My situation is unique to me. I haven't had debt since I was in my late 40s. That doesn't mean my expenses are lower. It just means I am paying cash which means I am pulling from savings to replace a vehicle or repair my house. For me it is better to look at my 5 year average spending to determine what I need in retirement.
All financial situations are unique, but to generalize a bit. Wouldn't your average expenses be lower, especially over time, because you're paying cash: 1. You are not paying interest (For example a $10,000 dollar purchase costs you 10k, but for the financee that same 10k purchase may wind up costing the 12.5k in the end. 2. You are generally buying less expensive things (such as a car) than someone that would finance.
@ajb541 , possibly, but being debt free doesn't mean you won't have expenses. It just means you aren't burdened by debt. If your income drops you will have to make the hard choices but you are not in jeopardy of losing something because you can't make the payments. Being debt free does mean you now have to be diligent and make payments to yourself so you have the cash for repairs and replacement. Some people see being debt free as a way to spend money in other ways instead of saving more.
@@Dave-sw2dm Agreed, my point definitely wasn't zero debt = zero expenses... it was more to your points that you are better leveraged in a loss of income scenario and that there is more cash available for investing and saving.
21.3% of Americans are happily and comfortably retired and only 3.2% have $1M+ The real retirement goal is to have very little, or better yet NO, debt going into retirement.
@@jerrypedrick6206 , but those are costs. Whether you save up and pay cash, or take out a loan, you are still spending money. Being debt free doesn't mean you won't have expenses in retirement.
Hey Tom, Great video my friend. I think the important thing to remember in retirement is doing something you enjoy! You know, like not working when you have to, rather working when you want to! Assume you have your mortgage paid off, no car payment & no credit card or other debt, your costs to live are drastically reduced. Your biggest concern (cost) will be health care. We never know what day will be our last, so why not retire as early as possible? Find an inexpensive hobby, maybe even one that lets you earn a little side income. Perhaps enough to cover health care costs? Just losing the stress of 9 - 5 ( or 4-4 for me! ) will undoubtedly improve this journey we call life :)
How do you determine how much you need to retire if you plan to retire before collecting social security? How does this scenario play out someone retires at 60 years old but does not plan to to collect social security until 70? The way I would calculate this would be to determine annual expenses and initial assets at age 60, take 4% of initial assets (hopefully this number covers yearly expenses). I would include how much the initial assets are expected to grow for the 10 years until SS kicks in (assume 6% increase per year). Then once SS kicks in I would determine how much income can be expected based on how much the initial assets grew in the 10 years, plus how much is expected from SS at age 70. Does this sound about right?
@@donnymac575 You’re thinking about it the right way. The difficult part is factoring in how inflation and taxes will impact your plan. Over 10 years your annual expenses could increase higher than expected and taxes on withdrawals can reduce how far your savings can stretch. Planning for healthcare costs will be important too. Hope that helps!
I retired right after my 61st birthday. I am 65 now and I’m waiting for Social Security until age 70. I was told to have 8 times my final salary at age 62. But of course I retired before then . And I am married and my wife has retirement accounts too. So 8 times my final salary would have been about $350,000 . I had twice that amount but spent $100,000 the first year paying off all debts. Now , I withdraw from a bank traditional IRA and an investment traditional IRA and supplement it with distributions from Roth IRA. We are spending more than I thought we would in these first few years but we have found that our spending decreases each year despite inflation. By the time I draw Social Security, it should cover all of our living expenses and we can use our investments for travels and discretionary spending.
@@johnscott2746 Thank you for sharing your actual experience and insight. You mention an important point about initially spending a lot in the beginning and then spending starts to decrease. This is common and important. In the beginning is the Go-Go years then Slow-Go years and finally No-Go years. Retirement spending often looks like a smile with costs coming back up down the line for healthcare. Nice work planning ahead!
I’m 62. I get $78K per year from my pension and SS. I have a small 401K. I have no debt, except for my $1,600 monthly mortgage. I live in Texas where the cost of living is slightly below average. I’m doing ok. If I get a part time job, I’ll be over $100K per year.
@@Alan-lv9rw The pension/social security combo makes a huge difference for many who still have access to a pension. Good for you and thanks for watching 👍
You mention the key thing that most planners avoid like the plague...living on a budget. Only people who live on a budget have control over their money, and only people who have control over their money can make informed decisions about retiring. Once you have a budget, such that you're controlling what your money does, the next step is eliminating debt, especially "bad" debt. The third step is investing in assets that appreciate in value, while avoiding going back into debt. People who do these three things understand their financial situation and are highly likely to enjoy a dignified retirement.
I'll be getting my VA disability 4k a month plus a police pension of 3.6k a month I'm currently 58. Plan on retiring at 60. Also will be putting in for my SSDI at 60 as well. If that don't come trough before 62 I'll be drawing SS then 2.4k a month. Paying off all debt before retiring except house and two cars. At 62 I should be bringing in 10k a month and enjoying what time I have left on this earth.
I watch alot of retirement videos. I want to know the maximum amount of money I can spend a year. I will then back into my living arrangements and retirement costs. All these variables is mind numbing. A good financial planner just needs to show people how much is the maximum we can spend. Just my opinion.
