It’s time for my annual “Life of Riley” report. This is the report in which I estimate how much money you need to be at the threshold of upper-crust living— call it the lower upper crust— without the indignity of work.

This year you need an estimated $4,192,720 if all of your income comes from a 50/50 portfolio of stocks and bonds producing dividends and interest. The recent increase in interest rates— the one that has the entire planet trembling— dropped the required amount about $600,000 in a single month. If interest rates rise further you won’t need to be nearly as rich to live the Life of Riley.

If you dare to withdraw from your portfolio at a rate of four percent, which would require taking some principal, you’ll need a mere $1,850,000. And if you’re retired and about 40 percent of your necessary income comes from Social Security, you’ll need still less, a piddling $1,110,000.

Whichever measure you use, it’s a lot of money— at least a cool million. That’s far more than most people have, whatever their age. The only good news here is that the amount of money needed is has declined from last year because fixed income yields have risen.

Another key figure is the actual income needed to be at the edge of the lower upper crust. I’ve defined it as the minimum income needed to be in the top 25 percent of households in the United States. That was $69,126 in 2010, which is the last year for which the Internal Revenue Service has produced the data. This year the IRS announced a new methodology for calculating. It raises the income somewhat over the older method. Adjusted for inflation, it would be about $74,002 for this year.

Yes, that top 25 percent threshold is a bit arbitrary. It’s in the same ballpark that some call the “mass affluent” and a lot of people would rather be affluent without the mass part. On the other hand, it’s an income that 3 out of 4 people wish they had, so while you may not be a reader of Vogue, Town & Country or the Robb Report, you can be quite sure that you’re living higher on the hog than most.

The Life of Riley Index: The Ever-Rising Cost of Living Pretty Well

This table offers three different ways of calculating the investment money needed to deliver an income at the bottom of the top 25 percent of all households, as measured by the Internal Revenue Service.

Year S&P500 Yield 5Yr Treasury Yield 50/50 Portfolio Yield Top 25% AGI Threshold 50/50 Rentier Nest Egg needed @4% withdrawal rate Nest Egg needed after 40% SS
1985 4.25% 10.12% 7.19% $30,928 $430,452 $773,200 $463,920
1986 3.49% 7.30% 5.40% $32,242 $597,627 $806,050 $483,630
1987 3.08% 7.94% 5.51% $33,983 $616,751 $849,575 $509,745
1988 3.64% 8.47% 6.06% $35,398 $584,608 $884,950 $530,970
1989 3.45% 8.50% 5.98% $36,839 $616,552 $920,975 $552,585
1990 3.61% 8.37% 5.99% $38,080 $635,726 $952,000 $571,200
1991 3.24% 7.37% 5.31% $38,929 $733,817 $973,225 $583,935
1992 2.99% 6.19% 4.59% $40,378 $879,695 $1,009,450 $605,670
1993 2.78% 5.87% 4.33% $41,210 $952,832 $1,030,250 $618,150
1994 2.82% 6.68% 4.75% $42,742 $899,832 $1,068,550 $641,130
1995 2.56% 6.77% 4.67% $44,207 $947,631 $1,105,175 $663,105
1996 2.19% 6.07% 4.13% $45,757 $1,107,918 $1,143,925 $686,355
1997 1.77% 5.77% 3.77% $48,173 $1,277,798 $1,204,325 $722,595
1998 1.49% 5.15% 3.32% $50,607 $1,524,307 $1,265,175 $759,105
1999 1.25% 5.54% 3.40% $52,965 $1,560,088 $1,324,125 $794,475
2000 1.15% 6.15% 3.65% $55,225 $1,513,014 $1,380,625 $828,375
2001 1.32% 4.55% 2.94% $56,085 $1,910,903 $1,402,125 $841,275
2002 1.61% 3.82% 2.72% $56,401 $2,077,385 $1,410,025 $846,015
2003 1.77% 2.97% 2.37% $57,343 $2,419,536 $1,433,575 $860,145
2004 1.72% 3.43% 2.58% $60,041 $2,331,689 $1,501,025 $900,615
2005 1.83% 4.05% 2.58% $62,068 $2,410,408 $1,551,700 $931,020
2006 1.87% 4.75% 2.94% $64,702 $2,200,748 $1,617,550 $970,530
2007 1.86% 4.43% 3.15% $66,532 $2,115,485 $1,663,300 $997,980
2008 2.37% 2.80% 2.59% $67,280 $2,602,708 $1,682,000 $1,009,200
2009 2.40% 2.20% 2.30% $66,193 $2,877,957 $1,654,825 $992,895
***2010 1.98% 1.93% 1.96% $69,126 $3,535,857 $1,728,150 $1,036,890
**2011 2.05% 1.52% 1.79% $70,232 $3,934,567 $1,755,800 $1,053,480
**2012 2.24% 0.76% 1.50% $72,479 $4,831,963 $1,811,986 $1,087,192
*2013 2.03% 1.50% 1.77% $74,002 $4,192,720 $1,850,050 $1,110,030
Historical     3.00%     5.00%     4.00%      $74,002 $1,850,050 $1,850,050 $1,110,030

One of the interesting things we can observe is that of all 28 years covered, retirees and people who withdrew money at a four percent annual rate had only one year in which the amount of money required actually declined. It was 2009— the year the economy really tanked. In fact, the figure for retirees has been reasonably stable since it first crossed a cool million in 2008. Still, it takes a lot of money to be independently lower upper income.

Is there some good news here?

Yes. It appears that interest rates and stock dividend yields have bottomed. If stock and bond yields climb toward more normal levels in a recovering economy— say to a 5 percent fixed-income yield and a 3 percent stock dividend yield, a 50/50 portfolio would yield 4 percent, not 1.77 percent. If that happened the amount of money you’d need to live the Life of Riley would be cut by more than half.