How To Access Your Money Once Retired
If you have let’s say $6,000,000 saved in savings accounts then you likely will have the money divided up between several FDIC-insured accounts so that if one bank goes down for whatever reason you are protected up to a certain amount. Currently, a bank offers $250,000 of FDIC insurance for your money.
As of this writing, 2015, you can’t even get 0.5% of interest rate from a bank. You may have a little better luck with CD’s but you would still get a return of less than 1% on your money on which you would have to pay taxes, so basically your money would lose it’s worth at a higher rate than it accumulates interest each year (because of inflation).
Once you retire you can take money off the top of your savings and use it for your daily expenses. If you spend around $150,000 a year in retirement well then your money might last somewhere around 40 years. Not bad if your life expectancy is less than 40 years.
If you have $6,000,000 invested in stocks/bonds and other paper investments you could expect a return somewhere in the $200,000 per year range. This is assuming you sell off some of the investments every year and get some dividend returns as well. Historically, your $6 mill would also likely hold it’s value or maybe even go up. I won’t go into it any further here, but we will discuss this again at some point.
You may do a combination of the above in order to diversify. You may have some cash holdings in savings accounts, you may have a CD-ladder, you may have some money invested in mutual funds and maybe even some money in real estate investments.
How Does Retirement ‘Income’ Work?
The reason I posted this is that some individuals don’t have any idea how they would generate “income” once they no longer work. This post isn’t even taking into account any pension income or social security income.
If you’ve read some of my writing you probably know that I am against you saving $6 million. Geez, people, getting to $6 million is a lot of work. Of course, if you love what you do then it does not even work and as long as you have a decent budget you likely have a church of bills stashed away. One of my colleagues, who retired last year, worked with our medical group since the early 80’s and left with $3 million in one retirement account, another $3 million in 401k’s and he had a pension worth $135k/yr. This isn’t taking into account his paid-off house and any personal savings. Big balla’!
As a quick example, if you have $800,000 saved and spent only $40,000 per year then your money would last 20 years if kept in a savings account. That same $800,000 could also generate $28,000 annually for those who don’t mind canned cat food for dinner, on occasion. J/K.
I have laid out a nice little 10-year career plan for a fresh new attending. With a paid off condo/house and a relatively simple lifestyle an attending with or without a family could easily live off of $30-40k annually. You could either generate all of this income passively (by investing $800-900,000) or you could work a small/simple part-time job making $20,000/yr and getting the rest of the income from $400-500,000 invested.