After 1.5 years of retirement I’ve realized it’s hard to get past the mindset that you don’t touch retirement money unless you absolutely have to. Thanks for the reminder that the reason I saved all those years is so I could use it in retirement.
I am headed into retirement 1 DEC. Now thankfully I will have a pension, and we have saved very aggressively our whole lives. I have very minimal fears to spend in the first 5-10 years of retirement because as a FF , we tend to die young, and I intend to enjoy those years!!! I really enjoy your videos
Biggest mistake was selling a rental property AFTER going on Medicare and incurring large capital gains that skewed our income for that year resulting in more than tripling next year’s Medicare Plan B and D premiums! A nice “problem” some would say, but better planning could've avoided this! 😢
@@trobop1 Look up IRMAA rules and IRMAA brackets. To avoid IRMAA we should’ve sold 3 years before starting Medicare. Sold a property held with my brother who was not on Medicare so he didn’t get hit with IRMAA.
Thanks Eric ! Excellent video as usual. I'm almost 65 y/o and semi retired; I can relate to all this information. Actually eye opening really. Very useful / helpful, as are the comments from your subscribers here. Great channel. Makes me optimistic.. Thanks again.
Thanks for another great video. ;) I'm definitely in the camp that has some of the psychological tendencies being discussed, and it helps tremendously to have a solid plan that I understand!
My interpretation is a touch different - could it be people spend less as they have less to spend? Sure, I agree with the sentiment, but it's hard to take aggregate data and attribute it to one phenomenon, when there are probably several. That said, it seems to me: Oops, we need to trim a bit to make this work.
Retirement planning needs to take into account the healthcare adage: nothing good happens after 80. Now, of COURSE it’s POSSIBLE you can be alive and thrive after 80, but we are talking averages aren’t we? At 85 the curve gets steep. Two takeaways: 1. how old do your immediate relatives live to, and how healthy are they? 2. What are their habits and how do they compare to yours? Broad range of drinking/smoking/eating/social life/exercise. Of course everyone is different, so for me I plan on 20 years of social security (full retirement from 65, FRA is 67) semi retirement from 62. The money particulars are basic: conversion to Roth early, a tear of spending saved, travel done the first 5-10 based on ability, spend on experiences. If I manage to live to 90 that would be amazing. Between social security and savings I should be ok even though 90 is unlikely. Getting old is part of the deal; health span is between genetics and your accumulated personal choices. No one gets out alive!
1:49 Why do financial advisors always lean so heavily on a 30 year projection when the average retirement span is so much less? (The expected retirement length in the U.S. significantly rose between 1970 and 2020 from 12.8 to 18.6 years for men and from 16.6 to 21.3 years for women. - credit Motley Fool) As advisors squabble over acceptable withdrawal rates, it would seem that acknowledging the 10 year disparity would amount to a large percentage shift.
Longevity Optimism. My dad has been in retirement nearly 35 years. He worked about 30 years as a civil engineer when he came to the US. I know longevity is mostly lifestyle rather than genetics, so I’m doing everything I can to have a healthy, vibrant 30+ years in retirement.
0:55 Does your statement about spending decreasing as you age assume that the subject enjoys good health?? My dad is on Eliquis (as is my wife) at @ $600/ month. My parents pay out a good share of their SS income to their part D coverage. With both of my parents having some form of arthritis, God forbid they have a doctor try to put them on Embrel at $9,000 - $12,000 a month each!
Much of my joy in life comes from helping others, a few bucks spent in gas, clothes or a good meal goes a long way and while ya can’t cash in smiles and hugs they are unforgettable memories.
You don’t need to change. Congratulations that you discovered early on in life the secret to living a financially secure life that’s full of joy and security.
This is great info. Having retired in Q1 2022 I experienced rather large paper losses on my retirement portfolio the 3 months before and following my retirement date. I did not stress out about this due to asset allocation that included 4 years of living expenses in cash. If you use the 4% rule of thumb for retirement assets, you should have 25 years of living expenses in retirement assets. If 4 of the 25 are in cash, that equates to 16% cash which is a reasonable allocation for most portfolios. For the balance, I am all in on large cap equity mutual funds. My portfolio has recovered significantly since retiring and my wife and I are enjoying our daily walks, grandkids and our upcoming cruise.
