I love how technical this video is and as advanced as I think I am with personal finances, I’m still learning new things from this video. So thank you very much for what you do. I also wonder how many people can actually even digest this kind of advanced content 😂🤷🏻♂️
I'm glad to hear that you're still picking up some new ideas from the videos! Sometimes I am a bit concerned about how digestible the material in the videos are. If I have time during the week I usually rewrite the script a few times to make it easier to follow, but some weeks just don't allow for that as much as I'd like :)
I think I should clarify my earlier comment. Everything you say vocally or display visually on your videos are perfectly easy to follow. So from my perspective, you don’t need to make any changes there. My only concern was how many people can actually even educate themselves enough to achieve financial freedom and even amongst them, your videos are still for a very selective few. Once again, I love what you do and very much thankful for it but I also hope there’s more people than I think that can appreciate your content.
Can you not have a 1/N for the first few years, (4 say) than switch to the 4% rule after you’ve travelled and bought a few toys lol 😂, cause than you’ve had a few fun years and can than settle down and chill but still live well right? How would you figure out how much you need thou?
I don't see why you couldn't! It may require some extra retirement savings to make sure that once you get to the start of year 5 (or whatever year you make the switch) you still have at least 25 times your annual expenses for the year in your nest egg without having to cut your living expenses down so far that it would be too uncomfortable to live on (and you'd have to be okay with the almost inevitable drop in income that you would experience when making the switch between these two particular methods of course). Hypothetically, if you had $1 million saved and figured you'd need the money to last you 20 years in retirement you could withdraw $50,000 the first year (1/20 of the total nest egg) and continue adjusting the 1/N formula each year until you make the switch to the 4% rule. As long as the market was doing alright you would probably be fine. Using the example I just laid out, if we also assume that the market had returns of 20%, -6%, 2%, 9%, and 15% in years 1-5 for an average return of about 8% per year your withdrawal in year 5 (the first using the 4% rule) would be about $40,130. This is a little less than what it would've been had you just used the 4% rule from the start (it would've been about $44,160 assuming a 2% inflation rate), but depending on what you value that may be worth the trade-off for having those comparatively larger withdrawals in those first four years (in this case withdrawals would've been $50,000, $60,000, $56,400, and $57,528 in years 1-4 respectively). The potential downside to doing this is the possibility that you withdraw a larger percentage of your nest egg during a down market in those early years. If the market is performing poorly enough during that time span it could potentially cripple your income for the remainder of your retirement. Using the same assumptions as before except with market having returns of -20%, -6%, 2%, 9%, and 15% in years 1-5 that first 4% rule withdrawal amount would be about $26,750 (the equivalent of about $24,230 in today's dollars if we adjust for inflation of 2% each year over those 5 years). So, yes, it could be done although I personally would rather take a different approach if given the choice. For example, if you've gotten to the point that you could retire using the 4% rule, but you wanted a few toys and to travel somewhere I would prefer to work another few months to a year in order to buy those toys before retiring and save up some money for that trip (in theory this shouldn't take incredibly long given that you are at a point where you can put all your money that isn't going to living expenses toward these goals and you've obviously alreday been saving enough in order to be able to retire). That's just my personal opinion though, I don't know if that's something that would work for you and your situation. Thanks for the comment! Hope this helps :)
Next Level Life wow! Yes, Thankyou! I see what you mean, I’m thinking what you said at the end there would be correct, I’d save for the ( in my case as I’m pessimistic AF about the markets and investing...the 4/3% rule for my 30 years to death(90 is my goal as All my family has lived to 90 plus if it’s just health and not some freak accident lol) I’m currently 42 with a decent job and a paid for house and decent car...But as I’m a good saver I bet I could fund the first few years with a padded amount for my trips and a few extra toys to play with till I’m abit too old for them than sell again( sailboat and fancy car lol) and add that money back into my nest egg. I want to have some real fun the first few years and than downsize and work on my art and garden 🌴🌺. The inflation is what scares me as I’ve already seen what it’s done to my money, and how it eats what little interest I make on my investments right now 😢 just the price of gas and milk in the last 20 years for me has been an eye opener! Thankyou So much for your detailed response! I’m gonna crunch some numbers this week and get a better idea of what to save for! This has given me a boost! 🚀Thankyou!
I thought the 4% was supposed to be always on the current amount of money at the start of the year, not on the 1st year. But makes sense: it is riskier to adjust your income above inflation. In the case of Jane withdrawing only 40k USD, she is getting richer every year and her buying power keeps shrinking.
As Rihanna once said, “I got love on the brain,” I say I got money on the brain mainly because as your wealth grows, the excitement that you are going to be just fine proportionally grows! Thanks for the videos 💰💰💰
I find myself watching numerous financial videos on your channel every single day. I love this channel! Please keep this wealth of knowledge flowing!
Any retirement strategy needs to account for RMDs at age 72. Also no mention of taxes and pre vs after tax accounts all impact which strategy to use.
Such a great channel. Really enjoying it!
Thanks, Alex!
Great video! Love the drawings!
Thanks, Kirin!
