Debunked: 7 Common Retirement Savings Myths that Keep People Awake at Night
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- Опубликовано: 17 июл 2021
- This video discusses 7 Common Retirement Savings Myths that Keep People Awake at Night. This video discusses the $1 million dollar savings target, the 70-80% retirement spending target, the maxing out your 401k focus, the no debt in retirement fallacy, the stay working until your mortgage is paid off crisis, the misunderstood conservative investment focus and the "all my friends have more than me fallacy."
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Having retired in 2016 I can tell you first hand it matters more "how much you owe" than it does "how much you have". My wife and I retired debt free (me in 2016 and her in 2018) While we have saved for our retirement, we are yet to touch any of that money. It's important to note here that we purchased a new travel trailer and a new pickup truck to pull it with and paid cash for both out of our regular savings account. The freedom that being debt free brings is priceless.
Retired in January 2023, at 63-1/2. Zero debt, home paid off. And savings should provide enough investment income to cover my annual costs (with social security). I think I've got all bases covered :-) My point is, I totally agree with you about no debt. I have never had any (outside of my mortgage), and never will. It's a huge lifestyle choice few people apparently are willing to commit to.
One thing to think about, it you have a 3% mortgage, with the Fed boosting interest rates, is that you may be able to get more interest than 3% in a conservative vehicle right now. If your outstanding debt at 3% is 100,000, but you can get a guaranteed 5% for, say, 5 years, instead of immediately paying off your mortgage with this money, if you keep making payments, you will accrue ~$2000 a year for five years, and during that time, you will also not owe on any principal paid off during those 60 payments. For many years, we have been in a place where savings accounts paid around 0%. Now, especially if you have a large, low interest loan, it would pay (literally) to think twice before you pay it off.
Thank you. Just what I needed to watch.
My wife and I are directors of our farm business and own property, plus small pensions. I am nearly 55, my wife is 52.
We have started to save to retire from the farm, and possibly live on rental income, I'd really appreciate you go LIVE and talk about how to earn passive income online and retire comfortably, let’s say $1M.
you should consider financial planning.
It isn’t about how much you save, it’s about how you manage your money. Whether you work to earn income or invest, it still boils down to income vs expenses, so yeah you may look into financial advisors for a strategy that suits your timing.
@@jessicasquire I totally agree, I'm 60 and newly retired with about 1.2 million outside retirement funds, no debt, and very small dollars in retirement funds compared to my portfolio balance over the past 3 years till date. tbh, the role of the investment advisor can only be overlooked, not denied. just have to do your research in finding a reputable one.
@@patrickbrussels4454 that's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well.
@@Erikkurilla01 My specialist is *STEPHANIE KOPP MEEKS* I found her on a CNBC interview where she was highlighted and contacted her a while later. She has since give passage and leave focuses on the protections I center around. You can turn her upward on the web assuming you care oversight. I fundamentally follow her exchange design and haven't lamented doing as such.
I've just retired recently and I must say I found this video informative and great to review. These psychological concepts are much more useful for individuals attempting to avoid mistakes than I realized when I was first introduced to them. This is probably why Warren Buffett talks so much about temperament being crucial to his investing success.
I can’t focus on the long run when I should be retiring in 3years, you see I’ve got good companies in my portfolio and a good amount invested, but my profit has been stalling, does it mean this recession/unstable market doesn’t provide any calculated risk opportunities to make profit?
There are a lot of strategies to make tongue wetting profit especially in a down market, but such sophisticated trades can only be carried out by proper market experts
I agree, my profit has been consistent no matter the market situation, I got into the market early 2019 and the constant downtrends and losses discouraged me so I sold off, got back in Dec 2020 this time with guidance from an investment adviser that was recommended by a popular economist on a subreddit, long story short, its been 2years now and I’ve gained over $850k following guidance from my investment adviser.
@@bob.weaver72 Impressive can you share more info?
@@lipglosskitten2610 Big Credits to ''Catherine Morrison Evans'' she has a web presence, so you can simply search for, there are some others but it might be difficult to get them, but Catherine has been a good guide through the year.
On behalf of those starting to get their schmidt together, thank you.
It is never to late to start.
Keep up the good work.
I'm getting close to that 1.6% benchmark Jeff, I retired at 63 with very little saved up due to bad planning & foresight. Good stewardship and good luck has grown it to about 750K. I told my money guy, “I don’t know if I’m retiring for good, but I’m retiring for now.” Haven’t looked back since.
The cost of health insurance for seniors is a major topic especially for those who are finding it pretty tough after retirement. How have you handled health insurance ?
@@schukerD I paid for COBRA until Medicare kicked in..
