How Much Money Do I Need to Retire?
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- Опубликовано: 6 авг 2024
- 2-step process to figure out how much money you need to retire.
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DISCLAIMER: This video is only helpful hints and education. It is not specific tax, legal or investment advice. Before considering acting on anything you see in this video, first consult with your tax, legal or investment advisor. While the information expressed in this video is believed to be accurate, neither Andy Panko, CFP®, RICP®, EA nor Tenon Financial LLC make any guarantees to its accuracy.
The government should NOT be your retirement plan. One thing I learned in 2020, is depending on the government is not a good idea.
This is deep! Everyone wants the lifestyle but few are willing to make the sacrifices required to get there . Investing wisely before retirement should be a goal .
The truth is the markets are constantly in a state of uncertainty.
On average, the US dollar has lost around 1.79% of its purchase power over the past ten years due to inflation. Not investing your money means losing money to inflation.
If you plan for SSA to be 100% gone, $0.00 a month, then the world is in such a state of chaos that NO amount of money will save you.
Only billionaires with their own island and private security will make it.
I like how simple it is. Retirement financial planning is a stressful topic. If a video is too complex or has too much details, it tends to discourage people and they may just walk away. I remember when I was 27, I didn't want to spend energy on the subject and said I will work till I drop. 😃 However, I did max out my 401k and put some in ROTH account... which helped me tremendously later on. I will check out Andy's other videos to get more in-depth material, because I already researched a lot myself. This is definitely a very good entry level video!
I'm glad you liked the video, thanks!
very informative and very well made. Thank you!
Great info I really needed thx
Very through and well done!
Great Video ..... Thank you!
I you invest the $1 million in dividend-paying stocks, you should be able to get $40K a year in dividends. Then you will never run out of money, without needing to withdraw anything. Even if you are more conservative and only get $30K, you're very unlikely to run out of money. Your dividends will very likely grow with inflation. However, you should keep a pool of cash of about $100K to cushion any rough patches in the market.
40K per year used to be a lot I expect by the time I retire that'll be about how much it will cost me to fill my gas tank. Dollar is collapsing. Nobody is being honest
Well done, thank you.
thanks!
Thank you.
I think you also have to consider if you expect to have the same lifestyle or are willing to live a more financially conservative lifestyle in retirement.
thank you
Thanks for your very nice and educational video.
I will be 65 later this year and I plan to retire soon. I was wondering if there is an association between the 4% rule (or 3%) and the RMD (required minimum distribution)? I recently learned we would have to withdraw certain amount at 72, and the RMD will be about 4% from all traditional 401K/IRA. But we won’t have a choice to withdraw only 2.5% for RMD. Is that correct?
Hi. No, RMDs and the 4% rule are unrelated.
Yes, it's correct that once you're 72, you can't withdraw only 2.5% of your tax-deferred accounts. You need to withdraw at least as much as the RMD amount, which is about 3.65% the year you're 72. However, you don't need to actually spend the money; you simply need to take it out of your tax deferred accounts (and pay tax on it). Whatever money you don't need, you can just turn around and put it into a bank account or brokerage accounts, etc.
You are best.
thanks
Good information
thank you!
verry helpful for me
I’m glad you found it helpful!
60% Stock and 40% bonds is also very tired advice. I own zero bonds and I will never buy bonds. Their historical returns are low and they are no safer than U.S. Stocks. The Fed can raise rates on a dime and your bond value will plummet. Keep in mind, we are at historically low interest rates, so they are likely to increase, since they can't get much lower.
they add a buffer for spending in downturns-what do you suggest-100 precent stocks
Exactly! I agree 100%. I have been retired 4 years and have zero bonds and never will own bonds. But my situation might be different from another person’s.
Depends on your age
Lost me at putting my age of death in my retirement formula. Why not just invest and focus on passive and semi-passive income? Then I just need to know how much I make monthly in passive income minus expenses.
I agree. Anytime I need to use by date of death I always put in that I will live to be 100 years old. I think our net worth will continue to grow until we die. Retiring debt-free is a wonderful thing. People need to include any rental income, pensions, Social Security and IRA/401(k) in order to calculate how much income they will have in retirement.
100k @ 5% plus 1600 monthly SSA.
Cheap city USA or 1000 cities in other nations.
More than that is doing very well.
It depends.
Very good video.. thank you I have one question:
I have studied the 4% rule and one thing that surprised me is it considers you a withdrawal of a constant 4% (+ inflation) out throughout your retirement.
If I am blessed to live to be 95, I find it difficult to believe that I will be pulling out that much money, or need that much money when I’m in my 80s.
My question, is that an accurate analysis that I am stating?
Everyone's situation will be different. But yes, there are many people who end up spending less in their later years than they do in their earlier years of retirement.
The purpose of the study that resulted in the 4% rule wasn't to say how much people SHOULD take out. It was simply a study to find, based purely off historical results, what is the maximum amount of dollars that could have been taken out at the beginning of a 30-year retirement, while subsequently increasing that amount for inflation year year, without the portfolio running out.
