Thank you, I agree. I plan to retire at 61 in 6 months. I'm 60 with 5 rental properties, pension, 401K and Soc. Sec at 67. I plan to spend more first 10 years and I have assets to fall back on if I need a plan B. Many people tell me to keep working because I'm too young. I don't think they understand that managing 5 rentals is a part time job. That with Travel, Golf, Gym and Boating is plenty to keep me busy. I'm not retiring to sit down and do nothing. I am retiring to have more time to do the things I want to do. I have worked hard and saved and invested my whole life so I would be able to retire early and healthy enough to enjoy life.
This is why taking monthly pension payments instead of a lump sum is almost always better. Let pension and SS do the heavy lifting in retirement. Then supplement your income with your IRA. I also told myself at 60 that I could work until 66 and 10 months, FRA. Now 64, I’ve hit the wall and will retire next year at 65. You know when it’s time.
I retired at 57-1/2 and my $1700 pension wouldn't have come close to my needs. And, when I die, it's gone! I made out much better with the lump sum. The downside is, currently, I have no guaranteed income. That is my reason (in addition to excellent health and genetics) for delaying Social Security to at least 67. That will be my only guaranteed income and will cover my expenses by a factor of two. Pensions vary, but for most, the lump sum invested will return more than the monthly payout. Most pensions (not reduced for spouse) disappear when you die, and it's not unheard of for pensions to be underfunded and run into problems. But, it's a personal choice.
As long as you aren't worried about creating generational wealth. Pensions, annuities, and social security are all wealth sinks. You pay in massive levels of wealth and when you pass on, your children get none of that wealth. These are all mechanisms that steal generational wealth from the working class. I specifically chose a 401A instead of a pension. I have $250k in there after 15 years. When I hit 60 I'll have over 1.6 million in there. If my wife and I die in a helicopter crash in the Caribbean after we retire that wealth won't evaporate it can be passed on to our children.
Almost All utube ch were saying TAKE LUMP SUM NOT MONTHLY PAYMENTS! Until last year? Now suddenly they are saying take Monthly Payments? I get a decent Pension? Only $1842 p mo $22k for yr? But it is steady income. But fixed, no COLA I am single no kids so I don't need to leave a legacy? I want theyxsteady income. I Also have $350K IRA the pension payout is almost 10%
Very helpful, especially the reminder that the 79% Monte Carlo score at the end isn't a definitive "failure" because the severity (given pension and SS) of failure is relatively mild.
Thanks James. I had an epiphany after reading the book 'Dying With Zero'. You covered the most salient point: your retirements savings should also enhance you and your family's life while you are living. Not just enhance your heirs afterward. You are one of very few who acknowledge that dying with the most shouldn't be the ultimate goal for planners.
I believe some of the “adjustments” along the way during retirement that James alludes to includes the significant chance that Social Security and Medicare could cut benefits less than 10 years from now; that poor health could strike at any time and impose additional costs for home health care and even long-term care; or some other calamity. I do agree with his point about trying to enjoy retirement life more fully if health and finances allow, within reason. Many people automatically assume they can work more years if they must or simply want to, but so many life events can stymie that. We can only prepare as best we can, starting decades in advance.
This is one of my favorite videos from you!! Seeing real life examples really make a difference in understanding retirement decisions. We had the same situation - - leaving too much at the end so we got to exit work at 60 and 56!!! Totally agree - make your plan optimize your Life!!! You are such a talented speaker and I love your videos!!!
Thanks James for the wonderful video. This is exactly applicable to us. "No point in leaving a bunch of money at the end, it's the life experiences that matter" - resonated with us. Contemplating retiring in another year at 62 and managing expenses within SSI and taking out from 401(k) as needed. Zero financial liabilities. Thanks again.
This is a great way to think about it. And, honestly, one of the main reasons I’m considering the need to hire an advisor. I feel like I have a pretty good grasp on what I need to be doing today to accumulate and invest - but the end goal and withdrawal strategies are where I feel less confident.
Very good video. Love seeing planners not fixated on getting people to save ever more money, and instead getting "enough" money and living a happy life. Money does not equal happiness, except maybe for planners that are asset managers and get more money by having their clients save ever more money. Only quibble I have is with the expenses projection. It is verified fact that retiree spending declines over their lives, even adjusted for inflation. Dataset after dataset has shown this for decades. Right Capital even has this as a built-in model (Bernicke's Reality Model). Displaying the plan using this expense model, along with some of the other built-in models (like spending smile) can make this type of presentation even more informative, enlightening, and more importantly realistic.
Great video James. The hard part is knowing how much to keep in reserve to ensure not running out of money. I'm thinking anyone who is prudent will end up leaving a significant portion behind to their heirs.
I'd love to see a scenario for an average middle class single person looking to retire at age 60, with a mortgage, $1 million portfolio and delaying SS until age 70. I love these plan analysis videos! However, we need to see more scenarios for single retirees. Millions of American retirees are single and that number is growing every year. Financial content creators need to realize this and talk more about the different challenges and/or advantages that single retirees face.
Seems like it would be simpler, what complications would single people face that married people don't? Keep in mind that married couples still need to plan for the possibility of a surviving spouse (e.g. what if the spouse with the large pension dies and there isn't a big survivor benefit?).
