The $7 Million Net Worth Lifestyle - Is It Enough to Retire? (2024) (2024)

$7 million sounds like an incredible amount of money. It’s likely more than most of us will see at once at any time in our lives! So, what can the $7 million lifestyle get you?

It all depends on what level of expenses your incur, the returns you generate from your investment portfolio, and whether you’re generating any supplemental income. Let’s take a look at what you need to know.

Is $7 million considered rich?

Statistically speaking, yes, having a net worth of $7 million is considered rich. According to the latest survey from the US Federal Reserve, a net worth of $7 million puts you in the top 5% of the families in the US by net worth. In fact, $7 million is considered high enough to be classified as very high net worth.

However according to Fidelity research some years ago, US millionaires no longer see $7 million as enough to be considered “rich”. At the time of the study (back in 2011), 420 out of 1,000+ millionaires responding to a survey stated that they didn’t feel rich – with the apparent cut-off being $7.5 million.

Honestly speaking though, I’d say that this is a bit of a pessimistic view. It’s natural for everyone to feel that they’re still fighting the good fight and they’re the “Average Joe”. Of course someone else will always have a bigger house or better cars.

One valid point to take away from that survey is that a $7 million figure sum still has to be invested and spent wisely. It might not give you unlimited financial freedom, especially if you’re adept at splashing the cash.

Liquid Assets vs Total Net Worth

When talking about the $7 million of net worth, it’s important to consider whether we’re talking about just liquid net worth or total net worth.

Liquid net worth is the value of your assets (minus any debts) and excludes your primary residence. Depending on whom you speak with, liquid net worth may also exclude other assets such as a business that you own as it cannot be easily or quickly sold.

Total net worth, on the other hand, encompasses everything. It adds in the value of your home minus any mortgage plus any other illiquid assets that you may have.

The obvious issue is that if most of your wealth is tied up in your primary home, it likely does not generate any cashflow for you. The true question then becomes how much liquid capital do you have that can generate returns for you.

Having $7 million in liquid net worth is very different from having $7 million in total net worth. In the former, it means the value of your investment portfolio, savings, and even rental properties is worth $7 million. These assets generate returns for you which can be used to fund your lifestyle on an on-going basis.

Alternatively, you can sell them down and generate big chunks of cash of which you can use to buy vacation homes or nice cars!

How do I make $7 million?

There’s no fast track to a $7 million lifestyle. Many people make this kind of bank by carefully investing, buying and selling companies, or building on an inheritance.

You probably won’t make $7 million from the regular paycheck, but providing you save and invest wisely, there’s no ceiling on how much you could earn over a lifetime. If you’ve come into some serious money lately, why not look at the best ways to invest those millions and grow that income further?

Is 7 million enough to retire?

Yes, I think that $7 million dollars is more than enough to retire comfortably for most people. A retiree with a moderate risk tolerance can conservatively plan for an average annual return of at least 5%, when invested in a balanced portfolio. So your average annual pre-tax income would be anywhere from $250k (with a $5M portfolio) to $350k (with a $7M portfolio).

That’s enough money to live a very comfortable life for an indefinite period of time! Of course market and economic conditions will cause the year-to-year results to differ, so please remember to plan accordingly.

There are a few important details to consider, so let’s go through them here.

Expected Return Ranges

Let’s assume that your liquid net worth is $7 million and let’s look at some ranges for how far that money will go. If you put the money in relatively secure savings account or money market funds, you can expect to generate an interest return of anywhere from 3-5%. This of course varies over time.

If you invest the money in the stock market in a 100% equity fund, you could generate up to 8% on average, but with some volatility.

This puts the your expected annual pre-tax retirement income on a $7 million portfolio in the $210,000 to $560,000 range. This is equivalent to $17,500 to $46,660 per month of pre-tax retirement income.

Any income that you expect to generate (if you are still employed or are running your own business), will of course be on top of this.

Now let’s look at the same figures assuming your total net worth is $7M.

If your primary home is worth between $1 to 2M, then your liquid net worth is between $5 million to $6 million. These liquid assets, i.e. your retirement funds, are what will generate income for you and what should be used to calculate the passive income generation.

As you can see, the range of retirement income is quite wide, so what you can do really depends on both how you have invested the money and how you spend the money.

It’s of course quite a healthy income regardless, and you would easily be looking at a Fat FIRE retirement.

Expected Expenses

An average family of four (two adults and two kids) has an annual expenses of around $100,000. This figure includes housing costs. If your home is fully paid off, you can knock-off $30,000 from that figure, so the annual expenses will be in the range of $70,000.

Where you live can also have a big impact on how far that money stretches as local costs can vary significantly. If you live somewhere like California, for example, this fortune is likely to soon peter out. Using it in Ohio, meanwhile, is likely to get you a little more traction.

