When Can I Retire? How to Determine If You Can Retire Using 2 Free Tools
ฝัง
- เผยแพร่เมื่อ 5 ต.ค. 2024
- A viewer recently asked me if he was able to retire in two years. He provided his investment balances, projected expenses, and pension income. In this video we'll evaluate his situation to determine if he can retire.
To determine if you can retire, it's important to evaluate both your expenses and income in retirement. This can be challenging for several reasons:
1. Expenses are at best an estimate
2. Medical expenses can be a wild card
3. One-time and periodic expenses can be difficult to calculate
4. Future income (social security, pensions) may not start for years
5. Estimate how much of your investments you can spend each year is at best a rough estimate.
To help, I walk through two free tools in the video:
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#retirement #caniretire #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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Rob - I love your shorter videos. You always provide great content in everything you do, but for a busy professional like me (I'm still practicing law after 31 years) the shorter uploads are much more practical; I rarely have time to sit through a one or two hour video no matter how great your content and presentation. I encourage you to keep up the quality/excellent work while reducing the length of your videos - no small task when you are discussing some complex investing topics but I think many viewers such as myself would benefit from more concise presentations. Thanks for everything you do for the investing community - I really appreciate your insights and generosity in sharing! Keep up the great work!
I hope to retire at 50. Currently 35. 500k saved, paid off house, and no debt. Max out my HSA, Roth, and 401k every year and add about 500 a month to a brokerage.
Whats HSA?
Save more in your brokerage and retire sooner.
Sounds like a wiener to me. Also look into if you can do a Roth backdoor conversion every year as well. If you do, instead of putting that $500 month into a cash brokerage account, you can put it into a Roth where it grows tax free FOREVER. But if you do start a cash account as well, make sure you only invest in ultra low cost tax efficient ETFs or Mutual funds. Like VTI or VOO are examples of low cost, tax efficient ETFs. Tax efficient basically means the ETF kicks off minimal distributions or dividends every year (which you must pay income tax on every year if it's in your cash account) and instead relies on share price appreciation over time. If you hold them long term (more than a year) they will taxed as a long-term capital gain rate.
Wow, you are so much ahead of majority of Americans.
Whatever you do, make sure healthcare is covered.
With a 75K pension and 2.3 million and looking for $100k a year to retire? Did the same thing with two small pensions, social security and 500K in an IRA and retired at 55. It must be all about expenses when you retire. Most IRAs even if poorly managed grow at a rate of at least 6%.
I retired at 56 years old and single. It's been 2 1/2 years of happiness. Thanks Rob for your dough roller podcast.
He has a 75K pension coming, and wants to retire on 100K per year? He could squeeze that out of 800K easy.
2.3 million with a pension of 75k per year and currently age 53? I’m sorry but why are you even asking.🙄
Yep. I'll just go out back and shoot myself now. Sounds like bragging to me.
Deciding to retire, in reality, is more often a psychological decision than one based on a calculation.
Suzy Orman always has stupid questions like this. And her answer is always to be concerned and work longer. lol
@@daveo1984 I hear what you’re saying Dave, but I would recommend watching some videos from Holy Schmidt. He explains how a large percentage of Americans have nothing or next to it. So in reality, this question is quite ridiculous in comparison to the situation of many out there.
@@Kayla11113 agreed
great explanation Rob!
I will use the free tools
Tracking expenses is useful. I retired at 54 but from experience in 8 years my expenses has doubled since my first year of retirement.
We know our expenses will increase in early retirement as we kick up the travel more. We are budgeting 20-25K a year for travel in the first 10 years and at some point those costs will go down as we get tired of traveling overseas so much and perhaps start doing more in country travel, etc. It is important to know your numbers currently or you can't estimate/plan what they will be in retirement. Currently our base household spend is 33-35K a year. That's all our bills with a fair amount of entertainment like going out with friends to events, festivals, etc. So we need around 55K in early retirement to have the travel we want. The beauty of it is, we can always pull back on the travel if we need to. So I see it as added buffer. If our overall investments just earned 3% overall throughout the remainder of our life, it will provide us with plenty of money. I have them invested to where we earn a lot more than that. Have only had 2 negative years in the past 15 years, so can't complain.That's without taking SS into account. Once we turn that on, perhaps a little early like 65, then SS covers more than our household expenses ( adjusted for inflation and estimated COLA over the next 30 years ). But knowing your numbers can bring great tranquility. Cheers !
