Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions


If you looked closely at this title, you may be itching to correct my spelling of the word principle. In fact, I chose this phrasing carefully, and I did mean principal, as in a sum of money, as opposed to principle, a fundamental truth.

A Golden Goose Principal, or GGP,[1] is a net worth large enough that you can live off the income it generates without drawing down the underlying principal. (The metaphor, inspired by the fable, is that you live off the golden eggs laid by the goose, While the goose lives on indefinitely). Not only does this allow you to avoid the anxiety associated with watching your nest egg dwindle, you can bequeath that principal to your children, grandchildren, or favorite charitable cause.

Since I am pitching GGP as a fundamental truth, it is technically the Golden Goose Principal Principle (GGPP).

It’s relatively easy to estimate your GGP. Suppose you use budget forecasts to calculate that you’ll need an income of $120,000 annually in retirement. You wish to be conservative by assuming your principal will be invested in very safe US Government Treasury bonds yielding 3% per year.[2] Then a GGP of $4 million will do the trick: that is, 3% of $4 million is equal to $120,000.

Which begs the question: Is a $4 million nest egg attainable?

In my personal finance lectures I show that a responsibly managed annual household income of $200,000 can realistically lead to a nest egg of around $4 million. See the Hypothetical Wealth Accumulation spreadsheet attached to this page. (The spreadsheet also shows that a $2 million nest egg is realistic for a household with a $100,000 budget).

As most physician households command higher gross earnings than the $200,000 figure,[3] nest eggs in the four to six million dollar range are attainable. The assumptions required to reach the $4 million threshold are:

  1. A thirty-year investment horizon. Assume you are 37 years old and planning to retire at 67
  2. Retirement plan contributions of $33,000 annually. This includes your contributions and the employer match
  3. Compounded annual returns of 8% on retirement investments
  4. 30-year fixed mortgage payments on a home initially valued at $300,000 with average annual property value growth of 3%
  5. Your budget allows you to service student debt and mortgage payments


 As can be seen from the supporting documentation in the Resources section of this site, over 30 years: a retirement plan with annual contributions of $33,000, growing at 8% annually, accumulates to a future value of $4.0 million; the $300,000 home appreciates at 3% to about $730,000; and by retirement age, mortgage and student debt are paid off. (NOTE: By convention, the value of your home is not included in your total net worth or total nest egg because you can't expect to earn a cash return on your home--since you're living in it!) 

If we use a more conservative investment growth rate of 6%, the retirement plan totals $2.7 million. A dual-income household in which each person earns $200,000 and the initial home is valued at $600,000 can achieve twice these numbers, which is to say retirement plan totals of $5.4 million at 6% or $8 million at 8%, plus a home valued at $1.45 million.

There are several reasonable challenges to my calculations, including: Is the $200,000 budget realistic? Does it account for inflation? Can I pay off student loans, put money aside for retirement, pay off a mortgage, secure insurance, invest in 529 college savings plans for my children, etc., all on top of regular household expenses?

In response I direct you to the sample budget in the Budget to Live Within Your Means chapter. An electronic copy of the budget may also be found under the Resources section of this website. The $200,000 budget allocates: $19,000 to retirement plan contributions ($14,000 in matching funds are assumed from your employer), realistic mortgage payments for a $300,000 home purchase, annual student loan payments of $24,000, and $5,000 contributions into children’s 529 college savings plans. The budget reflects excess cash of $10,000, which is available to address the aforementioned challenges.

Furthermore, in reality you can expect your income to rise over time. In my future wealth accumulation projections I assume your annual income remains fixed. Some of your wage increases will likely neutralize inflationary effects.

I also assume you will receive nothing in retirement from Social Security. If you receive even a modest $1,000 per month ($12,000 per year) in such benefits, the rest of your nest egg only needs to provide you with $108,000 annually, necessitating a lower GGP.

Yes, higher payments may be required to service a larger amount of student debt. Yes, if the employer match is low, more of the assumed $33,000 would have to come from the household. Yes, if children attend private schools, additional costs annually could be in the tens of thousands of dollars. Keep in mind, however, that the budget already accounts for basics such as food, clothing, transportation, utilities, etc. Any additional (after-tax) income above the $200,000 level is available to make student debt payments, support private school tuition, set aside more money for retirement, pay off a larger mortgage, or increase 529 plan contributions.

Clearly, lots of refinements could be made to all these assumed numbers, including the earnings, expenses, taxes, etc. My point is to show that a GGP of $4 million is attainable. Where exactly your household lands is entirely up to you.

Retirement planning math is both simple and unforgiving. Your accumulated nest egg depends on:

  1. How much of your annual income you save – rules of thumb recommend anywhere from 10% to 20% but, of course, the more you save the better
  2. The length of time over which you save – longer is better. Ideally, you need at least three decades
  3. The average annual growth rate, or return, on your investments – low-risk investments mean slower average nest egg growth (around 1%-3%), while high-risk investments allow for faster growth (around 7%-10%).

Each of these represents a choice you make as a household. I recommend you create realistic budget and net worth forecasts utilizing comfortable assumptions. If the net worth forecast is at or above your desired GGP, you’re in good shape. If, on the other hand, the forecasts indicate you are not on track to reach GGP, you have four choices: save more each year, save for longer (delay retirement), invest more aggressively (take on higher risk), or increase your income.

There are many online resources on retirement planning, including information from major investment companies such as Vanguard, Fidelity, and (formerly the American Association of Retired Persons). 

These resources include a variety of calculators for estimating your retirement cash flow needs, healthcare costs, etc. Links are available in this site's Resources section.


[1] In a previous publication I referred to this concept as critical-mass principal.

[2] At time of writing, yields on 30-year maturity Treasury Bonds are close to 2%. This is unusual. It’s anticipated that in future higher rates will be restored. You can, of course, opt for higher yielding corporate bonds at any time. 

[3] According to Medscape’s Physician Compensation Report 2019, primary care physicians earned an average of $237,000 while specialists earned $341,000.

Yuval Bar-Or

04/09/2020 03:39 PM

The article title, below, is a live link. Click on it to view the video.

"How much you'll have for retirement if you invest an extra $1,000 a month, starting in your 20s, 30s and beyond"

Source - CNBC