As a retiree, you’ll have to plan for shouldering higher than average medical expenses so please do keep that in mind. While in your working life you may have a corporate medical or health plan, in your retirement you will have to take on the full cost of such an insurance plan.

The good news is that once you cross the age of 65, you’ll also qualify for Medicare so that will help to defray a lot of your medical expenses.

Of course the other offset is that if you are older, you also may not have expenses tied up with raising children as they would have grown up and are hopefully self-supporting!

Finally, it’s also important to keep in mind that someone with a $7 million net worth portfolio may typically be used to a more lavish lifestyle than the average American family.

The good news is that even if you double the expenses of the average family, even with the lower end of the range shown above, it’s clear that a family can live fairly comfortably.

It’s worth mentioning that at $150,000 of annual income – essentially just interest income – you’re already in the top 20% range of household income. Not bad at all for a very secure income stream coming from interest on a savings account!

Let’s look at few other important points.

Income Taxes

Taxation can be a particularly complicated topic, so it’s best to discuss this with your financial advisor from an early stage. Depending on the types of accounts you saved your money in when building up your wealth, your tax rates can vary dramatically when you’re withdrawing that money in your retirement.

In addition to the typical 401(k) and Roth IRA, there is now also the option of the Roth 401(k), a relatively new retirement tool. In order to best determine your asset allocation, amongst other factors, you’ll have to account for current marginal tax rate and your future expected tax rates.

If you own a small business you’ll have to take in to account how potential business income or a sale of your business will impact your finances.

I recommend spend time at an early stage of your life for your long-term financial planning – even when it might seem like your retirement age is a long time away – is crucial. The last thing you want is to have your millions of dollars locked up and subject to very high tax rates on withdrawal!

Social Security

It might seem funny to talk about social security income for some in the multi-millionaire camp, but hey – it’s your money! Do remember to take it in to account in your calculations if you are over 60 years in age.

You can start to draw on Social Security once you cross the age of 62. The longer you wait, the more you can withdraw annually, but of course you have to balance that off with your expected lifespan and your health situation.

The Social Security Administration has a useful tool to help you plan your retirement income. You can also get an estimate of your benefits from their website.

Additional Income

You may have some sources of active income, but you could potentially look at generating some passive income as well.

Investing in a few properties to generate rental income is a great idea. The diversification of your investments beyond the stock market can potentially serve as a buffer when the economy or financial markets swoon.

Finally, as we’ve seen, a $7 million portfolio can throw off lots of cash each year. If you’re ever in a situation where there is more money at the end of the year that has not been used, I recommend reinvesting the money back in to your portfolio. This helps to keep building up your portfolio value which will help boost your future dividend income and boost your financial security.

What are some perks of the $7 million lifestyle?

Perks of having $7 million include being able to afford a nice home, high quality vacations, nice cars, and generally enjoying a relatively luxurious lifestyle! Most importantly, it makes you financially free.

While money may not be everything in the world, it does have a big impact on day-to-day stress levels. And wow it would be great to not have to deal with the daily work commute or with an annoying boss!

It’s also important to note that the millionaire lifestyle may actually not be that much more different than a “regular person’s” lifestyle. For someone on the outside looking in, this is in fact the most surprising. This is because most self-made millionaires often got to that stage by living a simple lifestyle.

They drive simple cars, wear normal clothes (not designer labels), and live in regular houses. Those who often look like millionaires, may not actually be so as they simply spend too much money and actually have no savings or investments!

Having said all that, let’s look at some of the benefits that come with having such a nice pot of cash.

Being Financially Free – The Basics are covered

More than anything else, being financially free is the biggest reward that one can get with having such a nice pot of cash. People define financial freedom in different ways.

We choose to define it how Robert Kiyosaki did in his famous book, Rich Dad Poor Dad: when your passive income (returns from investments and assets) are more than sufficient to cover all your needs (bills, mortgages, living expenses, etc.), you are financially free!

As outlined above, even at the lowest end of the range, the income generated from your liquid wealth will be more than enough to cover your core expenses, which puts you in a very comfortable spot!

This means that you no longer have to work to simply to pay your bills or keep your family fed. You have the option of retiring, or you can choose to pursue a lifestyle hobby – like traveling the world, or you can even pursue entrepreneurship! Once you no longer have to work to pay the bills, your mind is free!

From this point forward, your life is only limited by your imagination and the returns generated from your portfolio. As long as your expenses remain under control, not only can you live your life comfortably, but you can easily pass on the remaining money to your children or relatives as an inheritance.

It’ll keep your family housed

I think it’s fair to say that under most circ*mstances, with a net worth of $7 million dollars, you have the ability to pay off your mortgage (should you still have one) and eliminate a major debt overhang.

An average household spends 31% of their expenditure on housing, so if you’re able to eliminate that cost, you’re annual expense requirement will drop considerably.

