Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My parents both spent same number of years in the civil service, but my mom was investing through a wealth manager, and my dad through the 401k.
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha.
It's true, not everyone has access to this kind of information. Lack of knowledge can definitely make people panic. But it's amazing that you've been able to make over $187k passively through investing with an advisor! Having a great wealth manager can really make a difference, regardless of how the economy is doing. Keep up the good work!
I’m 79 been retired twenty years. We update a spreadsheet showing all our financial assets on the first of every month and the graph over the last few years shows us if we can or should adjust our spending. Having said that we enjoy our lifestyle and don’t want to spend more. My wife and I spent the morning cycling in the hills amongst beautiful scenery and stopped along the way to eat a sandwich on a bench with an incredible view. I’d rather do that than anything. There is no point spending for the sake of it, as you get older the desire to impress vanishes. If you do a lot of exercise and eat right your spending may not follow the smile pattern. When we first retired we used to ski all day with just a quick snack for lunch, now we often just ski the morning and then go for a good lunch with a couple of glasses of wine so we are spending more.
Are you able to share your spreadsheet template via Google docs please? Obviously it will be empty of data but handy to have the layout and formulas etc.
I retired at the age of 58 at the end of June 2022. I worked in healthcare for 35 years. Working through the pandemic nearly destroyed me. Thankfully we had planned well and I was able to take early retirement.
I’ve worked hard to save about $500,000 for retirement, and now I’m ready to turn my savings into a paycheck. But how much can I afford to withdraw from savings and spend is what I don’t know. If I spend too much, I risk being left with a shortfall later in retirement. But if I spend too little, I may not enjoy the retirement I envisioned. What’s your advice on this please?
Personally, I used the 4% rule as a guideline, didn't follow it precisely. For greater level of confidence around portfolio longevity and ability to meet my goals, I use a well experienced advisor. In a nutshell, I'm semi-retired and only work 7.5 hours weekly since getting fully invested in the markets for 5 years now, amassing about $1.3m so far, after subsequent investments.
As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?
I think the safest strategy is to diversify investments. Like spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
NICOLE ANASTASIA PLUMLEE is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
It’s about time somebody explains it the right way. I’ve seen so many people that retire from work and within 10 years they’re dead. Some of these people were not in the best physical state and I told them to enjoy your life while you’re still have it I understand people want to give their kids and family, a nest egg, but you worked your whole life and should enjoy it first.
@@41ldawg99 it may be that after 10 years they're dead but at least they didn't have to spend ten years wondering what would they do if they lived 20. And they have a buffer against market collapses.
Depends on what’s important to the individual. I have worked and played hard for the majority of my life. I grew up dirt poor and plan on working until I’m 70. I can live comfortably on just social security at that point. I will leave several million to my kids. It brings me more joy knowing they will have those resources than anything I would do with it.
@@CRPizza925instead of waiting to die to have your kids enjoy your wealth why not share it with them now and make memories with you, instead of after your gone?
@@CRPizza925 As someone whose father left him a comfortable inheritance, I see this from the side of both beneficiary and benefactor. I'll be forever thankful to my father for blessing me with that gift, and I'm planning to do something similar for my loved ones (and charities). "You can't take it with you." No, you can't, but you can leave it to someone you care about.
Although I have interests in global economics I don't watch the news anymore... I have enough FUD lol. Thanks for this news and offering your insight on how to navigate during unfortunate times/events like this. You're right about keeping level headed when investing so that's why I think it's important to limit the amount of FUD we consume. I don't watch the media but the news that you present has enough to know issues going on without riding the emotional rollercoaster if I were to watch the news everyday. Now I buy and just trade long term more than ever, I have made over 16 btc from day trading with Francine Duguay in few weeks, this is one of the best medium to backup your assets incase it goes bearish.
The key to financial stability is having the right investment suggestions for a diverse portfolio. Many investment failures and losses happen when you invest without proper guidance.
We are in our early eighties, I retired at 67 and we enjoyed several winters in Florida and Arizona. as well as boating in the summer. We follow a cash flow plan on our spending, considering our capital as our pension, invested in dividend stocks and some bonds. We only spend our income yearly and now that is more than we need. We are now selling our home, worth around $1M and will be renting, with the cash flow from the house paying the rent. Our net worth has increased every year since retirement, however we never lacked for money during that time. We maintain a years cash flow reducing the risk of having to sell stocks during bad times. We could have spent more but never needed it. We know our kids will spend the money more than we did, however it should make their retirement better for them.
You are the first financial expert that actually considers factors that reduce the need to spend money in their later years. I've always thought this and it bugs the heck out of me when the so called pros do not consider this in their planning. You are correct! It's money grabbing and it's caused so many people to unnecessarily continue to work! Thanks for being honest!!
I retired at 50 because I didn’t want to die while still slaving away. I then transitioned into travel as a job and lifestyle and would always encourage people to stop dreaming and start doing. So many people work until it’s too late to travel and really enjoy the fruits of their labor. I’ve always known better and love your honest approach to what should come next.
@@ericammons9804 travel is overestimated. Airplanes these days are nothing more than flying toilets. Cruise ships are lethal. You can drive but then you end up far from home where you don't know where you can eat the best food for the least price.
You are certainly the "thinking mans" TH-camr. We all know that everybody's situation is different and one size does not fit all in retirement. Excellent content.
Thank you AGAIN for being a transparent ethical financial educator always. I have worked with you for a few years now and you have gotten me debt free outside of a 2.99% mortgage. I never thought I would be so financially ready to retire so thank you and your team!
The concept of mini-retirement changed my life. I'm no longer waiting for some retirement paradise when I'm 65. It helps to know how to fund the lifestyle. You know, making money while you sip that piña colada by the beach does help. I wouldn't have been able to do it otherwise.
Yeah, people miss that part. You don't jet out to Puerto Rico with your life savings. Proper investing and a good business acumen are big pluses. Invest in the stock market, real estate, build businesses. That's just it.
Most people make retirement planning way too complex. It's not that difficult. Focus on eliminating ALL debt before retiring (including mortgage). Start early and pay yourself first. $500/mo. ($16/day) for 30 years at a 10% return (S&P average over the last 30 years) grows to over $1.1 Million! If you have NO DEBT and don't live in CA, you'll have more than enough to live in most places (if not, MOVE). My folks retired 7 years ago with no debt and about $500K in savings. They left CA and moved to SC. They live a stress free life with their SS and dividend income. They have never taken a penny from their savings and it's growing every year without any additional contributions. So. their savings is really a $500k emergency fund! Think for a moment how much cash you would have every month with no mortgage payment, no car payment, no credit card payment, etc. Bottom line, you don't need a $1 million to retire if you willing to live in a low cost state like SC!
Great point. I follow the the same program. Live off a combination of dividend income and govt pensions between my wife and I. Never worry about running out of money because I never have to draw down my portfolio. As you say, key is paying off mortgage, car and credit cards before retiring.
Great video! I sort of already came to your way of thinking on using those "spending bands" when I was modeling this out in New Retirement. I keep my base living expenses all throughout retirement, but then I am adding 5 year "bands" of generic "discretionary spending" which are much higher in the first 5 years, then slowly taper down for the net couple 5 year bands. This video and the sources you list are why I am less afraid of running out of money, and more afraid of not spending enough money and missing out in earlier retirement on the fruits of all our labor and saving!
I built a home-made giant spreadsheet all the way to when I am 100 with everything included. The goal is to be broke at 100 then live off of reverse mortgage. Each December, I set budget for the coming year based on what the condition at the time was. If the portfolio goes up, budget goes up, and vise versa. This approach gives me peace. No long-term-care insurance: Plan A - drop dead otherwise healthy; Plan B - have robots take care of me (a set of R2D2 and C-3PO please); Plan C - when things go really bad, go where it’s legal for guaranteed outcome of escape.
If you need to replace a car , it's way up, insurance is up, have a failure of a roof that's way up ...all of your day to day month to month costs have risen . Look at your electric bill , gas bill, etc. up, up , up even if your usage is down.
I mean, it depends on where you live. You need to adjust for your own numbers. For people living in costal states retiring today, I think these are fairly realistic numbers. If you live in the Midwest like I do, these these numbers look pretty close to what I am projecting for my own retirement in over a decade. But for others these numbers will seem rediculously small, or large. Everyone's numbers will be pretty different.
