I quite like the buckets approach. I've been very disappointed, however, in the scholarship I've seen discussing buckets. Many financially savvy people are opposed to buckets, and to illustrate they erect a rebalancing based approach to refilling the buckets, and then proceed to tear it down. Christine at Morningstar has some good articles on buckets, but not to the level I'd consider scholarship. Ray Lucia of course has a lot of bucket content, but again very light on scholarship. Is there any scholarship of similar quality to Bill Bengen's Trinity study, relating to a bucket-based portfolio approach including rules to manage the portfolio?
@@gauravipal5691 You wouldn’t buy a property without at least a 6-8% cash on cash return. Meaning the return on the total amount needed to acquire the property. If your total cost out of pocket was $100,000 to acquire a $400,000 property you would then be looking to net at least $7-8,000 per year on that property. This is very possible. In addition to the cash on cash invested you would also benefit from long term appreciation. If the $400,000 property appreciates 2% per year that is $8,000 the first year. $8,000 is another 8% of the $100,000 you invested. Then there is amortization. If you are considering real estate it takes some studying and knowledge. Active investors do very well.
I agree with @gauravipal5691. We had a cash flowing duplex for about 30 years and eventually bought Stesssa - a program that tracks rents and expenses, which I recommend. After one vacancy where we blew through a year’s worth of cash flow, we went back through our tax records and found that over 10 years we were earning only 3% average per year. Who needed that headache when we could cash out, pay capital gains and do better at the bank? The good news is that we sold it for 20% above asking price which covered the taxes! I don’t have rental property any ,ore as part of my retirement plan.
I watch these types of videos and get a little frustrated. I can't imagine spending a whopping $10,000 a month and I am still working! I'm 62 and trying to figure out if I can retire on $500,000 and when to start SSI. I don't need to leave any money behind for children. I currently live a good life and sock away money netting just $3300mo on my job. Where's that video?
I agree. my wife and I have monthly expenses around $5500/mo. we both work and will each draw above average SS as well as a modest pension for me. We will have around the same amount in 401k as you. We should be fine but would be nice to see real world examples that don’t have $1m + saved.
A pension works like an annuity. Let your pension and SS do the heavy lifting in retirement. Then supplement that income with your IRA. Too often financial advisors recommend a lump sum rather than monthly payments from a pension. Of course they do, more money under management, higher commissions for them. If your return rate is greater than 6%, and most are and you’re in good health, take the monthly installments.
Of course, only about 1/3 of future retirees will have a pension. A pension is mathematically the same as an annuity, and as such many pensions are the best annuity money can buy. Not all of them are, and some pensions are high risk. Look how many pensions have been assumed by the PBGC and the replacement rate for those people whose pensions failed and had to be assumed.
You have to do your due diligence when it comes to a pension. Mine is 120% funded. When they get around 80% things can get sketchy. I’m getting an 8.4% annual return. And I need 11 years and 7 months to get my lump sum back. I’m 65 now so I’ve got to live until I’m just shy of 77. I’m in good health. This seems doable…
If you have a significant 401K balance to begin with. A pension along with SS allows you to be more aggressive in your investments because your pension and SS are meeting your monthly expenses. You roll that lump sum over and now you have a bigger balance but now have to live off at least part of that income. You’re far more sensitive to sequence of returns and market fluctuations. For me, I’ll take the monthly pension and have the peace of mind. I’ve been invested in the markets for over 30 years. I know first hand how volatile it can get.
hi Kevin, we are planning to retire in 3 year from now at 65, i am investing 401k in T rowe Price, the T rowe price is talking about Managed Payout Program of the T rowe price retirement trust. , what do you think about this? what is pros and cons Thank
You need 5 million to retire early comfortably. 3% withdrawal would provide 150K per annum before taxes. It’s still not a luxury lifestyle. I spend 7,000 to 15,000 per month. My asset allocation is 40% commercial / real estate 50% global ETF 10% money markets.