@@ramonfred Alright thanks
What type of money guy do you use ? ( I am new to this situation )
@@francescadelight FERROCHROME SECURITIES
#6 - Usually the advice is post retirement need is 80% of income, you clarified it to be 80% of expenses which is exactly right. Half of my salary was put in to savings so calculating anything based on my raw income was wrong from the start.
Great channel!
Thanks for commenting
Nicely done. Your balanced and sane approach combined with high value content will help a lot of people. Bravo!
This is a really good video. In a few areas, I may do something differently because of my own personal circumstances. For example, I'm fortunate to have a pension, but that pension is composed of about 60% equities and 40% less risky investments. If something happens to the pension fund, then I need something to fall back on. That means my other assets are pretty conservative in Roth IRA's and have far less risk. Your best advice is to seek the advice of a financial planner and make that planner aware of your risk tolerance and retirement goals or if you are capable, look very closely at your income and assets and how they will sustain you in retirement and manage risk during these uncertain times. Thanks, Jeff! 👍👍👍
I’m so appreciate that you talk about actual dollar figures. I get frustrated that our society thinks it’s too private, or inappropriate to talk about their actual earnings and savings. A capitalist society that doesn’t want to talk about money makes no sense to me.
you are not making any sense. of course capitalist societies must talk about money.
and of course it is inappropriate for anyone to invade your privacy by demanding that you talk about your earnings and savings.
does it make sense to you that our capitalist society should be talking about your private actual savings and earnings? if so, explain.
@DrSchor SCHOR Yes it makes sense to talk about actual earnings. Businesses depend on employees not talking about their wages. Some businesses have rules that employees can’t talk about their earnings with each other. Why? Because then employees will find out that some employees get paid more than others for doing the same work. Governments must show what employees make (ex. teachers salaries, town officials, etc.), so the thought of posting salaries is already being done.
I'm debt free since early 40's, 62y/o now. It can be done if you can get over the idea that you can buy happiness, or status. We needed a newer car. I bought a 2011 Honda Pilot Touring model with 66k miles in immaculate condition. It had single owner, and all service records. Dealer has replaced timing belt and water pump before reselling. Its good to go for another 106k miles. The original price was $45k ish I paid $16k, paid cash. We hope to continue living well in retirement soon .
Excellent advice and speaking the truth. I do enjoy your vids. As you have said, retirement looks different for everyone. If you need to improve your situation, it is never too late. Keep these vids coming.
This is no time for pride, embarrassment or any other thing but determination. It is more productive to concern oneself with that which one can influence rather than pine about time lost. A bit of stoicism may help clear the path. Great advice, sir. Whoever your clients are, they should be glad they have clear-minded straight shooter in their corner.
Thanks MJA, I appreciate the kinds words.
This is by far the best channel covering this content. Rational, data based and not just focused on the wealthy folk. THANKS.
Thank you. I try to provide unique insight.
Thanks for the advice.Many run out of life before they run out of money.
Thanks for the advice and comfort on making that transition. We are wanting to retire early and think we have a large enough nest egg. Taking your advice and heading for the financial planner. It would be shame to hold off retirement when we could or jump off early and reject it for years to come. Looking forward to what comes next.
Good advice on the advisor. I had it beaten into my head I needed to plan for a 4% 401K - IRA withdraw rate through retirement. My advisor looked at my numbers and asked why am I still working, you have enough passive income to retire with 0% withdraw..
Went straight home and filled our my resignation letter and after 3 years of retirement he was not only correct but have been saving and helping our son out with his home purchase.
Yet to touch the IRA and thinking about buying another rental home once the market does what it always does.
*One caution that I faced, my wife's medical expenses (outside of health insurance).
Thank you for your videos and pointed honesty.
Thanks for this information. You make me feel much better about myself.
You got me with the hot thumbnail. Well played Geoff. 😂
Will be 60 this year and retire in a year or two, been working same great company for 33 years, currently have $1.4 million and will strategically pay off my house in 2 years. I can do 7-8 * percent return on Vanguard funds…I will probably keep my home and just rent snowbird during the winter a nice home in Florida or Arizona…Been consistently saving for 35 years, and adding 1 percent every years when I get a raise, the beauty of compound interest is incredible…lastly, it is not how much one has, but keeps and the life style on has, my folks retired with less money and were happy and no issues.
excellent!
@@galencaudill6462 He is only 60. That would be moderately conservative portfolio.
tell us the current July 2022 value of your $1.4M risk account?
How does your comment relate to retirement myths? Are you making a meaningful contribution to this discussion or just attempting to brag?
I very much appreciate the level of professionalism displayed in Schmidt's video's. They are right to the point, well thought out and always informative.
Wow this video was packed full with good information. Thank you!