@@michaelt2974Inflation is below 3% now. Which is good but that doesn’t mean prices will ever drop. They will maintain current levels and go up at a moderate rate now. The days of a $2 gas and $5 meal deals are long gone.
Healthcare, folks. That's what delays many of us in the US. Every person who goes on about retiring before 65 in the US should state their healthcare provisions.
I just budget an additional $12k per year per person. We spend $70ish thousand now and make adjustments for what I'll spend in retirement. Sure it's a lot of extra money. But not complicated. That's what Healthcare.gov says it will cost for me.
I recently sold my condo for $400k and i want to invest the money in the stock market. However, it appears the market is at an all-time high. Should I invest elsewhere or wait for a market correction?
The stock market is risky But staying on the sidelines is riskier. Missing the next bull run will be far more costly to your long-term wealth than getting in at the "right price". Consult a financial advisor if you're unsure how to proceed.
You're right, I and a few Neighbours in Bel-Air Area work with an advisor who prefers we DCA across other prospective sectors. Instead of a lump sum purchase, Following this, my portfolio grew 37% in the last quarter
Mind if I look up your advisr please? I've worked in real estate for over 25 years and have neglected a major stock portfolio. This served me well when I was flipping and renting houses, however I need a different plan now
I've stuck with the popularly ‘’Melissa Elise Robinson” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
hank you for putting this out, it has rekindled the fire to my goal... was able to spot Melissa after inputting her full name on the web, she seems highly professional with over a decades of experience
Your first analysis helps to also debunk the 4% rule. Spending varies from7%+ in the “go-go” years down to under 3% later on. I always look at the “4% Rule” as a rule of thumb during pre-retirement years to get an idea of the nest egg I need to build to retire.
Invest in the financial markets before retiring by diversifying across assets, allocating a small portion of your portfolio, staying updated on market trends, and considering long-term holding to balance risk and growth.
Very possible! especially at this moment. Profits can be made in many different ways, but such intricate transactions should only be handled by seasoned market professionals.
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
Finally!!! A CFP that addresses the elephant in the room. CFPs don’t want you to spend down because they charge based on AUM. I would never hire the individual. Charge me a flat rate of $5 or $10K for advice but damn if I’m going to pay you 1-2% of my portfolio balance.
Yes you might say that but More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire without any investment. Retirement becomes truly fulfilling when you possess two essential elements: financial resources and a meaningful purpose in life. Make prudent investment choices to secure good returns and ensure a comfortable retirement. .
I can personally verify this is true information. I have been retired for a little over two years, and I have only been drawing my pension so far. I turn 62 next year and I will be starting Social Security then. This still leaves me with my 401k to start at a later time if / when it's needed.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
I have always saved and invested roughly 60% of my salary since I began working in 2009, I max out my 401(k), IRA, and HSA accounts. I am 50 years old. I'll pass the $4 million threshold this month. I have a 100% investment in Vanguard ETFs and several blue-chip equities. Avoiding debt and cutting expenses are my two money-saving secrets. I make passive investments with the help of Cynthia my FA who manages my portfolio and makes sure I outperform the market.
Cynthia Alexandra Depken is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
IMO one shouldn't even enter retirement until all debt has been erased, no mortgage, no car payments, no outstanding credit card debt. THEN your retirement income will solely go directly towards your living expenses, and not have paying off debt principle and interest eat a bunch of that monthly income. Also, if your anticipated spending budget in retirement is HIGHER than your income in retirement, then that deficit mathematically means an increased risk that you will run out of savings in retirement, you should work longer or save more cheddar or start cutting some wants from that budget. Nothing is more sad than someone 85 going back to work because they've run out of cheddar.
This exactly confirms my suspicion on most retirement calculators and scenario modeling tools. Use Excel and dynamically adjust your spending every year. Thank you!
LOVE love this. Yes, it is about phases and adjusting our distributions accordingly. There is no online projection tool that can define for us what is right or 'safe' AND take into account our many variables. Taking a full perspective is really important and should be done with a specialist. SO many variables. Thank you for the reinforcement!
I know four or five people who took social security early and retired, not long thereafter. And I see them around because they come back to work. Looking for some part-time income. One thing to keep in mind is that the United States is absolutely a brutal place to be if you don't have money. If I leave some money behind for the wife and son after I croak that's fine by me as long as I'm not being hounded by bill collectors. Because one of the best things about a cushion of money is KNOWING THAT IT'S THERE. It's not like I intend to sit around in a rocking chair all day, although that might not be so bad. I have 40K in hobby related equipment and can keep myself amused for quite some time with the stock of stuff on hand.😊
Yes! Some plan extra money in retirement so they can spend it. I plan for extra money in retirement so I can sleep peacefully. It’s all about what value you get out of your money. My money pays my family twice: I get the profound mental benefits of having extra savings; my heirs get the benefit of spending the money (assuming I never had to dip into it).
The thing with retirement spending that really catches people off guard is the cost of assistance care. I view this as a separate category and multiple times more expensive than healthcare.
The biggest lie nearly all of the financial _'advisors'_ told us decades ago was to not put money in the Roth IRA, but put it in a traditional IRA. They said 'take the tax deduction now because you will be in a lower tax bracket when you retire". Now decades later I have a decent portfolio with a *HUGE* tax tumor. And my tax bracket is the same.
Most advisors don’t tell you that we should consider the tax consequences on the pre-tax earnings, not just the contribution. I have earnings on my Roth contributions from years ago that is now equal to multiple times the original contribution amount (especially those made during the 2008-09 financial depression). I’m so glad that I took the Roth route on those contributions. If you think the tax situation is bad now, wait until you are forced to make Required Minimum Distributions which might take you up a notch in your marginal tax rate. If this applies to you, consider making Roth conversion before RMD kicks in to alleviate the impact of the RMD tax bombs later.
You contributed at your marginal rate but your withdrawals are at your effective rate. Traditional is nearly always the right option, especially so if you can retire early and do Roth conversions.
Great video. My wife and I retired recently (49 yo). I had to run a different withdrawal rate because we will be receiving a pension at 55, which I project will cover all our living expenses. We want to travel as we are moving to Europe in September so I am allocating our withdrawal rate to be higher in the first few years then taper off especially when we draw the pension. This video perfectly summarized exactly what you need to do. Also, I recommend using an AI program to validate some of your assumptions. That has been very helpful for me
Thank you for the thought provoking video. As someone not interested in “generational wealth”, the idea of dying with millions under management irritates me greatly.
8% seems wildly optimistic given recent returns. I use a much more conservative rate. I think what many planners fail to explain clearly is that your lump of money keeps earning a return while you are chipping it down. Your savings total is not a static number over time.
Good video. I looked at the 4% rule as a go/no-go before I entered retirement, but truth of the matter is if we spend wisely and don't waste money we should be fine. Occasional splurge is okay, but have the discipline to know when and where to cut back if needed. Entering retirement with a small home mortgage as the only debt helped as well. I could pay it off but at 2.5% it would be a poor decision.
I understand the math and statistics. I also suffer from fear, uncertainty and doubt. As long as the portfolio goes up I know I'm good, but going down is an uncomfortable trajectory ending in a bad place. I'm not sure there is a good way out. I think the only solution to the FUD is for my portfolio to reach escape velocity - not that I couldn't spend it, but "plenty" of spending doesn't dent it.
While not economically rational, part of me thinks a simple deferred annuity might alleviate my fear (depending on rates). Something like 1/4-1/3 of my portfolio to an deferred annuity that kicks in at 64 (or so), then take social security later. Takes a lot of the longevity fear out.......
Technically, you should spend more early into retirement, when you are physically capable of spending more or doing more activities, and decrease it as you age, when you can no longer move as much, and thus, the only increasing cost besides inflation is health (older people need more check ups) and transportation costs. But most other extra spending like activities, vacations, etc. decreases with age.
With $900k in assets, I've been managing my retirement portfolio for five years, but lately I've underperformed. Is it possible to make this better, or should I sell and open a high-yield savings account instead?
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 stocks, gold, silver, and digital currencies. Despite the adversity in the economy, now is an opportune moment to contemplate these investment avenues.
The pathway to substantial returns doesn't solely rely on stocks with significant movements. Instead, it revolves around effectively managing risk relative to reward. By appropriately sizing your positions and capitalizing on your advantage repeatedly, you can progressively work towards achieving your financial goals. This principle applies across various investment approaches, whether it be long-term investing or day trading.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.