I agree. This isn't a nicely formatted case study, but I retired in 2014 with < $600K and just renting. My Plan A retirement was to retire to Hawaii. However, when I was 53, my mom had already had 3 heart attacks. My dad had 2 heart attacks and 2 strokes. My annual spending was $33K-36K. So, My Plan B kicked in, and I retired. I did Texas Obamacare for the 1st year at $330 a month with a $10K deductible. I moved to a small town in Arkansas, less than 1 hour away from them, and annual expenses went down to $18K. #1 Tip: Investment outside of retirement accounts, at a young age!!! If you retire early, you need it. Also a good way to avoid taxes. I had around $200K in a taxable account, now down to $102K. Long term capital gains isn't Federally taxed until $41,675 for singles, then taxed at 15%. IRA distributions are taxed as ordinary income. #2 Tip: Know your state's laws. Obamacare would have been $550 a month, but Arkansas Medicaid was free if my income is < 1.33 x Poverty level. I picked the frugal route. Now I just have to pay $4.70 for some prescriptions under Medicaid. Arkansas taxes long term capital gains at 50%. So, $8K of capital gains only counts as $4K of income. Under $10K of income in Arkansas = No income tax. So, my 2nd -9th year of retirement, I had free Medicaid and kept my income low using cash savings and long term capital gains. In your taxable accounts, If your stock is up 80% and long term taxable gain is $8K, you also pull out your original $10K tax free. So, I funded my retirement using my taxable account, while staying below the 1.33 x the poverty level. #3 Tip: Know your state's retirement laws. At 59 1/2+, Arkansas doesn't tax the 1st $6K from a retirement account. So, I started taking $6K from my IRA each year. At 60+, I can take free classes at state funded colleges, with some limitations. Pre-Covid, they had 5-6 free movies with free pizza. Also, lots of clubs or events with free food. I enjoyed the student dissertations with free lemonade and cookies. I used to be able to go to the free student clinic. They stopped that last year for 60+ students. :( Once I hit 65 and start Medicare, my IRA will be my main source of income, $59K a year, until I hit 70 and Social Security around $40K a year + $6K from my 401k Arkansas tax free and maybe some long term capital gains. #4 Tip: Have some Roth account(s). Roth gives you flexibility, after 5 years. Some possible penalties for younger than 59 1/2. I have $16K in a Roth account from 2008. I can use it for emergencies, without raising my income.
One thing you may want to take a look at is the rate of return assumption between the ages of 60 and 67. I think you assumed somewhere between 6% and 7% if I remember correctly. For that short time period, I might take it down to somewhere between 2% and 3% and re-run the numbers. I think that would definitely move the needle in the success probability calculation without changing anything else.
I totally agree with you; 6 or 7 percent as the rate of return is almost 3x of what is realistic as 2 or 3 percent. If your draw-down rate is 4%, then you are going in the hole.
Hi James, I've recently retired (after crunching my numbers) at 55. I really enjoyed your different perspectives. Just some things to add. 1) As I get older, my time is more valuable than money, where time is finite and money can always be made. 2) I have children, and providing some inheritance is my last gift to them. However, too much of a good thing is not always a good thing (aka, money); eg entitlement, my children not practicing stealth wealth (poses security risks), buying expensive bad habits. Hence, I calculate the near sum of zero when my wife and I reach our 90s (minus the inheritance sum and humble abode). 3) If you can get by on your "core" streams of income, worst case scenario, you can probably still live a frugal life, and be humble about it. Happy retirement!
Always very wise and balanced advice, using data at the core of the analysis. More financial advice should be given this way. Far too many use the old rules of thumb without any nuance or analysis. I recently lost a friend (several decades older than me), but he had just retired about two years ago. He had $10M+ in assets. While I know he enjoyed what he did for a living, I ask myself how much MORE of life he could have enjoyed if he would have retired sooner. Once he made that retirement transition, he loved it... and the time he spent with his hobbies. I'm conservative and want to ensure I'm financially secure... and truthfully, I'm sure I'll postpone retiring later than I should simply as a result. BUT, I'm not going to extremes. I enjoy this kind of analysis because it brings a reasonable approach to the question... and it balances the extreme goals of "100% success rate" with the practicalities of life... and bringing it back to the questions that should matter most: what are you hoping to get out of life... what is this portfolio's purpose. Nice work, James.
Good on you suggesting earlier retirement vs more assets at expiration. Lifetime safe and secure job people tend to over-save. But their mortgage should've been paid off by 60 easily.
Another great video. Thank you! I recently went through a retirement financial planning process with a cfp and we had an 85% confidence level in the plan. I was struggling a little with why not go up to 95% confidence. The way you framed it in the video was very helpful in explaining why going to a super high confidence level may not always be the best way to go and that a plan can always be adjusted going forward as needed.
@16:50 James Canole...hated by all children of retirees. 🤣 But the severity of failure makes perfect sense. I've never thought about it from that perspective. Like most people, I'm just in squirrel mode of saving, investing, saving. Another great video. I've been binge watching and doing your course (highly recommended) for the last month or so.
This was really helpful! Thank you so much. I would like to see a real-life scenario of someone who thought they had ideal plans, investments looked good, etc. and then as they retired, it went really bad, to illustrate what type of pitfalls to avoid. That is the ultimate fear so would be really interesting to see an example of that.
Great video James. I think my husband and I are close to Jim & Jennifer’s scenario but we’re think of retiring sooner than initial plan. We don’t have children to leave $ to but I worry that we might not have enough. It makes me hopeful that we can make it work.
Your observation about using available funds to live and not hoarding cash are spot on , to a degree. My own numbers from 2 years ago showed a similar pattern. My advisor said that I could have retired the prior year with no worries! But on further discussion, as a single senior I need to be aware of the likelihood of long-term care. LTC is very expensive. I hope to self insure and rely on my pension, Soc Security, and 401k withdrawals if and when I need LTC. So I adjusted slightly, but I could still pass with a few million if 8 never need LTC, and I'm OK with that.
