I think the main thing is to get to a solid number and consider hopping back into part time work and/or cutting expenses if things look grim the first 5 or so years in retirement
SS can be tricky because it's only guaranteed while you're alive. We all will die, and normally one spouse will live considerably longer than the other. That "guaranteed" income will take a hit at some point. Ive always looked at the 4% rule as a baseline. Its the same as the 25x rule. I dint think anyone really looks at it as the answer to all your retirement questions. We both retired before 60 with a goal of spending the exact same as our "bring home" pay leading up to retirement. Due to inflation, kids stillin college, and a lot of traveling, we have actually needed more income than planned. Fortunately, that number is still in the 4% area and we are doing all we want. It's good to be retired.
Social security is guaranteed even in death because your spouse is eligible for survivors benefits if she's at an eligible age and any minor children you have will receive survivors benefits also.
@@jdollar5852 I'm not sure how you know it doesn't apply for most of us but the point is it is around and is available. And as most couples don't have the same work history I believe it applies for most couples.
Great walk thru of the options and possible outcomes. Of course there is much more info needed for individuals to make their plan “fail safe” - but this shows the importance of a holistic view of your pension funds.
I don't understand why people are avoiding touching the principle at all. Is it only so this money can be passed on to inheritors? If that's the case, isn't the 4% rule meaningless if you don't plan to pass on money?
Except for my wife, I have no heirs. I’m playing it safe for my senior care. I want to die in my house with caregivers, not being abused in a nursing home. Same for my wife.
I put numbers into a withdrawal calculator and came up with 6.6%. That is because I did not adjust for inflation and assumed 7% return on investment. For married retirees like me in the TSP, you need a new notarized form every time you change the withdrawal amount. If I set it to a fixed amount I only need the one form for the rest of my life. People spend less as they get older (go go years early, slow go years later). My FERS pension and SS will have cost of living adjustments, so I don't really need a COLA for my TSP withdrawal. I am %100 C Fund (S&P 500) that averages 10%+ per year so 7% is a modest assumption.
@@jmurphy644 Thanks for the tip! Part of the TSP modernization was streamlining the withdrawal system by eliminating the snail mail form and spousal notarization hassle. I just submitted monthly installments at 6% annual of the current TSP account total with spouse email docusign. Much easier than the old way.
I’ve been diligently working, saving and contributing towards early retirement and financial freedom, but since covid outbreak, the economy so far has caused my portfolio to underperform, do I keep contributing to my 401k or look at alternative sectors to meet my goals?
I'm in line with having an advisor oversee my day-to-day investing cos, my job doesn't permit me the time to analyze stocks myself. Thankfully, my portfolio has just 5X in barely 5 years, summing up nearly $1m after subsequent investments to date.
bravo! I appreciate the implementation of ideas and strategies that result to unmeasurable progress, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
Thanks for sharing. I curiously searched for her full name and her website popped up after scrolling a bit. I looked through her credentials and did my due diligence before contacting her. Once again many thanks.
Well done, thank you. Please integrate your adaptive strategy with actuarial data. Not many people live for 30 years after retirement. An interesting exercise is to calculate the required present value (PV) of your portfolio based on anticipated yearly withdrawals and actuarial data
Excellent video, your content always sparks so many ideas in my head. I am planning a flexible withdrawal approach to retirement and I really appreciate your videos. Thank you!
Wonderful video. Add to this that it would be very difficult to need for money into your later years in retirement instead of your beginning and its plain to see the 4% rule is really very accurate if you want to leave a lot of money to your children.
1:50 another (unstated in this episode) glaring problem with the Bengen 4% is how the 30-year planning window for the portfolio is less appropriate 1) should life expectancies increase since the mid-1990s, and 2) average ages of retirement (point in time when portfolio withdrawals begin) decrease since the mid-1990s.
@@dmoon9037 it is a keen observation. In the event, however, we know that as of today, life expectancies have decreased due to various things such as fentanyl, COVID, firearm deaths and getting crushed by SUVs.
Thank you for debunking the ultra conservative "4% rule". If someone follows that, they will die with a huge pile of money. In addition, it also does not account for any modulating your spending (withdrawals) in down markets (spend less during that drop) which can greatly lower your risk.
Historically they will on average but what happens if the future doesn't have the same high returns that the US had 4% did not work in most countries historically
@@johngill2853 Unless you live in a country that does not have the ability to invest directly, or indirectly, in US equities or bonds they can easily replicate US returns. There are alway crazy ass corner cases, and if that's the situation, just go buy lottery tickets.
@@mrallan8063 they can easily replicate past US returns? We can't even guarantee we will have past US returns in are timeline There are no guarantees in stocks for your specific timeframe. We hope 4% works for our specific timeframe (actually I'm shooting for 3%, it's easier on the stomach)
Great video. Another factor I've been playing with is paying off my mortgage. Between that, and receiving social security, my wife and I could potentially find ourselves with an income stream our 70s which is (inflation-adjusted) higher than what we spend now, even if we zip through our entire savings. I have been needing to try to do all of these calculations myself, and find myself re-looking at them each time I have a frustrating day at work. I suppose I need to find a decent financial advisor.
I've been saying this all along. My 5 biggest uses of cash: 1. Retirement and college savings 2. Mortgage 3. Income Tax 4. Health Insurance 5-6-7 Travel, Vehicles, Groceries #1 goes away. #2 house will be paid off, so only taxes and insurance, #3 mostly goes away (Aside from income tax on 401k distributions and dividends/capital gains), #4 mostly goes away with Medicare. Something like over 60%+ of our cash outlays go away. This leaves us with maybe a cash need of $4000-$5000/month. Maybe $7000-$8000 if we travel extensively. I'm just not seeing this being overly challenging until our health starts to really fail us.
Curios - what about an early retiree? I'm 50 with $2.7 invested and no debt. No house though I rent. If I retire, I'm looking at roughly $2k a month in SS at 62. I'm a flexible person, not married and no kids. I'd really like to spend as much I can early on in my retirement? Do you think 5% would be an acceptable withdrawl rate? Thanks.
Just looked into a memory care facility for a relative who is physically healthy.. $80,000 a year and he may be there 10 years or more.. LTC goes up more than cpi too.. having some dry powder for this will provide a better facility and less stress or burden on the family..
At that age, I hope my family leaves me alone and let's the state jump in to put me somewhere. Most likely I dont know my family anymore anyways and why burden them with those types of financial burdens. You lived a good life, time to just let the days pass until you pass as well.
Another good video, thanks. I would like to see these concepts taken a little bit further. We typically think of retirement and spending as a hard line transition from accumulation to decumulation. But the reality is that for most people it could be softer. While official retirement might happen between age 57-67, there are lots of things happening before that time: kids moving out, mortgage being paid off, income peaking, etc. What would be the impact of possibly moving spending into even the later working years? Maybe buy that Porsche. Maybe rent the downtown penthouse. That is, extend the left side of the smile a bit into the working years.
He looked at multiple different portfolios from 100 percent bonds to 100 percent stocks and everything in between. He also looked at multiple retirement durations from 10 to 50 years or so.
You never know when you will die. My mom died at 60 and didn't enjoy anything even though she wanted to do so much after retirement. Take that money and go enjoy.
I am going with 6% of my total TSP balance (near its all time peak) divided by 12 for a fixed monthly installment withdrawal, no yearly inflation adjustment. This should hold up greater than 30 years even with a well below average C fund return on investment. Retirees tend to spend less as they get older so the decreased purchasing power is actually not that bad. In 7 years I will file for SS at full retirement age for a delayed boost in retirement income. Worst case scenario, if there is big crash like 2009 or 2020 I can just turn off the installment spigot for 6 months to a year and wait it out on my ample cash reserves.
