Given the persisting global economic crisis, it's essential for individuals to focus on diversifying their income streams independent of governmental reliance. This involves exploring options such as digital currencies. Despite the adversity in the economy, now is an opportune moment to contemplate these investment avenues. Thanks to Loraine Souvenir for her exceptional guidance and support in mastering these essential skills! so glad I started her program.
Having access to reliable information is crucial for us as investors to succeed both financially and in life. This is valuable, I've just looked up her full name on my browser and found her webpage without sweat, very much appreciate this
Surprised to see her mentioned here! She tailors trading courses to suit beginners’ needs and really knows her stuff. Her advice has been invaluable to my trading journey-definitely worth it!
Wealth building and financial freedom are attainable with the right knowledge and tools. Using proper financial strategies and products is essential to growing and sustaining long-term wealth.. glad to know you want others to succeed
It's truly refreshing to see a comment about Loraine Souvenir. I've also had the pleasure of working with her for several months after discovering more about her online. She has a knack for simplifying complex issues, whether it's a market surge or decline. Her approach consistently keeps you ahead of the curve. I'd call her a guru, for sure
Thank you for sharing your experience. She’s helped grow my reserve, despite inflation, from $87k to $246k as of today..Her insights and daily siignals are worth following.
That is great advice and what I follow. My wife and I have always lived below our means. In the last couple of years my wife decided to get a part time job because our boys were grown-up. Also my career took off and started making more $. Our lifestyle didn’t change despite the extra income and lower costs (no further college tuition and so on). When we retire we will need about 20%-25% of our current income.
I like to base spending in retirement on expenses rather than income. It's good to plan based on your expected expenses. And as you said, expenses are variable rather than static in retirement. It's good to have flexibility in your retirement plan.
And recognize that expenses will vary over the time of your retirement. You'll have the go-go years (early retirement, when you may travel a lot), the slow-go years (early 80's) and then the no-go years (> 85).
I work for a school district. Every year the district sends a couple of messages… “we are saddened to inform you John Doe has passed away. He worked as a teacher for 30 years in our district. Funeral services will be held on…” Some of these people died within 2-5 years after retirement. Do your research. Be realistic. Be conservative. Factor in the possibility of a major illness. Unless you really love your job, try to retire early. Enjoy life while you are able to.
it will always make FISCAL sense to work that one more year ... I'm retired and love it, advise valuing your freedom highly when determining if continuing to work
Yes, but these statistics are a little skewed. Some retire _because_ they have health problems. Yes, other's job IS their identity, are lost without their job. Perhaps depression sets in. Some spend their time in front of the tube. None are good. Others are doing something the always wanted to do but didn't have the time. Your personality makes a huge difference. Plan for time, as well as money, in your retirement.
I’d like to see research on the lifespan of career teachers. All the stress and pathogen exposure may do beyond average damage over time. Similarly, it at least seems to me that significant obesity is more common. I quit in no small part because of how sick I was getting.
@alexc2265 weak, imagine if you worked in a hospital, nursing home, or daycare. You complaining about stress, trauma, and pathogens. Please, some people aren't fit for life.
@@alexc2265 My (maybe incorrect) assumptions is that teachers' average lifespans are on the high side due to the abundance of time off they are allowed to enjoy life if they choose.
LOL, when I retired 7+ years ago I had a budgeted amount to live on that was 21% of my income. It's because of that I was able to retire at 52. Controlling spending can = early retirement. It did for me. Retirement is so much more fulfilling than spending everything I made when I was working. AND the kicker is I am spending less than I budgeted for in retirement. I now cruise 12 times a year at a minimum. But I find budget cruises all the time. I target $50-60/night on cruises and I am headed out on a 6 week cruise on Jan 4th.
That may be good for you, but don't assume that everyone wants to live an austere retirement. Many retirees wait until this final stage of life to do many of the things they've always dreamed of (travel, charitable giving, home/vehicle upgrades, etc) and these things cost money. We all have our own individual goals for retirement and most people don't want to spend their golden years living on a shoestring if they can avoid it. Also, the age at which you retire is far less important than how healthy you are when you retire. Prioritizing good health throughout life is easy and "cheap" insurance for having an active and meaningful retirement at any age.
Most people can't live on 21% of their income. It doesn't matter whether you were making $100K or $1 million a year. If you can live on 21% of your income you were rich because you were making far more money than you need to spend, and even in retirement you are living on even less. Wealthy people are always frugal. It's just that frugality will look different for a millionaire vs a billionaire even if they spend only 4% of their wealth.
@@dlg5485not assuming anything. Just stating my situation. And after 7+ great years in retirement I was diagnosed with cancer earlier this year. Lucky for me no one can take those 7 years away from me. Lucky for me I am healthy enough to have a good prognosis. So I know full well the value of health.
Way to go Joel! Agreed, controlling spending = early retirement, it's just basic math. AND retirement changes the way people see the world. I know a few retirees and they say their spending isn't what they expected it to be (they expected travel, chasing their bucket list, etc.), cause after the initial extended vacation stage, they settle into a routine with more purpose, more simple enjoyment of freedom, and less spending. Therefore the smile profile in spending that financial experts keep telling you is the norm.
Hi Erin, good information! The other factor when your income goes down is less income tax. Most of the incomes you quoted will keep the top dollars out of the 22% bracket.
I am so glad that you produce videos like this. I've spoken with financial advisors who are 100% sure that the 80% (or 85%) income ratio is cast in stone and can't be questioned. I point out that I save about 25% for retirement... and they start rambling about how that will be offset by increased spending for healthcare, travel, etc. I feel like I've been pushed (forced) to continue working and saving more without any real purpose. Right now, my estimated retirement income is over 90% of my current salary (gross)... but my financial advisor is saying that I should work a few more years.
Look at your last 2 years on net, take home pay and how it’s been utilized. See how much of that you want to maintain in retirement. My bet is if you are projecting 90% of gross, that covers your actual annual spending. Make sure to account for taxes and even when looking at your net pay, there are expenses that likely go away e.g., college tuition, after tax investments…
They are financially incentivized to have you invest more. Not saying that means anything they say is untrue, you just have to understand the bias they are working with.
If you can comfortably live within the confines of your expected retirement income (all sources combined such as Social Security, and not only investment income), whose business is it to decide when you retire? YOURS alone!
Suze Orman says you need $10M, just in case, Dave Ramsey says you can spend 8% (in your dreams!), and sensible folks say you need to have enough to cover your ACTUAL expenses. Then ACTUAL retired folks are afraid to spend cause they're afraid to run out of money and fear unexpected expenses. So aim for covering your expenses PLUS whatever you think you need to calm those "what if?" fears. And there's the rub, those fears can get kind of nutty...
Agree. Nutty is the right word. People retire on near nothing and are generally fine but we are “guided” that it is never enough. Even the 1.35M in the beginning of the video is a lot. It is Nutty :-)
@ I have a few people I listen to. Justin with number crunch nerds, Jeffery Holy Schmidt and a could have others. Different perspectives. Have a great day.
How many folks end up requiring that high level of care and how long is it needed? My understanding is it's under 3% of all retirees with most needing it for under a year. That's a pretty small risk for most of us. My 90 year old father is alert and still walks a mile a day. So, there's hope for the rest of us.
@@JBoy340a My point is that long term care & assisted care are only needed by maybe 5% of retirees. Many can cover that thru savings or equity in their house. I know the issue fairly well as my mom was in Hospice for 3 years at home and my uncle was in an assisted care facility for 18 months.
This is really great to hear. I'm GenX, so ever since the 1990s, I have been hearing that it is hopeless, that no amount is enough, and that we can all look forward to eating cat food underneath a tarp in our old age. It's nice to hear that such a dismal future isn't necessarily destined for all of us.
I understand that some people have it a lot worse than I do, so I don't mean to imply that everyone will be able to retire. However, like you, I'm Gen X, and whenever people said stuff like this to me, I always said that I would literally rather live in a tarp than work forever. No, I'm outta there. I'm retiring in 2 years no ifs, ands, or buts.
GenX too, we actually had school teachers in the late 80s/early 90s bluntly tell us our generation would work till we died, there would be no pensions or retirement for us. And people wonder why GenX are cynical! Regardless, I've trimmed all lifestyle debt and pumping 30% of gross into retirement/investment vehicles, in the hope of exiting the rat race at 60ish.
I’m planning my retirement income needs based on my take home income, not my gross income. I’m estimating that my tax rates will be 3% higher than my tax rates today are and I’m estimating that I’ll receive 70% of the Social Security that the SSA says I’ll receive. It took a few hours to put together a spreadsheet that breaks out my Roth vs. traditional vs. HSA vs. Social Security vs. pension spreadsheet and get it to calculate my taxable and non-taxable income, but it gives me pretty good data to use to determine what my retirement lifestyle should look like assuming a 7% rate of return on my investments after inflation from now until when I retire. I don’t care what my gross income is in retirement. I care what my take home after taxes and health care is!
How can I participate in this? I sincerely aspire to establish a secure financlal future and i'm eager to participate. Who is the driving force behind your success?
Same. I'm saving fairly aggressively these days. That on top of payroll taxes adds up to a hefty chunk. Better to look at realized income and actual expenses.
@fdm2155 Everyone certainly can evaluate their situation as they see fit. But, if one is living on $50k, why would it matter if they were making $50k or a million? If you are comfortable living on $50k, I don't see why your current salary is relevant. That will be going away when you retire. I would be striving to achieve the income needed to meet my lifestyle. To me, income is what an employer has determined you're worth to them. It really has nothing to do with the income you require to be happy.
I encourage young people to front load their retirement accounts to a point of screaming for a 5 year time frame. I mean put as much money as possible in these accounts. For my two daughters for every 1 dollar they put in I matched with 2 - [ I did this ONLY for the 5 years; you think I'm Bill Gates or Warren Buffett? ]. WHY??? The answer is simple; simply more time compounding with larger starting amounts.
Always a pleasure Erin. I entered early retirement this year. My home was paid off and I had no debt. I ran some Monte Carlo simulations and met with an advisor for the macro numbers. On the small side, I looked at spending for the past few years and found it to be fairly consistent. Overall, I feel like I will be just fine (but hopefully better) in the long run. I've had some wrinkles this year (needed to get a new car) but that wasn't entirely unexpected. Health care is always a concern.
As a soon retiree, keeping my 401k on course after a rocky 2024 is top priority. I have been reading of lnvestors making up to 250k ROI in this current crashing market, any recommendations to scale up my ROI before retirement will be highly appreciated.
