Personal Finance

I'm about to retire with $10 million saved in the bank - is it smart to just live off of dividends and interest for a few years

Marc Guberti

Published: February 10, 2025 10:03 am

A Redditor recently posted in the Fat FIRE subreddit to gauge if he’s ready to live off dividends and interest payments. The Redditor has $10.8 million in stocks and treasuries plus $650k in cash. This cash position is based on the $17k that he currently has plus a future $500k payout that he will receive.

The house and car are paid off, which makes it even better for the Redditor. A $12.8 million net worth combined with a $15k/mo projected burn makes retirement quite feasible. I will share my thoughts, but it is good to speak with a financial advisor if you can.

Calculating 3% and 4% Yields

Investors can find plenty of assets with 3% yields. While 4% yields are also possible, they come with more risks or lower returns. However, we will use these yields to see what the retiree can afford.

A $10 million stock and Treasuries portfolio that yields 3% generates $300,000 per year. That comes to $25k per month. Meanwhile, a 4% yield brings in $400,000, which translates to $33k per month.

Those numbers put the Redditor well above their desired $15k/mo in projected expenses. Those expenses come to $180k per year, so the Redditor really needs a 1.8% yield. It’s easier to find equities that yield 1.8% while presenting the opportunity for long-term gains. The Redditor can also opt to put some capital into growth investments and other funds into high-yielding T-bills.

The Redditor does have to anticipate taxes, but a $650k cash position is more than enough to compensate. 

Retirement Is Feasible At Any Age

The Redditor leaves out their age, but it really doesn’t matter in this case. A $10 million portfolio’s 1.8% yield is enough to cover the Redditor’s expenses, excluding taxes. It’s very easy for portfolios to make 2% each year, and the Redditor can gradually put more capital into relatively low-risk investments.

The math will always work out with finances. A smaller nest egg would make the Redditor’s age more important for this conversation. Many Redditors in the comments expressed the same sentiment. This person is ready to retire, especially with one more year at work to collect extra income. 

It happens that the Redditor is about to turn 50, but even then, it’s more than enough money to retire. 

No Need to Take Big Risks

The Redditor has done a good job for themselves, and a focus on dividend stocks and Treasuries is the right move at this stage. The more money you have, the less meaningful every additional dollar becomes. For instance, an extra $100k means less to someone with $10 million compared to someone who has a $500k net worth.

Chasing higher returns means incurring more risks, and it isn’t really necessary for the Redditor to take more risks at this point. An extra 30% return won’t do much to change the Redditor’s life, but a 30% decline will hurt. It’s not worth taking big risks once you have already achieved your financial goals. The Redditor should take it easy, consider defensive investments, and celebrate what they have accomplished.