It's a very good systematic approach to doing the math on getting an idea, but I feel like ignoring taxes is a big mistake. If you need $50k per year, you have to withdraw ~22% additional money to get actual $50K in spending money. This is a much larger factor than inflation.
I am debt-free, with paid for house, I cannot touch my IRA savings this year because of Obamacare rules, yet I am making my means met just on my 23K in S.S. , Next year I will be on Medicare and plan to match my S.S. with IRA distributions, I should be able to do that for the next 25 years, This will give me a lot of excess income to enjoy life, bottom line is you don't need 50K a year to have an enjoyable retirement
Why did you choose a 4% rate of return? Historically stocks have been significantly higher. Not to mention most bonds have also returned higher rates of return. Such a low rate of return almost seems designed to tank projections.
You can pick whatever ROR you want for projections. Stocks have returned historically higher returns but I am being conservative just in case they don't.
Great video, I’ll be close to $3m at 55 and while I’d love to retire, I’m still nervous. The plus is being nervous makes one think thru decisions and use math rather than emotions.
Replacement ratio is worthless, income has no relationship with expenses. It is all about expenses, once you know your expenses you can calculate how much money you need - which has no relationship to your current income.
I agree your expenses are the most important number to know. i just retried this yr, making $185k a yr if i stayed. We only need ~$40k to live off of and that is ~22% of my final base salary. Once SS kicks in then we dont need to touch our retirement accounts which would be taxable and roth accounts.
Replacement figures are not worthless when you consider the number of people who 1 grow their lifestyle by income, 2. Operate on zero-based budgets. 3. Prefer to utilize conservative methods for planning. Yes expenses are the most critical thing to control in the execution of retirement with income being 1b….but when it comes to planning, this is totally valid.
A slight mistake in the video around the 7-minute mark. 50k * 5% is $2,500. The result listed in the video is correct, but you need to divide by the withdrawal rate.
The studies showing people spend less in discrenery spending from what I have seen are heavily dependent on your retirement income. Someone spending 100k will cut back more than someone spending 50k.
Drew´s analysis of my Financial EKG showed me that given my expected profile at retirement and LE I will need less than 50% of my current income to live comfortably. That was a welcome relief from all the standard hype about how much you need in retirement. It´s all about your planned expenditures and expected income,. As Drew says, done correctly the math doesn't lie. Drew calculates earnings growth very conservatively which gives me a great level of comfort. With any luck my wife and I will die with $0, but more and more that´s beginning to look like a challenge.
Just found you, this is my first video. I love how you do the math with us and go through your thought processes. Very helpful. Found you while watching the money guy show
Expenses - I cant seem to figure out how much health insurance will play a factor at retirement (either at before or after 65 when medicare kicks in although supplemental would kick in at that point) Can you please isolate this specific expense at the different stages when discussing expenses in general?
I totally disagree on the 70-80% needed in retirement. I’ve been saving about 75% for yrs so clearly I don’t need that much and if I can save that much then my expenses must be real low so again I don’t need that much. 15-20% will get me by just fine.
Beware of recency bias and sequence of return risk. The next 40 years are not going to be like the last 40 years, which was a period of declining interest rates. Planning on half the historical return may be reasonable as an average over a 40 year period, but if there is a three-year bear market starting the day you retire, your nest egg might be reduced to $800,000 before inflation, well below your needed $1.4 million. You may want to retire early, but if you need a Goldilocks economy to make it work, you are likely to get eaten by the bears. Face it, there is no way to KNOW how much money you will need. You can't forecast the market or inflation 40 years into the future. Better build in a substantial margin of safety. The easiest way to do that is to work until your full retirement age.
Here's the perfect formula. Start with the day you expect to die. From there factor in what you think your expenses will be between now and then. Throw in how much it will cost to bury you along with all the other end of life expenses. Then consider what you will get from Social Security and your savings and your life insurance. Then just do the math. Don't forget how much you want to leave behind for your relatives to fight over and you are there. Piece of cake. :)
The average life expectancy of a 55 year old American male is right at 80. I know its better to be optimistic, but the likelihood of anyone living to 95 is extremely low. Most people are going to spend until they are 75 or so. Around that age we tend to become more sedentary. I know very few people over age 80 who are still doing a lot of going. I like the go-go, slo-go, no go philosophy. You didn't factor in any Social Security benefits here. Did I miss something? Im ok with the 4% return for retirees. The markets should cover that, but being conservative makes sense.
The likelihood of living to 95 is a lot lower if you can no longer afford food at age 80. My mother lived to 95. My mother-in-law is alive at 93. My father lived to 88. No way in the world I am planning to spend only to age 75!
**Free Retirement Download: The Checklist to Retirement:** 📊
pearlwealthgroup.com/
It's a very good systematic approach to doing the math on getting an idea, but I feel like ignoring taxes is a big mistake. If you need $50k per year, you have to withdraw ~22% additional money to get actual $50K in spending money. This is a much larger factor than inflation.
Taxes are progressive. 50k withdrawal is not taxed in the top bracket. It is gradually taxed through the differing brackets. Thanks for the comment!
That's a lot of money, Thanks for sharing.
You bet
Thanks for these vids. You simplify things in a short easy to understand way. I'd love to get in touch to discuss more
Thank you for watching! Would be honored to help!
Man am I having to wait along time to watch this video! Seems like its been in my watchlist for over a week already!! Keep up the good content!
Patience young Jedi. Thanks for watching!
@@yourfinancialekg LOL...Hey, The force is strong with this one! When I see a video where the topic is right up my alley i get impatient!!