All these safe withdrawl rates but no mention of the risk of outliving funds and how, if you accept a higher risk, you can tale out more than 4%. Especially when yiy underdrand thst it is unlikely you will die before your targeted "end" date. I'm comfortable with a 10% chance of portfolio failure.
Very timely information for me. I will retire in August at age 57. I plan to have a 10 year gap before SS. I have a deferred income annuity which I may turn on at 65. I have been modeling out various withdrawl rates, and while I can live on less income, if I can afford to spend more in early retirement, I would want to.
Excellent content. I always wondered why greater than 4% withdrawal is considered risky when historical equity returns are around 10%. As I have commented earlier, if you have a safe cash position to ride out 2-3 year investment cycles (I like 4 years or 15% of my portfolio) , you can comfortably enjoy withdrawals greater than 4%. I retired at the end of March 2022. From 3 months before to 3 months after my my retirement date, my portfolio took a 15% hit. I did not adjust any of my expenses and am enjoying my go-go years of retirement to the fullest. Since this low point, my portfolio has regained nearly all that was lost (on paper). What I would like discussed in the future video is the validity of the 60/40 equity/bond "rule". I think the days of bonds being counter-cyclic to equities are long gone. If I had 40% bonds throughout the latest interest rate cycle, I'd be in much worse shape than I am today. I think the pivot to bonds as you age is a fallacy and one of the reasons why target date funds have not lived up to their hype when first offered.
Thank you for this. I think many don't realize the importance of what this may mean for long-term tax planning / RMD's in the later stages of a life. This is, I'm assuming, based on a traditional retirement plan which re-balances to a certain percentage portfolio. For those of us with a more "risky" investment plan, I don't know of a withdrawal/income strategy that is based on a higher, more volatile growth curve. This includes me, so I think a dynamic withdrawal reassessed every year, and probably every 6 months or so is advisable, along with lump sum withdrawals to a cash account as a safe harbor where the spigot to such accounts as those in the market tax deferred may be reduced or turned off during morket downturns.
Social security income is NOT inflation adjusted. In my experience over the last 8 years, my SA COLA increases haven’t even been half of our experienced inflation rate, a rate that is far lower than the CPI measurement the feds use to calculate the annual COLA.
Each month, my retirement accounts provide a change in market value. If I subtract my contributions, I get a better idea of the actual change; this works great in accounts where I no longer make contributions (e.g., former employers 401k, old IRAs). Every 3-5 years, depending on growth or loss, I reset my baseline which is the minimum principal balance I want to maintain. I have a target amount I want to withdraw for the year, though I may make withdrawals throughout the year. I also estimate how many years I will live and need to have this income; my estimated annual interest rate; estimated annual inflation rate; my total retirement savings, which lets me calculate the estimated retirement amount needed adjusted for inflation. At the end of the year, I create a copy of this calculation using the actuals for the year, which I use for the coming year estimates. This approach seems more accurate, depending on the accuracy of my estimates which is why I update with my actuals every year, than a simple percentage amount. IMO
Just wondering how it would work out if I took a purely flat rate of 4% per year. That would be very market dynamic and let the stock market determine actual withdrawals
Because there would be huge swings in your yearly amount which most people can't deal with. Say your $1m portfolio gets cut it 1/2 like in 2008. Your first year would be 40k and the next year would be 20k. Huge swing.
So how do you figure out based on your own personal situation what your percentage withdrawal is? It sounds like it's very customized based on your balance and age of retirement. Did I miss the part of what percentage of inflation they base this on? And what percentage of returns?
Did your examples for smaller portfolios also use the 30-year timeframe, i.e. portfolio is exhausted at or around the 30 year mark, and OASI is the only income that continues after consuming the portfolio for income?
As I recall, a 60/40 portfolio averages around 6% return, or close to 4% after inflation. So does the 4% rule basically assume you live entirely on inflation-adjusted returns, and only dip into your basis during downturns? I assume both your payout and balance would adjust with inflation. This would be like a perpetual inflation-adjusted annuity. Seems awfully conservative when I think of it that way.
For retirement accounts only that dont include SS, annuities, rental income erc., Do these assume total income for couples? E.g., the $2M example could be $1.3M from one spouse and $0.7M from another?
1:56 OK, but you do see why leaving your children with $1.5 million inheritance is better than leaving them with, right? Yeah, yeah, you have to be smart about taxes.
6.3% is pretty high. If you retire at 67 you can take out 4.5% assuming a 5% return with 3% inflation. If you retire later you can take out more. These 6.3% projections assume you keep all your money I'm stock, but in real life your advisor will put you into safer less volatile investments that earn less.
Can you do a video which explains that the current SS math says, on an actuarial basis, that it doesn't matter when you start SS? It is my understanding that the SSA actuarial calculation is that payees get the same amount of $$ regardless if they start early or FRA or later. The issue is that a recipient only has one life, and that can be longer or shorter than the average.
Actually you are incorrect, there is a breakeven point no matter what age you start receiving SS, if you live past that date it is better to delay. If you die before that date it would have been better to start receiving it earlier.
@@dec1slh I know the answer, but there are too many idiot financial writers who keep claiming, and brainwashing people into, delaying collecting ss when you are closer to death and homebound living in diapers is a better financial path. People need to understand that a year of health at 62 is likely 5x or 10x better than at 72. No amount of money can buy back that time.
It’s interesting that I recently read Bengen revised his number to 3.3% due to inflation in recent years. I don’t know if he re-ran his studies but that’s what I read.
That's just not true as this article which interviews Bengen shows: Father of 4% Rule Urges Caution, Cash as Market Risk Rises By Jane Wollman Rusoff May 09, 2022 at 05:18 PM Recent calls to cut withdrawals to around 3% or less are too conservative, Bill Bengen tells ThinkAdvisor. Bill Bengen, the inventor of the so-called 4% retirement portfolio withdrawal rule, has a crucial message for financial advisors: “Manage the risk portion of a retirement nest egg actively. Unless you’re willing to vary - reduce - your clients’ allocations to reduce risk, it could be damaging,” the former 25-year advisor argues in an interview with ThinkAdvisor. But have the pandemic, falling markets and rising inflation torn up the 4% rule/? Hardly, he says. “We’re in a period of rising interest rates, and probably both stocks and bonds will do poorly,” he says. This time, the Federal Reserve “may not have the luxury” to use monetary policy to affect “a quick cure,” Bengen cautions. In a research paper published in 1994, he recommended a 4% withdrawal rate in tax-deferred accounts for the first year of a 30-year retirement, making adjustments in subsequent years according to inflation rates. But about two years ago, he increased his suggested rate to 4.7% based on new research he’d conducted. Recently, however, citing “high inflation [as] a huge threat to retirees,” Bengen revised the rate once again and recommended a rate lower than 4.7%. “If people want to take a few tenths off and take it down to 4.5% or even 4.4%, I wouldn’t argue,” he says in the interview. Bengen is suggesting a retirement portfolio asset allocation of “55% of your normal allocation to stocks” and “cutting your bond allocation at least in half.”
Can you do a video about having a mortgage in retirement? Dave Ramsey says get a 15 year loan and pay it off earlier. Ric Edelman says get a long mortgage and never pay it off.
