adults and two kids) has an annual expenses of around $100,000. This figure includes housing costs. If your home is fully paid off, you can knock-off $30,000 from that figure, so the annual expenses will be in the range of $70,000.
Of course the expenses of a family with $10 million in net worth will likely be much higher than the $100k for an average family. Nevertheless, this is a a good reference point. Even if you double or triple that figure (and this would be after-tax expenses), you’re still only at the lower end of the ranges presented in the table above.
Let’s take a look at a few other important factors to keep in mind.
Taxation is complicated topic, so it’s best to discuss this with your financial advisor from an early stage. Depending on which types of accounts you saved your money in, your tax rates can vary dramatically when you’re withdrawing the money.
If you own a business you’ll have to take in to account how potential business income or a sale of your business will impact your finances.
Although it’s boring, it’s important to spend time at an early stage for your retirement planning is crucial. The last thing you want is to have your millions of dollars locked up and subject to very high tax rates on withdrawal!
Do remember to take it in to account in your calculations if you are over 60 years in age. You can start to draw on Social Security once you cross the age of 62. The longer you wait, the more you can withdraw annually, but of course you have to balance that off with your expected lifespan and your health situation.
The SSA has a useful tool to help you plan your social security income. You can also get an estimate of your benefits from their website.
If you do own a business or have a skill you can deploy in your retirement – whether it’s an early retirement or an on-time retirement – do remember to take in to account any additional income you may receive.
Finally, please remember to think beyond just the stock market for your investment opportunities. For example, you can invest in real estate to generate rental income that is hopefully uncorrelated with the financial markets. The real estate doesn’t have to just be residential homes. You could look at multi-family housing units, commercial property, RV parks, etc.
Using modest leverage can help boost your overall return on investment. Of course managing a property means some work is needed on your part, so it may interfere with your retirement plans. One option is to outsource this work to a reputable agency.
As we’ve seen, a $10 million portfolio can throw off lots of cash each year. If you’re ever in a situation where there is more money at the end of the year that has not been used, I recommend reinvesting the money back in to your portfolio. This helps to keep building up your portfolio value which will help boost your future dividend income and boost your financial security.
What are some perks of the $10 million lifestyle?
Perks of having $10 million include being able to afford a very nice home or two, high quality vacations, very nice cars, and generally enjoying a luxurious lifestyle! Most importantly though, it puts you firmly in the camp of being financially free.
While money may not be everything in the world, it does have a big impact on day-to-day stress levels. And wow it would be great to not have to deal with the daily work commute or with an annoying boss!
Being Financially Free – The Basics are covered
More than anything else, being financially free is the biggest reward that one can get with having such a nice pot of cash. People define financial freedom in different ways. We choose to define it how Robert Kiyosaki did in his famous book, Rich Dad Poor Dad: when your passive income (returns from investments and assets) are more than sufficient to cover all your needs (bills, mortgages, living expenses, etc.), you are financially free!
As outlined above, even at the lowest end of the range, the income generated from your liquid wealth will be more than enough to cover your core expenses, which puts you in a very comfortable spot!
This means that you no longer have to work to simply to pay your bills or keep your family fed. You have the option of retiring, or you can choose to pursue a lifestyle hobby – like traveling the world, or you can even pursue entrepreneurship! Once you no longer have to work to pay the bills, your mind is free!
From this point forward, your life is only limited by your imagination and your expenses. As long as your expenses remain under control, not only can you live your life comfortably, but you can easily pass on the remaining money to your children or relatives as an inheritance.
It’ll keep your family housed
I think it’s fair to say that under most circumstances, with a net worth of $10M, you have the ability to pay off your mortgage (should you still have one) and eliminate a major debt overhang. An average household spends 31% of their expenditure on housing, so if you’re able to eliminate that cost, you’re annual expense requirement will drop considerably.
Of course whether you choose to pay off your mortgage or invest the cash depends on many factors. On a pure financial basis, it comes down to comparing the after-tax interest rate on your mortgage with the after-tax returns from your investments. If the two figures are relatively close, it might make sense to just pay off the mortgage and eliminate a big debt overhang over your head! Reducing and eliminating debt is one of the best ways to reduce to finance-induced stress in your life.
It’ll keep your family fed
A fortune of $10 million will, at least, give you something to be grateful for. In an age where many people struggle to feed themselves, $10 million will handily cover most basic necessities and then some. On average, US households spend between $420 per month (single person) to $1,000 a month (family of four) on food. This works to between $5,000 to $12,000 per year. You will have more than sufficient income to cover this aspect of your needs!
You will not have to worry about bills
A resounding response from millionaires on this question revolves around regular bill payments. While housing and inflation may start to sap away at your savings, it’s safe to say you can ignore some of the smaller expenses you’d otherwise budget carefully for.
For example, think about electricity, gas, phone bills – even Netflix and Amazon Prime. These costs are likely to feel very small when you have liquidity of $10 million available. It’d be nice to ignore these costs once in a while…!