I love how technical this video is and as advanced as I think I am with personal finances, I’m still learning new things from this video. So thank you very much for what you do. I also wonder how many people can actually even digest this kind of advanced content 😂🤷🏻♂️
I'm glad to hear that you're still picking up some new ideas from the videos! Sometimes I am a bit concerned about how digestible the material in the videos are. If I have time during the week I usually rewrite the script a few times to make it easier to follow, but some weeks just don't allow for that as much as I'd like :)
I think I should clarify my earlier comment. Everything you say vocally or display visually on your videos are perfectly easy to follow. So from my perspective, you don’t need to make any changes there. My only concern was how many people can actually even educate themselves enough to achieve financial freedom and even amongst them, your videos are still for a very selective few. Once again, I love what you do and very much thankful for it but I also hope there’s more people than I think that can appreciate your content.
“Final year of retirement” is a nice euphemism for death 😂
Can you not have a 1/N for the first few years, (4 say) than switch to the 4% rule after you’ve travelled and bought a few toys lol 😂, cause than you’ve had a few fun years and can than settle down and chill but still live well right? How would you figure out how much you need thou?
I don't see why you couldn't! It may require some extra retirement savings to make sure that once you get to the start of year 5 (or whatever year you make the switch) you still have at least 25 times your annual expenses for the year in your nest egg without having to cut your living expenses down so far that it would be too uncomfortable to live on (and you'd have to be okay with the almost inevitable drop in income that you would experience when making the switch between these two particular methods of course).
Hypothetically, if you had $1 million saved and figured you'd need the money to last you 20 years in retirement you could withdraw $50,000 the first year (1/20 of the total nest egg) and continue adjusting the 1/N formula each year until you make the switch to the 4% rule. As long as the market was doing alright you would probably be fine.
Using the example I just laid out, if we also assume that the market had returns of 20%, -6%, 2%, 9%, and 15% in years 1-5 for an average return of about 8% per year your withdrawal in year 5 (the first using the 4% rule) would be about $40,130. This is a little less than what it would've been had you just used the 4% rule from the start (it would've been about $44,160 assuming a 2% inflation rate), but depending on what you value that may be worth the trade-off for having those comparatively larger withdrawals in those first four years (in this case withdrawals would've been $50,000, $60,000, $56,400, and $57,528 in years 1-4 respectively).
The potential downside to doing this is the possibility that you withdraw a larger percentage of your nest egg during a down market in those early years. If the market is performing poorly enough during that time span it could potentially cripple your income for the remainder of your retirement.
Using the same assumptions as before except with market having returns of -20%, -6%, 2%, 9%, and 15% in years 1-5 that first 4% rule withdrawal amount would be about $26,750 (the equivalent of about $24,230 in today's dollars if we adjust for inflation of 2% each year over those 5 years).
So, yes, it could be done although I personally would rather take a different approach if given the choice. For example, if you've gotten to the point that you could retire using the 4% rule, but you wanted a few toys and to travel somewhere I would prefer to work another few months to a year in order to buy those toys before retiring and save up some money for that trip (in theory this shouldn't take incredibly long given that you are at a point where you can put all your money that isn't going to living expenses toward these goals and you've obviously alreday been saving enough in order to be able to retire). That's just my personal opinion though, I don't know if that's something that would work for you and your situation.
Thanks for the comment! Hope this helps :)
Next Level Life wow! Yes, Thankyou! I see what you mean, I’m thinking what you said at the end there would be correct, I’d save for the ( in my case as I’m pessimistic AF about the markets and investing...the 4/3% rule for my 30 years to death(90 is my goal as All my family has lived to 90 plus if it’s just health and not some freak accident lol) I’m currently 42 with a decent job and a paid for house and decent car...But as I’m a good saver I bet I could fund the first few years with a padded amount for my trips and a few extra toys to play with till I’m abit too old for them than sell again( sailboat and fancy car lol) and add that money back into my nest egg. I want to have some real fun the first few years and than downsize and work on my art and garden 🌴🌺. The inflation is what scares me as I’ve already seen what it’s done to my money, and how it eats what little interest I make on my investments right now 😢 just the price of gas and milk in the last 20 years for me has been an eye opener! Thankyou So much for your detailed response! I’m gonna crunch some numbers this week and get a better idea of what to save for! This has given me a boost! 🚀Thankyou!
Have you done or plan to do a video on 72 t calculation explained?
Haven't done one yet. It is on my list of ideas, but it isn't one that I've begun active work on yet.
I thought the 4% was supposed to be always on the current amount of money at the start of the year, not on the 1st year. But makes sense: it is riskier to adjust your income above inflation.
In the case of Jane withdrawing only 40k USD, she is getting richer every year and her buying power keeps shrinking.
So many ads! -__-
I like your voice....and the video
$3mil for a big mac. It better be BIG!
Yeah, for that price it had better be the biggest and best tasting burger I've ever had lol :)
Don't have a wife a kids. Work really hard , invest, live simply. Theres your retirement by 40
Best. Advice. Ever.
As Rihanna once said, “I got love on the brain,” I say I got money on the brain mainly because as your wealth grows, the excitement that you are going to be just fine proportionally grows! Thanks for the videos 💰💰💰