I only see that situation as a downside if someone is unhappy in their job. I loved my job until circumstances changed. I'd planned to retire at 60 but chose to retire at 57-1/2. My portfolio will continue to grow and really accelerate at 67 or 70 when I begin Social Security. I'm completely satisfied with my lifestyle and give to charity. I plan to leave a legacy for my family, and from what I'm seeing, my daughter's decendents will receive even more! I wish I had that kind of financial security and peace of mind through my life. That's my gift to my descendents, no regrets!
Perhaps my favorite video you've done to date. These Monte Carlo simulators seemed designed to give us a safety blanket to assure us we won't be broke when we are older, without focusing on how to enhance your retired quality of life!
Im 54,I was so excited about my plan and Monte Carlo score of 94. I real thought I had an above average , aggressive spending plan in retirement from 60 to 80 .Thank you for another viewpoint. Going to redo some scenario’s and up the spending to lower my score .
I'm starting to approach that 100%. I slowed down the progress by switching to part time work, but I'll probably have to start traveling more. Biggest risk then might be finding a comfy and affordable place for an expat retirement and then having too much money again with the lower cost of living.
Excellent perspective, even counter to “conventional wisdom”. Love these scenario videos, particularly when they are real world mainstream examples… and have wrinkles in them.
Your approach to retirement planning is spot on. It's not just about saving for the future, but enjoying life now. Your case study shows that it's okay to spend and live your dreams in retirement, not just hoard money.
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Thank you, James, for putting in the time to give such detailed examples that still lead back to principles and to the big questions about retirement. You have fundamentally changed the way that I think about retirement, taken away a lot of the mystery and scariness, and given me a more practical, positive, and here's a big one--purposeful--vision for the kind of retirement that is possible. I appreciate so many of your videos, but the one that stuck with me recently was about the six things to have in place before retirement, i.e., strategies for income, investment, taxes, insurance, and estate planning, landing with #6, having a purpose for retirement. I always learn something from your presentations, James, but I realize that I'm the only one who can decide an a purpose that scratches the deep itch for meaning. I'm working on that, and I very much appreciate your regular reminders while I keep learning about the financial and practical aspects of retirement planning. Thanks, and God bless you.
Thank you, James. This is our exact situation. Strong pension income and two decent SSA's to look forward to as well. It has made retiring at 55 in 17 months seem very realistic. It does make us comfortable spending a little earlier as we have those other safety nets in place.
Fantastic video, James! Your major points on using money to maximize life is 100% the appropriate focus. Traditional retirement planning previously left me varyingly focused on other, less important, aspects. More videos like this please!
great that you are extimating the cost off living against core expenses since adding a house would wildly overestimate the needed income. however the spending smile and the coverage of LTC using existing physical assets (Housing - your Plan B) indicate fewer expenses during the slow-go / no-go years. Do you have software or do you use the Ty Bernicke reduction of expenses by 1-2% per year to a base value over retirment? Add more expenses for travel / care-giving and earlier retiremennt >>>>> GREAT advice -- 100% statistical coverage showing how much extra money you would probably have is a GREEN FLAG
I liked that in this video you gave some examples for people to listen to about actually living life to live... not to work. Retire and start living life people.
I like seeing the perspective that Monte Carlo is the chance of making an adjustment. One thing that I’ve yet to see from any advisors is a video on determining when an adjustment is required from a tactical management perspective. If someone has a 50/50 portfolio and it drops 30%, now what? What are you using to decide if a spending reduction is needed or if you’re going to spend as normal through a market correction or crash?
I have a son who is severely autistic. I have a goal of leaving him a well funded special needs trust to help him when I am gone. This example is not near what I have, but I am striving towards it.
I have an autistic child too but he does work at a retail job making $20,000 and he’s going to need our help because he doesn’t earn enough to support himself and has social skills issues. He can drive a car but he doesn’t have a girlfriend. Women aren’t too interested in him and he spends a lot of time by himself. He has a few friends who are also in the same boat. I’d like to see this covered in one of these simulations. Providing for an adult child who has disabilities. We have our home paid off and a good net worth and my husband gets a pension of $30k. Husband has had a health scare so he’s working part time now. We’re in our early to mid 60s now. Holding off on ss for another year until age 66 to maximize ss benefits. He is supposed to get 3700 at age 66 and a half. I stayed home so I will collect spousal benefits.
I really enjoy your website, you give some of the best advice and you are correct People have to learn how to enjoy the money they spent their whole life saving.
This is a great video, James. This case study resonates with my situation as it relates to having 2 pensions and 2 strong Social Security benefits and not having to rely heavily on my portfolio assets. Please continue to provide more case studies like this with RightCapital.
James, really enjoy your video, the end about what you want to be once you retire. My wife and I talk about this more than anything else. I am a little worried about the next phase and she is content on dealing with it when the times come. Great stuff and thank you so much!
I just found your videos today and they are a breath of fresh air. I'm 42 and my spouse is 46 and every few months I panic a bit about our retirement savings and if they are adequate. I also sometimes worry that I'm being overly cautious. I use Empower Retirement and the simple plan I have created for savings estimates 100% success. For someone 20-25 years from retirement, so still saving, and also with pretty solid fixed income (1 pension and 2 social security) what percent success rate do you recommend?
Great video with interesting food for thought. With my educator pension and strong investment portfolio, I'm in a similar situation, so this is a great thought exercise with different outcomes and goals.
Really appreciate this video and the breakdown of the inflation effect. I will say that my experiences will not require all of my portfolio either. I know what I will enjoy and if there is legacy wealth left for the next generation, that is ok too. Thank you!
