Grant Cardone Says 'If You Have A Million Dollars, You're Broke... You Need $10M In 2024 To Be Rich'

08/07/2024 09:28 AM

Real estate investor and equity fund manager Grant Cardone recently explained in aikTok clip that if you have a million dollars, you will be broke in 2024. According to Cardone, a million dollars was a big deal in 1960, but it has deflated rapidly and is worth only 10% of what it was then. Hence, if you needed a million dollars to feel rich in 1960, the devaluation of the fiat currency means we would need $10 million to be rich today.

Cardone's estimate is far from what Americans think about how much they need to feel rich. A recent survey revealed that Americans need a net worth of $2.2 million to feel wealthy. The survey participants elaborated that they measured wealth in terms of the financial freedom millions of dollars bring, whether affording a lavish lifestyle or overcoming unprecedented life events.

While $10 million might not be enough, many stories continue to break about lottery winners and even ex-NFL players going broke fast after retirement. According to Cardone, the first step to reaching the $10 million milestone is creating passive income that equals your earned income. He estimated the amount should be between $400,000 and $500,000 annually. The best-selling author also wants you to bring in another half a million dollars annually from investments.

How Much Money You Need To Be In America's Top 1%?

Estimates show that even Cardone's $10 million goal isn't enough to be in America's top 1% net worth percentile. According to a net worth calculator from The Kickass Entrepreneur, you need $11.6 million by 2025 to be among the top 1% of America's most affluent. In contrast, the amount drops drastically to $2.7 million if you aim for the top 2%. Going higher up in the percentiles becomes an unusually steeper climb, especially if you are already in the top 5%. For instance, going from 95% in the net worth percentile to 99% means adding around $10 million to your existing wealth.

Is $10 Million Enough To Retire Comfortably?

Regarding retirement, most Americans think a retirement corpus of $1.46 million is sufficient to retire comfortably. However, Cardone pointed out that "if you want to buy a house, $200,000 is gone," or if you have to pay for medical bills, especially terminal illnesses, you could be down another $200,000 quickly and are back to square one. Around 10,000 Baby Boomers will turn 65 every day until 2030, and 70% of people will need long-term care in their lifetime. According to Genworth, the annual cost of assisted living facilities will increase to $86,279 by 2033 from $64,200 last year, while semi-private room costs in nursing home facilities could increase to over $139,000 by 2033 from $104,025 in 2023.

However, many retirees rely on Social Security and are navigating retirement with much less than $1 million in net worth. While retiring with $10 million should be ideal, how your net worth is allocated matters. For instance, you might have most of your net worth tied to your massive house, which won't help if you need large amounts of cash for unforeseen expenses. If you want to sustain your pre-retirement lifestyle, one way is to invest in income-generating assets that produce risk-free cash flow.

The US 10-year bond yield of 5% in 2007 would have fetched you $500,000 in risk-free passive income on a $10 million corpus. Half a million dollars will provide most with a decent retirement life. However, declining rates over the years have impacted the average retiree's ability to generate the same levels of passive income. Today, the 10-year bond yield is around 3.9%, which can generate almost $390,000 a year.

More Ways To Boost Retirement Savings

While $390,000 is a decent income if you have no debt, surprise medical bills or expenses can still have you scraping by year-end. With $10 million, you have some leeway to add risk elements to your portfolio for higher returns with sufficient margin to hedge those investments. Aiming for yields up to 5% by diversifying wealth across asset classes like real estate investment trusts, rental properties, bonds, and dividend aristocrat stocks under the supervision of a financial adviser can bump your annual income and grow your net worth without the high market risks.

It may also make sense to geo-arbitrage or move to a different place to lower your living costs. However, moving to a developing nation or even to a new state can be disruptive, especially for households with children. Sometimes, looking within your city can reveal several cost-saving options and cause minimal disruption to your way of living. Furthermore, if you amassed $10 million before 60 and are mulling retirement, you can preserve your wealth for longer by deferring your retirement until 60. In turn, your nest egg will also grow with the power of compounding. Similarly, delaying Social Security benefits beyond 62 can significantly boost your monthly income. More money means you have more to lose, so create a basket of low-risk passive income instruments with the help of a fiduciary adviser to spend your hard-earned wealth with joy in retirement.

The Rich Save $150 Billion in Annual Taxes

Cardone also suggested that if you own a company, consider selling it in the future or taking debt against it to reduce income taxes significantly. The wealthy often use strategies like backdoor Roth IRAs, 1031 exchanges, donations, and employing their children to lower taxable business income significantly, workaround retirement contribution limits, avoid real estate capital gains tax, and create lifelong tax-free passive income streams. US Treasury estimated that over $150 billion in taxes owed by the top 1% goes unpaid annually.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.