Track Guy, I've been retired for 13 years and have a mortgage on my house and a 6 figure construction loan on a project I did for my son at his home. It would be interesting to hear Eric's take on your question, but I would bet it would be that it all depends on your specific situation. You need to look at what your income stream will be, your expense stream, your financial situaiton and make a decision based on your personal situation. All the information out there is for you to use for knowledge and a overlay for your particular situation to help you make your decisions. Just my 2¢
Financially it can make sense to carry a low interest mortgage, even into retirement. But there is nothing much greater than the feeling you have when you are totally debt free in retirement. We were a single income family, I retired the day I turned 60, we have been debt free for over 10 years and own 3 homes free and clear. When you have no debt your living expenses are minimal, ours will easily covered by SS when we turn on SS, everything else is just bonus money.
There is something called the opportunity cost of money. If you sell your home and all the extra crap you have to keep it running, you can put that money to work for you and probably exceed rent. Even bigger benefit, free up more time to enjoy your retirement instead of frittering it away puttering around your fiefdom.
The problem is people change there invest as their near retirement. If you have been saving and have a decent pile of cash when you retire stay invest 80% SP500, 20% Bonds, Treasuries. Stupid to not capture the gains
My problem is I’m retired 6 years and I’m scared to death to spend a dime of my savings so I live off of social security. I also have no children to leave it to. HELP!
You should look into a SPIA.. a single premium income annuity.. pays you guaranteed monthly income for your life.. you will never worry about running out of money. The return on investment is not that good, but it gives you peace of mind to spend it all each month with the next payment coming every month.
I appreciate the comment but why does our content need to reflect the average person? For instance, we have a lot of content on Roth Conversions, someone with less than $250k doesn't need to worry about Roth Conversions. So should no one post content around Roth Conversions because it doesn't fit into most peoples plan?
The balance of the portfolio doesn't matter much when talking about the 4% rule and having your portfolio last at least 30 years. Those with bigger portfolios have more wiggle room to reduce their withdrawals in bad economic times but if we're talking strict adherence to the 4 percent rule it matters little if your portfolio is $250,000 or $2 million.
@@SafeguardWealthManagement Sorry, I didn't mean this as a criticism, but just pointing out that lots more of us have smaller portfolios and we're probably more in need of your perspective, experience and advice. That's all. Some of us are putting much smaller pieces together and don't have as much "buffer" if we make a mistake. Thanks for your videos.
You mentioned 1966 being the only year that failed the 4% rule, you might want to check retiring in the 1999/2000 timeframe. The 4% rule would run you out of money on a 60/40 portfolio around 2020...
Just ran this in portfolio visualizer. 60/40. $1M starting in Jan 2000 taking 4% would currently have more than the person started with ($1M+). I ran varied combinations of total stock market, large cap, etc. All show similar results
We did a study on this exact same subject starting with the dotcom bust and found you would have MORE money in 2022. I'm not sure how you did your numbers but the math just doesn't support what you're saying.
I doubt it. They’ve been saying this for 40 years. SS is the 3rd rail of politics. Touch it and you die as a politician. They’ll just print more $$ like they always do.
This plan ignores a very real problem. Long term care / medical assisted living. People may need to have substantial assets at the end of life to pay for expensive care so you don’t bankrupt your children just as they are approaching retirement. As someone with parents on both sides in their 90s, this is a very real scenario. So planning for ‘leaving 2M’ on the table is the responsible thing to do.
The 4% rule was based on the idea that your expenses each year is 4%. So you don't start off spending 4% then add other sources of income, reduce or increase your spending. Its for the situation where you have to spend at least X amount of dollars each year no matter the circumstances. Any spending that adjusts above the minimum needed each year can follow whatever else rule. What I do is figure out the minimum that we'd need to spend every year. This is only covering the essentials. I'd like to have enough invested so that 4% or less can cover those costs. That's after factoring in other sources of income like pensions, social security, etc. Anything above that is flexible spending.
Anyone who would suggest that the 4% rule be used to plan retirement spending without modification by any additional income streams is an idiot. It is a rule on the 'safe' (technical defintion...) inflation-adjusted withdrawal rate to not run out of money in 30 years of a retirement. It says NOTHING about other income streams; the person using the rule has to take those into account intelligently. It actually doesn't have anything to do with spending; just withdrawals.
The 4% rule is just a simple starting point to have a goal to save up to its not something that is set in stone that you will be thrown into prison if you brake it! If you have a bad investment year then try to spend less in that year if you are having a really awesome year then you can spend a great deal more in that year.
Perhaps this is the wrong question to ask...how many financial problems have been caused by those asking "What's the MOST I can spend"? What if instead the question was "What's the least amount I need to spend to enjoy my retirement"? The truth is that spending isn't correlated to happiness and if (gasp) you DON'T spend all of your money so what...give your kids and grand kids a head start and/or leave a legacy of charitable giving. I guarantee you won't care if you don't spend it all, only if you do before you're done with your air addiction. Honestly, with a paid off house and no other debt I can't help but wonder what folks are spending so much on. Eating out is an expensive disappointment compared to home cooking and the cost differences are staggering these days. Jewelry, expensive clothes, large homes and super cars...a Jedi craves not these things and neither does a sensible retiree that's looking to make life easy and carefree by focusing on those things that truly matter and jettisoning everything that doesn't add real value. So many expenses have less expensive or free options that are also better and all I see are options to get exactly what we want and save money. I was reminded of this again when we recently had to upgrade our 3G flip phones because they're cutting the network. After looking at all of the options we chose to go with 4G flip phones, lol. Sure we could have bought expensive smartphones but they're so expensive that you need "insurance" which is also expensive and comes with $40 co-pays for things like broken screens. Unlike our flip phones which can disappear into any pocket where on earth do people keep them? As far as I can tell most people choose to walk around all day with only one free hand. No screen protectors or cases needed with flip phones either, we saved about $2,400 vs the latest smartphones, our plan is $250/year less expensive, battery replacements are as simple as popping off the back with a fingernail and they're far more sturdy. Since I'm not a 13 year old girl I have zero interest in social media and when I'm out and about all I need/want is a phone and no additional screen time. I see iPhone zombies everywhere I go and I'll never become one. I laugh as there's a new push for folks to put down their smartphones these days because they're far too attached...it's clown world at it's best. Why on earth would my wife and I ever go out to a restaurant for breakfast which is now $40 with tax and tip at local restaurants when we can simply head into the kitchen, turn on some light jazz and make unbeatable waffles from scratch with real maple syrup (dark amber), sausage or bacon and scrambled eggs for about $1.50/serving? I'm never giving up my crispy waffles right off the iron for ones that wait under heat lamps on the pass for several minutes before being walked 50 to 100 feet to our table where it's now cold and has completely lost it's charm. Obviously this is something I feel strongly about and I truly believe that the good life is so inexpensive that it's available to all. Live Simple, Live Free!
Ditto - we have found that in our first 5 years of retirement, we have spent less than we thought we would, but have not denied ourselves anything that we enjoy. It is just that after 40+ years of marriage, we have learned to enjoy simple pleasures. Time with friends and family. Good home cooked meals. Enjoying our home. Traveling in the USA and outside the USA (except during the pandemic insanity). Buying a new car. We have been debt free since our early 50’s. Life is good. We will have enough left over for the next generation when we pass from this earth to give them a cushion so they, in turn, can do the same for the next generation after them.
This advice echoes or mirrors the fundamental flaw in all financial planning, today. It is based on "how much can you spend?", instead of "can you follow a budget?" and only spend what is spelled out in that budget? Financial planners don't want you to follow a budget. They want you to invest as much as you can, because they get paid based on "assets under management". They don't care even a little bit about your financial well-being, so long as you invest as much money with them as possible, so they can get wealthy off of your diligence. Any financial discussion that doesn't begin with the creation and analysis of a proper budget...is not a discussion in your best interests.