I think the US will go bankrupt. My wife and I have 80 years combined work history and paid into the system all our working lives. We EXPECT to get something out of it, but it appears that immigrants who never paid into the system will get first priortiy.
“Down to the banana republics Down to the tropical sun Go the newly retired Americans Hoping this one is the one Spending their Social Security on a bottle of rum and a line So can I rent a one bedroom Or Buy some tequila and a lime…”
All I can say is........ inflation and I don't hear any mention of this in your video. You can bet that the cost of living will far exceed your example for those planning on retiring in the next 10 years. You can expect the cost of living to double. So much for that $5000/month SS income....by then it will need to be at least $7500/month if not more. Never forget that relying on SS to even be there past 2035 might be considered wishful thinking. That's why investment planners say you need to have a target of ten times your income by retirement age. I am not a financial planner nor an expert, but I do have common sense. I am turning 60 this month and I am far from that $1 million dollar mark and no I don't sleep well at night. My point is lowering a person's target for retirement is not a good thing. You should always aim higher and know that while you might not achieve that goal you will be close enough.
@@tdkz72 thank you for sharing your thoughts and I completely agree! We should all aim higher to account for inflation. My goal in the video was to encourage you to think differently about how much to save. Rather than focus on an arbitrary number, focus on your specific retirement and what those specific expenses could look like for you. There’s an interesting article based on real data by Andrew Biggs titled You Don’t Need To Be a Millionaire to Retire. The results were among seniors with 50k - 100k in savings 86% were doing ok. Of course we should all aim much higher than that but don’t forget to plan for what specifically brings you happiness in life.
@@mikehamack6347 depends when you retire. At my age it will be another 25 years. I'll definitely need at least $3M, especially since there will be no social security. Please explain to me how it could possibly be less. I'll wait.
I sure would like a video showing real examples, well laid out in Excel, showing monthly income sources, and then how the taxes on each one and the whole are calculated. Otherwise, for me, it's a lot of words.
My situation is unique to me. I haven't had debt since I was in my late 40s. That doesn't mean my expenses are lower. It just means I am paying cash which means I am pulling from savings to replace a vehicle or repair my house. For me it is better to look at my 5 year average spending to determine what I need in retirement.
All financial situations are unique, but to generalize a bit. Wouldn't your average expenses be lower, especially over time, because you're paying cash: 1. You are not paying interest (For example a $10,000 dollar purchase costs you 10k, but for the financee that same 10k purchase may wind up costing the 12.5k in the end. 2. You are generally buying less expensive things (such as a car) than someone that would finance.
@ajb541 , possibly, but being debt free doesn't mean you won't have expenses. It just means you aren't burdened by debt. If your income drops you will have to make the hard choices but you are not in jeopardy of losing something because you can't make the payments. Being debt free does mean you now have to be diligent and make payments to yourself so you have the cash for repairs and replacement. Some people see being debt free as a way to spend money in other ways instead of saving more.
@@Dave-sw2dm Agreed, my point definitely wasn't zero debt = zero expenses... it was more to your points that you are better leveraged in a loss of income scenario and that there is more cash available for investing and saving.
21.3% of Americans are happily and comfortably retired and only 3.2% have $1M+ The real retirement goal is to have very little, or better yet NO, debt going into retirement.
No debt is great, but are you going to replace a car over your retirement? Make repairs to your home? Etc.
Absolutely right. Zero debt is the key
@@Dave-sw2dmare you gonna save money leading up to retirement? If you did then you can buy a car and fix up your home. It’s not that complicated.
@@jerrypedrick6206 , but those are costs. Whether you save up and pay cash, or take out a loan, you are still spending money. Being debt free doesn't mean you won't have expenses in retirement.
Hey Tom,
Great video my friend. I think the important thing to remember in retirement is doing something you enjoy! You know, like not working when you have to, rather working when you want to! Assume you have your mortgage paid off, no car payment & no credit card or other debt, your costs to live are drastically reduced. Your biggest concern (cost) will be health care. We never know what day will be our last, so why not retire as early as possible? Find an inexpensive hobby, maybe even one that lets you earn a little side income. Perhaps enough to cover health care costs? Just losing the stress of 9 - 5 ( or 4-4 for me! ) will undoubtedly improve this journey we call life :)
@@RCInsiders 100%! If the numbers work, getting out of the 9-5 can change your life. Thanks for watching!
Perfectly said
How do you determine how much you need to retire if you plan to retire before collecting social security? How does this scenario play out someone retires at 60 years old but does not plan to to collect social security until 70? The way I would calculate this would be to determine annual expenses and initial assets at age 60, take 4% of initial assets (hopefully this number covers yearly expenses). I would include how much the initial assets are expected to grow for the 10 years until SS kicks in (assume 6% increase per year). Then once SS kicks in I would determine how much income can be expected based on how much the initial assets grew in the 10 years, plus how much is expected from SS at age 70. Does this sound about right?
@@donnymac575 You’re thinking about it the right way. The difficult part is factoring in how inflation and taxes will impact your plan.
