My grandmother is about to turn 92 in about a month. She is doing well and I am her caregiver. I plan to live that long so I am taking great care of my health now at 40 and she taught me how to run her rental property business.
One critical cost is health care prior to age 65. The period from 63 to 65 will require funding to cover health care costs. That cost can run upwards of $2,000/month depending on coverage and plan selected. This is $ spend that needs to factored in.
@@dennistyler8746 You don’t need to be poor to use Obama Care, you need to be tax free. Which just means to maximize your Roth bucket by the time you apply for Medicare,
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I see too many advisors forget to include health care costs. If they are 63, they will have to get health insurance on the ACA. Their income will determine if they get a subsidy. They need to show as little income as possible until they reach Medicare age.
I would never go with my company pension, which equals 5% on average. I can do better on the markets so I am taking the lump sum. Never ever do an annuity too complex and they never want you to annuitize as that’s when they lose their commissions
COVID isn’t causing inflation. Massive uncontrolled government spending. I’m retiring overseas. Retirement professionals never seem to touch on relocating to maximize your retirement.
One thing to consider is are you a renter or homeowner. If you rent then I would agree your cost of living would continue to increase. If you own your home, your spending IMO would not rise with inflation. As you age your habits change, normally you don't travel eat out or drive as much as your earlier years in retirement.
We're targeting about $85K after taxes from a combination of social security and our investments. We also have some land rental income that brings in a little over $15K a year after land taxes and expenses.
Good stuff. Would like to see you breakdown the options on exactly how and when you make those Roth IRA conversions from the qualified funds in order to keep those taxes as low as possible given current tax rates and rules. Thanks!
I have a lot of videos about Roth conversions. They can be a powerful strategy in retirement for those that have done a good deal of saving inside their retirement accounts. Make sure to check those videos out! Thanks for watching and commenting!
I like your videos but you never have examples for single people. I wish you would consider that in some of your future videos. And if you do, please do not assume qualifying for deceased spouse benefits. Just please do one for single period. Thanks for your consideration.
Please talk some about the early demise of one spouse affects planning since especially for women this is a common event which can massively affect planning.
Great video as usual. Personally I think it is just the right level of detail for me. One question about your company. Is Oak Harvest a "Fee based" or a "Percentage of Portfolio based" billing?
The list of assumptions shown in the beginning is a great start.. I would like to also add a common scenario, for example, that at retirement, the retirees home will be fully paid and has a much higher market value, and they can likely downsize to add the equity to the non-qualified base amount that can also be invested to an annuity, for instance, for more retirement income. And further down the road, that home can be reversed-mortgage to tap into more equity etc.
I thought he did figure into the market variations; in the 1,000 simulations he had the market go up and down (e.g., 13 percent down) abs he also had the conclusion of 65% successes probability - which is not great, but it probably accounted for some catastrophic downs like a Great Recession.
I noticed that the Roth conversion analysis did not take into consideration the tax that would be paid during this process and the impact that this would have on the portfolio - it appears as though the $1.5M is used in both scenarios, however this would not be the case after paying taxes during the conversion process - what am I missing?
Whatever you think you may need, I would increase it because running out of money when your old is not a good place to be. The average annual cost today of a nursing home is $100K. What do you think it will be in 20 or 30 years? How many years do you think you can spend $100K on just a nursing home before you will run out of funds? When you consider how much you may need, plan around a worst case scenario.
I used to be a home health physical therapist and saw too many people who hadn't planned at all for care needs, were really surprised to have ongoing ones (denial can be strong). At that point, they couldn't exactly go out and earn more money. So yes, don't get in that situation if you can help it. It's hard, though, because it's a huge game-changer and unknown in advance.
Pensions are like a pot of GOLD! My (military) retirement grows with inflation and is there at the beginning of every month from the time I was 44 (48 now) and will be there until I pass. And, even after that there will be a % that is passed to my wife until she passes. That's the definition of stress-free living!!
It's great for you. I understand why you would like them, but for the rest of us (i.e., taxpayers who fund these pensions) they are an awful system. Every government employee, even someone working for the military, should have a defined-contribution plan, not a defined-benefit plan. This is what millions of taxpayers have. There is no reason to treat government employees any differently.
Pensions are great but the cons is not being able to hand it down to your children. Sure your wife will get a % if you pass but none to the kids. Of course I'm assuming you want to create "generational wealth" for your family.
@@JiggyC If the pension took the place of a 401(k) or IRA and that's all we had, I'd agree with you. The pension ensures we don't worry about emergencies, and that's what a large number of people concern themselves with. It allows me to not have an emergency fund, all our additional cash is invested and we don't have $50K-$100K in a savings account making absolutely nothing. We both max out 401(k)s, both traditional IRA (backdoor to Roth), and then add more to our Brokerage. My pension value allows us to invest to that level. In my case the pension allows me to build actual generational wealth.
@@tshandy1 Pensions and great benefits are among the few perks of working for the government. Otherwise, compared to the private sector, government employees are not compensated that well.
He did. He said, yes $1.5 M can let you spend $100,000 a year. But you are going to Be success at that all with a probability of success with only 65% of the time. Chances are, there is 35% chance, that you are going to run out of money before you are 92 or 94.
To really know if you have enough to retire, you need to know how much you will spend during your entire life, and when. No one will spend the same amount each year, so that's not a good number to use. One year you may spend 50K, the next year you buy a car and spend 80k, and the next year you put a new roof on your home and spend 70k. So using a fixed amount, adjusted for inflation is not very accurate. Much better to use the amount you will actually use each year, year by year. It's not that hard to come up with year by year numbers. Most expenses are the same, but then you have big expenses once in a while to add to the normal expenses. A new roof on your home, and then again 25 years later. A new car, and then again, and again every so many years, up to a certain age when you no longer drive. How much you spend is important, but when you spend it is in many ways even more important.