My wife will join me in retirement next year at 60 y/o our total monthly expenses is $7200 with no debt. We plan on doing family vacations yearly so our monthly expenses will increase. Roth conversions don't make sense if you plan on drawing down retirement accounts early at 60 y/o.
Great presentation - definitely checking out both tools using the different models. Thanks for sharing, Rob! 👍🏼
Great video and software demo as well. I liked being able to factor in pension income and see the impact it has. Thanks again.
$100k annual spend-$75k pension income= $25k (delta). Use a simple multiple of 40, so $25k * 40 = $1,000,000 (nest egg needed).
You might need add room for Tax. I am sure he means 100K after tax expense.
Just two words... The Professor.
My only regret is not converting more traditional retirement plans and IRAs to Roth accounts. Good investment returns, RMDs and other investment income have put me into the highest tax bracket I've ever had. If I had known how successful I would eventually be, I would have Rothicized a lot more.
Yup us to we will start spending down at 60 y/o not waiting for RMDs.
Cool tools; Thank you for sharing those
Thanks, Rob.
One thing the calculators and tools don’t take into account is when you can access the money. I am 50 planning to retire at 55. I can’t pull SSN till 62 and my IRA/401k till 59.5. So the money for 55-60 needs to come from other accounts. When I started looking at this it made me realize I have plenty saved up, but I don’t have enough that is in accounts I can use from 55-62. So I am concentrating on that for these last 5 years.
You can pull from your 401k using rule 55. look it up, but to do this you don't want to roll it into a IRA. Also make sure your plan supports Rule 55. I was in the same boat, then found out about this. retiring in 15 weeks at 57.
@@brianpabian5115 absolutely right about rule of 55! Just need to retire from the company you have the 401k with and ensure they allow withdrawals without restrictions.
2.3m is enough to retire now. just use the 4% rule, it's over 90k a year income. Yes I know 4% rule not perfect but it's good enough. a lot of these retirement gurus are way too conservative imo. realize that with the 4% rule, in most cases your portfolio will MASSIVELY increase over the years. Double or more, he will likely have 5 million or more when he dies. Also realize living to 95 is unlikely for most people. I get its a "worst case scenario" but these are all way too pessimistic in all reality. Personally being overweight I figure I'll be lucky to make it 75 forget 95.
Very good video and well reasoned.
FWIW My lifestyle is pretty conservative and my biggest expenses are taxes and insurance.
Me too.
@@rob_berger have you looked at how much you might be able to self insure?
Great question .
I also would recommend one use retirement modeling software like New Retirement or OnTrajectory to help.
Great video! Thanks Rob!
Love this video! I've always been cautious with how I invest in my Roth IRA and the Personal Capital tool really helped clear the air for me. Thank you so much for sharing, Rob!
Very cool. Thanks eh! From bc, Canada
Hello Rob, really enjoy your videos, learn so much from them! The content coupled with your great personality makes it fun to learn! Would like your thoughts on VYM, MGK, and for the Smalls VBK instead of VBR. Thanks! Jesse
Thank you for the videos! I find them to be very informative. I've watched your videos about the 4% rule and I don't know ....... maybe I'm a slow learner or learn better with examples but, I'd like to see an example of the 4% rule in action as in, into the second year and some years beyond. Not exactly certain on how to use inflation in my calculations. Also , do RMDs effect this Calculation and if so how? Thanks again for any of your time given to this, Eric.
If you retire with a nest egg of $750,000 the four percent rule says for year one of retirement you can take out $30,000 to live on and pay expenses. In year two if inflation is 3% you increase your year one withdrawal by 3% ($30,000 x 1.03) so you would take out and live on $30,900 in year two. In year three if inflation goes up to 4% you take year two withdrawal and increase it by 4% ($30,900 x 1.04) so you would have $32,136 to live on and spend in year three of retirement. You just keep repeating this every year based on the current inflation rate reported. Hope this helps clarify things!
