Justin, I always appreciate your realistic views. I get tired of all the advisors that think a million is the minimum. You and Josh Scandlen are my two favorites. He came out and said most people can retire with $500,000 in retirement savings. That number is more achievable for most people.
You need to know your spending and annual expenses. Life expectancy also figures into the equation. Being debt free going into retirement is a big plus!
once heard a caller tell Dave Ramsey that he was concerned that he was going to run out of money even though he had $2.5 million in investments and what not. I fell out of my chair when I heard that.
If your withdrawals are from taxable or Roth accounts, you’ll pay a low tax rate. If the 30k is from a taxable account and let’s say you have some capital gains, you’ll still pay less than 10% overall, unless your state taxes are high. Taxes usually go down a lot in retirement.
Yes, it may be possible to find yourself in a surprisingly low tax bracket in retirement. And especially with the type of planning you're talking about, it's less of a surprise (it's the intended destination).
I just retired on 1-1-2023. I have been doing my own investing for over 30 years. And I never earned much money. But you do not need one million dollars to retire. But a lot of financial people want to make you think that you do. That is because 95 percent of people do not know how to manage their money. If you need a financial person to manage your money you are open to being scammed and losing all of your money in my opinion. I always cringe when my friends tell me that they are going to see their financial planner to see if they have enough money to retire. They are not in control of their money. Having a financial planner can be a very good thing for people. But they need to stay on top of things on a monthly basis. But the "Do I have enough money to retire really" bothers me-:) Most people will never retire if they believe the One million dollar BS. All people know how to spend money. But most people do not know how to save money.
As Justin said in this and most of his videos, the amount of money any individual will need in retirement depends entirely on their personal circumstances and lifestyle. What makes a comfortable retirement for you is completely irrelevant to anyone else. We all have to base our retirement planning on our own carefully considered goals.
Here's my plan. First thing is to divide your investments by the number of anticipated retirement years. At a minimum you should be able to draw that much money each year if your investments only keep up with inflation. So if it's stocks, it just needs to keep up with inflation. If you need less then you are in a very good position. If you need more, either work longer to increase the amount invested and reduce the number of years, or lower your expenses. People are very resourceful. You'll then need to plan for the dip. If its stocks, there are going to be multiple. It's inevitable. So plan for the worst dip combined with the longest recovery period. Let's say you estimate a 50% crash at worst, with a recovery time of 8 years. This means for 8 years it would be great to have 50% of your money come from another source. Hence 4 years of expenses. This source should be your backup or emergency fund. Some refer to it as one of their buckets in retirement. Keep that fund topped off for inflation and separate from the rest of your investments. It's there when your investments are doing pooly. As the time passes you can re-evaluate if you need that much in emergency funds and spend some if not. Keep in mind that if you can reduce your spending during a dip, that will also help.
Very interesting video. Did I miss the part about how long this assumes one's retirement is? Is this assuming one is starting at 65 or 70 years of age? Thanks.
I don't remember if there's a specific mention about timeframe in the video-so you might not have missed anything. But it uses the 4% (or 3%) "rule" for estimates, which is based on a 30 year retirement.
Another great video, Justin. I plan to implement a "bridge" strategy, retiring at 61 or 62 with about 1.5 million, and delaying SS until 70. Most of my portfolio will be in a 403b and I want to convert much of that money to my Roth acct soon after retiring, only keeping enough in the 403b to live on until age 70. After age 70, SS will be my primary source of income and I plan to supplement that with money from a well funded HSA (I am quite healthy and I don't expect I'll need most of those funds for healthcare) and from the Roth, if needed. My primary reason for converting 403b funds to Roth funds is to have as much tax free money as possible for legacy purposes. I'm still 8-9 years from retirement, so my plans could certainly change, but I feel pretty good about this strategy.
What about investing toyr million into dividend king & aristocrats? You could weight it for a 3% or 4% yield which would give you the $30k or $40k annual income your examples use without you needing to sell anything. Your 1m remains intact. Plus dividends are typically raised each year so they're continuing to go up.
Just discovered your channel great content thanks 🙏
Justin, I always appreciate your realistic views. I get tired of all the advisors that think a million is the minimum. You and Josh Scandlen are my two favorites. He came out and said most people can retire with $500,000 in retirement savings. That number is more achievable for most people.
