What's The Best Way To Figure Out How Much You Need For Retirement
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- เผยแพร่เมื่อ 15 ก.ย. 2022
- How do you figure out how much you need for retirement?
What is the best rule of thumb when it comes to retirement planning? What is the approach that will get you closest to your goal and on track?
Thanks for watching @ErinTalksMoney I appreciate you!
Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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While you are here, why not check out some of my other videos:
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Here are some of my money goals: • My Financial Goals
#retirement #retirementplanning
We were lucky to be able to "test" our retirement income by actually living on that amount for a couple years BEFORE we pulled the plug and retired. Hence, we were confident of our retirement budget. It's worked out well so far and we haven't even touched SS yet.
Saving too much has turned out to be a blessing. Working the last few years until 55 per our plan, it has been nice and relaxing to know that there is enough to support us for the rest of our lives. We have shifted to legacy planning while waiting for 55 and access to 401K money as well as retiree healthcare which for us are two of the biggest pieces of our retirement puzzle.
One retirement option, not for everyone of course, is to retire overseas to a low cost of living country. There are low cost of living destinations in Europe, Central America, and Asia. I am an American expat living in Thailand for the past five years. I retired at 55 years of age 11 years ago.
I’ll be turning 50 this year house almost paid off in five years no credit card debt. No car payment. My financial advisor told me I have enough money to retire at 55. I’ll probably work till I’m 65 because I love what I do.
It's all about a plan. If you make a plan and stick to it you will succeed. We got married in 2000 on my wife's 50th birthday. We had two car payments, a small mortgage and a loan for some land. We made a plan to pay off the highest interest loan first, then move all that money to the next highest. We were debt free in three years. We have pensions from the state teachers fund and from the local municipality. We also have social security. I receive a disability payment from the VA. We have 401k and 457 plans also. We manage to gain a couple thousand dollars a month after expenses. The past few years we have invested in the stock market and have a fair amount in that account. We are 72 and 75 and plan to take only the RMD payments from our retirement accounts and will have the stock market money if we would ever need it. We would never be in this position without that plan. Life is good.
The problem is that not many of us are like you. There are a lot of people out there, who have no idea about having a life plan. There are smart people and then, there are not too smart people. It's all about the Bell Curve. That is why Social Security is a good thing, but it is not enough.
Moment of pain, lifetime of glory!Maximize Roth IRA & Roth 401k plans, time is on your side when you’re young, $100 spent today could have been worth $1,000 in the future if you invested it early on.
I’m trying the Vanderbilt plan. When he was asked how much money he needs he said a little more.
I use the 4% rule. Knowing that the creator of the rule suggests that it might be too conservative is reassuring. In my projections, I do not take my pension or social security into account. Additionally, I plan to work for money until I am 68 years old, God willing.
I subscribed to your channel a few months after this video came out. I just watched it and it’s one of your best videos.
I’m over simplifying, but it really shows how important it is to have a thorough budget established so you have an accurate idea of your expenses versus retirement income.
I absolutely think you can "save too much for retirement" in the form of one more year syndrome. There are a lot of ppl feel like they don't have enough for retirement despite their massive nest egg
I dont understand how you can say that the rule of 300 doesn't account for inflation but the 4% rule does... they give you the same number! I always have heard the rule of 300 as just another form of the 4% rule
At age 30, no metrics for me yet! I'm just glad this will be the first time I max my Roth 401k, Roth IRA, and HSA all in the same year. I figure if I can keep doing that, I'll be alright in retirement 😅
Way to go you may want to put some in traditional look at your tax bracket
Can you max out on the Roth 401k and the Roth in the same year? What is the total amount of both in 2023?
@@dan6756 yes Roth IRA is $6500 and Roth 401k is $22,500 if you max out Roth you cannot put anything in traditional accounts because they have a combined maximum amount
Seems like the “rules” mention would have you working for a much longer period of time, although I can agree I don’t want to run out of money, the big fear for me is running out of time. At 60 I only have around 1000 weeks of expected decent health! For me the key was planning my expenses at age 60, paying off the mortgage, purchasing vehicles, boats and building my dream shop so it would be paid off for retirement leaving expenses far lower in retirement and paying much lower taxes. Work smarter not harder😂
Erin, Thanks for the information. I'm thinking the calculation for total amount to save for retirement should be Monthly required income (say $6,000) minus expected social security then multiple that value by 300. For example, say $4,700 is the social security monthly amount (taxes and medicare not included) resulting in $1,300 per month left over. That's the value to be saved for retirement times 300 which is a lot less than one million dollars.