The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
Having an lnvestment adviser is the best way to go about the market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly cause I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I nettd over $220K so far, that made it clear there's more to the market that we avg joes don't know
My financial advisor is Annette Christine Conte” I found her on a CNBC interview where she was featured and I reached out to her afterwards via her website
We started retiring 4 years ago. Wife from PT at 63,and I went PT at the time she retired. I fully retired at 63 with just some minimal side gig of $1000 per month. No debt! And, a budget help a lot. We used to make over $200k. Now we do better on less than $100k. Wife started Soc Sec at 63, I’m waiting till 70. Money goes WAY further due to extra time and a flexible schedule. We eat out less, but travel more. However travel is cheaper due to extra time and traveling off peak. Average about 10-12 weeks of vacation. We don’t buy “stuff” or clothes very often. I do a lot of maintenance and repairs. Way less taxes, more prudent shopping, no retirement contributions. Cheaper Medicare. So we are less than 50% of pre-retirement income. We are considering increasing our fun spending even more, as we have a bit of a buffer. When I take SS at 70 ALL base spending will be covered just by SS except the travel budget. Great video like usual!
Between 2 SS checks, one pension check and two soon-to-me MRD's from our 401K's, we'll be making MORE than we did when we were both working! Everything we own is paid for with the exception of a mortgage of 11 years left at 2.5% interest. I'd say we're in good shape! Another good one Erin!
You can earn about $124,000 to remain in the 12% tax bracket, and SS is maxed at 85% being taxes, so for most people, taxes really aren't that big a deal!
Erin, you are a very sharp gal who really knows her stuff. My wife and I are in our mid 50s so we’ve been talking. We have lived on a budget our entire marriage, own our home free and clear, college accounts for the boys and have been savers. We also determined that we’ll need about 60% so your math completely aligns with our assessment. Nice work and great video!
It's all about your expenses. Rules might make a good guideline years ahead of time, but once you get close to retirement, look at your actual expenses and base it off that.
I am pretty terrified of medical expenses when we grow old. That is my MAIN anxiety about retirement and aging. Having taken care of my mother as she died (and my parents have great insurance!) and seeing how just two months of nursing care obliterated their finances (they will only cover one of hospice or nursing care, not both as the illness progresses, leaving you stuck and bleeding!)
@@JBoy340a I’m well aware of that as I moved my mother to Medicaid just last year and had to sell her home so that she doesn’t have any assets. Your original statement didn’t mention long term care…somewhat different than normal medical expenses IMO. But yes, it’s something we should all be concerned about.
I started tracking every dollar on income and expense 5 years before retiring. By the time I retired, I knew exactly where I had been spending my money each month. That's not to say that I had a crystal ball about future events ... but I had a pretty solid idea of what my retirement budget would look like when I retired.
Personally I prefer a good old cash flow analysis versus rules of thumb. Broad based percentages of income or percentage withdrawal rate just doesn't take into consideration one's spending. Yes, making a detailed all encompassing cash flow analysis requires some work, but it also lays out potential additonal spending capacity or cost cutting.
And even this can be simplified just by starting with net take home pay as a barometer for maintained lifestyle and add in a health care and tax expectation.
Believe it or not, giant financial companies might have incentive to scare the pants off you. "You need to save 10% - no wait 15% - no wait 20% - at least. Do this for 30-40 years, preferably max out your Social Security so you don't have to withdraw as much from 401k/IRA. If you do all this you can withdraw 4% for 20 years and MAYBE not have to live on cat food." Saving and investing (two different things) are great but never forget the incentives of the person selling the product.
Absolutely true. And from a person who despises the shady, self-interested side of the financial industry, I can still say you're best to save as much as you think you'll need (plus!), aggressively (cause half the population gets "retired" earlier than they planned), and ensure you're paying the lowest fees possible. Do it for future self, and don't forget the "plus" part, for peace of mind and the odd luxury 🙂
@@dstevens518 thanks... i saw an awesome quote the other day, the guy said "discipline is nothing more than doing a favor for your future self." Here is to good discipline and erring on the side of caution!
The history is after WW2 Wall Street came up with the retirement idea as we know it. Retirement is the same as college costs, for example. Wall Street needs you to buy their products in large bulk to clip pennies per thousand. It's just capitalism at a large scale.
There's an old book called Retire On Less Than You Think by Fred Brock. I highly recommend it. Another newer one is called "How To Retire Happy, Wild and Free" by Ernie J. Zelinski. Both good reads and they challenge the modern retirement theory.
I like how you used percentages and actual dollar amounts to explain retirement spending. I am using my annual expenses to determine how much to save for retirement. For example, I have been tracking my annual expenses for the last 3 years using Capital One (Empower now). I plan to continue tracking my expenses for the next 10 years and use that information to determine my estimated retirement expenses. I find tracking expenses is easier than using a pre-retirement income % as a way to estimate retirement expenses. The best strategy for planning for retirement spending is to know where your money is going, as you pointed out in this video (e.g., mortgage, FICA taxes, etc...), to understand how withdrawal's in retirement will likely be dynamic vs. static (as you mentioned), how much fixed income one will likely recieve in retirement (e.g., pension, social security), and to understand the different ways retirement income will be taxed (Traditional IRA's vs. Roth vs. Brokerage accounts). Regarding your comment about some people may need to save 20% less is true in many cases (very extreme conservatives would fit this category). Bottom-line though is the more one learns about personal finances, the better one can plan for retirement :) Thanks Erin for this video and the other ones. I have enjoyed them.
I had been tracking expenses for years before retirement, so had a good projection of what would increase, decrease or stay the same. I think everyone should attempt this rather than relying on a rule of thumb. With downloadable data from banks and credit card companies, it’s not too hard to get a fairly accurate picture. Three years into retirement, our overall expenses have actually increased, primarily due to travel.
This is a great video! It’s the only one I’ve seen that clearly talks about reductions caused by lower taxes and not needing to save. I retired and am spending about what I thought I would, but it’s much less than 80% of my former salary.
Thoroughly enjoy your content Erin. Don’t think that some of us haven’t noticed that you’re getting close to 100,000 subscribers… We expect a celebration video when you hit that milestone!
It’s so close! Honestly, back in January, I said to myself that I hoped this channel could hit 100,000 by the end of the year. And it’s looking like that dream might come true. 😊🙏
Thank you so much for looking at the real data and putting it to examples. We all hear the "4% rule" and "80% rule" as if they were written on tablets of stone. Ever since I've seriously looked at retirement I realized that 1) I will no longer be saving for retirement and 2) I will no longer be paying state tax, SSI or Medicare tax. Finaly, I won't be saving for post-tax investment. If I add all those up, I end up needing way, way less per year in terms of gross income to replace my current net income level. BUT every single tool starts with, "what is your current gross income" and runs from there. Then they adjust for inflation at a set rate per year and increase the withdrawal rate based on that. I know from my parents that speeding actually goes down over time as you age and have less energy to travel, etc. In fact my parents actually ended up putting money in savings after taking SSI and RMDs as they got older.
Thank you for this, Erin! I always find these videos lacking. When "experts" create these videos they do not tell the whole story. What is the proper withdraw rate and how much do you need, not taking Social Security into consideration. Percentage of current income to retire is another. I agree with you, 80% is overkill. No one talks about that fact you no longer need to count the 15% for investments. Or, you no longer pay the FICA tax. One other expense to consider is the reduction in taxes. Not bringing in as much money will reduce your tax burden. As I get closer to retirement I seem to be focusing more on reducing the amount going out rather than coming in. There is that psychology thing.
Personally, I don't find much value in making a retirement expense estimate based on one's income. A person with a yearly income of $80K may need 80% or 90% for post-retirement expenses. A person making $300K, based on their lifestyle, may need 80% to 90%, or may choose to reduce their lifestyle and live on 50% of earnings. A lot depends on one's lifestyle choices, as well as other factors such as health, etc. I retired 14+ years ago at the age of 56. At the end of my first year in retirement, my actual expenses were approximately 60% of the full year income from my last year of working, but my income was fairly high and in the 90%+ US income group. In my case, my relatively high actual yearly retirement expenses have remained high over the years. As an example, I own my home mortgage-free, yet the yearly expense for real estate taxes, maintenance, improvements, insurance, etc., have easily averaged $30K to $35K per year. Medical costs (premiums and out-of-pocket expenses), along with income taxes, transportation and food have dramatically risen over time and are big chunks of my budget. Before I retired at 56, I created an expense type budget at 50 and monitored my expenses versus my budget. I did this for all of the years prior to retirement to verify that my budgeting was reasonably accurate, and also analyzed my potential income in retirement to verify that my wife and I could retire in comfort. I used actual expenses data, over time, along with verifiable income data, rather than using someone else's estimate as a percentage of income, to determine if and when it might be prudent to retire. IMO, people have to do their own homework by analyzing their current and future lifestyle, to determine if/when they might wish to retire.
You nailed it. I overestimated my retirement income needs by about 25%. I have friends who are working longer thinking 80% is needed. Can't wait to share this one with them.
So you're saying they can live on less than 80%, can retire now, but they don't realize they can live on less than 80%? Maybe they just want to have more money in retirement? There is no rule that says you have to retire once you reach FI. I know several coworkers of mine who can retire today if they want.
I never understood why people start and say 80% of your income and justify it because of you won't be contributing to retirement any longer. Why not just base it off your take-home pay in the first place. That would factor in things like retirement contribution and such
This is what retirement looks like to me... NOT having to work for "the man" any longer and no annual reviews. Fortunately, that does not require too much money. Much less than what the financial experts claim. Fresh air is still free. Last I checked. And going for a walk or run at the park is a good time in retirement to me. My dad is retired and doesn't have much material wise (he gets by) but he has no boss or customers/clients and that is rich to me. That's my goal and it gets closer every day.
Great video. Start saving for retirement when you are young is a must. Being debt free really gives flexibility in retirement spending. I love how you talk with your hands. If ever you are short on subject matter, I think you could do a best of half hour of bloopers! I would watch. Of course I'm retired with a little time on my hands.
I want to say thanks Erin - been subscribed for a few years now and you are one of the few people in my "money advice" rotation I think back to and reference while giving myself or others advice. Thank you for explaining the nuances & broader strokes on an informational basis! A fan of the bloopers at the end too because you're well-spoken, and we ALL goof up trying to execute that sometimes 🤣🤣
Good video. I agree 100%. I just retired and looking at replacing 50% of gross income, which is approximately my current take home pay after 35% tax and 15% for 401k and other savings. In addition, SS will cover 30% if that amount, thus my retirement savings only needs to replace 35% of my gross earnings.
