We are 62 with $2,100,000 Saved, Can We Retire?
Вставка
- Опубліковано 24 тра 2024
- 👥 Want to schedule a free consultation? Click here: www.thepeakfp.com/free-consul...
Read a Sample Financial Plan: www.thepeakfp.com/blog/sample...
Knowing if you have saved enough for retirement can be a daunting task for anyone. Every person's situation is different if you want to learn more about whether you have saved enough for retirement, click this link to schedule a call: www.thepeakfp.com/free-consul...
Eric Amzalag, CFP®, RICP®
_ _
Disclaimer: Please consult with your own tax, legal and financial advisors for personalized advice.
#retirement #retirement #retirementplan #retirementincomeplanning #retirementincome #fiduciary #financialadvisor #financialadvice #feeonly #feeonlyadvisor #feeonlyfiduciary #financialplanner #certifiedfinancialplanner
👥 Want to schedule a free consultation? Click here: app.thepeakfp.com/YTWWU
The issue is not whether you have enough money, the issue is whether you have enough time left to live and enjoy your money.
You could die any time, have a stroke, a heart attack , cancer and die or basically be gravely disabled.
No amount of money could make you happy if you are dead, or could not even scratch your ass.
Unless you want to earn the distinction of being the most financially rich tenant of a cemetery.
The only thing you can't get more of is time.. absolutely right.
I’ve been watching a few of these videos on this topic. Yours is one of the easiest to understand and more importantly easy to listen to. Keep up the good work.
Why thank you! I will admit on behalf of all financial planners it is certainly a tall task to take a financial story that often takes 50+ years to live and distill it into a comprehensible twenty minute video!
Great video! Easy to follow and implement. Keep them coming!
Right on. So glad you enjoyed it :)
Good video. Will watch more of your content.
Awesome, thank you!
You can easily retire put 2 years living expenses in high interest savings and 10% of what’s left in short term bonds and 90% low cost s&p etf. Done enjoy your life.
🙏🙏🙏
That is a great suggestion and keeps things simple. Save paying a CFP 1% of managed assets.
Sounds like the right plan for you both! Best of luck!
Outstanding content, thank you!
Glad you enjoyed it David 😊
@@ThePeakFP Can't wait to hear your new podcast, you are a most creative individual!🎯
Hi David - here is a link to the new podcast listing. Please let me know your feedback and if you have any suggestions for topics I can cover on it!
thepeakfp.transistor.fm/
@@ThePeakFP Outstanding! Here are a few suggestions: Asset allocation in retirement, sequence of return issues, safe withdrawal rates: 4% rule, RMD method, cognitive biases with money, optimization versus running out of money in retirement, tax-efficient retirement planning, financial software packages advisor versus what layperson has available, Social Security claiming strategies, Roth conversion glide paths, i.e., what're the best ages to perform. I really like the way you freshly present the material. Cheers!
Thanks Eric, the case study very helpful and informative!
My pleasure! So glad you enjoyed it!
Their 800,000 soon to be mortage free house ensures them never running out of money.
It's all about how they choose to spend their money...
There are no guarantees financially - it's all about what compromises one is willing to make around ones spending behaviors...
Incorrect.
Millions of people are retiring with only $100,000 saved. Yes, its a no- brainer.
Maybe a better title would have been, Can we spend "$X" each year on this amount of money...
Front load risk or back load risk. Excellent terms. Never heard those terms before.
Heh! Glad you enjoyed em!
I realize everyone's situation is unique. That said, unless there are health issues involved, I'm a big fan of waiting until 70 to collect social security if possible. Only 85% at most is federally taxed and in many states it is exempt from state taxes. Also, the cost of living adjustments have a larger impact.
Taking SS ASAP allowed me to retire several years earlier and without stressing over it too much.
People make two big mistakes when calculating their retirement income needs. One, is assuming that your costs will go down. You should expect your costs to go up every year due to inflation and debasement of the currency. The other is not evaluating the cots and likelihood of a long term care type of event that requires either full time care or a nursing home. That is likely to happen if you live long enough and can be very expensive. Unless you have a plan for this, you'll have to rely on the government to provide for your support (assuming it will).
Excellent points.
According to the Social Security Administration's actuarial life table for the United States, the probability of death for a 62-year-old is approximately 1.2% to 1.5% per year. This means that out of 1,000 62-year-olds, about 12 to 15 might be expected to die within one year.
A 62-year-old man has about a 42% chance of living to age 85.
A 62-year-old woman has about a 55% chance of living to age 85.
This plan significantly exceeds the 4% rule. When the stock market is near all-time highs this seems quite risky. I would not sleep at night with this plan. I would spend less or work longer rather than "rolling the dice."
Ultimately that might be the prudent choice in this version of the case!
What are the expenses?
"Adjusting the plan" is better than saying "Running out of money" as most people don't actually run out of money with social security.
Fair enough :)
@@ThePeakFP Very good information otherwise.