It was intended to say, conservatively, how much inflation-adjusted constant annual withdrawal can some take out of their portfolio over their retirement without any historic risk of running out of portfolio. In many cases, people could have actually taken out more than 4%. And for those who don't actually need as much as 4% throughout their retirements, sure, they can take out less.
@@RetirementPlanningEducation Thank you for your detailed reply I appreciate it will keep listening …and learning!
Semper Fi 👍🏽🇺🇸
A lot will depend on how much you spend. The biggest one is medical expenses. Do you see a possibility that medical expenses could be higher as you age?
Solid content and presentation of it.
Everone? Attention to detail is important.
So way too simplistic. Am I assuming the 100000 includes taxes, or is that added. So I need 120000?
Why is conventional wisdom always the 4% rule? This is stupid. My mutual funds earn an average of over 10% annually. Some years 19%, but 2021 will probably be zero. As long as you don't withdraw more than the fund made the previous year, your nest egg will last forever.
What about in a bear market?
If your mutual funds are giving you zero return in 2021 then it’s you that is stupid…..pick a different mutual fund!
What do you do in years where your fund as a negative performance, pay back money to it?
So during the decade of 2000 to 2010 what would you have lived off of?
@@brucebobtrotter2170 there is no 4% rule. 4% came from the Trinity study is just historical data that showed 4% was the safest highest withdrawal rate without running out of money in 30-year periods.
Yeah I'll skip on the annuity. Historically stocks have done well.
@@NipItInTheBud100 really? So what funds are you changing to. Chasing performance is usually a road to disaster
Around how many years out from retirement should one start trying to calculate future expenses?
Great question. It's a good idea to start at least two to three years before so you can begin really paying attention to your expenses, if you're not already. Track all of your expenses for a few years before retirement so you know with certainty what you actually spend. You don't want to guess you spend "about" $40k each year to end up realizing after the fact that you actually spend more like $60k per year. Then once you have a good handle on what your actual expenses are pre-retirement, I'd start to nail down the future estimates no later than the last year before retiring. Because you shouldn't make a decision about when to start Social Security without having a firm estimate what your expenses will be. Same thing for pensions (if you have one).
It may not be that valuable to do detailed retirement expense projections when you're more than 5 or so years away from retirement. Because life happens and things change along the way. It wouldn't hurt to start the process early and begin getting some rough figures in mind. But don't get too hung up on trying to figure your future expenses to the penny when you're still a bunch of years away from retiring.
What future expenses? By the time you retire and hopefully earlier, you want your house paid off. You should always be paying cash for cars. Of course you wouldn’t have any credit card debt. So when you retire your expenses should be something like Health insurance or Medicare premiums, property tax on your house, electricity, gas, car insurance, gasoline, and then fun stuff like vacations and travel and cruising and Mexico. These type of things should be able to be listed in 10 minutes. I say do it right now. Also, if you’re not out of debt, make a plan right now. Make sure that plan involves having your house paid off as soon as possible but certainly before you retire. The plan should also include sources of income at different years. For example, you may be living on your IRA or your brokerage account from age 50 to 65. Then maybe a pension or Social Security kicks in. Maybe a year later or two years later or three years later your wife’s Social Security kicks in. Sounds like a spreadsheet to me.
If you plan it right, you don't need any money to retire. I have been retired for 5 years now and have not touched one dime of my savings. Remember the key to a happy retirement is not based so much on how much money you have, but rather how much money you owe. Set your goal to be debt free by the time you want to retire. When I say that I'm talking about debt, not monthly expenses. So no mortgage. No car loans. No loans of any kind. Do that and you will be amazed how for your Social Security will get you.
All the best Bernie!
Nice to hear. I am 7 years from retirement and am debt free, own my home and two cars. Plan to continue maxing out my 401k, Roth IRA's, and HSA until then.
The problem is some people pay $20000 per year on Property taxes Because of dollar devaluation. Some call it inflation. Now that the US is no longer the reserve currency and our dollar is or dollar is free falling. I think it's safe to say most of us won't ever be able to afford to retire. They have these retirement calculators I adjust my savings accordingly I'm in the green I check it 2 or 3 years later I'm in the red. This goes on and on. A couple of my rich friends say you need to have owned your own business working from someone else you will never be able to comfortably retire anymore. Let's go Brandon.
USA
$400 food
$200 utilities and phone
$300 prop taxes/condo fee
$300 Medicare and Medigap
$1200 minimum if own your home freehold
$1 million or $10 million?
I'm 65, never worked in America and just recently moved here form the UK. How do I sign up for SS?
I’ve you’ve never worked in a job that had you pay into the SS system, I don’t know that you can get any SS. But I really don’t know much about international and cross border issues, so maybe I’m wrong.
Or, is there any kind of UK equivalent of SS that you’re getting?
You won't get American social security, but you can have your uk pension sent over.
