Yes, if you want to retire early and you need $10M invested to produce enough [safe] income for what you need, then you will indeed need to save quite a lot over 30 years. That’s not a major revelation to people who have discussed this topic for decades (almost 3 decades now!) Heck, in general a 10% savings rate is nowhere near enough ($40k on a $400k income), usually a 20% savings rate is the minimum when considering early retirement, so that would be saving about $80k of a $400k income. Obviously, this is for typical cases, normal saving, normal investing, maybe 7-10% a year gains, it doesn’t refer to “lucky” folks, like those who happen to work for Nvidia (or similar) for 5-10 years and have been granted stock and options that are now worth many millions over just a few short years.
As I mentioned earlier (I think in this thread), $400k income for MFJ+2 kids doesn’t have a particularly high tax bracket today at 24%. I think there is quite a good chance that in retirement their bracket could be higher in many years, and it will almost surely be higher once one spouse dies (and even if not higher per se, much more of the single’s income will be taxed at the marginal rate, than what their joint income was taxed at before the death of one spouse).
I don’t think this is true. There will definitely be years in which they have higher taxable income. For example:
- The year they sell their house (for $2M that they bought it for $300k twenty five years ago). Total income = $250k from investments + ($2M - $300k basis - $200k improvements - $500k exemption) = $1.3M income that year.
- The first year after retirement, when the 6 month time period has elapsed and they have to dispose of all the stock options they’ve earned over the last 10 years (and held because their company stock price was steadily increasing). Total income = $250k from investments + $1.2M option exercise (all ordinary income) = $1.45M income that year.
- Six years later, one of the stocks they hold in their taxable account has shot up by 10X and is now 75% of their account. They are strongly urged to diversify, so they sell 80% of it resulting in a long-term capital gain that year of about $1M. At least that is taxed at only 23.8%, but it pushes up ALL their other ordinary income (pensions, social security, interest, non-qual divs, etc) into the highest tax bracket.
- Fifteen years later, they are getting older, and they realize that an entire year has passed and they haven’t used their second home by the lake, they just don’t have the energy to pack up and set up home there anymore. So they decide to sell it. They sell it for $750k, the basis is tiny because they bought it way back after a big financial housing crisis for only $135k. Income that year = $300k from investments + $38k from social security + $19k from spouse social security + $25k from pension + ($750k - $135k - 50k improvements) = $947k that year. In very high tax bracket.
So there will be some years with a higher tax bracket. And then suddenly 18 years in, one spouse dies. BOOM, almost all that income, and since most of it is derived from investments it remains, is taxed at higher rates, and you are permanently in a higher tax bracket (unless you get remarried, of course). Therefore, this couple is VERY likely to be in a higher tax bracket for quite a few of the years after retirement.
(And I didn’t even mention that there could easily be various changes in tax law over that period of time that could increase their tax bracket.)