Mutual funds are a huge rip off. You can invest in the same companies with an index fund, and get better returns due to the greatly reduced fees. The deceased Vanguard founder (John Bogle; goes by Jack) figured this out years ago when he wrote a college dissertation paper on the subject.
Wow.. our budgeted spending is very close to this! Same reason you were saying ! We learned this from my mom and dad who had a great retirement, and traveled like crazy for the first six years .
I retired 7 years ago at age 62, My wife followed 5 years ago, also at age 62. So far we have not used any of our retirement savings. The key for us was being debt free by the time we walked away from our jobs. With everything paid for, we are having no issues living on just our Social Security. It's not magic, it's just math and it's not complicated math. It's the kind of math you learned in grade school. Debt is great while you are working. It allows you to get things you want sooner. Debt in retirement will just drag you down. Work hard, pay off your debt and retire early. It's a solid plan.
9:30: '80%+ loss in the stock market' is deceptive. By my calculations, the top to bottom loss during the Great Depression was 67%. The top to bottom months was 34 months, with full recovery in 1936. The top to bottom capital loss was 86%, but dividends of 19% were paid out, for a Total (negative) return of 67%. Dividends used to be much higher, than they are today. I have a retiree friend who has a portfolio of 100% fixed income. His father lived through the Great Depression and he's terrified of owning stocks during retirement. And, he didn't understand that the press doesn't include dividends when they report how much the stock market is up or down. It's a very common mistake to not include dividends when calculating Total returns. Capital gain/loss plus dividends = Total return. The Great Depression was bad, but the numbers thrown around (80%+ loss) are deceptive. The BIGGEST 'pain' from the Great Depression was for those who lost their jobs. As retirees, we are shielded from that pain, as we are already unemployed. We can't lose something (a job), that we don't have. For reference, the Housing Bubble of 2007 to 2009, top to bottom loss was 57% capital loss + 5% dividends = 52% Total (negative) return. The chance of full recovery from any stock market crash is always 100%.
It becomes a timing issue as well as a "what stocks" issue. In 2008, my mother took a beating in the market, like most folks. Unfortunately, much of her portfolio was in banks. She retired from a financial institution and banks took a serious beating. She was in her late 70s at the time and her individual portfolio didn't have time to recover before she died. She never struggled financially because she had done well, but her net worth didn't recover before she died.
@@jdollar5852 Diversification is vital. Almost no retiree should be invested in individual stocks (in my opinion). An S&P 500 index fund is sufficient diversification. Full recovery from the Housing Bubble of 2007 to 2009, was reached in 2012.
Hi Larry, while the numbers are significantly different, whether it's 67% or 86%, I suspect that for most either loss would be viewed as devastating. Glad I like rice and beans. Hoping to stay strong during the inevitable downturns.
@@i-postm4943 Of course a 67% 'loss' is devastating. My point is that professional advisors should get their numbers correct, especially when it comes to the Great Depression. I have a retiree friend who has a $1.5 opportunity cost (for 2012 to 2023), due to this unnecessary fear mongering. She's 64 with an asset allocation of 20% stocks & 80% bonds. Furthermore, the Roaring 20s had very high stock returns: 1928 47.57 1927 37.10 1926 11.51 1925 25.83 1924 27.10 1923 5.45 1922 29.07 We now have regulations to limit leveraged stock purchases, by the average Joe, which led to the above 'irrational exuberance' (to quote Fed Chair Greenspan).
Thanks for talking about the fact that you should spend the most when you are a "younger" retiree. My husband and I travel quite a bit and hope to continue as much as we can. Unfortunately our "first five year" were affected by Covid and we missed out on some of that time for traveling and are trying to make it up now.
