It’s a very interesting point. I got good advice from my mom and uncle in my 20s, to put as much away in my 401k as I could stomach. I’m 37 now with 440k. For being invested for 14 years, it’s amazing how hard it’s compounding. I’ll obviously continue to contribute but I’m going to focus on my pre-retirement Bridge brokerage account, now.
@@Wuestenwiesel I hate all work though. I'm 41 and have about $500k, so yes I could just barista FI at this point I'm sure. Plus if I were to quit my current job and just work a job that pays the bills only (barista) I would also have a pension of about $900/month starting at 55. If I stick with the current job until 55, my pension would be about $2300/month. But I hate work so much, both my current job and the thought of working as a barista or at home depot or whatever that I seriously think about suicide every day.
I definitely over saved, but just can’t change. My wish is just to start blowing my money freely, easier said than done after being so frugal all these years. I need to try. Enjoy life.
I can totally relate to how you feel. When you’ve been frugal with your money all the years, it’s a lot harder to just freely spend your money without feeling guilty.
Consider sharing the blessings of your hard work and frugality. It may bring you tremendous joy and happiness to help someone else climb the ladder to financial security.
I've lived on less than $20K for so many years, it's hard to break the habit. I'm actually shocked at how high my retirement income is. This takes some getting used to!
Wonderful video. It is hard to leave that ROTH money on the table. At almost 52, being able to add 27K to my ROTH 401K (ROTH and catch up ROTH) and another 7K ROTH to my IRA (backdoor) is a huge benefit but you are right in that when I plug "new" money into my retirement calculator I can see that the next 3 years before I turn 55 and retire, do not really change my retirement number all that much. In fact it changes very little above the actual dollars that I add today because it has had less time to grow. The money we added decades ago is doing all the heavy work. Still having more ROTH, even with the immediate tax hit, seems like a worthwhile pursuit until 55 and retirement.
Kudos on the video. Never thought of it this way. Thought of retiring at 50 and after a year not working, realized it wasn’t going to be easy. Got a job offer at 1/3 of my pay and it more than covers spending needs even after throwing most of it into savings. Working for another 5 years and not having to draw will make retiring early much easier even without saving during the next 5 years. I’m going to have to rethink what I do with my earnings going forward.
My wife and I go on international trekking trips (I’m 41 and she’s a bit younger) every other year and on those trips without fail, we meet retirees who tell us they wish they didn’t wait and did more when they were younger like us. We’re privileged in that we’re able - I know that, but I think your point is a good one. Find the balance in life as soon as you can. Your youth is more valuable than any amount in a portfolio.
Good video, that's a strategy I've been using to plan out retirement. I looked at retiring in my late 50's, but then I looked at medical insurance costs and that was a shocker! I decided to keep working until 65 when Medicare kicked in and my house would be paid off, plus I reduced my savings/investments contributions and put that money towards renovations on my house to make it comfy for the next 30 years. The renovations are done, the house is paid off, and 65 is about a year away. All set for the next "round" of life! (and I don't mean rounds of golf . . . not a fan!).
I guess one could save the last few years as cash (income fund) and that could be your cash bucket in case portfolio goes down in retirement. I think that would make a bigger difference having it as a cach cushion. Maybe some in i-bond, some in cash, some in save index find, etc.
Good point. And realizing you've crossed the finish line is not easy. It's stressful because no one knows the future. I retired 20 years ago at 45 and I kept running the numbers in my head, watching my spending and thinking about what I wanted in the future. I didn't have a big pile of money, only about $100k and a $2200/mo mortgage. I wasn't sure I had retired. I could still be productive and I like being productive and thinking out of the box. I had been a software engineer, loved it, and continued to write software for fun. But just writing software for 30, 40 years would I then look back and wish I'd done other things. Plus I had gotten married a couple years earlier and knew if divorced the higher my salary grew the more I'd have to pay in alimony and that force me to keep working. Plus losing 1/2 my assets. So I decided to retire. What the money did allow me to do is try new things that probably wouldn't earn a lot, but I didn't need a lot. I fixed up that house in San Jose CA, sold and moved to Phoenix buying a house for cash. Not having a mortgage changes the way I looked at expenses. Paying $2200/mo made other expenses look small. Going out to eat for $50 looked like nothing. But once the mortgage was gone other expenses started looking like a lot of money. My life got simpler and happier, or as happy.
How in the world did you retire with only $100k at 45? Does that include only after tax money or is retirement and after tax money. Did you have a pension? What was your total monthly expenses? I know this may seem like prying but we constantly see in the news you need $1 million, 2, even 3 million to retire at normal retirement age.
I recognize this pattern of deferring living until a goal is met. I've become better at it, and currently don't have any hindering goals. I'll have to keep this in mind the next time I do.
2:32 skipping year 30 where I am. I've ramped up my retirement savings to 24k a year, but even with being higher than ever, about $70k-$100k+ currently is from compounding. So we get to $2.6 million. Here's the second kicker. Right now my biggest cash flow impacts (not necessarily expenses) are mortgage (incl. taxes and insurance), health insurance, income taxes, and retirement contributions. These total about $8900 per month in my household. At retirement, this total becomes property tax and insurance (no mortgage), medicare supplement, much lower income taxes, and no retirement contributions. Now the total is about $3300 per month - assuming I stay in a higher-cost home. My need for income or other cash flow drops dramatically.... so setting up a retirement that replaces my income at 100% is going to be wildly in excess of my needs. I may have over saved and I may be continuing to over save.... not that I'm going to stop because it's a habit. 6:53 another question I have thought about is what is the difference of working full time/full salary to 65 vs. going to half time and half salary at 62 and continuing that to 68. The answer is I would be MUCH BETTER OFF, because I would be in a higher tax bracket working full-time age 62-65, and going half time puts me in a much lower tax bracket. Also, even if my contributions slowed or stopped, I also could file Social Security and start withdrawing LATER, increasing my benefits at my full retirement at 68.