It’s nice to know that, at least initially, there’s some financial comfort to be had.
The Fun Stuff – What can I do with $10 million?
Of course when we think of being rich, it comes down to the luxuries of life! How much you can splurge ultimately depends on how your portfolio is structured. Do you plan to run down your portfolio to $0 over your life? Or do you plan to live purely from the returns and pass on the portfolio to your heirs? Both scenarios are wildly different and can impact how you spend the cash. The following sections outline the latter scenario.
You can take a nice annual vacation
Who doesn’t like vacations? With a $10 million dollar investment portfolio, you can certainly generate hefty returns and use some of that to fund a nice vacation. If you’re going to a fancy location with your family and flying first class, you could potentially afford to do that once per year. You could probably afford one vacation that costs $50,000 to $100,000 per year. Or you can split that amount up in to multiple buckets and take multiple vacations!
Of course it all depends on how much income you’re generating from your portfolio and other sources and making sure all your basic needs are covered first.
You can’t take the private jet yet
When we dream of being millionaires, the first thing that comes in to people’s mind is a private jet (or a yacht). After all, it is the ultimate status symbol!
Unfortunately, even having $10M in liquid assets may not be enough to help you take a private jet. Using a shared jet service like NetJets would cost you something like $6,500 per hour at a minimum and you would need to sign up for at least a 50-hour commitment. This means you’re looking at a minimum bill of $325,000 per year. Ouch!
But no need to worry. You can still comfortably fly first class for a lot less and without any minimum annual commitments. That alone is more than enough for me!
You can buy a nice car or luxury gear
One nice aspect of already having a good pot of cash is that you no longer need to save. Any excess income in the year can be spent however you see fit. It could be a vacation, or it could be a nice car, luxury watches, purses, clothing, fine wines, etc.
Of course you also choose to upgrade to a brand new dream house! Why not? Just remember to ensure that you’ve accounted for all carrying costs – such as maintenance, upkeep, property taxes, and utility bills.
Enjoy this lifestyle – you’ve earned it!
Many people wish to donate to charitable causes that they believe in. If this is you, that’s fantastic! You could pursue this in two different ways – a lump sum contribution or annual donations. There are also multiple different tax-efficient ways to donate this money, such as directly through a stock portfolio (as opposed to pure cash). There are pros and cons to each method so this is best discussed with your financial advisor.
My personal preference is annual contributions, as retaining the money in your control gives you greater flexibility to deal with any contingencies. This could be a financial emergency in your family or it could turn out that you decide to donate to several different causes in varying amounts each year.
If you do wish to donate a lump sum, a good option would be donate it via your will. This gives you the best of both worlds – keeping your money over your life and then finally leaving a big chunk when you pass away.
Of course this is a deeply personal decision, so one has to decide what works for each person! Regardless, donating to charity is ultimately a good decision, and the details are just about what works best for your life situation.
Before You Go…
Having a $10 million net worth is fantastic and certainly brings with it great perks that most of us can only dream about. But there’s also a great responsibility. If you feel overwhelmed, please do consult a financial advisor to help optimize your financial security and maximize your retirement income.
If you’d like more information to read, you’ve come to the right place! Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles.
How long will $10 million last in retirement?
Depending on your asset allocation, you can expect to generate between 3% to 8% off a $10 million investment portfolio. This would generate between $300,000 to $800,000 of pre-tax income per year. As long as your spending levels are below what your portfolio generates after taxes, the money can last forever! If you wish to spend more than that, please use the retirement calculator to plan your drawdown.
Is $10 million enough to retire at 55?
Yes, absolutely. You can expect to generate between 3% to 8% from your investment portfolio, which means $10 million would generate between $300,000 to $800,000 of pre-tax income per year. As long as your spending levels are below what your portfolio generates after taxes, your $10 million portfolio can last from 55 to forever! Try our retirement calculator for your specific situation.
Is $10 million enough to retire at 60?
Yes, absolutely. You can expect to generate between 3% to 8% from your investment portfolio, which means $10 million would generate between $300,000 to $800,000 of pre-tax income per year. As long as your spending levels are below what your portfolio generates after taxes, your $10 million portfolio can last forever! Try our retirement calculator for your specific situation.
Is $10 million enough to retire at 50?
Yes, absolutely. You can expect to generate between 3% to 8% from your investment portfolio, which means $10 million would generate between $300,000 to $800,000 of pre-tax income per year. As long as your spending levels are below what your portfolio generates after taxes, your $10 million portfolio can last forever! Try our Fat FIRE calculator for your options.
Is $10 million enough to retire at 30?
Yes, absolutely. $10 million puts you in the top 2.5% of households in the US for net worth. You can expect to generate between 3% to 8% from your investment portfolio, which means $10 million would generate between $300,000 to $800,000 of pre-tax income per year. As long as your spending levels are below what your portfolio generates after taxes, your $10 million portfolio can last from 30 to forever! Try our Fat FIRE calculator for your options.