How Much Do You Need to Retire in 2023?
HTML-код
- Опубликовано: 8 май 2024
- Planning for retirement can be challenging, but knowing two key pieces of information can simplify the process: your expected retirement expenses and the portion covered by your portfolio. There are two approaches to determine expenses:
Bottom-up method: Create a detailed budget by listing all your expected expenses in retirement. While this method provides a precise figure, it requires careful planning and consideration of various expenses.
Top-down approach: Consider your current take-home income and determine if it covers all your needs. Then, subtract any future expenses that will no longer be necessary in retirement. This approach gives you a rough estimate of your retirement expenses.
Once you have your expenses, calculate the portion to be covered by your portfolio after accounting for other income sources. Applying a safe withdrawal rate, like 4% or 5%, helps find the portfolio size required.
While this method gets you close to your retirement number, periodic review and professional advice ensure a comfortable and secure retirement. Make sure also to consider other factors like taxes, inflation, marital status, insurance, and lifestyle changes when planning for retirement.
=============================
Learn the tips & strategies to get the most out of life with your money.
Get started today → www.rootfinancialpartners.com/
Subscribe to be notified for future videos: / @rootfp
_ _
For more resources and content, check us out below!
🔔Subscribe to our channel to learn more about all things portfolio management / @rootfp
🎧 Listen to our podcast readyforretirement.buzzsprout...
🧑💻 Visit our website www.rootfinancialpartners.com to learn more about us
👥 Connect with us on Facebook / rootfinancialpartners
📷 Connect with us on Instagram / rootfinancialpartners
🔗 Follow us on LinkedIn / 18347030
_ _
⏱ Timestamps ⏱
0:00 Intro
1:37 Bottom-up approach
2:11 Top-down approach
3:44 Step 2
5:13 Example
8:48 Other factors
11:51 Outro
Other videos we think you'll like:
About Root: • Financial advisors wit...
Worried about retirement? Start here: • Worried About Retireme...
![Do We Have Enough for Retirement? [Plus Bonus Worksheet]](http://i.ytimg.com/vi/Ees8A5LRd3A/mqdefault.jpg)
This guy explains the basics of retirement planning better than anyone else I’ve come across, (whether on RUclips or elsewhere).
I have been retired since 2020 at 57. I can tell you one thing. By far the most important thing is to enter retirement with ZERO debt. Zero debt means no mortgage, no car payment, no CC debt. Next step is to buy everything you think you need for the next 5 years in retirement. We moved to Florida, bought a brand new townhouse in a great neighborhood. The HOA fees pays for all outside townhouse maintenance and insurance so I know what my costs are upfront. Cloths, furniture, etc all paid for in cash. Once you have that, then you can easily adjusted depending on what the market does in the first 5 years of your retirement. We got lucky the market did very well, but even if it didn't our budget would been covered with cash and dividends.
One last point. If you are debt free you will be surprised how little you need for retirement.
Congratulations! I fully retired at age 59 and like you, have zero debt. I bought all the things I wanted and did all the major maintenance on my 43 year old house I bought in 1980. Waiting 2 more years to collect my max SS at 70. My pension and dividends well covers my yearly expenses.
Debt free IS a key. However, IF you have a very low-rate mortgage that you COULD easily pay off if desired it still works. You are right, NO car or CC debt.
I love getting points from people who've already been through that. I'm at a loss and this, scares me to death
@@CheckThisOut77 Yes, if you have a low interest mortgage and the funds to cover the payments, paying it off is optional. Some people seem to derive a psychological benefit from paying it off; for me it's incidental.
Whatever that amount is will be either too much or not enough. I will just learn to survive each day as it comes and not worry about it.
We love your videos. You explain everything so simple that even we can understand 😅 Thank you!
Yes, we had a number. But with South Florida’s drastic rise in home owner’s insurance and real estate taxes on the coast, we kept having to shoot for a higher number.
Plan B: which was a good one. Sell the house and move to a lower cost country.
Currently in Mexico. Ecuador was our 2nd choice.
Good idea except now you are in Mexico. Nice place to visit but sure as heck would never want to live there!
@@edhcb9359 you don’t know that unless you’ve tried. Or have you?
And with the current state of the US- meaning last 9 years, why would anyone want to live there?
I’ll stay in a country that kids always come home from school, and not in a body bag,
Oh, wait…one less person coming here.
Never mind….yours right. You should stay where you are. Lol.
Where in mexico did you end up?
Congratulations on moving to Mexico.