Great analysis on the false claim of that 80% rule. Two additional points. While you mentioned healthcare, medical insurance premiums and deductables will be higher, even for medicare. Second, SS must be included, as it is part of that 80%. My SS at FRA will be about 36% of my income at retirement. Once my wife collects, our combined will be about 56%. So, that, along with the 15% savings rate and FICA, that means we need about 20% of my salary in retirement from our savings.
@@randolphh8005 Not sure who "us" is, but most employer sponsored plans, even with employee participation, cost less to the employee than medicare will be, when considering premium costs and deductables.
@@jdgolf499 Us is my wife and I. The current Part B premium is $175/month. Part D is $0 per month. Wife has Supplemental Plan HDG at $46/month. That works out to $221 per month all in. Her max deductible for health is $2700. Her meds are tiered, but it works out to $15 copay per month. So meds are similar to private, but premiums are much better and deductible and max out of pocket are better. For myself the same $175 Part B and $0 Part D. I have Supplemental plan N at $165 per month with a deductible of $240 per year, and a $20 copay for some office visits. Total premiums are $340 per month with max annual deductible of $240! Combined that is $561 per month with max deductible of less than $3000 per year. We paid much more while working and had much higher copays and deductibles! We were on ACA plans which were a bit lower with a premium subsidy for 2 years, but they had huge deductibles and copays. We worked in healthcare also, Medicare when done right tends to be much cheaper than commercial and even employer sponsored plans. We were paying between $800-$1400 per month in the past for less coverage on employer plans. We initially budgeted $500 per person per month for healthcare. We are no where near that now.
Also, you can save on transportation. You won't need two cars and no more commute expenses. Car insurance should reflect less miles, dont forget to try to lower car unsurance.
I’m aiming for 55%. Ran the numbers and estimated our living expenses at 65, 75 and 85. Fidelity has a really helpful worksheet for this. I even did my taxes based on my estimated age 65 income, assuming all of today’s codes of course. Really fun exercise.
80% is way overkill. My top 6 monthly uses of money in order are 1. Mortgage $4700 , 2. Investments/Retirement $4500 3. Taxes $3000, 4. Health Insurance $1200, 5. Vacations/Travel $1200, 6. Vehicles $800 When I retire...1. will be taxes and insurance only $1000, 2. nada $0, 3. way lower $1000?, 4. Medicare $500, 5. OK, I'll keep that one $1200and 6. That one will be about the same too $800. Still, adding it up, I'll be cutting my uses of money less than in half: 4500/15400 = 29%....probably closer to 50% once utilities and food are factored in.
@@thedopplereffect00 Nope - not putting any extra. It's a 15-year mortgage, with an original amount of $548k at 1.99%. The house is worth about $1.6 million, and I'll probably trade it for a house worth half as much when I retire, taking the tax-free capital gain.
Great video. I'll be shedding my car payments in the next 4 months. Our house payment within the next year. I just had to re-roof our home, so thats a big expenditure out of the way. I'll be retiring at 60-61... I'm currently 58. I'm looking forward to the freedoms and less that hopefully come with retirement.
The 80% rule is so basic, I feel it does more harm than good. If you spend decades working during your career, it would behoove you to perform more than one 1st grade math operation to plan the rest of your life. Start with cost of living when determining retirement planning, and then work your way backwards instead of throwing the 80% dart and hoping it all works out. Good video.
That’s exactly what we did a few years before retiring and again a few months before. We ran 0-based budgeting over a full year which gave us our true cost of living. Those values were then used in retirement calculators that allow bypassing the 80% of income rule (think Boldin). And that’s how we realized retiring at 56 was a reality.
Great video! I'd thought about the mortgage payment but not the other stuff. Now that you pointed it all out, of course it makes sense! Thank you for this, I follow several financial youtubers and yet I'd never seen such a clean, simple breakdown of this particular topic.
I love your videos. The are all very helpful and educational. I enjoy the bloopers as well. They bring a touch of humor to the rather "scary" topic of retirement and investments. Thanks for sharing. Cheers!😊
Great advice, well presented Erin. Thank you. Just as with pre-retirement savings, self discipline in consumption and eliminating debt have made retirement spending for us readily achievable at the lower end of the range you discussed.
I'm always grateful to see people giving advice that doesn't follow the "rules." I'm currently only living on 30% of my income if I take away the savings, housing, and fica that you described. So, I always thought the whole 80% "rule" was ridiculous.
I make 60 but fully fund my 401k with 30 and 6 to HSA so I'm spending 24. That's my budget. $2,000/month. SS will give me 37 and investments bring in 20. I have 57 to replace 60 when I retire. I have a buffer of 505. Work any overtime that is available. Live frugally. Cook at home, Don't buy prepared food. Drive an old car you can fix. Never buy new. A cc is only so you can consolidate monthly bills and make one money transfer. You can do it.
Know your expenses - another great video from Erin. When you rollup your take home pay and see where the money goes each year it's easy to see the starting point of expenses and understand your budget. After retirement, as indicated here, you will see many of these expenses change and get a better idea of where you are headed and if you had been planning for 80% of your salary as income, the "buffer" becomes very noticeable.
We moved from the suburbs ($9,000 per year property taxes) to a more rural area ($2,700 per year). That helped a lot, with a slight house downsize at the same time. The down-side was we are now electric only. whereas we had gas, water, and sewage in the burbs. We now have the option to burn wood for heating. However, we decided to install solar with batteries to help deal with the frequent power cuts. That was expensive. We are also investing in heat pumps and more economical appliances. In essence, we are spending more of our savings to reduce future electricity costs and increase energy security and independence. Figuring this all out beforehand would have been impossible. For example solar panel and battery costs have plummeted in the past few years.
We also have solar and batteries at our suburban home. We have high electricity costs that just keep rising. But with the solar and batteries we have almost no electricity bill. We usually pay the connection fees of around $11/mo.
I retired four years ago. I always looked forward to retirement and truly enjoy being retired. My spending really dropped off. With not going to work I don't spend the money on gas, don't eat out and don't have to buy clothing, business clothing. Plus, if income is reduced your taxes go down. With the tax savings and reduction in spending I easily saved $20,000 per year.
Also, keep in mind, at 65 you can qualify for a reduced property taxes or qualify to freeze it from going up, some can deferred the taxes until death. Seniors also tend to eat less due to declining appetites or just being more health conscious.
Great video, and very accurate. In my case, I no longer had a car payment (or any other debt) and drive significantly less. Moving from NY to FL saved an additional 6% in income tax and 2% on real estate tax. On top of these, people likely will pay less federal income tax as they are spending less, Medicare is typically less than health insurance and social security is taxed favorably.
How about 30%! A married couple making $100K each could live on $5K a month in retirement. Especially if the house is paid off. FYI, expenses are not a % of income. They are specific expenditures. We have a lot of control of how big or small these expenditures are. A real retirement plan identifies actual costs instead of plugging in a %
We were good savers (well, my wife is), I took SS at 70 and she took it at FRA. She has a small pension and between the SS and pension, it covers about 80-90% of current expenses. (we do have a mortgage of 2.95%). Love your TH-cam. And, as I said before, you look very nice in the black dress.
I spend a lot more in retirement than I did when I was working. The difference is I’m no longer saving for retirement. I used to make $120k and save $60k. Now I spend $80k. Lots more time now to do things I enjoy. No debt is a key factor for financial stability in retirement.
While younger (18-30's) your goal should be at least 100% of your income, meaning you contribute as much as you can to retirement. In your 40's (generally your highest point for income), you should really be maxing out your contributions. By your 50's you can start to assess your needs vs wants and determine if you've managed your financial life well enough to be where you wanted, and if your house is paid off. By your 60's you will know if you can retire when you wanted or will need to work longer.
Great minds think alike I just wrote the same thing regarding young people. My wife and I have just closed in selling our house and will use that money on top of the monies we and saved and will rent. I'm done with all of the maintenance of home ownership time to let someone else to that for me along with those up front costs. Even with rent increases that I see coming down the pike our pile of money is now so large even the up scale apartment rent plus increases will never have a draw down all the way to zero. If that was to occur then the U.S. will be in a Mad Max situation!
We are 65 and 67 and retired. I disagree on the aggressive saving when young. A balanced approach is better. We spent a lot of money when younger on travel and experiences, and don’t regret one dime of it. We still managed to save, but as you get older health and lifespan become real issues. Just this month I learned one close friend age 65 needs open heart surgery, another age 70 diagnosed with Stage 4 pancreatic cancer. I was told last month I will need hip surgery soon. A LONG HEALTHY RETIREMENT IS NOT TO BE ASSUMED EVEN IF YOU WORK ON IT. Health usually runs out before wealth!
Running scenarios with 80-90% of current Net Income, but I will adjust yearly as needed. If the markets are down then likely lower than 80% and if the markets are up, maybe more than 90%. I have always lived within or below my means and feel comfortable that with all the great information from your videos as well as others I will be ready in 5-8 years to retire.
We were both 6 figure earners in our final 10 years of working. We now spend 100% of our bring-home income. That number is no problem as long ss markets do well. If they tank we can adjust accordingly. Our set spending is approximately 36% of our income. Insurance, taxes, food, and all other monthly bills. Theoretically, we could cut our spending back to that set amount. I really didn't look at our salaries, but our bring-home. I used the 4% rule as a guideline. The 4% rule is a good place to start. We hammered our savings after the kids were gone and had our house paid off by age 50.
I'm 59. Last week I had a meeting with my financial advisor. After plugging in all the numbers, monthly expenses etc and accounting for travel, he said I can retire with with 99% of what I need to live on until 92. So if I wait a few months until I turn 60 it will jump to 110%. Not sure how they can predict this with not knowing what inflation will be.
We are working with a financial advisor and we came up with a number significantly less than 80% or even 50%. We expect to be debt free when we retire, but we want to enjoy retirement so we are accounting for travel, etc. But yeah, it's definitely a more personalized number for us.
Great video, thanks. My wife and I pull in just enough retirement income (401k, part time work, ss) to stay just within the 12% tax bracket. I see the 22% tax bracket as a 10% penalty added to the 12% tax bracket. This is more than what we need as our goal is to lower future RMDs and excess funds goes into brokerage account.
Transportation to a job is huge in this equation. Not only less fuel costs, but also wear and tear on the vehicle. Might even get to downsize to 1 less car.
I saved enough to rep;ace over 100% of my income and here is why. I am divorced and live alone. My children are not nearby. I don't own a home so I pay rent and I have no long term care insurance. I have enough to self insure. I feel I have enough income to cover nearly all eventualities. I talked to my daughters and they are pleased that my finances are in order. They said all of their friends are, in part, supporting their parents financially. One more thing, this stint of inflation has been problematic for many. It has lead to wage inflation. Things cost a lot more now.
