I recently crossed $1M in savings. [...] I'm 41.
So you'd have a gap of $0.5K-$1K per month, i.e. $6K-$12K per year, to fill by withdrawing from your savings. The upper end of that range is $12K / $1M = 1.2% of your savings per year.I'm 'Digital Nomad' and spend between $1.5K and $2K pcm in a very LCOL part of the world. If I did lose my 2 clients I'd be down to between $1K and $2K [income]
You may have heard of the "4% rule" for retirement, in which one can withdraw 4% the first year of retirement, thereafter increase the dollar amount for inflation, and have a very good chance of one's savings last for the 30 years of a "normal" retirement.
But if you were forced to "semi-retire" now, you might have more than 50 years ahead of you, in which case most people here would consider a 4% initial withdrawal rate to be too high. However, there is a related concept of "perpetual withdrawal rate", which maintains your savings at about the same level, even after adjusting for inflation. A commonly cited initial withdrawal rate for this case is 3%, with 2.5% for very conservative/fearful people.
So if you lost those two clients, you could easily start with withdrawing 1.2% per year, adjust the dollar amount for inflation, and still have your savings grow over time, of course at a slower rate than if you were not withdrawing anything.
Even if you stopped working completely, your initial withdrawal rate would be only in the 1.5%-2% range!
Of course, all this assumes that you can maintain your spending at its current low level for the rest of your life. Nevertheless, for the near and medium-term future you have a lot of financial flexibility.
Statistics: Posted by 22twain — Tue Jul 16, 2024 5:23 am — Replies 23 — Views 1932