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>> I had a terrible epiphany the other night--if I won $4 million in the lottery tomorrow, I'd have to keep working. After taxes, that $4 million would become $2 million...and if I were to put all of it in an interest bearing account at today's measly rates (let's just say 2% for the sake of round numbers), that would get me $40,000 per year--not enough to support my partner and me now, let alone in 25 years post-inflation.

I've never had a high-paying job but have always been very careful with my money, and I always thought that the cushion I've built up would ensure security later. But jeez, if $4 million doesn't even cut the mustard (and believe me, I don't have $4 million saved), how the heck does anyone ever retire??

Most of these jackpots have options to either receive $X over 20-30 years (annuitized) or as a lump sum for about half of $X. So if you won a $4 million lump sum, you might also have an option of receiving about $8 million over 30 years ($267,000 a year for 30 years). Seems very doable to me. Spend half of that (after tax) and invest the other half for inflation and for when the payments stop.

If you worry about taking it all and getting 1% on savings, you could choose the annuitized payouts (knowing that they will eventually end and are not adjusted for inflation, which you'd have to account for by spending considerably less than your annual payout) or take the lump sum and purchase a single premium immediate annuity (SPIA) to provide income for life (subject to concerns about insurer solvency and stability).

Historically one has pretty much always been able to pull out 4% a year, inflation adjusted, in a diversified portfolio with about 50-60% stocks. After taxes you'd have about $2 million to $2.6 million depending on state income tax. Let's split the difference and say you had $2.3 million in a portfolio after tax. That allows for $92,000 a year, inflation adjusted, for life. Some people are getting more cautious about their outlook for the future and don't feel comfortable with 4%. Even down to a 3% withdrawal rate, your starting payout would be $69,000 a year. (This does require some ability to maintain a prudent, diversified portfolio which has its asset allocation managed.)

The bottom line is that if you're relying only on savings account interest to provide retirement income, you're probably going about it the wrong way.

As for your final question, except for a few prodigious savers and investors in the 401K-based retirement world, "middle class retirement" is largely defined by who has a good pension. And that's all but dead in the private sector and can't be sustained in the public sector for much longer. So maybe the concept of "middle class retirement" was an economic anomaly caused by a post-WW2 economic prosperity bubble which we've desperately (and increasingly unsuccessfully) tried to keep inflated with increased debt and government spending. Not a pleasant thought, but one I personally think has at least a 50/50 chance of being true.

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