Ours is about 45%. 80% is crazy for the vast majority of us. Especially later in retirement when you’re not traveling as much as quite frankly you just don’t buy as much stuff.
Regardless of percentage you must plan for increases in cost of living. You should be planning on increasing income by x% percent per annum. Setting a fixed percentage seems a little dangerous.
My bank has an awesome feature where you can categorize every expense and get a summary report per month. I have a pretty comprehensive spreadsheet I keep that tracks all monthly net income, expenses, and investments. It took a while to establish what the "budget" should be, but now we plan ahead. In retirement, things like a mortgage, broker account deposits and expenses for kids' activities and helping with college should go away. So we plan to have less than 80% of our current expenses. For retirement planning, I can use that number to reverse calculate what our gross income needs to be to net out to what is needed in our pockets.
We will still have a mortgage when we retire. But one thing I find quite interesting is that she assumes 0% income replacement from social security. Did I miss something there? I understand the future looks like it may be cut, but down to nothing? Also, medical expenses may increase, but you also get Medicare rather than paying health care premiums. Redirecting your health care premiums + current other out of pocket is likely to be as much as or more than monthly medicare costs (e.g. we're paying $600/mo for premiums right now, excluding copays and such). Basically, I'm targeting minimum 70% current spend in retirement, made up from investments, social security, and a modest pension. I'm looking for the investments themselves to be 40% of current spend.
We started at 102% of our spendable cash before retirement. This covered our basic expenses and some fun expenses. Since the stock market was so good my first five years of retirement, I spent additional funds on a boat,dock, lift and a whole house generator. Then we spent money on great vacations. The last couple of years we are spending our basic expenses since the market has been so poor for us. We have some fun money, but less than the first five years. I am hopeful that things will improve in the coming years.
My wife and I have been retired for 10 years now and we do very well on about 50% of our pre-retirement income. And we aren't skimping, we live better now than we ever did when we were working. Of course the mortgage is paid off, the kids are out, and no longer having to save for retirement frees up a lot of cash. That said, the percentage of pre-retirement income you need does also depend on what your income was before retirement. A high income person will need only a small fraction of their pre-retirement income while a low income person may need 100%. As always there's no simple formula.
I prefer to look at expenses. In my 50s, I was saving 35% of my salary. My expenses were $36K a year, I ate out for every meal. After I retired, I moved to a small town, only ate out twice a week and took 1 class per semester. Expenses dropped to $18K a year or just 20% of my pre-retirement income. 10 years later and close to Medicare age, I relaxed and my expenses are $26K a year.
One thing not mentioned here is the cost of raising children. I believe the most recent updated study indicated that raising a child from birth to age 18 was around $250,000 give or take. We have four. When you remove the cost associated with raising children and even if you replaced that with assumptions oncost for a travel and gifts with grandchildren, this is a pretty significant reduction and incognito as well.
I would only count projected expenses towards my retirement number. A higher savings rate means you keep your expenses low so you need less money to retire than your gross salary. It can be used to estimate how long you take to get to your retirement savings requirements. However, you should know your required expenses vs entertainment expenses and plan accordingly. It’s the only way to know you have enough.
We are both retired with no debt of any kind. We live just fine the thing I was surprised the most by was what it cost us for 2 jobs , 2 cars upkeep insurance, taxes gasoline Clothes on and on. Leaving work alone saves us a ton. 70 percent is plenty of our former salaries. The only thing is if you plan to travel a lot plan that before you retire it is Expensive!!!!
Great video Erin. I’ve thought a lot about this topic. I always felt that 80% for my circumstances was way too high, especially because the last 20 years before I retired I was saving around 35% of my gross salary. I have been retired now for 3 years. I monitor every penny of my spending using a budgeting app. I am spending 39% of my last year’s salary. I am a widower so I don’t have an active social life and rarely go out to dinner as I don’t like doing it alone.
I'm retired at 60 just over five years ago. I was well prepared for it with both a pension and 401k. Part of my strategy was to move from a high cost area (DC suburbs) to a lower one...our income, and other taxes are significantly lower. That said, the ridiculous inflation deleted about 20-25% of my buying power against my pension income which is fixed...no increase ever. Thankfully, the 401ks (my wife has one as well) have done well. On the other hand the value of the home we purchased has increased dramatically, as did the property taxes (37%), so we're back to paying DC level property tax. The areas I save are: 1. Food...I used to eat breakfast and lunch at the office, so that was a fairly significant expense when compared to eating at home. 2. Fuel/vehicle maintenance...my daily 25 mile trip to work has been reduced to simply going out for errands and entertainment. 3. Clothing/dry cleaning...my work clothes were typically business casual, but always done at the local cleaner. I'm rarely in anything other than shorts and a tee-shirt these days. 4. Medical...now that I'm no longer paying $10k + a $7k deductible for medical care (soon to be x2 when my spouse hits 65), I'm learning all about Medicare. On the other hand, we do spend more on vacations...3 trips to Europe in the last two years, and planning a month long trip next year. We've also got our first pet...she's probably cost me ~$10k over the last 4 yrs. And I picked up a pontoon boat that was $69k, but with a dock lift, accessories, insurance, etc., we've probably put $100k into it. The home we purchased, while slightly downsized, was built in the 80s, and has been a real money pit, easily costing over $100k in repairs (new HVACs, replaced all the polybutylene plumbing, etc.) alone. So, what's my feeling on the 80%? I'd suggest sticking with it for planning. You can always adjust downward as you reassess your finances...we do so annually, adjusting our 401k withdrawals appropriately. You also never know when an unexpected expense is going to surprise you...those home expenses, food and fuel inflation, etc., can really add up. Also, unless you love your work, I recommend punching out as early as financially possible. I regret not doing so 5-10 years earlier. I've been enjoying the added travel, recreation, 2 grandkids, and actively working to keep my community nice....people ask what I do in retirement, let me tell you, there still aren't enough hours in a day.
I retired in '22 with a pension that's around less than 60% of my gross. I also started SS at 63 which gave me another 25%. My wife will retire in December with a teacher pension of about 50% with no SS in the future. We haven't had to dig into our Roths, my 401k and some company stock but that'll change in '25. We'll probably do the recommended 4% from my traditional 401k and let the Roths grow before RMDs kick in. Looking back I think I could have retired sooner, but with kids in college didn't want to take a chance.
@erintalksmoney Thank you for this. Super sensible advice. We are quickly approaching retirement age and this was probably the most sober calculation advice we’ve seen. Thank you! ❤
My retirement spending if I was single would probably be around 2000 to 3000 per month. I'm married. So it's probably more like 12,500 a month. Having said that, my wife is STARTING to consider the idea of down sizing. she's starting to think the thought about how much daily life in mid 50's would be nearly impossible and certainly dreary at 80 (we DIY, we are very active, we do a lot of the home repairs and maintenance and cleaning). But one thing I will never stop doing is some sort of useful activity, be it a part time job or heavy volunteering.
Another thing to mention is another massive expense that goes away after retirement ……saving for retirement. That stops and in turn you start spending down instead of saving up
Hi Erin. Great vid today and discussion on this important topic in Retirement Planning. It is elusive and comes down to everyones best guess as to what their expenses/needs will be in retirement, but it is critial that you get it fairly close. There are a number of tools on line available to help those planning in this area. I believe The MoneyGuys have a specific course called something like Know Your Number that targets this specific topic. I always enjoy and benefit from your vlogs, keep up the great content. Have a blessed week and I'll see you on the next one. Larry, Central Valley, Ca.
I'm within a couple of years of retirement and I luckily have a small pension. That combined with Social Security will essentially replace my current take home pay (after my taxes, insurance, HSA, and 401k contributions) so my withdrawals will mainly cover taxes and travel.
![[#2024MAMA] G-DRAGON - 무제(Untitled, 2014)+POWER+HOME SWEET HOME+뱅뱅뱅+FANTASTIC BABY | Mnet 241123 방송](http://i.ytimg.com/vi/Ox29z5Nf1Uk/mqdefault.jpg)
Given the persisting global economic crisis, it's essential for individuals to focus on diversifying their income streams independent of governmental reliance. This involves exploring options such as digital currencies. Despite the adversity in the economy, now is an opportune moment to contemplate these investment avenues. Thanks to Loraine Souvenir for her exceptional guidance and support in mastering these essential skills! so glad I started her program.
Having access to reliable information is crucial for us as investors to succeed both financially and in life. This is valuable, I've just looked up her full name on my browser and found her webpage without sweat, very much appreciate this
Surprised to see her mentioned here! She tailors trading courses to suit beginners’ needs and really knows her stuff. Her advice has been invaluable to my trading journey-definitely worth it!
Wealth building and financial freedom are attainable with the right knowledge and tools. Using proper financial strategies and products is essential to growing and sustaining long-term wealth.. glad to know you want others to succeed
It's truly refreshing to see a comment about Loraine Souvenir. I've also had the pleasure of working with her for several months after discovering more about her online. She has a knack for simplifying complex issues, whether it's a market surge or decline. Her approach consistently keeps you ahead of the curve. I'd call her a guru, for sure
Thank you for sharing your experience. She’s helped grow my reserve, despite inflation, from $87k to $246k as of today..Her insights and daily siignals are worth following.
Great video. I’m retiring in two weeks at 62 and I built my plan on expenses and goals, not % previous income.
Congrats !! Enjoy the Holidays
That is great advice and what I follow. My wife and I have always lived below our means. In the last couple of years my wife decided to get a part time job because our boys were grown-up. Also my career took off and started making more $. Our lifestyle didn’t change despite the extra income and lower costs (no further college tuition and so on). When we retire we will need about 20%-25% of our current income.
I like to base spending in retirement on expenses rather than income. It's good to plan based on your expected expenses. And as you said, expenses are variable rather than static in retirement. It's good to have flexibility in your retirement plan.
I do the same thing. I estimated what my expenses will be in retirement, then I calculated how much gross income I will need to net that amount.
Same!
And recognize that expenses will vary over the time of your retirement. You'll have the go-go years (early retirement, when you may travel a lot), the slow-go years (early 80's) and then the no-go years (> 85).
I work for a school district. Every year the district sends a couple of messages… “we are saddened to inform you John Doe has passed away. He worked as a teacher for 30 years in our district. Funeral services will be held on…” Some of these people died within 2-5 years after retirement.
Do your research. Be realistic. Be conservative. Factor in the possibility of a major illness. Unless you really love your job, try to retire early. Enjoy life while you are able to.
it will always make FISCAL sense to work that one more year ... I'm retired and love it, advise valuing your freedom highly when determining if continuing to work
Yes, but these statistics are a little skewed. Some retire _because_ they have health problems. Yes, other's job IS their identity, are lost without their job. Perhaps depression sets in. Some spend their time in front of the tube. None are good.