Thanks, Erin.
Before you retire, paying all debt and mortgage will help lot. Then figure out essential expenses for living daily life like food, utility etc. and cover it with social security and annuity so that you do not worry about how long you have to fund retirement since both social security and annuity provide for lifetime income. For other non essential expenses use other fund invested outside annuity.
I respectfully disagree about the mortgage. That should be carefully considered on a case-by-case basis. Look at your interest rate, the loan-to-value ratio, any possible repairs that might be looming, etc.
If your interest rate is low enough for inflation to offset what you're paying in interest, that mortgage can make life more secure. It's a fixed, known quantity, whereas possible upgrades and repairs, especially the big-ticket items, needed down the road are unknown quantities. If you have a paid-off mortgage, but no savings with which to replace the septic system or the roof if needed, you'll either take out another loan at an also-as-of-yet-unknown cost, or let your property deteriorate. I think we've all seen those folks who age in place stubbornly while their house falls apart around them.
But your basic logic makes sense. What I see you saying is that in these days when fewer people have pensions, create your own fixed income streams. At the end of the day, it's about predictability and minimizing uncertainty.
Good video with excellent presentation as always.
Always really like your living room. Clean with no unneeded clutter. More people need to focus on this too.
I basically aimed for full gross income replacement with a combination of passive and investment income. While this is overkill in many ways, it also provided a buffer if my expenses increase and it is a hedge against anything that can hurt my financial life in the future. I am actually at that place now and simply making all the large purchases I want before going into early retirement. Having all the major renovations to my house and property and all other major expenses covered before losing my income seemed to be a good idea.
May I ask how old you were when you retired Eugene
@@Robert74450 I have not retired just yet but I will be retiring 3 months before turning 50 in 2 1/2 years.
I plan on using a 5% rule with guardrails plus part-time work in a job I enjoy as a buffer
Honestly I have not heard of the method but it makes a lot of sense. The word millionaire with a million dollar is over rated now a days. Great valuable information. Thank you for sharing
Another great video Erin..hope you and your husband are enjoying your summer..we've had beautiful summer here in michigan 😊
I just got back from Michigan!! I will always love my home state! ✋
I will wait until my open money segment to state my complete thoughts... But it really depends on a multitude of factors. How active is your retirement going to be. What do you want to do.
If you want to leave a legacy behind by making some sort of impactful donations, do you want to help out your kids by leaving them an inheritance. All things that can easily manipulate the number. Or are you just going to buy an RV and drive around the country.
I read so much financial literature that states most people have very little set aside for retirement. I am not sure how they are going to even retire.
Volunteer at a hospice and you will run into plenty of people who regret working and saving too much
This is the best comment I've read 👍. Thank you.
Nonsense!! If there were mandatory retirement savings requirements were in place there’ll be lesser sum of old folks that are living below poverty or homeless and on the streets.
Most Americans don’t believe in taking accountability for their lives in retirement and looking out for handouts. When they’re young and healthy spends every dime they earn not a penny put away for retirement when it takes very little to start with that can grow because of compound returns.
Most high schools don’t teach personal finance and basic formulas for compound returns or what index funds are in a required class for graduation and colleges even worse. Requirements are there for humanity classes but not for personal finances.
Great explanation with full details on income and income streams and the the realistic amount of money you really need in retirement.
Thanks!
THank you so much for saying that basing your retirement needs on your EXPENSES rather than income. It irritates me so hard when people assume income is the variable for how much savings you need.
When in doubt, save more. Yup. I'm sure those recently retired and seeing the recent "temporary" inflation lasting longer than expected are pretty grateful for the extra cushion they have. I want to sleep well in my retirement, and indulge myself a little when I feel like it.
Dave Ramsey says to get a 15 year house loan and pay if off faster. Ric Edelman says to take out a 30 year loan and never pay it off. Can you do a video on the comparison of the methods?
Great video and information!!