Every time I watching your video, I really enjoy it. I like the ideas to retire early and enjoy life as you described in this video. Thank you so much for excellent video. 👏👍
Excellent video, as always. Many parallels to our current situation. Would be interested to explore scenarios where the spouse with the pension and SS predeceases their partner. What are some viable plans for the surviving spouse if 2/3 of the couple’s guaranteed income goes away?
Thank you for the perspective on what a 50% success rate means. I will likely have a pension, and with social security, all that income outside my portfolio covers over half of my current living expenses. I will run some scenarios where I retire earlier and push that success rate much lower. I thought I was being aggressive at an 80% success rate. I plan on having three years of cash and withdrawal flexibility at retirement. So I planned on continuously updating the plan anyway. Excited to see how soon I can transition to the next phase. Thanks again for permission to push the envelope.
Very very very few of us have a significant pension. A $48K pension and a little savings, you can retire with flying colors. Without a pension, you better have north of $2M liquid assets + paid off house to retire. I really wish retirement planners would spend very little time talking about people with good pension. It's just not relevant to 95% of us.
Can you do one where someone is in there 40's and figure out how many years at minimum they should work to retire earlier? In the video above, you have the couple retiring early, but can we see on that is opposite?
I thought I paid attention through all the screenshots you shared and scrolled, but was there a long term care cost contingency built in to the plan? At least for the expected surviving spouse?
James, according to the US Census Bureau, 46.4% of adults are single. When you present examples only for married couples you are only relevant for 53.6% of your audience. Considerations for singles are much different than for married couples. There is no one in the home to call an ambulance if they have a medical emergency, only one income covers the same bills that two income couples cover ( utilities,mortgage etc). Every other planner and their dog presents plans for married couples where one persin can act as the backup plan for the other. It is a very different calculus for a single person, no one has your back. Even married people end up single as it is unusual for both to pass at the same time. It would help the other half out if you were to explore how the planning changes.
Part of the scenario needs to include when to take social security based on anticipated longevity. The pension and social security will last them as long as they live so it should be maximized.
I like to know the answers to 99% Probability of Success. In this case, they are happy at 100% but you are always at 100% until you find the beginning of the bend of the curve. In my situation, things drop off fast as you increase your spending rate. So there isn't that much difference between 99% and 80%. but you stay out of a lot of trouble staying slightly conservative. Plus, something not anticipated may come along.
Enjoyed the deeper dive beyond the unduly singular “probability of success” number. Is it your sense that the software you are using is coming up short for your client planning purposes?
Please make a video about someone who has three retirement properties and IRA savings in CDs and no money in the stock market. Please show us what that looks like
Wow! This was actually an eye opener for me. Thank you for your great contents regarding retirement. Your videos have helped me in planning my retirement considerably.
I don't think the current Social Security landscape will look the same 10-20 years from now. There'll have to be changes to keep the system solvent. My concern for my retirement is that those changes will include 'means testing' whereby those who've sacrificed and saved for decades and have amassed some given 401K/IRA amount will see their social security payments reduced - like they do for college financial aid. For that reason, I don't include the full % of my projected Social Security benefit in my retirement budget planning. If I'm wrong, then my situation gets better 15 years from now, not worse.
Means testing is total bs. Social security is not a benefit. It is your money confiscated by the government. If others planned poorly, it is sad but not your obligation to pay for them. My strategy is to wait longer so when the government reduces what they promised, which they will because duh MATH, my retirement won't be knee capped.
With $236k in income, this couple could have been saving far more than just 10%. At least 20% would have been more appropriate at that income level, depending on location, lifestyle, etc. My savings rate is about 40%, and I'm single with an average middle class income.
Thank you, I agree. I plan to retire at 61 in 6 months. I'm 60 with 5 rental properties, pension, 401K and Soc. Sec at 67. I plan to spend more first 10 years and I have assets to fall back on if I need a plan B. Many people tell me to keep working because I'm too young. I don't think they understand that managing 5 rentals is a part time job. That with Travel, Golf, Gym and Boating is plenty to keep me busy. I'm not retiring to sit down and do nothing. I am retiring to have more time to do the things I want to do. I have worked hard and saved and invested my whole life so I would be able to retire early and healthy enough to enjoy life.
He is one of the smartest guys in this large RUclips space, James Conole. 🙏
This is why taking monthly pension payments instead of a lump sum is almost always better. Let pension and SS do the heavy lifting in retirement. Then supplement your income with your IRA. I also told myself at 60 that I could work until 66 and 10 months, FRA. Now 64, I’ve hit the wall and will retire next year at 65. You know when it’s time.
I retired at 57-1/2 and my $1700 pension wouldn't have come close to my needs. And, when I die, it's gone! I made out much better with the lump sum. The downside is, currently, I have no guaranteed income. That is my reason (in addition to excellent health and genetics) for delaying Social Security to at least 67. That will be my only guaranteed income and will cover my expenses by a factor of two.
Pensions vary, but for most, the lump sum invested will return more than the monthly payout. Most pensions (not reduced for spouse) disappear when you die, and it's not unheard of for pensions to be underfunded and run into problems. But, it's a personal choice.
As long as you aren't worried about creating generational wealth.
Pensions, annuities, and social security are all wealth sinks.
You pay in massive levels of wealth and when you pass on, your children get none of that wealth.
These are all mechanisms that steal generational wealth from the working class.
I specifically chose a 401A instead of a pension. I have $250k in there after 15 years. When I hit 60 I'll have over 1.6 million in there.
If my wife and I die in a helicopter crash in the Caribbean after we retire that wealth won't evaporate it can be passed on to our children.
