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If you have $5 million in total assets and you’re interested in retirement, the good news is that you can sustain a pretty hearty annual income from withdrawals for many types of lifestyles and at a variety of ages.
We think you need three things to retire successfully with $5 million:
Here we’re talking about not only traditional retirement accounts like 401(k)s or IRAs, but also things like capital gains on business assets or brokerage accounts. If a majority of your savings is within pre-tax retirement accounts, such as a 401(k) or traditional IRA, you’ll need a Roth IRA conversion strategy as well to help avoid significant tax expenses later in life.
An investment plan that is low-cost, and straightforward, can last for decades, especially if you’re retiring early.
As you build investable assets nearing $5 million, fees on your expenses can easily begin to eat up many tens of thousands of dollars per year. It would not be unheard of for a portfolio of $5 million to have a total cost of $75,000 per year after paying a financial advisor and a mix of high cost mutual funds.
At Arnold & Mote we are flat-fee advisors, so your investment balances over time are not eaten up by growing by a percentage fee for investment management.
You need a diversified mix of short-term and long-term holdings in stocks and bonds to help fuel your current lifestyle and not be so complicated you can’t understand investment performance on your own.
We utilize low cost index funds for our clients with expense ratios under 0.10%. These low costs plus out flat fee can save you tens of thousands of dollars per year in fees.
A charitable plan becomes even more important in this asset range. Chances are with $5M, you’ll have a significant pot of savings left over after your lifestyle needs are met, and you may want to consider how to put that money to work in your broader community.
Things like Qualified Charitable Distributions, Donor-Advised Funds, and charitable annuities all have a place in a comprehensive charitable plan at this asset level.
You can flourish while retiring with $5 million, but a comprehensive plan that addresses taxes, investment choices, and charitable giving will ensure your satisfaction for decades to come!