I also stopped contributing 5 years before retirement. But I guess it's no big harm for most people to keep contributing, such as to a brokerage account. If you have extra money, you have to put it somewhere -- better into a brokerage account than a low-yield bank account or under your pillow. If you do stop contributing, all your ducks have to be in line: you know what you're doing in your investment, you already have an emergency fund put aside, you have a good projection of what your nest egg will be like N years from now, and you have a good idea of your expense during retirement.
It's so true, I was not used to withdrawing money instead of saving. My regret is not spending my money earlier. Wish I went overseas before tis pande.
Your videos are so well packaged and polished so well! They're informative and easy to follow. I wish I was at the $2M million mark but not quite there.
I'm probably at the point where I don't need to save any more for retirement. I have been trying to change my mindset a bit and am making a couple significant purchases that will improve my life quality while not impacting my finances for retirement. I still enjoy tinkering in the stock market, so would like to continue working at finding successful investments.
@@howellwong11 spending is harder than saving… I’m not sure how ppl measure life bcuz it’s almost silly to be frugal while ur young just to wait n spend ur money in the nursing home…. Retiring with health should be everyone’s goal
This right here is not talked about enough. I struggle with this very thing. I’m already at coast FIRE but feel that I need to continue to max out all my accounts to feel peace of mind. I do plan on stopping working all together at 50 in 12 years.
Great insight. I love the emphasis on current enjoyment and consumption when it makes financial sense to do so. I am guilty of moving that financial goal post.
My wife and I were blessed to figure this out early. We hit it hard before we had kids and both maxed out 401K's and IRA's. It took some sacrifices but we were young and didn't miss the money at the time. By the time the kids were old enough to enjoy and remember experiences we were able to lay off of the savings and allow the money already in the portfolio to provide the growth we need.
I joke with my kids that if they use the last nickle in my account to pay off the back hoe driver to throw the dirt on my grave, then I did life right.
Our portfolio is healthy but we have two problems. We love our careers and are still enjoying them in our late 60s. The second problem is that the pandemic taught us that our favourite things don't cost much money! We love hiking and walking, listening to audio books, playing games, watching good movies. Sure we can take trips to do those things in more interesting places but more expensive things don't guarantee more enjoyment.
Your video began with you making the comparison between the amount you contribute and the amount you earn. When you started giving guidelines I was hoping you would continue with that theme. Specifically I was hoping you would address the annual contributions as a percentage of total retirement account balance. For example, if your annual contributions are less than 1% of your retirement account balance due to capital appreciation in your retirement accounts, is that a sign that future contributions aren't worth it?
Here is why to keep saving when it appears you have met your retirement income goals. You assumed an 8% return on investment during the accumulation phase. What would be the result of your retirement if the return during your 30 years of retirement is 1%. And you based your income needs from your portfolio at 3.2%. The "oversaving" can be thought of as an insurance policy for running out of money in retirement. Another reason for "oversaving" is you cannot predict if you will have some large expense over your 30 years of retirement. And what if your retirement ends up being 40 years --- that "oversaving" would come into play here.
When to stop saving? Never! There will be times to spend, but that's not all the time. Some months you will have money left at the end. What do you do with it? You don't just spend because you can! The theory that you spend less as you age scares me. That's not always the case. You may need to hire help for housework, or lawn care. Maybe even full time. That can be expensive! If you end up in a nursing home, that can be over a hundred thousand dollars a year.
I'm doing this my own way. I'm maxing out a Roth 401k, and supplementing with deferred 401k withdrawals to pay taxes on that now. This will give tax flexibility in the future.
I call this "Time For Toys" once I hit my magic number in about seven years I plan on stopping my savings and working for a couple more years just to buy toys.
We have reached FI but haven't stopped working yet while our daughter is in college. (College is covered with a well funded 529 plan we started 15 years ago). Since we have all this excess income with no mortgages on either of our two homes and no other debt, we are treating ourselves to luxuries like first class travel and upgrading our home etc. We figure we'll get that out of our system now while we have the excess income. We've always been savers and lived more frugally than many people so it's been a bit weird to spend more excessively. When we do retire, we'll lock things down a bit more.
This is very helpful content. I am not sure if my income streams will hold up so I guess I continue to save to keep my self-employment taxes down and to make sure that we have enough... and leave something to our heirs. But... this was food for thought. 🙂 Thank you for the content!
Great thoghts. I understand this is focus on US tax situation. If you have a middle-class salary like mine of usd 120t , the tax bill is rather moderate and therefore you can really consider on stop saving. What great luck American have. In my country, Switzerland, it is really hell. The total tax is about 70% of the brut income, if you do not go on saving. So you stop saving means, you still have to save, not for you, but for filling the government pocket. And clearly this is no option I would ever consider. I have no choise. Every year I have to transfer my usd 120t from my free funds to a retiring account to get the 0-tax bill. I wish I could change tax-residency to USA.
Great video. Hits home for me….. 57 yo. 4 million in trad Ira , another 3 million outside in stocks…. Now my issue is doing huge Roth conversions before 2026 and balance a 1 million bene Ira that needs to be taken out in 8 years. Thinking of converting 3.5 million in 2024 and 2025. This will free me up from RMD and tax free for legacy. I really won’t use that money, We can live off pension. Soc sec. etc….. but I’m still working 7 days a week, saving and maxing out all in Roth now. Still feel like I don’t have enough and I enjoy my work. Wife retired at 55 yo. Last month. I can’t just pull the plug. I feel like I’m still living paycheck to paycheck and broke believe it or not.