I'm missing the part about maintaining the 12% tax bracket while doing the roth conversions. Not understanding the numbers if trying to convert 1 million over 8 years (prior to taking SS at age)
Yeah, I couldn't figure that out either. The 12% tax bracket for a married couple ends at about $80K. That amount is not going to put much of a dent in a large IRA. To do some serious Roth conversion before turning 70, I believe you'll need to incur some taxes in the 22 to 24% brackets. I hope we get some clarification about this in a follow-on video.
Some planners will be happy to charge you a flat fee. Others, like my experience with Edward Jones, steer you towards funds with high upfront entry fees. Iirc they’re called class A mutual funds. Again based on my experience once you get into these funds and pay those fees your advisor will pass you off to a more junior one. But I digress 😄
Here in AZ there is no tax on social security so I am planning at age 64 to take SS. Why would I pull monies out of my 401k and pay taxes on that money which would result in pulling more money out of my 401k to get the net of $3000 a month.
@@alanmoore2197 thanks for the response. so a 1.5million portfolio had a 65percent success rate in the vid. Is that what he tells us what we should have to generate a 100k/yr ?
You describe a pension as a guaranteed source of income. I have several friends whose employers underfunded their pension plans and now they are only getting a portion of what they were lead to believe they would be receiving. Am I misunderstanding this and the pension I have is somehow insured to prevent from getting screwed in my retirement years?
I always thought that pensions are guaranteed. I work for a company that went bankrupt 2 times in last 20 years and the pensions untouched and every penny is getting paid.
Eeks! Big rambling preamble. Might start with the amount range, then narrow in at how you got there if you really want to make this concise and interesting.
It can't be easy or concise - if you make it easy you are fooling yourself and making it inaccurate and far too simplistic, there are many impactful variables that pretty much always do vary significantly.
If a person has to wait til 70, I agree. I retired at 58 and believe me, ageism starts, so getting to 70 will be hard for many unless u own your own business or work at McDonalds. The answer should be do I have enough to retire at 63 with 1.5 M, the answer is no if 100 K a year is essential. I would consider a cheaper country where you dont need 100K to live. Retiring at 70 must have been a kick in the guts.
From the look of things, It can't be overemphasized that, Cash is thrash! 3 BEST and surprisingly easy ways to double/hold your funds in 2021; Cryptt, Real Estates, who can guess the 3rd?...
Nothing worse than being 88 and low on cash.. I'd disagree I think never enjoying life because you we're skimping is bad too. People at 88 are not often skydiving or seeing the world. But at 63 they might be. This guy never seems to answer the specific question asked instead he always moves from I want to retire at 63 to lets retire at 79 or 85.
Need is a very different beast than desire. I mean, sure, I don't need $100K per year after taxes. But if I had it I could figure out a way to spend it!
@@todda2026 While in some places that is true, if you want to retire in Manhattan the cost of living is much greater than in rural Ohio, the median household income for retirees is about $50K. Not too surprising given the median family income is around $60K (before taxes). But if you set yourself up well, in retirement you are no longer paying social security or FICA taxes, you are no longer saving for retirement, you are no longer paying for college, you are no longer paying a mortgage or at least your payments are now very low - all to say your expenses should be much lower than earlier in life, especially if you had kids. Other things like health may go up. But for example my retirement cost of living is about 55% of when working and paying to raise kids, save for retirement and college. And that includes fun stuff like travel, dinner out and such.
If you NEED to spend (because no one WANTS to spend) 100.000 a year, it's time to move to a cheaper place. If you need to spend 100.000, I bet you had enough money to pay your living property in full, so you should be able to spend way less on housing than when you rent, and on top of that, you don't have children in the house. So sell that big ugly house and live in a smaller place. Ideally, buy a penthouse and you hardly have any maintenance costs. Ofcourse you have taxes and bills for the general parts in the appartment building. And ask yourself: what do you need to purchase when you're 65? You're done with spending on your children, and unless you're a material gimmicks freak, you spend money on living comfortably (restaurants, good wine, travel, whatever). If you still have holes in your pockets to finance your too-big boat or yearly golf club subscription, it's time to think about making donations to poor people, if you care more about being happy and making the world a better place.
I would also add, personally I want $100,000 today but, those funds are adjusted over time for inflation! I also want to leave that nest egg behind for my Daughter! Legacy wealth!
Per Forbes - “This technique is not suited for everyone and does not replace your 401(k)s or IRAs. If you are at a point in your life that you do not need life insurance, you may want to consider a Roth. Also, consider maxing out your 401(k)s and IRAs prior to funding a LIRP, as employers often will match your contribution to a certain limit, which is essentially “free money” for you. If you have already maxed out your other tax-advantaged retirement savings plans, LIRPs can be a good alternative to obtain a tax-free income stream in retirement.”
I like your videos but you never have examples for people that are only going to live to 85 or so. Its always 90 plus. More than 50% of retirees will not live past 85 that is a fact. You say It's not prudent to plan for a shorter life expectancy, but it's just that you have to have more money so some think that they need more and can't retire. You can give the two examples you just don't.