🤦🏻♂️ The underlying message of this video is basically, "You can spend more than you think" and your takeaway is, "Financial Planners want you to save all your money so they can get a higher fee". Interesting...
I don't even have that. I've got 300K and am now just retired, but as I am forced to house-hunt, I'll have a mortgage of some sort as well to deal with.
Too scary to spend more upfront...you do not really know the future, and once you sell it and consume it, it is gone. I understand enjoy yourself, but I think it is best to leave budget for 'contingency planning'.
The 4% rule doesn't take into account other income streams? There is no 4% rule. Read the study it never once says the word rule. 4% plus inflation is historically the SAFEMAX (highest safest withdrawal rate) nothing more
Kind of semantics, right? Whether the study called it SAFEMAX or the 4% rule, what does everyone call it today? Thats why I call it the 4% rule in this video. And yes, it doesn't take into account other income streams. That's my point in the video. Take an idea that struggles to have practical application and iterate on it.
@@SafeguardWealthManagement SAFEMAX means highest safest withdrawal rate and that is different than you saying most of the time you can withdrawal more. You have to remember before the study that information wasn't readily available. The study wasn't meant for how much you can spend in retirement,it was how much you can safely withdrawal from your portfolio over 30 years. Your looking at the study differently than what it provided because we have so much more information now. The study was only about safe withdrawal rate from a portfolio and not how much you can spend.
Great video except where it said "Social Security is an extremely safe asset". Social security has been a disaster for most of my working years but politicians lack the courage to make the required changes so we will see big reductions in benefits in the next decade. A ponzi scheme will always fail, even if run by the government and they force in new investors, it will just take longer. We are at the end of this one's run.
It's worked in more than just the US. It's worked in Canada for example. Further, it worked in 98% of starting years in the last century plus. You might find benefit in watching this video - ua-cam.com/video/t-PhOHaIltk/v-deo.html where I touch on points you're eluding to. Btw: I'm not saying 4% is the standard or even a good plan. I'm quite critical of the 4% rule. In this video, I'm saying if you're basing your retirement off historical analysis and including the rest of your income streams, the situation looks vastly different.
Delaying Social Security is one of the dumbest decisions ever. All of these pros cite "statistics". Well...statistics give us a hint, but certainly doesn't tell us the future. Far too many lose out on collecting any social security *at all* by passing away before their delayed collection age. Plus, the "crossover age" is further out than many realize. Personally, I'd much rather collect social security early and use the money while I'm still young vs take a massive gamble based on "statistics" that say I *may* live to 70 ( or whatever my collection date is ).
You can't make a blanket statement like delaying social security is one of the dumbest decisions ever. Delaying social security is something that will differ from person to person depending on their circumstances. There are numerous very good reasons why a person may delay social security.
I agree. Mathematically I figured it would take 11 years to make up for what I collected from 62 to 70. That means I have to live until 81 and I doubt that will happen.
You use $2 million as the amount saved for retirement, but really - how many people have even close to that saved by retirement age? Not many. I saved the amounts they told me I should throughout my career since age 30, but I don't even have close to the $1 million I was told I would have by age 65. Thank God we invested in rental properties because our retirement funds are anemic. Between the 2008 housing collapse crisis and covid years where the stock market took such a big hit, our retirement funds lost quite a lot of money, and took years to recoup in past stock market slumps. So, unless the retiree has your example of $2 million or more by retirement and so can afford to take inflationary and stock market slump hits to their income, I can't agree with your logic to encourage people to spend more of their saved retirement funds in early years of retirement.
One would be better served taking 4% when the stock market is flat or negative for a year and only take out more than 4% when the market is up for the year. Only take more than 4% in positive years up to the amount of taxable income that will barely keep you in your usual tax bracket. If you don’t need the extra income, don’t splurge, put it in a brokerage account and invest it at a low to moderate risk index fund so you have it if you are hit with an unexpected expense. You may be able to avoid being forced to take out so much money that you jump up a tax bracket in a down year (of the stock market).
4% rule is overly optimistic. Historical data shows that if you have bonds, you can’t bank on 4%. Even with 100% equity, you are looking at a number closer to 2.7% if you are lucky. Ben Felix has an excellent video going over why, exactly, this is. Anyone stating you can bank on anything greater than 3% is flat out lying to you
Now model it with 20 years of 15% inflation and a 2 million medical procedure. Shit happens and it's very risky to assume anyone knows where their life is headed.
If everyone assumed 15% inflation for 20 years and a $2M medical procedure nobody would ever retire! Plus, if you have medical insurance you are covered for medical procedures.
@@livingtheslolife you have to model all REAL possibilities to make balanced decisions. Modelling with 2% inflation failed as it was MUCH higher and still is.
I optimized my withdrawal rate by not giving a “ financial planner” their cut from my portfolio.
I think the main thing is to get to a solid number and consider hopping back into part time work and/or cutting expenses if things look grim the first 5 or so years in retirement
SS can be tricky because it's only guaranteed while you're alive. We all will die, and normally one spouse will live considerably longer than the other. That "guaranteed" income will take a hit at some point.
Ive always looked at the 4% rule as a baseline. Its the same as the 25x rule. I dint think anyone really looks at it as the answer to all your retirement questions.
We both retired before 60 with a goal of spending the exact same as our "bring home" pay leading up to retirement. Due to inflation, kids stillin college, and a lot of traveling, we have actually needed more income than planned. Fortunately, that number is still in the 4% area and we are doing all we want.
It's good to be retired.
Social security is guaranteed even in death because your spouse is eligible for survivors benefits if she's at an eligible age and any minor children you have will receive survivors benefits also.
That doesn't apply for most SS recipients. By age 62, most retirees have no minor dependants. My wife and I qualify for very similar SS benefits
@@jdollar5852 I'm not sure how you know it doesn't apply for most of us but the point is it is around and is available. And as most couples don't have the same work history I believe it applies for most couples.
If one of us kick the bucket then the investments should be enough for the other.
What the hell are you talking about!
One of best channels🎉
Great walk thru of the options and possible outcomes. Of course there is much more info needed for individuals to make their plan “fail safe” - but this shows the importance of a holistic view of your pension funds.
Great communication. Well explained.
Love the guardrail idea!!!! It gives me a picture of what I should adjust based on current conditions.
I don't understand why people are avoiding touching the principle at all. Is it only so this money can be passed on to inheritors? If that's the case, isn't the 4% rule meaningless if you don't plan to pass on money?
Except for my wife, I have no heirs. I’m playing it safe for my senior care. I want to die in my house with caregivers, not being abused in a nursing home. Same for my wife.
I put numbers into a withdrawal calculator and came up with 6.6%. That is because I did not adjust for inflation and assumed 7% return on investment. For married retirees like me in the TSP, you need a new notarized form every time you change the withdrawal amount. If I set it to a fixed amount I only need the one form for the rest of my life. People spend less as they get older (go go years early, slow go years later). My FERS pension and SS will have cost of living adjustments, so I don't really need a COLA for my TSP withdrawal. I am %100 C Fund (S&P 500) that averages 10%+ per year so 7% is a modest assumption.
You don't need the notarized form for TSP anymore but your spouse gets an email and has to agree to the withdrawal
@@jmurphy644 Thanks for the tip! Part of the TSP modernization was streamlining the withdrawal system by eliminating the snail mail form and spousal notarization hassle. I just submitted monthly installments at 6% annual of the current TSP account total with spouse email docusign. Much easier than the old way.
