Hello James, i love your content. I found Ramsey about ten years ago and his methods have changed my life. I recently (1yr ago) found you and again, it has been a life changer. Ramsey got me out of debt except for my house and you have got me believing that i will be able to retire and stay in southern California. I continue to gain knowledge by watching a bunch of content creators and every once in a while one will scare me. Actually (taxes, health care and inflation) scare me. So, i rewatch some of your videos and i feel reassured about my situation. I'm 54 and plan to work another 8-10 years. I really appreciated the content on a single person's scenario. But i do my best to apply all of your concepts to my life. Thank you for everything and I wish you a happy new year.
Looks like there is an error on the 1sr case: 7.5k-4k SS = 3.5k per month which makes 42k withdrawal per year, not 67k. So they are on almost comfortable 4.2%, not 6.7
Two things. First, he didn't make clear that the 2000 per month for social security was not what they were actually going to get. That is their full retirement age amount. Since they are claiming early at 62, the amount is reduced. You can see that they only get 30800 from SS in the first year, not 44000. (Only collect SS for 11 months the first year since their birthdays are in January which means payments start in February.) Second, the savings are in IRA/401k which will be fully taxed on withdrawal also causing part of the social security to be taxed. Taxes are not included in the 7.5k/mo retirement expenses which means a bigger withdrawal to pay the taxes.
I think that the $2000 per person for SS is being de-rated from FRA and not the actual amount they would get upon retirement at 62, or possibly that he simply misstated the amount as what they would get and not the the FRA amount and didn't mention that it was supposed to be de-rated. This seems to be applying a double adjustment factor since he claimed that the $2000 was what they get but the first year was only $30600 and not $48000. This seems to be a strange way of presenting this because you will never be looking at the FRA number when you are taking about retiring today... You would use your "today" value. So, I think this is an error that he didn't catch. However, that only highlights the problem that he is trying to address, which otherwise is on-point I believe.
Nicely done, a clean scenario comparison, as usual to illustrate the basics. Don’t neglect to plan for the periodic one time expenses. Fund a cash buffer to handle them. Examples could be new roof on the house, replacement vehicles, etc…
You do make excellent clear videos. Every thought of changing to a fee only model? I bet you would do great, and I would be more than willing to advocate for people to hire you. As an AUM, nope I cant.
Thanks James! I love having yours and Ari’s videos to help me plan for retirement. I was looking for the link to the spreadsheet you referenced. I may have overlooked it.
James, Another great video! I went through a similar exercise to gain confidence in my decision to retire early. The timing of income streams (pension, social security, part-time income, etc.) is key to understanding the needed portfolio withdrawal rate. Thanks!
I thought you were going to post a link to a spreadsheet to work out one's expenses. I don;t see such a link. The last couple of videos have been useful. I am 14 years older than my wife and that video was interesting. Now this video to help on our retirement. I am already "retired". I quote it as I have a side gig that brings in about $1000 per month but only takes me an hour or two a day. I am on Medicare but haven't yet started SS. We are waiting till I am 70 to start collecting. That will be next December. I have about $750K in retirement funds and my wife has about the same. I am not too worried about our finances but we will have very different retirements due to the age differential. We are both essentially retiring single. We can't do anything now because she works. In 14 years when she retires I will be gone or in the no go years. Oh well. Please keep up with the videos.
Is this an apples to apples scenario since one couple is 62 and the other is 67? Would like to see how it compares at the same ages but different social security withdrawal times. BTW, the content of your videos is superior to most.
Love your videos. One thing I have noticed is that the “portfolio” has been simplified and assumes and % return but does not show separate dividend income. It may be taxed at a higher rate than capital gains. It would be helpful to show these and how they impact taxes and cash flow.
This is a great video. You explained it really well and in simple terms. And the way you did it is very soothing. Too bad I don't make anywhere enough to need to worry about this. 😅😅😅 Simply save as much as I can and spend as little as I can. 🤦🏻♂️ Though, it does make me realize how little I spend on a monthly basis compared to your clients. So at least that's hopeful. 😅
Seniors need to focus on ways to save money… senior discounts, churning credit card welcome bonuses, traveling during off peak times, or using their social security direct deposit to churn checking account welcome bonus
You're not blind. He hasn't posted it and hasn't responded to people asking about it. I'm guessing with the holidays and stuff, he's got other stuff going on. Hope he shares it soon. Getting my financial ducks in a row is my main resolution for 2024!