Not as much as you think. NY doesn't tax retirees on certain pensions and SS up to a certain amount and has a lower property tax rate for elderly. With selling your house and moving, you end up paying brokers and lawyers and other fees so you end up spending a lot more just to "save in taxes"
Even in high cost of living livings , $100,000 is still a lot of money to spend, assuming you are debt free, and have mortgage paid off, kids gone and college paid for, and no other financial obligations plus great health... Still plenty of $ to splurge on the grandkids, buy Hermès bags, eat at the French Laundry, travel the world a couple of times a year first class, but maybe it’s not enough to own a yacht or a private jet. .
@@aaronosborn7395 On one level, what counts as "not that much" is subjective. If you feel you are struggling, then that is the way you feel. However, there is definitely something jarring about people who are better off financially than 95% of the other people in their own cities saying that they don't have that much. Objectively, they actually have quite a lot! Looking at the $100k/year example, the average salary in Manhattan is just under $70,000 per year (before tax). Manhattan is a pretty expensive place to live, yet most people get by. Obviously, a lot of workers there commute. At any rate, the point is that from an objective perspective, a retiree who has $100,000 per year after taxes is doing pretty well. Maybe not great if they live in Manhattan and have to rent (they should probably buy in Queen's), but they still have somewhere around twice the disposal income of the average person working in that very expensive city. In most places in the country, $100k after taxes for a retiree is a ton. Again, a person may subjectively feel that it isn't. Fine. And relative to Elon Musk, it isn't a lot. But in normal language, concepts like "a lot" and "not that much" are generally used to compare something to an average exemplar of that thing in the same environment. It's just improper use of language to point to a giant salt mine and say "that's not a lot of salt", even though it is true that there are bigger salt mines. The fact is that if you've got $100k/year after taxes in retirement, you're wealthy. You have a lot of money. If for some reason you like to see yourself as a struggling middle class person, go ahead, but you're not.
In my elementary brain, why do analysts always apply inflation to the entire investment return? In his $100k example, what if the couple only spends $60,000 per year on goods and services. Shouldn't the 2.5% inflation rate apply only to the $60,000? If that is the case, the "effective inflation rate" on the entire investment would be much less than 2.5%.
What kind of spending other than spending for ‘goods and services’ are there? Even charitable giving is tied to inflation. A tip of $2 20 years ago was great. Now a tip of $5 is great.
Think of it this way, if you put the $1M in a safety deposit box, it will still be $1M in 10 years. However, inflation waits for no one, so ignoring compounding interest, your $1M now has the buying power of $775,000(2.5% x 10 = 22.5%, $1M less 22.5% = $775k), because prices have gone up 2.5% per year. Does that help?
@@jgk9820 All of this makes complete sense, but if you have 1.5M in a SD box your not doing yourself a favor. Invest in something to hedge inflation. Converting to Roth IRA seems logical, but that tax bill would be hefty IMO. Buy property and generate income that way maybe, stash away money in something that rises with inflation:). Not saying anything negative about the presentation though, all good stuff I'm learning from!
@@todda2026 no, no, no, your missing the point of the example. I’m simply attempting to explain the loss of buying power and why the inflation rate applies to the total $100k and not just the $60k. Apparently I missed the mark entirely.
Did you ever really answer the question “ Can a couple retire with 100k” If you did, then I missed the answer. You did give me many confusing things to think about though.
That wasn't even the question he started out with? Question was can I pull the equivalent of $100K per year after tax (with a starting point of $1.5M investments). Can a couple actually retire on $100K - Probably not - unless you can live on
Alan Moore Agreed. I didn’t word my response well. But still I am unsure of the answer because I missed what a couple would need in order to pull 100 K from their portfolio given inflation rates.
@@pattyfavazza4744 There is no simple answer - it depends. He showed a specific case where $1.5M was most likely (%) enough - but he assumed starting investments & mix (of Q/NQ/TF), future inflation rate, tax strategy & future tax rates, the couples other income, social security income & timing, when they would each die. Obviously all these things can be and likely are very different. The analysis he ran also evaluated many different investment return sequencing scenarios - hence the 'confidence of success' % ("success" being defined as money left at the point you are both both dead). It was actually a good generic set of assumptions - but it likely needs tailoring.
Alan Moore yes, so in this day in age, given all these variables and things to consider, it is very difficult to have the confidence to retire. So, as someone who is trying to prepare, when I saw the title, I was hoping to not only explore all the factors to consider, but also some sort of concrete answer to the question. My hope was to gain some confidence here.
Hi Patty, I'm doing another video today, released in a couple weeks, to address your specific questions. Truth of the matter is there is no silver bullet or simple answer. These videos only provide a snapshot of the current situation. They are designed to open your eyes to everything that goes into retirement planning. Plans change and need adjusting over time.
@@san209nha9 What you wrote makes no sense. If I make 50K I can plan to retire with 50K?? Not unless I have $50K a year in retirement savings to spend.
@@twilde3754 1- If you make 50k after tax, that means you make 70k as gross annual income. Over the 30 years of working, and if you pay tax, your social security income will be around $2.5k a month at your retirement age. 2- If you can save $200 a month to your Roth IRA, with 10% return from mutual funds, after 30 years you will have 434k. When you retire you can cash out 10% profit from your Roth IRA (without paying income tax) which is 43k per year (3.5k per month) 3- Your total retirement income will be 6k (2.5k + 3.5k) per month, or 72k per year (more than 50k target) and you don't have to pay tax for income that you earn from Roth IRA.
Probably not, you probably weren't ever an over achiever either. You obviously haven't put multiple children through post graduate degrees. I've paid more than that in taxes. It's all relative, though. If your comfortable where you are, that's great. Spending 100K in a year, doesn't mean your living high on the hog. Also depends where you live. Location can double your spending, without increasing your quality of life.