I do the same thing, but I use the bucket system for three years of safe money. I use an 8% withdrawal for the S&P 500 only during up years.
Great video thanks!
Great video!!! Makes a lot of sense!! Great job digging into this 4% rule
I’ve been diligently working, saving and contributing towards early retirement and financial freedom, but since covid outbreak, the economy so far has caused my portfolio to underperform, do I keep contributing to my 401k or look at alternative sectors to meet my goals?
keep contributing! I'd suggest you consider financial advisory at this point in time, remember you are in for the long haul
I'm in line with having an advisor oversee my day-to-day investing cos, my job doesn't permit me the time to analyze stocks myself. Thankfully, my portfolio has just 5X in barely 5 years, summing up nearly $1m after subsequent investments to date.
bravo! I appreciate the implementation of ideas and strategies that result to unmeasurable progress, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
’Nicole Desiree Simon’. is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Thanks for sharing. I curiously searched for her full name and her website popped up after scrolling a bit. I looked through her credentials and did my due diligence before contacting her. Once again many thanks.
Well done, thank you. Please integrate your adaptive strategy with actuarial data. Not many people live for 30 years after retirement. An interesting exercise is to calculate the required present value (PV) of your portfolio based on anticipated yearly withdrawals and actuarial data
Think about the people who have no social security though.
Thank you. A good thought provoking video.
This is great analysis!
Excellent video, your content always sparks so many ideas in my head. I am planning a flexible withdrawal approach to retirement and I really appreciate your videos. Thank you!
Wonderful video. Add to this that it would be very difficult to need for money into your later years in retirement instead of your beginning and its plain to see the 4% rule is really very accurate if you want to leave a lot of money to your children.
1:50 another (unstated in this episode) glaring problem with the Bengen 4% is how the 30-year planning window for the portfolio is less appropriate 1) should life expectancies increase since the mid-1990s, and 2) average ages of retirement (point in time when portfolio withdrawals begin) decrease since the mid-1990s.
@@dmoon9037 it is a keen observation. In the event, however, we know that as of today, life expectancies have decreased due to various things such as fentanyl, COVID, firearm deaths and getting crushed by SUVs.
I want to see retirement for a 40 year old for 50 years with 1.25m
Thank you for debunking the ultra conservative "4% rule". If someone follows that, they will die with a huge pile of money. In addition, it also does not account for any modulating your spending (withdrawals) in down markets (spend less during that drop) which can greatly lower your risk.
Historically they will on average but what happens if the future doesn't have the same high returns that the US had
4% did not work in most countries historically
@@johngill2853 Unless you live in a country that does not have the ability to invest directly, or indirectly, in US equities or bonds they can easily replicate US returns. There are alway crazy ass corner cases, and if that's the situation, just go buy lottery tickets.
I don't see a problem with the 4% rule. To me the 4% rule should be applied to fixed expenses after accounting for all other sources of income.
@@mrallan8063 they can easily replicate past US returns? We can't even guarantee we will have past US returns in are timeline
There are no guarantees in stocks for your specific timeframe. We hope 4% works for our specific timeframe (actually I'm shooting for 3%, it's easier on the stomach)
Great video. Another factor I've been playing with is paying off my mortgage. Between that, and receiving social security, my wife and I could potentially find ourselves with an income stream our 70s which is (inflation-adjusted) higher than what we spend now, even if we zip through our entire savings. I have been needing to try to do all of these calculations myself, and find myself re-looking at them each time I have a frustrating day at work. I suppose I need to find a decent financial advisor.
I've been saying this all along.
My 5 biggest uses of cash: 1. Retirement and college savings 2. Mortgage 3. Income Tax 4. Health Insurance 5-6-7 Travel, Vehicles, Groceries
#1 goes away. #2 house will be paid off, so only taxes and insurance, #3 mostly goes away (Aside from income tax on 401k distributions and dividends/capital gains), #4 mostly goes away with Medicare.
Something like over 60%+ of our cash outlays go away. This leaves us with maybe a cash need of $4000-$5000/month. Maybe $7000-$8000 if we travel extensively.
I'm just not seeing this being overly challenging until our health starts to really fail us.
Retire early and take SSI early so that you can enjoy life while you have your health.
Another very good video Eric. Thanks for sharing this info with everyone. Larry O. Ca.
8:15 (constructive comment) the chart for the spending smile looked like a half-smirk, 😂
Loved your video. Thank you 👌🏻
Leaving money and opportunity on the table leads to peaceful sleep. Consumption isn't the be all end all use of money
Or the opposite. Many people getting closer to death say their concern is regrets. Not having a bigger number in the bank
Curios - what about an early retiree? I'm 50 with $2.7 invested and no debt. No house though I rent. If I retire, I'm looking at roughly $2k a month in SS at 62. I'm a flexible person, not married and no kids. I'd really like to spend as much I can early on in my retirement? Do you think 5% would be an acceptable withdrawl rate? Thanks.
Just looked into a memory care facility for a relative who is physically healthy.. $80,000 a year and he may be there 10 years or more.. LTC goes up more than cpi too.. having some dry powder for this will provide a better facility and less stress or burden on the family..
LTC has so far gone up more than CPI*
FTFY
My grandmother passed 2 years ago and our spending on her memory care facility was higher than that.
At that age, I hope my family leaves me alone and let's the state jump in to put me somewhere. Most likely I dont know my family anymore anyways and why burden them with those types of financial burdens. You lived a good life, time to just let the days pass until you pass as well.
Another good video, thanks. I would like to see these concepts taken a little bit further. We typically think of retirement and spending as a hard line transition from accumulation to decumulation. But the reality is that for most people it could be softer. While official retirement might happen between age 57-67, there are lots of things happening before that time: kids moving out, mortgage being paid off, income peaking, etc. What would be the impact of possibly moving spending into even the later working years? Maybe buy that Porsche. Maybe rent the downtown penthouse. That is, extend the left side of the smile a bit into the working years.
I'm spending all my retirement funds in 16 years, and if i cant then ill try harder....
Wasn't Bengen's study a 50/50 portfolio?
It was based on a 60/40 portfolio I believe.
50/50. Read the study. It’s rather narrow.
He looked at multiple different portfolios from 100 percent bonds to 100 percent stocks and everything in between. He also looked at multiple retirement durations from 10 to 50 years or so.
I currently only need 2.9% withdrawal to be amply comfortable, and this number should drop over the next 30 years of compounding until retirement age
Sounds like you need to use more of that money!
I like this guy
May hire him
You never know when you will die. My mom died at 60 and didn't enjoy anything even though she wanted to do so much after retirement. Take that money and go enjoy.
I am going with 6% of my total TSP balance (near its all time peak) divided by 12 for a fixed monthly installment withdrawal, no yearly inflation adjustment. This should hold up greater than 30 years even with a well below average C fund return on investment. Retirees tend to spend less as they get older so the decreased purchasing power is actually not that bad. In 7 years I will file for SS at full retirement age for a delayed boost in retirement income. Worst case scenario, if there is big crash like 2009 or 2020 I can just turn off the installment spigot for 6 months to a year and wait it out on my ample cash reserves.
All these safe withdrawl rates but no mention of the risk of outliving funds and how, if you accept a higher risk, you can tale out more than 4%. Especially when yiy underdrand thst it is unlikely you will die before your targeted "end" date. I'm comfortable with a 10% chance of portfolio failure.
Very timely information for me. I will retire in August at age 57. I plan to have a 10 year gap before SS. I have a deferred income annuity which I may turn on at 65. I have been modeling out various withdrawl rates, and while I can live on less income, if I can afford to spend more in early retirement, I would want to.