It all depends on where you live. If you live in West Virginia, you need very little to retire. If you live in LA you need a lot to retire. Also, depends on your kids. If they’re still financial,y dependent on you, then you need even more to retire. Also, depends on your living arrangement. Do you have a mortgage or not? My rule of thumb is to have about the same income in retirement that I had while I was working.
I keep wondering if you account for 1% in management fees? Instead of Tim and Sally taking out, for example, 2% of their investment wouldn’t they be taking out 3%? I imagine they would still be OK as compared to the other couple, but it always seems like that should be taken into consideration for those of us who do use a wealth manager like yourself. I understand the value, but I never see that those fees are included in the big picture. Do those fees get plugged in when forecasting?
What if they retired at 62 and didn't take SS until 67. Their portfolio would go down for a few years, but then would it recover when they start taking SS at 67?
Wrong move. You would draw $90k/yr at $7500/month. In 5 years that $450k out of your portfolio to get an extra $500/month in ss benefits. You would need millions of dollars in savings to accomplish that. Not a smart move honestly
James. I have been watching the Root Financial videos (you and Ari) for years. These RightCaptial case studies gives us a good perspective on how financial advisors digest and interpret the information from these retirement planning tools. In a recent video from Ari, it looks like you and Ari are no longer taking on new clients personally. However, you will be able to assign another advisor within Root Financial. Will you or Ari be taking on new clients in the future? Please advise.
Bill and Susan want $7500 per month to live on, they're getting $4000 in social security which means they only have to take $3500 each month or $42000 per year. This is a 4.2% withdraw rate.
I recently learned in order to be a root financial client, we need to have at least $2M assets for you to manage, that's excluding 401k etc. I am now confused with your videos of your clients with less than that amount. Are you showing real life examples?
Hi James, Maybe I’m dense but in the first scenario, if they need $7,500/mo and get $4,000/mo Social Security , they need $3,500/mo from the portfolio, or $42,000/yr. 4.2% withdrawal rate. What did I miss?
We have to tax extra for taxes so they get $7,500/mo after taxes. When you factor in taxes that must also be pulled out in the withdrawal it drives the withdrawal rate up.
Even with taxes, only up to 85% of their SS is taxable. We need to know more about the $42K. Where is it coming from? A Roth or a taxable account? How much is qualified dividends or muni bond income? These things affect the total taxable income.
@@RootFP They're married filing jointly on a total income of less than $100k. Their total tax rate should be less than 12%, so the numbers aren't adding up. If you're assuming a 6.5% return their portfolio should still be growing. Further, are they factoring in that when they turn 65 their healthcare costs should decline because they'll be eligible for Medicare? In reality, this couple should downsize and push their SS benefit until 65-67 and live off the proceeds from selling their home and their existing funds.
@RootFP But you didn't do that in the second scenario. Between social security and their portfolio withdrawal, they have a little over $90,000 or $7,500/month. At least in year one. Are you saying the second couple isn't paying anything in taxes?
@RootFP And with the first couple your example only shows them collecting around $30,000 from social security in the first year when they should be collecting close to $48,000 ($2,000/month for each person). I think your example assumes $2,000/month at their full retirement age and it is reduced because they are reiring at 62. I understand your general point in this video but you have muddied the water with your examples.
You have Bill and Susan taking out 67k their first year…. With 7500.00 a month (less their 4000.00) they need to withdraw 3500.00 a month x12 = 42000.00 a year they need to withdraw.
I know all manner of people/couples & none of them require a $7500 pm spenditure in retirement. I indeed travel the world skimping on nothing for $2000 pm. I've no idea how some people burn through money.
You didn’t clarify the tax effect. For first couple, they seem to need about $98k at 62. Yet the second couple only seem to need about $90k at 67. This is already in the second couple’s favour. Both couples APPEAR to have the same $7500 per month spending desire. However, at 67, the first couple’s spending is much MORE than $7500, as the graph slopes upwards. The second couple’s is only $7500. So naturally the second couple does better in the long run, as they are ALWAYS spending less at every age level.