Great video!Being honest about the situation is the best way to approach everything.Being out of debt is the big one.I can adjust my life easily.A low key life or if the finances permit live a little larger.
Thanks for the perspective Larry. So true!
Being out of debt is a good goal. But the old beater car needed $2400 worth of work/repairs. Do you repair a car worth only $5,000? Do you buy another used car
which could also nickel and dime you to death, or do you by newer, and have debt and payments on a depreciating asset? I think transportation costs need to be
discussed more thoroughly.
One expense that went up for me in retirement, was healthcare insurance expense. When working, my healthcare was covered by my employer, at zero cost to me. I planned for my retirement, and with SS, Pension, and dividend/interest income, I do very well.... and then the bad news... IRMA.. My Medicare cost is 3 times the base, about $500 a month, and that was a zero cost when working.
I really enjoy your videos. You have a great way of sharing information.
I had to listen to the last point a couple of times to get it straight in my head. "Less than 50% of people who are at retirement age have more than $5000.00 in retirement savings." I was wondering how much less than? Great information as always. I really enjoy your calm demeanor in the videos.
Yes--CPA Geoffrey (Holy!) Schmidt is calm and rational. Just the right recipe for delivering truth and facts. He is on a very honorable mission. Methodical thinking, planning and execution makes socialists jealous. And hysteria keeps psychologists busy. Avoiding both is what all of us can do to live longer! Thanks, Geoff. Great work!
Thank you 99!
Thank you Kelly.
I just told a friend about this claim of 50% of people retiring have less than 5000 in savings. Is this their savings account or all savings and investments? Can you point me to where you got this information. Thanks
You are really a lot of help all us work on our retirement. What is the yearly max permitted per year. I thought it was unlimited.
As a CPA and CMA and VP Finance of the firm I worked for I never had a 401k but had tons of stock options. When I retired at 50 I had enough money to live to 100 on my old style of living but now I spend less than half of when I worked.
In films we hear sometimes about these stock options of companies. (The companymen)
Could you please explain a bit how that works. Does your company buy you options of this company at the exchange and the employees can sell them after 10 or 20 years?
Are they comparable with stockoptions let's say of Apple or Tesla which I might buy next Monday and sell them one month later?
These options have a time factor that makes them difficult.
That is the reason why I cannot understand the concept of stockoptions for employees.
Thank you. This video relieved a lot of my retirement worries. I did make some stupid purchases in my "go go" years, but am getting serious about my finances.
Best retirement advice channel I've found! Thank you for the great information and advice without shaming or name calling. 🙂
Enjoy your videos. We are planning on retiring in 2 years at 55. Videos like these help our confidence that we will be just fine. Keep them coming!
Nice!
Thanks for the kind words
Lol, nobody really retires, if anything this pandemic showed me how boring it would be to retire.
I think the key is the word should. Your situation is where your at. Make the attempt to pay it off but if your situation is such that you have to retire then you go from there and leave any "should have" behind because your dealing with the situation as it is.
Good straight talk on retirement. I especially like the part about people with a million in savings but are still worried because of the lifestyle they created in their working years. I retired at 50. But we always stayed grounded during the working years. Drove our cars and trucks as long as we could before buying another. Bought one house. Paid it off early. Like what he said about the sneakers. Some people have to have the new stuff right away. Impulse buying will bite you hard later.
Sound thinking!
very good video. Finally somebody who understands retirement!
Great that you point out it’s more import to be moving your financial situation forward than to be embarrassed about it.
So many people could turn their situation around if they would just talk about it
401k balance is like an insurance policy most people with a substantial balance have very little plan to spend at least until the minimum distribution. The key is that those with a sizable amount will never see significant financial issues because during their life time of wealth accumulation have developed an above average financial acumen. And that is their real strength.
Geoff, let us know what you think about the 4% annual withdrawal from savings rule.
Another factor in the need for $1mil in savings is other sources of income. Some retirees or soon to be retirees still have pensions. That pension can significantly mitigate the need for savings. I have an acquaintance who is retired who owns a duplex that supplies him with monthly income, again lessening his need for money from savings.
Very good point.
Thanks Schmidt, good advice.
Another great video ! thanks again. I appreciate the advise.
My pleasure Richard.
Another great video on common sense Jeff… thank you very much!
Thanks JP!
Have you ever reviewed the benefits of a health savings account? I have one from my previous employer and it’s seems like a good way to reduce medical expenses.
Best investment you can make, triple tax benefit. Make sure your account is invested in S&P 500 Index fund
@@Yette this comment isn't aging well 5/01/2022
@@adstaton8461 day trader? I'm invested for the long haul.
You are right, HSA is the #1 BEST place to put money.
Does that 1.6% apply just to 401k's, or does apply to IRA'S as well? Most folks rollover 401k's to IRA'S during their careers.
