How Much Do You Need to Retire?
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- Опубліковано 22 чер 2024
- Not sure how much you need to retire?
These two simple questions can help you determine that. Watch to learn the method that will help you estimate retirement expenses and find clarity about what you need to enter into retirement.
Learn the tips & strategies to get the most out of life with your money.
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⏱ Timestamps ⏱
0:00 intro
0:34 Variables
1:15 Here’s what to do
1:45 Two Basic questions
2:04 Number one
3:10 Number two
4:05 Putting these to work
5:45 Example
6:15 An important note
10:01 Taxes example
11:24 Inflation example
12:38 Marital status example
13:20 Other variables
14:18 Summary
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I retired last October and just turned 65 with right at 1M in my portfolio, no credit card debt, no mortgage, it's paid off in full. We are pulling out $4000 after taxes a month and living very comfortably. Even with the current economic environment my mixed portfolio is doing very well. I don't plan on pulling my social security until I reach my FRA. My wife and I meet with our financial adviser/planner every 2 months just to stay on track and make any adjustment if needed.
That's awesome. What helped you to reach retirement. Was prudent saving over long term, or by investing in the markets with mutual funds and stocks?
It appears per year you're pulling out anywhere from $48,000 (if coming mostly from Roth and brokerage accounts) Or up to $60,000 if coming from mostly traditional retirement account. That seems a little high for a $1 million portfolio. Withdrawal rate is between 4.8% and 6%
I guess you've already done the math and saw social security will likely greatly reduced the stress on the portfolio so you're ikely ok.
It's been my experience that people estimate that they'll live far longer than they actually do. People should be realistic in their expectations - those that are 65+ thinking they have 20 - 25 years of retirement to plan for are borderline delusional. I'm in perfect health and don't think I'll live much past mid 70 (twenty years) - and I have planned that way. I have never heard someone say that they "out-lived" their retirement - but, I have heard countless stories of people dying long before they even started to enjoy retirement. Retire now - not later.
You are clueless! Or maybe working in a cancer ward. 50% of those reaching age 65 make it to 83/84. Those are real numbers with real people. So 20-25 is totally realistic for a couple to plan for. I agree 30years is very optimistic.
So are you saying that you have enough money to support yourself until age 75? What happens if you live until age 90? I agree with you about retire now if you have enough money, but you need to plan to live to age 90. My dad died at 87 and my mom died at 93.
There’s clearly a balance to be had.
Assuming you’re not overly concerned about leaving an inheritance (which it seems like you’re not) then sure, you don’t want to out-live your pension pot.
However, you also don’t want to run out of money early.
I think planning for your mid to late 80s is a sensible approach
I retired at 47 years old from the USAF. My military retirement and VA benefits will last till the day I die. I also have TRICARE and VA insurance for life.
My dad is close to 300lbs, has type 2 diabetes, with metastatic prostate cancer, pulmonary issues, and heart disease. He's 79. Like all of us he could die tomorrow or he could live 7 more years. Who knows?
His dad lived to 90 and his mom to 98. I'm basing my personal longevity on at least 90 just in case.
It is certainly important to strive for balance though. I have a cousin that died or MRSA at 39 and our shared grandmother died of cancer 63.
Prepare for the future but not to the point of misery today.
Bottom up approach will bring peace of mind. Track everything, we use Quicken and have for 20+ years. This allows us to know where every penny goes. I don't have to guess at my retirement expenses, I know exactly what I spend to live and created a retirement budget based on that number.
Always helpful. Thank you.
Doesn't matter what you think you are doing for retirement. I became disabled at 58, had to live on savings 4 yrs til disability came through. Totally upended the course of life.
Good video. People miss the planning part of other income like SS or pensions sometimes. We do a bottom up approach. We track all our expenses so we know what we spend today and then looking forward we have to estimate some things like health care costs in early retirement and then again when we turn on medicare. We realized years ago our portfolio really has to cover all our income needs for about 6 years. That's it ! Then when my SS gets turned on ( a little early mind you ), that covers all our base household expenses. When my wife turns hers on, it will cover most our travel expense as well ! Sweet ! So income from portfolio in our mid to late 60s will only be for extended travel, new car, fix a roof, major medical event or something like that. Really gives us peace of mind knowing that.
I've math'd out my retirement for several scenarios. With the 4% rule, my portfolio "should" increase through retirement. However, if I let the market-based portfolio sit untouched for 6 or 7 years, I can actually go to 5% or more. Reality is, it will be fluid, year to year, based on my retirement needs, retirement streams, and market value. I don't have a specific retirement dollar amount I have to reach, I have retirement streams (pension, SS, 401k, PERA, etc.) that will vary in value over time.
great video as always James!