Excellent content. I always wondered why greater than 4% withdrawal is considered risky when historical equity returns are around 10%. As I have commented earlier, if you have a safe cash position to ride out 2-3 year investment cycles (I like 4 years or 15% of my portfolio) , you can comfortably enjoy withdrawals greater than 4%. I retired at the end of March 2022. From 3 months before to 3 months after my my retirement date, my portfolio took a 15% hit. I did not adjust any of my expenses and am enjoying my go-go years of retirement to the fullest. Since this low point, my portfolio has regained nearly all that was lost (on paper).
What I would like discussed in the future video is the validity of the 60/40 equity/bond "rule". I think the days of bonds being counter-cyclic to equities are long gone. If I had 40% bonds throughout the latest interest rate cycle, I'd be in much worse shape than I am today. I think the pivot to bonds as you age is a fallacy and one of the reasons why target date funds have not lived up to their hype when first offered.
Post Fed pivot six months after your comment and bonds are shining
Thank you for this. I think many don't realize the importance of what this may mean for long-term tax planning / RMD's in the later stages of a life. This is, I'm assuming, based on a traditional retirement plan which re-balances to a certain percentage portfolio. For those of us with a more "risky" investment plan, I don't know of a withdrawal/income strategy that is based on a higher, more volatile growth curve. This includes me, so I think a dynamic withdrawal reassessed every year, and probably every 6 months or so is advisable, along with lump sum withdrawals to a cash account as a safe harbor where the spigot to such accounts as those in the market tax deferred may be reduced or turned off during morket downturns.
Social security income is NOT inflation adjusted. In my experience over the last 8 years, my SA COLA increases haven’t even been half of our experienced inflation rate, a rate that is far lower than the CPI measurement the feds use to calculate the annual COLA.
Each month, my retirement accounts provide a change in market value. If I subtract my contributions, I get a better idea of the actual change; this works great in accounts where I no longer make contributions (e.g., former employers 401k, old IRAs).
Every 3-5 years, depending on growth or loss, I reset my baseline which is the minimum principal balance I want to maintain.
I have a target amount I want to withdraw for the year, though I may make withdrawals throughout the year.
I also estimate how many years I will live and need to have this income; my estimated annual interest rate; estimated annual inflation rate; my total retirement savings, which lets me calculate the estimated retirement amount needed adjusted for inflation.
At the end of the year, I create a copy of this calculation using the actuals for the year, which I use for the coming year estimates.
This approach seems more accurate, depending on the accuracy of my estimates which is why I update with my actuals every year, than a simple percentage amount.
IMO
Makes sense to me. Just figure out howich you can spend every few years and make adjustments as needed.
Just wondering how it would work out if I took a purely flat rate of 4% per year. That would be very market dynamic and let the stock market determine actual withdrawals
Because there would be huge swings in your yearly amount which most people can't deal with. Say your $1m portfolio gets cut it 1/2 like in 2008. Your first year would be 40k and the next year would be 20k. Huge swing.
great video! What are your Company fees , % of Portfolio, annualized or other fee bases monthly flat bases on Assets Managed?
I don’t get your guardrail example. It shows about 7% withdrawal and only lowers it slightly when the balance goes down about 32%
So how do you figure out based on your own personal situation what your percentage withdrawal is? It sounds like it's very customized based on your balance and age of retirement. Did I miss the part of what percentage of inflation they base this on? And what percentage of returns?
Did your examples for smaller portfolios also use the 30-year timeframe, i.e. portfolio is exhausted at or around the 30 year mark, and OASI is the only income that continues after consuming the portfolio for income?
As I recall, a 60/40 portfolio averages around 6% return, or close to 4% after inflation. So does the 4% rule basically assume you live entirely on inflation-adjusted returns, and only dip into your basis during downturns? I assume both your payout and balance would adjust with inflation. This would be like a perpetual inflation-adjusted annuity. Seems awfully conservative when I think of it that way.
For retirement accounts only that dont include SS, annuities, rental income erc., Do these assume total income for couples? E.g., the $2M example could be $1.3M from one spouse and $0.7M from another?
3.5% swr for me
1:56 OK, but you do see why leaving your children with $1.5 million inheritance is better than leaving them with, right? Yeah, yeah, you have to be smart about taxes.
6.3% is pretty high. If you retire at 67 you can take out 4.5% assuming a 5% return with 3% inflation. If you retire later you can take out more. These 6.3% projections assume you keep all your money I'm stock, but in real life your advisor will put you into safer less volatile investments that earn less.
Can you do a video which explains that the current SS math says, on an actuarial basis, that it doesn't matter when you start SS? It is my understanding that the SSA actuarial calculation is that payees get the same amount of $$ regardless if they start early or FRA or later. The issue is that a recipient only has one life, and that can be longer or shorter than the average.
Actually you are incorrect, there is a breakeven point no matter what age you start receiving SS, if you live past that date it is better to delay. If you die before that date it would have been better to start receiving it earlier.
@@jerrylabat550 Please re read the last sentence of my comment.
@@mrallan8063you answered your own question. Il
@@dec1slh I know the answer, but there are too many idiot financial writers who keep claiming, and brainwashing people into, delaying collecting ss when you are closer to death and homebound living in diapers is a better financial path. People need to understand that a year of health at 62 is likely 5x or 10x better than at 72. No amount of money can buy back that time.
It’s interesting that I recently read Bengen revised his number to 3.3% due to inflation in recent years. I don’t know if he re-ran his studies but that’s what I read.
That's just not true as this article which interviews Bengen shows:
Father of 4% Rule Urges Caution, Cash as Market Risk Rises
By Jane Wollman Rusoff
May 09, 2022 at 05:18 PM
Recent calls to cut withdrawals to around 3% or less are too conservative, Bill Bengen tells ThinkAdvisor.
Bill Bengen, the inventor of the so-called 4% retirement portfolio withdrawal rule, has a crucial message for financial advisors:
“Manage the risk portion of a retirement nest egg actively. Unless you’re willing to vary - reduce - your clients’ allocations to reduce risk, it could be damaging,” the former 25-year advisor argues in an interview with ThinkAdvisor.
But have the pandemic, falling markets and rising inflation torn up the 4% rule/? Hardly, he says.
“We’re in a period of rising interest rates, and probably both stocks and bonds will do poorly,” he says.
This time, the Federal Reserve “may not have the luxury” to use monetary policy to affect “a quick cure,” Bengen cautions.
In a research paper published in 1994, he recommended a 4% withdrawal rate in tax-deferred accounts for the first year of a 30-year retirement, making adjustments in subsequent years according to inflation rates.
But about two years ago, he increased his suggested rate to 4.7% based on new research he’d conducted.
Recently, however, citing “high inflation [as] a huge threat to retirees,” Bengen revised the rate once again and recommended a rate lower than 4.7%.
“If people want to take a few tenths off and take it down to 4.5% or even 4.4%, I wouldn’t argue,” he says in the interview.
Bengen is suggesting a retirement portfolio asset allocation of “55% of your normal allocation to stocks” and “cutting your bond allocation at least in half.”
Can you do a video about having a mortgage in retirement? Dave Ramsey says get a 15 year loan and pay it off earlier. Ric Edelman says get a long mortgage and never pay it off.