Thanks for the video with sound retirement financial advice.
My pleasure
Retired at 65 with no credit card bills made some changes like got rid cable TV and when streaming a savings of 60.00 per month
Thank you very much!
You are a very good speaker. I might suggest that you consider becoming a speaker/presenter for CPE sponsored by the AICPA or state group. I think you would be very popular. I am thinking of live internet or recorded programs. You might step up on technical material while keeping the ‘common sense’ elements of your presentation. The material out there available is often incredibly boring. Some zing from you would go over well. Good luck in your endeavors.
He's good, he takes a long time to get to the point though.
Jeff I love your approach to these educational videos, but please clarify: when you refer to numbers like "1.6% of retirees have $1M", do you mean individuals, married couples etc. If $1M is a good retirement goal does that mean a married couple should aim for $2M? Just example numbers, but I never know if I should accept numbers at face value or "adjust" them to accommodate a spouse.
I need to challenge myth #3. I sold my home a couple years ago. It was a 160 year old house. I had done a lot to it, but the repairs were just not going to end soon. And frankly I got tired of taking care of the house on my own, mowing, landscaping, snow shoveling. I wanted to stop having to do all that. What I found is that, even though I live in a pricey "luxury" building, I spend significantly less than I did as a homeowner. No property taxes, which were growing at a fast pace every year, I don't need a car, so no auto insurance, etc. Renter's insurance and utilities are a tiny fraction of what I spent in the house (for gas it went from $150 - 200/mo in the winter to $15/mo. I'm happier, have more time, I have amenities like a pool, hot tub, gym, sauna, package service and security. When my washing machine broke I called maintenance and it was replaced in a couple hours. And now I'm done with the downsizing chores of getting rid of all the stuff in my basement, and other things I just don't need. All in all I think this was a spectacular decision.
Glad that you are happy with your decision. But for the record, your rent does include the cost of real estate taxes.
@@youngtimer964 Yes, of course. I'm not opposed to taxes, but overall I am saving more than $1K per month over living in my house. That's pretty substantial.
You are the exception that proves the rule. Im glad your decision works well for you but, cmon a 160 year old house as your example? I could also say that since I got rid of my cancerous right arm, missing one arm is advantageous.
@@rolandostaelena great analogy. Repairs on the house we're only a part of the cost, though, as detailed in my post. Quality of life and more discretionary time are key. I have run into many people who moved from home ownership to renting, with very similar savings results.
It's not just old houses that need constant repairs either. Any house more than a few years old needs lots of work. By the time the mortgage is paid the repairs come due
I really appreciate your channel
This vid is completely accurate, so different from so many of the click bait/drama channels.
Not really. Clickbait redhead is just as sleazy.
Respectfully putting in my 2-cents:
1 - Save a lot more than your 401k. That's only for employer matching. Nothing more.
2 - Extra money after 401k needs to go toward paying off debt > mortgage, student loans, credit cards, etc...
3 - After debts paid off, start an investment portfolio. Can't even spell stock market? No problem. Have it professionally managed.
Folks, got to plan everything EARLY. Why 3 kids? Let's just have 1. Why upgrade to that neighborhood? Ours ain't that bad. Like a big SUV? Nothing wrong with a Toyota Camry that would run 200K miles + easy. Delay, delay, delay. Go to Europe after you paid off the mortgage. Buy the Rolex after all the loans are gone. Being late can be a virtue.
Very well said.
Great info!! Trying my best to save enough for retirement. 👍😇
Can you recommend a financial planner or group?
As a retired mechanic for 50yrs I never had a employer that offered any 401k contribution.
You are not alone unfortunately.
Thank you so much.
Good lessons discussed here. Thanks.
Thanks William
Great content! Thank you
Great advice and information.
Thanks for the kind words.
I will still have a mortgage when I retire but I also have an annuity, the sole purpose of which is to make the monthly mortgage, property tax and insurance payment.
I am going to retire in 2 months time ( or rather decide not to extend my employment contracts). I am 53 years old and start seriously thinking about retirement in 2011 (at the age of 42). I was lucky worked with a good company which rewards it staff with mil dollars of stock value...i cashed out the stock and put in very safe instrument..
At 10:15 you blew my mind when you said 50% at retirement age don't even have $5,000 saved for retirement. I wonder what kind of debt load they are carrying with virtually no savings also.
25% of retirees live on social security alone. That is a poverty crises.
It may not be debt load. If your expenses dont get covered by your income, you cant save. And dont give the tired trope of " stop going to starbucks". I ride the bus and rarely do I see a person with Starbucks. Poor people arent buying coffe for 5 dollars. Housing costs have gotten crazy. Lived in California where 50% of my takehome was a one bedroom. From 1970 to 2000, home prices were about 4 times income. During the 2008 bubble, it was 7, then it went down, now it is back to 6.