I am 68 and plan to work till 70, but may hit the wall next year.
Almost All utube ch were saying TAKE LUMP SUM NOT MONTHLY PAYMENTS! Until last year? Now suddenly they are saying take Monthly Payments? I get a decent Pension? Only $1842 p mo $22k for yr? But it is steady income. But fixed, no COLA
I am single no kids so I don't need to leave a legacy? I want theyxsteady income. I Also have $350K IRA the pension payout is almost 10%
Love your perspective about money being a tool towards a fulfilling life, not a portfolio balance at death goal.
Very helpful, especially the reminder that the 79% Monte Carlo score at the end isn't a definitive "failure" because the severity (given pension and SS) of failure is relatively mild.
Thanks James. I had an epiphany after reading the book 'Dying With Zero'. You covered the most salient point: your retirements savings should also enhance you and your family's life while you are living. Not just enhance your heirs afterward. You are one of very few who acknowledge that dying with the most shouldn't be the ultimate goal for planners.
I believe some of the “adjustments” along the way during retirement that James alludes to includes the significant chance that Social Security and Medicare could cut benefits less than 10 years from now; that poor health could strike at any time and impose additional costs for home health care and even long-term care; or some other calamity. I do agree with his point about trying to enjoy retirement life more fully if health and finances allow, within reason. Many people automatically assume they can work more years if they must or simply want to, but so many life events can stymie that. We can only prepare as best we can, starting decades in advance.
This is one of my favorite videos from you!! Seeing real life examples really make a difference in understanding retirement decisions.
We had the same situation - - leaving too much at the end so we got to exit work at 60 and 56!!! Totally agree - make your plan optimize your Life!!!
You are such a talented speaker and I love your videos!!!
Thanks James for the wonderful video. This is exactly applicable to us. "No point in leaving a bunch of money at the end, it's the life experiences that matter" - resonated with us. Contemplating retiring in another year at 62 and managing expenses within SSI and taking out from 401(k) as needed. Zero financial liabilities. Thanks again.
This is a great way to think about it. And, honestly, one of the main reasons I’m considering the need to hire an advisor. I feel like I have a pretty good grasp on what I need to be doing today to accumulate and invest - but the end goal and withdrawal strategies are where I feel less confident.
Would love to see more single incomes household scenarios. Married, but only one income, changes the equations I am sure and one I relate to.
Thank you for the feedback
Very good video. Love seeing planners not fixated on getting people to save ever more money, and instead getting "enough" money and living a happy life. Money does not equal happiness, except maybe for planners that are asset managers and get more money by having their clients save ever more money.
Only quibble I have is with the expenses projection. It is verified fact that retiree spending declines over their lives, even adjusted for inflation. Dataset after dataset has shown this for decades. Right Capital even has this as a built-in model (Bernicke's Reality Model). Displaying the plan using this expense model, along with some of the other built-in models (like spending smile) can make this type of presentation even more informative, enlightening, and more importantly realistic.
Great video James. The hard part is knowing how much to keep in reserve to ensure not running out of money. I'm thinking anyone who is prudent will end up leaving a significant portion behind to their heirs.
I'd love to see a scenario for an average middle class single person looking to retire at age 60, with a mortgage, $1 million portfolio and delaying SS until age 70.
I love these plan analysis videos! However, we need to see more scenarios for single retirees. Millions of American retirees are single and that number is growing every year. Financial content creators need to realize this and talk more about the different challenges and/or advantages that single retirees face.
That’s not at all “the typical middle class single person”. 😂
Maybe do a scenario where one spouse dies young and the other one is left as a widow or widower.😢
Agree! NOT nearly enough content for single folks. E
Seems like it would be simpler, what complications would single people face that married people don't? Keep in mind that married couples still need to plan for the possibility of a surviving spouse (e.g. what if the spouse with the large pension dies and there isn't a big survivor benefit?).
I agree. This isn't a nicely formatted case study, but I retired in 2014 with < $600K and just renting.
My Plan A retirement was to retire to Hawaii. However, when I was 53, my mom had already had 3 heart attacks.
My dad had 2 heart attacks and 2 strokes. My annual spending was $33K-36K.
So, My Plan B kicked in, and I retired.
I did Texas Obamacare for the 1st year at $330 a month with a $10K deductible.
I moved to a small town in Arkansas, less than 1 hour away from them, and annual expenses went down to $18K.
#1 Tip: Investment outside of retirement accounts, at a young age!!!
If you retire early, you need it. Also a good way to avoid taxes.
I had around $200K in a taxable account, now down to $102K.
Long term capital gains isn't Federally taxed until $41,675 for singles, then taxed at 15%.
IRA distributions are taxed as ordinary income.
#2 Tip: Know your state's laws.
Obamacare would have been $550 a month, but Arkansas Medicaid was free if my income is < 1.33 x Poverty level.
I picked the frugal route. Now I just have to pay $4.70 for some prescriptions under Medicaid.
Arkansas taxes long term capital gains at 50%. So, $8K of capital gains only counts as $4K of income.
Under $10K of income in Arkansas = No income tax.
So, my 2nd -9th year of retirement, I had free Medicaid and kept my income low using cash savings and long term capital gains.
In your taxable accounts, If your stock is up 80% and long term taxable gain is $8K, you also pull out your original $10K tax free.
So, I funded my retirement using my taxable account, while staying below the 1.33 x the poverty level.
#3 Tip: Know your state's retirement laws.
At 59 1/2+, Arkansas doesn't tax the 1st $6K from a retirement account.
So, I started taking $6K from my IRA each year.