Others are doing something the always wanted to do but didn't have the time. Your personality makes a huge difference. Plan for time, as well as money, in your retirement.
I’d like to see research on the lifespan of career teachers. All the stress and pathogen exposure may do beyond average damage over time. Similarly, it at least seems to me that significant obesity is more common. I quit in no small part because of how sick I was getting.
@alexc2265 weak, imagine if you worked in a hospital, nursing home, or daycare.
You complaining about stress, trauma, and pathogens. Please, some people aren't fit for life.
@@alexc2265 My (maybe incorrect) assumptions is that teachers' average lifespans are on the high side due to the abundance of time off they are allowed to enjoy life if they choose.
LOL, when I retired 7+ years ago I had a budgeted amount to live on that was 21% of my income. It's because of that I was able to retire at 52. Controlling spending can = early retirement. It did for me. Retirement is so much more fulfilling than spending everything I made when I was working. AND the kicker is I am spending less than I budgeted for in retirement. I now cruise 12 times a year at a minimum. But I find budget cruises all the time. I target $50-60/night on cruises and I am headed out on a 6 week cruise on Jan 4th.
That may be good for you, but don't assume that everyone wants to live an austere retirement. Many retirees wait until this final stage of life to do many of the things they've always dreamed of (travel, charitable giving, home/vehicle upgrades, etc) and these things cost money. We all have our own individual goals for retirement and most people don't want to spend their golden years living on a shoestring if they can avoid it. Also, the age at which you retire is far less important than how healthy you are when you retire. Prioritizing good health throughout life is easy and "cheap" insurance for having an active and meaningful retirement at any age.
Most people can't live on 21% of their income. It doesn't matter whether you were making $100K or $1 million a year. If you can live on 21% of your income you were rich because you were making far more money than you need to spend, and even in retirement you are living on even less.
Wealthy people are always frugal. It's just that frugality will look different for a millionaire vs a billionaire even if they spend only 4% of their wealth.
@@TheFirstRealChewy I’m not a millionaire nor ever was or will be. One can live very comfortably on much less than one thinks.
@@dlg5485not assuming anything. Just stating my situation. And after 7+ great years in retirement I was diagnosed with cancer earlier this year. Lucky for me no one can take those 7 years away from me. Lucky for me I am healthy enough to have a good prognosis. So I know full well the value of health.
Way to go Joel! Agreed, controlling spending = early retirement, it's just basic math. AND retirement changes the way people see the world. I know a few retirees and they say their spending isn't what they expected it to be (they expected travel, chasing their bucket list, etc.), cause after the initial extended vacation stage, they settle into a routine with more purpose, more simple enjoyment of freedom, and less spending. Therefore the smile profile in spending that financial experts keep telling you is the norm.
Hi Erin, good information! The other factor when your income goes down is less income tax. Most of the incomes you quoted will keep the top dollars out of the 22% bracket.
I am so glad that you produce videos like this. I've spoken with financial advisors who are 100% sure that the 80% (or 85%) income ratio is cast in stone and can't be questioned. I point out that I save about 25% for retirement... and they start rambling about how that will be offset by increased spending for healthcare, travel, etc. I feel like I've been pushed (forced) to continue working and saving more without any real purpose. Right now, my estimated retirement income is over 90% of my current salary (gross)... but my financial advisor is saying that I should work a few more years.
Yup, same here. To retire on 80% of my income I have to live on 75% of my income before retirement. Make that make sense!
Look at your last 2 years on net, take home pay and how it’s been utilized. See how much of that you want to maintain in retirement. My bet is if you are projecting 90% of gross, that covers your actual annual spending. Make sure to account for taxes and even when looking at your net pay, there are expenses that likely go away e.g., college tuition, after tax investments…
Look at how much you actually spend. Also, firing your advisor automatically reduces that amount by 1%
They are financially incentivized to have you invest more. Not saying that means anything they say is untrue, you just have to understand the bias they are working with.
If you can comfortably live within the confines of your expected retirement income (all sources combined such as Social Security, and not only investment income), whose business is it to decide when you retire? YOURS alone!
Knowing how to plan for retirement is such an underrated skill! Thank you for talking about the topic Erin 😊
Suze Orman says you need $10M, just in case, Dave Ramsey says you can spend 8% (in your dreams!), and sensible folks say you need to have enough to cover your ACTUAL expenses. Then ACTUAL retired folks are afraid to spend cause they're afraid to run out of money and fear unexpected expenses. So aim for covering your expenses PLUS whatever you think you need to calm those "what if?" fears. And there's the rub, those fears can get kind of nutty...
Agree. Nutty is the right word. People retire on near nothing and are generally fine but we are “guided” that it is never enough. Even the 1.35M in the beginning of the video is a lot. It is Nutty :-)
That’s why I listen to Erin because she’s a regular person who does her homework on what she talks about. A very common sense, smart woman
@ I have a few people I listen to. Justin with number crunch nerds, Jeffery Holy Schmidt and a could have others. Different perspectives. Have a great day.
@@drz400sy8 I like Holy Schmidt too, very level headed, with a seriously understated sense of humour...lol.
Suze who?
The medical expenses are the big unknown. Long term care in a facility can easily run $100K+/year. A local place by me charges over $200K/year.
How many folks end up requiring that high level of care and how long is it needed? My understanding is it's under 3% of all retirees with most needing it for under a year. That's a pretty small risk for most of us. My 90 year old father is alert and still walks a mile a day. So, there's hope for the rest of us.
@@ItsEricAZ I know people that have had relatives in long term care facilities for 4 or 5 years.
@@JBoy340a My point is that long term care & assisted care are only needed by maybe 5% of retirees. Many can cover that thru savings or equity in their house. I know the issue fairly well as my mom was in Hospice for 3 years at home and my uncle was in an assisted care facility for 18 months.
This is really great to hear. I'm GenX, so ever since the 1990s, I have been hearing that it is hopeless, that no amount is enough, and that we can all look forward to eating cat food underneath a tarp in our old age. It's nice to hear that such a dismal future isn't necessarily destined for all of us.
I understand that some people have it a lot worse than I do, so I don't mean to imply that everyone will be able to retire. However, like you, I'm Gen X, and whenever people said stuff like this to me, I always said that I would literally rather live in a tarp than work forever. No, I'm outta there. I'm retiring in 2 years no ifs, ands, or buts.
GenX too, we actually had school teachers in the late 80s/early 90s bluntly tell us our generation would work till we died, there would be no pensions or retirement for us. And people wonder why GenX are cynical! Regardless, I've trimmed all lifestyle debt and pumping 30% of gross into retirement/investment vehicles, in the hope of exiting the rat race at 60ish.
"...eating cat food under a tarp..." Thanks for the visual!
I’m planning my retirement income needs based on my take home income, not my gross income. I’m estimating that my tax rates will be 3% higher than my tax rates today are and I’m estimating that I’ll receive 70% of the Social Security that the SSA says I’ll receive. It took a few hours to put together a spreadsheet that breaks out my Roth vs. traditional vs. HSA vs. Social Security vs. pension spreadsheet and get it to calculate my taxable and non-taxable income, but it gives me pretty good data to use to determine what my retirement lifestyle should look like assuming a 7% rate of return on my investments after inflation from now until when I retire.
I don’t care what my gross income is in retirement. I care what my take home after taxes and health care is!
Retirement isn’t an end goal, but a journey best secured by careful and consistent investments.
Retirement is the reward of disciplined investing over the long term, not just a destination.
My adviser guided me through retirement planning, ensuring my investments were strategically positioned for long-term rewards
How can I participate in this? I sincerely aspire to establish a secure financlal future and i'm eager to participate. Who is the driving force behind your success?
Nicole Anastasia Plumlee can't divulge much. Most likely, the internet should have her basic info, you can research if you like..
I just Googled her name and her website came up right away. It looks interesting so far. I sent her an email and i hope she responds soon.
This is why I never, ever look at my gross pay while forecasting for retirement...strictly take-home pay.
Same. I'm saving fairly aggressively these days. That on top of payroll taxes adds up to a hefty chunk. Better to look at realized income and actual expenses.
Eight years into retirement, I couldn't tell you what my take-home pay was. Expenses are what matters.
Look at your expenses. Not your take home pay.
@@hogroamer260 Okay, but you likely need to be mindful of your current income...ie "take home pay" equivalent in retirement?
@fdm2155 Everyone certainly can evaluate their situation as they see fit. But, if one is living on $50k, why would it matter if they were making $50k or a million? If you are comfortable living on $50k, I don't see why your current salary is relevant. That will be going away when you retire. I would be striving to achieve the income needed to meet my lifestyle.
To me, income is what an employer has determined you're worth to them. It really has nothing to do with the income you require to be happy.
I encourage young people to front load their retirement accounts to a point of screaming for a 5 year time frame. I mean put as much money as possible in these accounts. For my two daughters for every 1 dollar they put in I matched with 2 - [ I did this ONLY for the 5 years; you think I'm Bill Gates or Warren Buffett? ].
WHY???
The answer is simple; simply more time compounding with larger starting amounts.
If only they would listen.
Always a pleasure Erin. I entered early retirement this year. My home was paid off and I had no debt. I ran some Monte Carlo simulations and met with an advisor for the macro numbers. On the small side, I looked at spending for the past few years and found it to be fairly consistent. Overall, I feel like I will be just fine (but hopefully better) in the long run. I've had some wrinkles this year (needed to get a new car) but that wasn't entirely unexpected. Health care is always a concern.
I retired early, using ACA for income. love how you get subsidies for showing low income
@@jimclark5037I hope the ACA survives Trump
As a soon retiree, keeping my 401k on course after a rocky 2024 is top priority. I have been reading of lnvestors making up to 250k ROI in this current crashing market, any recommendations to scale up my ROI before retirement will be highly appreciated.
The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
Having an lnvestment adviser is the best way to go about the market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly cause I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I nettd over $220K so far, that made it clear there's more to the market that we avg joes don't know
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
My financial advisor is Annette Christine Conte” I found her on a CNBC interview where she was featured and I reached out to her afterwards via her website
Thanks a lot for this recommendation. I just looked her up, and I have sent her an email. I hope she gets back to me soon.
We started retiring 4 years ago. Wife from PT at 63,and I went PT at the time she retired. I fully retired at 63 with just some minimal side gig of $1000 per month.
No debt! And, a budget help a lot.
We used to make over $200k. Now we do better on less than $100k. Wife started Soc Sec at 63, I’m waiting till 70.
