How Much Do I Need to Spend $10k/month in Retirement?
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- เผยแพร่เมื่อ 24 ก.ค. 2024
- Planning for retirement can be daunting, filled with anxiety about having enough money. John and Jane, a couple like many of you, transformed their retirement fears into a secure future, living on $10,000 per month. Here's how they did it.
Facing Retirement Anxiety:
John and Jane feared running out of money in retirement, influenced by their parents' struggles. Determined to avoid this, they aimed to either enjoy retirement or live frugally but worried about overspending or missing out.
Before planning, their finances included:
-John's 401(k): $1,000,000
-Jane's 401(k): $700,000
-Joint Investment Account: $320,000
-Home with a mortgage balance.
They assumed a 7.2% annual growth rate pre-retirement and 6.5% during retirement to guide their plan.
Setting Retirement Goals:
At ages 62 and 60, they aimed to retire at 67 and 65, spending $10,000 monthly. John planned to delay Social Security until 70 for $3,900/month, while Jane would collect at 67 for $3,100/month. They both contributed 10% of their salaries to their 401(k)s, with a 3% company match.
Cash Flow and Expenses:
In retirement, income would shift to Social Security and investment withdrawals. They ensured their portfolio could sustain their lifestyle, adjusting for inflation.
Mortgage and Tax Strategies:
Their mortgage, with three years of payments left, was factored into their plan. Effective tax planning, including Roth conversions and charitable giving, helped minimize liabilities.
Withdrawal Rates and Portfolio Sustainability:
An initial withdrawal rate of 4.5% would drop to 1.5% once both received Social Security. Their portfolio was projected to grow, ensuring sustainability.
Exploring Enhanced Spending:
They explored higher spending scenarios up to $14,000/month, maintaining a comfortable margin for enhanced spending.
Finalizing the Plan:
John and Jane decided to retire at 65 and 63, allowing $11,000 in monthly spending. They optimized investments, tax strategies, and ensured proper insurance and estate plans.
John and Jane's journey shows the power of comprehensive planning, providing peace of mind and financial security for a comfortable retirement.
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⏱Timestamps:⏱
0:00 - John and Jane
2:09 - Goals and income
3:59 - Cash flows
6:12 - Making a tax plan
7:30 - Portfolio withdrawals and analysis
9:58 - Optimizing success
12:14 - Takeaways
13:39 - Considering possibilities
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Your delivery is much better than others. Directly to the point and succinct.
A detail that doesn't often get mentioned in the context of RMD's is, just cause you have to take it out doesn't mean you have to spend it. So especially if the distributions exceed the need, ensure the excess goes into a brokerage or any savings vehicle and that money will remain available for the future and can resume growing.
Thanks James for another very informative video!
Great info and clear presentation as always, James. I love your "scenario" style videos. So practical and helpful to apply to our own situation. Keep fighting the good fight, sir.
Nice video James! A comprehensive financial plan can help give people the clarity and confidence to retire and enjoy it!
Thanks for the very interesting scenario
Fantastic video!
I learn a lot from the case studies, but they've been mostly about the setup. I'd like to see some showing the journey during retirement, the way it plays out for people.
Great Video!
Awesome video as always, and you're so gorgoeus!
Nice video. C
Why are they waiting to retire when they have so much money? Live life now!
I love your videos, and want to try your academy, but I wonder if I can apply them to Canadians
Most people who supported their parents or in-laws due to their poor planning swear they will never do that to their children. This is why they’re overly cautious. If you’d been there you’d understand.
So true. Retirement has always been not having to work anymore. Having enough money to not have to work. Relaxing, working in the garden. Exploring hobbies. Spending time with family and friends. Going fishing. Only recently has it become traveling the world, taking cruises, buying a business. Expectations for retirement have changed dramatically!
"Optimizing Success" section well done. IMO, "probability of success" MC percentage > 95% is too high. I think of that as an "opportunity cost"-like situation; you could spend more to have better experiences, help out family/charity, etc., or even buy more if that's what you're into. If you're at or beyond where this example is, congratulations!, you've won! Now go enjoy it.
Also, I'd say that MC % success intolerance will increase for me as I age and transition from "go-go", to "slow-go", to "no-go" stages. Meaning, I'll need a higher MC% success as I age to feel secure. While "Die With Zero" is a neat idea (and a good book), the thought of running low on funds in your 90s is terrifying to most rational people (including yours truly).
If I had 3M and owned my house at 62, I would already retire. I get the concept of this video but its not "most" people who have that concern.
Most retirement advice isn't for most normal people. They are unrealistic.
Any chance you can mention what state your retirees are in? Just curious
While I like these analysis scenarios that James does, I hate how he seems to just lets his clients pick a random number for their retirement needs.