I'm 61 and eligible to begin SS later this year. It's a big decision. Longevity is the major concern. My mother died at 81, my father at 49, and my grandparents averaged 76. Genetically speaking, I'm not going to live until I'm 80, so delaying may not be optimal. We aren't going to depend on SS for our income as we already have enough assets to live comfortably, even if we live to age 95, but I do want to be able to do some Roth conversions and tax strategies. My accountant did the math for me this year. Theoretically, if I had taken SS in 2022, my federal tax obligation would have increased by $4k, based on an annual SS benefit of $24k. It gets extremely theoretical as you try to project tax rates, longevity, etc.
I retired at 59 and so did my wife. ACA subsidies are based on a lot of factors. We have a substantial "cash" bucket, so we are able to spend what we want and still keep our taxable income low. We pay $175 a month for the 2 of us. Much less than the corporate plans we had while working. We are in GA, so your state could be different.
After 1.5 years of retirement I’ve realized it’s hard to get past the mindset that you don’t touch retirement money unless you absolutely have to. Thanks for the reminder that the reason I saved all those years is so I could use it in retirement.
Yep. It's time to start living like a teenager again... with rich parents. haha
Don’t sacrifice your 50s and 60s for what “may” be higher income when you’re 87.
Yeah I'm spending the most in the first 5 years-- on Roth conversion taxes! 😂
I am headed into retirement 1 DEC. Now thankfully I will have a pension, and we have saved very aggressively our whole lives. I have very minimal fears to spend in the first 5-10 years of retirement because as a FF , we tend to die young, and I intend to enjoy those years!!!
I really enjoy your videos
Biggest mistake was selling a rental property AFTER going on Medicare and incurring large capital gains that skewed our income for that year resulting in more than tripling next year’s Medicare Plan B and D premiums! A nice “problem” some would say, but better planning could've avoided this! 😢
So when do you feel you should have done it? Just before or
Should you have held on it it?
@@trobop1 Look up IRMAA rules and IRMAA brackets. To avoid IRMAA we should’ve sold 3 years before starting Medicare. Sold a property held with my brother who was not on Medicare so he didn’t get hit with IRMAA.
Another terrific episode, Dave. And I would stress that it takes some time to get those " retirement sealegs". It is not intuitive for most of us.
Thanks Eric ! Excellent video as usual. I'm almost 65 y/o and semi retired; I can relate to all this information. Actually eye opening really. Very useful / helpful, as are the comments from your subscribers here. Great channel. Makes me optimistic.. Thanks again.
Thanks for another great video. ;) I'm definitely in the camp that has some of the psychological tendencies being discussed, and it helps tremendously to have a solid plan that I understand!
My interpretation is a touch different - could it be people spend less as they have less to spend? Sure, I agree with the sentiment, but it's hard to take aggregate data and attribute it to one phenomenon, when there are probably several. That said, it seems to me: Oops, we need to trim a bit to make this work.
How would the early retirement spending graph look for a couple retiring 10 years apart?
Thanks! Makes me feel better about my strategy.
Retirement planning needs to take into account the healthcare adage: nothing good happens after 80. Now, of COURSE it’s POSSIBLE you can be alive and thrive after 80, but we are talking averages aren’t we? At 85 the curve gets steep. Two takeaways: 1. how old do your immediate relatives live to, and how healthy are they? 2. What are their habits and how do they compare to yours? Broad range of drinking/smoking/eating/social life/exercise. Of course everyone is different, so for me I plan on 20 years of social security (full retirement from 65, FRA is 67) semi retirement from 62. The money particulars are basic: conversion to Roth early, a tear of spending saved, travel done the first 5-10 based on ability, spend on experiences. If I manage to live to 90 that would be amazing. Between social security and savings I should be ok even though 90 is unlikely. Getting old is part of the deal; health span is between genetics and your accumulated personal choices. No one gets out alive!
1:49 Why do financial advisors always lean so heavily on a 30 year projection when the average retirement span is so much less? (The expected retirement length in the U.S. significantly rose between 1970 and 2020 from 12.8 to 18.6 years for men and from 16.6 to 21.3 years for women. - credit Motley Fool) As advisors squabble over acceptable withdrawal rates, it would seem that acknowledging the 10 year disparity would amount to a large percentage shift.