A fee only annuity? What? If you are going to get an annuity 1. A MYGA for a CD like investment 2 A single premium immediate annuity for a penion like insurance 3 A deffered immediate annuity for longevity insurance
Thank you Kevin, great video, I learned a lot. One question, if you buy the annuity for 500k at 7.5 % is the entire principal of 500k still there at your death to leave to your children? Thank you
Good video Kevin. The bucket strategy is a "feel good" strategy that makes you define rules on when to refill buckets. Most would be better off financially (but maybe not emotionally) using a simple rebalancing strategy.
Use your imagination. If you pick up an extra $75 a day near a Costco exit and invest, you are well on your way to filling your buckets. Just one example.
@@tomm.8892I'm struggling to understand how we're supposed to get that $75 a day from Costco. Maybe because I've never been to a Costco. Can you elaborate?
For me, 2-3 years of cash or short term treasuries (10%), and the rest in a basket of broad market index funds (90%). 4-6% withdrawal rate with guard rails. Add to that income from a few rental properties. Then SS according taken according to what the market does and what makes sense from a tax perspective. Paid off, down-sized house. Low ratio of fixed expenses relative to total expenses. Should be able to handle just about anything. Big garden and lots of ammo just in case we can’t! 👍🏻
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Excellent information
I quite like the buckets approach. I've been very disappointed, however, in the scholarship I've seen discussing buckets. Many financially savvy people are opposed to buckets, and to illustrate they erect a rebalancing based approach to refilling the buckets, and then proceed to tear it down. Christine at Morningstar has some good articles on buckets, but not to the level I'd consider scholarship. Ray Lucia of course has a lot of bucket content, but again very light on scholarship.
Is there any scholarship of similar quality to Bill Bengen's Trinity study, relating to a bucket-based portfolio approach including rules to manage the portfolio?
Well done Kevin 👍
much needed thanks Kevin.
Hope it was helpful! It's a bit hard to explain.
Great video, one of our buckets is a rental property. Very stable income, occasional expense surprises, excellent long term inflation hedge.
Typically rental income after you deduct property tax, insurance, HOA and maintenance expense barely comes to 3% of the property value.
@@gauravipal5691 You wouldn’t buy a property without at least a 6-8% cash on cash return. Meaning the return on the total amount needed to acquire the property. If your total cost out of pocket was $100,000 to acquire a $400,000 property you would then be looking to net at least $7-8,000 per year on that property. This is very possible.
In addition to the cash on cash invested you would also benefit from long term appreciation. If the $400,000 property appreciates 2% per year that is $8,000 the first year. $8,000 is another 8% of the $100,000 you invested.
Then there is amortization.
If you are considering real estate it takes some studying and knowledge. Active investors do very well.
I agree with @gauravipal5691. We had a cash flowing duplex for about 30 years and eventually bought Stesssa - a program that tracks rents and expenses, which I recommend. After one vacancy where we blew through a year’s worth of cash flow, we went back through our tax records and found that over 10 years we were earning only 3% average per year. Who needed that headache when we could cash out, pay capital gains and do better at the bank?
The good news is that we sold it for 20% above asking price which covered the taxes!
I don’t have rental property any ,ore as part of my retirement plan.
Great video!
awesome video - thanks!
I watch these types of videos and get a little frustrated. I can't imagine spending a whopping $10,000 a month and I am still working! I'm 62 and trying to figure out if I can retire on $500,000 and when to start SSI. I don't need to leave any money behind for children. I currently live a good life and sock away money netting just $3300mo on my job. Where's that video?
I agree. my wife and I have monthly expenses around $5500/mo. we both work and will each draw above average SS as well as a modest pension for me. We will have around the same amount in 401k as you. We should be fine but would be nice to see real world examples that don’t have $1m + saved.
Good ideas
A pension works like an annuity. Let your pension and SS do the heavy lifting in retirement. Then supplement that income with your IRA. Too often financial advisors recommend a lump sum rather than monthly payments from a pension. Of course they do, more money under management, higher commissions for them. If your return rate is greater than 6%, and most are and you’re in good health, take the monthly installments.