I definitely share your sentiment about these firms. Finding financial advisors like Monica Lisa Payne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Thanks for sharing this. I did my own little research, and your advisor looks advanced and experienced. I wrote her and dialed her twice but she didn't pick up so I scheduled a phone call.
Better safe than sorry. The object is not to use up all your money but to have money when you need it. Things like auto repair, dental work, and medical expenses can be relatively minor; then again, they can become major, too. The leading cause of bankruptcy in the U.S. is medical debt. And old people more than any others get sick, fall down and break something, wind up having hospital or nursing/rehab center stays, and/or have a lot of medications to pay for. That can break down even substantial savings pretty quickly. Having a sizable rainy day fund, with no intention of spending it down over time, is a wise move.
I see a person's salary as a marker for requiered retirement income. The problem is that no one knows how much of my income was actually being spent and how much save.
I created spending bands in right capital...mainly vacations and spending. from 62-77 the rate is high...after 77 goes down.. Kind of simulates what your doing. Good facts.. i cant stand the 4% rule it tries to use and easy method to solve a complex problem...KNOW YOUR EXPENSES before and proposed after retirement then build a plan. Nice video! Spend till the end baby....if i have my full amount when i die..i consider that a loss...
While I do agree it could be fairly nefarious, I think it’s important as well to realize that no one has all the answers and if I’m advising a client on how to spend in retirement, the last thing I would want is to be the one that told them they could do something and then something bad happens and suddenly they are the 1% of the 4%er’s that will run out of money. I think most people would rather have absolute confidence they’ll be alright. An advisors job I think is to give them the bulletproof plan and allow flexibility to do something different if they’d like.
My husband and I were fortunate enough to be able to pay off our mortgage early. We were both still working, and took the payment amount that we had been using to pay off our mortgage faster and we put it straight into investments. We were able to retire early because of almost 7 years of putting away what would have been our mortgage payment as well as maxing out our 401K/403B plans. Thankfully we were taught by both of our parents the value of living within our means. Thank you for your advice. I know it will help people. we are interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
I live in the south western part of US and we see a lot of retirees and Snowbirds. We’ve seen a lot of people living almost solely on Social Security and they can really find themselves in a pickle. When one of them passes, all of a sudden their income cuts nearly in half, leaving them in an impoverished situation. With many in our society choosing to not have children or living alone I suspect that number wilt increase significantly in 30/40 years. Shockingly, the number one group in America at the highest risk for suicide are men age 80+.
Good video! The saving and investing is super dynamic with lots of data to analyse. The retirement spending on the other hand is static with no data. This makes no sense!
First, this is probably the best discussion of spending, inflation, and expected growth. It's both much simpler and in other ways more complex because you don't know when you'll die and you don't know what the economy will do. With that said, retirement spending in the first 5-10 years is higher than your working years. Just a fact. And of course, when you hit 73, most people have no idea the government forces you to take a significant chunk out of your 401K/Roth and then you'll jump to a higher tax bracket. Might as well take it out sooner and spend it when you are healthy enough to enjoy your savings. One quibble with your advice. 8% _compounded_ returns don't hold up over time. You need to do a Monte Carlo simulation (and I know you don't like them) based on past history to get an accurate understanding of growth in your portfolio. That model is generally a closely guarded secret for most financial advisors, especially if they're accurate! ;)
Yeah, the 4% rule follows extremely specific investment allocation, and distribution method. It was never meant to be a retirement model for actual use. As a tool for someone like me who is a long ways away to have a rule of thumb to project future needs. But boots on the ground actual retirement will be base inelastic costs, and optional costs. When things go well the optional costs stay high, and when things are low the optional costs cut dramatically. That dynamic capacity to cut and raise costs make reality harder to guess and track, but it's also why so many people are able to retire even when they do run out of money.
4% rule depends on your interpretation. If you calculate 4% of your starting wealth, fix that amount and inflate it at say 3%RPI, that's one trajectory that rarely fails. But if you spend 4% of whatever your wealth is each year, that gives you spending which increases by say 8% pa, but probably will run out...in 25 years.
I had initially planned to retire at 62, work part-time, and save money, but the impact of high prices on various goods and services has significantly disrupted my retirement plan. I'm worried about whether those who experienced the 2008 financial crisis had it easier than I currently am. The volatility of the stock market is a concern as my income has decreased, and I fear that I won't be able to contribute as much as before, potentially jeopardizing my retirement savings.
In short.. If you were smart enough to save up a sizable nest egg, more than likely you are going to be able to get through retirement without spending all your money. You are not stupid. You have proven you are practical.
I drive more in retirement , I think while working my commute was 30 miles each way with services I needed near that route (so buy groceries after work etc). But I moved to a smaller rural ish town and while it has some services like grocery , and home improvement stores within 6 or so miles each way. Mall like big box shopping is a bit sparse, advanced medical care which used to be sort of nearby is now 1 or 2 hours away. I find my self driving 500 miles once or twice a month to visit aging relatives etc. And I tend to like getting some windshield time to visit other nearby towns, festivals and just blow off some time and gain some anonymity. for a few minutes (small town life , everybody knows your business, wonders why you're pulling out of your driveway etc).. .. .. So my driving probably has increased as has the cost of fuel , repairs etc . House is paid off but insurance and taxes have gone up, as have groceries and pretty much anything else, new roof more than doubled, lawn care way up etc.. Even my water bill has doubled with less usage as it's calculated differently and has a huge amount of added fees that keep going up .. I could stop using water entirely and my bill will still rise. Electricity is up, nat gas is up, trash services up. I wish someone would have warned me about near hyper inflation and hidden fees and taxes that would be coming at that point I probably would have worked another year or two which would have put me into the C19 2020-21 market drop , where out of uncertainty I probably would have worked at a higher pay rate due to being an essential business...and I would have been contributing to my 401 or stock purchases in a down market so all the funds and raw stock stuff would have been on sale and jumped a few years in 2024. . Rather 2 years after I retired I hit severe sequence of return failure due to c19 crushing the market., everyone printing money hand over fist and causing inflation that isn't really transitory.
Glad you liked it! You can find the supporting spreadsheets here: please make sure to download by clicking FILE - Make a Copy OR FILE - Download (XLSX) docs.google.com/spreadsheets/d/1-f2MALEhwqJcNAojCIiVLODYsa6tKUEK_BcdCda97tM/edit?usp=drive_link
@@ThePeakFP Thanks! You can change the word “edit” near the end of this link to “copy” and it will automatically make a copy for the person who clicked the link. A very helpful tip!
i think an impediment is that people pick the magic dollar amount and calculate the age from that, rather than the opposite - picking the age and whatever dollars you have, you have. Yes, it may be less than you’d hope, or less than you are used to spending while working. If you can’t embrace that, then don’t retire. Live within those means and enjoy it.
I think to model realistic curves one needs to (1) include volatility in the return projections. No investment returns a fixed return every year. A portfolio may never recover from minus 20-30% for a few years, depending upon what years in the process those 15, 20, 30% downturns occur. Thus, a straight 7 or 8% return line will provide overly optimistic projections. (2) include Long Term Care. Instead of 4% withdrawals annually, what does the retirement financial plan look like if withdrawals were 4% annually until age 79, but then jumps to 12% withdrawals to pay for a nursing home plus medical for the next eight years? Maybe it will be OK, maybe not.
If you're living well, and buying whatever you want, why would you want to spend more? Many people simply have more income in retirement than they can use. My housing, transportation, and food expenses actually went up after I retired.
What about when you are covering for two people, as most are planning on retiring as a couple. The probablilty of two people outliving a pot of money is much higher than one person.
I was thinking of something similar - determine how much I’ll need plus SS at 70 and set that aside in a separate account that I don’t touch until 70 - and the rest is my budget to spend as I want until 70. 😊
I don't understand why do did not address mandatory distributions on the impact of those on savings. I think housing, transportation, and food is replaced by services like house cleaning, law maintenance, pet care/boarding, food delivery plans. Also, we need to figure out the impact of inflation, I think your table should be 6% inflation. I think it will be unprecedented in the next 10 years. Also, I think the withdrawal rate should consider market performance, dumb to put it on a fixed rate, 100% agree.