@@twilde3754 I just want to share the real life experience. It's up to you to have the will to do it or not. In addition, nowadays the fund managers can do a lot more efficient than 10-30 years ago, so 10% annual return is very easy, 15% becomes normal. That means if you have 20 years to work, you still can reach the goal of 500k or 1 million in your retirement IRA. Currently I don't have a 100k net from the working income annually. But when I retire in 5 years I can have 100k net from my retirement income.
Do you know how to multiply and divide? Do you have $500,000 (1/3 that much)? Then divide the spendable amount by 3. Do you have $3 million (2 times as much)? Multiply by 2. Etcetera.
Bonds take you backwards. Bonds dont even cover the cost of living increase. Better off with preferred shares or dividend paying blue chips for security.
@@bradevans3815 this is a 30 year retirement. You cannot base your retirement strategy purely on today's rates. Bond rates change over time just like stocks. If a person retired in 2000 during the decade when stock returns were practically zero would you be saying stocks take you backwards invest in something else? The point is when you retire you need to look at your retirement portfolio from a long term 30+ years mindframe rather than what's going on today.
@@ariefraiser140 Bonds have done nothing and will continue to do nothing for the forseaable future. With huge debt mounting constantly, bonds are no longer a safe haven. Could even see defaults. I would tread carefully and dont listen to so called financial experts. A few years of backwards rates and you will never get the returns you hoped for.
Way to complex for the “average” individual to comprehend. Never really answered the question of how much you need to have 100K income after retirement. Just get to the point and dumb it down a bit. You’re a more than qualified financial advisor. Most are not on your level so make your explanations a little more basic. Just my 2 cents.
Delay spending your working capital when possible. Example: Borrow three years of expenses. Finance it for 10. After three years, take a distribution and repay the loan. Repeat. With three additional years of compounding, capital gains should more than beat inflation and interest and marginal tax increase from large distribution. You win.
I don't think your math works... if you look at staying in the 12% bracket you could take about $100k out of your qualified account, and owe about $10K in taxes when you factor in the standard deduction. That leaves about $90K per year with a total taxes of $30k. To borrow enough money to spend $270K in 3 years, you might need to borrow about $400k. (270 + about 40% more to cover the monthly payments and finance cost). The loan will still have a balance of about $300K after 3 years. To pay that back with taxes you need to take out about $350K. Since it is done all at once you will max out the 22% and go into the 24% maybe $50K of taxes.
@@jerrylabat550 True, however You missed my point of delaying any spending of working capital for three years. It isn't primarily a tax strategy. This is only a simple suggestion to get an additional three years of compounded returns to offset interest and additional marginal tax. If your total return doubles in three years, great. Opportunity cost can easily exceed marginal tax increase. However the opposite is also true if the working capital decreases in value over the three years. Yikes. Cheers.
My grandmother is about to turn 92 in about a month. She is doing well and I am her caregiver. I plan to live that long so I am taking great care of my health now at 40 and she taught me how to run her rental property business.
One critical cost is health care prior to age 65. The period from 63 to 65 will require funding to cover health care costs. That cost can run upwards of $2,000/month depending on coverage and plan selected. This is $ spend that needs to factored in.
Unless you retire poor enough for obamacare...
@@dennistyler8746
You don’t need to be poor to use Obama Care, you need to be tax free.
Which just means to maximize your Roth bucket by the time you apply for Medicare,
$2000/mo is high
Yeah...Bama-Care!
Excellent video and far more moving parts the average investor just cannot tackle alone
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I see too many advisors forget to include health care costs. If they are 63, they will have to get health insurance on the ACA. Their income will determine if they get a subsidy. They need to show as little income as possible until they reach Medicare age.
I would never go with my company pension, which equals 5% on average. I can do better on the markets so I am taking the lump sum. Never ever do an annuity too complex and they never want you to annuitize as that’s when they lose their commissions
COVID isn’t causing inflation. Massive uncontrolled government spending. I’m retiring overseas. Retirement professionals never seem to touch on relocating to maximize your retirement.
Where are you going? What will be your expenses?
Lol COVID caused so many supply shortages.
You making it way more complicated than it needs to be
I don't think so - this is one of the best generic analyses I have seen. He is quite clear on all the factors.
One thing to consider is are you a renter or homeowner. If you rent then I would agree your cost of living would continue to increase. If you own your home, your spending IMO would not rise with inflation. As you age your habits change, normally you don't travel eat out or drive as much as your earlier years in retirement.
We're targeting about $85K after taxes from a combination of social security and our investments. We also have some land rental income that brings in a little over $15K a year after land taxes and expenses.
Good stuff. Would like to see you breakdown the options on exactly how and when you make those Roth IRA conversions from the qualified funds in order to keep those taxes as low as possible given current tax rates and rules. Thanks!
I have a lot of videos about Roth conversions. They can be a powerful strategy in retirement for those that have done a good deal of saving inside their retirement accounts. Make sure to check those videos out! Thanks for watching and commenting!
Great video with excellent visuals. Love the initial breakdown as it helps to break down the concept.
Glad I found your channel!
👋Hey @aviewer9516, we're happy you're here too!
I like your videos but you never have examples for single people. I wish you would consider that in some of your future videos. And if you do, please do not assume qualifying for deceased spouse benefits. Just please do one for single period. Thanks for your consideration.
Yes!!! Single, never married, no kids here myself!
Yes - I agree too. Single, never married and no kids.
Yeah me too! No spouse, no kids and no mortgage. Just me and the cat!