I actually enjoy 7 days a week, kind of the way of life at my work. As for my kids, well, yes, they will enjoy spending, hopefully it will last several generations... I need to just spend. Seems like I ve just been spending, but on the kids. Helping fund Roth IRA, 401 k helping fund $6 k since they just graduated and starting new jobs. If anything, I will spend to help out the kids start there new life, makes it easier for them. Why give it them when they are 55-60, they need the help now. I know I had nothing and raising three kids, not easy.
@@Binatasj well the first two kids will appreciate it….the third not so sure, still immature……. Never a perfect world. Thinking of the rotten kid might make me just pull the plug and retire….. spend as much as I want. I was thinking to contribute the max 401k in Roth, then retire. And take out 50% from my paychecks. For 2022.
This is the situation I'm in. I've saved all my life and now need to learn how to spend in my retirement. I have a $6.8M portfolio at 58 yo and have started working with a wealth planner to implement Roth conversions and reassess my portfolio to reduce my yearly taxes through all my mutual funds capital gains. What am I saying for now? 35 years as an executive in the corporate world and I hated it - so retired at 56.
I stopped saving for retirement…because I invest for retirement instead. As the investments grew, they started to pay the amount that I would save annually. The. They started to make car payments. I put the car on payments because the larger amount of capital allowed access to investments with higher return. In 5 years, you own the car and still have the investment amount. Trade the car in later and either enjoy less payments due to a high down payment or put the minimum down and buy an even larger investment that covers the cost of the car and operating costs as well. That will snowball until you have the car completely taken care of. My retirement is based on how much money per annum you get paid cash flow and how much you make in capital gains or deferred payments. When all is set properly, you will see everything increase hands off after you subtract cost of living.
4:21 the role of saving more is to build the generational wealth that you can leave to your kids or other family members and hope that they can continue that for generations to come.
Please enjoy it. Give yourself the job of planning and taking trips. Get involved with an organization where you can pitch in and help one day a week, to have structure, socialization, and be needed and expected there.
I haven’t stopped saving for retirement, but I have scaled back on the 401K just so there is enough contribution to get the company match. I might as well take the free money the company is providing as a benefit. I’ve been putting the rest into a brokerage account, not for retirement, but as fun money.
I've done the same. At age 50 I have more in my pretax accounts than I probably needed so I lowered that down to just get the company match and now am building more in my after tax accounts so that I manage my taxes and ACA subsidies better.
Yeah, I have not over saved yet, but outside of the match, the 401k is the last item to throw savings at. 401k to get the match first, because it was in works budget as part of my compensation, so I'll take my compensation! Roth 2nd because there are no RMDs there, so it can keep compounding years past retirement without taxes...plus it doesn't take a lot to max the Roth, so why not? HSA 3rd as it is a great short term emergency fund, and if left untouched has the most flexibility and benefits. And again, the max contribution is not high, so why not? 401k beyond the match 4th to meet the bare minimum retirement goals that the Roth and HSA can get to because the limits are so low. 529s and other specialty accounts 5th. They are known expected expenses, so why not prepay them, have some interest help, and do it tax free? Non retirement 6th. Sure, no tax advantage, but the idea here is more for an advanced emergency fund. Keep closer to 2 months of savings in savings, then grow this acct to the other 1-4 months of expenses so there is that combined 3-6 month buffer. At least then you can have it really grow at least with inflation, or convert to cash flow during a tough time so it can last more than 6 months in a crisis. Additional 401k 7th. Help save on taxes, or pad that retirement out. I'm not sure my paycheck will ever be high enough to warrant this lol, but if you need more tax shelter, there it is! Additional nonretirement last. Expanding beyond that 6 month threshold can be the ticket to an emergency fund that can cash flow expenses for a few months between jobs. As it grows it can supplement part time work for a psudo retirement. Or if you have an ungodly income, it can grow to replace your income for a full retirement as tou slowly drain it before retirement and social security kicks in.
@@hazzardjk That was part of my reasoning as well. I should have noted I’m still maxing the Roth IRA and HSA buckets because I want the tax diversification in retirement. I will be 55 this year and am planning to retire in 3-5 years. I have a couple of non-financial goals I want to meet first. I’ve already run the numbers, monte carlo simulations etc and they all say I’m between a 98 - 100% confidence level of meeting my financial needs.
@@hazzardjk if your company offers a roth 401k I would strongly suggest you put your money in there and let it grow totally tax free. The tax benefits are just too good to pass up on a roth. Especially if your choices are brockerage account vs roth 401k. Additionally you can take your contributions out the roth before age 59.5.
@@ariefraiser140 Thanks for the comment. I am actually doing that as well as after tax to increase the 3 different buckets of money we’ll have available to us at retirement (pretax, ROTH and after tax). Our plan is to ensure we can adjust our reported income to qualify for a good health care subsidy.
I began saving early on, but now I'm considering putting some of my income in a bridge account instead of retirement accounts so I don't have to work till normal retirement age if I don't want to.
I’m with ya 100% on this. I’m 37 with 440k in my 401k. I’ll continue to contribute but I’m gonna focus on this Bridge account, so like you said, I can maybe retire at 50 or 55
The taxation rate after $400,000 will almost certainly get higher so there is likely a upper limit on what you should have in traditional retirement plans so for savers who have been maxing out for many years , they will pay more tax potentially if they put too much into traditional plans. I would like more discussion on this rather the simple principles discussed here.
It still all just boils down to whether you you think you will be paying more taxes now or more later. You are making a bet. For me, just deferring $50k per year of income that the state of CA won’t get to touch when I move out of here for retirement is worth the satisfaction.
@@genxx2724 How many people really have to worry about that though? I should be finishing here with about $3M in my 401k. Most of it is pre-tax. If it grows to $5M by the time I’m having to take RMD’s then that’s $150k per year(~3%) that I’m taking out to be taxed on and when you add it to my wife’s pension we are still in a much lower tax bracket than we would have been if we had elected to be taxed first. And my example gets into the 1 percentile of 401k savers so how many high earners will actually benefit from Roth?