As you know Mexico has ex pat communities that have been there since the 1940's. San Miguel De Allende, Chapala Area, Queretaro, Merida, Puerto Vallarta, etc. and many more are being establish every year.
Weather is great, food is delicious, cost of living is lower and people are open minded and warm hearted.
Good and bad people all over the world, just need to research and find the right spot.
I was born in the US but now have dual American/Mexican citizenship. Plan to retire and eventually live in Mexico when I retire at 57 (3 years to go).
@@nedmerrill6228 On Lake Chapala. 20 minutes from the town of Chapala. We absolutely love it.
We owned a vacation home here 20 years ago, so retirement in Mexico was always a possibility for us.
As you know, there are cheaper countries you can retire to other than Mexico.
But, we’ve always loved Mexico for 1) the people are very warm hearted 2) the culture/food/customs/family Values 3) the beauty and all the travel it affords/so much to see and of course the cost of living is significantly lower than where we came from in the US
We've been tracking our expenses for a while now, so we know what our withdrawal "paycheck" needs to be. We'll also need to be able to project "income" for our ACA insurance plan (both of us are pre-Medicare age). You have to know these numbers to adjust your plan as you go along. There are SO many variables, market returns, allocations, black swan events, medical bills, "incidentals" like water heater, transmission, air conditioner, etc. Treat your plan as a baseline from which to deviate as necessary.
Great stuff James!
Yes, we have a number and are on track to retire early. I have been keeping an accurate monthly budget for a few years, so I was easily able to calculate what we will need in retirement -- the bottom-up method. And of course I removed some costs that I know will go away, and have added some cost estimates for things we don't need now but will in retirement, such as health insurance.
I had a number, about two numbers ago. Then when I reached it...I picked a new number that was about 50% higher. Then when I reached that number, I picked a new number that was 33% higher. When I reach that, I'll probably be done with picking numbers.
The first number was a minimal lean FIRE number, the second allowed for more luxury spending and travel, and the third number would be difficult for me to consistently spend each year unless I did something silly like getting married in the US.
Yes. 800k will be enough for me. I feel lucky to know when enough is enough. I know several couples who don't seem to have enough ever.
You never really know though.
Knowing your “enough” is so important
@@edhcb9359yes you do, we retired 2 years ago, spending less than planned, and will have all of our base expenses covered by SS at age 70. No debt solves most things. Our portfolio is strictly for discretionary. Retirement has been much easier to save money in, than while working.
@@edhcb9359 True of about anything except death and taxes.
I have $800k but I wish it were enough. If I was single, maybe. With a family it will be a while
Yes we have a number in mind. We will have 2 pensions and 2 SS checks. My wife retires in 3 years but I will continue to work 5 more (to get my pension). Those streams of income will more than cover our expenses (some which we won’t have in retirement). Our TSPs and Roth TSPs will cover all the extras that we want to do in retirement (travel, hobbies, etc.). We feel very blessed to be in a good position.
We have a number. We've been tracking current expenses (bottoms-up), but also researching cost of living in a few different locations (top-down) so that we understand options if or when we move.
We'll eventually have three income sources between a pension, retirement savings, and eventually social security. Planning to use the time between retirement and taking social security to do Roth conversions to help our future tax position when we do take SS.
This is just what I needed. My spouse and I were talking about how much we need to retire. I said i was happy my stocks were finally going up, and i was over 225,000. He said we each need 1.3 million. We are factory workers in wisconsin, with a pension at each of our workplaces. I didn't dispute his beliefs, but in 10 years when I turn 60 and him 58, he will be floored to realize we should have enough. His understanding is s.s. will be nothing, and so will our vested pensions.
Yes, we do have a number. We are living on 1 SS, 1 defined pension and supplementing the gap with my passive dividends. Im waiting 3 more years to collect my maximum SS at 70. Debt free with only everyday living expenses. Thank you for the video.
What is complicated, and difficult to “normalize” into an “average scenario”, is that the withdrawal percentage needed from the portfolio likely changes with time. Many people retire prior to the most beneficial time to start drawing Social Security, so their portfolio must provide a lot higher percentage…maybe even 100 percent of their spending needs…for a number of years. And they’re taking these in the most dangerous time when sequence of returns risk is highest. Adding the complexity of the “spending smile” over time creates another layer of difficulty. In other words, wouldn’t someone’s number be quite different (likely higher} if they don’t have the additional income sources immediately at retirement? Is there a withdrawal percentage for the first five years of retirement that is too risky? What if 4-5% works after Social Security kicks in, but before that, 10% withdrawals would be needed. Is there a way this can be mapped out in a video? It seems many more people fit into this scenario than the two that were given in the video, where the supplemental income sources were available (and optimized) at the beginning of retirement.