$100K? I am retired and live like a king on $60,000 (everything is paid for and I make a Country Club home in Florida).
Everyone's situation is different.
Great job. I am now subscribed to your channel.
Please talk some about the early demise of one spouse affects planning since especially for women this is a common event which can massively affect planning.
Great video as usual. Personally I think it is just the right level of detail for me. One question about your company. Is Oak Harvest a "Fee based" or a "Percentage of Portfolio based" billing?
From their website, it’s percentage based.
The list of assumptions shown in the beginning is a great start.. I would like to also add a common scenario, for example, that at retirement, the retirees home will be fully paid and has a much higher market value, and they can likely downsize to add the equity to the non-qualified base amount that can also be invested to an annuity, for instance, for more retirement income. And further down the road, that home can be reversed-mortgage to tap into more equity etc.
Forget reverse mortgage. Just sell it and rent or downsize.
Only 1000 simulations? Monte Carlo analysis (widely used for this) uses 2500 simulations, & yes the 65% is too low
It’s always 4% withdrawals. Don’t forget to factor in numerous market fluctuations. Tech Bubble, Great Recession.
Often RMDs exceed 4% then you can eat it on taxes and also burn more money than you would want to.
I thought he did figure into the market variations; in the 1,000 simulations he had the market go up and down (e.g., 13 percent down) abs he also had the conclusion of 65% successes probability - which is not great, but it probably accounted for some catastrophic downs like a Great Recession.
I noticed that the Roth conversion analysis did not take into consideration the tax that would be paid during this process and the impact that this would have on the portfolio - it appears as though the $1.5M is used in both scenarios, however this would not be the case after paying taxes during the conversion process - what am I missing?
Good point, but my hunch is he didn’t go into the many details, but his software already took that into account.
Whatever you think you may need, I would increase it because running out of money when your old is not a good place to be. The average annual cost today of a nursing home is $100K. What do you think it will be in 20 or 30 years? How many years do you think you can spend $100K on just a nursing home before you will run out of funds? When you consider how much you may need, plan around a worst case scenario.
Thank you for contributing that information.
I used to be a home health physical therapist and saw too many people who hadn't planned at all for care needs, were really surprised to have ongoing ones (denial can be strong). At that point, they couldn't exactly go out and earn more money. So yes, don't get in that situation if you can help it. It's hard, though, because it's a huge game-changer and unknown in advance.
If one is so worried about this, then reduce initial retirement spending to $40k? 60-80 years. So that there will be MUCH more money for 80- death.
Pensions are like a pot of GOLD! My (military) retirement grows with inflation and is there at the beginning of every month from the time I was 44 (48 now) and will be there until I pass. And, even after that there will be a % that is passed to my wife until she passes. That's the definition of stress-free living!!
It's great for you. I understand why you would like them, but for the rest of us (i.e., taxpayers who fund these pensions) they are an awful system. Every government employee, even someone working for the military, should have a defined-contribution plan, not a defined-benefit plan. This is what millions of taxpayers have. There is no reason to treat government employees any differently.
Pensions are great but the cons is not being able to hand it down to your children. Sure your wife will get a % if you pass but none to the kids. Of course I'm assuming you want to create "generational wealth" for your family.
@@JiggyC If the pension took the place of a 401(k) or IRA and that's all we had, I'd agree with you. The pension ensures we don't worry about emergencies, and that's what a large number of people concern themselves with. It allows me to not have an emergency fund, all our additional cash is invested and we don't have $50K-$100K in a savings account making absolutely nothing. We both max out 401(k)s, both traditional IRA (backdoor to Roth), and then add more to our Brokerage. My pension value allows us to invest to that level. In my case the pension allows me to build actual generational wealth.
@@tshandy1 Pensions and great benefits are among the few perks of working for the government. Otherwise, compared to the private sector, government employees are not compensated that well.
@@tshandy1 Ah, military are taxpayers and even our pensions are taxed. So, ah take that to the bank.
You never tell us if the $1.5Mil would last at $100k per year spending?
He did. He said, yes $1.5 M can let you spend $100,000 a year. But you are going to
Be success at that all with a probability of success with only 65% of the time. Chances are, there is 35% chance, that you are going to run out of money before you are 92 or 94.
Do you manage all those accounts while someone is working? Or at retirement? Thanks
To really know if you have enough to retire, you need to know how much you will spend during your entire life, and when. No one will spend the same amount each year, so that's not a good number to use. One year you may spend 50K, the next year you buy a car and spend 80k, and the next year you put a new roof on your home and spend 70k. So using a fixed amount, adjusted for inflation is not very accurate. Much better to use the amount you will actually use each year, year by year. It's not that hard to come up with year by year numbers. Most expenses are the same, but then you have big expenses once in a while to add to the normal expenses. A new roof on your home, and then again 25 years later. A new car, and then again, and again every so many years, up to a certain age when you no longer drive. How much you spend is important, but when you spend it is in many ways even more important.
Good video thanks. One question, won’t owning assets, ie stocks, house, help solve the inflation concern/factor?
@@carysalazar5374 Much inspired by this , can you share helpful info on your advisor? I am looking to make a change on my finances as well.
I'm missing the part about maintaining the 12% tax bracket while doing the roth conversions. Not understanding the numbers if trying to convert 1 million over 8 years (prior to taking SS at age)
Yeah, I couldn't figure that out either. The 12% tax bracket for a married couple ends at about $80K. That amount is not going to put much of a dent in a large IRA. To do some serious Roth conversion before turning 70, I believe you'll need to incur some taxes in the 22 to 24% brackets. I hope we get some clarification about this in a follow-on video.