@@LarryManiccia Yes it does Larry. Thank you for that.
Expenses are the X factor for me. I'm in a similar position at 51 but my kids are only 14 and I don't know how my expenses will change when they leave for college (both covered with college funds), which makes my calculations complex and variable....
You showed us a binder where you keep documents for your wife in case something happens to you. I'd like to do something like that for my husband who is financially savvy but doesn't actively manage our money. So I'd like to put together something for him in case something happens to me. What did you put in your binder? Specifically referring to the investment side of things. Thanks
I'd like to see him do a video talking about this as well.
Please folks, don’t ever pay AUM (assets under management) fees. That 1% is a killer and you don’t need to have anybody manage your assets. Watch Berger and others and you will gain the confidence to manage your own portfolio.
Rice and beans goes a long way for pennies on the dollar retirement.
Awesome!!!
Are there any security risks to linking your investment accounts to a site like Personal Capital?
Read the fine print for your connected brokerage accounts and see what they say about giving out your passwords to places like Personal Capital. There may be some reimbursement exclusions in there somewhere.
Given your prediction that value stocks will outperform growth stocks in the next decade or so, could you advocate a 50/50 vti schd split. I'm 35 with no investments/retirement accounts but have accumulated a 1m net worth through small business and real estate. Your videos are invaluable to novices like myself and experts alike, so thank you for that.
Nice work! Great to diversify between real estate, stock market, and business ownership!
How does New Retirement’s planner ($96/yr) stack up against these 2 free tools?
Regarding the future salary on the SS document. Is this an estimate of the last year you will work, or is it an estimate of next years salary? There is not much information on this.
thanks
I'm enjoying your videos and would appreciate your thoughts or recommendations for resources regarding withdrawals once I stop working (targeting age 55), specifically - when I do start making withdrawals from my after-tax brokerage account or 401K - do I sell the shares that I bought at the lowest price, highest price, other? I've been able to find plenty of resources on creating an overall withdrawal strategy, e.g. when to start withdrawing on certain types of accounts (401K, Roth IRA, etc.).
Can you make a short video about M1 Finance. Pros, cons, is it safe long term. Since it’s fairly new and not as big as Vanguard and fidelity. Some people maybe hesitant to trust it. I have Fidelity for my 401k and Roth. I’d like to open a taxable account. I like the features and simplicity of M1. What your thoughts on this.
It's worth to keep money in few brokerages. If you use fidelity, consider split money with vanguard, Schwab and M1. Yes it is a bit pain in glutes but nice conservative way to keep your money secure as possible
Can someone help me understand why VIPSX, a Vanguard TIPS fund, average maturity just over 7 years, paying 5.2% yield, has dropped in share price about 6-1/4% since last September. I'm not saying it's a good or bad fund, but why the price drop during this inflationary time?
I have a Universal Life Ins policy I contribute $5,000 a year and since inception I've received over an 8% return. I can start drawing at age 60. Is it possible to include this type of income/investing in Personal Capital? I also have a pension and social security and a 401k and over stock investments I'm just not sure how to include the Life Insurance in the retirement planner.
Rob, I have a question. My wife and I both have 401ks through work but we want to open another retirement account. We are interested in a Roth. Should we each open up a Roth individually (2 separate accounts) or just one combined? I don’t think we could each put $6,000, at the current time. If we open 2 separate accounts, can we both put money in the same place, like the same 3 funds (like both s&p 500, etc) or should the money be in completely different funds? Thanks!
Definitely open separate accounts and fully fund. Since you're not limited in what you can invest like the 401k, find a low cost index fund that gives you the diversity you plan needs. Hard for anyone to advise you what to invest in without knowing your investment style and what you already are invested in.
It is all dependent on how you spend your money. It is alarming the guy spends 100k a year..... I only spend about 40k a year after tax with all expenses. If I wanted a "comfortable" living, it would be 50k for me. That is half of what that guy is spending. That being said... i do live in a low cost state.
FICalc is useful. Personal Capital wants me to link all of my financial accounts (which I will not do without vetting them first), and they have been unrelenting in trying to get me to engage with one or more of their financial advisors ever since I signed up for their site. So not too impressed with them at this point.