These folks seem to be spending well above $120k per year, so I’m betting they will want to spend a lot in the first 5 years of retirement. And while their Mortgage may go to zero, their housing costs do not.
Retire at 67? Not much time left to do anything.
You can retire before age 67 (say at 65) and just live off your investments for 2 years hopefully before tapping into social security.
I retired at 50, lived on investments and took Social Security at 62. Never looked back.
A "good" retirement can be expensive. We have a $50,000 a year travel budget. Generous, but still plenty of limitations.
Add cost of life, taxes, Medical, RMDs, etc. Well, it can get expensive.
my dad told me about ROTH.
while i was a kid at the time, once he got older I see why he made a point to stress this.
in his later years of life, he had a nice nest egg to draw from but Uncle Sam had his hand in the pot as well every time he made a withdrawal.
each car purchase, every home decor project my mom wanted, every home reno project he wanted, every lump he took out to take his wife on vacay, every lump he took out for education for myself and my brother, every lump he took out to help us poor "kids" get started in life like a down payment for a home or a down payment for a car.
dont get me wrong my dad wasnt stingy, I'm just writing as if im in HIS POV. since uncle sam had an annual fee based on how much he withdrew. dont forget the fees for the advisor who didnt stress his cut on each withdrawal.
so yeah, i have a wary sense when it comes to taxes and advisors. they both do great jobs but their fees, if not fully understood can eat away the nest egg even faster.
after listening to James for the PROS FOR 401KS, and seeing how a traditional 401k hit my dad so many times with taxes. i can see that both have their perks.
but for me, i prefer the peace of mind knowing my employer has my taxable retirment plan and my personal ROTH IRA can be used for emergencies, lump withdrawals, and the like tax free.
my question is:
will my roth withdrawals increase my taxable income table? since it is drawn money? i wish it was invisible money to the governemnt but how does dual income work?
since it was already taxed prior to making contributions. BUT id also have taxable withdrawals from my employers retirment plan. (COBRA i believe)
are you saying 50k is for TRAVEL only?
not even baseline cost of housing. (like taxes, insurance, utilities, groceries)
even as a kid, I thought 50k a year was just a BASIC retirment income.
in my youth mind of crude math, 50k for 20 years was what a million dollars could get you. (just using ONLY SUBTRACTION, no interest, investing, and so on)
just save a million bucks, quit your job and life off a 50k salary for 20 years. if you die sooner that covers the costs of the funeral and leaves something to the heir. if you die later, tough luck buddy.
that was my childhood math okay.
i still use that goal post but optimize it further with tips from proper financial advisors.
so yeah, I'll tell anybody. a million dollars is NOT a lot of money. anything over is peace of mind any thing under means you gotta reaccess your financial plans.
although 600k may very well be the real number using cost of living adjustments. I DONT KNOW!!!
hearing about the 4% rule means even 1 million not meet the 50k withdrawals. since 4% of 1 million is 40k.
Essentially I'm just throwing my thoughts out there, and they can easily be debunked but having NO PLAN is the worst plan. having a less optimized plan at least can be further improved with a proper Financial advisor.
Wait, you said $50k yearly travel budget. Aren't all of these other expenses already factored into an overall budget?
I use to think I needed a huge travel budget, but the closer I get to retirement, the less interested I am in extensive travel. I still want to travel some, but not like I was originally planning. I know several retirees who thought they would travel 50% of the time, but got sick of that pace very quickly. Travel, especially overseas, takes a lot out of anyone, especially those over 65. Priorities change and mine are shifting away from travel and toward improving my housing situation and doing more gifting. I love to entertain at my home and I've realized that having a newer home in retirement that is more modern and doesn't require a lot of maintenance is a better use of my limited resources.
That's not a good retirement, that's a great retirement. Out of reach for most people. And probably not even desirable. I enjoy traveling as much as anyone, but we enjoy our modest RV and camping three or four times a year. Couldn't imagine spending fifty grand on that! We have never had any desire to go abroad or stay in fancy hotels. Not our style, even if it was free. To each his own!
Where can you access the planning tool being used? He mentioned getting the tool. Did I misunderstand?
Does the software take into account local taxes or just federal and state?
9 more years for me and my wife to retire. Hopefully will have similar balance as this example. Big difference is my wife will have a significant pension if she works til 60. Big concern for us is covering medical expenses for the 5 years leading up to Medicare and also converting some of the money to Roth.
These videos give a lot of insight. Much appreciated
Hoping you live long enough
I have seen the same tool in multiple videos discussing retirement scenarios. What is the name of this tool? Thank you
Hi, first of all thank you. I enjoy your content and I’m learning something. I am interested in learning more about tax loss harvesting relative to capital gains in retirement. You’ve made the statement that under certain circumstances they would not be taxable. I’m struggling to understand what those circumstance would be?