After 10-20 years I dont think your savings would still be 10K/mo. They should incease with inflation and salary increases. A percentage savings rate would be a better comparison. But yes, as the savings grow, my net worth now grows much more with growth and dividends than my working salary.
If it helps, you can assume he's referring to 10k in real terms. He's just pointing out that whereas savings are the largest annual contribution when you start, it becomes the least the closer you get to the end of your working/saving period. It can be hard to spend more and save less when you've disciplined yourself to save for 20 or 30 years.
to all you people with tons of money and not enjoying it. just look at the obituary's and see who died today, and check out how old they were. a lot of people die young or what i think is young , under 65.
I can't enjoy life while working. I'm "only" 41 years old. I have around $500,000 so I could probably stop saving and retire at 65 (or even earlier) but I hate work so much I think about suicide. Spending my money isn't going to make me enjoy work at all.
If you have one million in 401K now at age 54, and you plan to retire in at 58, in 4 years, is ok to take foot off the gas pedal on contributing to the 401k? Right now maxing out the 401k and also a separate Roth account.
I stopped contributing 5 years before retirement. You can do this only if you see the finish line. If unsure, reduce contribution gradually, not all at once.
@@danieljacobs6921 you are exactly right! He’s not even correct in the first part of his statement. Inflation would (1.03)^10 which would reduce buying power by closer to 34%…. If you hold 100% cash which most retirees don’t.
@@beatricerights put your savings in the market in an index fund (s&p500 etc). That is your hedge against inflation. Start the pension, take a year to see if you enjoy retirement, and to see if the pension/savings is doable. If it doesn’t work get another job. You’ll still have the pension and another income while growing your savings. But make sure you retire with a purpose; travel, family time, hobbies. Don’t sit home and be bored.
Can you address if you have a huge trad ira, do you recommend doing Roth conversion in one large chunk, like millions. This will free up RMD, since just doing small amounts each year isn’t enough to prevent rmd
@@RootFP yes, I agree, but in this case, it’s currently 4 million, if I just do $100 k a year and it grows $300 k a year, it’s not doing anything. By the time I’m 72 in 15 years, this 401k will be 8-9 million possibly. The rmd will be huge, like $400-500 k a year at 72 years old.
Don't pay attention to anybody else's number If push came to shove,I can live on just my Social Security at 70, it isn't too far from what I actually spend now because of my savings rate.(but of course this isn't my goal)
I know that you are just using a hypothetical situation, however within the first 2 minuets of this video I already see several flaws. 1st most 25 years old are not even thinking about saving for retirement because they are trying to get their life going. So the notion that they are able to save 10000 a year is laughable. They are trying to pay off their student loans and if married thinking about if and when they want to start a family, then you add a kid(or two) in the mix.. Even a two income household would find it challenging to save 10 grand a year. You need the house and the car to go along with that family you are starting.. So I guess my point is for probably 99 percent of the folks out there they will not be able to stop saving for retirement. 🤷♂
You’re overthinking it. It’s just a hypothetical and everyone’s situation is very different. The point is there comes a time where some people don’t need to keep saving to be able to retire.
Just because the average person won’t doesn’t mean it’s not a possible solution for many. Even still, the concept still applies and if they can’t save 10k then start with what you can and increase as you get more income.
This is what they call “Coast FIRE.” No need to invest any more, just keep working so time passes and your army of dollar bills continues to compound.
It’s a very interesting point. I got good advice from my mom and uncle in my 20s, to put as much away in my 401k as I could stomach. I’m 37 now with 440k. For being invested for 14 years, it’s amazing how hard it’s compounding. I’ll obviously continue to contribute but I’m going to focus on my pre-retirement Bridge brokerage account, now.
Army of dollar bills, sounds like you are strong with the FOO
@@Wuestenwiesel I hate all work though. I'm 41 and have about $500k, so yes I could just barista FI at this point I'm sure. Plus if I were to quit my current job and just work a job that pays the bills only (barista) I would also have a pension of about $900/month starting at 55. If I stick with the current job until 55, my pension would be about $2300/month.
But I hate work so much, both my current job and the thought of working as a barista or at home depot or whatever that I seriously think about suicide every day.
@@sstrongman1667 Bri & Bo
I definitely over saved, but just can’t change. My wish is just to start blowing my money freely, easier said than done after being so frugal all these years. I need to try. Enjoy life.
I can totally relate to how you feel. When you’ve been frugal with your money all the years, it’s a lot harder to just freely spend your money without feeling guilty.
Consider sharing the blessings of your hard work and frugality. It may bring you tremendous joy and happiness to help someone else climb the ladder to financial security.
I want to be RICH in retirement. You’re right, it’s gonna be difficult to start spending.
I've lived on less than $20K for so many years, it's hard to break the habit. I'm actually shocked at how high my retirement income is. This takes some getting used to!
Wonderful video. It is hard to leave that ROTH money on the table. At almost 52, being able to add 27K to my ROTH 401K (ROTH and catch up ROTH) and another 7K ROTH to my IRA (backdoor) is a huge benefit but you are right in that when I plug "new" money into my retirement calculator I can see that the next 3 years before I turn 55 and retire, do not really change my retirement number all that much. In fact it changes very little above the actual dollars that I add today because it has had less time to grow. The money we added decades ago is doing all the heavy work. Still having more ROTH, even with the immediate tax hit, seems like a worthwhile pursuit until 55 and retirement.