Money goes WAY further due to extra time and a flexible schedule. We eat out less, but travel more. However travel is cheaper due to extra time and traveling off peak. Average about 10-12 weeks of vacation. We don’t buy “stuff” or clothes very often. I do a lot of maintenance and repairs. Way less taxes, more prudent shopping, no retirement contributions. Cheaper Medicare.
So we are less than 50% of pre-retirement income. We are considering increasing our fun spending even more, as we have a bit of a buffer. When I take SS at 70 ALL base spending will be covered just by SS except the travel budget.
Great video like usual!
Between 2 SS checks, one pension check and two soon-to-me MRD's from our 401K's, we'll be making MORE than we did when we were both working! Everything we own is paid for with the exception of a mortgage of 11 years left at 2.5% interest. I'd say we're in good shape! Another good one Erin!
Soon to have MRD with 11 years left on a mortgage is tough.. but probably not unusual.
@@mrm7309 - In our case our mortgage is only 20% of our gross income per year.
How do you keep income taxes low?
You can earn about $124,000 to remain in the 12% tax bracket, and SS is maxed at 85% being taxes, so for most people, taxes really aren't that big a deal!
Erin, you are a very sharp gal who really knows her stuff. My wife and I are in our mid 50s so we’ve been talking. We have lived on a budget our entire marriage, own our home free and clear, college accounts for the boys and have been savers. We also determined that we’ll need about 60% so your math completely aligns with our assessment. Nice work and great video!
It's all about your expenses. Rules might make a good guideline years ahead of time, but once you get close to retirement, look at your actual expenses and base it off that.
I am pretty terrified of medical expenses when we grow old. That is my MAIN anxiety about retirement and aging. Having taken care of my mother as she died (and my parents have great insurance!) and seeing how just two months of nursing care obliterated their finances (they will only cover one of hospice or nursing care, not both as the illness progresses, leaving you stuck and bleeding!)
My retirement medical expenses have decreased since hitting 65 last year. Medicare is a godsend.
@@donwilber1628 unfortunately Medicare does not cover many of the expenses associated with long term care which can run well over $150K/year.
@@JBoy340a I’m well aware of that as I moved my mother to Medicaid just last year and had to sell her home so that she doesn’t have any assets. Your original statement didn’t mention long term care…somewhat different than normal medical expenses IMO. But yes, it’s something we should all be concerned about.
I started tracking every dollar on income and expense 5 years before retiring. By the time I retired, I knew exactly where I had been spending my money each month. That's not to say that I had a crystal ball about future events ... but I had a pretty solid idea of what my retirement budget would look like when I retired.
Personally I prefer a good old cash flow analysis versus rules of thumb. Broad based percentages of income or percentage withdrawal rate just doesn't take into consideration one's spending. Yes, making a detailed all encompassing cash flow analysis requires some work, but it also lays out potential additonal spending capacity or cost cutting.
And even this can be simplified just by starting with net take home pay as a barometer for maintained lifestyle and add in a health care and tax expectation.
@@ValkyrieIA I was going to lead with exactly that but opted to generally show my dislike for rule of thumb analyses for a major life event.
Believe it or not, giant financial companies might have incentive to scare the pants off you. "You need to save 10% - no wait 15% - no wait 20% - at least. Do this for 30-40 years, preferably max out your Social Security so you don't have to withdraw as much from 401k/IRA. If you do all this you can withdraw 4% for 20 years and MAYBE not have to live on cat food."
Saving and investing (two different things) are great but never forget the incentives of the person selling the product.
Absolutely true. And from a person who despises the shady, self-interested side of the financial industry, I can still say you're best to save as much as you think you'll need (plus!), aggressively (cause half the population gets "retired" earlier than they planned), and ensure you're paying the lowest fees possible. Do it for future self, and don't forget the "plus" part, for peace of mind and the odd luxury 🙂
So true!
@@dstevens518 thanks... i saw an awesome quote the other day, the guy said "discipline is nothing more than doing a favor for your future self." Here is to good discipline and erring on the side of caution!
The history is after WW2 Wall Street came up with the retirement idea as we know it. Retirement is the same as college costs, for example. Wall Street needs you to buy their products in large bulk to clip pennies per thousand. It's just capitalism at a large scale.
There's an old book called Retire On Less Than You Think by Fred Brock. I highly recommend it. Another newer one is called "How To Retire Happy, Wild and Free" by Ernie J. Zelinski. Both good reads and they challenge the modern retirement theory.
I like how you used percentages and actual dollar amounts to explain retirement spending. I am using my annual expenses to determine how much to save for retirement. For example, I have been tracking my annual expenses for the last 3 years using Capital One (Empower now). I plan to continue tracking my expenses for the next 10 years and use that information to determine my estimated retirement expenses. I find tracking expenses is easier than using a pre-retirement income % as a way to estimate retirement expenses. The best strategy for planning for retirement spending is to know where your money is going, as you pointed out in this video (e.g., mortgage, FICA taxes, etc...), to understand how withdrawal's in retirement will likely be dynamic vs. static (as you mentioned), how much fixed income one will likely recieve in retirement (e.g., pension, social security), and to understand the different ways retirement income will be taxed (Traditional IRA's vs. Roth vs. Brokerage accounts). Regarding your comment about some people may need to save 20% less is true in many cases (very extreme conservatives would fit this category). Bottom-line though is the more one learns about personal finances, the better one can plan for retirement :) Thanks Erin for this video and the other ones. I have enjoyed them.
I had been tracking expenses for years before retirement, so had a good projection of what would increase, decrease or stay the same. I think everyone should attempt this rather than relying on a rule of thumb. With downloadable data from banks and credit card companies, it’s not too hard to get a fairly accurate picture. Three years into retirement, our overall expenses have actually increased, primarily due to travel.
This is a great video! It’s the only one I’ve seen that clearly talks about reductions caused by lower taxes and not needing to save. I retired and am spending about what I thought I would, but it’s much less than 80% of my former salary.
Thoroughly enjoy your content Erin. Don’t think that some of us haven’t noticed that you’re getting close to 100,000 subscribers… We expect a celebration video when you hit that milestone!
It’s so close! Honestly, back in January, I said to myself that I hoped this channel could hit 100,000 by the end of the year. And it’s looking like that dream might come true. 😊🙏
@@ErinTalksMoney your success is well deserved!
Thank you so much for looking at the real data and putting it to examples. We all hear the "4% rule" and "80% rule" as if they were written on tablets of stone. Ever since I've seriously looked at retirement I realized that 1) I will no longer be saving for retirement and 2) I will no longer be paying state tax, SSI or Medicare tax. Finaly, I won't be saving for post-tax investment. If I add all those up, I end up needing way, way less per year in terms of gross income to replace my current net income level. BUT every single tool starts with, "what is your current gross income" and runs from there. Then they adjust for inflation at a set rate per year and increase the withdrawal rate based on that.
I know from my parents that speeding actually goes down over time as you age and have less energy to travel, etc. In fact my parents actually ended up putting money in savings after taking SSI and RMDs as they got older.
Thank you for this, Erin! I always find these videos lacking. When "experts" create these videos they do not tell the whole story. What is the proper withdraw rate and how much do you need, not taking Social Security into consideration. Percentage of current income to retire is another. I agree with you, 80% is overkill. No one talks about that fact you no longer need to count the 15% for investments. Or, you no longer pay the FICA tax. One other expense to consider is the reduction in taxes. Not bringing in as much money will reduce your tax burden. As I get closer to retirement I seem to be focusing more on reducing the amount going out rather than coming in. There is that psychology thing.
Personally, I don't find much value in making a retirement expense estimate based on one's income. A person with a yearly income of $80K may need 80% or 90% for post-retirement expenses. A person making $300K, based on their lifestyle, may need 80% to 90%, or may choose to reduce their lifestyle and live on 50% of earnings. A lot depends on one's lifestyle choices, as well as other factors such as health, etc. I retired 14+ years ago at the age of 56. At the end of my first year in retirement, my actual expenses were approximately 60% of the full year income from my last year of working, but my income was fairly high and in the 90%+ US income group. In my case, my relatively high actual yearly retirement expenses have remained high over the years. As an example, I own my home mortgage-free, yet the yearly expense for real estate taxes, maintenance, improvements, insurance, etc., have easily averaged $30K to $35K per year. Medical costs (premiums and out-of-pocket expenses), along with income taxes, transportation and food have dramatically risen over time and are big chunks of my budget.
Before I retired at 56, I created an expense type budget at 50 and monitored my expenses versus my budget. I did this for all of the years prior to retirement to verify that my budgeting was reasonably accurate, and also analyzed my potential income in retirement to verify that my wife and I could retire in comfort. I used actual expenses data, over time, along with verifiable income data, rather than using someone else's estimate as a percentage of income, to determine if and when it might be prudent to retire. IMO, people have to do their own homework by analyzing their current and future lifestyle, to determine if/when they might wish to retire.
You nailed it. I overestimated my retirement income needs by about 25%. I have friends who are working longer thinking 80% is needed. Can't wait to share this one with them.
So you're saying they can live on less than 80%, can retire now, but they don't realize they can live on less than 80%? Maybe they just want to have more money in retirement? There is no rule that says you have to retire once you reach FI. I know several coworkers of mine who can retire today if they want.
@@TheFirstRealChewy Oh, they want to retire. I just think more sources of information on what to expect in retirement will help them.
I never understood why people start and say 80% of your income and justify it because of you won't be contributing to retirement any longer. Why not just base it off your take-home pay in the first place. That would factor in things like retirement contribution and such
This is what retirement looks like to me... NOT having to work for "the man" any longer and no annual reviews. Fortunately, that does not require too much money. Much less than what the financial experts claim.
Fresh air is still free. Last I checked. And going for a walk or run at the park is a good time in retirement to me.
My dad is retired and doesn't have much material wise (he gets by) but he has no boss or customers/clients and that is rich to me. That's my goal and it gets closer every day.
We can definitely have a rich life without having to be rich!
Exactly my perspective.
oh yeah! buy a fishing pole and kayak and you'll be having a great time for almost no money. I love my walks on local trails!
Great video. Start saving for retirement when you are young is a must. Being debt free really gives flexibility in retirement spending. I love how you talk with your hands. If ever you are short on subject matter, I think you could do a best of half hour of bloopers! I would watch. Of course I'm retired with a little time on my hands.
I want to say thanks Erin - been subscribed for a few years now and you are one of the few people in my "money advice" rotation I think back to and reference while giving myself or others advice. Thank you for explaining the nuances & broader strokes on an informational basis!