Depends on debt and spending habits.Easy 6 percent return 126k a year.They cant live on that nobody can help.
People get to choose how much money they would like to spend in retirement. The question in this case study (also the same question most retirees would like answered) is "Can I live with the same standard of living IN retirement as I once did PRE RETIREMENT?"
Much prefer you show the planning with a retirement smile spending pattern. it seems much more realistic of a spending pattern than just straight line $7000 spending adjusted for inflation for their entire life. I am doubtful they are going to be spending 150k+ per year when they in their 80s
I can show the retirement spending smile in a future video. while a simple point, the focus of this case study was to show the considerations of risk at the front of lnes retirement versus risk at the back, and how using averages can hide where problems might arise...
Thanks for watching and thank you for the feedback!
With nearly $1.5M tax deferred they definitely should have taken their standard deduction + filling the 10% bracket until 65 (to not impact health subsidies) out of their tax deferred savings. After 65 they should take even more versus burning through their post tax money. With $1.5M tax deferred any year that has them paying $0 taxes is a bad plan.
Thanks for the view and the support Jerry
Eric, I didn't get where there is any risk at all to their plan. You showed a 69% prob of success for Monte carlo, but the cash analysis showed them dying with several million dollars, not running out of money. Did you pick the wrong Monte Carlo run for your cash analysis? It would seem very odd to tell them, "here, look at this spreadsheet, it shows that you'll only have a couple million left when you die, better keep working!"
The end of life asset assumption is financial planning tools is very misleading and should almost universally be ignored in my opinion. I can make a video on the future addressing why.
But the short answer to your question is that the number you are referring to is an estimate of the median end of life assets with an assumed investment rate of return.
Median means that 50% of scenarios end with more assets and 50% end with less. So there is no certainty there how it will play out. Financial Planning tools also use straight line investment rate of return scenarios which fundamentally don't match reality.
This is why I usually steer viewers and clients to focus on the monte carlo probability but more importantly on their cash flow numbers because the cash flow numbers more closely mimic real life and are based on things 100% in your control - how much money you want / plan to spend each year!
I hope this helps answer your question. If it does not, feel free to send me an email using the contact section on my website and I'll send you a screenshare video explaining a bit deeper.
Here's a video I made several months ago that explains some of the flaws with retirement planning tools. I believe it will more clearly visually address the exact problem we are discussing from your comment above:
ua-cam.com/video/enEYwzdi4hY/v-deo.html
Thanks! I spent the last two decades of my career doing discrete event simulation (non-financial). You spent about 10 minutes talking about your cash flow spreadsheets. It seems like you are saying to ignore the ending balances in every one of those sheets (every one of which showed millions left at the end of life), and instead infer risk only from the RPI% column. Obviously the denominator used to calculate the RPI% column is the ending balance amount!
I have seen others show a time series of a bad monte carlo draw run to illustrate running out of funds, maybe your software didn't allow this, and you are only showing a median value for each year (the word median was not used in your video!).
I think most people who are watching your videos are people who have the question "will I run out of money?", not "is my withdrawal rate going to exceed X %?" I guess I still have a lot of learning to do. Are you basically saying that they're at risk because they're violating the 4% rule?
I can appreciate your question and what the financial planner is saying. Would like to see if they take out some conservatism. So at age 95 they have 3 million dollars. How about get that down to 500k? Yes, people want to pass on some money or donate it. Does this just ensure the Financial Planner gets about 1% or 30k a year at this point? There are people with 300k or less when they retire and they are still enjoying like. To emphasize what I said before, I very much appreciate what the FP is saying. Respectfully.
After building hundreds of financial plans, one of my big takeaways is that I de-emphasize the estimate of end of life assets shown in the plan. Anecdotally (and my opinion) is that they will be largely incorrect as most financial planning tools use "straight line" illustrations when calculating those end of life asset pool sizes. Straight line illustration meaning it estimates an average rate of return of say 6% per year, and then in every year in the plan there is an EXACTLY 6 percent rate of return. But this is completely inaccurate and does not reflect reality at all.
Therefore I steer people to the cash flows section because I believe that it is the most prudent area through which to make decisions. Your 30 year retirement is a series of 30x 1 year decisions. Each year you choose how you will behave, how you will spend, and you do that based off the prior years performance and what you think the coming year will bring... Therefore using a plan with a 30 year forecast of end of life assets is, in my opinion, quite misleading. As a financial planner whom people rely on for their well being, i am VERY wary of setting misleading expectations (especially careful of being too optimistic) because people change their real life day to day behaviors based on my advice.
That being said, I want to show my clients (and viewers) what to be aware of without creating unecessary fear. I want them to UNDERSTAND, because comprehension will overcome fear and allow people to spend their money responsibly, rather than end their life with a pile of unspent money and regrets about not having done so.
Monte carlo and end of life assets mislead people without clear understanding of the trade offs. Cash flow is reality.
I hope this made sense!
