Peak FP Podcast: Retirement Planning Tools Will Ruin Your Retirement
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- Опубликовано: 9 июл 2024
- Interested in a plan to Navigate the Retirement Risk Zone?
www.thepeakfp.com/free-consul...
Resources referenced in the video:
Income Labs - incomelaboratory.com/
Everydollar - www.ramseysolutions.com/ramse...
RPI Spreadsheet Calculator - docs.google.com/spreadsheets/...
Better Portfolio Risk Measures - • Understanding Asset Al...
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Eric Amzalag, CFP®, RICP®
Read a Sample Financial Plan: www.thepeakfp.com/blog/sample...
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Disclaimer: Please consult with your own tax, legal and financial advisors for personalized advice. Peak Financial Planning Inc, or its members cannot be held liable for any use or misuse of this content.
#retirement #howmuchtoretire #retirementplanning #retirementplan
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I retired at 54. NEwRetirement and Monte Carlo gives me 3rd party confirmation of my spreadsheets and rules of thumb. Putting too fine a point on forward projections can cause stress. Best is to be directionally correct and know stress points and levers to improve as life unfolds.
I believe this channel provides solid content on interesting topics. One day he may have as many subscribers as you do!
Agreed. It's about expectation versus reality- if we expect monte carlo to indicate or be more meaningful than it is, we may end up in trouble. It's useful directionally, but does not provide the turn by turn directions most of us seek (and need) in order to succeed over time.
Hey joe! Cool seeing you in the comments! I watch you all the time!
I'm 62 and almost ready to retire. worked for the same organization since 1985, when I graduated. I will receive a pension equal to 65% of my present income because I am grandfathered into it. I believe I'm fairly unique. At age 62, my pension and social security pay for all of my expenses; they don't touch my portfolio, with the exception of unforeseen costs or car purchases.
For my part, I would never touch an annuity. However, drawdown mix plus fixed term would proceed.
In this approach, you can profit from predictable income and returns on equity.
My girlfriend in Ecuador rented out her house for $500 a year. It had multiple gardens, a spacious living area, two bedrooms, and additional room for storage or crafting.
I'm lucky. My health insurance is not paid for. All I do is visit the VA hospital.
The tool does exactly what it's supposed to do. Expecting it to do more is the problem. I don't drive a car and complain that it can't fly.
This is a great way to put it. In fact, with your permission I would love to borrow this statement. Excellently said. It's all about expectations versus reality.
Good video. You seem to really know your craft. I believe that most of you viewers here are folks who desire to dig into the details. Like Joe, I also am a NewRetirement user. I plan to retire in about 1 year (little less than a year). The tool tells me that I have a very high likelihood of success when I choose average assumptions. When I choose pessimistic assumptions, the chance decreases drastically. However, the tool shows me when I go broke. An analogy I have heard before is that if things are not going well, make adjustments - when the pilot takes off, he has an ideal path/plan that he would like to take to the destination. If something unexpected happens during the flight, he makes appropriate adjustments. Again, your audience here knows how to track, update and adjust a financial plan. But thank you for the info. Good luck with this channel.
Early retirement is achievable, but it requires disciplined saving, wise investments, and careful planning for potential healthcare costs and inflation."
Dividend investing can provide a reliable income stream in retirement, helping you cover expenses without dipping into your principal.
Roth IRAs are excellent for retirement due to their tax-free growth and withdrawals, especially if you expect to be in a higher tax bracket in the future."
As you get closer to retirement, adjusting your asset allocation to include more bonds can reduce risk and provide more stable returns.
Focusing on a “financial score” is like going to the doctor and only focusing on cholesterol and blood pressure because you get scores. There are many factors that can impact your financial health as well as your physical health. Some can be measured and others can’t.
Love the Income Lab information. Having said that, it is only available to advisors. Need to continue to push tools like this and education to do-it-yourselfers who have an aptitude for this. That plus a periodic visit with a flat fee advisor (preferably on an hourly basis - not annual asset based charge) would be extremely helpful.
A 30-year projection is nothing but a guess. Monte Carlo simulations give thousands of guesses -- the vast majority of which are way off. All you need to know is: 1) what is the average return for your assets over time, and 2) what has been the worst case historically for the desired timeframe. If you get better returns, there is no problem. If you get worse returns -- especially in the beginning -- you make adjustments. No plan is locked in. If you have to cut back on spending for a year or so, no big deal. You should have allocated funds for that specific purpose, anyway.
A Monte Carlo simulation certainly is not a financial plan.
It is a mathematical calculation and predictor based upon historical information and current status.
Not bad to play around with, but I certainly would not take it to the bank.
After I ran the scenarios, I ran them again with a 20% drop in my retirement savings amount (in case of a large dip in the market). After I did that, I felt confident in my savings and my plan.
Anybody worrying about having too much money left before they die has a high quality problem. That’ll never be me
Thank you for this video, i have been playing town cryer on this issue to deaf ears. It is all a best guess.
I use excel to do my own formula for retirement as I will input the critical factor according to my own situation. At the same time I use Monticello simulation just for checking purposes.
I think one way the Monte Carlo can be off is that it predicts more variation in the out years than what is realistic. For instance, the program uses an annual standard deviation on returns. That forces a growth in variation through the years. But in real life, there are short term forces (like day trading) that kind of disappear in long term investing because prevailing forces like the real value of a company and profitability.