Currently @ 48 y.o I'm fortunate enough to have a pension that I'm eligible to receive at 59, a Roth IRA, and a Roth 401k. If the government so chooses I may receive SS. With my retirement accounts doing well, and a pension I'm planning on a retirement age of 61, 62. Early...maybe for some. But being a Millwright in a Steelmill isn't a place to spend alot of time beyond your eligible retirement age
Just turned 67. Abs no desire to work another 3 years to hit that magic# of 70. Will retire debt free early to mid next year. I think I'm smart, won't know until I do it, God willing. With a lot of my hard saving, 401k & SS, it should take care of me.
Thank you
Simply AWESOME!!!!!
Great video
I just want to mention a thought of mine, I have a strategy for withdrawal, whatever allocation we choose to take out from our portfolio we cannot live out of air. We need the needs and we can play with the wants. My point is why taking out 4% at the set date and spend whole year when we can withdraw just barely enough for the next month or two? Why? Well, when we take out 40000 at once those are dead money, that is they are not making money in the stock or bond market, and if we instead take out let's say 5 to 8 thousand every time, the rest of the money stays invested for the month or two until we pull out again, which can be a game changer in a bear market.
I retired last year and find that I need 65% of my pre retirement income including funds to pay 15% fed/state tax. That reflects no SSA medicare deductions, no house payment (house is paid up), lower income taxes, no retirement savings, change in healthcare premiums, but increased travel and fun!
Congrats to you. Also seemed you thought about it much more than an average Joe. Best of luck and enjoy!
Our plan is to invest as much as we can without feeling like we are only living for tomorrow.
We are outsourcing our early retirement by fully purchasing a home in another country in which it takes one third the cost to live yearly then it costs here in the states coupled with 7 years of cash for when the market is crashing, and passive income should hold us steady until SS comes and we can easily live on that due to our very low overhead costs
I use the 4% and think I may spend more in retirement due to travel. Therefore I think a bit more around 3% withdrawal. Guess having too much feels better. Can always give it away later. But I don’t want to wait too long since there is no guarantee of your health.
Thanks Erin I had not heard of the Rule of 300. Again I’m learning from your channel.
We spend on average about 4K /mt in retirement and are currently earning around 7K . We have let our largest annuity grow without touching it (non qualified $ ) and will start receiving 50% of what it earns in the Spring 2023 when we due another term ( getting 2.05% Term and should be able to get at least 4.25% in May 2023) My wife also gets a small pension next fall of about 6K per year . Going from 60K to 85K with another tap in also on 2-Annuities at 4% of their interest on 160K . Our SS should also go up 8.5% to 9% in 2023 , At age 67 I got out of the market and can sleep at night knowing were on a great path...
Good morning Erin. I do think you have to have a balance of spending money while you are young and enjoying life, and also saving for your retirement. That is why the earlier you have a plan the better off you will be.
I started saving for retirement at the age of eleven and by nineteen I had saved 46 k I married very poorly and he stole from me so after years of saving and hard work at 39 I had 400k at forty I had zero so the one main thing I learned in life is be careful who you are in relationships with business or marriage they can steal from you
You have to calculate the savings requirement pre-tax. Doing it post-tax guarantees a shortfall.
I don't include SS in my retirement. There is just too much talk by our "leaders" around cutting this benefit in some way. I don't want to be dependent on this when it can be changed at a whim by whomever is in power. I look at it as "fun" money.
I'm retired. I don't know anyone that is spending $5000/ month on "Expenses." You must be mixing in both debt and expenses. If you are free from debt... you will not need $5K/month unless you have spending issues. All of my current monthly expenses add up to $1,600/month. I have no debt. $1,600 times 12 months = $19,200/year to cover expenses. Even if I bump spending to $30K/year it is still well below this $5K/month or $60K/year spending figure.
I use the 4% rule as a basic guideline. I have about 11 years before retirement and am on track. Just need to figure out how to allocate my money as I get closer to retirement. Thank you so much for your TH-cam channel! It is very informative.
Hi Erin, another great video and I also love this topic. I myself, kinda like to look at a lot of different approaches of how to come up with how much I’ll need to retire. And as you put it, when in doubt, save more. 😊
You were saying that most people don’t retire with a million dollars and I thought that would make a great video. Such as what percentage of people retire with $1 million compared to those retiring with $900,000 compared to $800,000 and so on. I just thought that would be a really cool video. If you agree, I would love to see you film that😊
Have a blessed day 😊
You would almost have to do that video by region since the amount needed to retire can vary greatly by a persons location. The amount needed to retire with one million or more is a lot greater say in San Francisco then it would be rural New Mexico!!