Track Guy, I've been retired for 13 years and have a mortgage on my house and a 6 figure construction loan on a project I did for my son at his home. It would be interesting to hear Eric's take on your question, but I would bet it would be that it all depends on your specific situation. You need to look at what your income stream will be, your expense stream, your financial situaiton and make a decision based on your personal situation. All the information out there is for you to use for knowledge and a overlay for your particular situation to help you make your decisions. Just my 2¢
Financially it can make sense to carry a low interest mortgage, even into retirement. But there is nothing much greater than the feeling you have when you are totally debt free in retirement. We were a single income family, I retired the day I turned 60, we have been debt free for over 10 years and own 3 homes free and clear. When you have no debt your living expenses are minimal, ours will easily covered by SS when we turn on SS, everything else is just bonus money.
There is something called the opportunity cost of money. If you sell your home and all the extra crap you have to keep it running, you can put that money to work for you and probably exceed rent. Even bigger benefit, free up more time to enjoy your retirement instead of frittering it away puttering around your fiefdom.
The problem is people change there invest as their near retirement. If you have been saving and have a decent pile of cash when you retire stay invest 80% SP500, 20% Bonds, Treasuries. Stupid to not capture the gains
My problem is I’m retired 6 years and I’m scared to death to spend a dime of my savings so I live off of social security. I also have no children to leave it to. HELP!
You should look into a SPIA.. a single premium income annuity.. pays you guaranteed monthly income for your life.. you will never worry about running out of money. The return on investment is not that good, but it gives you peace of mind to spend it all each month with the next payment coming every month.
So you think SS is a stable guaranteed income??? Also forced distributions on your withdrawals based on age assuming tax advantage account??
Why are you talking about a $2m household net worth when 89% of households are below that? The 50% household net worth is about $250k.
I appreciate the comment but why does our content need to reflect the average person? For instance, we have a lot of content on Roth Conversions, someone with less than $250k doesn't need to worry about Roth Conversions. So should no one post content around Roth Conversions because it doesn't fit into most peoples plan?
The balance of the portfolio doesn't matter much when talking about the 4% rule and having your portfolio last at least 30 years. Those with bigger portfolios have more wiggle room to reduce their withdrawals in bad economic times but if we're talking strict adherence to the 4 percent rule it matters little if your portfolio is $250,000 or $2 million.
@@SafeguardWealthManagement Sorry, I didn't mean this as a criticism, but just pointing out that lots more of us have smaller portfolios and we're probably more in need of your perspective, experience and advice. That's all. Some of us are putting much smaller pieces together and don't have as much "buffer" if we make a mistake. Thanks for your videos.
@@ariefraiser140 Yes. This.
It's worse than that. The total median retirement savings for a 62 year old is $16,000. Welcome to The Failed States of 'Murica.
In your first example you give 4% of $250,000 as $50,000. That sound more like 20% to me.
That would be. You're missing a 1 and a decimal place. $1,250,000
@@SafeguardWealthManagement My apologies, as you said missed the one. Good video, thanks.
I limit myself to 3.5%.
You mentioned 1966 being the only year that failed the 4% rule, you might want to check retiring in the 1999/2000 timeframe. The 4% rule would run you out of money on a 60/40 portfolio around 2020...
Just ran this in portfolio visualizer. 60/40. $1M starting in Jan 2000 taking 4% would currently have more than the person started with ($1M+). I ran varied combinations of total stock market, large cap, etc. All show similar results
We did a study on this exact same subject starting with the dotcom bust and found you would have MORE money in 2022. I'm not sure how you did your numbers but the math just doesn't support what you're saying.
I guess, sit your arse down! LOL
Social Security bwnis will be cut for younger people however. Never ever trust the government.
I doubt it. They’ve been saying this for 40 years. SS is the 3rd rail of politics. Touch it and you die as a politician. They’ll just print more $$ like they always do.
This plan ignores a very real problem. Long term care / medical assisted living. People may need to have substantial assets at the end of life to pay for expensive care so you don’t bankrupt your children just as they are approaching retirement. As someone with parents on both sides in their 90s, this is a very real scenario. So planning for ‘leaving 2M’ on the table is the responsible thing to do.
If they run out of $$ - Medicare kicks in to over their LTC cost at a Medicare facility.
The majority of people never get to needing care. It's the exception rather than the norm.
The 4% rule was based on the idea that your expenses each year is 4%. So you don't start off spending 4% then add other sources of income, reduce or increase your spending. Its for the situation where you have to spend at least X amount of dollars each year no matter the circumstances. Any spending that adjusts above the minimum needed each year can follow whatever else rule.
What I do is figure out the minimum that we'd need to spend every year. This is only covering the essentials. I'd like to have enough invested so that 4% or less can cover those costs. That's after factoring in other sources of income like pensions, social security, etc. Anything above that is flexible spending.
Anyone who would suggest that the 4% rule be used to plan retirement spending without modification by any additional income streams is an idiot. It is a rule on the 'safe' (technical defintion...) inflation-adjusted withdrawal rate to not run out of money in 30 years of a retirement. It says NOTHING about other income streams; the person using the rule has to take those into account intelligently. It actually doesn't have anything to do with spending; just withdrawals.
The 4% rule is just a simple starting point to have a goal to save up to its not something that is set in stone that you will be thrown into prison if you brake it!
If you have a bad investment year then try to spend less in that year if you are having a really awesome year then you can spend a great deal more in that year.
Perhaps this is the wrong question to ask...how many financial problems have been caused by those asking "What's the MOST I can spend"? What if instead the question was "What's the least amount I need to spend to enjoy my retirement"? The truth is that spending isn't correlated to happiness and if (gasp) you DON'T spend all of your money so what...give your kids and grand kids a head start and/or leave a legacy of charitable giving. I guarantee you won't care if you don't spend it all, only if you do before you're done with your air addiction.
Honestly, with a paid off house and no other debt I can't help but wonder what folks are spending so much on. Eating out is an expensive disappointment compared to home cooking and the cost differences are staggering these days. Jewelry, expensive clothes, large homes and super cars...a Jedi craves not these things and neither does a sensible retiree that's looking to make life easy and carefree by focusing on those things that truly matter and jettisoning everything that doesn't add real value. So many expenses have less expensive or free options that are also better and all I see are options to get exactly what we want and save money.
I was reminded of this again when we recently had to upgrade our 3G flip phones because they're cutting the network. After looking at all of the options we chose to go with 4G flip phones, lol. Sure we could have bought expensive smartphones but they're so expensive that you need "insurance" which is also expensive and comes with $40 co-pays for things like broken screens. Unlike our flip phones which can disappear into any pocket where on earth do people keep them? As far as I can tell most people choose to walk around all day with only one free hand. No screen protectors or cases needed with flip phones either, we saved about $2,400 vs the latest smartphones, our plan is $250/year less expensive, battery replacements are as simple as popping off the back with a fingernail and they're far more sturdy. Since I'm not a 13 year old girl I have zero interest in social media and when I'm out and about all I need/want is a phone and no additional screen time. I see iPhone zombies everywhere I go and I'll never become one. I laugh as there's a new push for folks to put down their smartphones these days because they're far too attached...it's clown world at it's best.
Why on earth would my wife and I ever go out to a restaurant for breakfast which is now $40 with tax and tip at local restaurants when we can simply head into the kitchen, turn on some light jazz and make unbeatable waffles from scratch with real maple syrup (dark amber), sausage or bacon and scrambled eggs for about $1.50/serving? I'm never giving up my crispy waffles right off the iron for ones that wait under heat lamps on the pass for several minutes before being walked 50 to 100 feet to our table where it's now cold and has completely lost it's charm.
Obviously this is something I feel strongly about and I truly believe that the good life is so inexpensive that it's available to all.
Live Simple, Live Free!