Excellent point. He needs to add a few words on exactly when and how much those conversions occur.
Don’t forget to add the standard deduction in when calculating where the 12% tax bracket ends
You can take out like 100k a year as a couple and only pay about 9k in federal tax
How much would your fee be annually for the couple in this example? Please give a dollar amount as well as a percent.
Some planners will be happy to charge you a flat fee. Others, like my experience with Edward Jones, steer you towards funds with high upfront entry fees. Iirc they’re called class A mutual funds. Again based on my experience once you get into these funds and pay those fees your advisor will pass you off to a more junior one. But I digress 😄
As you get older, you will spend less, It wont be a problem.
Here in AZ there is no tax on social security so I am planning at age 64 to take SS. Why would I pull monies out of my 401k and pay taxes on that money which would result in pulling more money out of my 401k to get the net of $3000 a month.
15:36 so at the end, is he saying someone needs 4.9 million dollars portfolio to spend 100k a year in retirement ?
No - not at all - pay attention, that was the final lifetime earnings of the initial investments over time - started with $1.5M.
@@alanmoore2197 thanks for the response. so a 1.5million portfolio had a 65percent success rate in the vid.
Is that what he tells us what we should have to generate a 100k/yr ?
@@alanmoore2197 thanks for the advice !
Yes that’s my understanding too
100k a month? nice try, but people earn that much won't watch this video..
You describe a pension as a guaranteed source of income. I have several friends whose employers underfunded their pension plans and now they are only getting a portion of what they were lead to believe they would be receiving.
Am I misunderstanding this and the pension I have is somehow insured to prevent from getting screwed in my retirement years?
Private corporate pensions CAN go under and leave you with 10% or worse of the promised amount. In short, great to have, but not a guarantee.
I always thought that pensions are guaranteed. I work for a company that went bankrupt 2 times in last 20 years and the pensions untouched and every penny is getting paid.
It doesn't always happen that way. You are fortunate.
Eeks! Big rambling preamble.
Might start with the amount range, then narrow in at how you got there if you really want to make this concise and interesting.
I’m with you brother! 👍🏽
It can't be easy or concise - if you make it easy you are fooling yourself and making it inaccurate and far too simplistic, there are many impactful variables that pretty much always do vary significantly.
So what you’re saying is we should wait until we are dead to start drawing the money we save
If a person has to wait til 70, I agree. I retired at 58 and believe me, ageism starts, so getting to 70 will be hard for many unless u own your own business or work at McDonalds. The answer should be do I have enough to retire at 63 with 1.5 M, the answer is no if 100 K a year is essential. I would consider a cheaper country where you dont need 100K to live. Retiring at 70 must have been a kick in the guts.
From the look of things, It can't be overemphasized that, Cash is thrash! 3 BEST and surprisingly easy ways to double/hold your funds in 2021; Cryptt, Real Estates, who can guess the 3rd?...
organ harvesting.
Nothing worse than being 88 and low on cash.. I'd disagree I think never enjoying life because you we're skimping is bad too. People at 88 are not often skydiving or seeing the world. But at 63 they might be. This guy never seems to answer the specific question asked instead he always moves from I want to retire at 63 to lets retire at 79 or 85.
Goodness. 100.000$ after taxes per year?!? Why would anyone need this much?
Livin the baller lifestyle
Need is a very different beast than desire. I mean, sure, I don't need $100K per year after taxes. But if I had it I could figure out a way to spend it!
2 people & 100k isn't much. Living is costly, don't underestimate.
@@todda2026 While in some places that is true, if you want to retire in Manhattan the cost of living is much greater than in rural Ohio, the median household income for retirees is about $50K. Not too surprising given the median family income is around $60K (before taxes).
But if you set yourself up well, in retirement you are no longer paying social security or FICA taxes, you are no longer saving for retirement, you are no longer paying for college, you are no longer paying a mortgage or at least your payments are now very low - all to say your expenses should be much lower than earlier in life, especially if you had kids. Other things like health may go up. But for example my retirement cost of living is about 55% of when working and paying to raise kids, save for retirement and college. And that includes fun stuff like travel, dinner out and such.
great
I spend around $40K a year and have a positive cash flow. Most of my estate is going to charity.
Most of my estate is going to charity too.....my children.
@@sharonh2991 Agree, give to your family. Most charity organizations are ripe with fraud IMO.
If you NEED to spend (because no one WANTS to spend) 100.000 a year, it's time to move to a cheaper place.
If you need to spend 100.000, I bet you had enough money to pay your living property in full, so you should be able to spend way less on housing than when you rent, and on top of that, you don't have children in the house. So sell that big ugly house and live in a smaller place. Ideally, buy a penthouse and you hardly have any maintenance costs. Ofcourse you have taxes and bills for the general parts in the appartment building.
And ask yourself: what do you need to purchase when you're 65? You're done with spending on your children, and unless you're a material gimmicks freak, you spend money on living comfortably (restaurants, good wine, travel, whatever). If you still have holes in your pockets to finance your too-big boat or yearly golf club subscription, it's time to think about making donations to poor people, if you care more about being happy and making the world a better place.
I would also add, personally I want $100,000 today but, those funds are adjusted over time for inflation!
I also want to leave that nest egg behind for my Daughter! Legacy wealth!
This showed the $100K withdrawal adjusted throughout for inflation. Legacy inheritance was not part of the question posed - but easily could be added.
I plan on drawing at 54 to 56.
