Kevin O’Leary: Retire on $500K and never work again. Is this strategy a financial miracle or a dangerous gamble?

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How overmuch wealth is enough?

According to entrepreneur Kevin O’Leary, it truly depends connected your manner and however you put your funds.

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“Do not put successful your brother’s restaurant,” helium warned successful an interrogation clip posted to his authoritative YouTube transmission (1).

“Or a bowling alley, oregon a bar, oregon each that different crap. You’ll suffer your money,” helium added.

Instead, O’Leary believes a idiosyncratic could past comparatively comfortably with conscionable $500,000 successful the slope and “do thing other to marque money” — provided that $500,000 is invested correctly.

But is “Mr. Wonderful” truly onto something?

Here’s a person look astatine his thesis and whether it’s really realistic for astir people, peculiarly erstwhile reasoning astir their retirement.

Half a cardinal dollars doesn’t look similar a batch of wealth these days. In fact, it’s little than fractional the magnitude the mean American says they request to retire: The latest Northwestern Mutual survey recovered that U.S. adults believed the “magic number” for status successful 2025 is $1.26 cardinal (2).

Considering that alone, O’Leary’s fig already sounds paltry.

Nevertheless, helium believes the close concern tin present a tenable retirement. A emblematic saver, helium says, tin make 5% returns successful fixed income securities with “very small risk,” oregon betwixt 8.5% and 9% “if you enactment immoderate of it successful equities and are consenting to thrust the volatility (1).”

Those numbers surely look realistic. The existent output connected a 10-year U.S. Treasury enslaved is astir 4.20% (3), portion the S&P 500 has delivered mean yearly returns of astir 10.56% since 1957 (4).

But surviving disconnected a 4.20% output connected fractional a cardinal wouldn’t beryllium easy. It translates to conscionable $22,500 successful yearly income, astir 15% of which would spell toward aesculapian expenses unsocial by property 65, according to a survey by RBC Wealth Management (5). This means that retirees pursuing this strategy would request to trust connected Social Security to marque up the difference, oregon dramatically set their lifestyle.

Even the precocious extremity of O’Leary’s assumptions falls short. Assuming a idiosyncratic deploys $500,000 successful a portfolio made up of stocks and bonds for 9% yearly returns utilizing the classical 60/40 split, they would gain little than $50,000 a year.