Yes, that was a very curious factoid! It must be a lot of the people who sit in the library all day.
Almost makes me want to open a coop trailer park.
And what blows my mind even more is most people collect Social Security is 62 and have no savings. Guaranteeing themselves a life of poverty
Question please. When I reach 59.5, should I cash out my pre-tax accounts and move them to Roths in order to avoid the inevitable increasing taxes to come later?
You pay tax to convert to Roth. Do it slowly over time and it will be the most tax efficient
You do not need to wait till 59.5 to convert to Roth. You can convert at any point. Do the conversion slowly and spread out several years so you are not hit with the tax due all at once!
Talk to your accountant. He knows the tax ramifications of the conversion(s). Everyone's situation is different!
The advice about doing in slowly over years is excellent. And do talk to your tax advisor before making your moves. One caution: I always assumed my income would decease after retirement, as would my tax bracket. Just the opposite happened. In hindsight I should have moved everything to Roth as soon as possible. And remember, Congress likes to change the rules of the game. They could suddenly forbid converting to Roth. Whatever you do, there is an unavoidable amount of guesswork.
Total sense. Also add that most people think they will be fit and healthy for the next 25 years , working on an expected age of death. Truth is that health costs will eat into your savings more than anything else. Furthermore, most people really slow down from 77. If they haven’t got dementia by then, then they’re all shuffling around not spending much at all and certainly not on worldwide cruises..So spending falls off a cliff at 75-82. Best to live where there’s free healthcare, cheap lifestyle but lots to do for free ( beaches, forests , gyms). In walking range ( no need for an expensive car). Then you can retire around 60, have 15 years of mobility enjoyment at low cost. And ensure you are debt free and savings compound at 10% ++.
While rent goes up, I will compare that to the going up cost of (aging home) maintenance, the unending incline in property tax (like Texas), and many states (like Florida) property insurance too. I will stay with rent, at least renting is most flexible and may be more cost effective too...every situation requires a financial analysis.
Totally agree. I’d see a financial planner if you are u sure.
I have been thinking along these same lines lately - there is a lot of merit to selling the house, extracting the equity, and using at least some of that money to finance your rental payments in retirement! My only problem is that my biggest joy in life is tinkering on old cars, and it is difficult to find a rental arrangement that offers enough garage space to indulge in my favorite pastime. Because of this, I am likely looking at being a homeowner in my Golden Years and having to be content sitting on that equity and eventually passing it on to my heirs.
@@ddellwo ...or do a reverse mortgage and drain the equity out of the home while aging in place.
@@boatsie - Yes, although the thing I don’t like about that option is that you still don’t escape the unexpected upkeep costs that invariably come with home ownership. If only there was a place with no property taxes so that a “a paid off home” really meant a significant reduction in your ongoing annual living costs……😐
@@ddellwo ....a place with no property taxes?...let me know when you find it 😎
I am trying to find out if Indiana residents are qualified for the "CARE" act passed by Congress in January. It allows a person to withdraw up to 100,000 dollars from their retirement account without the 10% penalty. There are however requirements to qualify for the exemption. Anyone know? Thanks.
Tc
My retirement planning was derailed by my unplanned disability retirement. Legal and medical expenses wiped us out. However, I've gone on to having an amazing life with lots of adventure -for 28 years so far! Credit rating is trash right now, but it doesn't really matter. More fun and adventure ahead.
@@notpublic8961 Sounds like someone is making judgements without knowing the facts. I've make a good life in spite of my physical issues and doctors are amazed at my long term survival. Hope you never have to suffer injuries like mine.
THANK YOU! Every time I hear myth number 6 and 7 I have a conversation with myself out loud - LOL (because I believe those are total myths-at least for me). I really appreciate your content.
Thanks Sharon. More to come!
It's always a bit confusing to me when how much you should have for retirement numbers are thrown around. I am a 65 year old unmarried woman, no children, in a professional field so I've done ok financially over the years and have saved for retirement well enough . However, I'm never sure if the nebulous "$1M" is supposed to support a couple or per person. Some expenses are the same regardless of how many people you need to support in retirement and some expenses are per individual. Also depends on cost of living where you live or where you will retire. There are so many variables to everyone's situation, no wonder $1M is a myth but it sure seems to hang on as the threshold that needs to be reached.