Yes. The number that replaces my take home pay today with room for cost of living increases.
Nice video James. I have a number, but living in SoCal has been costly. Looks like I may have to retire to Mexico if inflation stays elevated. I only wish I had found this channel over 20 years ago. Many thanks & have a great weekend.
There are many things wrong with California but taxes for the average retire is not one of them
Example
You can report 100k of income, of which 60k is taxed as ordinary income combined with 40k of social security and your total state income tax is less than 1% (MFJ)
Plus because of prop 13 California has some of the lowest property taxes
Yes.
Best way to figure expenses is to put everything on a credit card except mortgage and car payments and then in 6 months look at your statements. That will tell you how much your spending on average. It also show you were to cut back on unnecessary spending.
Two plans:
1. I did a detailed analysis of income/expenses.
2. I simply look at my bank account each month. Is it consistently dropping every month? It has been slowly creeping up even in retirement. Income sources: My SS, wife’s small SS, pension ($2,455/mo), and my required RMD.
Yes
yes
3 1/2 years from retirement and we always had a number, even if it has changed over the years.
First, finally, great video
Yes, I have a number but still working out what my portfolio diversification should be.
We made a very accurate budget, and realized we are there, and then some. $1million is more than enough, could have done less. No debt and good SS numbers
I have a number goal but not an ultimatum. 58yr old now.....goal at 62 1.1M, but will reasses when I get closer depending on the stock market..
Yes do. Expenses will be $5000 a month.
Yes I have a number but I’m not sure when we are going to get there!
Yes, I have my number and seems to keep going down the longer I work :)
That’s great!
Yes, I have a number. 10k
Thank you James. Awesome content. I am retired on a pension. I am 62 and have almost a million in net worth. I moved to a low cost of living area and plan on living on 25K per year, even though my income is 250 to 300k per year.
With over $250k income, your SS will be around 4k a month. So, all you would need is to cover that 5 or 8 years before you take SS. BTW, I do not believe anyone could live anywhere in US for 25k a year. Best of luck
@@MKF1205 that's tight living on 25K especially if you happen to have some unforeseen expenses, like a new roof or some type of non insured event. Try to factor in increases in insurance premiums, utilities ,food, etc which seem to run higher than the posted inflation numbers. You'd get around $40K in SS per year, I'm guessing half of your $1 million is invested someplace , so let's say you get 4% on the 500K that's another $20K coming in . So $60K minus the taxes, you should do fine.
Are you living on a poverty level subsistence(by choice) out of some sort of sadistic punishment to yourself or are you(mistakenly) thinking that heirs will remember you in a better light when you leave eventually them a large sum of money?
250k a year pension? Wow. Did you mean 25k pension?
You mean all the pundits that say you need 80% of your pre retirement income are wrong ... lol
Congrats well done
Yes. I'm 58 and my wife is 62. We're on track to have between 12 and 15 million for retirement. She is retired and I'm looking to retire in the next 12-18 months. So our number is 12-15 million.
So, my husband and I will come and live with you guys
Does becoming a widow now put you in a different tax bracket? I could retire at 62 based on my math, but if I die before my wife she loses a lot of the other income streams and then will be hit with higher taxes if she still needs the same level of income to keep her standard of living.
What future tax rates are you using for your clients' financial plans?
Different for everyone. Depends on what you expect out of retirement and where you lve. Live in Wyoming and content to wile away the hours fishing in the local pond? Or do you live in New York and expect to travel the world?
I have my fixed monthly right now. That is just over 1/2 our s.s. payments. Beyond that if I used the 4% rule, we would have more per month than we ever had with no car or house payments. I do not even know what to do with it.
Start by getting a life.
can you cover non-taxed va and SSDI ?
I’m planning to retire in 16 years at age 65. My estimated retirement savings at that time could be anywhere from $1.8 million to $2.8 million. I’m estimating my annual household expenses to be $67,000. If I factor in what I’m estimating to receive annually from Social Security, then the amount I need to withdraw from my retirement accounts annually is only $15,000.
We'd love to have $12K/mo. after taxes adjusted for inflation. The problem is making that much before being forced into retirement. More realistic is having $8K/mo. after taxes.
Any thoughts about planning for retirement with the SS cliff coming for those who hit full retire in 2033? The coming 25% cut needs to be addressed.
