$1M to live on? Not even close to live comfortably. If you want to live like a hermit, watch every dime you spend, and hope there is no recession (there always is and can last a couple of years), then yes, you could get by.
None of the posts above included medical expenses, new cars, large car repairs bills, vacations, hospices expenses, home repairs, maybe redecorating/furniture expenses, etc.
No lose of principal? If you know what you are doing, yes, but 99% of the people don’t. Right now, the majority of the people have to sell some of their portfolio while the market is down, this is the worst scenario that can happen because when the market recovers, you have less in the market to get you back to where you were. Never allow this to occur. There are easy ways to not allow this to happen but most don’t do them.
Another thing to consider: how much are you making each year? Somebody said above you get 4% from your bank. Today yes, but normally you will get < 1%. Even at 4%, you are still losing money to inflation. You were getting 4% when inflation 2 years ago was triple that rate. You will never MAKE money when earning less than the inflation rate. But let’s say you are making 4% and inflation is 2% and you pull out the standard 4% each year to live on, your principal is already down 2%. And this is the best scenario.
If you base your portfolio on a the normal growth rate per year, then you better have have your portfolio setup so you never pull from it during a downturn in the market or you live long enough for the market to recover. For example, the average loss during the 2097/2008 crisis was around 40%. So take your $1M portfolio and decrease it by $400,000, now you have $600,000. If you take your 4% out per year, it’s now $24k you take out, not $40k because your base dropped. So do this for the average of 18-24 months that a recession can last, and your portfolio is now $550,000. Then if you needed any type of large expenses during these 2 years, your portfolio could be down to $500,000. Now, how long will it take you to get back to $1M so you can pull out the $40k you need to live on? You need the market to double to get you back to were you were years ago.
This scenario is more realistic than anything else stated above. I don’t go by averages, I go by what if scenarios. I never pull a dime out of my holding when the market is down like this, and actually, I have available $$$ to get in when the market is down.
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