@@ziggystardog Algebra, Geometry, Trigonometry, Calculus - all taught in high school. Not a single word about personal finance. Never heard of an IRA until my 30s. It was never mentioned, even when learning about compound interest. I'm lucky to have self-educated myself and caught up, but why was nothing taught about it in high school? It's appalling.
Im younger and I decided to just try this as a single person. Age , 43 now. I wish i had the 7500 he is referring to but the basic principal works. Im just on a smaller scale of one person. My biggest fear is my age. Dividends have become an important tool to stops me from selling assets. I dont want to start until age ,50. I need help on ensuring longevity and keeping up with inflation. Right now it looks as if im doing ok. But all knowlege helps. To stay within my desired withdrawal rate i had to remove professional management. I simply need to pay myself first but if i thought that they would do better than myself id had them my accounts.
The second couple gave away 5 years of retirement life. The value of that needs to be included at some level. The first couple just needs to review and lower their expenses. I’d still rather be them.
Good math. But looks like that first couple needs a better portfolio. Certainly won't work if they are paying advisor fees. The latter couple is clearly underspending and is also very poorly advised.
The second couple will die with lots of cash. Not sure that’s best of all options. Also, people don’t usually spend the same amount across their retirement I presume.
Question: I just retired and want to take out $100K per year from my IRA and 401k, but I have to pay taxes on that money. Let's say I'm in the 24% tax bracket (my wife is still working). How do I calculate how much do I have to take out from my IRA to pay the taxes on the 100k I just took out, and since I will then have to pay taxes on that amount as well, how much more? And then the taxes on that amount....
I am a total noobie but don't understand your discussion about the first couple. 7500/month budget is 90k/year, and they're going to get 48k per year in social security. Your graph showed them only get 31k from SSI that first year, which I don't understand, but even if that was correct, why would they pull almost 68k out of their savings that year? That would give them 100k/yr when we said they wanted to live on 90k. Is that just some automatic cushion we need to factor in? And by their early 80s, I would have assumed downsizing that $800,000 house is viable if not preferable, especially since it will probably be worth twice that by then.
There are two major fallacies with this video. First you assume Social Security will be stable and fully funded going forward. Second you don’t take into account them 5 more years of healthy retirement the first couple enjoyed. Also, it’s not practical that your expenses will stay as high when you reach your 80s
I'm sure I am the dick: But these make me laugh. You have a million AND Assumed inc of 6.5% and you can't make it work???? Maybe I use new math - 65K + 24 + 24 is greater than the 7.5 X 12 (113 > 90) Sure there is tax but here is 23 for tax. But you can't fix stupid. Peace out.
Not the point that he seems to be making. His main point was 1) know expenses and 2) how much does your portfolio need. The portfolio would need less if you have real estate, business income, pensions, annuities, etc.
Hello James, i love your content. I found Ramsey about ten years ago and his methods have changed my life. I recently (1yr ago) found you and again, it has been a life changer. Ramsey got me out of debt except for my house and you have got me believing that i will be able to retire and stay in southern California. I continue to gain knowledge by watching a bunch of content creators and every once in a while one will scare me. Actually (taxes, health care and inflation) scare me. So, i rewatch some of your videos and i feel reassured about my situation. I'm 54 and plan to work another 8-10 years. I really appreciated the content on a single person's scenario. But i do my best to apply all of your concepts to my life. Thank you for everything and I wish you a happy new year.
I’m glad to hear that! Happy New Year to you too.
I agree
Looks like there is an error on the 1sr case: 7.5k-4k SS = 3.5k per month which makes 42k withdrawal per year, not 67k.
So they are on almost comfortable 4.2%, not 6.7
Two things. First, he didn't make clear that the 2000 per month for social security was not what they were actually going to get. That is their full retirement age amount. Since they are claiming early at 62, the amount is reduced. You can see that they only get 30800 from SS in the first year, not 44000. (Only collect SS for 11 months the first year since their birthdays are in January which means payments start in February.) Second, the savings are in IRA/401k which will be fully taxed on withdrawal also causing part of the social security to be taxed. Taxes are not included in the 7.5k/mo retirement expenses which means a bigger withdrawal to pay the taxes.