I have some issues with some of the stuff he’s saying. For instance: Although I don’t think the 4% rule is a realistic withdraw path because of changes in life and needs, his explanation of having the same principal after 17 or 18 years doesn’t mean much. Have the same principal doesn’t mean the same buying power. 20 years later with the same amount in principal with a 3% inflation would mean the principal is only worth a little over half the original amount. And the first “lie”, he spoke about….i don’t know why someone couldn’t put in the software the changes that come along later in life. Most softwares will allow you to change withdraws or incomes later. I’m glad he’s questioning the methods. But I’m not sure he’s right about some of his gripes. It’s all an understanding of what’s being computed. I agree everyone needs to know what what these “lies” really mean.
My concern for our later years is that as we approach 90 its more likely that we'd need to move to assisted living or a nursing home. Those are very expensive and their costs go up by at least the rate of inflation if not faster.
Average length of long term care is around 2 years, with most needs less than 5 years. Just plan accordingly. Also, when you are paying for Long Term Care in a facility, that means many of your other expenses will go down. You no longer will travel for leisure or even seeing relatives , no more dinning out in fancier restaurants, no need to pay for golf clubs membership, etc.
First lie: You need to hire a Financial Planner. This is right up there with all hiring out stuff you don't want to do. Too fat? Hire a dietitian, keep eating crap and blame the dietitian. Can't walk up stairs? Hire a personal trainer and take 1 session. For 99% of people asset management is pretty easy to understand. Doing it is the issue. What people need to a hire is a dude who comes to your house and kicks you in the nuts each month you blow your budget on crap. That could be effective.
It is hyper conservative. But that's allright for people with excess savings. Those people live rich lives on a small percentage of their income. But that's not most people. Great content!
I've kept much of my savings in cash for safety, but I'm unsure if it's right for retirement. Contemplating investing $100K in stocks, as I've heard investors can profit in tough times. Unsure about my next move
I'm so glad that all these examples have everyone retiring with $1 million. Is this the average amount people are retiring with? Let's give some examples with half that amount. Isn't it more realistic that way more people are retiring with $500,000?
That is a big issue with many of these types of videos, lots of assumptions that may not fit you such that completely different decisions should be made. Not only will the dollar amount vary, but so will the types of accounts the money is in. Some have all their money in an IRA/401K, some have Roths, some have a large retail brokerage accounts, some have rental properties that produce income, some have well funded annuities. Without considering all the variables for a particular person, the conclusions are rather meaningless for most people...unless they happen to be exactly like the example. And in answer to your question, most people don't even have $500K and are in serious trouble, especially if social security is cut which will happen if nothing is done, and neither of our political parties is talking about it seriously.
I know what the long term average return is on the funds my IRA is invested in, I take distributions that are 1% less than that. I'm young enough that I want my IRA to continue to grow a few more years.
I like the videos and appreciate all the work that went into them. But at 14:50 your spreadsheet has a discontinuity at year. 2030 where adjusted spending went down. I've seen these errors in various videos, yours and others. Such inaccuracies doesn't help my confidence. In my opinion, if you're going to show a spreadsheet with numbers, make sure the numbers are accurate
I would argue that the view you should pay off your home is not always correct. If you look at a curve over time, the actual cost of a fix rate mortgage effectively drops and taxes, insurance and repairs increase. The mortgage leverages others peoples money and you sell later.
The straight line inflation is fine. Having a little too much is never an issue. If it ends up meaning the client works an extra year so be it. Like you said they are free to adjust discretionary spending. Batting 1.000 is much better than adopting some arbitrary model that may leave you short. You are trying to fix a problem no one has to squeeze maybe one less year at best off working years? Too risky.
Some people want 100% rate of success and are willing to make significant financial tradeoffs for that (meaning spending much more conservatively), and some people actually want to spend more of their wealth but are simply afraid to do so because there are not good models out there showing how it can be done safely. I hear that you would rather go for a higher probability of success and that is entirely your right! I wish you the best of luck about that, and I certainly have other videos on my channel - and will have others come out in the future - that will help with that.
I couldn't get my math to align with your spreadsheet percentages in the initial example. Also I can't understand the real difference between the probability of success vs the fixed withdrawal method, as one is looking forward with assumptions, and the other plans drawdowns based on a probability of success.
Your examples are with people who make more money than I have ever dreamed of. Not realistic for most of us. I will not be able to "retire" in the classic sense. When I turn 70 in 2032, I will file for my social security benefits, and keep on working my full time job. I will have two incomes, but only have to work one job. The irony is that I will save far more money for classic retirement AFTER my official retirement, than before. I have already verified this plan with my accountant and my employer. My research indicates there will be no problem with the SSA on this. In a few more years when the housing market has calmed down, I will buy a house, and when that is paid off, then I will consider whether I can afford not to have a job. Beyond the money, I still need the structure and validation of a job. I am not the type of person who wants to run around on a bunch of trips. Sipping a long-island ice tea on a beach while watching the sun set would bore me to death in less than a week. I have hobbies, but they can be done in my local metropolitan area(Philadelphia, PA), mostly at home. Finally, there is the Singularity, which most people don't take very seriously yet, but should. When the AI and humans merge, initially through a neural link and implants, but later more substantially, the prospect of essentially living for ever will be a real possibility. No matter how much I save, it won't last a trillion years. So when those of us who are still around in 2045(www.msn.com/en-us/news/technology/a-scientist-says-humans-will-reach-the-singularity-within-21-years/ar-AA1osINN) realize I'm not being ridiculous, they will ask one of the very important existential questions: What does it mean to retire?
![ฮักเทื่อสุดท้าย - บอย ศิริชัย [OFFICIAL MV]](http://i.ytimg.com/vi/-1PoPoQ-B-k/mqdefault.jpg)
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My parents both spent same number of years in the civil service, but my mom was investing through a wealth manager, and my dad through the 401k.
This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha.
It's true, not everyone has access to this kind of information. Lack of knowledge can definitely make people panic. But it's amazing that you've been able to make over $187k passively through investing with an advisor! Having a great wealth manager can really make a difference, regardless of how the economy is doing. Keep up the good work!
Can you recommend any? I am in need of a Cfp to grow my retirement account.
Annette Marie Holt is the licensed adviser I use. Just research the name. You’d find necessary details to work with to set up an appointment.
@@foreverlaura-fq4eu _not everyone has access to this kind of information_
Well, you're watching this video so everyone has this information.
I’m 79 been retired twenty years. We update a spreadsheet showing all our financial assets on the first of every month and the graph over the last few years shows us if we can or should adjust our spending.
Having said that we enjoy our lifestyle and don’t want to spend more. My wife and I spent the morning cycling in the hills amongst beautiful scenery and stopped along the way to eat a sandwich on a bench with an incredible view. I’d rather do that than anything. There is no point spending for the sake of it, as you get older the desire to impress vanishes.
If you do a lot of exercise and eat right your spending may not follow the smile pattern. When we first retired we used to ski all day with just a quick snack for lunch, now we often just ski the morning and then go for a good lunch with a couple of glasses of wine so we are spending more.
Are you able to share your spreadsheet template via Google docs please? Obviously it will be empty of data but handy to have the layout and formulas etc.
Congrats you are living the life!
Well done! I retired at 54 on my dividend growth portfolio. Simple things like writing this while sitting by my pool in Florida makes life wonderful.
kudos to you. Health is a form of wealth. You are living life to the fullest.😀😀
You drink wine at 80? You definitely won!
I retired at the age of 58 at the end of June 2022. I worked in healthcare for 35 years. Working through the pandemic nearly destroyed me. Thankfully we had planned well and I was able to take early retirement.
I’ve worked hard to save about $500,000 for retirement, and now I’m ready to turn my savings into a paycheck. But how much can I afford to withdraw from savings and spend is what I don’t know. If I spend too much, I risk being left with a shortfall later in retirement. But if I spend too little, I may not enjoy the retirement I envisioned. What’s your advice on this please?
I'd highly recommend using the 4% rule, maybe you'd know just how much to spend after retirement
Personally, I used the 4% rule as a guideline, didn't follow it precisely. For greater level of confidence around portfolio longevity and ability to meet my goals, I use a well experienced advisor. In a nutshell, I'm semi-retired and only work 7.5 hours weekly since getting fully invested in the markets for 5 years now, amassing about $1.3m so far, after subsequent investments.
Scam thread! Please be aware!
SCAM ALERT
With the current rate of inflation, the Boomers saved wealth and a wood chipper have a similar sound.