You need to know your spending and annual expenses. Life expectancy also figures into the equation. Being debt free going into retirement is a big plus!
once heard a caller tell Dave Ramsey that he was concerned that he was going to run out of money even though he had $2.5 million in investments and what not. I fell out of my chair when I heard that.
If your withdrawals are from taxable or Roth accounts, you’ll pay a low tax rate. If the 30k is from a taxable account and let’s say you have some capital gains, you’ll still pay less than 10% overall, unless your state taxes are high. Taxes usually go down a lot in retirement.
Yes, it may be possible to find yourself in a surprisingly low tax bracket in retirement. And especially with the type of planning you're talking about, it's less of a surprise (it's the intended destination).
Expenses, expenses, expenses.
Awesome video! As always you are great!
I just retired on 1-1-2023. I have been doing my own investing for over 30 years. And I never earned much money. But you do not need one million dollars to retire. But a lot of financial people want to make you think that you do. That is because 95 percent of people do not know how to manage their money. If you need a financial person to manage your money you are open to being scammed and losing all of your money in my opinion. I always cringe when my friends tell me that they are going to see their financial planner to see if they have enough money to retire. They are not in control of their money. Having a financial planner can be a very good thing for people. But they need to stay on top of things on a monthly basis. But the "Do I have enough money to retire really" bothers me-:) Most people will never retire if they believe the One million dollar BS. All people know how to spend money. But most people do not know how to save money.
As Justin said in this and most of his videos, the amount of money any individual will need in retirement depends entirely on their personal circumstances and lifestyle. What makes a comfortable retirement for you is completely irrelevant to anyone else. We all have to base our retirement planning on our own carefully considered goals.
Here's my plan.
First thing is to divide your investments by the number of anticipated retirement years. At a minimum you should be able to draw that much money each year if your investments only keep up with inflation. So if it's stocks, it just needs to keep up with inflation. If you need less then you are in a very good position. If you need more, either work longer to increase the amount invested and reduce the number of years, or lower your expenses. People are very resourceful.
You'll then need to plan for the dip. If its stocks, there are going to be multiple. It's inevitable. So plan for the worst dip combined with the longest recovery period. Let's say you estimate a 50% crash at worst, with a recovery time of 8 years. This means for 8 years it would be great to have 50% of your money come from another source. Hence 4 years of expenses. This source should be your backup or emergency fund. Some refer to it as one of their buckets in retirement. Keep that fund topped off for inflation and separate from the rest of your investments. It's there when your investments are doing pooly. As the time passes you can re-evaluate if you need that much in emergency funds and spend some if not. Keep in mind that if you can reduce your spending during a dip, that will also help.
Thanks for sharing your strategy-it's always neat to hear how people approach their retirement planning.
Very interesting video. Did I miss the part about how long this assumes one's retirement is? Is this assuming one is starting at 65 or 70 years of age? Thanks.
I don't remember if there's a specific mention about timeframe in the video-so you might not have missed anything. But it uses the 4% (or 3%) "rule" for estimates, which is based on a 30 year retirement.
Another great video, Justin. I plan to implement a "bridge" strategy, retiring at 61 or 62 with about 1.5 million, and delaying SS until 70. Most of my portfolio will be in a 403b and I want to convert much of that money to my Roth acct soon after retiring, only keeping enough in the 403b to live on until age 70. After age 70, SS will be my primary source of income and I plan to supplement that with money from a well funded HSA (I am quite healthy and I don't expect I'll need most of those funds for healthcare) and from the Roth, if needed. My primary reason for converting 403b funds to Roth funds is to have as much tax free money as possible for legacy purposes. I'm still 8-9 years from retirement, so my plans could certainly change, but I feel pretty good about this strategy.
Nobody has 1 million to retire , only 100 grand
What about investing toyr million into dividend king & aristocrats? You could weight it for a 3% or 4% yield which would give you the $30k or $40k annual income your examples use without you needing to sell anything. Your 1m remains intact. Plus dividends are typically raised each year so they're continuing to go up.
inflation... also lookup "sequence of returns" risk.
The only thing worse than having only a million dollars for retirement is not having a million dollars for retirement. 🤗