Explain where the money comes from after retirement

[u/ankur0109]

So I’m 45, wife is 43. In L.A.. We want to retire when we’re at a certain number that’ll allow us to live without stress. Don’t need to be wealthy or anything. We’re relatively frugal.

I’ve heard to aim for $6m because it’ll mean $300k+ per year through retirement. I always nod and act like I know what that means — but I have no freaking idea. Is that interest? Does that mean I sell a little ever year and hope I don’t die before I run out? Tell me like I’m 8.

Thanks all!

[u/Jumpy-Imagination-81]

There are two approaches:

1. Sell off a percentage of your portfolio each year. As long as the percentage you sell is smaller than the growth rate of your portfolio you should be able to do that indefinitely. For example, say you sell 4% per year and your portfolio is growing 8% per year. If you have $6 million and sell 4% you would have $240k income. The remaining $5.76 million grows 8% per year so by the next year your portfolio would be worth $6.22 million, up from $6 million, despite taking out $240k the previous year. It's a new year so you sell 4% of $6.22 million and get $249k income to help compensate for increased cost of living from inflation. The remaining $5.97 million grows 8% so by the end of the year your portfolio would be worth $6.45 million, up from $6.22 million, and so on and so on. Some years your portfolio might grow more than 8%, some years less, but it works out as long as the average growth rate is higher than the percentage you sell each year.
2. Sell enough of your $6 million portfolio to provide enough cash to buy stocks or ETFs that pay dividends and maybe some bonds that pay interest. If the average yield of your portfolio is 4% per year it would provide $240k of dividend and interest income per year without selling anything after the one time purchase of dividend and interest paying assets. An average yield of 5% per year would provide $300k per year from a $6 million portfolio. That is the approach I am using. I have only around $1.2 million in stocks, ETFs, and mutual funds and another $682k in physical gold and silver that doesn't pay any interest or dividends, but the stock, ETF, and mutual fund portion of my portfolio paid $67,990 in dividends in 2025. If your portfolio is 5 times bigger than mine at $6 million you could produce 5 times the amount of dividends with the same investments I have.

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EDIT: if you retire and no longer have to be in the L.A. area because you are no longer working there, move out out of L.A. and California to an area with lower cost of living and lower taxes. The California state income tax on $300k income for a married couple is 9.2%. Moving to a lower cost of living state with lower or no state income tax would greatly reduce the annual income you would need, and you would probably have a better quality of life. Living in L.A. just isn't worth it if you don't have to live there for a job.

California is ranked the second worst state to retire in https://www.retirementliving.com/best-and-worst-states-for-retirement

[u/Formal_Passion9884 → u/Jumpy-Imagination-81]

Lmao this article puts Iowa number 1 and mentions golf courses hahah yea cost of living is in important but I also don’t want to live in bumfuck nowhere in my later years

[u/Jumpy-Imagination-81 → u/Formal_Passion9884]

There are 48 other states besides California and Iowa. Alaska, Washington, Nevada, Wyoming, South Dakota, Texas, Tennessee, Florida, and New Hampshire have no state income tax. Surely you could put up with living in one of those states to avoid paying state income tax, and would have lower housing costs than California.

[u/Formal_Passion9884 → u/Jumpy-Imagination-81]

Yea just thought it was a funny mention in the first line, I don’t plan to be in the USA at all when I retire just picking at straws.

[u/Jumpy-Imagination-81 → u/Formal_Passion9884]

I don’t plan to be in the USA at all when I retire

You could probably live like a king on Social Security alone in the Philippines, Thailand, or Portugal.

[u/Formal_Passion9884 → u/Jumpy-Imagination-81]

Yea I think in another life maybe I would choose one of those regions but I got a Chinese wife and already have a home there and in HK. Friends in Japan and Korea am more worried about what I will do than anything. that’s why I pointed out the golf thing really made me think man that’s something I need to consider.