Over 10 years your annual expenses could increase higher than expected and taxes on withdrawals can reduce how far your savings can stretch. Planning for healthcare costs will be important too. Hope that helps!
I retired right after my 61st birthday. I am 65 now and I’m waiting for Social Security until age 70. I was told to have 8 times my final salary at age 62. But of course I retired before then . And I am married and my wife has retirement accounts too. So 8 times my final salary would have been about $350,000 . I had twice that amount but spent $100,000 the first year paying off all debts. Now , I withdraw from a bank traditional IRA and an investment traditional IRA and supplement it with distributions from Roth IRA. We are spending more than I thought we would in these first few years but we have found that our spending decreases each year despite inflation. By the time I draw Social Security, it should cover all of our living expenses and we can use our investments for travels and discretionary spending.
@@johnscott2746 Thank you for sharing your actual experience and insight. You mention an important point about initially spending a lot in the beginning and then spending starts to decrease. This is common and important.
In the beginning is the Go-Go years then Slow-Go years and finally No-Go years. Retirement spending often looks like a smile with costs coming back up down the line for healthcare. Nice work planning ahead!
Fear is what keeps me working - and moving from a saving brain to a spending brain (how do I do that after 35+ years?)
I’m 62. I get $78K per year from my pension and SS. I have a small 401K. I have no debt, except for my $1,600 monthly mortgage. I live in Texas where the cost of living is slightly below average. I’m doing ok. If I get a part time job, I’ll be over $100K per year.
@@Alan-lv9rw The pension/social security combo makes a huge difference for many who still have access to a pension. Good for you and thanks for watching 👍
That is amazing!!!
My adviser said 25 times of annual spending expenses
No, you need about 3 million.
AND half that will disappear in taxes.
You mention the key thing that most planners avoid like the plague...living on a budget. Only people who live on a budget have control over their money, and only people who have control over their money can make informed decisions about retiring. Once you have a budget, such that you're controlling what your money does, the next step is eliminating debt, especially "bad" debt. The third step is investing in assets that appreciate in value, while avoiding going back into debt. People who do these three things understand their financial situation and are highly likely to enjoy a dignified retirement.
@@jasonbroom7147 I agree with all this. Well said 👍
I'll be getting my VA disability 4k a month plus a police pension of 3.6k a month I'm currently 58. Plan on retiring at 60. Also will be putting in for my SSDI at 60 as well. If that don't come trough before 62 I'll be drawing SS then 2.4k a month. Paying off all debt before retiring except house and two cars. At 62 I should be bringing in 10k a month and enjoying what time I have left on this earth.
@@MetalRipper67 awesome! 👍
I watch alot of retirement videos. I want to know the maximum amount of money I can spend a year. I will then back into my living arrangements and retirement costs. All these variables is mind numbing. A good financial planner just needs to show people how much is the maximum we can spend. Just my opinion.
I think the US will go bankrupt. My wife and I have 80 years combined work history and paid into the system all our working lives. We EXPECT to get something out of it, but it appears that immigrants who never paid into the system will get first priortiy.
“Down to the banana republics
Down to the tropical sun
Go the newly retired Americans
Hoping this one is the one
Spending their Social Security on a bottle of rum and a line
So can I rent a one bedroom
Or Buy some tequila and a lime…”
All I can say is........ inflation and I don't hear any mention of this in your video. You can bet that the cost of living will far exceed your example for those planning on retiring in the next 10 years. You can expect the cost of living to double. So much for that $5000/month SS income....by then it will need to be at least $7500/month if not more. Never forget that relying on SS to even be there past 2035 might be considered wishful thinking. That's why investment planners say you need to have a target of ten times your income by retirement age. I am not a financial planner nor an expert, but I do have common sense. I am turning 60 this month and I am far from that $1 million dollar mark and no I don't sleep well at night. My point is lowering a person's target for retirement is not a good thing. You should always aim higher and know that while you might not achieve that goal you will be close enough.
@@tdkz72 thank you for sharing your thoughts and I completely agree! We should all aim higher to account for inflation. My goal in the video was to encourage you to think differently about how much to save. Rather than focus on an arbitrary number, focus on your specific retirement and what those specific expenses could look like for you.
There’s an interesting article based on real data by Andrew Biggs titled You Don’t Need To Be a Millionaire to Retire. The results were among seniors with 50k - 100k in savings 86% were doing ok. Of course we should all aim much higher than that but don’t forget to plan for what specifically brings you happiness in life.
If your that worried about inflation then keep working
Correct, you need at least $3M
No you dont
You absolutely dont.
@@mikehamack6347 depends when you retire. At my age it will be another 25 years. I'll definitely need at least $3M, especially since there will be no social security. Please explain to me how it could possibly be less. I'll wait.
😅
I sure would like a video showing real examples, well laid out in Excel, showing monthly income sources, and then how the taxes on each one and the whole are calculated. Otherwise, for me, it's a lot of words.
@@johnklinekurtz I like the idea. I’ll do this in an upcoming video. Thanks for watching
This is just more misinformation! Can you spell, "important"? Remember, it has two t's!