Kudos on the video. Never thought of it this way. Thought of retiring at 50 and after a year not working, realized it wasn’t going to be easy. Got a job offer at 1/3 of my pay and it more than covers spending needs even after throwing most of it into savings. Working for another 5 years and not having to draw will make retiring early much easier even without saving during the next 5 years. I’m going to have to rethink what I do with my earnings going forward.
My wife and I go on international trekking trips (I’m 41 and she’s a bit younger) every other year and on those trips without fail, we meet retirees who tell us they wish they didn’t wait and did more when they were younger like us. We’re privileged in that we’re able - I know that, but I think your point is a good one. Find the balance in life as soon as you can. Your youth is more valuable than any amount in a portfolio.
Good video, that's a strategy I've been using to plan out retirement. I looked at retiring in my late 50's, but then I looked at medical insurance costs and that was a shocker! I decided to keep working until 65 when Medicare kicked in and my house would be paid off, plus I reduced my savings/investments contributions and put that money towards renovations on my house to make it comfy for the next 30 years. The renovations are done, the house is paid off, and 65 is about a year away. All set for the next "round" of life! (and I don't mean rounds of golf . . . not a fan!).
Thank you!
I don’t normally comment on financial videos but this was a different perspective that I can appreciate.
Glad to hear it!
I guess one could save the last few years as cash (income fund) and that could be your cash bucket in case portfolio goes down in retirement. I think that would make a bigger difference having it as a cach cushion. Maybe some in i-bond, some in cash, some in save index find, etc.
Good point. And realizing you've crossed the finish line is not easy. It's stressful because no one knows the future. I retired 20 years ago at 45 and I kept running the numbers in my head, watching my spending and thinking about what I wanted in the future. I didn't have a big pile of money, only about $100k and a $2200/mo mortgage. I wasn't sure I had retired. I could still be productive and I like being productive and thinking out of the box. I had been a software engineer, loved it, and continued to write software for fun. But just writing software for 30, 40 years would I then look back and wish I'd done other things. Plus I had gotten married a couple years earlier and knew if divorced the higher my salary grew the more I'd have to pay in alimony and that force me to keep working. Plus losing 1/2 my assets. So I decided to retire.
What the money did allow me to do is try new things that probably wouldn't earn a lot, but I didn't need a lot. I fixed up that house in San Jose CA, sold and moved to Phoenix buying a house for cash. Not having a mortgage changes the way I looked at expenses. Paying $2200/mo made other expenses look small. Going out to eat for $50 looked like nothing. But once the mortgage was gone other expenses started looking like a lot of money. My life got simpler and happier, or as happy.
How in the world did you retire with only $100k at 45? Does that include only after tax money or is retirement and after tax money. Did you have a pension? What was your total monthly expenses? I know this may seem like prying but we constantly see in the news you need $1 million, 2, even 3 million to retire at normal retirement age.
@@ariefraiser140; maybe he's 110 years old and retired in the early 1950's?
Your clear financial wisdom combined with your appreciation of life beyond the almighty dollar is so refreshing. Thank you!
Thanks Anthony!
I recognize this pattern of deferring living until a goal is met. I've become better at it, and currently don't have any hindering goals. I'll have to keep this in mind the next time I do.
This is exactly what I am doing! Enough is enough
2:32 skipping year 30 where I am. I've ramped up my retirement savings to 24k a year, but even with being higher than ever, about $70k-$100k+ currently is from compounding.
So we get to $2.6 million. Here's the second kicker.
Right now my biggest cash flow impacts (not necessarily expenses) are mortgage (incl. taxes and insurance), health insurance, income taxes, and retirement contributions. These total about $8900 per month in my household.
At retirement, this total becomes property tax and insurance (no mortgage), medicare supplement, much lower income taxes, and no retirement contributions. Now the total is about $3300 per month - assuming I stay in a higher-cost home. My need for income or other cash flow drops dramatically.... so setting up a retirement that replaces my income at 100% is going to be wildly in excess of my needs. I may have over saved and I may be continuing to over save.... not that I'm going to stop because it's a habit.
6:53 another question I have thought about is what is the difference of working full time/full salary to 65 vs. going to half time and half salary at 62 and continuing that to 68. The answer is I would be MUCH BETTER OFF, because I would be in a higher tax bracket working full-time age 62-65, and going half time puts me in a much lower tax bracket. Also, even if my contributions slowed or stopped, I also could file Social Security and start withdrawing LATER, increasing my benefits at my full retirement at 68.
I also stopped contributing 5 years before retirement. But I guess it's no big harm for most people to keep contributing, such as to a brokerage account. If you have extra money, you have to put it somewhere -- better into a brokerage account than a low-yield bank account or under your pillow. If you do stop contributing, all your ducks have to be in line: you know what you're doing in your investment, you already have an emergency fund put aside, you have a good projection of what your nest egg will be like N years from now, and you have a good idea of your expense during retirement.
It's so true, I was not used to withdrawing money instead of saving. My regret is not spending my money earlier. Wish I went overseas before tis pande.
Beautifully elaborated with solid reasoning
Thank you, Charles!
Your videos are so well packaged and polished so well! They're informative and easy to follow. I wish I was at the $2M million mark but not quite there.
I'm probably at the point where I don't need to save any more for retirement. I have been trying to change my mindset a bit and am making a couple significant purchases that will improve my life quality while not impacting my finances for retirement. I still enjoy tinkering in the stock market, so would like to continue working at finding successful investments.
I have been retired for 21 years and I am still saving. It is a life long habit of mine.
Old habits are hard to break!
@owleyes I am enjoying my retirement. I saved for 30 years and I deserve to enjoy life. Good luck to you.
Ahah that wat a man told me… I think saving is hard, try spending 🤣🤣
@@Buggu3 I am happier saving than I am spending. Am I the only one?