@@NipItInTheBud100 Stay vigilant my Jedi, patience is a key attribute of the force
@@yourfinancialekg Ok, I think we dorked out enough for now...LOL
@@NipItInTheBud100 listen bro, I can dork out with the best of them 😂
I am debt-free, with paid for house, I cannot touch my IRA savings this year because of Obamacare rules, yet I am making my means met just on my 23K in S.S. , Next year I will be on Medicare and plan to match my S.S. with IRA distributions, I should be able to do that for the next 25 years, This will give me a lot of excess income to enjoy life, bottom line is you don't need 50K a year to have an enjoyable retirement
Great video! Definitely worth the wait!! Thanks!😊
Glad you enjoyed it!
Why did you choose a 4% rate of return? Historically stocks have been significantly higher. Not to mention most bonds have also returned higher rates of return. Such a low rate of return almost seems designed to tank projections.
You can pick whatever ROR you want for projections. Stocks have returned historically higher returns but I am being conservative just in case they don't.
Great video, I’ll be close to $3m at 55 and while I’d love to retire, I’m still nervous. The plus is being nervous makes one think thru decisions and use math rather than emotions.
Very good point and great job!
Replacement ratio is worthless, income has no relationship with expenses. It is all about expenses, once you know your expenses you can calculate how much money you need - which has no relationship to your current income.
I agree your expenses are the most important number to know. i just retried this yr, making $185k a yr if i stayed. We only need ~$40k to live off of and that is ~22% of my final base salary. Once SS kicks in then we dont need to touch our retirement accounts which would be taxable and roth accounts.
Good point Jerry!
Replacement figures are not worthless when you consider the number of people who 1 grow their lifestyle by income, 2. Operate on zero-based budgets. 3. Prefer to utilize conservative methods for planning. Yes expenses are the most critical thing to control in the execution of retirement with income being 1b….but when it comes to planning, this is totally valid.
A slight mistake in the video around the 7-minute mark. 50k * 5% is $2,500. The result listed in the video is correct, but you need to divide by the withdrawal rate.
You got it!
May God bless you and your family and ne safe during Hurricane Idalia.
Thank you!
The studies showing people spend less in discrenery spending from what I have seen are heavily dependent on your retirement income. Someone spending 100k will cut back more than someone spending 50k.
Very true John!
Drew´s analysis of my Financial EKG showed me that given my expected profile at retirement and LE I will need less than 50% of my current income to live comfortably. That was a welcome relief from all the standard hype about how much you need in retirement. It´s all about your planned expenditures and expected income,. As Drew says, done correctly the math doesn't lie. Drew calculates earnings growth very conservatively which gives me a great level of comfort. With any luck my wife and I will die with $0, but more and more that´s beginning to look like a challenge.
Thanks for the great comment Glenn!
Drew what about the social security? I’m planing to retired this year with 900k and move yo Brazil. João Pessoa.
I think you're gonna be ok!!
Just found you, this is my first video. I love how you do the math with us and go through your thought processes. Very helpful. Found you while watching the money guy show
Awesome! Thank you for watching!
Expenses - I cant seem to figure out how much health insurance will play a factor at retirement (either at before or after 65 when medicare kicks in although supplemental would kick in at that point) Can you please isolate this specific expense at the different stages when discussing expenses in general?
I can do that!
$50K divided by 5% equals $1MM not times 5%
You got it!
I totally disagree on the 70-80% needed in retirement. I’ve been saving about 75% for yrs so clearly I don’t need that much and if I can save that much then my expenses must be real low so again I don’t need that much. 15-20% will get me by just fine.
Glad you have done the work to figure out what you need!
Beware of recency bias and sequence of return risk. The next 40 years are not going to be like the last 40 years, which was a period of declining interest rates. Planning on half the historical return may be reasonable as an average over a 40 year period, but if there is a three-year bear market starting the day you retire, your nest egg might be reduced to $800,000 before inflation, well below your needed $1.4 million. You may want to retire early, but if you need a Goldilocks economy to make it work, you are likely to get eaten by the bears. Face it, there is no way to KNOW how much money you will need. You can't forecast the market or inflation 40 years into the future. Better build in a substantial margin of safety. The easiest way to do that is to work until your full retirement age.
Very true, great comment!
Heck, just work until you die. That is 100% foolproof! Can't trust SS either!....right?
We have to go off some assume options to plan. We can always make adjustments down the line.
@@darlenepaul2918 yes!
Here's the perfect formula. Start with the day you expect to die. From there factor in what you think your expenses will be between now and then. Throw in how much it will cost to bury you along with all the other end of life expenses. Then consider what you will get from Social Security and your savings and your life insurance. Then just do the math. Don't forget how much you want to leave behind for your relatives to fight over and you are there. Piece of cake. :)
The average life expectancy of a 55 year old American male is right at 80. I know its better to be optimistic, but the likelihood of anyone living to 95 is extremely low.
Most people are going to spend until they are 75 or so. Around that age we tend to become more sedentary. I know very few people over age 80 who are still doing a lot of going. I like the go-go, slo-go, no go philosophy.
You didn't factor in any Social Security benefits here. Did I miss something?
Im ok with the 4% return for retirees. The markets should cover that, but being conservative makes sense.
Great comment!
The likelihood of living to 95 is a lot lower if you can no longer afford food at age 80. My mother lived to 95. My mother-in-law is alive at 93. My father lived to 88. No way in the world I am planning to spend only to age 75!
I believe currently for men it is 83 not 80
@@darlenepaul2918 yes it is!
is that without social security
So you obviously didn't pay attention during this video