My basic method is to estimate yearly expenses in retirement, then subtract out fixed income sources (Social Security, pensions, annuities, rental income, etc.), and finally to multiply the difference by 25. This gives the estimated amount a person will need to cover their expenses for around 30 years. This is really just accounting for fixed income sources when applying the 4% rule. For example, if a person needs around $50k a year for expenses in retirement and they will get $20k in Social Security benefits and a small $10k pension per year, they will need $50k-($20k+$10k)=$20k extra per year. Multiply that by 25 and you get $500k for a target nest egg. Obviously this is really simplified since it doesn't take into account a lot of things like taxes, uncertainty regarding the future of Social Security, etc. but I think if offers a decent starting point for thinking about this issue.
I think people should also realize that having no debt in retirement is huge. (especially car payments) I have watched several other youtubers talk about the retirement video and I really like Erin's the best. Because she also explains that your money during retirement in stocks continues to grow and it is so important to keep at least 50% in stocks. I do not like the 4% rule. I think the 300 rule is best for me because it emphasizes living day by day as opposed to yearly. If you make more than 4% (over say 20 years) on investments during retirement and your only spending 4% than wouldn't you die with more money than you started your retirement with? I want to spend every dime before I die. LOL Great Job Erin!!!!!
No debts is a huge factor.
You just explained how to set up a simple spreadsheet on personal finance. And a simple way to check yourself along the way. Well done Erin, so straightforward. I took your information and I'm so ready for my Dec. 31st retirement. Hope you have a good book for the weekend.
Erin - I believe my financial advisor estimated that my living expenses being retired will be approximately 60% of what it is now. The only stone around my neck is a home equity loan I'm currently paying off. In addition to my monthly payments, I have a military pension kicking in now, and I plan to use 100% of those funds as additional payments to the principle. I hope when I'm ready to retire from my civilian job, I'll have that paid off and be financially set.
Two years before you plan to retire, use a credit card to buy EVERYTHING, regardless of how little the amount is. This is a sure way to track, and have a record of every dime spent. Then adjust for things like medical, or expenses you won't have once retired, or add for vacations, hobbies, etc, that you want to do. Key is to know what you are spending today as a baseline!
lol. I thought you were going to say something about credit scores. But yeah, that's a fantastic idea! I do that just out of simplicity but it's a good way to see your spending.
I looked back at my credit card spending plus bills I paid directly from my bank for a whole year to determine what my annual spending was, so agree with your comment.
I can get a statement from my checking account to accomplish the same thing. Online one can download your transactions of course
@@chemquests Agreed, but I generally don't write checks in the McDonald's drivethrough, gas station, or any number of other small purchases.
@@jdgolf499 debit card instead of credit card. Pay with money you already have instead of money you have to pay back. I do use credit cards in some cases, but if I were compelled to only have 1 card, it would definitely be the debit card.
4% and Social Security along with the pension as a bonus
Can you clarify when speaking of “income savings” for retirement, is that solely investment income or is it defined as one’s “net worth income” which includes personal assets? I’ve been retired since 2020 with investment income representing 40% of my net income. My assets (RE property, bank savings) covers the rest. As well, my debt is zero (no mortgage, no loans) with only exception for normal cost of living expenses. I don’t have an investment in a long term care policy and it will probably be the only cost variable I haven’t calculated into my retirement. Thanks for your videos and content. It’s been a good source of advise and heads-up.
Good video, although many won’t take notice until they hit 50 plus and then start to panic.
I’m in the UK and we have a good portion of the working population who have little ( less than £50K) other than their state pension currently £9300 a year. Some have houses they can down size, but some are renting and what happens then?
I have looked at a few of these calculators, and think I am OK as have a mix of defined benefit pensions and then defined contributions which I’m adding to while working. Wife and I also have two rental properties that add to our income, these may get sold if they become troublesome to maintain or kept and managed by my kids.
My calculations show were OK especially once house is paid for
Hi Erin
Found a business that gave me a pension 33 years ago and have been semi retired for 5 years. Go back occasionally to help but still enjoy trips and winters in FL . Spent a year with my dad when mom past in 2020 feel blessed.
It's funny how a million dollars is not as much as it used to be. In the 70s as a kid I figured a million would last forever and you could buy anything. We used to talk about getting a van with "wall to wall carpetting!" Like that was a cool thing. lol As an actual adult, I have hardwood floors and an 86" tv in the living room with I really only use for work. Today I'm editing macrophotography shots I took of an ant and a bee while my two English bulldog puppies breath loudly watching me work. Can't complain!