Something I have heard and not sure if I heard it here or another source is that all the retirement institutions wants us to save more as it increases their pockets with the fees they charge; it may be the case but some of us may need more money then others. That "1M" figure can be a lofty goal but at least it is a goal, I have preached to my sons now is the time to start saving in both retirement and non retirement accounts to have money to enjoy life a little vs being bitter that life was unfair. I agree there are some things that can cost a couple the same as a single person and I just recently I came to the realization that at some point a couple becomes a single person and that will or can change the dynamics of money for the survivor. There are some people very scared about not having enough money for retirement even when they pass the 70 YO mark, having that magical number (whatever that is) could make people feel secure about retiring assuming they want to retire.
There's no magic number that works for everyone. Some couples spend less than some singles. You need to get a good handle on your expenses and obligations. One rule of thumb is to multiply your yearly expenses by 25... But that doesn't factor in taxes, social security, debt, etc. A 1 million nest egg can theoretically generate a 40k income by the 4% rule.
25 times expenses is basically what you need for retirement. Of course this is counting social security, pensions and other income. The Trinity study is what you want to look at. The Trinity study is the gold standard of retirement withdrawals. They consider 4% basically the safest highest withdrawal rate. But nothing says you can't take more risk and do 5% or less risk and take 3%. But the historical data is there
Good word as always, I never figured I would be a millionaire anyway, but I took a blue collar career, now my net worth mite be getting there or close to it, but I don't consider that. What means more to me is the quality of my life now, an not being a slave to the job an having to travel to make a living. But by me taking an early retirement at 62, I showed my wife that we would save at least 1k a month in expenses, an be home to help her. But we are not high rollers anyway, more conservative with all aspects of our money by the school of hard knocks, lol. Thx for the vid
Informative vid, thanks💥
Thank you.
You can retire cheaply if you have no real expenses and low cost hobbies , however you can't always control things like property taxes/ bond proposals etc. (which can force you to sell you home), utilities , rising food /fuel and clothing costs due to inflation and future government fiscal policy. So try if you can to reduce expenses while you are young, experiment for a month or two living as cheaply as you can while still being happy and not just surviving and put most or some of what you are not spending into your retirement or at least create some type of emergency fund, or expect a probable fiscal derailment. In retirement you could easily find your self needing a new $15-30,000 roof one day, or a flooded basement with sewage water from a heavy sudden rainstorm (sometimes renting makes sense), having some type of expensive medical condition or needing to replace that beater of a car you're driving with a van so you can live down by the river and poo in a bucket and pee in an empty dollar store detergent bottle.. But to some that is a comfortable retirement.
I think the paying your house off myth doesn’t matter if you’re planning on moving out of a high cost real estate area and having a lot of equity in it.
Can I add a comment about a Roth IRA to this? I didn't have access to a Roth until maybe 15 years before I retired in 2020. However, the first 7 or 8 years of that period were the toughest in my life, financially (long story, my fault). Had I been contributing the bulk of my savings, or frankly any of them to a Roth, I would have drained it during this period either all at once or bit by bit. I never would have made up those lost years. Since I didn't quit or lose my job, thankfully, I couldn't get at the money I was contributing and I did not stop or even lower the contributions. I had to find other ways to deal with my financial mess. I did, and when retirement was in sight in 2017, I buckled down and made a plans to retire in 2020 if I met certain conditions. I retired early and will wait until FRA or maybe even 70 to take social security. I can do this, even though I have to pay tax on my deferred comp money because I have deferred comp money; which I wouldn't if it were Roth.
I'm a renter, my yearly expenses are approximately 21000. My social security statement says I will get 28500 at 70, so if I worked to 70 I would need zero dollars. My savings are for retirement before 70 and to have more of my wants covered. Needs and wants are two different things.
Social Security is scheduled to go broke (along with Medicare) and Joe Biden wants to hasten that by lowering the Medicare age to 60.
@@commonsense6967 If they don't act it will pay between 75 to 80 percent, minor adjustments to the cap and to payroll tax would make that reduction even smaller. I'd be more worried about the stock market than social security.
@@commonsense6967 There is a strong case to be made that Social Security went broke a few years ago. At that time the cash in the Social Security's savings was totally depleted and from then until now the difference was make up for by government borrowing. Social Security checks will continue coming for a long time, with token increases, but the buying power of the checks gets less every year. (I've been on it for about 14 years now. Thank goodness my investments have grown while Social Security is slowly evaporating.)
@@pizza4me298 Medicare is actually scheduled to go broke first. And the stock market, at this point, is nothing but a ponzi scam. I fear the time has come to invest in physical gold and silver (not forgetting about the means to defend it with, either.)
Is your rent price controlled, what happens if the building gets sold and you are asked to move and the next place you find is a third more expensive ? What happens if we start seeing higher inflation levels your fixed costs will start to rise.
Great lesson
Thank you Marty!
Thanks
You bet
What are your thoughts of a company managing your 401k,IRA etc. at retirement? Does the Managing Fee justtify their knowledge of hopefully out performing , vs. no fee and letting it just sit in a fund like a index fund.
