Kevin O’Leary Says You Can Retire on $500K With “Very Little Risk.” I’m a CPA — Here Are 6 reasons That’s Wishful Thinking

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Kevin O’Leary has a retirement pitch that sounds almost too good to argue with: park $500,000, earn about 5% a year in fixed income with “very little risk,” never touch the principal, and live off the roughly $25,000 it throws off (1).

I’ve been a CPA since 1981 — and I’ll give Mr. Wonderful this: The discipline underneath his pitch is sound. It’s that phrase “very little risk” that raises my eyebrows a bit.

The 10-year Treasury — about as close to risk-free as it gets — is currently paying around 4.5% (2). And to get that guaranteed return, you’ll have to keep your money invested for 10 years. (You can sell before the 10 years is up, but may get more or less than you originally invested.)

Inflation just came in at 4.2% for the year through May, the hottest reading in three years (3). And the Fed’s benchmark rate is sitting at 3.5% to 3.75%, with officials signaling higher for longer (4).

Stack those up and O’Leary’s “safe 5%” starts to wobble. Even your “diversified” index fund is now a concentrated bet on a handful of tech giants.

So, before you build your retirement on half a million and a promise, here are six things that little word “safe” is hiding.

1. Right now, a truly safe 5% doesn’t exist

O’Leary’s number assumes you can earn 5% without taking real risk. Today you can’t. The safest options — Treasurys, FDIC-insured savings, CDs — pay somewhere from the high 3s to about 4.5%.

To reach a dependable 5% or more, you have to reach past “safe” into credit risk, longer-dated bonds, or stocks. That’s a fine choice to make on purpose. It’s a dangerous one to make because someone told you it was risk-free.

The move that does make sense: know exactly which slice of your money is the genuinely safe part, and make sure it’s actually earning something.

Here’s one easy place to park that safe slice, and without having to o out to a 10-year bond: simply switching to a better bank account.

If you’re still at a traditional brick-and-mortar bank, you may be paying monthly checking fees while earning almost nothing on your savings.

SoFi offers a combined checking-and-savings account with no account fees, and with eligible direct deposit you can earn up to 3.80% APY on savings — many times the national average. (APY is variable and can change at any time.)

New members who set up qualifying direct deposit may also be eligible for a cash bonus of up to $400, based on the amount deposited. Terms apply — see details.

Check out SoFi for yourself.

2. To hit 5%-plus, you take on risk you can’t see

One popular way to juice yields today is covered-call funds and high-dividend products that advertise fat monthly payouts.

I was a stockbroker for 10 years and have traded options for nearly 45, and I’ll tell you what that covered-call income really is: you’re selling away your upside for cash today.

It looks free right up until the market rips higher without you — or it drops, and the “income” doesn’t come close to covering what you lost on the shares.

As for high-dividend stocks and ETFs, high yields get cut, too, usually at the worst possible moment. Dividend stocks and funds carry real trade-offs worth understanding before you lean on them to buy groceries.

3. Inflation turns a “safe” income into a slow pay cut

A fixed $25,000 a year ($500,000 at 5%) sounds stable. It may be at first, but with inflation running 4.2%, that check buys a little less every single year.

Twenty years in, you’d need roughly $45,000 to buy what $25,000 buys today. But O’Leary’s plan doesn’t increase the payout — you’re not supposed to touch the principal that would let it grow.

So “very little risk” quietly skips the one risk every retiree lives with for 20 or 30 years: the steady erosion of what their money can actually buy.

The honest way to size a retirement isn’t a headline number anyway — it’s your real income gap, run against a safe withdrawal rate and stress-tested for exactly this.

Quick aside — most internet financial advice comes from people who weren’t alive during the last recession. I’ve been writing about money for more than 35 years. Want rock-solid advice? Sign up for the free Money Talks Newsletter. Takes 10 seconds. No fluff. No spam.

4. One bad market early on can break the whole plan

Here’s the part that worries me most. The “never touch principal” promise only holds if your income actually covers your life. The moment it doesn’t — a medical bill, a special assessment, one bad year — you sell something.

And if you’re selling into a falling market early in retirement, the damage compounds. Advisors call it sequence-of-returns risk, and I’ve watched four crashes do exactly this to people who were sure they were safe.

The order your returns arrive in matters as much as the average. O’Leary’s tidy 5% assumes a smooth ride markets don’t actually give you.

5. $500K only works under a very specific set of conditions

Read O’Leary’s own fine print and the plan needs a paid-off house, no debt, a low-cost area, lean spending, and a decent Social Security check on top. Pull any one of those out and the math starts to buckle.

For a lot of homeowners 62 and older, the squeeze isn’t net worth — it’s monthly cash flow, with most of their money locked inside the house. If that’s you, tapping home equity can be a smarter lever than wringing more yield out of a too-small portfolio.

If you’re 62 or older, the equity in your home could become cash you can use now. A reverse mortgage lets eligible homeowners convert part of their home equity into funds — while keeping ownership of their home.

What it could help you do:

• Free up your monthly budget with no required monthly mortgage payment*
• Cover everyday expenses or build an emergency cushion
• Make home improvements
• Fund the retirement lifestyle you want

See how a reverse mortgage works and whether you qualify.

6. What O’Leary gets right — and the move that beats guessing

I don’t want to be unfair to the guy. His core advice is solid: spend less than you make, leave your principal alone, and don’t sink your savings into your brother-in-law’s restaurant. (I owned a restaurant once — he’s dead right about that one.)

Where he gets dangerous is stapling “very little risk” to a 5% target the current market won’t hand out for free. The fix isn’t a hotter yield. It’s a real plan built around your actual expenses, taxes, and timeline.

If you’re nearing retirement, this is the perfect time to consult a qualified expert. One Vanguard study shows DIY investors turn $500K into $1.7 million over 25 years – while those with advisors reach $3.4 million. You could be missing half your potential wealth.

How do you find good financial advice? Simple. SmartAsset, for example, instantly matches you with up to three fiduciary advisors – legally required to prioritize your interests. They spot tax savings, Social Security strategies, and planning gaps you’d never see alone. And first appointments are typically free.

$100K+ in investments? Get matched free in minutes.

The bottom line

$500,000 might be plenty — or nowhere near enough. It depends entirely on your life, not on a number that fits neatly into a video clip. Anyone who tells you one figure works for everyone is selling simplicity, not safety.

Build the boring, unglamorous version. Keep your safe money genuinely safe, know exactly what you’re risking for every extra point of yield, and assume that both inflation and a bad market will show up — because sooner or later, they always do.

Sources: Benzinga (1); U.S. Department of the Treasury (2); Bureau of Labor Statistics (3); CNBC (4).