At 60+, I can take free classes at state funded colleges, with some limitations.
Pre-Covid, they had 5-6 free movies with free pizza. Also, lots of clubs or events with free food.
I enjoyed the student dissertations with free lemonade and cookies.
I used to be able to go to the free student clinic. They stopped that last year for 60+ students. :(
Once I hit 65 and start Medicare, my IRA will be my main source of income, $59K a year, until I hit 70 and Social Security around $40K a year + $6K from my 401k Arkansas tax free and maybe some long term capital gains.
#4 Tip: Have some Roth account(s).
Roth gives you flexibility, after 5 years. Some possible penalties for younger than 59 1/2.
I have $16K in a Roth account from 2008. I can use it for emergencies, without raising my income.
One thing you may want to take a look at is the rate of return assumption between the ages of 60 and 67. I think you assumed somewhere between 6% and 7% if I remember correctly. For that short time period, I might take it down to somewhere between 2% and 3% and re-run the numbers. I think that would definitely move the needle in the success probability calculation without changing anything else.
I totally agree with you; 6 or 7 percent as the rate of return is almost 3x of what is realistic as 2 or 3 percent. If your draw-down rate is 4%, then you are going in the hole.
Hi James, I've recently retired (after crunching my numbers) at 55. I really enjoyed your different perspectives. Just some things to add.
1) As I get older, my time is more valuable than money, where time is finite and money can always be made.
2) I have children, and providing some inheritance is my last gift to them. However, too much of a good thing is not always a good thing (aka, money); eg entitlement, my children not practicing stealth wealth (poses security risks), buying expensive bad habits. Hence, I calculate the near sum of zero when my wife and I reach our 90s (minus the inheritance sum and humble abode).
3) If you can get by on your "core" streams of income, worst case scenario, you can probably still live a frugal life, and be humble about it.
Happy retirement!
Always very wise and balanced advice, using data at the core of the analysis. More financial advice should be given this way. Far too many use the old rules of thumb without any nuance or analysis. I recently lost a friend (several decades older than me), but he had just retired about two years ago. He had $10M+ in assets. While I know he enjoyed what he did for a living, I ask myself how much MORE of life he could have enjoyed if he would have retired sooner. Once he made that retirement transition, he loved it... and the time he spent with his hobbies. I'm conservative and want to ensure I'm financially secure... and truthfully, I'm sure I'll postpone retiring later than I should simply as a result. BUT, I'm not going to extremes. I enjoy this kind of analysis because it brings a reasonable approach to the question... and it balances the extreme goals of "100% success rate" with the practicalities of life... and bringing it back to the questions that should matter most: what are you hoping to get out of life... what is this portfolio's purpose. Nice work, James.
I love the term "severity of failure!"
L♡VED THIS! The aim is not to DIE with as much money as possible, but to DIE with as meaningfully lived life as possible ♡♡♡
Die with memories, not things.
Good on you suggesting earlier retirement vs more assets at expiration. Lifetime safe and secure job people tend to over-save. But their mortgage should've been paid off by 60 easily.
This case study really helps put the pieces in place. Please make more content on other case studies. Great job.
James I'm from Scotland different tax laws etc but still got a great deal out of this.....thanks
Another great video. Thank you! I recently went through a retirement financial planning process with a cfp and we had an 85% confidence level in the plan. I was struggling a little with why not go up to 95% confidence. The way you framed it in the video was very helpful in explaining why going to a super high confidence level may not always be the best way to go and that a plan can always be adjusted going forward as needed.
@16:50 James Canole...hated by all children of retirees. 🤣 But the severity of failure makes perfect sense. I've never thought about it from that perspective. Like most people, I'm just in squirrel mode of saving, investing, saving. Another great video. I've been binge watching and doing your course (highly recommended) for the last month or so.
This was really helpful! Thank you so much. I would like to see a real-life scenario of someone who thought they had ideal plans, investments looked good, etc. and then as they retired, it went really bad, to illustrate what type of pitfalls to avoid. That is the ultimate fear so would be really interesting to see an example of that.
Great video James. I think my husband and I are close to Jim & Jennifer’s scenario but we’re think of retiring sooner than initial plan. We don’t have children to leave $ to but I worry that we might not have enough. It makes me hopeful that we can make it work.
Great point about the severity of failure
Yeah, more examples like this please
I never heard of that “probability of success” retirement number. Thanks for the education.
Your observation about using available funds to live and not hoarding cash are spot on , to a degree. My own numbers from 2 years ago showed a similar pattern. My advisor said that I could have retired the prior year with no worries! But on further discussion, as a single senior I need to be aware of the likelihood of long-term care. LTC is very expensive. I hope to self insure and rely on my pension, Soc Security, and 401k withdrawals if and when I need LTC. So I adjusted slightly, but I could still pass with a few million if 8 never need LTC, and I'm OK with that.
I only see that situation as a downside if someone is unhappy in their job. I loved my job until circumstances changed. I'd planned to retire at 60 but chose to retire at 57-1/2. My portfolio will continue to grow and really accelerate at 67 or 70 when I begin Social Security. I'm completely satisfied with my lifestyle and give to charity. I plan to leave a legacy for my family, and from what I'm seeing, my daughter's decendents will receive even more! I wish I had that kind of financial security and peace of mind through my life. That's my gift to my descendents, no regrets!
Perhaps my favorite video you've done to date. These Monte Carlo simulators seemed designed to give us a safety blanket to assure us we won't be broke when we are older, without focusing on how to enhance your retired quality of life!