"There is no dignity quite so impressive, and no one independence quite so important, as living within your means." Calvin Coolidge
@@alphamale2363 So true and even more so when you live far below your means and can use that to save even more..
Coolidge was a great leader, now unfortunately forgotten.
Ditto - we have found that in our first 5 years of retirement, we have spent less than we thought we would, but have not denied ourselves anything that we enjoy. It is just that after 40+ years of marriage, we have learned to enjoy simple pleasures. Time with friends and family. Good home cooked meals. Enjoying our home. Traveling in the USA and outside the USA (except during the pandemic insanity). Buying a new car. We have been debt free since our early 50’s. Life is good. We will have enough left over for the next generation when we pass from this earth to give them a cushion so they, in turn, can do the same for the next generation after them.
@@kathleens8339 What more could anyone possible want?
Sadly, in contradiction to your motto (You don't need more money, you need a better plan.), most people do need more money, plan or no.
Can you please source the resources? Any books?
The 4% rule tends to longer working years or leaving a bunch when you die - much of which goes to taxes!
This advice echoes or mirrors the fundamental flaw in all financial planning, today. It is based on "how much can you spend?", instead of "can you follow a budget?" and only spend what is spelled out in that budget? Financial planners don't want you to follow a budget. They want you to invest as much as you can, because they get paid based on "assets under management". They don't care even a little bit about your financial well-being, so long as you invest as much money with them as possible, so they can get wealthy off of your diligence. Any financial discussion that doesn't begin with the creation and analysis of a proper budget...is not a discussion in your best interests.
🤦🏻♂️ The underlying message of this video is basically, "You can spend more than you think" and your takeaway is, "Financial Planners want you to save all your money so they can get a higher fee". Interesting...
A budget is "how much can I spend?" 😂 You will die eventually. After a while you won't have anything to save for.
Starting examples with 2M are not realistic for the middle class. I agree with your videi but I would start with 1M bal for these examples.
Totally realistic for no kids, subtract xx per kid
Using $1m baseline also makes it easier for everyone online to do the ratios in their head if they have more/less assets.
I don't even have that. I've got 300K and am now just retired, but as I am forced to house-hunt, I'll have a mortgage of some sort as well to deal with.
40k for every million real simple
Too scary to spend more upfront...you do not really know the future, and once you sell it and consume it, it is gone. I understand enjoy yourself, but I think it is best to leave budget for 'contingency planning'.
The 4% rule doesn't take into account other income streams? There is no 4% rule. Read the study it never once says the word rule.
4% plus inflation is historically the SAFEMAX (highest safest withdrawal rate) nothing more
Kind of semantics, right? Whether the study called it SAFEMAX or the 4% rule, what does everyone call it today? Thats why I call it the 4% rule in this video.
And yes, it doesn't take into account other income streams. That's my point in the video. Take an idea that struggles to have practical application and iterate on it.
@@SafeguardWealthManagement
SAFEMAX means highest safest withdrawal rate and that is different than you saying most of the time you can withdrawal more. You have to remember before the study that information wasn't readily available.
The study wasn't meant for how much you can spend in retirement,it was how much you can safely withdrawal from your portfolio over 30 years. Your looking at the study differently than what it provided because we have so much more information now.
The study was only about safe withdrawal rate from a portfolio and not how much you can spend.
@@SafeguardWealthManagement everyone calls it but how many actually read it? people don't actually read it but talk about it
@@SafeguardWealthManagement look up term "Chinese whisper" and that is what you are doing with 4% plus inflation withdrawals from portfolio
Great video except where it said "Social Security is an extremely safe asset". Social security has been a disaster for most of my working years but politicians lack the courage to make the required changes so we will see big reductions in benefits in the next decade.
A ponzi scheme will always fail, even if run by the government and they force in new investors, it will just take longer. We are at the end of this one's run.
4% rule only worked in USA, it fails in all other countries. So if you use it, you're betting on continued American exceptionalism.,
It's worked in more than just the US. It's worked in Canada for example. Further, it worked in 98% of starting years in the last century plus. You might find benefit in watching this video - ua-cam.com/video/t-PhOHaIltk/v-deo.html where I touch on points you're eluding to.
Btw: I'm not saying 4% is the standard or even a good plan. I'm quite critical of the 4% rule. In this video, I'm saying if you're basing your retirement off historical analysis and including the rest of your income streams, the situation looks vastly different.
I believe you meant American Empire and Hegemony. There's been nothing exceptional about the US.
Delaying Social Security is one of the dumbest decisions ever. All of these pros cite "statistics". Well...statistics give us a hint, but certainly doesn't tell us the future. Far too many lose out on collecting any social security *at all* by passing away before their delayed collection age. Plus, the "crossover age" is further out than many realize. Personally, I'd much rather collect social security early and use the money while I'm still young vs take a massive gamble based on "statistics" that say I *may* live to 70 ( or whatever my collection date is ).
You can't make a blanket statement like delaying social security is one of the dumbest decisions ever. Delaying social security is something that will differ from person to person depending on their circumstances. There are numerous very good reasons why a person may delay social security.
I agree. Mathematically I figured it would take 11 years to make up for what I collected from 62 to 70. That means I have to live until 81 and I doubt that will happen.
Your post.....😢 there are plenty of reasons why delaying to FRA or even 70 makes sense.
I agree, social security may not even be around when I turn 70. Why not collect the social security and leave my 403 and other accounts to grow.
There aren't many or any investments that can "guarantee" an 8% return.
You use $2 million as the amount saved for retirement, but really - how many people have even close to that saved by retirement age? Not many. I saved the amounts they told me I should throughout my career since age 30, but I don't even have close to the $1 million I was told I would have by age 65. Thank God we invested in rental properties because our retirement funds are anemic. Between the 2008 housing collapse crisis and covid years where the stock market took such a big hit, our retirement funds lost quite a lot of money, and took years to recoup in past stock market slumps. So, unless the retiree has your example of $2 million or more by retirement and so can afford to take inflationary and stock market slump hits to their income, I can't agree with your logic to encourage people to spend more of their saved retirement funds in early years of retirement.
One would be better served taking 4% when the stock market is flat or negative for a year and only take out more than 4% when the market is up for the year. Only take more than 4% in positive years up to the amount of taxable income that will barely keep you in your usual tax bracket. If you don’t need the extra income, don’t splurge, put it in a brokerage account and invest it at a low to moderate risk index fund so you have it if you are hit with an unexpected expense. You may be able to avoid being forced to take out so much money that you jump up a tax bracket in a down year (of the stock market).
4% rule is overly optimistic. Historical data shows that if you have bonds, you can’t bank on 4%. Even with 100% equity, you are looking at a number closer to 2.7% if you are lucky. Ben Felix has an excellent video going over why, exactly, this is. Anyone stating you can bank on anything greater than 3% is flat out lying to you
Now model it with 20 years of 15% inflation and a 2 million medical procedure. Shit happens and it's very risky to assume anyone knows where their life is headed.
If everyone assumed 15% inflation for 20 years and a $2M medical procedure nobody would ever retire! Plus, if you have medical insurance you are covered for medical procedures.
@@livingtheslolife you have to model all REAL possibilities to make balanced decisions. Modelling with 2% inflation failed as it was MUCH higher and still is.
@@bluesky2145 I’m not suggesting that anyone model 2% inflation as that isn’t realistic. But neither is 15%. Nor is a $2M medical procedure.
If inflation were to rise 15% for the next 20 years a gallon of milk would be $67.
Even 7% would quadruple the cost in 20 years.
Wait to 70 to retire, and die 70 years and 2 days