Is $5M in Treasury Bills Enough to Be Set for Life?
A few months ago I saw this video of Kevin O’Leary (Mr. Wonderful) arguing that $5M was enough for a lifetime of financial security. On the surface it seems hard to argue with this, but it was how O’Leary recommended investing this money that gave me pause. As he said:
I tell everybody this. You should strive very hard if you’re an entrepreneur to have $5M in T-Bills. Not in anything else, just T-Bills. Making 3.82% this morning. You know you’ve made it and you’ve safeguarded your family for the rest of your life if you can get $5M liquid in T-Bills.
O’Leary wants everyone to just “T-Bill and Chill.” I see his point. With 1-year U.S. Treasury bills currently yielding around 4%, $5M in T-Bills would generate around $200,000 per year (or about $160,000 after tax) for the rest of your life. That income would be exempt from state income tax as well. The vast majority of people could live off of this with ease.
But living off of this amount now isn’t the problem. Living off of it later is.
Why $5M in the “T-Bill and Chill” Strategy Eventually Fails
While it’s tempting to look at $5M in T-Bills and think you’d be set for life, in reality, two factors will probably derail your plans.
The first is inflation. $5M is a lot of money today, but it won’t necessarily be in 40 years. I use 40 years as a benchmark because research shows that if your portfolio can survive 40 years, it will likely survive even longer.
But when you invest solely in T-Bills, your nominal investment never grows in value. You have the same $5M for the next 40 years. And how much will $5M buy in 40 years? No one knows.
But we do know how much $5M today would’ve bought 40 years ago (in 1987). The answer is $1.66M. In other words, $1.66M in 1987 has the same purchasing power as $5M in 2026. You can see the amount of money that has the same purchasing power as $5M in 2026 in the plot below:
As you can see, you don’t need nearly as much money in the past to have the same purchasing power as $5M in 2026 dollars.
Taking this a step further, we can adjust O’Leary’s original statement (above) for inflation going back to 1987. If we did so, it would be as-if he said the following in 1987:
You’ve safeguarded your family for the rest of your life if you can get $1.66M liquid in T-Bills.
At the time, this would’ve seemed like a good idea because $1.66M felt like what $5M feels like today. But, today $1.66M is still just $1.66M. It’s a lot of money, but it’s not $5M. In fact, it’s 67% less.
That’s the problem with sitting in T-Bills for so long. Both your purchasing power and your income get destroyed over time. Today, someone with $1.66M in T-Bills would only be making around $66,000 in income, a far cry from the $200,000 that you would earn with $5M invested at today’s yields.
But inflation isn’t even the worst part of this strategy—fluctuating Treasury rates are. Since the late 1980s, the 1-Year U.S. Treasury has fallen from nearly 10% to basically 0% before increasing to 4% in recent years:
These fluctuating rates are the actual reason why the “T-Bill and Chill” strategy fails in the long run.
To illustrate why, let’s imagine someone who invests $1.66M in T-Bills at the prevailing T-Bill rate each January (starting in 1987) and lives off that income for the rest of the year. For example, in January 1987, they earn 5.78% on their $1.66M in T-Bills generating around $95,950 in nominal income (or $288,925 in 2026 dollars). In January 1988, they earn 6.99% on their $1.66M in T-Bills generating around $116,000 in nominal income (or $335,856 in 2026 dollars).
If we did this each year until 2026, what would’ve happened to our investor’s T-Bill income over time? It wouldn’t have been pretty. The chart below illustrates the inflation-adjusted income (in 2026 dollars) of $1.66M invested in 1-Year U.S. Treasury Bills over time:
As you can see, our hypothetical 1987 T-Bill investor would’ve seen their real income decline by 85% by 2003 and by 99% by 2021! That isn’t a typo. In 2021, $1.66M in T-Bills would have only earned $2,136 (in 2026 dollars) because the 1-Year T-Bill rate was just 0.1%.
To be fair, part of this decline is due to 1987 being an unusually high starting point for real yields. Back then 1-Year T-Bills paid a couple percent above inflation, but by 2021 they were paying far below it. That’s the core issue with this strategy—real yields can fluctuate wildly to your detriment.
Either way, can you imagine trying to live off of $2,100 a year after previously living off of more than $300,000? I understand that you could technically sell down your T-Bills to offset this lower income, but that defeats the purpose of the strategy.
After you start selling down your capital, you need to start worrying about safe withdrawal rates and running out of money. And, once you do that, you’ve no longer “safeguarded your family for the rest of your life” as O’Leary claims.
But, the truth is that $5M in T-Bills was never going to safeguard your family for life. It’s a great emergency backstop, but if inflation ramps up or rates fall off a cliff, your T-Bills won’t be able to save you. That’s the bad news.
But there’s good news too—those who can save up $5M in T-Bills probably don’t have to worry about their finances anyway.
Financial Discipline is the Real Asset
As I’ve just demonstrated, $5M in T-Bills is a subpar long-term strategy. But that doesn’t matter. Why? Because the type of person who can save $5M in T-Bills isn’t the type of person who is going to have financial issues.
Getting to $5M is hard. Only 4% of U.S. households (across all ages) have this much net worth or more (based on the latest data). But getting to $5M and putting it in T-Bills demonstrates extraordinary financial discipline. It is this discipline that is the real asset, not the $5M.
And those who are this disciplined will find ways to make it through—by cutting their spending, changing their investments, or going back to work. Because money comes and goes in a variety of ways. But for those who know how to acquire and hold onto it, it’s never really an issue.
So, Kevin O’Leary is right, but for the wrong reason. $5M in T-Bills is enough for life, but it’s not because of the $5M.
Thank you for reading.
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This is post 509. Any code I have related to this post can be found here with the same numbering:
