Here's Why the 5 Years Before Retirement Are So Important
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- เผยแพร่เมื่อ 28 พ.ค. 2024
- People often look past the last few years before retirement. But those years are crucial to the development of your successful retirement plan.
James explains the reasons why these years are crucial to planning for your retirement both financially and personally.
In reason #1, you'll see what important lesson we can learn from Warren Buffet on compound interest.
Learn the tips & strategies to get the most out of life with your money.
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⏱Video Chapters⏱
0:00 Introduction
0:30 Reason 1: Compound interest
1:33 Example using compound interest
3:13 Reason 2: Understand the cost of retirement
4:34 Reason 3: Paying for big things upfront
5:27 Reason 4: Opportunity to take care of medical procedures
6:10 Reason 5: Chance to dream
8:20 Outro
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39 and I’m obsessed with retirement
Hang in there! I am 3 years from early retirement and I've been watching these videos every day 😁
59 and me, too
Don't be....
Enjoy your relative youth!
Do be Smart and plan and geek out with investment calculators and YT videos but please, enjoy every day!
Last 5 years
Is consolidate and reduce risks
Do not lose the cart
Stay healthy
Pay all your taxes
Stress reduction
Get a new interest in life to replace your career - not just travelling and eating or spend time with family- they get bored with you
Those last 5 years could come sooner than we think, such as being laid off from work. Be prepared!
Unemployment rate is 3.8% today
You don't understand that in my last 5 years as a 60 year old I am struggling to stay employed because companies clean out out the old people, they eliminate whole departments and hire young people for half of what we were making. So the last 5 years are brutal for most corporate people. And I worked for the richest man in the world. There's a reason he is that rich.
Corning laid off my brother in law at his 29th year at the company. Fucking pricks.
Unemployment rate is 3.8% today
This person is talking about his personal situation and you're quoting him a general statistic. What was the point of that?
@repriser9876
Are you kidding, you make me sick. Know one hires older people, God is going to make you learn how selfish your comment is. That is like telling a women who is beaten up by her husband that it's her fault and she can't leave because she has several children and she has no money.
@@repriser9876 I work in a company with all old people at the top. They see my 59-year-old butt as a young guy.
James is so much wiser than his age. I wish I had known him 10 or 15 years ago (I am now 76), especially that I used to live less than 10 miles from his office at the time!
Have 13 more years to retirement, and I probably drive my wife crazy talking about what we need to do/are doing, to prepare. #1 is getting house paid off by that date. #2, maximizing the employer contribution/match and each pay raise we get, we take that % and send it to our retirement account. #3 - all debts paid off and go cash #4 - trying to increase our cash assets so that we have enough for a major house repair, ie A/C, roof, windows, carpets, etc. While tomorrow is always an unknown, studies show that those who plan for how they deal with disaster are the ones who live the longest. We also started a diet to increase our health as well. And finally, I'm working on a notebook of notes for my wife should something happen to me, that she can open that notebook, and find where the passwords are stored encrypted, where all the accounts are and access to them, etc, so she doesn't have to search for insurance, social security processes, etc.
Love it! We’re on a similar path. Be sure to put the notebook in a safe (if actually writing information down)
Looks like you got the plan down!
I’m 49, I’m soooo ready. I’ve worked 2 to 3 jobs at a time for many years (worked healthcare for decades, got furloughed for the first part of 2020, then worked at some of the best and worst facilities during 2020-2024 and I am done) i have had roommates helping pay expenses for most of my life and I and now I am ready to be done with it all. I am 100% confident that I can figure out what to do with my time.
This is exactly what happened to my wife and I. We went from years of working, saving, investing and wondering if we’d have enough to retire- to now knowing that we will pretty much never run out of money. This allowed us to retire last year at the age of 60. Thanks for your great videos James!
That's amazing! Congratulations.
This is very accurate in my case. I'm 71 and still working. The past five years my net worth doubled even though that is still well under $500k. Over my career I made very little from interest and practically none from compound interest due to being too conservative in investing. However because of a good job I was able to work from home at good pay with zero work expenses, save much more, and max out my Social Security by not taking that until 70.
Out of curiosity, what work from home job did you have?
People are stuck on the
"4% Rule" but if you've yet to dip into your nestegg, maybe this can help:
>If an individual retires at age 65, the Safe withdrawal is typically 5% for a single life and 4½% on a joint and survivor basis;
The percentages go up to 6% and 5½% if the retirement age is 70.<
So 6% of 400k is 24K annually and that includes an annual adjustment for inflation...
Ie: An extra 2K/Month for the rest of your life....
Hope that helps!
@@rosig.1304 Gravedigger?
Nice job. One thing I’d also suggest is to consider how you’ll age in your home. Look at barriers and hazards, and if remodeling or updating consider how to mitigate them with universal design and so forth.
I've been retired 22 years and I started to save when I started work. The principles you talk about are true. The eighth wonder of the world is power of compound interest. But our biggest expenses were paying for my wife to enter a nursing home for the last 3 years. She had MS for 26 years. The nursing home costs were $1000 per week. She has now passed and I can start to do a little travel.
I did the same thing, saving since I was 10 years old. Had to leave work due to a shytty work place environment. Luckily, have a good pension.
RIP！lots of respect for your sacrifice and hopefully you can enjoy some golden years
Yes, he's right
Work till 65 pay taxes and bills and then retire at 65 and die at 68.
Statistics show that people who retire at or after 65 only live another 5 years to enjoy pension, whereas people who retire at 55 live till 80s and 90s.
I believe the best age to retire is when you think it's enough.
My grandfather and stepfather retired at age 62 and both died only months later. My father in law retired at 55 and lived until 83....
Please point out these statistics... Comment seems jaded.
I’m turning 55 next month. I will be depending on my pension when I retire. Currently have 34 years in the pension system. I am tier 1, which is 55 years old and 25 years of service. 23 of those years are with an employer that pays for my medical after 25 years of employment. That being said, I will be retiring in 2026 at age 57! Definitely planning on doing something, part time, to keep myself busy. 😎
"Compound interest is the 8th wonder of the world." - Albert Einstein. People tell you about it but you never believe it until you start to see it really take hold of your money, at times it's almost unreal to watch your money actually grow by the day once compound interest start to work it's magic. If you're still early in the game, just hang in there and keep going , trust me good things are coming!
I'm in the 4-9 year window to Retire by full retirement age . My steps to prepare are living debt free including no mortgage no auto loans. Lessening expense as in NEM 2.0 Solar last year + whole house fan adder to secure electrical costs . Looking at my long term investments and taking the initial buy in of some higher fee/lower performance mutuals out to then fund a very low fee index SP500 fund with that money yearly to hopefully double my pretty good retirement by the time I do retire. Lots of what this video states is real, you simply have more money and options than you did when younger. I wish everyone luck in building that retirement nest egg. Do some Roth conversions when the Market is down to ride it back up tax free and to get athe RMDs under control with a 5yr+ Roth
I do plan to get a new vehicle one day and pay mostly cash payoff after the first month financed to get a better deal. I also plan to do some Kitchen renovation and fence work with the extra money coming in now. That should keep my wife happy. Perhaps a battery and solar car charge one day. Glad you mentioned take on some bigger projects before retirement.
James, this video is spot on coming from someone who just turned 60 and planning on retiring at 65.
Your videos are fantastic. Thank you for the great advice.
Very well thought out. Perhaps what would be helpful is a 5 year checklist.
This video is spot on. Very much appreciated for making it.
One of the most well-rounded and considered pieces I have seen on retirement. Thanks so much for sharing this - it has definitely changed my perspective!
Let is what we are doing. So true to every point 😂. Thank you 🙏!
This Video is so Enlightened 👍❤👍
All of this is so true. Great points.
totally agree with these talking points.
This is very good content, thank you.
The problem with number one and compounding it's a double edged sword
If you're aggressive and the worst happens you may have to retire later or with less
And if you're conservative/balanced in your investment you won't be able to be able to take advantage of as much compounding
Yes I remember 2008
sad side of compounding is that it applies to inflation too.
Diversity is helpful too!
Having 100% in stocks can be tough!
We have about 66% in Real Estate and 33% in stocks!
The Real Estate is Rental Houses and Rents haven’t gone down in a long time! Rents continue to go up nearly 10% per year!
So glad you mentioned this. It's very risky trying to double a portfolio in 5 years. If the market dumps someone could be stuck for very long time.
@@kbrabson My feeling about this is that the banksters design the ups and downs of the market in order to claw back what regular people have worked so hard for.
Such wisdom from such a young man.
It’s always good to have a financial plan. I work with a licensed planner and fixed-income strategist in LA. The fixed income portion of your portfolio won’t simply serve as a buffer to the volatility of the equity portion of your portfolio, but will provide legitimate income
Love your videos!
I do have a question if you have time, Where did your passion for finance/ retirement planning come from?
I’m 53 and plan to retire in 5 years. I‘ve only allowed myself the opportunity to dream about my retirement in the last 3 months or so but I must say it’s brought a renewed energy to my life that I haven’t had in ages! Thank you for your advice, I now I have a new focus; steps 3, 4, and 5!
Thanks for watching, I'm glad it's been helpful. It's an exciting time of life, enjoy!
You can read more about my background on our website here: www.rootfinancialpartners.com/about
The thought of retirement makes me cry. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you weren't to blame for.it's especially difficult for people who are retired.
Great video.
I state that our younger generation can become millionaires but it is going to need your assistance going forward.
Blessings.
Awesome video, I’m 58 and planning to retire at 67. I have a really great next-egg. I’ve know about compounding interest, but had no idea this is when it really starts to payoff. I’m going to keep putting away the maximum. I Love the Warren Buffett example. Thanks for the wonderful information.
it's been happening the whole time, but you notice more toward the end. When the compounding each year far exceeds your contributions that year, it is pretty exciting.
Hello From Finland . I am Retired in Helsinki , can go 55 age. Now I am 58 age. Money & Business is not my Time anymore ! Retired in Finland is ok !
I have a Plan , is Retired in Finland & Thailand about 50 /. 50 .
This is good idea !
Thank you for good Video & all the Best to You !
Retired 4 You.
Great list!
This is great 👍
Brilliant analysis ❤
Thumbs up!! I always watch and listen to you cus im working on my retirement savings. Thanks for your vid
Very smart young man. I'm working but considering trying to build rental income for retirement. I was a stay at home mom on rental income. Gave the homes to the kids but want to do it again.
That’s what got me retirement. Selling my big house and paying off my rentals. Just need to wait two years for my last kid to graduate and then I can buy a boat and sail off to the Caribbean. Rentals have worked well for me because I am terrible at saving.
I really enjoy your recommendations are you a Dave Ramsey recommend?
Brilliant video! Thanks!
I’m glad you liked it. Thanks for watching!
I'm 49 and have been thinking about retirement planning a lot for the last 5 years. I just don't want to put my head in the sand and leave anything to chance.
Great message.
Grammar Point: Common error in the use of “there’s”. “There’s many reasons…”. Correct: “There are many reasons…”
So you're a teacher.... You don't need retirement advice too much... Other than watch what you spend just like anybody else despite benefits. Lol
Interesting you say that .My state pension system calculates your pension, based on your 5 highest years.
Really, really wish you would feature single investors and retirees. There are massive numbers of wealthy singles out there that need help and this number only grows as they get older and wealthier. Also, a tiny fraction of folks have pensions and I notice a very high proportion of your examples feature those with pensions.
For your young age, you are very wise and money savvy! I listen to many financial gurus but this video taught me something new nobody has covered before. Great info!
Thank you
Because he has emotional intelligence (EQ) along with the financial knowledge. Not just a salesman. Run for office, James!
An assumption of 8% return the 5 years before retirement? To get that sort of return, they'd still need to be 70-100% in equities. That's too risky for me given sequence of return risk + no pension. I've been tbrough 2008.
Also, can't assume employer match/vesting is that good or, that 401(k) account will have good fund choices and low fees/expenses.
My pension fund has almost doubled every 5 years since 2008. I did switch the funds to high risk.
Great advice.
Great advice
Is it better to sell real estate to not have a mortgage in retirement, or consider holding real estate for the equity e.g., use of a reverse mortgage for supplemental income? Thank you for your excellent content!
I wish I knew all this beforehand since I will reach retirement age in a few months.
This video is made for a very exclusive audience. He assumes everyone had a steady career and steady career growth. That is so not true of the average person in this country.
Done with mortgage. Done with car loan. No debts. Scared of investing. Very conservative. What next? Yes, still work FT at 59.
Nice 😊
Was just wondering what you think about life insurance when you get nearer to retirement. The premium is so high but I have been paying it for so many years. Is it better to just save that capital?
The link to the next video at the end doesn’t work.
James…question. I’m 55, and work for the VA hospital. I plan to retire at 60. I’ll have 33 years of federal service including my military time. Should I be less aggressive with my tsp the last two or 3 years or keep it in C and S fund currently. Thanks and I subscribed.
Always enjoy watching your videos James 🥰 But I’m a bit confused about one thing. The premise of this video is that you can astronomically grow your investments in the last 5 yrs of retirement. But aren’t those last 5 years also the time that you should invest less aggressively? Conservative investments are not likely to give you 8% return like you suggested in your video. I would have loved it if this video had addressed that aspect of investing for retirement 🙂
Your time frame for investing 5 years before retirement is probably a very long time. When you retire, you'll only need a tiny fraction of the total to pay for expenses. The rest stays invested, probably for decades. If you shift a lot of money around very conservatively so early it's probably overkill.
a tiny fraction in that first year*
No edits for this filthy phone poster
As long as you have enough cash for 4-5 years of living expenses, you can stay fully invested in the stock market.
Got it. But if you're in a stressful job it may be time to continue working a job but not that stressful job. Of course that depends on your life situation. I am single, healthy, no debt and don't need to be the richest person in the graveyard.
What about number 1 in relation to what happened in 2008?
Well explained 😊
Great channel as I approach retirement. Those guns are distracting dude!
If you have a traditional IRA or 401k you need to open a Roth IRA and at least put a little money in it to ensure you will be able to do Roth conversions later in retirement.
Very interesting mostly coming from a very young good looking man❤
I thought for sure that sequence of return risk would be on this list. The last 5 working years and first 5 retirement years are when you are most vulnerable to a major downturn in the market. Maximizing your savings during your last 5 working years makes sense. Investing very aggressively to try to double your nest egg in this time does not make sense. Don't run this risk of losing the money you will need to live on in your first 5 years of retirement.
Another insightful, thought-provoking video, James. Thank you!
I am late to the party as I plan on retiring at age 58 in 4years and 7 months. Mortgage free in a year. I hope to have around 450k in my 401k by then and my retirement check should be around 5k. I have tried to plan ahead and purchased solar outright so no bill there and free well water. Being a single household earner what would you recommend I do with my 401k upon retirement as once I leave my employer I will be faced with this decision? Convert to a Roth IRA? My bills will be very low once the mortgage is finished and I will have income to use for investments in the market. As I get closer to retirement these things weigh heavy on my mind constantly as I want to be prepared. Thanks and nice video 👍🏻
Wish I could be as optimistic as this young man. I guess as long as the government can keep exponentially creating debt we are good?
I am switching homes. I have to move out of the city. So I am building a zero energy conservative house then selling this one that is worth a little more. If I wait to officially retire? I wont do it. Its NOW! My plan just became CRYSTAL the 5-7 view is TRUTH! Thank you for this vid! ❤
Wait, I thought the general rule of 72 in Economics says at X% rate it takes Y years to double. So, if 8% return, it would be more like 9 years (72/8) not 5 years. For doubling in 5 years it would be 72/5 or something like 14-15% return right? What am I missing?
Your calculations are correct.
You are continuing to contribute during those 5 years.
I am 59 retiring at 62:
#1. I'll believe it when I believe it.
#2. $3,500.00 per month in a gem of a city in South America.
#3. No way! Still driving the 2012 and 2017 cars. No purchases. Pedal to the metal saving!
#4. Colonoscopy in the can (no pun intended) last month.
#5. Gem of a city in South America!!
Love this channel that I just found. Can you do a video on how Federal government pension, which has COLA, influences retirement. I"m pretty sure I'm good but would love more info. Lot of Federal and State workers out here. Thanks. I'm assuming having $40,000 pension is equivalent to having $1,000,000 in the bank...which I can't access, sort of a 4% rule without access to the principal. Is this similar to an annuity or different? Anywho, just thought I would ask and see. Cheers.
This assumes capitalist markets don't tank. Since 12/31/2021 my 403b has not grown a penny. It's treaded water while my employer and I pour money in and the markets continue to go sideways. And we haven't even hit the recession *everyone* is saying will happen soon.
The best time to invest is when the market is down so count yourself fortunate.
I would argue retirement planning begins the minute you receive money via inheritance, paycheck, etc. especially if one is an average income earner.
Can you tell us where to get 8% interest rate?
How about +8% dividends? Ticker ARCC, JEPI, PFLT, RIO, RVT, SCM
Is it better or worse to earn more 5 years prior to retirement in terms of ss benefits?
I want to spend in Spain, enjoying the sun, Sea, sangria
Last 5 years, stack as much cash as possible. Stop investing . Your investments should already be growing on their own. Stack cash so you dont have to draw from investments in a down Market, and to pay for unexpected emergencies. Have several years of living expenses.
And maybe do some Roth conversions too
Enjoy your videos. However, James, didn't you make a mistake by claiming a doubling of money in 5 years with an interest rate of 8%? The rule of 72 indicates that it would take 9 years to double money assuming an 8% rate. Now, your scenario could be possible if you are making large contributions, but those numbers seem a little misleading unless I'm missing something?
Work alot when your young and save
Overall I enjoy your presentations, however your presentation of item 1 is ONE sided as you only look at the sunny side (positive 8% returns for those 5 years). You should also present the caution that is needed because one could also be in a -8% downward spiral that could devastate that nest egg one has built for 40 years.