Of course whether you choose to pay off your mortgage or invest the cash depends on many factors. On a pure financial basis, it comes down to comparing the after-tax interest rate on your mortgage with the after-tax returns from your investments. If the two figures are relatively close, it might make sense to just pay off the mortgage and eliminate a big debt overhang over your head!

Reducing and eliminating debt is one of the best ways to reduce to finance-induced stress in your life.

It’ll keep your family fed

A fortune of $7 million dollars will, at least, give you something to be grateful for. In an age where many people struggle to feed themselves, $7 million will handily cover most basic necessities and then some.

On average, US households spend between $420 per month (single person) to $1,000 a month (family of four) on food. This works to between $5,000 to $12,000 per year. You will have sufficient income to cover this aspect of your needs!

You will not have to worry about bills

A resounding response from millionaires on this question revolves around regular bill payments. While housing and inflation may start to sap away at your savings, it’s safe to say you can ignore some of the smaller expenses you’d otherwise budget carefully for.

For example, think about electricity, gas, phone bills – even Netflix and Amazon Prime. These costs are likely to feel very small when you have liquidity of $7 million available. It’d be nice to ignore these costs once in a while…!

It’s nice to know that, at least initially, there’s some financial comfort to be had.

The Fun Stuff

Of course when we think of being rich, it comes down to the luxuries of life! How much you can splurge ultimately depends on how your portfolio is structured. Do you plan to run down your portfolio to $0 over your life? Or do you plan to live purely from the returns and pass on the portfolio to your heirs?

Both scenarios are wildly different and can impact how you spend the cash. The following sections outline the latter scenario.

You can take a nice annual vacation

Who doesn’t like vacations? With a $7 million dollar investment portfolio, you can certainly generate hefty returns and use some of that to fund a nice vacation. If you’re going to a fancy location with your family and flying first class, you could potentially afford to do that once per year. You could probably afford one vacation that costs $30,000 to $50,000 per year. Or you can split that amount up in to multiple buckets and take multiple vacations!

Of course it all depends on how much income you’re generating from your portfolio and other sources and making sure all your basic needs are covered first.

You can’t take the private jet yet

When we dream of being millionaires, the first thing that comes in to people’s mind is a private jet (or a yacht). After all, it is the ultimate status symbol! Unfortunately, even having $7M in liquid assets may not be enough to help you take a private jet.

Using a shared jet service like NetJets would cost you something like $6,500 per hour at a minimum and you would need to sign up for at least a 50-hour commitment. This means you’re looking at a minimum bill of $325,000 per year. Ouch! Even with a $10 million net worth, you might struggle to justify such a level of spending.

But no need to worry. You can still comfortably fly first class for a lot less and without any minimum annual commitments. That alone is more than enough for me!

You can buy a nice car or luxury gear

One nice aspect of already having a good pot of cash is that you no longer need to save. Any excess income in the year can be spent however you see fit. It could be a vacation, or it could be a nice car, luxury watches, purses, clothing, fine wines, etc. Of course you could always buy a nice house too!

No matter what you choose, please remember to factor in any carrying costs such as maintenance, property taxes, license fees, security, etc.

Enjoy this lifestyle – you’ve earned it!

Charitable Donations

Many people wish to donate to charitable causes that they believe in. If this is you, that’s fantastic! You could pursue this in two different ways – a lump sum contribution or annual donations. There are also multiple different tax-efficient ways to donate this money, such as directly through a stock portfolio (as opposed to pure cash). There are pros and cons to each method so this is best discussed with your financial advisor.

My personal preference is annual contributions, as retaining the money in your control gives you greater flexibility to deal with any contingencies. This could be a financial emergency in your family or it could turn out that you decide to donate to several different causes in varying amounts each year.

If you do wish to donate a lump sum, a good option would be donate it via your will. This gives you the best of both worlds – keeping your money over your life and then finally leaving a big chunk when you pass away.

Of course this is a deeply personal decision, so one has to decide what works for each person! Regardless, donating to charity is ultimately a good decision, and the details are just about what works best for your life situation.

Before You Go…

$7 million is a lot of money and as we’ve seen here, it’s vitally important to invest the cash in a matter that is suited to your requirements so that you can generate returns from those funds over the long run. If you simply spend the $7M without having invested it, it will likely run out fairly quickly!

Ultimately if you find these matters too complicated, I do recommend speaking with your financial advisor.

Hopefully you found this information useful. Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles.

In a nutshell, the fastest way to becoming financially free is to cut your debt, minimize unnecessary expenses, so you can save and invest your money!

There are plenty of investment books and podcasts that you can use as a learning resource along the way to help you reach your goal faster.

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by Brianna Johnson

Brianna Johnson, a Miami-based finance veteran, is a wealth advisor for high net-worth families. She loves to write and to share her knowledge. For PFF, she writes in-depth articles on finance and investments that help readers get unique insights. See more.