The big part you're not mentioning is what company do you want to manage your money. Many management companies are high expense.
What you want is a fee only advisor with a fiduciary responsibility.
i have been looking for an advisor with whom I can discuss my situation, but none of them seem to want to talk to me unless I have $500k in assets. Even the fiduciary I looked up had this requirement. Is there someone I can go to if I am not hitting this number?
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.
worst case:
nursing home costs go up to 125k
you need to be in a nursing home while retired
you are retired for 25 years, from age 6o to 85
You need to save $3,125,000 by age 60.
It sure is good you figured out what you think you need.
Having zero debt including your home is a no brainer before you retire.
@@notpublic8961 true, but im not one of them. Had both shots months ago!
If that's what helps you feel good about your finances, then it is a no brainer. Retirement should be less stressful than when you are accumulating.
You don't *need* to be debt free, but you don't want to have unreasonable debt. As long as your passive income outweighs your expenses, including debts, you should be good to go.
It's PERSONAL finances for a reason.
My mortgage rate is 2.5%. My Roth made 73% last year.
Only people with no brains rely on overly simple aphorisms.
To have a mortgage in retirement or not requires analysis of your private circumstance.
I have done well saving and will be in or close to the million dollar club. I never made even 70 grand a year. That all said my parents never had more than 150,000 grand in saving and they did fine in retirement. I don't live large and many of the things I love cost little to no money. I plan on leaving my daughter very well set up. Many people seem to spend, spend and spend. Its as if they are trying to buy happiness. I am also fortunate to have a old school pension too. If I live by the 4 percent rule I will have more money in retirement than I did working. House will be paid off soon, even better. I started in my 401 K with the minimum and increased it one percent per year until I hit 15 percent. The rule of 72 is a great rule to know and understand.
Good points!
Enter retirement with only five or ten thousand dollars? I can’t imagine how people who do that survive....
It would require a lot of sacrifice.
They might expect their children (if they have any) to financially support them for the rest of their lives.
I’m betting that the majority of people who fall into this demographic are older female divorcees or widows who were full-time homemakers and/or worked minimum waged jobs their entire lives. They are surviving on just their former spouse’s social security & living in subsidized housing or in their car. The smart ones have taken to operating RUclips channels and earn extra income from ads & donations from viewers.
@@boatsie That is basically me....
@@brandonblahnik6002 What an unfair burden to put on their grown kids, most of whom have it tougher in life than we did.
Money can't buy happiness. They did a study and found out that people with $10 million dollars are no happier than someone with only $9 million.
I been rich. I been poor. Rich is better
Money may not buy happiness, but you can pay unhappiness to stay away!
actually there was a study that determined people making around 80K were the happiest even more so than multi millionaires :)
As someone who has been homeless before, I can say for certain that statement is bullshit.
@@MrKogline You didn't get the joke. People with $10 million are no happier than someone with only $9 million, because people with $9 million are really fucking happy, and an extra million didn't matter.
If you plan to retire in place, a paid for house is a great asset to have if you need cash for an big unexpected expense.
Where can you find that 4-5% return on a conservative investment?
It's usually a hybrid of corporate debt securities and higher dividend equities.
Thanks for these common sense videos about retirement. As a financial planner, I think it’s also important to discuss guaranteed income such as SS, pensions and variable annuities with lifetime payments. These can go a long way toward securing a large portion of your retirement income basic needs.
Thanks for the comment David.
Annuities: Proceed with caution. A CFP once told me, "Annuities are sold not bought," meaning that they are recommended by those who are paid for selling them. You're giving away part of your savings to the seller. Not saying it can never work, just know what you're getting into.
@@djw8888 I am a financial advisor as well as a planner and I own variable annuities fully understanding the cost. A certain amount of guaranteed income is beneficial and there aren’t too many ways to accomplish this. VAs can be one good way. I’d be careful of pithy sayings without knowing the facts. People like Susie Orman and Ken Fisher have their own agendas.
@@davidschmidt5810 I own an immediate annuity and think a great number of people should at least put some percentage of their retirement money in them with a highly rated insurer.
Excellent video
Financially I feel pretty confident on retirement as I've been tracking my expenses for almost two decades. My challenge is deciding who I will be in retirement. Heh heh. After so many years of work, my self image is probably tied to work to a significant degree. Thinking of listing my retirement projects and planning out my days in terms of them.
Part time work. Those door greeters at Walmart aren’t always there for the $
@@rickyaz8640 Oh, please.....
That is often a concern many people overlook.
Boredom and isolation can be real issues. Especially when we see ourselves, as what we did for decades. Having family and friends, plus hobbies helped me during the first years of retirement.