I think that the $2000 per person for SS is being de-rated from FRA and not the actual amount they would get upon retirement at 62, or possibly that he simply misstated the amount as what they would get and not the the FRA amount and didn't mention that it was supposed to be de-rated. This seems to be applying a double adjustment factor since he claimed that the $2000 was what they get but the first year was only $30600 and not $48000. This seems to be a strange way of presenting this because you will never be looking at the FRA number when you are taking about retiring today... You would use your "today" value.
So, I think this is an error that he didn't catch. However, that only highlights the problem that he is trying to address, which otherwise is on-point I believe.
That's what I was wondering.. It wasn't explained out if it's something different
Nicely done, a clean scenario comparison, as usual to illustrate the basics.
Don’t neglect to plan for the periodic one time expenses. Fund a cash buffer to handle them. Examples could be new roof on the house, replacement vehicles, etc…
Good point. Thank you.
Thank God I can retire back in Romania and live with no issue on $24k a year. When I left 14 years ago that was my salary with 2 kids
Great job James, very informative, great info to go on.
Your examples always feature couples, or widows. Please give examples for those of us who never married.
You do make excellent clear videos. Every thought of changing to a fee only model? I bet you would do great, and I would be more than willing to advocate for people to hire you. As an AUM, nope I cant.
Thanks James! I love having yours and Ari’s videos to help me plan for retirement. I was looking for the link to the spreadsheet you referenced. I may have overlooked it.
James, Another great video! I went through a similar exercise to gain confidence in my decision to retire early. The timing of income streams (pension, social security, part-time income, etc.) is key to understanding the needed portfolio withdrawal rate. Thanks!
I thought you were going to post a link to a spreadsheet to work out one's expenses. I don;t see such a link.
The last couple of videos have been useful. I am 14 years older than my wife and that video was interesting. Now this video to help on our retirement. I am already "retired". I quote it as I have a side gig that brings in about $1000 per month but only takes me an hour or two a day. I am on Medicare but haven't yet started SS. We are waiting till I am 70 to start collecting. That will be next December. I have about $750K in retirement funds and my wife has about the same. I am not too worried about our finances but we will have very different retirements due to the age differential. We are both essentially retiring single. We can't do anything now because she works. In 14 years when she retires I will be gone or in the no go years. Oh well.
Please keep up with the videos.
Is this an apples to apples scenario since one couple is 62 and the other is 67? Would like to see how it compares at the same ages but different social security withdrawal times. BTW, the content of your videos is superior to most.
James, I thought the first couple each had SS of $2000 each. But the graph shows only $24,000 SS income. What am I missing? Thanks
Love your videos. One thing I have noticed is that the “portfolio” has been simplified and assumes and % return but does not show separate dividend income. It may be taxed at a higher rate than capital gains. It would be helpful to show these and how they impact taxes and cash flow.
Excellent! Appreciate this info very much.
Great Video!
This is a great video. You explained it really well and in simple terms. And the way you did it is very soothing. Too bad I don't make anywhere enough to need to worry about this. 😅😅😅
Simply save as much as I can and spend as little as I can. 🤦🏻♂️ Though, it does make me realize how little I spend on a monthly basis compared to your clients. So at least that's hopeful. 😅
Seniors need to focus on ways to save money… senior discounts, churning credit card welcome bonuses, traveling during off peak times, or using their social security direct deposit to churn checking account welcome bonus
I must be blind: where is the spread sheet he mentions he'd be sharing the link to (6:30)?
I am having trouble finding the link too
You're not blind. He hasn't posted it and hasn't responded to people asking about it. I'm guessing with the holidays and stuff, he's got other stuff going on. Hope he shares it soon. Getting my financial ducks in a row is my main resolution for 2024!
It all depends on where you live. If you live in West Virginia, you need very little to retire. If you live in LA you need a lot to retire. Also, depends on your kids. If they’re still financial,y dependent on you, then you need even more to retire. Also, depends on your living arrangement. Do you have a mortgage or not? My rule of thumb is to have about the same income in retirement that I had while I was working.
