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You don’t need $10 million to retire

12 April 2019

First things first, $US10 million like the figure Ms Orman quoted is over $AUD14 million. At an assumed earning rate of, let’s say, 6% p.a., a fairly reasonable amount, that $14 million would return about $840,000 after one year, which is significantly higher than the average surgeon’s salary. 

Even in a standard savings account or term deposit, $14 million would go a long way. If you put $14 million in a savings account with a 2.80% p.a. interest rate (fairly high by today’s low standards), you’d earn nearly $400,000 in the first year purely in interest. This assumes your savings account doesn’t have a cap on the amount that can earn the maximum interest rate, which a lot of them do. But even a reduced interest rate would still earn you a fortune. 

You’d get similar figures with term deposits. If allowed to invest that full $14 million, a five-year term deposit at 3.00% interest could earn more than $2 million in interest. 

A lot of these calculations are hypothetical, but the end message is the same: the money you have in retirement is not meant to be stuffed under your bed. It’s meant to be working for you, long after you yourself have finished work. One of the fundamentals of retiring is having enough passive income (such as through dividends and interest from investments) to provide for your daily needs.

Read more on Savings.com.au.

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