The long term capital gain rate for a married couple with $89k or less of income is zero. It’s half for a single person.
Every time you point over your shoulder and say if you want to know about (fill in the blank) and you point over your left shoulder to the top of the screen there's not anything embedded on the screen that you're pointing to, to show what video to go look at? With other folks I follow I can see their embedded info, but not yours???
Signed up for the retirement academy and I am having trouble login in, can you help, I sent email and have not gotten replied back
Never spent that much in a month in my life, except if I was buying a car or a house! Maybe on a big bucket list vacation I might do it, but month to month spending??!! Inflation hasn't hit THAT bad!
I don't know how they could even be worried. I did the numbers for withdrawing 7k, but my family members don't have longevity and I won't be traveling in my 80s.
10,000/ month is not enough. What if you require 30k before taxes per month? What nest egg should you have ? Social Security is the same so what’s the value?
Their mortgage is satisfied but they will still pay taxes and insurance on their 900k home which may be significant and not accounted for..
How much are they getting from social security and does either one of them have a defined pension? If I have a $2,000 a month pension for life what is the equivalent worth in savings? What if we're getting $5,000 a month combined from social security? Do we include this in our monthly income? Also your mortgage goes away but your property taxes keep going up. 22 years ago my property taxes were $3,500 now they are about to top $11,000. All our utilities have gone up in the past 22 years and we live in a 2300 s.f. house on half an acre. Since the couple in this example both worked for at least 35 years I assume they should each be getting at least $3,800 a month each in s.s. for a total income from s.s. of around $90,000. I assumed they're each getting the max amt of s.s. because of the amount of money they have saved in their 401k's plus the million dollar value of their home plus their other substantial savings. .
My own experience at 51 is that even though the calculators say I can confidently retire anytime I want, the reality of the situation is that we live in a complex world where stock market crashes happen frequently, taxes go up, inflation is highly unpredictable (and severe), healthcare costs are up up up, insurance costs are the same way. How can I confidently do anything in this environment?
Based on what I've experienced, your health can take a big dive in your 50s and that health issues such as cancer come out of nowhere. If you're married, there's a good chance that one or both of you us going to experience severe health problems sooner than you think. In truth, an early death is not all bad because it doesn't drain the portfolio. Reality is that the sick person will linger on for years draining the wealth (even with insurance) before Medicare kicks in.
If you have 8 figures or high 7 figures, you're set. If not, be prepared for disappointment.
It’s easy with that much money ! The challenge is for the 89% of the rest of us
So, they are only pulling 1.3 - 4.8% out of retirement savings and have 41.7% in fixed investments? That's no different than not contributing enough to get the company match. They are leaving money on the table.
Besides, they are working too long. They are going to be all jammed on RMD's. Why not spend that down now?
Luckily, my spouse and I were able to pay off our mortgage early. We took the money we were spending to accelerate our mortgage repayment and invested it right away while we were both still working. We were able to retire early after accumulating what would have been our home payment for over 7 years and maxing out our 401K/403B plans. Thankfully, both of our parents taught in us the importance of living within our means.
Because of the dearth of crypto fraud-bot scammers in the comment section of this channel compared to the vast majority of other financial channels where 100’s populate the comments within minutes of a video’s release, I am convinced the vast majority of other financial content creators are, in fact, just vehicles for those scammers to comment and thus are inexorably linked directly to those creators. Thank you James!
The problem really is that more than half the population don’t have enough money to live and also prepare for not earning money in later life.
Laugh out loud, retire right now. No calculator required
Wrong. I sure hope you aren’t paid to give people any sort of financial advice, personal or otherwise.
Need at least 3 million portfolio to enjoy 10k per month based on 4% withdraw rule
4% rule. Done question answered and I didn’t even need to watch the video.
They should be saving more in their 401k’s. That would be my first recommendation as an RIA. You can’t retire early, not max out prior to retiring, still have a mortgage, plan on no income for 3 years, and THEN expect to be balling in retirement. I see some heartache in this couple’s future, because they think they have more money than they actually do. They want to spend like someone that has twice as much as the real number.
No, they have more than enough in tax deferred accounts. Every additional dollar they invest should go into Roth accounts, and they should be doing Roth conversions out of their tax deferred accounts if it makes sense from a tax perspective.
Well, as a single woman of 62 with $1M net worth I must be a total failure. Geez!
😂😂😂 Then I see myself a failure too. I am a 66 years old women and with $1.5 million saved in addition to pension and social security. My husband has been sick and disabled for years.
Why do you need to spend $10,000 a month in retirement
The problem we have is because Most people always taught that " you only need a good job to become rich". These billionaires are operating on a whole other playbook that many don't even know exists.