Of course, only about 1/3 of future retirees will have a pension. A pension is mathematically the same as an annuity, and as such many pensions are the best annuity money can buy. Not all of them are, and some pensions are high risk. Look how many pensions have been assumed by the PBGC and the replacement rate for those people whose pensions failed and had to be assumed.
You have to do your due diligence when it comes to a pension. Mine is 120% funded. When they get around 80% things can get sketchy. I’m getting an 8.4% annual return. And I need 11 years and 7 months to get my lump sum back. I’m 65 now so I’ve got to live until I’m just shy of 77. I’m in good health. This seems doable…
Agree with you. This is how I plan to do it, but none of these advisers recommend it.
If I take the lump sum and invest it I should make more overtime than not taking a lump sum.
If you have a significant 401K balance to begin with. A pension along with SS allows you to be more aggressive in your investments because your pension and SS are meeting your monthly expenses. You roll that lump sum over and now you have a bigger balance but now have to live off at least part of that income. You’re far more sensitive to sequence of returns and market fluctuations. For me, I’ll take the monthly pension and have the peace of mind. I’ve been invested in the markets for over 30 years. I know first hand how volatile it can get.
Great video! 🌟 I was shocked by the 2nd strategy. Did you know it could boost retirement income by **20%**?
hi Kevin, we are planning to retire in 3 year from now at 65, i am investing 401k in T rowe Price, the T rowe price is talking about Managed Payout Program of the T rowe price retirement trust. , what do you think about this? what is pros and cons Thank
What was the internal rate of return of the annuity?
Great question! 🌟 Did you know the internal rate of return of some annuities can exceed **5%** annually?
What about the reverse glide path? That is gaining popularity.
You need 5 million to retire early comfortably. 3% withdrawal would provide 150K per annum before taxes. It’s still not a luxury lifestyle. I spend 7,000 to 15,000 per month.
My asset allocation is
40% commercial / real estate
50% global ETF
10% money markets.
A fee only annuity? What?
If you are going to get an annuity
1. A MYGA for a CD like investment
2 A single premium immediate annuity for a penion like insurance
3 A deffered immediate annuity for longevity insurance
Thank you Kevin, great video, I learned a lot. One question, if you buy the annuity for 500k at 7.5 % is the entire principal of 500k still there at your death to leave to your children? Thank you
Nope. Think of it as buying a pension. Once you die, it’s gone.
Nope. DB will decrease as you continue to withdraw money (can be lifetime income) from annuity. DB will be totally gone at some point.
Great review!
@@leeharrell777 Thank you for the explanation.
@@jwmore Thank you for the explanation.
Good video Kevin. The bucket strategy is a "feel good" strategy that makes you define rules on when to refill buckets. Most would be better off financially (but maybe not emotionally) using a simple rebalancing strategy.
With $300k in cash, which is 2 1/2 years of living expenses, and no debt, why would you not be 100% invested in a smart mix of equities?
Market crash!
Yes, but no risk, no reward. Not to mention not investing means you're losing money to inflation.@@viaggi3945
Question. Where are the 75 percent of us going to get all these buckets of money from. ?
Use your imagination. If you pick up an extra $75 a day near a Costco exit and invest, you are well on your way to filling your buckets. Just one example.
@@tomm.8892 you might be right lol
Be the ant, not a grasshopper.
@@tomm.8892I'm struggling to understand how we're supposed to get that $75 a day from Costco. Maybe because I've never been to a Costco. Can you elaborate?
Work hard obviously 🙄
For me, 2-3 years of cash or short term treasuries (10%), and the rest in a basket of broad market index funds (90%). 4-6% withdrawal rate with guard rails.
Add to that income from a few rental properties. Then SS according taken according to what the market does and what makes sense from a tax perspective.
Paid off, down-sized house. Low ratio of fixed expenses relative to total expenses. Should be able to handle just about anything. Big garden and lots of ammo just in case we can’t! 👍🏻
The ammo would be your investment in precious metals 😅