Pay off your mortgage before retiring and then you will find you that you need less. Take Social Security as late as possible up to 70.
Agree, unless you are wealthy(over $2million in investments) taking Social Security early(before FRA or later) is a common mistake. The amount of money at 62 just isn’t enough for living off of for most. I’m in geriatrics and see this mistake all the time. The only exception is wealth or a truly short life expectancy.
Most people CAN live off mostly SS starting at age 67, and especially at 70.
Retirement planning is kind of fun! That's why I still study it even though I'm retired :)
hahaha, love that!
I kinda use the 4% rule but loosely. I'm still at least a decade from retirement so I focus on a minimum amount I want and save to go above as much as possible. But I love the Monthly Expenses x 300 rule. That is so simply and quick to calculate in your head.
My retirement plan is simple. I'll only be spending retirement money on skanks and blow, so if I move to South America where the skanks and blow are cheap, I won't need much. plan to retire in about 4 years.
According to the SSA my SSI benefit @ age 70 will be $4,584 (you showed the max as $4,194.00)
Another great video but I was disappointed that you edited all your videos and removed the shorts at the end. Those were great and shows how much time goes into your videos. Keep up the work and I hope you reconsider your ending shorts.
They are still going to be in lots of videos - just not every video! 😊
I retired at 55 years of age 11 years ago. I had about $550,000 in savings and a generous pension plus Social Security both of which have yearly cost of living increases. I also retired to Thailand 5 years ago which has a much lower cost of living. I tracked my expenses for a few months before retirement and a year after retirement. I found myself to be spending less that I thought I would. As for retiring early - the time and experiences of living life when you are younger and healthier outweigh (in my opinion) the sacrifice of working at a job you no longer value. Learn to live within your means and enjoy it.
So I used the 300 and adjusted it to 20 years or 240 x monthly expenses (currently $1,553 with no mortgage and zero debt each month) and this gave me a number just shy of $380k for needed nest egg. Is this formula producing figures for inflation adjusted dollars? I believe our retirement savings (SAR SEP / IRA / ROTH / 457b) combined should make this amount (or more) and then I will have my SS and my Pension as well as my wife's SS on top of that amount as a cushion. My goal is not to be rich, nor to make our kids rich (we love them, but feel that they will value what they earn more than anything that is inherited). I was told the best way to live each year is if you neither get a tax refund, nor owe a tax payment; I think our retirement should be focused is similar fashion. I have always looked for ways to return the favor for anything my parents gave me (mostly advice and ethics) and to give similar to our kids.
Thanks for the video. I think it's potentially dangerous to apply any "rule" to a decision as complex as this one. The better strategy is probably to simply establish aggressive savings habits at an early age and eliminate debt as soon as possible, especially large debts like cars and mortgages. If you do these things, likely the rest takes care of itself.
Granny always said for every dollar you spend save one
I’m planning to retire with $1M investment income. Based on a 5%+ return. Should be able to get by well on that.
Would love to hear about what % of your investments to spend when retired so you dont run out of money!!! My husband and I diagree on this..help!
Besides inflation, investment allocation (percent of stocks and bonds, etc.), and expenses during retirement, another important factor in figuring out the nest egg you will need is how long you think you will live, i.e. how long your nest egg should last. That varies widely. A FIRE person retiring in his 30s may need his nest egg to last another 50 years, whereas someone who retires at 70 may only need it for 10-15 years or so. If you use one of those nest egg calculators, they will tell you that the longer you live on your nest egg, the higher the probability that the money will run out, as you would expect.
Sequence of returns is huge too. If you retire right into the beginning of say, 2008, you are in a world of hurt. One needs a ton of cash to live off of so they can avoid selling stocks that are down 50%. (like 3 years worth of cash)
3 bucket strategy all the way! Couples’ SS & Pension covers projected expenses. 10 years of fun money in bonds, all else in mutuals. Cash in money market for the stormy days. Love your messaging! Candidly wish we were as insightful as you are at such a young age .
Good points raised, but did not really mention health costs and life expectancy. Scrub YOUR expenses, likely they will be lower in retirement than you think. Don't base your decision on averages, but be aware of them. Carry no debt into retirement. If Social Security is your only source, well you better keep working as long as you can, even if its a crappy job.
