A Personal Finance Blog for Malaysian: How much money you need to feel rich?

Wednesday, November 3, 2010

How much money you need to feel rich?

CNN Money asked people how much money they needed to feel rich. As you might imagine, the answer varied widely. Even answers from the experts varied widely -- they said you needed "somewhere around $2 million to $12 million in savings" to feel rich. The difference makers: what age you are (younger people need  more money so it lasts longer) and where you live (you need more money to live in more expensive markets.)

This is entirely the wrong question for me. I don't care about feeling rich. What I'm shooting for is retiring comfortably with a solid income (from investments) and plenty of extra money so there's no danger that I will ever run out of it.

As such, I think $3 million is the right number for me. From that amount I can earn $120,000 per year (at 4%). Since I only need $70,000 per year to live at my current (very comfortable) standard of living, I can still sock away $50k per year and I'll never run out of money. Pretty sweet, huh?

Then again, if I wanted to push it, I could make due on $2,000,000. At 4% I'd still earn $80,000 and not have to touch my principal. But that's a bit too close for comfort for me, so I'll wait until at least $2.5 million before I retire.

Of course, I could plan on spending some of the principal and retire a good amount lower than $2,000,000. But that's too risky for my taste.

Besides I have two big expenses that I need to navigate before I'm "home free" retirement-wise: pay for college for my kids. Once that is done my major expenses will be over and I can really focus on moving towards retirement.

How about you? How much do you think you'll need to feel rich? Or how much do you think it will take for you to retire completely?

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