Would that were true. Take 10% of the top for an agent. Then consdering the top Federal tax bracket is 39.6%, the Minnesota take is 9.85%, he would take home approximately $445K annually. If he were extremely conservative in his spending he would net $400K a year. Over 3 years he may have $1.2M still in the bank.
5% ($60,000) is a relatively aggressive withdrawal rate if you want your money to last for 30 years, let alone the rest of his life, given market fluctuations. 3% or $36,000 is more realistic.
Bottom line...get a degree and plan to use it.
Well...the two of you are talking at cross purposes. 45North is assuming that is you have $X it would earn X% and you take that to live on. His/her example was 5% gain on $3MM. That is flawed for many reasons; for example, consider the possibility of another 2008. People living a certain lifestyle on $150,000/year simple can't live that same lifestyle at $100,000/year. And they won't. They'll take more from their accounts assuming that good markets in the future will make up for it. (Spoiler alert: They won't)
And you are correct that a 5% withdrawal rate is aggressive, when we're talking actual withdrawal rates. Actuarial models show that a 5% withdrawal rate would last ~24 years before you exhaust your money. 6% would last 17 years, etc.
Here's what those models are really trying to illustrate, and I'll use the widely cited "
Fidelity Insights" study.
In that example, they go back to 1972, and "retire" with a balanced portfolio (50% S&P 500, 40% Agg Bond, 10% T-Bills) of $500,000. So now we set a budget and some rules. We will withdraw an annual rate of 10%, 9%, etc. to see how long our money will last using the actual market returns of that portfolio.
Very important rule: each year we will also impute the actual rate of inflation experienced during the study and increase the amount withdrawn. When you decide how much to withdraw, you are setting your budget for the rest of your life. If you lived a certain lifestyle by withdrawing X% the first year, the next year it will cost the same dollar amount
PLUS the rate of inflation. If we tried to withdraw 10% + inflation, our money would have lasted 9 years. 9% almost 10 years. 8% adds another year. 7% adds 2 years on top of that. 6% gets us out to 17 years, and 5% runs out at 24 years. 4%, or $20,000 the first year? We'd still be fine.
The illustration in the link I provided stops the study at 35 years, and appears to end just before the Great Recession started. They have an updated version that I can't find an image online that runs it out until 2015, and we would have survived the Great Recession, be roughly 109 years old, and paying ourselves an inflation adjusted $112,000 (give or take some tip money).
After the Great Recession, some people prefer to model it using 3% withdrawal, but this study starts a time where we had a prolonged flat to down market (S&P on 1/1/1972 - 103.30, 1/1/1980 - 110.90) and high inflation (1972-3.2% lowest, 1980-13.5% highest with a couple of other double digit years), so I still feel comfortable with 4%
QED