Glad you debunked the myths of many of these approaches and the drawbacks. As you said, they are too simplistic. As you mentioned, one of the biggest issues on the income side is ignoring social security. On the expense side it's ignoring the fact that many retirees no longer have a mortgage payment. And most approaches don't even account for age. The best approach is a detailed income/expense budget.
So ... with both rule of 300 and 4%, we would subtract the $50k or so my wife and I expect to get from soc sec?
Another fantastic video from Erin! Two caveats, though. One - be sure that you have all of your major debt paid off. And even with your mortgage paid off, plan for real estate taxes and insurance. And two - keep in mind that the government has its own version of the 4% rule called Minimum Required Distributions. Careful planning can help you through MRDs.
$1,500,000 is ALOT OF MONEY To Save! I only have $400K. But with pension and Soc Security it makes it easier? Don't need ALL of that number Before I retire?
I always kept a budget and when my pension and SS benefits equal my living expenses, I retired. That was 23 years ago and I am living comfortably. Today, you need to initiate a retirement savings plan, so the burden is on you. How many of you are doing this? I see lot of problems ahead.
Your current expenses are not the same as when you actually retire. E.g: mortgage gone, investments gone so for me that knocks 2k off my current expenses. There’s also a load of other expenses I can do without come retirement day, Netflix, paying for my kids phones, transport etc. basically my monthly expenses will be 1/4
Hi Erin
As I recall you posted something very similar months ago. Personally I felt that you for some extent were recycling.
Anyhow, Regarding investment I would suggest you approach paul Merriman & Richard Buck book:"we're talking millions".
Generally speaking I do enjoy your presentations.
When calculating how much you spend per month you need to adjust for what you're doing in retirement to fill the hours you were working. You now have ~40 hours a week that you were at work.
We use the “4%” rule to estimate our needs. We drop it down to 3.5% as we plan on “retiring” around 50. We plan to work part time for a number of years after and see ourselves with some type of income stream for many years after 50. With that said the calculations can be a little muddy since we plan to have income coming in but it helps us get an idea of where we need to be. We are about 10 years out and we feel comfortable where we are today with our savings.
I plan to sell my house in 10 years and live on it for 20 years with part time fun job. I'll be 46. Then I'll start using my retirement accounts and ss. Overall, I think starting in 10 years(when I don't have kids' expenses) I would retire with 600 000. Traveling the world and enjoying the cheap/ free stuff.
Where will you live?
@@Elizabeth-mt6bb Everywhere😊 I would slow travel the world to find good spots for me and then decide. Turkey was my to go spot until recently. Now it is as expensive as Spain
I use 5% with Guyton- Klinger methodology. I like the idea of being able to adjust down or up depending on how may portfolio is doing. Sometimes the standard 4% rule seems like you are playing chicken with a Mac truck.
"or, what if you worked a job you didn't care for, just to save more money for retirement when you could have retired sooner"... "or what if you lived so frugally that you missed out on the joys of today for the sake of saving for a better tomorrow"... and, I think, "it is really important to like the job you do, but sadly, not everyone loves their job"... Hmmm... Well Erin, a couple of thoughts: for one, the ability to learn to live on less and be content with less is incredibly invaluable. Learn to absolutely love that bean and rice burrito and that hand crafted made at home cup of coffee. Learn to love that piece of junk bike and recycle those kitty litter containers in hopes of being able to live for free and bike tour around the US (not to mention the health benefits, the travel and the people you will meet). Learn that the govt wants you to work so they can skim 30% of what you make as well as charge your employer another 30% for the privilege of employing you. Ceasing from work is a really difficult decision to make as you have pointed out. On Dec 31 last year I nearly hit 1m and was ready to cease from work. Now I've gone backwards like many others. Very discouraging. Doing the math is the easy part, well sorta. I guess I've learned that I'm happier in life realizing that more happiness is gained from family, friends and good experiences than what money ever brought, but also no that stressing over money and needs is no picnic either. I've also learned that the more I save the more I stress over that money! I keep watching your videos in hopes of discovering the "secret sauce" but still, it has evaded me. Keep up the good work! Thanks for your insight!
I am thinking about turning my saving into an annuity with Tina cref. How about an annuity video? I use 4%
What about if you have a pension?