Longevity Optimism. My dad has been in retirement nearly 35 years. He worked about 30 years as a civil engineer when he came to the US. I know longevity is mostly lifestyle rather than genetics, so I’m doing everything I can to have a healthy, vibrant 30+ years in retirement.
0:55 Does your statement about spending decreasing as you age assume that the subject enjoys good health?? My dad is on Eliquis (as is my wife) at @ $600/ month. My parents pay out a good share of their SS income to their part D coverage. With both of my parents having some form of arthritis, God forbid they have a doctor try to put them on Embrel at $9,000 - $12,000 a month each!
I spent my whole retirement the first year and now I’m broke
He did say you'd spend the most in the first year of retirement..
@@MrEscape314not all though
@@catchristo9406 I think all is included in most. If you lose all of something, you've lost most of it too..
Eric: Do you actually work with prospective clients who have $1.15M in savings? Or is your client Minimum $2.0M?
Best retirement show on RUclips. Practical, actionable, and 3:52 optimistic. Love the graphics. And I’m in same space.
Hey Joe. You have a good channel too. I enjoy watching both SWMs videos and yours.
I’m with Bill!
Zoller is terrific, isn't he? Especially given his youth, he has excellent insight.
From Joe Kuhn, this is an informed opinion. I enjoy your show, Joe, as well.
Joe, really appreciate the compliment. You've got awesome content as well!
I've been frugal my whole life. Why should I change when I retire? I'm very happy with little.
There are a lot of folks like you.
Much of my joy in life comes from helping others, a few bucks spent in gas, clothes or a good meal goes a long way and while ya can’t cash in smiles and hugs they are unforgettable memories.
You don’t need to change. Congratulations that you discovered early on in life the secret to living a financially secure life that’s full of joy and security.
This is great info. Having retired in Q1 2022 I experienced rather large paper losses on my retirement portfolio the 3 months before and following my retirement date. I did not stress out about this due to asset allocation that included 4 years of living expenses in cash. If you use the 4% rule of thumb for retirement assets, you should have 25 years of living expenses in retirement assets. If 4 of the 25 are in cash, that equates to 16% cash which is a reasonable allocation for most portfolios. For the balance, I am all in on large cap equity mutual funds. My portfolio has recovered significantly since retiring and my wife and I are enjoying our daily walks, grandkids and our upcoming cruise.
Mutual funds are a huge rip off. You can invest in the same companies with an index fund, and get better returns due to the greatly reduced fees.
The deceased Vanguard founder (John Bogle; goes by Jack) figured this out years ago when he wrote a college dissertation paper on the subject.
@@larryjones9773 Larry, I mostly am invested in index funds or some others with very low expense ratios.
Jan 2022 to start your retirement. I bet that was fun.
Wow.. our budgeted spending is very close to this!
Same reason you were saying !
We learned this from my mom and dad who had a great retirement, and traveled like crazy for the first six years .
Great presentation! Like that you also address non-financial topics.
I retired 7 years ago at age 62, My wife followed 5 years ago, also at age 62. So far we have not used any of our retirement savings. The key for us was being debt free by the time we walked away from our jobs. With everything paid for, we are having no issues living on just our Social Security. It's not magic, it's just math and it's not complicated math. It's the kind of math you learned in grade school. Debt is great while you are working. It allows you to get things you want sooner. Debt in retirement will just drag you down. Work hard, pay off your debt and retire early. It's a solid plan.
Great one Eric ! Now let's see your approach to the 3 yrs Prior to retirement.
Would like to see a video about how to decide how much to scale income up and down vs. market performance.
Thank you so much for this. "Delayed gratification" can become "never gratification" unless we are more conscious and confident in our plan.
9:30: '80%+ loss in the stock market' is deceptive.
By my calculations, the top to bottom loss during the Great Depression was 67%. The top to bottom months was 34 months, with full recovery in 1936. The top to bottom capital loss was 86%, but dividends of 19% were paid out, for a Total (negative) return of 67%.