It sounds like you are thinking about the issues the right way.
No $1,000,000 in my TSP but 1/2 that and 1 military pension and 1 fed gov pension, plus SSA and some VA disibility. Still I'm selling my home moving to Fl and getting a part time job with disney just to get the free tickets for the grandkids visits. I will still invest $10 a week in lotto tickets.
In Short...... We Must and Mostly depend on ourselves First before Someone else....
So true.
@@HolySchmidt Looks like you had a good VACATION and We All need it to Recharge ourselves.
Buy a small house no rent and used cars .....pay off everything never spend your 401k and live off of social security only in retirement and you will live like a king simple and happy. your 401k is the piece of mind
Nice perspective.
Don't forget eventual RMD's and how much is in your tax deferred retirement savings. You may be headed for the dreaded tax bomb.
My house is paid off, no debt, no kids, and I have 200k saved. Doesn't take much to make me happy, all I really need is an internet connection and hiking boots. No expensive hobbies. Could I invest that 200k in an ETF and feasibly retire now and live off the earnings from the ETF? I'm 47 years old. My daily routine consists of writing books (of which I get royalties, but I'm not counting those in my finances), and hiking with my dog. Other than that, pretty "boring" life, which suits me fine. Could I do this and retire on 200k? Any advice or thoughts would be appreciated by anyone. Thanks. One more thing: my house is valued right now between 300-400k, but I'd prefer NOT sell it if possible. I'd like to know if any retirees actually live off 200k in investments and survive. No mortgage, no tv bill, cheap car insurance (my premiums are super low).
Income from $200k will only only gross $8-12 thou a year. That’s not much income to get to SS age without some other income. Find some work you really enjoy and never work again! Best of luck.
@@davidschmidt5810 Thanks David, yes, that's assuming 5-7% return in the market. And SS kicks in at what, age 62? Now, if I sold my current house, and bought a lesser home, I could probably bank 400k in savings. Even at 5%, that's about 20k yearly. And on good years, quite a bit more. So selling the house and scaling down a bit might be the answer. Best years of our lives, in our 50s and 60s, no time to waste working a job if you can hike the mountains instead. Thanks!
I would imagine your biggest concern at retiring at such a young age is affordable quality healthcare … Medicare is almost 20 years away … you may be healthy now, but the longer you live the more likely the need for healthcare which seems to be outpacing inflation by 3X … best of luck with whatever you choose
I was an avid Sierra backpacker, and looked forward to hiking the Pacific Coast Trail and the Appalachian Trail end-to-end in retirement. Then I got neuropathy in my feet...
so what did you eventually decide to do?
I've been retired for 14 years now.
I retired with just a little more than $500,000 in cash value in my pocket. I took a cash buyout instead of a pension.
My yearly income initially in retirement (no SS yet) was about half or my working income.
Social Security at age 62 was just a bonus.
I paid off my mortgage about 11 years after retiring (my third mortgage).
I got an annuity for monthly income with a rider to guarantee my initial investment. Way better than a pension IMO.
Retirement is about budget and goals. If your mortgage is within you budget who cares if it is payed off? If your hobbies require space and equipment, keep your house. If you have the means and want to spend your time traveling, a low maintenance apartment may be a better fit than a house. One thing I find is that a small retirement income restricts the choices of your activities and what things you can buy, and whatever your income level, people in the next income level higher just "waste" their money on unnecessary things. Whatever makes you happy, I guess.
Exactly. My mortgage is a small fraction of my overall assets and at very low interest, and I have life insurance that would pay it off if I get hit by a truck. I am adamant not to have too much debt, but debt free? Not so much.
Boy did this make me feel good!
lol. Glad I could help. Keep saving!
Good explanation.
Thank you v much!
@@HolySchmidt You are clear and don't seem to make it overly complicated. In 1970, I was taking a college psychology coarse. The professor said "if you can't explain it to a seven year old, then you don't really understand it yourself". I thought that was brilliant and have followed it whenever I was teaching. Hopefully some people will listen to you and avoid problems. Good Luck, Rick
Will You be in the DFW area anytime this year?
I don’t understand your reply?!
the major thing for me was making the shift from saving money to spending it... difficult...
That is so true and realistic. At age 66 we finally slowed down after decades in a savings and investment mode. Now that we hit a very comfortable level its a different and difficult mindset to achieve. I can plurge but afraid too at times with all the uncertainty in the future.
That freaks me out.
@@philc.9280
No, no, no!
It’s time to relax and enjoy life. Your money is there to alleviate stress, not to expand your stress.
Best book to read is “The Millionaire Next Door” very good perspective on what a “true” millionaire looks like. You will be surprised at who is and who isn’t
I'll take John Bogle's books any day instead