I did the bottom up approach in planning to be as close as possible to what retirement costs may be. We will be people who need more in retirement then while we are/were working. I also think people leave out things that may pop up and don't plan for it. Car Repairs, car payments, house repairs and pet expenses may be things people don't plan for. Our budget already includes possible pet expenses, possible car payment, taxes and medicare expenses along with emergency money. I have our budget planned to need $8-$9K a month which should give us extra money for either expensive things that pop up or "fun" things. But as was said here, not all of that comes from our portfolio, most come from SS and my modest pension. I estimate that I will need about $20K a year to withdraw from our retirement funds, so a 30 year retirement is $600K which we have more than that saved already. When I first was budgeting for our retirement didn't take into account that planning for future events such as long term care needs to be done but by dumb luck I have those covered as well. I also planned for what happens when one of us dies as far as budgeting.
It's not perfect but we're going in with at least an idea.
Positive advice for a young one....thanks to you....
People with the top 1% of net worth in the U.S. in 2022 had $10,815,000 in net worth.
The top 2% had a net worth of $2,472,000.
The top 5% had $1,030,000.
The top 10% had $854,900.
The top 50% had $522,210.
Dynamics are what makes these calculations difficult. I'm stunned some computer programmer hasn't written the ultimate retirement calculator to include options like mortgages or cars being paid off in different years of retirement or collecting Social Security at different ages. When I retired at 56-1/2 I was withdrawing $6k per month. At 61 I was able to reduce that down to $3k per month. In 7 years, at 70, I will begin to draw Social Security (currently forecasted @ $4k/month). Even in those numbers, there are gray areas. For example, that 3k withdrawl, I withold 20% federal taxes because I'm converting $80 - $100k per year to Roths. When I get to Social Security, I will be paying very low taxes so I will have a much bigger "paycheck", even considering inflation. My point is, people need to be able to do calculations and financial planning
...or trust a stranger with their money.
The Rich Broke or Dead calculator (my favorite) includes an option to add an additional expense and additional income from certain age ranges. You can model the mortgage payoff or SS earnings with that.
NewRetirement does all that very well, in detail, with taxes.
I have a military retirement, VA disability now….I work for a state corrections…if I retire now I’ll have $3800 monthly and I have $1200 state retirement and $600 SS deferred until 62….I’ll also have $1000 a month for 15 years (deferred comp). I’m still afraid to retire
Lol duh
Income is the most important component but you also need investments (paper assets or properties) and hefty savings too!!
It’s minimum 4 buckets!! Period.
Why not?I have military and VA retirement plus TSP savings. Im going to enjoy my retirement.
Sounds you are in good shape for retirement depending on cost of living where you are?
The big one that comes out FICA
I'll be 66 when I retire in The Philippines 4/2024, with (starting) assets of $220,000 savings, $1,800 monthly SSI, $900 monthly interest income, about $1,500 monthly income from (about)
50 hrs. of work and NO DEBT. I'll have a $2,000 (or less) monthly budget (which includes a top, private health plan) and this plan will enable me to live VERY well and SAVE about $30,000
yearly, so in 5 years my savings will increase to about $400,000 which will continue to grow. I think my plan will do the trick for the rest of my life, and living in The Philippines is the key to
my successful retirement/savings plan, as the cost of living is (overall) about 50% LESS than The U.S.
Just multiply what you plan to spend per year by 25.
I feel that we need minimum three buckets for retirement.
One is income to cover minimum of your expenses
Second to have a home to live in fully paid for
Third is cash savings for emergency fund
Fourth is investments that grows at market rate…,
I have an answer to both how much I need and want to retire.
I want 1.1 million at 64 but I could retire at say 60 with about 800k
If you're not a big spender, go early!!!
@@hogroamer260 I would rather have more to spend if no health problems show up. I want to retire to something.
We need $1,750,000. Not including real estate asset.
Wow.. I say $1.73M. we are amazingly close. I want to use the 3% rule and take out $1k initially. That's taking today's expenses and assuming 4% inflation for the next 14 years.
I would say more like 3 mill
I once worked in a shop that hired a woman. She had men fired as she rose to the top. She was a professional assassin in the workplace. Eventually she got to the top and had no one else to blame. It was beautiful as the business Eventually closed as it was always excuses why we couldn't accomplish anything as she had all the key personnel fired. I can laugh about it now but at that time I really needed that job. However it taught me to never place my source of income in the hands of one company.
i need $840,000 to retire at 63 - $540,000 for normal retirement age to live comfortably for a single and as retiring pre 67 an additional $200k for the additional 5 years
$2.5m USD in a dividend portfolio yielding 4-5% yearly. So you can live comfortably and still reinvest for family legacy and a long life..
My name is rich I am 72. I do not have any debt. I have 500 thousand in the stock market I own my condo .I own my card.. my income is about 2500$ a month .way more than my bills. I started at 24 making my retirement. I take to vacations a year with out touching my profoolow. I think for a high school drop out. I started my own bussiness at 30 years old… I did great. I retired at 30. I got divorced at 40 years old an gave up half. An I am still ok. Rich from Naples fl.