A fan of the bloopers at the end too because you're well-spoken, and we ALL goof up trying to execute that sometimes 🤣🤣
Wow, thank you! 😊
😁
Good video. I agree 100%. I just retired and looking at replacing 50% of gross income, which is approximately my current take home pay after 35% tax and 15% for 401k and other savings. In addition, SS will cover 30% if that amount, thus my retirement savings only needs to replace 35% of my gross earnings.
Great analysis on the false claim of that 80% rule. Two additional points. While you mentioned healthcare, medical insurance premiums and deductables will be higher, even for medicare. Second, SS must be included, as it is part of that 80%. My SS at FRA will be about 36% of my income at retirement. Once my wife collects, our combined will be about 56%. So, that, along with the 15% savings rate and FICA, that means we need about 20% of my salary in retirement from our savings.
Great point! SS is part of your retiremnt income as well, even if you do want to keep using the 80% rule.
Insurance is cheaper on Medicare with a supplemental, than while working for us
@@randolphh8005 Not sure who "us" is, but most employer sponsored plans, even with employee participation, cost less to the employee than medicare will be, when considering premium costs and deductables.
@@jdgolf499 Us is my wife and I. The current Part B premium is $175/month. Part D is $0 per month. Wife has Supplemental Plan HDG at $46/month. That works out to $221 per month all in. Her max deductible for health is $2700. Her meds are tiered, but it works out to $15 copay per month. So meds are similar to private, but premiums are much better and deductible and max out of pocket are better.
For myself the same $175 Part B and $0 Part D. I have Supplemental plan N at $165 per month with a deductible of $240 per year, and a $20 copay for some office visits. Total premiums are $340 per month with max annual deductible of $240!
Combined that is $561 per month with max deductible of less than $3000 per year.
We paid much more while working and had much higher copays and deductibles! We were on ACA plans which were a bit lower with a premium subsidy for 2 years, but they had huge deductibles and copays.
We worked in healthcare also, Medicare when done right tends to be much cheaper than commercial and even employer sponsored plans. We were paying between $800-$1400 per month in the past for less coverage on employer plans.
We initially budgeted $500 per person per month for healthcare. We are no where near that now.
Love the goof ups segment at the end! Some really accentuate your personality. Good presentation of the topic.
Also, you can save on transportation. You won't need two cars and no more commute expenses. Car insurance should reflect less miles, dont forget to try to lower car unsurance.
Subract social security as well. There goes another ~$40k.
I’m aiming for 55%. Ran the numbers and estimated our living expenses at 65, 75 and 85. Fidelity has a really helpful worksheet for this. I even did my taxes based on my estimated age 65 income, assuming all of today’s codes of course. Really fun exercise.
80% is way overkill. My top 6 monthly uses of money in order are 1. Mortgage $4700 , 2. Investments/Retirement $4500 3. Taxes $3000, 4. Health Insurance $1200, 5. Vacations/Travel $1200, 6. Vehicles $800
When I retire...1. will be taxes and insurance only $1000, 2. nada $0, 3. way lower $1000?, 4. Medicare $500, 5. OK, I'll keep that one $1200and 6. That one will be about the same too $800.
Still, adding it up, I'll be cutting my uses of money less than in half: 4500/15400 = 29%....probably closer to 50% once utilities and food are factored in.
wow - that is a large mortgage
I assume you're putting extra towards the mortgage, otherwise downsizing would make retirement a lot easier!
@@semimba Not really...it's just a 15-year conforming mortgage - not a jumbo.
@@thedopplereffect00 Nope - not putting any extra. It's a 15-year mortgage, with an original amount of $548k at 1.99%. The house is worth about $1.6 million, and I'll probably trade it for a house worth half as much when I retire, taking the tax-free capital gain.
@@andrewdiamond2697 capital gains exemption is capped at $500k for married
Great video.
I'll be shedding my car payments in the next 4 months. Our house payment within the next year.
I just had to re-roof our home, so thats a big expenditure out of the way.
I'll be retiring at 60-61... I'm currently 58. I'm looking forward to the freedoms and less that hopefully come with retirement.
The 80% rule is so basic, I feel it does more harm than good. If you spend decades working during your career, it would behoove you to perform more than one 1st grade math operation to plan the rest of your life. Start with cost of living when determining retirement planning, and then work your way backwards instead of throwing the 80% dart and hoping it all works out. Good video.
That’s exactly what we did a few years before retiring and again a few months before. We ran 0-based budgeting over a full year which gave us our true cost of living. Those values were then used in retirement calculators that allow bypassing the 80% of income rule (think Boldin).
And that’s how we realized retiring at 56 was a reality.
Great video! I'd thought about the mortgage payment but not the other stuff. Now that you pointed it all out, of course it makes sense! Thank you for this, I follow several financial youtubers and yet I'd never seen such a clean, simple breakdown of this particular topic.
Thank you so much for watching watching
I love your videos. The are all very helpful and educational. I enjoy the bloopers as well. They bring a touch of humor to the rather "scary" topic of retirement and investments. Thanks for sharing. Cheers!😊
Great advice, well presented Erin. Thank you. Just as with pre-retirement savings, self discipline in consumption and eliminating debt have made retirement spending for us readily achievable at the lower end of the range you discussed.
Great video! I was going through this exercise myself, but it's great to have your numbers and charts to help out!
I'm always grateful to see people giving advice that doesn't follow the "rules." I'm currently only living on 30% of my income if I take away the savings, housing, and fica that you described. So, I always thought the whole 80% "rule" was ridiculous.
I make 60 but fully fund my 401k with 30 and 6 to HSA so I'm spending 24. That's my budget. $2,000/month. SS will give me 37 and investments bring in 20. I have 57 to replace 60 when I retire. I have a buffer of 505. Work any overtime that is available. Live frugally. Cook at home, Don't buy prepared food. Drive an old car you can fix. Never buy new. A cc is only so you can consolidate monthly bills and make one money transfer. You can do it.
Know your expenses - another great video from Erin. When you rollup your take home pay and see where the money goes each year it's easy to see the starting point of expenses and understand your budget. After retirement, as indicated here, you will see many of these expenses change and get a better idea of where you are headed and if you had been planning for 80% of your salary as income, the "buffer" becomes very noticeable.
We moved from the suburbs ($9,000 per year property taxes) to a more rural area ($2,700 per year). That helped a lot, with a slight house downsize at the same time.
The down-side was we are now electric only. whereas we had gas, water, and sewage in the burbs. We now have the option to burn wood for heating.
However, we decided to install solar with batteries to help deal with the frequent power cuts. That was expensive. We are also investing in heat pumps and more economical appliances.
In essence, we are spending more of our savings to reduce future electricity costs and increase energy security and independence.
Figuring this all out beforehand would have been impossible. For example solar panel and battery costs have plummeted in the past few years.
We also have solar and batteries at our suburban home. We have high electricity costs that just keep rising. But with the solar and batteries we have almost no electricity bill. We usually pay the connection fees of around $11/mo.
Retirement is completely based on projected annual expenses. It's smart to have a buffer for any unexpected expenses as well.
We’ve been living way below our means and are hoping we can break the habit of not spending…
I retired four years ago. I always looked forward to retirement and truly enjoy being retired. My spending really dropped off. With not going to work I don't spend the money on gas, don't eat out and don't have to buy clothing, business clothing. Plus, if income is reduced your taxes go down. With the tax savings and reduction in spending I easily saved $20,000 per year.
Also, keep in mind, at 65 you can qualify for a reduced property taxes or qualify to freeze it from going up, some can deferred the taxes until death. Seniors also tend to eat less due to declining appetites or just being more health conscious.
Great video, and very accurate. In my case, I no longer had a car payment (or any other debt) and drive significantly less. Moving from NY to FL saved an additional 6% in income tax and 2% on real estate tax. On top of these, people likely will pay less federal income tax as they are spending less, Medicare is typically less than health insurance and social security is taxed favorably.
This was very informative and very thoughtful way at looking at my retirement plan
Thank you so much for watching!
How about 30%! A married couple making $100K each could live on $5K a month in retirement. Especially if the house is paid off. FYI, expenses are not a % of income. They are specific expenditures. We have a lot of control of how big or small these expenditures are. A real retirement plan identifies actual costs instead of plugging in a %
5k/month is 60%
@@thedopplereffect00 a couple making $100K each is $200K; so $5K a month is $60K a year or 30% of the couples income
@@markgsfamilychannel7114 oh my mistake, didn't see the "each" part. Very unusual to not just say household income
We were good savers (well, my wife is), I took SS at 70 and she took it at FRA. She has a small pension and between the SS and pension, it covers about 80-90% of current expenses. (we do have a mortgage of 2.95%). Love your TH-cam. And, as I said before, you look very nice in the black dress.
I spend a lot more in retirement than I did when I was working. The difference is I’m no longer saving for retirement. I used to make $120k and save $60k. Now I spend $80k. Lots more time now to do things I enjoy. No debt is a key factor for financial stability in retirement.
Retirement isnt a one size fits all, as you pointed out , their are different variables for everyone..Great video Erin..
While younger (18-30's) your goal should be at least 100% of your income, meaning you contribute as much as you can to retirement. In your 40's (generally your highest point for income), you should really be maxing out your contributions. By your 50's you can start to assess your needs vs wants and determine if you've managed your financial life well enough to be where you wanted, and if your house is paid off. By your 60's you will know if you can retire when you wanted or will need to work longer.
Great minds think alike I just wrote the same thing regarding young people.
My wife and I have just closed in selling our house and will use that money on top of the monies we and saved and will rent. I'm done with all of the maintenance of home ownership time to let someone else to that for me along with those up front costs.
Even with rent increases that I see coming down the pike our pile of money is now so large even the up scale apartment rent plus increases will never have a draw down all the way to zero. If that was to occur then the U.S. will be in a Mad Max situation!
We are 65 and 67 and retired.
I disagree on the aggressive saving when young. A balanced approach is better. We spent a lot of money when younger on travel and experiences, and don’t regret one dime of it. We still managed to save, but as you get older health and lifespan become real issues. Just this month I learned one close friend age 65 needs open heart surgery, another age 70 diagnosed with Stage 4 pancreatic cancer. I was told last month I will need hip surgery soon. A LONG HEALTHY RETIREMENT IS NOT TO BE ASSUMED EVEN IF YOU WORK ON IT.
Health usually runs out before wealth!
Running scenarios with 80-90% of current Net Income, but I will adjust yearly as needed. If the markets are down then likely lower than 80% and if the markets are up, maybe more than 90%. I have always lived within or below my means and feel comfortable that with all the great information from your videos as well as others I will be ready in 5-8 years to retire.
We were both 6 figure earners in our final 10 years of working.
We now spend 100% of our bring-home income. That number is no problem as long ss markets do well. If they tank we can adjust accordingly.
