In 2023, Shark Tank host Kevin O’Leary made a surprising claim on YouTube: with the right investments and a modest lifestyle, a person can live comfortably on as little as $500,000.
“It’s all about lifestyle,” he said. “You can live off half a million dollars in the bank and do nothing else to make money.” [1] He went on to explain that investing this money in a relatively safe fixed income security could deliver as much as 5% in annual returns, while the stock market could deliver up to 9%, which would be enough passive income to live a modest lifestyle.
At the time, YouTube commenters were quick to call him tone-deaf for suggesting that people could live on as little as $25,000 a year. Two years and several rounds of inflation later, O’Leary’s math looks even less realistic. Here’s why.
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No room for error
At first glance, O’Leary’s suggestion doesn’t seem outrageous.
As of September, 2025, the 30-year U.S. treasury bond offers a 4.9% yield [2]. Investing $500,000 in this ultra-safe asset would deliver $24,500 in annual income. Depending on your location and lifestyle, that amount may not be comfortable but it is roughly 56.5% higher than the poverty line for individuals in 2025, according to the Department of Health and Human Services (HHS) [3].
Meanwhile, the S&P 500 has delivered a compounded annual return of 14.70% since 2010, according to Vanguard [4]. If you invested $500,000 in a low-cost index fund in 2010, you could have enjoyed an average annual return of $73,500 – well above the median individual income of roughly $62,000 in the second quarter of 2025, according to the Bureau of Labor Statistics [5].
It might seem like O’Leary’s thesis is justified, but these calculations make several assumptions, some of which are unrealistic.
For instance, $24,500 is above the poverty line if you’re living alone but nearly at that threshold if your household includes two or more people. In other words, a couple living on fixed income from $500,000 would technically be poor.
Investing in stocks instead of bonds, as O’Leary suggests, could be a solution. However, this strategy leaves little room for error or volatility. Even a handful of bad years could derail your financial plan.
Let’s say you invest $500,000 today and experience a negative 10% return in your first year. Also, because you’re depending on this money to meet living expenses you withdraw $50,000 during this bear market. At the end of the first year you’re left with just $400,000.
Even if you earn 10% a year, every year going forward, your annual income would be just $40,000. In other words, one year of negative returns can permanently reduce your passive income.
These calculations also leave out other important factors such as taxes, inflation, and the lack of compounding growth because you’re withdrawing the entire return every year. It’s safe to assume that retiring on $500,000 in 2025 could be possible but potentially unsustainable over the long-term.
This is why it’s important to include a margin-of-error and aim higher.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Save more, withdraw less
Because stock market returns and even interest rates on government treasuries are unpredictable, you should probably aim to withdraw less and save more.
When Bill Bengen developed the famous 4% rule, he looked back at historical returns for a balanced portfolio over 50 years to find a withdrawal rate that was low enough to sustain a nest egg for roughly 30 years, according to the Corporate Finance Institute [6].
Bengen’s calculations have been stress tested, which means this rule works even if an investor experiences some economic downturns or recessions along the way. In other words, it has a built-in margin of error.
If you apply the 4% rule to the current median individual income of $62,000, you would need roughly $1.55 million to retire comfortably. That’s three times higher than O’Leary’s minimum threshold.
Even if your lifestyle is modest enough for you to survive on $25,000 a year, you would need at least $625,000 in your nest egg.
Put simply, aiming higher and saving more is usually a good idea.
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[1]. YouTube. “How much would you need to live happily?”
[2]. CNBC. “U.S. 30 year treasury”
[3]. HealthCare.gov. “Federal poverty level”
[4]. Vanguard. “VOO”
[5]. Bureau of Labor Statistics. “Usual weekly earning of wage and salary workers second quarter 2025”
[6]. Corporate Finance Institute. “Four percent rule”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.