My 2 questions are what are the winning lottery numbers and when?
No spreadsheet in the description?
I would be curious to add another scenario, that retire at 62 and start collecting SS @ 67 FRA?
I keep wondering if you account for 1% in management fees? Instead of Tim and Sally taking out, for example, 2% of their investment wouldn’t they be taking out 3%?
I imagine they would still be OK as compared to the other couple, but it always seems like that should be taken into consideration for those of us who do use a wealth manager like yourself. I understand the value, but I never see that those fees are included in the big picture.
Do those fees get plugged in when forecasting?
What if they retired at 62 and didn't take SS until 67. Their portfolio would go down for a few years, but then would it recover when they start taking SS at 67?
Exactly right, Draw down on the investments a little more, but then when you collect later your social security payments will be higher.
Wrong move. You would draw $90k/yr at $7500/month. In 5 years that $450k out of your portfolio to get an extra $500/month in ss benefits. You would need millions of dollars in savings to accomplish that. Not a smart move honestly
James. I have been watching the Root Financial videos (you and Ari) for years. These RightCaptial case studies gives us a good perspective on how financial advisors digest and interpret the information from these retirement planning tools. In a recent video from Ari, it looks like you and Ari are no longer taking on new clients personally. However, you will be able to assign another advisor within Root Financial. Will you or Ari be taking on new clients in the future? Please advise.
Very few, and mostly just referrals from current clients. But the other advisors we’re bringing in the team are among the best in the industry.
@@RootFP Ok. I guess I waited too late.
Bill and Susan want $7500 per month to live on, they're getting $4000 in social security which means they only have to take $3500 each month or $42000 per year. This is a 4.2% withdraw rate.
He has an error in the spreadsheet. I think ir is derating SS down from SRA for the first example.
I recently learned in order to be a root financial client, we need to have at least $2M assets for you to manage, that's excluding 401k etc. I am now confused with your videos of your clients with less than that amount. Are you showing real life examples?
Hi James,
Maybe I’m dense but in the first scenario, if they need $7,500/mo and get $4,000/mo Social Security , they need $3,500/mo from the portfolio, or $42,000/yr. 4.2% withdrawal rate. What did I miss?
We have to tax extra for taxes so they get $7,500/mo after taxes. When you factor in taxes that must also be pulled out in the withdrawal it drives the withdrawal rate up.
Even with taxes, only up to 85% of their SS is taxable. We need to know more about the $42K. Where is it coming from? A Roth or a taxable account? How much is qualified dividends or muni bond income? These things affect the total taxable income.
@@RootFP They're married filing jointly on a total income of less than $100k. Their total tax rate should be less than 12%, so the numbers aren't adding up. If you're assuming a 6.5% return their portfolio should still be growing. Further, are they factoring in that when they turn 65 their healthcare costs should decline because they'll be eligible for Medicare? In reality, this couple should downsize and push their SS benefit until 65-67 and live off the proceeds from selling their home and their existing funds.
@RootFP But you didn't do that in the second scenario. Between social security and their portfolio withdrawal, they have a little over $90,000 or $7,500/month. At least in year one. Are you saying the second couple isn't paying anything in taxes?
@RootFP And with the first couple your example only shows them collecting around $30,000 from social security in the first year when they should be collecting close to $48,000 ($2,000/month for each person). I think your example assumes $2,000/month at their full retirement age and it is reduced because they are reiring at 62.
I understand your general point in this video but you have muddied the water with your examples.
Where is the link so we can work out what we need that you mentioned?
You have Bill and Susan taking out 67k their first year…. With 7500.00 a month (less their 4000.00) they need to withdraw 3500.00 a month x12 = 42000.00 a year they need to withdraw.
Error in the spreadsheet.
I know all manner of people/couples & none of them require a $7500 pm spenditure in retirement.
I indeed travel the world skimping on nothing for $2000 pm.
I've no idea how some people burn through money.
You didn’t clarify the tax effect. For first couple, they seem to need about $98k at 62. Yet the second couple only seem to need about $90k at 67. This is already in the second couple’s favour.