The main problem with this couple’s portfolio now is that it is too overweighted on tax advantaged retirement accounts, 80% allocation, vs only the 20% joint disposable assets accounts. Forgot about Roth conversions, which will require a minimum 5 year holding period before you can withdraw profits. The couple needs to aggressively take distributions from the retirement accounts and reallocate them to the 20% joint disposable assets bucket. That includes taking a profit on those Roth holdings ASAP before a huge market decline wipes out the growth, and leaves the couple with unrealized Roth losses that you can’t deduct. They couple can’t afford to get cute with trying to save on taxes, at the risk of unrecoverable market declines or lack of access to tax advantaged retirement accounts because of being too frugal with distributions.
Thanks for watching the case study lefty!
There is no 5 year waiting period on conversions if you are over 59.5 and have had Roth for 5 years - which is safe to assume given their current Roth balances. Refer to IRS publication 590-B.
Financial advisors never want you to take out your money and spend it, that's how they make their own salaries. Any 62 year old couple with 2.1 million dollars and a pension and S.S. will be fine, My advice is to retire and enjoy life.
Thanks for the comment. Different people have different levels of comprehension, education, and comfort with risk. It seems you are comfortable with navigating these waters on your own - so by all means do so.
For those that are not comfortable navigating these waters on their own, a financial advisor can be a great investment in the same way many people can stay healthy without a gym membership/personal trainer, while many feel comforted using the support of a group training or private training coach.
To each their own.
Thanks for the comment, enjoy your retirement!
I think he said they still had a mortgage at 62. That makes a difference.
It looks like thier portfolio balance is increasing in all the examples.
That's correct. It uses a "straight line" illustration which is almost always overly optimistic and incorrect, but unfortunately in a 20 minute youtube video there simply isn't enough time to cover everything :(.
Thank you for watching!
Why would they burn through cash first?
The financial planning tool has them living off "taxable" investments first - in the scenario shown the majority of it is cash. I'm not saying this is the optimal strategy, it is simply the one being demonstrated in this video.
However there can be good reasons to live off of cash and post-tax money if you retire early - it can allow for healthcare subsidies, low cost Roth conversions, and can be a way to navigate substandard market returns if that happens to be the investing environment one finds themselves retiring into.
As with all things, the strategy of how one sequences their withdrawals is highly individual and case dependent.
Thanks for the comment!
Too much in personal residence for someone with their net worth
I am wondering if having a more conservative portfolio in the first eight years is a way to offset the sequence of return risks. Obviously there are trade offs on returns. Once they get 5-6 years into the retirement, they are getting closer to their SS and maybe can take more risk, maybe 60/40. Seems counterintuitive but wondering if the model allows for that simulation.
I think this can be a wise strategy to consider. I have a video tangential to this topic that you can watch here: ua-cam.com/video/lpvvzPgbD9w/v-deo.html
I also have a video series talking about risk measures in portfolios that can help someone navigate this issue more skillfully here: ua-cam.com/play/PLNUMTwkQgp0-TC1PpAx7XP_ZlEKHKaI6L.html
I have seen 100s UA-cam video about retirement. I think you are speaking too fast and your graphic lacks details for elderly to see. As you know, there are a lot of people retiring with 500k or less. It is hard to think someone with 2.1 million could not retire comfortably. Your client need to control their spending or work longer.
This so good feedback thank you.
I will try to speak slower in the future. Sometimes I rush trying to get as much information out as possible and lose things in that process :/.
As for the amount of wealth - it's all about how people choose to spend their money... If you have a good pulse of your spending behavior and are willing to live within your means and have set your life up to do so, $500k can feel like far more than $2.1mm for someone who doesn't live withing their means and is not realistic about the trade offs they might need to consider.
I’ve seen a lot of videos also. I like to learn as much as possible as I’m navigating being single in retirement. I often get annoyed with these types of scenarios re people asking ‘can I retire’ questions with $1.5 + million in assets.😊
Useless comment by this guy. If you don’t like something about this video just shut up and move along. I found this video very appropriate and well done.
Retirement is unique to each person. It really depends on peoples lifestyle goals and spending behavior. Obviously someone with a large pile of money could retire if they choose to live more frugally... But that is a personal decision :D
@@jeffeason3599😂
So somone with over 2 million can't retire
"someone with over 2 million can't retire and spend the money THEY WANT to spend"... It's important to understand that everyone is entitled to try to retire the way THEY WANT to retire. For someone living on $50k a year in a cheap cost of living state, $2mm could be more than sufficient. For someone living in California with 12 years left on a mortgage they may need a whole lot more in order to stop working and maintain their standard of living.
You did not, explain all the terms you were using in this video in depth before you began talking about your scenarios so you left everybody that needs this way behind way in the beginning.
I am sorry to hear it.
I will do my best to clarify the terminology at the beginning in the future. Are there specific terms that I can do a better job defining? Thank you!
The world is de-dollarizing! I would look into allocating 3 to 5 percent into Bitcoin!
🙏🙏🙏