Is it possible that I can transfer retirement money (no paid tax yet) to LIRP for 5 yrs and not touch it and get some income after 5 yrs
Per Forbes -
“This technique is not suited for everyone and does not replace your 401(k)s or IRAs. If you are at a point in your life that you do not need life insurance, you may want to consider a Roth. Also, consider maxing out your 401(k)s and IRAs prior to funding a LIRP, as employers often will match your contribution to a certain limit, which is essentially “free money” for you. If you have already maxed out your other tax-advantaged retirement savings plans, LIRPs can be a good alternative to obtain a tax-free income stream in retirement.”
When you say $100,000 per year to spend … is that per person of a two person marriage/relationship; or is this for the couple?
This video is speaking of spending $100,000 a year total for a couple, not per person.
If loan companies can crank out loans like a machine gun using AI, this kind of so call planning looks primitive.
My guess would be 3+ million.
I like your videos but you never have examples for people that are only going to live to 85 or so. Its always 90 plus. More than 50% of retirees will not live past 85 that is a fact. You say It's not prudent to plan for a shorter life expectancy, but it's just that you have to have more money so some think that they need more and can't retire. You can give the two examples you just don't.
Life expectancy has been decreasing the past few years, especially with drugs overdoses, COVID, etc.
Why does it take so long for this guy to get to the point? I've seen it in his other videos.
3-4 millions.
If you have to ask you can’t afford it.
I would like to know how moving from a high tax state of NY to Florida would also help with taxes.
Not as much as you think. NY doesn't tax retirees on certain pensions and SS up to a certain amount and has a lower property tax rate for elderly. With selling your house and moving, you end up paying brokers and lawyers and other fees so you end up spending a lot more just to "save in taxes"
Why the heck does anyone need to be spending as much as $100k/year in retirement?
Depending on where you live a 100 K is really not really that much
Even in high cost of living livings , $100,000 is still a lot of money to spend, assuming you are debt free, and have mortgage paid off, kids gone and college paid for, and no other financial obligations plus great health... Still plenty of $ to splurge on the grandkids, buy Hermès bags, eat at the French Laundry, travel the world a couple of times a year first class, but maybe it’s not enough to own a yacht or a private jet. .
@@aaronosborn7395 On one level, what counts as "not that much" is subjective. If you feel you are struggling, then that is the way you feel. However, there is definitely something jarring about people who are better off financially than 95% of the other people in their own cities saying that they don't have that much. Objectively, they actually have quite a lot! Looking at the $100k/year example, the average salary in Manhattan is just under $70,000 per year (before tax). Manhattan is a pretty expensive place to live, yet most people get by. Obviously, a lot of workers there commute. At any rate, the point is that from an objective perspective, a retiree who has $100,000 per year after taxes is doing pretty well. Maybe not great if they live in Manhattan and have to rent (they should probably buy in Queen's), but they still have somewhere around twice the disposal income of the average person working in that very expensive city. In most places in the country, $100k after taxes for a retiree is a ton. Again, a person may subjectively feel that it isn't. Fine. And relative to Elon Musk, it isn't a lot. But in normal language, concepts like "a lot" and "not that much" are generally used to compare something to an average exemplar of that thing in the same environment. It's just improper use of language to point to a giant salt mine and say "that's not a lot of salt", even though it is true that there are bigger salt mines. The fact is that if you've got $100k/year after taxes in retirement, you're wealthy. You have a lot of money. If for some reason you like to see yourself as a struggling middle class person, go ahead, but you're not.
In my elementary brain, why do analysts always apply inflation to the entire investment return? In his $100k example, what if the couple only spends $60,000 per year on goods and services. Shouldn't the 2.5% inflation rate apply only to the $60,000? If that is the case, the "effective inflation rate" on the entire investment would be much less than 2.5%.
What kind of spending other than spending for ‘goods and services’ are there? Even charitable giving is tied to inflation. A tip of $2 20 years ago was great. Now a tip of $5 is great.
Think of it this way, if you put the $1M in a safety deposit box, it will still be $1M in 10 years. However, inflation waits for no one, so ignoring compounding interest, your $1M now has the buying power of $775,000(2.5% x 10 = 22.5%, $1M less 22.5% = $775k), because prices have gone up 2.5% per year. Does that help?
@@jgk9820 All of this makes complete sense, but if you have 1.5M in a SD box your not doing yourself a favor. Invest in something to hedge inflation. Converting to Roth IRA seems logical, but that tax bill would be hefty IMO. Buy property and generate income that way maybe, stash away money in something that rises with inflation:). Not saying anything negative about the presentation though, all good stuff I'm learning from!
@@todda2026 no, no, no, your missing the point of the example. I’m simply attempting to explain the loss of buying power and why the inflation rate applies to the total $100k and not just the $60k. Apparently I missed the mark entirely.
@@jgk9820 All good, I get the buying power and inflation argument. Makes total sense & also something we should all plan for! Thx
$200,000, unless you can make it through the Great War.
Did you ever really answer the question “ Can a couple retire with 100k” If you did, then I missed the answer. You did give me many confusing things to think about though.
That wasn't even the question he started out with? Question was can I pull the equivalent of $100K per year after tax (with a starting point of $1.5M investments).
Can a couple actually retire on $100K - Probably not - unless you can live on
Alan Moore Agreed. I didn’t word my response well. But still I am unsure of the answer because I missed what a couple would need in order to pull 100 K from their portfolio given inflation rates.