@@taffyalusa4642 I would like a Federal welfare check like other older Americans. This is very unfair.
@@billpasaki4769 why would you feel entitled to that if you've never contributed?
@@billpasaki4769
You’re funny. My social Security is base on what I PAID IN FOR THE PAST 50 YEARS. I don’t get money for just being alive.
$50k saved, a $1600 ssa check, and zero debt, is all you need.
Step one, max out Roth IRA in an S&P500 index fund
Step two, live off of the interest your investments accrue annually
ez
Step one always get a match from your employer in your 401k first
Step one most people pay less tax in retirement making a traditional better than Roth for most people.
The s&p 500 doesn't pay off interest. Stocks do not pay interest
This is a well made video, and I love how simple you made it. Great job! But I’m surprised as a fellow RICP the way you talk about the 4% rule. Even in the RICP course they clearly show that the trinity study was flawed in its finding of the 4% rule as it did not even factor in anything besides domestic equities. Dr. Pfau’s more recent work of more like 2.4% seems much more reliable from a planning perspective. In fact the the probability of success (as defined as having 1 dollar left at death) when running a Monte Carlo on $1MM drawing off 40k for 30 years at only a 2% inflation rate, the success rate is only 79%. If the client wanted to leave even $250,000 to their estate, the success rate drops to 72%. If a 3% inflation rate is used the success rate drops to 66%! Not to mention if taxes increase in the future. Not trying to troll you here, just saying as a fellow RICP we need to be advocates toward what people can really expect and bring solutions! God Bless.
I appreciate the constructive feedback, thanks. My goal with the video was to provide a better, but still pretty easy to use, way of guestimating how much investable assets would be needed to fund a retirement. Unlike most of the overly generic rules of thumb out there that say things like "a 50 years old should have $1,000,000," I wanted to provide a way to refine it down a bit, namely by mapping out expected expenses and taking stock of expected income above and beyond just investable assets.
In practice, I fully believe in and use the idea of matching up necessary expenses with sources of guaranteed lifetime income. While accounting for inflation on both ends. But I felt that level of detail would be a bit beyond the scope of this particular video. I did, however, dig more into matching up necessary expenses with lifetime income in my video on deciding between a pension or lump sum.
And yeah, I fully agree the 4% rule is far from perfect - I list all of its flaws and things to consider toward the end of the video. I even mention some feel 2.5% should instead be used (based on Pfau's research).
Annuities will earn 4% guaranteed. 2.4% is basically inflation. This is an attempt to convince people to invest more, which is great for fund managers. If I can't get 10% in the stock market, I can get much more in the investment real estate market.
@@anthonydooley224 and where are you saying Dr. Pfau’s research is coming from?
Mo than you got!!!
These planners just regurgitate the same old formula like a robot. $100,000 and travel. How cliche. Reminds me of all the marketing brochures from the investment houses where old couples are sailing the ocean on their 40 foot yacht smiling like the dickens with success. They need a new script and read the stats. The average family income is somewhere in the low $60's. Remove FICA and other work related cost and your at $50k or less. They almost set themselves up to eliminate clients that make under $100k. And traveling in retirement lol. That one gets me laughing. At least for me, I have no interest other than maybe one seeing Germany once....not every year. As a mater of fact, I know tons of retired people who did well and at most go to Colorado for a week. Most will spend way less as they approach their 70's and beyond. Get a reality check will you? Most retires will have to survive on way less than $60k and will do ok.
You are funny. Go on a cruise or go to Hawaii and you will see many many many retirees traveling all over the world. Many people invested and saved starting from their 20s as well as having income from rental property, pensions, her Social Security, and his Social Security. Many people are doing very very well in retirement. Especially those who retired debt-free. Is your point that you and many others did not save enough for retirement? I hope you saved enough to have an enjoyable retirement. Best wishes.
@@techguy3507 LOL! You're predictable but I'll play. Lets just say I'm in the top 8% net worth wise and I'll let you do the math on that. Thankfully I never needed to hire a CFP to tell me how to save and invest. Most still have the 80's sales pitch.
@@theadvocate1925
Bless your heart.
I'm gonna live forever cause I got Jesus... oh yeah, I'm debt free.
This is not for the average American it’s for a wealthy person let’s keep it real.
This is for the people who chose to save during their working career. Far from wealthy but I've always spent less than I made
Being average isn’t all that great. You are mostly correct that people who saved 15% of their income from 25 to age 65 will have 1 million or millions to retire on. It’s funny how most people seem to drive super nice cars and have car payments but if they would have driven a paid for a car and saved that car payment they would have a million or millions. The average person has credit card debt, car debt, and is making minimum payments. There’s nothing that great about being average. The average person doesn’t need this advice because they are probably still trying to make their credit card payments and car payments. It is sad that people who drove old cars and saved their money are called wealthy. I don’t think they are wealthy as much as they are frugal and responsible.
I had no idea you could see how much you've been paying into social security at ssa.gov. Going there now
It’s definitely a good idea to take a look!