John and Jane must have pretty high-paying jobs if they each are getting $3000+ a month in Social Security when they retire at 67. I plan to retire at 70 to get the maximum benefit and my Social Security is only going to be just above $1000 a month. I contributed the maximum I could to my 401(k)s, but none of my employers ever put any matching in, so they got lucky on their employer. And did you notice that they have $70K in cash alone? WTH, if I add up all of my savings accounts, I might, MIGHT just have a tenth of that. Damn, I want their life.
I've purchased the planning software. I've had difficulty accessing the initial instruction videos and making corrections on the asset allocation. I've so far not received information on how to access/use these areas.
There’s just too much variation. Retirement is so very individual. Health is still key. Worthless to have millions if your time becomes limited.
1500 ounces of gold
You can have more monthly income if you do strategies like covered calls, cash secured puts. But since I don't have the time to figure that out with a full-time job I use ETFs that do that for me for a portion of my portfolio.
Each person needs a retirement salary of about 70-75% of the average salary in the last 5 years.
@@user-pg6gi4tt4bexactly. I am earning $200k a year and there is no way I will spend $150k per year. Especially with our home already paid off and no debt. Me and wife will probably spend $5k a month, no including a couple of vacations a year at $15k total.
Why the hell are we shooting for $10k per month spending?! Down size, limit your life style and just enjoy what you have and live life!
Sounds like envy to me. Money enables many aspects of lifestyle, it just depends on your personal values and priorities. Don't assume that everyone shares your perspective, obviously they don't. We all have our own individual values and priorities. Just worry about building a successful plan for yourself and let others do the same.
Well for one thing, some people don’t want to downsize their lifestyle when they retire, or they want to live an even higher consumption lifestyle, for example with more travel. I’m confused why you’ve got a problem with their goals and think they should compromise?
Every white person I know, including myself, has those 3 pictures from Target
Thankfully, between five sources of income, my wife and I should have a minimum of 9k a month coming in the first year (after taxes and TRICARE monthly fee). This amount will increase 100-200 every year. With our expenses generously set at 6k, and our medical being covered (VA for me, Tricare for her), we should have a healthy cushion. We won't need to touch savings while I'm still alive (in fact we will continue to grow it). With my wife being 9 years younger than me, I want her to have the savings account for when I'm gone. That will leave her my military retirement, my social security, the savings account, her modest 401K and modest FERS, and my paid out life insurance policy to live on when I'm gone.
VA is fine, but you still have to sign up for Tricare. Medicare too, when it is time. Believe me, I have been there. You have plenty of money, don't screw up Health Care.
Thank you for your service, sir!
I'm grateful the US military provides a retirement to help our vets during their senior years.
High quality of life is not the same as high spending.😂😂😂😂
I just not all that concerned with a couple that has $2M in cash and 3&5 more working years in front of them. The concern is not realistic relative to the masses that might have somehow managed to put away a quarter of that amount and will rely heavily on SS. Will they get $10K a month? No, but can they get $5K a month? I dunno --but I'd more likely watch a video that discussed it.
This
Repeat..
You mean repost
A better question is how can anybody spend $10K a month in retirement? That's about three times more than we spend in California.
Travel and fun. My parents spend 8k a month in Indiana. With a paid off mortgage and no travel. It goes fast
you spend 40K a year in CA? Either you live in a very rural part of CA, or you're very, very budget conscious. That's even if you have a paid off house.
I think pretty easy. Maybe you take a trip or two, and bring along the family. Maybe you have other hobbies.
Vacations and traveling. Thats what we’re planning on doing.
That is 10k in future dollars....consider medical inflation and property tax inflation.
Ridiculous 10,000😂😂😂😂😂
I'm having trouble watching this as I'm shaking my head at the obvious security that they have. Retiring at 67? That's fine if you want to, but they definitely don't need to. They need to pay off the mortgage payment NOW...dumb to go into retirement with home debt in this scenario.
Really how many of the middle class have that kind of money saved
Not enough, but it’s not as rare as you imply. People in their early 60s who have been putting into a 401k (and getting matches) for their whole working career should easily be 401k millionaires.
Although I haven't looked up statistics for married 60 y/o couples in the US in this financial situation, it would seem that if you had a decent job (especially if BOTH had decent jobs), managed your finances well during your career, and were able to avoid what I call "financial triple plays" (e.g. divorce, legal troubles, crime/fraud, medical issues, etc.), being in this position is possible. I will freely admit the conditions I set forth are a challenge for vast numbers of people (no judgment).
Actually for their income level they really don’t have that large of retirement funds. We never earned half of their income and our retirement accounts had sufficient enough amounts that we were able to retire at 59/60.
About 5M households. But, he always qualifies these examples by saying not to get fixated on the dollar amounts but the principals.
I do but this is still not enough. Medical insurance aca silver plan is 1.3k a month.