Im 54,I was so excited about my plan and Monte Carlo score of 94. I real thought I had an above average , aggressive spending plan in retirement from 60 to 80 .Thank you for another viewpoint. Going to redo some scenario’s and up the spending to lower my score .
I'm starting to approach that 100%. I slowed down the progress by switching to part time work, but I'll probably have to start traveling more. Biggest risk then might be finding a comfy and affordable place for an expat retirement and then having too much money again with the lower cost of living.
Good job James. There isn’t any money box on a coffin. Enjoy what you have earned.
Excellent perspective, even counter to “conventional wisdom”. Love these scenario videos, particularly when they are real world mainstream examples… and have wrinkles in them.
Your approach to retirement planning is spot on. It's not just about saving for the future, but enjoying life now. Your case study shows that it's okay to spend and live your dreams in retirement, not just hoard money.
Thank you, James, for putting in the time to give such detailed examples that still lead back to principles and to the big questions about retirement. You have fundamentally changed the way that I think about retirement, taken away a lot of the mystery and scariness, and given me a more practical, positive, and here's a big one--purposeful--vision for the kind of retirement that is possible. I appreciate so many of your videos, but the one that stuck with me recently was about the six things to have in place before retirement, i.e., strategies for income, investment, taxes, insurance, and estate planning, landing with #6, having a purpose for retirement. I always learn something from your presentations, James, but I realize that I'm the only one who can decide an a purpose that scratches the deep itch for meaning. I'm working on that, and I very much appreciate your regular reminders while I keep learning about the financial and practical aspects of retirement planning. Thanks, and God bless you.
Thank you, James. This is our exact situation. Strong pension income and two decent SSA's to look forward to as well. It has made retiring at 55 in 17 months seem very realistic. It does make us comfortable spending a little earlier as we have those other safety nets in place.
Well done James!
Fantastic video, James! Your major points on using money to maximize life is 100% the appropriate focus. Traditional retirement planning previously left me varyingly focused on other, less important, aspects. More videos like this please!
great that you are extimating the cost off living against core expenses since adding a house would wildly overestimate the needed income. however the spending smile and the coverage of LTC using existing physical assets (Housing - your Plan B) indicate fewer expenses during the slow-go / no-go years. Do you have software or do you use the Ty Bernicke reduction of expenses by 1-2% per year to a base value over retirment?
Add more expenses for travel / care-giving and earlier retiremennt >>>>> GREAT advice -- 100% statistical coverage showing how much extra money you would probably have is a GREEN FLAG
I liked that in this video you gave some examples for people to listen to about actually living life to live... not to work. Retire and start living life people.
Really like the case study and you describing how you look at it.
I like seeing the perspective that Monte Carlo is the chance of making an adjustment.
One thing that I’ve yet to see from any advisors is a video on determining when an adjustment is required from a tactical management perspective. If someone has a 50/50 portfolio and it drops 30%, now what? What are you using to decide if a spending reduction is needed or if you’re going to spend as normal through a market correction or crash?
I have a son who is severely autistic. I have a goal of leaving him a well funded special needs trust to help him when I am gone. This example is not near what I have, but I am striving towards it.
Make sure you contact a lawyer who specializes in trusts. Especially a special needs trust.
You might want to look into putting him into a group home.
If you do that he can’t have much money
But he get 24 hour care
I have an autistic child too but he does work at a retail job making $20,000 and he’s going to need our help because he doesn’t earn enough to support himself and has social skills issues. He can drive a car but he doesn’t have a girlfriend. Women aren’t too interested in him and he spends a lot of time by himself. He has a few friends who are also in the same boat. I’d like to see this covered in one of these simulations. Providing for an adult child who has disabilities. We have our home paid off and a good net worth and my husband gets a pension of $30k. Husband has had a health scare so he’s working part time now. We’re in our early to mid 60s now. Holding off on ss for another year until age 66 to maximize ss benefits. He is supposed to get 3700 at age 66 and a half. I stayed home so I will collect spousal benefits.
@@dennykeaton9701Any advice on what type of law firm to look for? How can we be sure the Trust/law firm will outlast our child?
@@t.q.6639one that has focus on special needs trusts. Most elder law attorneys do this.
I really enjoy your website, you give some of the best advice and you are correct People have to learn how to enjoy the money they spent their whole life saving.
Great example. It's not very similar to our own, but the principles and thought process is the important part to see.
Really good video about true planning of all aspects of retirement. Love to see more of these videos
Appreciated the content of this video, very applicable to my wife and I.
This is a great video, James. This case study resonates with my situation as it relates to having 2 pensions and 2 strong Social Security benefits and not having to rely heavily on my portfolio assets. Please continue to provide more case studies like this with RightCapital.
This is awesome! We have a strong pension so it was really useful to hear a plan that included that perspective:)
James, really enjoy your video, the end about what you want to be once you retire. My wife and I talk about this more than anything else. I am a little worried about the next phase and she is content on dealing with it when the times come. Great stuff and thank you so much!
I just found your videos today and they are a breath of fresh air. I'm 42 and my spouse is 46 and every few months I panic a bit about our retirement savings and if they are adequate. I also sometimes worry that I'm being overly cautious. I use Empower Retirement and the simple plan I have created for savings estimates 100% success. For someone 20-25 years from retirement, so still saving, and also with pretty solid fixed income (1 pension and 2 social security) what percent success rate do you recommend?
Great video with interesting food for thought. With my educator pension and strong investment portfolio, I'm in a similar situation, so this is a great thought exercise with different outcomes and goals.
Right Capital for the win...
I realize the need for quality financial planners. Good job James.
These case studies are super helpful! I keep watching!