I am retired and spend 2K per month and bring in a net 8K per month. I am investing the difference
Enjoy your money my friend. what are you saving for? Treat yourself to some nice restaurants. Go on amazing vacations. Go to see some shows. Don't wait.
I used a lot of the available financial software programs to estimate how much I would have at retirement assuming various rates of portfolio return. It was clear starting to invest early, even small sums via dollar cost averaging would give the most money. My portfolio was 95% in stock at first trending down to 30% at retirement today. And I used only index funds. Our portfolio and expenses agree with the rule of 300. My philosophy is to spend all income but preserve principle. I enjoy your excellent videos.
The methods you discussed are good rules of thumb, but as you get closer to retirement, I think it is wise to do two things:
1. Better estimate your annual RETIREMENT expenses by age group (e.g., 55-59, 60-64, 65-69, 70-74, 75-79, 80-84, etc.). A good general rule of thumb is that you should expect that expenses will decrease by about 1% every year.
2. Use financial software (e.g., free version of New Retirement) to model the viability of your financial plan. This considers growth of your current savings (401k, IRA, other investments, etc.), Social Security benefits, your expenses, inflation, taxes, retirement distributions, and market upturns/downturns.
These two detailed steps should give you more confidence in your plan. If you are far from the date, you can tweak the size of your savings to see the different levels of confidence. In general, the financial software will provide a Monte Carlo analysis that tests your numbers against different levels of inflation and rates of return, and the percent of test iterations where your expenses were fully funded represents the confidence level of the plan (“90% confident that this plan can fund all my expenses”). Then, you just have to decide on a confidence percentage that you are comfortable with - typically 80% or 90%.
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I know everyone is different but what do you spend 5K a month on in retirement.?
Really solid presentation, Erin. Great (and accurate) information. 👏🏼👏🏼 I'm really focused on savings and investing for the next generation now. #legacy
Love the idea of leaving a legacy!
Retried with a 7 figure portfolio and receiving
about $243k in dividends. I have been in the
stock market about 20 years. Am I worried? Am I selling? Absolutely not. I have purchase growth stocks too a little at a time over the past few weeks. I am going to sit back and observe how this all plays out, adding more at a time. my investment strategy with my FA actually calms me down. Eye on the prize, stay the course!
Growing affluence is such a lovely thing to see!
Noob here, your FA if you don't mind can you link me?
Consistently investing in quality dividends
paying companies over the long term is a
relatively easy strategy to create generational wealth. I like this!
@@davipereira5741 Sure! She goes by MARY LORETTA MATHIAS, you can search her up to connect with her.
Ok I googled the lady you mentioned, and left a mail after going through her credentials. I'm really willing to make consultations to improve my portfolio.
Great video Erin. When will u retire ?
I have no idea - I love what I do so I don't want to retire 😊
The opposite of not saving enough isn’t saving too much…
It is not living enough now.
25X annual expenses.
Don’t these rules preserve your principal? I have no kids so I’m ok if I spend some of the invested amount.
The 4% less inflation withdrawal rate doesn't have a goal to preserve principle
. But by being the safest highest withdrawal rate in most time periods you end up with a lot more money. It's very conservative in most time periods
LOL, yeah follow this advice if you think you're living to over 100. Average lifespan is 78.6 years. I'm retired now for 5+ years. I am spending thousands per year less than I thought and living quite well. But if you want to work and minimize the time retired, by all means, keep working and go for it. The government needs you to keep paying taxes to fund the interest on the debt.
Bloopers?!
another excellent video! I use most of the same milestones you mention - probably most reliant on the 25X annual expenses - but also use the same age milestones to make sure I'm on track - currently in my late 40s so looking to see if I'm on track for the age 50 milestone of 6X salary - happy to report I'm on track - been saving over 20% of gross income for over 22 years - I do try to factor in social security, my pension, and a small annuity - like to have multiple shots on goal - I also have a rental property that I could sell to create a bridge account - should we choose to retire early - currently shooting for FI at age 55, the current stock market isn't very promising but I'm going to continue to dollar cost average into the market - I think the FED is committed to getting inflation under control, so buy stocks when they're on sale - I am concerned that the next decade could mirror the 1930s or 1970s. . .
hmm. 401k they said.. just lost 40% of its value in less than a year.. horray..
This is a simple determination, yet complex in all its variables. But what it boils down to is upon confirming that your retirement income will handily beat your retirement expenses, and that's year in and year out, then you'll know you're ready for the golden years.