As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?
I think the safest strategy is to diversify investments. Like spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
NICOLE ANASTASIA PLUMLEE is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
Just ran an online search on her name and came across her websiite; pretty well educated. thank you for sharing.
Nice video - I completely agree that the financial services industry is purposely trying to make people afraid of spending their own money.
It’s about time somebody explains it the right way. I’ve seen so many people that retire from work and within 10 years they’re dead. Some of these people were not in the best physical state and I told them to enjoy your life while you’re still have it I understand people want to give their kids and family, a nest egg, but you worked your whole life and should enjoy it first.
@@41ldawg99 it may be that after 10 years they're dead but at least they didn't have to spend ten years wondering what would they do if they lived 20. And they have a buffer against market collapses.
Depends on what’s important to the individual. I have worked and played hard for the majority of my life. I grew up dirt poor and plan on working until I’m 70. I can live comfortably on just social security at that point. I will leave several million to my kids. It brings me more joy knowing they will have those resources than anything I would do with it.
@@CRPizza925instead of waiting to die to have your kids enjoy your wealth why not share it with them now and make memories with you, instead of after your gone?
@@CRPizza925 As someone whose father left him a comfortable inheritance, I see this from the side of both beneficiary and benefactor. I'll be forever thankful to my father for blessing me with that gift, and I'm planning to do something similar for my loved ones (and charities). "You can't take it with you." No, you can't, but you can leave it to someone you care about.
Although I have interests in global economics I don't watch the news anymore... I have enough FUD lol. Thanks for this news and offering your insight on how to navigate during unfortunate times/events like this. You're right about keeping level headed when investing so that's why I think it's important to limit the amount of FUD we consume. I don't watch the media but the news that you present has enough to know issues going on without riding the emotional rollercoaster if I were to watch the news everyday. Now I buy and just trade long term more than ever, I have made over 16 btc from day trading with Francine Duguay in few weeks, this is one of the best medium to backup your assets incase it goes bearish.
Francine Duguay program is widely available online.
I appreciate the professionalism and dedication of the team behind Francine’s trade signal service.
Trading with an expert is the best strategy for beginners and busy investor s who have little or no time to monitor their trades.
The key to financial stability is having the right investment suggestions for a diverse portfolio. Many investment failures and losses happen when you invest without proper guidance.
It was quite challenging to understand the different trends on my own until i found out about Duguay. Trading made easy.
We are in our early eighties, I retired at 67 and we enjoyed several winters in Florida and Arizona. as well as boating in the summer. We follow a cash flow plan on our spending, considering our capital as our pension, invested in dividend stocks and some bonds. We only spend our income yearly and now that is more than we need. We are now selling our home, worth around $1M and will be renting, with the cash flow from the house paying the rent. Our net worth has increased every year since retirement, however we never lacked for money during that time. We maintain a years cash flow reducing the risk of having to sell stocks during bad times. We could have spent more but never needed it. We know our kids will spend the money more than we did, however it should make their retirement better for them.
You are the first financial expert that actually considers factors that reduce the need to spend money in their later years. I've always thought this and it bugs the heck out of me when the so called pros do not consider this in their planning. You are correct! It's money grabbing and it's caused so many people to unnecessarily continue to work!
Thanks for being honest!!
Thanks for the comment and the kind words. Enjoy the vidoes!
I retired at 50 because I didn’t want to die while still slaving away. I then transitioned into travel as a job and lifestyle and would always encourage people to stop dreaming and start doing. So many people work until it’s too late to travel and really enjoy the fruits of their labor. I’ve always known better and love your honest approach to what should come next.
@@ericammons9804 travel is overestimated. Airplanes these days are nothing more than flying toilets. Cruise ships are lethal. You can drive but then you end up far from home where you don't know where you can eat the best food for the least price.
You did not really retire. You fool yourself only by saying so
@@Steve-gx9ot Sure Steve, whatever you say...
That’s pretty admirable. Good for you. How do you monetize your travel in order to support yourself?
So you continued to work at a different job in travel industry?
You are certainly the "thinking mans" TH-camr.
We all know that everybody's situation is different and one size does not fit all in retirement.
Excellent content.
Thank you AGAIN for being a transparent ethical financial educator always. I have worked with you for a few years now and you have gotten me debt free outside of a 2.99% mortgage. I never thought I would be so financially ready to retire so thank you and your team!
The concept of mini-retirement changed my life. I'm no longer waiting for some retirement paradise when I'm 65. It helps to know how to fund the lifestyle. You know, making money while you sip that piña colada by the beach does help. I wouldn't have been able to do it otherwise.
Yeah, people miss that part. You don't jet out to Puerto Rico with your life savings. Proper investing and a good business acumen are big pluses. Invest in the stock market, real estate, build businesses. That's just it.
Most people make retirement planning way too complex. It's not that difficult. Focus on eliminating ALL debt before retiring (including mortgage). Start early and pay yourself first. $500/mo. ($16/day) for 30 years at a 10% return (S&P average over the last 30 years) grows to over $1.1 Million! If you have NO DEBT and don't live in CA, you'll have more than enough to live in most places (if not, MOVE). My folks retired 7 years ago with no debt and about $500K in savings. They left CA and moved to SC. They live a stress free life with their SS and dividend income. They have never taken a penny from their savings and it's growing every year without any additional contributions. So. their savings is really a $500k emergency fund! Think for a moment how much cash you would have every month with no mortgage payment, no car payment, no credit card payment, etc. Bottom line, you don't need a $1 million to retire if you willing to live in a low cost state like SC!
Great point. I follow the the same program. Live off a combination of dividend income and govt pensions between my wife and I. Never worry about running out of money because I never have to draw down my portfolio. As you say, key is paying off mortgage, car and credit cards before retiring.
Awesome 😊. I appreciate that you bring the data to back up your analysis. "In god we trust, all others bring data."
Great video! I sort of already came to your way of thinking on using those "spending bands" when I was modeling this out in New Retirement. I keep my base living expenses all throughout retirement, but then I am adding 5 year "bands" of generic "discretionary spending" which are much higher in the first 5 years, then slowly taper down for the net couple 5 year bands. This video and the sources you list are why I am less afraid of running out of money, and more afraid of not spending enough money and missing out in earlier retirement on the fruits of all our labor and saving!
I built a home-made giant spreadsheet all the way to when I am 100 with everything included. The goal is to be broke at 100 then live off of reverse mortgage. Each December, I set budget for the coming year based on what the condition at the time was. If the portfolio goes up, budget goes up, and vise versa. This approach gives me peace. No long-term-care insurance: Plan A - drop dead otherwise healthy; Plan B - have robots take care of me (a set of R2D2 and C-3PO please); Plan C - when things go really bad, go where it’s legal for guaranteed outcome of escape.
$82,000 in first year of retirement? How real is that? That’s more than I ever made while working in one year!
If you need to replace a car , it's way up, insurance is up, have a failure of a roof that's way up ...all of your day to day month to month costs have risen . Look at your electric bill , gas bill, etc. up, up , up even if your usage is down.
And yet the talking faces in cnbc keep saying inflation is cratering. In what universe are they living
I mean, it depends on where you live. You need to adjust for your own numbers. For people living in costal states retiring today, I think these are fairly realistic numbers. If you live in the Midwest like I do, these these numbers look pretty close to what I am projecting for my own retirement in over a decade. But for others these numbers will seem rediculously small, or large. Everyone's numbers will be pretty different.
I am planning on 84k a year till I get to full retirement age.
@@michaelt2974Inflation is below 3% now. Which is good but that doesn’t mean prices will ever drop. They will maintain current levels and go up at a moderate rate now. The days of a $2 gas and $5 meal deals are long gone.
Healthcare, folks. That's what delays many of us in the US. Every person who goes on about retiring before 65 in the US should state their healthcare provisions.
Indeed Healthcare will keep me working until I am 67
I just budget an additional $12k per year per person. We spend $70ish thousand now and make adjustments for what I'll spend in retirement. Sure it's a lot of extra money. But not complicated. That's what Healthcare.gov says it will cost for me.
I recently sold my condo for $400k and i want to invest the money in the stock market. However, it appears the market is at an all-time high. Should I invest elsewhere or wait for a market correction?
The stock market is risky But staying on the sidelines is riskier. Missing the next bull run will be far more costly to your long-term wealth than getting in at the "right price". Consult a financial advisor if you're unsure how to proceed.
You're right, I and a few Neighbours in Bel-Air Area work with an advisor who prefers we DCA across other prospective sectors. Instead of a lump sum purchase, Following this, my portfolio grew 37% in the last quarter
Mind if I look up your advisr please? I've worked in real estate for over 25 years and have neglected a major stock portfolio. This served me well when I was flipping and renting houses, however I need a different plan now
I've stuck with the popularly ‘’Melissa Elise Robinson” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
hank you for putting this out, it has rekindled the fire to my goal... was able to spot Melissa after inputting her full name on the web, she seems highly professional with over a decades of experience
The severity of failure is at least as important as probability of success.
Your first analysis helps to also debunk the 4% rule. Spending varies from7%+ in the “go-go” years down to under 3% later on. I always look at the “4% Rule” as a rule of thumb during pre-retirement years to get an idea of the nest egg I need to build to retire.
Invest in the financial markets before retiring by diversifying across assets, allocating a small portion of your portfolio, staying updated on market trends, and considering long-term holding to balance risk and growth.
Very possible! especially at this moment. Profits can be made in many different ways, but such intricate transactions should only be handled by seasoned market professionals.
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
Finding yourself a good broker is as same as finding a good wife, which you go less stress, you get just enough with so much little effort at things
Brian demonstrates an excellent understanding of market trends, making well informed decisions that leads to consistent profit
I'm surprised that you just mentioned and recommend Mr Brian Nelson. I met him at a conference in 2018 and we have been working together ever since.
Finally!!! A CFP that addresses the elephant in the room. CFPs don’t want you to spend down because they charge based on AUM. I would never hire the individual. Charge me a flat rate of $5 or $10K for advice but damn if I’m going to pay you 1-2% of my portfolio balance.
Fee only CFPs are the only ones I would consider.
you should pay him right away lolz.
I just noticed he still charges 1% of AUM over $500k. Same bullshit as any other CFP
@@jameschaves5723 cfp= certified financial parasite. inherent conflict of interest makes all of them untrustworthy.
I’ve not paid such fees, however I’m not 100% certain they are completely unjustified. Perhaps spend it for a short time to get things setup
This is probably the best video on retirement spending I have seen so far. Bravo.
Yes you might say that but More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire without any investment. Retirement becomes truly fulfilling when you possess two essential elements: financial resources and a meaningful purpose in life. Make prudent investment choices to secure good returns and ensure a comfortable retirement. .
I can personally verify this is true information. I have been retired for a little over two years, and I have only been drawing my pension so far. I turn 62 next year and I will be starting Social Security then. This still leaves me with my 401k to start at a later time if / when it's needed.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@ChrisDERUNNER quitting is not a good plan in either way.
I have always saved and invested roughly 60% of my salary since I began working in 2009, I max out my 401(k), IRA, and HSA accounts. I am 50 years old. I'll pass the $4 million threshold this month. I have a 100% investment in Vanguard ETFs and several blue-chip equities. Avoiding debt and cutting expenses are my two money-saving secrets. I make passive investments with the help of Cynthia my FA who manages my portfolio and makes sure I outperform the market.
Cynthia Alexandra Depken is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
IMO one shouldn't even enter retirement until all debt has been erased, no mortgage, no car payments, no outstanding credit card debt. THEN your retirement income will solely go directly towards your living expenses, and not have paying off debt principle and interest eat a bunch of that monthly income. Also, if your anticipated spending budget in retirement is HIGHER than your income in retirement, then that deficit mathematically means an increased risk that you will run out of savings in retirement, you should work longer or save more cheddar or start cutting some wants from that budget. Nothing is more sad than someone 85 going back to work because they've run out of cheddar.
Good video. The 4% rules and those who endorse it often dont consider a significant SS income in late 60s or 70. Thanks for this.
I am playing the "human or bot" game with the comments. Anybody else?
For now, bots are still easy to spot if one pays attention. Weird situation outlined, or bad grammars, are easy tip-offs.
This exactly confirms my suspicion on most retirement calculators and scenario modeling tools. Use Excel and dynamically adjust your spending every year. Thank you!
LOVE love this. Yes, it is about phases and adjusting our distributions accordingly. There is no online projection tool that can define for us what is right or 'safe' AND take into account our many variables. Taking a full perspective is really important and should be done with a specialist. SO many variables. Thank you for the reinforcement!
I know four or five people who took social security early and retired, not long thereafter. And I see them around because they come back to work. Looking for some part-time income. One thing to keep in mind is that the United States is absolutely a brutal place to be if you don't have money. If I leave some money behind for the wife and son after I croak that's fine by me as long as I'm not being hounded by bill collectors. Because one of the best things about a cushion of money is KNOWING THAT IT'S THERE. It's not like I intend to sit around in a rocking chair all day, although that might not be so bad. I have 40K in hobby related equipment and can keep myself amused for quite some time with the stock of stuff on hand.😊
Yes. It brings a lot of comfort knowing that I have enough money to last through my lifetime
Yup, it's better to be safe than sorry.
Yes! Some plan extra money in retirement so they can spend it. I plan for extra money in retirement so I can sleep peacefully. It’s all about what value you get out of your money.
My money pays my family twice: I get the profound mental benefits of having extra savings; my heirs get the benefit of spending the money (assuming I never had to dip into it).
The thing with retirement spending that really catches people off guard is the cost of assistance care. I view this as a separate category and multiple times more expensive than healthcare.
The biggest lie nearly all of the financial _'advisors'_ told us decades ago was to not put money in the Roth IRA, but put it in a traditional IRA. They said 'take the tax deduction now because you will be in a lower tax bracket when you retire". Now decades later I have a decent portfolio with a *HUGE* tax tumor.
And my tax bracket is the same.
Most advisors don’t tell you that we should consider the tax consequences on the pre-tax earnings, not just the contribution. I have earnings on my Roth contributions from years ago that is now equal to multiple times the original contribution amount (especially those made during the 2008-09 financial depression). I’m so glad that I took the Roth route on those contributions.
If you think the tax situation is bad now, wait until you are forced to make Required Minimum Distributions which might take you up a notch in your marginal tax rate. If this applies to you, consider making Roth conversion before RMD kicks in to alleviate the impact of the RMD tax bombs later.
You contributed at your marginal rate but your withdrawals are at your effective rate.
Traditional is nearly always the right option, especially so if you can retire early and do Roth conversions.
If you live in a high tax state and have a traditional IRA you can move to a zero tax state in retirement and NEVER repay the deferred state tax. 😊
Wow... you are one of the few financial channel that is realistic, and calling out the absurdly conservative 4% rule! Thank you!
I appreciate that!
Home, auto insurance, and property taxes has gone up nearly 40% in past 2 years. Obviously not a 3% projected inflation rate.
Great video. My wife and I retired recently (49 yo). I had to run a different withdrawal rate because we will be receiving a pension at 55, which I project will cover all our living expenses. We want to travel as we are moving to Europe in September so I am allocating our withdrawal rate to be higher in the first few years then taper off especially when we draw the pension. This video perfectly summarized exactly what you need to do. Also, I recommend using an AI program to validate some of your assumptions. That has been very helpful for me
Thank you for the thought provoking video. As someone not interested in “generational wealth”, the idea of dying with millions under management irritates me greatly.
Really enjoying your presentation and support material.
8% seems wildly optimistic given recent returns. I use a much more conservative rate. I think what many planners fail to explain clearly is that your lump of money keeps earning a return while you are chipping it down. Your savings total is not a static number over time.
Every retirement plan is unique.
This is why it’s important to have a plan that is designed specifically to suit your individual needs.
Its necessary to have very specific ideas on how you want to spend your retired life.
Good video. I looked at the 4% rule as a go/no-go before I entered retirement, but truth of the matter is if we spend wisely and don't waste money we should be fine. Occasional splurge is okay, but have the discipline to know when and where to cut back if needed. Entering retirement with a small home mortgage as the only debt helped as well. I could pay it off but at 2.5% it would be a poor decision.
My oh my, the idea that I will spend over $5 million over 30 years is wild. I’ve never thought of it that way. Thank you for the spreadsheets.
Well done, easy to understand and well taken.
I understand the math and statistics. I also suffer from fear, uncertainty and doubt. As long as the portfolio goes up I know I'm good, but going down is an uncomfortable trajectory ending in a bad place. I'm not sure there is a good way out. I think the only solution to the FUD is for my portfolio to reach escape velocity - not that I couldn't spend it, but "plenty" of spending doesn't dent it.