Warren Buffett became a millionaire when he was 32. I think that was in the 1950s. See his Wikipedia page and multiple other sources. Adjusted for inflation this is the equivalent of $11 million in 2023. So, he grew that over 58 years to billions.
"If you get an 8% growth rate" feels like a gigantic wish right now while I'm fussing around with tbills, ibonds etc trying to keep asset value with inflation!
I’m listening to retirement advice from a someone who looks like he just graduated from high school. Good advice though.
Kid I don’t try inn anyone is worried about what they will do when they retire.
Number one goal: never be around another human again unless I really like them such as close friend or family.
Never again be forced to associate with any human just to make a living.
So hopefully find a job to work from home then just enjoy the best of both worlds. No humans and making money
Rule of 72!
Multiply the # of years x Interest that your getting!
If:
For 7 years you earn about 10%!
Using the Rule of thumb above: 7x10=70!
(No, it’s not 72 but, remember this is a rule of thumb!)
(Please note, this doesn’t account for the money you save or any inflation!)
But, I think you should make this a Last 7-years leading to retirement!
I’m 43 now.. I’m already preparing to retire by 57
I’m 56 have $31,000 in 401k and contribute 18%
Good insight. I’m 60 and want to retire at 65. I owe about $130k on my home. Should I stop contributing to my 401k in order to pay the house off by age 65? Or continue with my 401k contributions? Thx.
keep contributing to the 401 k. look at what your 401k is making per year and what your mortgage interest rate is. For example: I work for a large creditu union, we now borrow 200 million a month at around 5% to lend it out at higher than that on mortgages and vehicle loans, etc. to make money for the members. The money you have borrowed for your mortgage may be at a much lower rate than what you are making in your 401 k. This difference is known as the Spead.
The downfall of Silicon Valley Bank has caused significant damage to the worldwide financial markets. As a result, investors are scrambling to revise their projections for interest rate increases and hastily selling off bank stocks across the board. As someone who has invested 200k in stocks, I find myself at a pivotal moment, wondering whether it's wise to cash out my depreciating portfolio. What strategies should I adopt to make the most of this bearish market?
In my opinion, cashing out now would be stupid - buy low sell high is the old adage. If you cash out now you have guaranteed a loss. I'm in a similar boat and rather than cash out I've increased my investments coz the stocks are cheaper. You should seek financial advice tbh - just make sure to ignore thee spambots that will inevitably come on here.
A good year almost always follows a bad year. 2022 was a bad year. There are always the ridiculous fear mongering naysayers, even during years the market is climbing. I just ignore them.
If you are spooked about the current market your allocation may not match your risk tolerance. Assessing your risk capacity would require a deep dive into your situation. You may want to invest in a plan with a certified financial planner (CFP). - Make sure it’s a CFP and not a financial salesman.
I disagree with #4. In fact, you should wait until you leave your employer coverage for medical procedures because the best COVERAGES are Medicare and Medicare Advantage plans!
How is your 401k compounding? You can't buy new shares with the profit you make so i didn't understand this
I’ve never had a 401k that didn’t automatically reinvest dividends and interest. Where is that going to go? Just sit in cash? That wouldn’t make sense. They want to charge you more transaction fees to reinvest.
Problem: The S&P500 has been flat over the last 2 years. Not even pension funds assume an 8% growth rate when the real economy is only growing 2-4% a year. You are assuming you are fully invested in equities when a lot of people at late in their career shift more to bonds.
It doesn't help when a stay-at-home spouse of 33 years decides she must have a divorce from their nearly 64-yr old mate.
I am very sorry to read this. I hope you'll be OK. Take care.
“Let’s assume that you have two spouses”. Ummm, I live in Illinois, not Utah 😆
I enjoy these videos but how can a 15 year old know this much about retirement?
Thank you for this! I am 58yo and had planned on going part time at 60yo and pull some from my retirement funds. I have been thinking more and more about staying full time until 65yo. The idea of continuing to let my money grow and compound is another reason to keep working. I recently changed jobs and can see myself easily staying her 6.5 more years and benefit from the compounding. Thank you for the insight and motivation! Love your channel!
You can also have less than the $750000 if the market goes down. No guarantee life is not always perfect
So what you're saying, if any are all those supposes are ? Let's suppose you do not have double income coming in. Let's suppose you're not able to max out your 401 K contribution. And let's suppose that your boss is not matching it. Well what about for all the supposes that don't exist are we screwed 3:51
01:56 assume you have two spouses??? I aint ever gonna be able to retire!
He looks like he's LDS.
What happens if 2008 happens? Are we doubled?