@@howellwong11 spending is harder than saving… I’m not sure how ppl measure life bcuz it’s almost silly to be frugal while ur young just to wait n spend ur money in the nursing home…. Retiring with health should be everyone’s goal
This right here is not talked about enough. I struggle with this very thing. I’m already at coast FIRE but feel that I need to continue to max out all my accounts to feel peace of mind. I do plan on stopping working all together at 50 in 12 years.
you are awesome! I love to stop saving now. It really makes sense just to stop and smell the roses.
Thank you!
Great insight. I love the emphasis on current enjoyment and consumption when it makes financial sense to do so. I am guilty of moving that financial goal post.
My wife and I were blessed to figure this out early. We hit it hard before we had kids and both maxed out 401K's and IRA's. It took some sacrifices but we were young and didn't miss the money at the time. By the time the kids were old enough to enjoy and remember experiences we were able to lay off of the savings and allow the money already in the portfolio to provide the growth we need.
While you are saving for retirement, your debts and home need to pay off prior to your retirement and get your LTC policy while you’re in your 50’s.
DIE WITH ZERO is an awesome book that taught me how to enjoy my retirement while also helping others while I am alive.
I joke with my kids that if they use the last nickle in my account to pay off the back hoe driver to throw the dirt on my grave, then I did life right.
Yes 👍🤑🥳
Should definitely keep saving up to point you are getting company match. Always take the FREE money.
Our portfolio is healthy but we have two problems. We love our careers and are still enjoying them in our late 60s. The second problem is that the pandemic taught us that our favourite things don't cost much money! We love hiking and walking, listening to audio books, playing games, watching good movies. Sure we can take trips to do those things in more interesting places but more expensive things don't guarantee more enjoyment.
Your video began with you making the comparison between the amount you contribute and the amount you earn. When you started giving guidelines I was hoping you would continue with that theme.
Specifically I was hoping you would address the annual contributions as a percentage of total retirement account balance. For example, if your annual contributions are less than 1% of your retirement account balance due to capital appreciation in your retirement accounts, is that a sign that future contributions aren't worth it?
Here is why to keep saving when it appears you have met your retirement income goals. You assumed an 8% return on investment during the accumulation phase. What would be the result of your retirement if the return during your 30 years of retirement is 1%. And you based your income needs from your portfolio at 3.2%. The "oversaving" can be thought of as an insurance policy for running out of money in retirement. Another reason for "oversaving" is you cannot predict if you will have some large expense over your 30 years of retirement. And what if your retirement ends up being 40 years --- that "oversaving" would come into play here.
When to stop saving? Never! There will be times to spend, but that's not all the time. Some months you will have money left at the end. What do you do with it? You don't just spend because you can! The theory that you spend less as you age scares me. That's not always the case. You may need to hire help for housework, or lawn care. Maybe even full time. That can be expensive! If you end up in a nursing home, that can be over a hundred thousand dollars a year.
let me get my mind around this idea. ??? no im not ready
Thank you so much for this video. I needed guidance and found this video very informative. Once again, thank you.
Glad it was helpful!
I'm doing this my own way. I'm maxing out a Roth 401k, and supplementing with deferred 401k withdrawals to pay taxes on that now. This will give tax flexibility in the future.
This was very useful, thank you
You’re welcome!
I call this "Time For Toys" once I hit my magic number in about seven years I plan on stopping my savings and working for a couple more years just to buy toys.
I like that! Time for toys!
We have reached FI but haven't stopped working yet while our daughter is in college. (College is covered with a well funded 529 plan we started 15 years ago). Since we have all this excess income with no mortgages on either of our two homes and no other debt, we are treating ourselves to luxuries like first class travel and upgrading our home etc. We figure we'll get that out of our system now while we have the excess income. We've always been savers and lived more frugally than many people so it's been a bit weird to spend more excessively. When we do retire, we'll lock things down a bit more.
This is very helpful content. I am not sure if my income streams will hold up so I guess I continue to save to keep my self-employment taxes down and to make sure that we have enough... and leave something to our heirs. But... this was food for thought. 🙂
Thank you for the content!
Great thoghts. I understand this is focus on US tax situation. If you have a middle-class salary like mine of usd 120t , the tax bill is rather moderate and therefore you can really consider on stop saving. What great luck American have. In my country, Switzerland, it is really hell. The total tax is about 70% of the brut income, if you do not go on saving. So you stop saving means, you still have to save, not for you, but for filling the government pocket. And clearly this is no option I would ever consider.
I have no choise. Every year I have to transfer my usd 120t from my free funds to a retiring account to get the 0-tax bill.
I wish I could change tax-residency to USA.
Excellent points!
Thank you!
Great video. Hits home for me….. 57 yo. 4 million in trad Ira , another 3 million outside in stocks…. Now my issue is doing huge Roth conversions before 2026 and balance a 1 million bene Ira that needs to be taken out in 8 years. Thinking of converting 3.5 million in 2024 and 2025. This will free me up from RMD and tax free for legacy. I really won’t use that money, We can live off pension. Soc sec. etc….. but I’m still working 7 days a week, saving and maxing out all in Roth now. Still feel like I don’t have enough and I enjoy my work. Wife retired at 55 yo. Last month. I can’t just pull the plug. I feel like I’m still living paycheck to paycheck and broke believe it or not.
If you don't work 7 days a week, you will feel more relaxed and confident about what you have had towards retirement :-)
Just think, if you don’t spend and enjoy your money, your heirs will have no problem spending your hard earned money.
I actually enjoy 7 days a week, kind of the way of life at my work. As for my kids, well, yes, they will enjoy spending, hopefully it will last several generations... I need to just spend. Seems like I ve just been spending, but on the kids. Helping fund Roth IRA, 401 k helping fund $6 k since they just graduated and starting new jobs. If anything, I will spend to help out the kids start there new life, makes it easier for them. Why give it them when they are 55-60, they need the help now. I know I had nothing and raising three kids, not easy.