I’m waiting for 95%
So what do you do? You can’t predict the future and any #’s you put into to SW are just guesses, likely to be wrong. And the SW doesn’t account for human adaption to the future conditions.
Retirement planning is like cooking bacon. You can eat it faster than you can cook it. It takes discipline to be able to sit at the table with enough for everyone to eat.
Great video. However, I'm not seeing the show notes with the 4 tools mentioned in this video.
Sorry - just added them to the description of the video - but here they are:
Resources referenced in the video:
Income Labs - incomelaboratory.com/
Everydollar - www.ramseysolutions.com/ramseyplus/everydollar
RPI Spreadsheet Calculator - docs.google.com/spreadsheets/d/1rjDmswOlsNvuaOHNqGAcEemQZlVZSlsFmxVE550KPiU/edit?usp=sharing
Better Portfolio Risk Measures - ruclips.net/p/PLNUMTwkQgp0-TC1PpAx7XP_ZlEKHKaI6L
The other problem with these Monte Carlo simulations is that they assume that market returns are independent and identically distributed. That assumption is not valid. My observation is that they underestimate the probability of success.
Hard push for using advisors - fine, thats your job, NP.
Can you discuss the fee mechanism in the industry - i.e. percentage of funds under management being the norm rather than a percentage of profits or savings.
Thats the key thing that puts me off retirement advisors, the fee mechanism is tilted towards the fund building part of the journey rather than the spend side.
Likening themselves to doctors, that was rich 😂
I think there's no reason to hire an advisor during the accumulation phase of the journey - at that point the primary focus should be on savings behavior (maximizing savings rate). Once one is entering the retirement risk zone (5 years before retirement, first 5 years in retirement), crafting retirement income and having a portfolio allocation both from a tax perspective and investment perspective is crucial. the portfolio allocation should SUPPORT the income one needs, not the other way around. To that end, begin by planning what income one will need from the portfolio, and then create a portfolio that supports that. From there, understand the loss recovery rule - that it takes longer to recover from losses (a 10% loss requires 11.1% gain, 30% loss requires 42.8% gain). The financial services industry has been a race to the bottom (in terms of advisor competency) because they are trying to compete with free online brokerage. As a result, the educational and experiential standards of investment advisors has dropped dramatically, unironically leading to worse client outcomes and therefore skepticism about working with an advisor. I cannot fault anyone for that.
When it comes to quantifying the fee an advisor charges for investment management, I believe it is broken into 4 parts:
1) Time saved
2) Mistakes avoided
3) Tax saved
4) Portfolio downside protection.
As I said in the video, there are all sorts of areas in our life where we choose (or choose not to) pay for expert advice. The best CPA's, lawyers, surgeons (whatever profession) charge a premium rate because they provide the best outcomes. No one has to work with that CPA/Surgeon/Lawyer. But if they want to, they can investigate, interview, and make a decision about what kind of care they want in each field.
My case is the same for financial advice. People can investigate, interview, and ultimately make their own decision about who or whether they want to partner with someone.
Some will, some won't.
I'm simply out here to educate and increase awareness of the complexity of the endeavor, because that is my core belief.
To each their own :).
Thanks for the kind comment and the support of the channel!
Waiting for Medicare to kick in.
Holy shit man. I'm going to have "probability of success" nightmares.
:S
It is dangerous to make forecasts, especially about the future. (Danish proverb, variously attributed)
The biggest problem, is that we each only have one life. If the tool tells me that in 83 out of 100 simulated lifetimes I don't run out of money, that means in 17 lifetimes I do run out. Great. That tells me nothing about what will happen in my specific life.
I live on a 500 year floodplain. Will it flood while I'm here? Probably not, but it might! I commute thru the annual floodplain. It's been over 10 years since it flooded, and people in all those houses that were newly built just before the last flood really freaked out. Will it flood again? Probably, and I expect many new people there will freak out, "I've been here 10 years and it never flooded before" even though the probability is 100% when forecast a couple of years in advance. We live what actually happens, without being able to repeat our lives often enough to match probabilities. And what assumptions lie behind that probability? Garbage in, garbage out.
There are many methods for predicting the future. For example, you can read horoscopes, tea leaves, tarot cards, or crystal balls. Collectively, these methods are known as "nutty methods." Or you can put well-researched facts into sophisticated computer models, more commonly referred to as "a complete waste of time."
--Dilbert
Understanding a building from scratch (in EXCEL) formulas and your own Monte-Carlo (In excel) is powerful - I built mine for the Monte-Carlo for monthly changes in market volatility. It is all about sequence of returns - (which is why Monte-Carlo is important). However, I do crash excel alot when going monthly for 40 years with the Monte-Carlo simulation - and plotting in excel is not very good because it cannot handle all 1,000 trial runs in on single graph. It does have its limitations. It was a fun project to do. And for peak and standard deviation (aka volatility) , I know how to take a set of data that I want to use and use the excel formulas to calculate the peak and SD.
I ran a calculator once where I was taking 20k a year from a mil over a 30year time frame. The result was less than a 100% hahaha. If it was all just cash in the can it would last 50yrs. So I just ignore them now.