While not economically rational, part of me thinks a simple deferred annuity might alleviate my fear (depending on rates). Something like 1/4-1/3 of my portfolio to an deferred annuity that kicks in at 64 (or so), then take social security later. Takes a lot of the longevity fear out.......
Technically, you should spend more early into retirement, when you are physically capable of spending more or doing more activities, and decrease it as you age, when you can no longer move as much, and thus, the only increasing cost besides inflation is health (older people need more check ups) and transportation costs. But most other extra spending like activities, vacations, etc. decreases with age.
Excellent content. I believe he has his viewers best interests in mind. I recently subscribed.
Inflation of 3% and returns of 8% with $2 trillion dollar government deficit spending? You're dreaming!
With $900k in assets, I've been managing my retirement portfolio for five years, but lately I've underperformed. Is it possible to make this better, or should I sell and open a high-yield savings account instead?
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 stocks, gold, silver, and digital currencies. Despite the adversity in the economy, now is an opportune moment to contemplate these investment avenues.
The pathway to substantial returns doesn't solely rely on stocks with significant movements. Instead, it revolves around effectively managing risk relative to reward. By appropriately sizing your positions and capitalizing on your advantage repeatedly, you can progressively work towards achieving your financial goals. This principle applies across various investment approaches, whether it be long-term investing or day trading.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.
I definitely share your sentiment about these firms. Finding financial advisors like Monica Lisa Payne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Thanks for sharing this. I did my own little research, and your advisor looks advanced and experienced. I wrote her and dialed her twice but she didn't pick up so I scheduled a phone call.
Great video, thanks. You always provide a unique viewpoint.
Better safe than sorry. The object is not to use up all your money but to have money when you need it. Things like auto repair, dental work, and medical expenses can be relatively minor; then again, they can become major, too. The leading cause of bankruptcy in the U.S. is medical debt. And old people more than any others get sick, fall down and break something, wind up having hospital or nursing/rehab center stays, and/or have a lot of medications to pay for. That can break down even substantial savings pretty quickly. Having a sizable rainy day fund, with no intention of spending it down over time, is a wise move.
Thanks Eric for another very helpful and informative video!
I totally agree with you on the 4% rule. Its a great estimation tool. Thats all. Actual spending does not go the way they say in the financial press.
I see a person's salary as a marker for requiered retirement income. The problem is that no one knows how much of my income was actually being spent and how much save.
You could…
I created spending bands in right capital...mainly vacations and spending. from 62-77 the rate is high...after 77 goes down.. Kind of simulates what your doing. Good facts.. i cant stand the 4% rule it tries to use and easy method to solve a complex problem...KNOW YOUR EXPENSES before and proposed after retirement then build a plan. Nice video!
Spend till the end baby....if i have my full amount when i die..i consider that a loss...
While I do agree it could be fairly nefarious, I think it’s important as well to realize that no one has all the answers and if I’m advising a client on how to spend in retirement, the last thing I would want is to be the one that told them they could do something and then something bad happens and suddenly they are the 1% of the 4%er’s that will run out of money. I think most people would rather have absolute confidence they’ll be alright. An advisors job I think is to give them the bulletproof plan and allow flexibility to do something different if they’d like.
My husband and I were fortunate enough to be able to pay off our mortgage early. We were both still working, and took the payment amount that we had been using to pay off our mortgage faster and we put it straight into investments. We were able to retire early because of almost 7 years of putting away what would have been our mortgage payment as well as maxing out our 401K/403B plans. Thankfully we were taught by both of our parents the value of living within our means. Thank you for your advice. I know it will help people. we are interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
I live in the south western part of US and we see a lot of retirees and Snowbirds. We’ve seen a lot of people living almost solely on Social Security and they can really find themselves in a pickle. When one of them passes, all of a sudden their income cuts nearly in half, leaving them in an impoverished situation. With many in our society choosing to not have children or living alone I suspect that number wilt increase significantly in 30/40 years.
Shockingly, the number one group in America at the highest risk for suicide are men age 80+.
Good video!
The saving and investing is super dynamic with lots of data to analyse.
The retirement spending on the other hand is static with no data. This makes no sense!
Very useful and interesting. Thank you.
Quintuple is 5 times the original amount, not 4 times.
First, this is probably the best discussion of spending, inflation, and expected growth. It's both much simpler and in other ways more complex because you don't know when you'll die and you don't know what the economy will do.
With that said, retirement spending in the first 5-10 years is higher than your working years. Just a fact. And of course, when you hit 73, most people have no idea the government forces you to take a significant chunk out of your 401K/Roth and then you'll jump to a higher tax bracket. Might as well take it out sooner and spend it when you are healthy enough to enjoy your savings.
One quibble with your advice. 8% _compounded_ returns don't hold up over time. You need to do a Monte Carlo simulation (and I know you don't like them) based on past history to get an accurate understanding of growth in your portfolio. That model is generally a closely guarded secret for most financial advisors, especially if they're accurate! ;)
Yeah, the 4% rule follows extremely specific investment allocation, and distribution method. It was never meant to be a retirement model for actual use.
As a tool for someone like me who is a long ways away to have a rule of thumb to project future needs. But boots on the ground actual retirement will be base inelastic costs, and optional costs. When things go well the optional costs stay high, and when things are low the optional costs cut dramatically. That dynamic capacity to cut and raise costs make reality harder to guess and track, but it's also why so many people are able to retire even when they do run out of money.
4% rule depends on your interpretation. If you calculate 4% of your starting wealth, fix that amount and inflate it at say 3%RPI, that's one trajectory that rarely fails. But if you spend 4% of whatever your wealth is each year, that gives you spending which increases by say 8% pa, but probably will run out...in 25 years.
Retired six years ago at 55 with $200K. Still have a mortgage, car payment, and sending my son to college. No problems.
I had initially planned to retire at 62, work part-time, and save money, but the impact of high prices on various goods and services has significantly disrupted my retirement plan. I'm worried about whether those who experienced the 2008 financial crisis had it easier than I currently am. The volatility of the stock market is a concern as my income has decreased, and I fear that I won't be able to contribute as much as before, potentially jeopardizing my retirement savings.
In short.. If you were smart enough to save up a sizable nest egg, more than likely you are going to be able to get through retirement without spending all your money. You are not stupid. You have proven you are practical.
I drive more in retirement , I think while working my commute was 30 miles each way with services I needed near that route (so buy groceries after work etc). But I moved to a smaller rural ish town and while it has some services like grocery , and home improvement stores within 6 or so miles each way. Mall like big box shopping is a bit sparse, advanced medical care which used to be sort of nearby is now 1 or 2 hours away. I find my self driving 500 miles once or twice a month to visit aging relatives etc. And I tend to like getting some windshield time to visit other nearby towns, festivals and just blow off some time and gain some anonymity. for a few minutes (small town life , everybody knows your business, wonders why you're pulling out of your driveway etc).. .. .. So my driving probably has increased as has the cost of fuel , repairs etc . House is paid off but insurance and taxes have gone up, as have groceries and pretty much anything else, new roof more than doubled, lawn care way up etc.. Even my water bill has doubled with less usage as it's calculated differently and has a huge amount of added fees that keep going up .. I could stop using water entirely and my bill will still rise. Electricity is up, nat gas is up, trash services up. I wish someone would have warned me about near hyper inflation and hidden fees and taxes that would be coming at that point I probably would have worked another year or two which would have put me into the C19 2020-21 market drop , where out of uncertainty I probably would have worked at a higher pay rate due to being an essential business...and I would have been contributing to my 401 or stock purchases in a down market so all the funds and raw stock stuff would have been on sale and jumped a few years in 2024. . Rather 2 years after I retired I hit severe sequence of return failure due to c19 crushing the market., everyone printing money hand over fist and causing inflation that isn't really transitory.
Hyperinflation hahahaha, what we have is no where near hyperinflation, read some history
Please stop using “lie” when no one is deliberately lying! How about “errors” or “mistakes” or “misconceptions”?
Correct. And what happens if the market crashes the year after you retire?
Agree, we don't need a boogiman to be persuaded, it actually detracts from credibility.
I trade stocks and only use my yearly profits and don't touch the principal. Only had one bad year in 2008.