Dividends used to be much higher, than they are today.
I have a retiree friend who has a portfolio of 100% fixed income. His father lived through the Great Depression and he's terrified of owning stocks during retirement. And, he didn't understand that the press doesn't include dividends when they report how much the stock market is up or down. It's a very common mistake to not include dividends when calculating Total returns. Capital gain/loss plus dividends = Total return.
The Great Depression was bad, but the numbers thrown around (80%+ loss) are deceptive. The BIGGEST 'pain' from the Great Depression was for those who lost their jobs. As retirees, we are shielded from that pain, as we are already unemployed. We can't lose something (a job), that we don't have.
For reference, the Housing Bubble of 2007 to 2009, top to bottom loss was 57% capital loss + 5% dividends = 52% Total (negative) return.
The chance of full recovery from any stock market crash is always 100%.
Well said. Thanks.
It becomes a timing issue as well as a "what stocks" issue.
In 2008, my mother took a beating in the market, like most folks. Unfortunately, much of her portfolio was in banks. She retired from a financial institution and banks took a serious beating. She was in her late 70s at the time and her individual portfolio didn't have time to recover before she died. She never struggled financially because she had done well, but her net worth didn't recover before she died.
@@jdollar5852 Diversification is vital. Almost no retiree should be invested in individual stocks (in my opinion). An S&P 500 index fund is sufficient diversification.
Full recovery from the Housing Bubble of 2007 to 2009, was reached in 2012.
Hi Larry, while the numbers are significantly different, whether it's 67% or 86%, I suspect that for most either loss would be viewed as devastating.
Glad I like rice and beans. Hoping to stay strong during the inevitable downturns.
@@i-postm4943 Of course a 67% 'loss' is devastating. My point is that professional advisors should get their numbers correct, especially when it comes to the Great Depression.
I have a retiree friend who has a $1.5 opportunity cost (for 2012 to 2023), due to this unnecessary fear mongering. She's 64 with an asset allocation of 20% stocks & 80% bonds.
Furthermore, the Roaring 20s had very high stock returns:
1928 47.57
1927 37.10
1926 11.51
1925 25.83
1924 27.10
1923 5.45
1922 29.07
We now have regulations to limit leveraged stock purchases, by the average Joe, which led to the above 'irrational exuberance' (to quote Fed Chair Greenspan).
Thanks for talking about the fact that you should spend the most when you are a "younger" retiree. My husband and I travel quite a bit and hope to continue as much as we can. Unfortunately our "first five year" were affected by Covid and we missed out on some of that time for traveling and are trying to make it up now.
Ugh, first 5 years of retirement have us tied to our house because of caring for a 103 year old! Vacation? Travel? 😂
Eric…sometimes I think you are reading my mind or talking to me! Kinda like going to church for the 1st time in awhile!!
Can I do ROTH conversion for the previous tax year?
make make?
I'm 61 and eligible to begin SS later this year. It's a big decision.
Longevity is the major concern. My mother died at 81, my father at 49, and my grandparents averaged 76. Genetically speaking, I'm not going to live until I'm 80, so delaying may not be optimal.
We aren't going to depend on SS for our income as we already have enough assets to live comfortably, even if we live to age 95, but I do want to be able to do some Roth conversions and tax strategies.
My accountant did the math for me this year. Theoretically, if I had taken SS in 2022, my federal tax obligation would have increased by $4k, based on an annual SS benefit of $24k.
It gets extremely theoretical as you try to project tax rates, longevity, etc.
Do you work with people on the east coast or just in Wisconsin?
We work with families all around the country!
I'm retiring at 60 ... will keep income low for first 5 years for Affordable Care Act subsidies, but age 65 to 70 will evaluate doing Roth conversions
I retired at 59 and so did my wife. ACA subsidies are based on a lot of factors. We have a substantial "cash" bucket, so we are able to spend what we want and still keep our taxable income low. We pay $175 a month for the 2 of us. Much less than the corporate plans we had while working. We are in GA, so your state could be different.