@@mlee1308 more power to you. I hope your kids realize how lucky they are!
@@Binatasj well the first two kids will appreciate it….the third not so sure, still immature……. Never a perfect world. Thinking of the rotten kid might make me just pull the plug and retire….. spend as much as I want. I was thinking to contribute the max 401k in Roth, then retire. And take out 50% from my paychecks. For 2022.
This is the situation I'm in. I've saved all my life and now need to learn how to spend in my retirement. I have a $6.8M portfolio at 58 yo and have started working with a wealth planner to implement Roth conversions and reassess my portfolio to reduce my yearly taxes through all my mutual funds capital gains. What am I saying for now? 35 years as an executive in the corporate world and I hated it - so retired at 56.
Check out the "How to switch from a savings mindset to a spending mindset" video. That might be a helpful one!
I stopped saving for retirement…because I invest for retirement instead. As the investments grew, they started to pay the amount that I would save annually. The. They started to make car payments. I put the car on payments because the larger amount of capital allowed access to investments with higher return. In 5 years, you own the car and still have the investment amount. Trade the car in later and either enjoy less payments due to a high down payment or put the minimum down and buy an even larger investment that covers the cost of the car and operating costs as well. That will snowball until you have the car completely taken care of.
My retirement is based on how much money per annum you get paid cash flow and how much you make in capital gains or deferred payments. When all is set properly, you will see everything increase hands off after you subtract cost of living.
Good content , u just confirmed my financial strategy.. thanks.
You’re welcome!
Very good and super useful. Thanks!
Glad to hear it!
Despite being an Indian, I gave a huge thumbs up for this video !!!!!!
Thank you!
4:21 the role of saving more is to build the generational wealth that you can leave to your kids or other family members and hope that they can continue that for generations to come.
Good info! Thank you👍👍
You’re welcome!
Great advice….a different perspective.
Thank you!
Excellent advice.
Thank you.
Great video, subscribed.
Welcome!
I think I over saved. I'm 60 & retired, with $2,000,000 saved. It's going to be very difficult to spend this by death. No spouse/children.
It’s something to be mindful of!
Please enjoy it. Give yourself the job of planning and taking trips. Get involved with an organization where you can pitch in and help one day a week, to have structure, socialization, and be needed and expected there.
That bcuz U were selfish to not have children… wat a waste of life… that not goals .. only wen u have someone to share money it’s meaningful
I want to grow for my Legacy!
I haven’t stopped saving for retirement, but I have scaled back on the 401K just so there is enough contribution to get the company match. I might as well take the free money the company is providing as a benefit. I’ve been putting the rest into a brokerage account, not for retirement, but as fun money.
I've done the same. At age 50 I have more in my pretax accounts than I probably needed so I lowered that down to just get the company match and now am building more in my after tax accounts so that I manage my taxes and ACA subsidies better.
Yeah, I have not over saved yet, but outside of the match, the 401k is the last item to throw savings at.
401k to get the match first, because it was in works budget as part of my compensation, so I'll take my compensation!
Roth 2nd because there are no RMDs there, so it can keep compounding years past retirement without taxes...plus it doesn't take a lot to max the Roth, so why not?
HSA 3rd as it is a great short term emergency fund, and if left untouched has the most flexibility and benefits. And again, the max contribution is not high, so why not?
401k beyond the match 4th to meet the bare minimum retirement goals that the Roth and HSA can get to because the limits are so low.
529s and other specialty accounts 5th. They are known expected expenses, so why not prepay them, have some interest help, and do it tax free?
Non retirement 6th. Sure, no tax advantage, but the idea here is more for an advanced emergency fund. Keep closer to 2 months of savings in savings, then grow this acct to the other 1-4 months of expenses so there is that combined 3-6 month buffer. At least then you can have it really grow at least with inflation, or convert to cash flow during a tough time so it can last more than 6 months in a crisis.
Additional 401k 7th. Help save on taxes, or pad that retirement out. I'm not sure my paycheck will ever be high enough to warrant this lol, but if you need more tax shelter, there it is!
Additional nonretirement last. Expanding beyond that 6 month threshold can be the ticket to an emergency fund that can cash flow expenses for a few months between jobs. As it grows it can supplement part time work for a psudo retirement. Or if you have an ungodly income, it can grow to replace your income for a full retirement as tou slowly drain it before retirement and social security kicks in.
@@hazzardjk That was part of my reasoning as well. I should have noted I’m still maxing the Roth IRA and HSA buckets because I want the tax diversification in retirement. I will be 55 this year and am planning to retire in 3-5 years. I have a couple of non-financial goals I want to meet first. I’ve already run the numbers, monte carlo simulations etc and they all say I’m between a 98 - 100% confidence level of meeting my financial needs.
@@hazzardjk if your company offers a roth 401k I would strongly suggest you put your money in there and let it grow totally tax free. The tax benefits are just too good to pass up on a roth. Especially if your choices are brockerage account vs roth 401k. Additionally you can take your contributions out the roth before age 59.5.
@@ariefraiser140 Thanks for the comment. I am actually doing that as well as after tax to increase the 3 different buckets of money we’ll have available to us at retirement (pretax, ROTH and after tax). Our plan is to ensure we can adjust our reported income to qualify for a good health care subsidy.
I began saving early on, but now I'm considering putting some of my income in a bridge account instead of retirement accounts so I don't have to work till normal retirement age if I don't want to.
I’m with ya 100% on this. I’m 37 with 440k in my 401k. I’ll continue to contribute but I’m gonna focus on this Bridge account, so like you said, I can maybe retire at 50 or 55
The taxation rate after $400,000 will almost certainly get higher so there is likely a upper limit on what you should have in traditional retirement plans so for savers who have been maxing out for many years , they will pay more tax potentially if they put too much into traditional plans. I would like more discussion on this rather the simple principles discussed here.