Really appreciate this video and the breakdown of the inflation effect. I will say that my experiences will not require all of my portfolio either. I know what I will enjoy and if there is legacy wealth left for the next generation, that is ok too. Thank you!
Every time I watching your video, I really enjoy it. I like the ideas to retire early and enjoy life as you described in this video. Thank you so much for excellent video. 👏👍
Excellent video, as always. Many parallels to our current situation. Would be interested to explore scenarios where the spouse with the pension and SS predeceases their partner. What are some viable plans for the surviving spouse if 2/3 of the couple’s guaranteed income goes away?
Really enjoy these use cases, puts all the principles into a tactical strategy
Excellent video James. Very helpful to see the case study, but more importantly, how YOU view their situation and help optimize it.
Thank you… this is a great discussion that helps us get an idea how to approach retirement. Thanks again.
Good planning advice! Nice video….
A really good wholistic view of how to thing about retirement planning. Thanks
You’re the best! Such important information!
Thank you for the perspective on what a 50% success rate means. I will likely have a pension, and with social security, all that income outside my portfolio covers over half of my current living expenses. I will run some scenarios where I retire earlier and push that success rate much lower. I thought I was being aggressive at an 80% success rate. I plan on having three years of cash and withdrawal flexibility at retirement. So I planned on continuously updating the plan anyway. Excited to see how soon I can transition to the next phase. Thanks again for permission to push the envelope.
Your videos are so great! So educational
More case studies please!
Also, what retirement software are you using?
This is a true ‘aha moment’. Luv this video 🎉
Why isn't Asset Allocation not one of the first adjustments to probability of success? Love the actually examples with the Right Capital software.
Very very very few of us have a significant pension. A $48K pension and a little savings, you can retire with flying colors. Without a pension, you better have north of $2M liquid assets + paid off house to retire. I really wish retirement planners would spend very little time talking about people with good pension. It's just not relevant to 95% of us.
I agree. The days of retiring with a pension and gold watch died decades ago.
Defined benefit + social security=super safety net.
Great video Thank you, what are you using as COLA for SS and inflation % on your projections?
Quite a wonderful video and point of view.
Can you do one where someone is in there 40's and figure out how many years at minimum they should work to retire earlier? In the video above, you have the couple retiring early, but can we see on that is opposite?
James, thank you very much for this video. I can see some similarities with my situation, and now I wonder if I'll be able to retire sooner.
A scenario for a single person with moderate income/savings would be helpful.
I thought I paid attention through all the screenshots you shared and scrolled, but was there a long term care cost contingency built in to the plan? At least for the expected surviving spouse?
Great scenario. Thanks 😊
Glad you enjoyed it
Good video. Thoughtful logic.
I really like these real life scenarios. Appreciate the great advice. Thank you 🙏
James, according to the US Census Bureau, 46.4% of adults are single. When you present examples only for married couples you are only relevant for 53.6% of your audience. Considerations for singles are much different than for married couples. There is no one in the home to call an ambulance if they have a medical emergency, only one income covers the same bills that two income couples cover ( utilities,mortgage etc). Every other planner and their dog presents plans for married couples where one persin can act as the backup plan for the other. It is a very different calculus for a single person, no one has your back. Even married people end up single as it is unusual for both to pass at the same time.
It would help the other half out if you were to explore how the planning changes.
So useful!
Part of the scenario needs to include when to take social security based on anticipated longevity. The pension and social security will last them as long as they live so it should be maximized.
I like to know the answers to 99% Probability of Success. In this case, they are happy at 100% but you are always at 100% until you find the beginning of the bend of the curve. In my situation, things drop off fast as you increase your spending rate. So there isn't that much difference between 99% and 80%. but you stay out of a lot of trouble staying slightly conservative. Plus, something not anticipated may come along.
Great info James.
Enjoy these case studies a lot, please keep them coming.
Yes. This is helpful
this was awesome!
Enjoyed the deeper dive beyond the unduly singular “probability of success” number. Is it your sense that the software you are using is coming up short for your client planning purposes?
Please make a video about someone who has three retirement properties and IRA savings in CDs and no money in the stock market. Please show us what that looks like
Wow! This was actually an eye opener for me. Thank you for your great contents regarding retirement. Your videos have helped me in planning my retirement considerably.
I don't even spend $8,000 to live luxuriously, how is that "core" expenses? That's 1/3 of my minimum yearly budget, with a car payment budgeted.
Very good point of view! Thanks!
Hi James,
We enjoyed these case studies and look forward for more.
We plan to retire in two years. Would you like to do a case study for us?
Me, too! 😂
I don't think the current Social Security landscape will look the same 10-20 years from now. There'll have to be changes to keep the system solvent. My concern for my retirement is that those changes will include 'means testing' whereby those who've sacrificed and saved for decades and have amassed some given 401K/IRA amount will see their social security payments reduced - like they do for college financial aid. For that reason, I don't include the full % of my projected Social Security benefit in my retirement budget planning. If I'm wrong, then my situation gets better 15 years from now, not worse.
Means testing is total bs. Social security is not a benefit. It is your money confiscated by the government. If others planned poorly, it is sad but not your obligation to pay for them. My strategy is to wait longer so when the government reduces what they promised, which they will because duh MATH, my retirement won't be knee capped.
With $236k in income, this couple could have been saving far more than just 10%. At least 20% would have been more appropriate at that income level, depending on location, lifestyle, etc. My savings rate is about 40%, and I'm single with an average middle class income.
His retirement account balance is especially low. Could be a divorce/child support/alimony situation. It's a real-world example.
Was thinking the same. But wife's pay may have increased a lot fairly recently.
Very helpful James.