Both couples APPEAR to have the same $7500 per month spending desire. However, at 67, the first couple’s spending is much MORE than $7500, as the graph slopes upwards. The second couple’s is only $7500. So naturally the second couple does better in the long run, as they are ALWAYS spending less at every age level.
Most people don't have near those amounts
Most people don’t use financial planners, or use them when it’s already too late
Yeah, better vote 🗳️ to keep those stock market gains!
These videos are not for “most” people
@@ziggystardog Algebra, Geometry, Trigonometry, Calculus - all taught in high school. Not a single word about personal finance. Never heard of an IRA until my 30s. It was never mentioned, even when learning about compound interest. I'm lucky to have self-educated myself and caught up, but why was nothing taught about it in high school? It's appalling.
Im younger and I decided to just try this as a single person. Age , 43 now. I wish i had the 7500 he is referring to but the basic principal works. Im just on a smaller scale of one person. My biggest fear is my age. Dividends have become an important tool to stops me from selling assets. I dont want to start until age ,50. I need help on ensuring longevity and keeping up with inflation. Right now it looks as if im doing ok. But all knowlege helps. To stay within my desired withdrawal rate i had to remove professional management. I simply need to pay myself first but if i thought that they would do better than myself id had them my accounts.
The second couple gave away 5 years of retirement life. The value of that needs to be included at some level. The first couple just needs to review and lower their expenses. I’d still rather be them.
Good math. But looks like that first couple needs a better portfolio. Certainly won't work if they are paying advisor fees. The latter couple is clearly underspending and is also very poorly advised.
The second couple will die with lots of cash. Not sure that’s best of all options.
Also, people don’t usually spend the same amount across their retirement I presume.
Question: I just retired and want to take out $100K per year from my IRA and 401k, but I have to pay taxes on that money. Let's say I'm in the 24% tax bracket (my wife is still working). How do I calculate how much do I have to take out from my IRA to pay the taxes on the 100k I just took out, and since I will then have to pay taxes on that amount as well, how much more? And then the taxes on that amount....
To get $100k to you it would be $124k out of portfolio with the 24% with holdings. Big chunk in taxes.
Divide 100K by .76. Don’t simply add 24K thinking that will net you 100K if you’re paying 24% in taxes.
I have $3,500.00 in my account. It will last me for a month or two. How do I retire?
The big difference is their retirement age of 4 years between the two scenario. This is not an apple to apple comparison.
I am a total noobie but don't understand your discussion about the first couple. 7500/month budget is 90k/year, and they're going to get 48k per year in social security. Your graph showed them only get 31k from SSI that first year, which I don't understand, but even if that was correct, why would they pull almost 68k out of their savings that year? That would give them 100k/yr when we said they wanted to live on 90k. Is that just some automatic cushion we need to factor in?
And by their early 80s, I would have assumed downsizing that $800,000 house is viable if not preferable, especially since it will probably be worth twice that by then.
They want $7,500/mo after taxes. So the extra amount is to pay fed/state taxes
@@RootFP Ah ok, thanks. Like I said, noobie :)
This scenario is simple, they're both different ages & have a 33.3% difference in SS.
It's not rocket science.
Are we assuming Bill and Susan want 7,500 per month after taxes ?
Yes
There are two major fallacies with this video. First you assume Social Security will be stable and fully funded going forward. Second you don’t take into account them 5 more years of healthy retirement the first couple enjoyed. Also, it’s not practical that your expenses will stay as high when you reach your 80s
🤘
His numbers look like crap, his assumptions are so unclear this is worthless 😂😂😂😂
I'm sure I am the dick: But these make me laugh. You have a million AND Assumed inc of 6.5% and you can't make it work???? Maybe I use new math - 65K + 24 + 24 is greater than the 7.5 X 12 (113 > 90) Sure there is tax but here is 23 for tax.
But you can't fix stupid. Peace out.
The backbone of your retirement should not be Social Security. It should be your portfolio. Backwards thinking in my opinion.
Not the point that he seems to be making. His main point was 1) know expenses and 2) how much does your portfolio need. The portfolio would need less if you have real estate, business income, pensions, annuities, etc.