It still all just boils down to whether you you think you will be paying more taxes now or more later. You are making a bet. For me, just deferring $50k per year of income that the state of CA won’t get to touch when I move out of here for retirement is worth the satisfaction.
@@edhcb9359 Hmm. But there’s still federal tax on huge RMDs. :-(
@@genxx2724 How many people really have to worry about that though? I should be finishing here with about $3M in my 401k. Most of it is pre-tax. If it grows to $5M by the time I’m having to take RMD’s then that’s $150k per year(~3%) that I’m taking out to be taxed on and when you add it to my wife’s pension we are still in a much lower tax bracket than we would have been if we had elected to be taxed first. And my example gets into the 1 percentile of 401k savers so how many high earners will actually benefit from Roth?
What is the $400K please?
@@genxx2724 $400k was the OP’s number, not mine.
Great video 👍
Thank you
Great video! Subscribed!
Thanks for the sub!
These videos are so enlightening. I learn so much every time I watch one.
Thank you, young man.
You’re welcome
New sub here. Great work
Thank you!
Great explanation
Thank you
Mind blown...🤯
After 10-20 years I dont think your savings would still be 10K/mo. They should incease with inflation and salary increases. A percentage savings rate would be a better comparison. But yes, as the savings grow, my net worth now grows much more with growth and dividends than my working salary.
It was just a simple example to highlight the importance of money compounding.
If it helps, you can assume he's referring to 10k in real terms. He's just pointing out that whereas savings are the largest annual contribution when you start, it becomes the least the closer you get to the end of your working/saving period. It can be hard to spend more and save less when you've disciplined yourself to save for 20 or 30 years.
Who the hell makes 10% growth every year? Some years the 1oK you put in is dollar cost averaged or appears to disappear.
to all you people with tons of money and not enjoying it. just look at the obituary's and see who died today, and check out how old they were. a lot of people die young or what i think is young , under 65.
I can't enjoy life while working. I'm "only" 41 years old. I have around $500,000 so I could probably stop saving and retire at 65 (or even earlier) but I hate work so much I think about suicide. Spending my money isn't going to make me enjoy work at all.
The dollar you save today is for consumption 30 years later. Your age today doesnt matter.
You can save at 50 and consume at 80
wow thanks for this. I'm going to save for my business and stop padding my 401k.
You’re welcome!
If you have one million in 401K now at age 54, and you plan to retire in at 58, in 4 years, is ok to take foot off the gas pedal on contributing to the 401k? Right now maxing out the 401k and also a separate Roth account.
I stopped contributing 5 years before retirement. You can do this only if you see the finish line. If unsure, reduce contribution gradually, not all at once.
This was so true until I hit2022. Now my contrubutions are to make up part of the lose
Glad it was helpful!
Very thought provoking. Thanks.
You’re welcome
Three percent inflation over only ten years will wipe out 30 percent of the buying power of your retirement savings!
Only if you are 100% invested in bonds. Equities out earn inflation by a large margin.
@@danieljacobs6921 you are exactly right! He’s not even correct in the first part of his statement. Inflation would (1.03)^10 which would reduce buying power by closer to 34%…. If you hold 100% cash which most retirees don’t.
I'm 51 no spouse or kids . I have a lot saved and will get a pension but, afraid of inflation
@@beatricerights put your savings in the market in an index fund (s&p500 etc). That is your hedge against inflation. Start the pension, take a year to see if you enjoy retirement, and to see if the pension/savings is doable. If it doesn’t work get another job. You’ll still have the pension and another income while growing your savings. But make sure you retire with a purpose; travel, family time, hobbies. Don’t sit home and be bored.
Can you address if you have a huge trad ira, do you recommend doing Roth conversion in one large chunk, like millions. This will free up RMD, since just doing small amounts each year isn’t enough to prevent rmd
The goal isn’t usually to eliminate RMDs completely. It’s to try to minimize lifetime taxes, which typically means paying some now and some later.
@@RootFP I’m thinking it might not be worth it to convert, especially if it’s a very large amount.
@@RootFP yes, I agree, but in this case, it’s currently 4 million, if I just do $100 k a year and it grows $300 k a year, it’s not doing anything. By the time I’m 72 in 15 years, this 401k will be 8-9 million possibly. The rmd will be huge, like $400-500 k a year at 72 years old.
@@mlee1308 enjoy paying your taxes. That's the solution.
Once again we are told that without 2 mil saved we cannot retire. How many retired millionaires do you know?
Don't pay attention to anybody else's number
If push came to shove,I can live on just my Social Security at 70, it isn't too far from what I actually spend now because of my savings rate.(but of course this isn't my goal)
Important to save and invest, but I think the most part is limit the debt
I know that you are just using a hypothetical situation, however within the first 2 minuets of this video I already see several flaws. 1st most 25 years old are not even thinking about saving for retirement because they are trying to get their life going. So the notion that they are able to save 10000 a year is laughable. They are trying to pay off their student loans and if married thinking about if and when they want to start a family, then you add a kid(or two) in the mix.. Even a two income household would find it challenging to save 10 grand a year. You need the house and the car to go along with that family you are starting.. So I guess my point is for probably 99 percent of the folks out there they will not be able to stop saving for retirement. 🤷♂
You’re overthinking it. It’s just a hypothetical and everyone’s situation is very different. The point is there comes a time where some people don’t need to keep saving to be able to retire.
Just because the average person won’t doesn’t mean it’s not a possible solution for many. Even still, the concept still applies and if they can’t save 10k then start with what you can and increase as you get more income.
Answer: never
I couldn't care less...I spend when I spend..
Let’s throw a solid 7-10% INFLATION into this equation. Maybe your next video.