Great video. Thank you!!
Glad you liked it!
You can find the supporting spreadsheets here:
please make sure to download by clicking FILE - Make a Copy OR FILE - Download (XLSX)
docs.google.com/spreadsheets/d/1-f2MALEhwqJcNAojCIiVLODYsa6tKUEK_BcdCda97tM/edit?usp=drive_link
@@ThePeakFP Thanks! You can change the word “edit” near the end of this link to “copy” and it will automatically make a copy for the person who clicked the link. A very helpful tip!
great content thanks how do you construct the distribution rate bands
I'm aiming to have 10 million when I retire. Pretty much there now. Still have like 25 years to go.
i think an impediment is that people pick the magic dollar amount and calculate the age from that, rather than the opposite - picking the age and whatever dollars you have, you have. Yes, it may be less than you’d hope, or less than you are used to spending while working. If you can’t embrace that, then don’t retire. Live within those means and enjoy it.
I think to model realistic curves one needs to
(1) include volatility in the return projections. No investment returns a fixed return every year. A portfolio may never recover from minus 20-30% for a few years, depending upon what years in the process those 15, 20, 30% downturns occur. Thus, a straight 7 or 8% return line will provide overly optimistic projections.
(2) include Long Term Care. Instead of 4% withdrawals annually, what does the retirement financial plan look like if withdrawals were 4% annually until age 79, but then jumps to 12% withdrawals to pay for a nursing home plus medical for the next eight years? Maybe it will be OK, maybe not.
If you're living well, and buying whatever you want, why would you want to spend more? Many people simply have more income in retirement than they can use.
My housing, transportation, and food expenses actually went up after I retired.
What about when you are covering for two people, as most are planning on retiring as a couple. The probablilty of two people outliving a pot of money is much higher than one person.
You make a good point
I was thinking of something similar - determine how much I’ll need plus SS at 70 and set that aside in a separate account that I don’t touch until 70 - and the rest is my budget to spend as I want until 70. 😊
I don't understand why do did not address mandatory distributions on the impact of those on savings. I think housing, transportation, and food is replaced by services like house cleaning, law maintenance, pet care/boarding, food delivery plans. Also, we need to figure out the impact of inflation, I think your table should be 6% inflation. I think it will be unprecedented in the next 10 years. Also, I think the withdrawal rate should consider market performance, dumb to put it on a fixed rate, 100% agree.
I have some issues with some of the stuff he’s saying. For instance:
Although I don’t think the 4% rule is a realistic withdraw path because of changes in life and needs, his explanation of having the same principal after 17 or 18 years doesn’t mean much. Have the same principal doesn’t mean the same buying power. 20 years later with the same amount in principal with a 3% inflation would mean the principal is only worth a little over half the original amount.
And the first “lie”, he spoke about….i don’t know why someone couldn’t put in the software the changes that come along later in life. Most softwares will allow you to change withdraws or incomes later.
I’m glad he’s questioning the methods. But I’m not sure he’s right about some of his gripes. It’s all an understanding of what’s being computed. I agree everyone needs to know what what these “lies” really mean.
Lots to ruminate here. Just subscribed. Plenty to learn here.
My concern for our later years is that as we approach 90 its more likely that we'd need to move to assisted living or a nursing home. Those are very expensive and their costs go up by at least the rate of inflation if not faster.
Average length of long term care is around 2 years, with most needs less than 5 years. Just plan accordingly.
Also, when you are paying for Long Term Care in a facility, that means many of your other expenses will go down. You no longer will travel for leisure or even seeing relatives , no more dinning out in fancier restaurants, no need to pay for golf clubs membership, etc.
Cost of long term care varies greatly by state, something to consider if you are considering a move.
First lie: You need to hire a Financial Planner.
This is right up there with all hiring out stuff you don't want to do. Too fat? Hire a dietitian, keep eating crap and blame the dietitian. Can't walk up stairs? Hire a personal trainer and take 1 session.
For 99% of people asset management is pretty easy to understand. Doing it is the issue. What people need to a hire is a dude who comes to your house and kicks you in the nuts each month you blow your budget on crap. That could be effective.
It is hyper conservative. But that's allright for people with excess savings. Those people live rich lives on a small percentage of their income. But that's not most people. Great content!
I've kept much of my savings in cash for safety, but I'm unsure if it's right for retirement. Contemplating investing $100K in stocks, as I've heard investors can profit in tough times. Unsure about my next move
"Lies" is a strong word. "Misconceptions" feels more accurate.
Good video 👍
I'm so glad that all these examples have everyone retiring with $1 million. Is this the average amount people are retiring with? Let's give some examples with half that amount. Isn't it more realistic that way more people are retiring with $500,000?
That is a big issue with many of these types of videos, lots of assumptions that may not fit you such that completely different decisions should be made. Not only will the dollar amount vary, but so will the types of accounts the money is in. Some have all their money in an IRA/401K, some have Roths, some have a large retail brokerage accounts, some have rental properties that produce income, some have well funded annuities. Without considering all the variables for a particular person, the conclusions are rather meaningless for most people...unless they happen to be exactly like the example. And in answer to your question, most people don't even have $500K and are in serious trouble, especially if social security is cut which will happen if nothing is done, and neither of our political parties is talking about it seriously.
I know what the long term average return is on the funds my IRA is invested in, I take distributions that are 1% less than that. I'm young enough that I want my IRA to continue to grow a few more years.
I like the videos and appreciate all the work that went into them. But at 14:50 your spreadsheet has a discontinuity at year. 2030 where adjusted spending went down. I've seen these errors in various videos, yours and others. Such inaccuracies doesn't help my confidence. In my opinion, if you're going to show a spreadsheet with numbers, make sure the numbers are accurate
Excellent info. Thank you!
Thanks!
I would argue that the view you should pay off your home is not always correct. If you look at a curve over time, the actual cost of a fix rate mortgage effectively drops and taxes, insurance and repairs increase. The mortgage leverages others peoples money and you sell later.
I don’t see aged citizens complain about withdrawals on 401k. And I’ve heard of how profitable it’s service can be.
Quintuple = 5 times (not 4)
The straight line inflation is fine. Having a little too much is never an issue. If it ends up meaning the client works an extra year so be it. Like you said they are free to adjust discretionary spending. Batting 1.000 is much better than adopting some arbitrary model that may leave you short. You are trying to fix a problem no one has to squeeze maybe one less year at best off working years? Too risky.
Some people want 100% rate of success and are willing to make significant financial tradeoffs for that (meaning spending much more conservatively), and some people actually want to spend more of their wealth but are simply afraid to do so because there are not good models out there showing how it can be done safely.
I hear that you would rather go for a higher probability of success and that is entirely your right! I wish you the best of luck about that, and I certainly have other videos on my channel - and will have others come out in the future - that will help with that.
How are peoples expenses so high if they own their home etc? My household expenses are far lower
I couldn't get my math to align with your spreadsheet percentages in the initial example. Also I can't understand the real difference between the probability of success vs the fixed withdrawal method, as one is looking forward with assumptions, and the other plans drawdowns based on a probability of success.
Your examples are with people who make more money than I have ever dreamed of. Not realistic for most of us.
I will not be able to "retire" in the classic sense. When I turn 70 in 2032, I will file for my social security benefits, and keep on working my full time job. I will have two incomes, but only have to work one job. The irony is that I will save far more money for classic retirement AFTER my official retirement, than before. I have already verified this plan with my accountant and my employer. My research indicates there will be no problem with the SSA on this. In a few more years when the housing market has calmed down, I will buy a house, and when that is paid off, then I will consider whether I can afford not to have a job. Beyond the money, I still need the structure and validation of a job. I am not the type of person who wants to run around on a bunch of trips. Sipping a long-island ice tea on a beach while watching the sun set would bore me to death in less than a week. I have hobbies, but they can be done in my local metropolitan area(Philadelphia, PA), mostly at home. Finally, there is the Singularity, which most people don't take very seriously yet, but should. When the AI and humans merge, initially through a neural link and implants, but later more substantially, the prospect of essentially living for ever will be a real possibility. No matter how much I save, it won't last a trillion years. So when those of us who are still around in 2045(www.msn.com/en-us/news/technology/a-scientist-says-humans-will-reach-the-singularity-within-21-years/ar-AA1osINN) realize I'm not being ridiculous, they will ask one of the very important existential questions: What does it mean to retire?