Our set spending is approximately 36% of our income. Insurance, taxes, food, and all other monthly bills. Theoretically, we could cut our spending back to that set amount.
I really didn't look at our salaries, but our bring-home. I used the 4% rule as a guideline. The 4% rule is a good place to start. We hammered our savings after the kids were gone and had our house paid off by age 50.
I'm 59. Last week I had a meeting with my financial advisor. After plugging in all the numbers, monthly expenses etc and accounting for travel, he said I can retire with with 99% of what I need to live on until 92. So if I wait a few months until I turn 60 it will jump to 110%. Not sure how they can predict this with not knowing what inflation will be.
I am SO excited for this video 😊
😁😁
Bo is that you?
@@Andrew-rv1xq No I just love the money guy show
We save about 30 percent and pay about 25 percent in taxes (self employment and income), so that makes a lot of sense!
We are working with a financial advisor and we came up with a number significantly less than 80% or even 50%. We expect to be debt free when we retire, but we want to enjoy retirement so we are accounting for travel, etc. But yeah, it's definitely a more personalized number for us.
Thank you for the bloopers. I am shooting for a 65-70% as we will still be paying mortgate P&I
Great information and I love your out takes. Thanks for great content
Great video, thanks. My wife and I pull in just enough retirement income (401k, part time work, ss) to stay just within the 12% tax bracket. I see the 22% tax bracket as a 10% penalty added to the 12% tax bracket. This is more than what we need as our goal is to lower future RMDs and excess funds goes into brokerage account.
Transportation to a job is huge in this equation. Not only less fuel costs, but also wear and tear on the vehicle. Might even get to downsize to 1 less car.
I saved enough to rep;ace over 100% of my income and here is why. I am divorced and live alone. My children are not nearby. I don't own a home so I pay rent and I have no long term care insurance. I have enough to self insure. I feel I have enough income to cover nearly all eventualities. I talked to my daughters and they are pleased that my finances are in order. They said all of their friends are, in part, supporting their parents financially. One more thing, this stint of inflation has been problematic for many. It has lead to wage inflation. Things cost a lot more now.
Ours is about 45%. 80% is crazy for the vast majority of us. Especially later in retirement when you’re not traveling as much as quite frankly you just don’t buy as much stuff.
Regardless of percentage you must plan for increases in cost of living. You should be planning on increasing income by x% percent per annum. Setting a fixed percentage seems a little dangerous.
My bank has an awesome feature where you can categorize every expense and get a summary report per month. I have a pretty comprehensive spreadsheet I keep that tracks all monthly net income, expenses, and investments. It took a while to establish what the "budget" should be, but now we plan ahead. In retirement, things like a mortgage, broker account deposits and expenses for kids' activities and helping with college should go away. So we plan to have less than 80% of our current expenses. For retirement planning, I can use that number to reverse calculate what our gross income needs to be to net out to what is needed in our pockets.
We will still have a mortgage when we retire. But one thing I find quite interesting is that she assumes 0% income replacement from social security. Did I miss something there? I understand the future looks like it may be cut, but down to nothing? Also, medical expenses may increase, but you also get Medicare rather than paying health care premiums. Redirecting your health care premiums + current other out of pocket is likely to be as much as or more than monthly medicare costs (e.g. we're paying $600/mo for premiums right now, excluding copays and such). Basically, I'm targeting minimum 70% current spend in retirement, made up from investments, social security, and a modest pension. I'm looking for the investments themselves to be 40% of current spend.
We started at 102% of our spendable cash before retirement. This covered our basic expenses and some fun expenses. Since the stock market was so good my first five years of retirement, I spent additional funds on a boat,dock, lift and a whole house generator. Then we spent money on great vacations.
The last couple of years we are spending our basic expenses since the market has been so poor for us. We have some fun money, but less than the first five years. I am hopeful that things will improve in the coming years.
My wife and I have been retired for 10 years now and we do very well on about 50% of our pre-retirement income. And we aren't skimping, we live better now than we ever did when we were working. Of course the mortgage is paid off, the kids are out, and no longer having to save for retirement frees up a lot of cash.
That said, the percentage of pre-retirement income you need does also depend on what your income was before retirement. A high income person will need only a small fraction of their pre-retirement income while a low income person may need 100%. As always there's no simple formula.
Everyone who is approaching retirement and is anxious about their savings need to listen and heed.
😊🙏
I prefer to look at expenses. In my 50s, I was saving 35% of my salary. My expenses were $36K a year, I ate out for every meal. After I retired, I moved to a small town, only ate out twice a week and took 1 class per semester. Expenses dropped to $18K a year or just 20% of my pre-retirement income. 10 years later and close to Medicare age, I relaxed and my expenses are $26K a year.
This was very helpful Erin. I hadn't thought about how much I pay into FICA as a savings once I reached retirement. This was really good perspective.
Glad it was helpful!
One thing not mentioned here is the cost of raising children. I believe the most recent updated study indicated that raising a child from birth to age 18 was around $250,000 give or take. We have four. When you remove the cost associated with raising children and even if you replaced that with assumptions oncost for a travel and gifts with grandchildren, this is a pretty significant reduction and incognito as well.
Nailed it! A you tube video that is spot on! 🎉
Just visit your ‘know your number’ on a yearly basis and then revise your plan as needed/able to keep you heading in the right direction.
Great video. I know it’s personally true for me. I make way more than I need to in retirement.
I would only count projected expenses towards my retirement number.
A higher savings rate means you keep your expenses low so you need less money to retire than your gross salary. It can be used to estimate how long you take to get to your retirement savings requirements.
However, you should know your required expenses vs entertainment expenses and plan accordingly.
It’s the only way to know you have enough.
We are both retired with no debt of any kind. We live just fine the thing I was surprised the most by was what it cost us for 2 jobs , 2 cars upkeep insurance, taxes gasoline Clothes on and on. Leaving work alone saves us a ton. 70 percent is plenty of our former salaries. The only thing is if you plan to travel a lot plan that before you retire it is Expensive!!!!
Great video Erin. I’ve thought a lot about this topic. I always felt that 80% for my circumstances was way too high, especially because the last 20 years before I retired I was saving around 35% of my gross salary. I have been retired now for 3 years. I monitor every penny of my spending using a budgeting app. I am spending 39% of my last year’s salary. I am a widower so I don’t have an active social life and rarely go out to dinner as I don’t like doing it alone.
I don't like going out alone either! Really makes you save a lot on food though!
@@ErinTalksMoney I can eat much healthier as well.
I'm retired at 60 just over five years ago. I was well prepared for it with both a pension and 401k. Part of my strategy was to move from a high cost area (DC suburbs) to a lower one...our income, and other taxes are significantly lower. That said, the ridiculous inflation deleted about 20-25% of my buying power against my pension income which is fixed...no increase ever. Thankfully, the 401ks (my wife has one as well) have done well. On the other hand the value of the home we purchased has increased dramatically, as did the property taxes (37%), so we're back to paying DC level property tax. The areas I save are: 1. Food...I used to eat breakfast and lunch at the office, so that was a fairly significant expense when compared to eating at home. 2. Fuel/vehicle maintenance...my daily 25 mile trip to work has been reduced to simply going out for errands and entertainment. 3. Clothing/dry cleaning...my work clothes were typically business casual, but always done at the local cleaner. I'm rarely in anything other than shorts and a tee-shirt these days. 4. Medical...now that I'm no longer paying $10k + a $7k deductible for medical care (soon to be x2 when my spouse hits 65), I'm learning all about Medicare. On the other hand, we do spend more on vacations...3 trips to Europe in the last two years, and planning a month long trip next year. We've also got our first pet...she's probably cost me ~$10k over the last 4 yrs. And I picked up a pontoon boat that was $69k, but with a dock lift, accessories, insurance, etc., we've probably put $100k into it. The home we purchased, while slightly downsized, was built in the 80s, and has been a real money pit, easily costing over $100k in repairs (new HVACs, replaced all the polybutylene plumbing, etc.) alone. So, what's my feeling on the 80%? I'd suggest sticking with it for planning. You can always adjust downward as you reassess your finances...we do so annually, adjusting our 401k withdrawals appropriately. You also never know when an unexpected expense is going to surprise you...those home expenses, food and fuel inflation, etc., can really add up. Also, unless you love your work, I recommend punching out as early as financially possible. I regret not doing so 5-10 years earlier. I've been enjoying the added travel, recreation, 2 grandkids, and actively working to keep my community nice....people ask what I do in retirement, let me tell you, there still aren't enough hours in a day.
I retired in '22 with a pension that's around less than 60% of my gross. I also started SS at 63 which gave me another 25%. My wife will retire in December with a teacher pension of about 50% with no SS in the future. We haven't had to dig into our Roths, my 401k and some company stock but that'll change in '25. We'll probably do the recommended 4% from my traditional 401k and let the Roths grow before RMDs kick in. Looking back I think I could have retired sooner, but with kids in college didn't want to take a chance.
@erintalksmoney Thank you for this. Super sensible advice. We are quickly approaching retirement age and this was probably the most sober calculation advice we’ve seen. Thank you! ❤
Glad it was helpful!
My retirement spending if I was single would probably be around 2000 to 3000 per month. I'm married. So it's probably more like 12,500 a month. Having said that, my wife is STARTING to consider the idea of down sizing. she's starting to think the thought about how much daily life in mid 50's would be nearly impossible and certainly dreary at 80 (we DIY, we are very active, we do a lot of the home repairs and maintenance and cleaning).
But one thing I will never stop doing is some sort of useful activity, be it a part time job or heavy volunteering.
Another thing to mention is another massive expense that goes away after retirement ……saving for retirement. That stops and in turn you start spending down instead of saving up
that was the first item she mentioned.
Oops! Wasn’t paying attention! Sorry Erin!
@@billyrayband
@@billyrayband I’m sorry I did not pay attention sorry Erin!
Calm down Jeff, we forgive you
Hi Erin. Great vid today and discussion on this important topic in Retirement Planning. It is elusive and comes down to everyones best guess as to what their expenses/needs will be in retirement, but it is critial that you get it fairly close. There are a number of tools on line available to help those planning in this area. I believe The MoneyGuys have a specific course called something like Know Your Number that targets this specific topic. I always enjoy and benefit from your vlogs, keep up the great content. Have a blessed week and I'll see you on the next one. Larry, Central Valley, Ca.
Thanks Larry 😊🙏
I'm within a couple of years of retirement and I luckily have a small pension. That combined with Social Security will essentially replace my current take home pay (after my taxes, insurance, HSA, and 401k contributions) so my withdrawals will mainly cover taxes and travel.