@@pattyfavazza4744 There is no simple answer - it depends. He showed a specific case where $1.5M was most likely (%) enough - but he assumed starting investments & mix (of Q/NQ/TF), future inflation rate, tax strategy & future tax rates, the couples other income, social security income & timing, when they would each die. Obviously all these things can be and likely are very different. The analysis he ran also evaluated many different investment return sequencing scenarios - hence the 'confidence of success' % ("success" being defined as money left at the point you are both both dead). It was actually a good generic set of assumptions - but it likely needs tailoring.
Alan Moore yes, so in this day in age, given all these variables and things to consider, it is very difficult to have the confidence to retire. So, as someone who is trying to prepare, when I saw the title, I was hoping to not only explore all the factors to consider, but also some sort of concrete answer to the question. My hope was to gain some confidence here.
Hi Patty, I'm doing another video today, released in a couple weeks, to address your specific questions. Truth of the matter is there is no silver bullet or simple answer. These videos only provide a snapshot of the current situation. They are designed to open your eyes to everything that goes into retirement planning. Plans change and need adjusting over time.
About $2.5 million. Next!
i see what you did there 🤣🤣
Huh? 100,000 dollars a year!!! I can't imagine spending $100,000 a year. This obviously isn't the channel for me.
If you make 50k a year after tax, you can plan to retire with 50k a year.
@@san209nha9 What you wrote makes no sense. If I make 50K I can plan to retire with 50K?? Not unless I have $50K a year in retirement savings to spend.
@@twilde3754
1- If you make 50k after tax, that means you make 70k as gross annual income. Over the 30 years of working, and if you pay tax, your social security income will be around $2.5k a month at your retirement age.
2- If you can save $200 a month to your Roth IRA, with 10% return from mutual funds, after 30 years you will have 434k. When you retire you can cash out 10% profit from your Roth IRA (without paying income tax) which is 43k per year (3.5k per month)
3- Your total retirement income will be 6k (2.5k + 3.5k) per month, or 72k per year (more than 50k target) and you don't have to pay tax for income that you earn from Roth IRA.
Probably not, you probably weren't ever an over achiever either. You obviously haven't put multiple children through post graduate degrees. I've paid more than that in taxes. It's all relative, though. If your comfortable where you are, that's great. Spending 100K in a year, doesn't mean your living high on the hog. Also depends where you live. Location can double your spending, without increasing your quality of life.
@@twilde3754 I just want to share the real life experience. It's up to you to have the will to do it or not. In addition, nowadays the fund managers can do a lot more efficient than 10-30 years ago, so 10% annual return is very easy, 15% becomes normal. That means if you have 20 years to work, you still can reach the goal of 500k or 1 million in your retirement IRA.
Currently I don't have a 100k net from the working income annually. But when I retire in 5 years I can have 100k net from my retirement income.
I would lower the bar not everyone has 1.5 million dollars, make a new video
Do you know how to multiply and divide? Do you have $500,000 (1/3 that much)? Then divide the spendable amount by 3. Do you have $3 million (2 times as much)? Multiply by 2. Etcetera.
Dude get to the freaking point.
$2.5 million invested in 50/50 stocks and bonds. Less if you have a pension and social security.
Bonds take you backwards. Bonds dont even cover the cost of living increase. Better off with preferred shares or dividend paying blue chips for security.
@@bradevans3815 this is a 30 year retirement. You cannot base your retirement strategy purely on today's rates. Bond rates change over time just like stocks. If a person retired in 2000 during the decade when stock returns were practically zero would you be saying stocks take you backwards invest in something else? The point is when you retire you need to look at your retirement portfolio from a long term 30+ years mindframe rather than what's going on today.
My guess too
@@ariefraiser140 Bonds have done nothing and will continue to do nothing for the forseaable future. With huge debt mounting constantly, bonds are no longer a safe haven. Could even see defaults. I would tread carefully and dont listen to so called financial experts. A few years of backwards rates and you will never get the returns you hoped for.
$100000 a year realy that’s not the average man my friend lets use our common sense
Most people live on $1500 a month
Way to complex for the “average” individual to comprehend. Never really answered the question of how much you need to have 100K income after retirement. Just get to the point and dumb it down a bit. You’re a more than qualified financial advisor. Most are not on your level so make your explanations a little more basic. Just my 2 cents.
Actually he told you in the beginning 1.5 million but that said if you don’t pay attention to taxes you won’t have any money at the end.
Delay spending your working capital when possible. Example:
Borrow three years of expenses. Finance it for 10. After three years, take a distribution and repay the loan. Repeat.
With three additional years of compounding, capital gains should more than beat inflation and interest and marginal tax increase from large distribution.
You win.
So, be in debt as much as possible abs use the capital for aggressive investing? Interesting idea - doe anyone see a problem with this approach?
I don't think your math works... if you look at staying in the 12% bracket you could take about $100k out of your qualified account, and owe about $10K in taxes when you factor in the standard deduction. That leaves about $90K per year with a total taxes of $30k. To borrow enough money to spend $270K in 3 years, you might need to borrow about $400k. (270 + about 40% more to cover the monthly payments and finance cost). The loan will still have a balance of about $300K after 3 years. To pay that back with taxes you need to take out about $350K. Since it is done all at once you will max out the 22% and go into the 24% maybe $50K of taxes.
@@jerrylabat550 True, however You missed my point of delaying any spending of working capital for three years. It isn't primarily a tax strategy. This is only a simple suggestion to get an additional three years of compounded returns to offset interest and additional marginal tax. If your total return doubles in three years, great. Opportunity cost can easily exceed marginal tax increase.
However the opposite is also true if the working capital decreases in value over the three years. Yikes.
Cheers.