Do tell. Has that been finalized?
SS will not be cut, there are too many voters that depend on it. There will be changes but the mostly likely are:
1. Increasing the percentage workers/companies pay will increase from 6.2% to something higher. It has previously been raised many times.
2. Raise or remove the income cap that SS tax applies to, currently about 160k.
3. Raise the FRA retirement age to 68 or 69. It has been raised before.
4. Add means testing to recipients. However, this one turns SS into a welfare program.
$8,000/year is what I think I want to have when I start my "retirement". I say that because I think I will continue to do something but it may not pay me in $.
No debts is the key! And a consistent COLA pension.😊
That COLA pension is a tad difficult to come by these days. 🦄
Indeed. Social Security is sort of a COLA adjusted pension. FED FERS pension for my wife and I. SS and Fed pension are a nice foundation.
I’m a retired nurse, no pension, and I am very comfortably living debt free on social security.
COLA pensions are bankrupting states like Illinois
Financial books have been so helpful. I’m 54 and my wife 50 we are both newly retired with over $3 million in net worth and no debts. Spending time with our children and grandchildren! Currently living smart and frugal with our money. We also moved out of a high property tax, high crime city into a peaceful small town! No longer putting blames on FED for our misfortunes. Saving and investing lifestyle in the stock market with the assistance of a licensed broker who we met at a financial seminar made it possible for us this early, even till now we earn weekly.
Congratulations, you are living the American dream. You retired very “early”. NO debts is a key.
You need 20 million to retire in america
With our government printing money like crazy, whatever it is we think we need to retire will be woefully short. History has never had our government under so much debt and forced to print more money, hence more inflation. Plan on working till 70.
The real questions is what are your expenses AND what is your income.
The "number" is pretty meaningless ( because you can't depend on it). You need to understand your cash flow.
The number helps you understand what your income could be
Whatever you think the number is, multiply it by 2.
$100K/yr to retire? how about $30k?
i reckon $600K
Yes. 2 million and no.
I wish he would use more conservative withdraw rate..5% would make me nervous.
If your base income is covered by guaranteed income like SS, pension, or annuity, you can increase your withdrawal rate to 5-6%. We only need our portfolio to last 15-20years. If we are still alive at 84, all our income needs will be met by SS and an annuity(about $6-7k per month). No debt is key, and we can spend our money while still able to enjoy it.
Almost everyone dies with money in their portfolio, what a waste(unless you intend to do so)
Yes, I know my number
I assume we'll finish paying for our house by the time we retire... but healthcare expenses will take it's place.😮💨
At the very minimum, if everything else fails, we want to at least afford food, clothing, shelter, utilities and healthcare. Without having to stand on a street corner everyday.
Ahhhhh…if it was as easy as only knowing 2 things to determine how much you need to retire!!
I need twice as much as I think I need.
Probably not. 😊
My number is 1 million at age 62.
You are not retired if you need a part time job for income, you are semi retired .
If you need $100K to live on, you're going to need to have around $125K coming in so you have money to cover your taxes.
You are taxing the 125k at 20%
but keep in mind that we have a progressive tax system and a standard deduction.
You will have to gross 110k to net the 100k of after tax income.
There is thread on Bogleheads pay zero tax on $100,000. It may interest you
Depends on where the money is made. If you are making 100K in qualified dividends for example and you are married filing jointly you pay ZERO in taxes.
$7000 month
$10m
I have been tracking all expenses this year and spend $7100 per month on average. That includes $1300 in monthly expenses that l won’t have in retirement. I have a $70k pension that will have a 2% annual cola. I am well past my number with other savings, but am only 44. Working one more year until 45 to pad my savings. Planning for 30-40k annually in addition to my 70k pension. Why do l feel like l need 150-200% of my actual number?
I am good at 1.3 million but will wait until 65 and I can have medicare
If you can keep your on paper income low, ACA is a pretty good deal for insurance, especially through 2025. I pay less than $300 per month, and they even had free plans available
2.14 Million in 2045
Yes, I have a number. Actually three numbers
My goal is 1.1 to 1.2 at 64 or
If I have 1.3 at 63
My back up plan in case of I get tired, sick or unemployed. Which is about 40k a year till 70(so when I'm 60 in an emergency I'd need 400k)
Well it’s 2024 🤣
this is nonsensical unless you're literally about to retire.. if you're 45, your $100k/year now will need to be like $250k/year at retirement.
Yes
yes
Yes
yes
yes
Yes