My income last year was 61000$
$3,000,000
No you need at least 6 million
2.5 MM
Payoff your mortgage and any debt before retirement and you will need less money than you would think. Without the mortgage we would only need 40K yearly. It is better to have more money in your retirement, don’t get me wrong but when you retire you will spend less unless you will be going on vacations more than once overseas. Anyway, I am building generational wealth so my goal is to have atleast 10M at 70.
I am not following your math. $30,000 / 5% gives you $600,000 needed in retirement account. But if you only need to withdraw 4% then $30,000 / 4% give you a portfolio value of $750,000. So I would need 150K more in my retirement account to withdrawal 4% vs your 5%? What am I not understanding of your example of a 5% withdraw vs a 4% withdraw?
I think he misspoke. A $600,000 portfolio that generates 5% interest/growth will get you $30,000. A $750,000 portfolio that generates 4% interest/growth will get you $30,000. I think he was referring rate of return, not withdrawal rate. It is the income that you are generating from the portfolio.
You need to be VERY careful ruling out income taxes in retirement. Many older people didn't have the Roth option when they began retirement savings. Then when Roths came along, they were earning more and Roths weren't as appealing. So now these people ARE paying income tax on their retirement plan withdrawls.
For moderate earners taxes, just are not a huge issue, effective rates are less than 10%. We paid no income tax last year after credits and deductions
@Randolph H There are obviously a full spectrum of situations, but to have a generic template that says remove taxes from your situation is nonsense.
$2000 a month
A top down approach is absolutely worthless... Your expenses are what matter, not your current income. If you have accumulated a retirement fund you have clearly demonstrated that your expenses don't match your income.
My thought exactly!
James, is there a good software you can recommend for those of us who don’t have access to the professional software financial advisors use?
New Retirement Plus.
64 have 520k i need 4k a month. Doable?
How about it's just a functional outcome? Not some hypothetical, or even practical financial calculation...I'm 76, too old, gimped up a bit from a previous concussion, to do any valuable work, or skill, can't even conjure up some scam, to produce meaningful income, so, I'm functionally retired. No choice, no saying Well I finally MADE IT! I CAN retire. Nope, I MUST retire and live (?) as best I can, many expenses are fixed, the equation ends up is there ANY discretionary income left over, or not? Top down, I get ONE income source on 4th Wednesday. Then start subtracting priorities...house payt & insurance & property taxes ($600 per month in my average house in a small town and I get, what? Trash pick up once a week?) AND the utilities & maintaining infrastructure (e.g. the fridge, furnace boiler & water heater all needed replaced in ONE year AND major car repairs AND some expensive health issues...shrunk my annuity down to 1/3 of what it was ten years ago when I retired. Sooooo, do I then have six years of draw down from my annuity to keep making up for ongoing shortfall month by month, OR to hope these major expenses have now been taken care of and wont need to be repeated in my lifetime...???)
Retired Time is Best Time for my & You Life !
#Retired4You
About 4 million. If I had 2 million right now I could retire and not change my living situation. My guess is in 20 years I’ll need 4 million to retire at 62.
$50k and a $1600 a month SSA check. Once you reach 67 you keep all job income. Do something you like that pays. Partime.
Must have zero debt and paid off car and modest rent or no mortgage.
Alternatively can live in 1000 cities in other nations on that.
If you have standard American Inflated lifestyle to Infinity and "need" 5k or 10k a month, you need to adjust your values not your budget.
These financial advisors tell you that you need big bucks because THEIR income is based off fees managing YOUR portfolio.
That's where the $2 million (same figure since 1975 - read in Money Magazine back then) needed to retire comes from. They figured their avg client base in number, calculate what income they (the CFA) want, then back out what each client should have under management so that they have the income they want.
It is 100% a self-serving con.
Ditch your financial advisor and you get a free 1-2% more to withdraw
The smartest guy in the room, James Conole, is...
According to your target:
Payout(10 Year)=1,000,000USD
Insurans:
Premium=? Yield=18% Year=10
Premium=1,000,000/1.18^10
Premium=200,000USD(Pay=1M)
{
PremiumA:A=Loan(Loan=0)
{
PremiumA=400,000USD
}
PremiumB:B=Income(1000K)
{
PremiumB=200,000USD
}
}
Loan(10 Year)=2,000,000 USD
Loan=? Yield=5% Year=10
Loan=2,000,000/1.05^10
Loan=1,200,000USD(Basic)
Balance
=Loan-A-B
=1,200,000-400,000-200,000
=600,000USD(Debt=0)
Thank you.
How much do I need? Enough.
According to another You Tube retirement expert 2 million is NOT enough.
There's never enough money to retire.
I wish your examples were more real world. I think the majority of Americans are not even close to having a retirement that pays $100k per year. Most don't have pensions and now SS is being looked at to reduce benefits in the future by Republicans. A significant portion of the US population don't even have $50k saved for retirement. Sad states of affairs in the US.
For a retired couple, I recommend no debt, no mortgage, no car payments, $500K in cash to ride out down markets, and $2M invested in the S&P 500. Draw down 4% to 6% per year depending on your needs. At $2M your investments have reached critical mass where your money is making real money and will last 30+ years.
Get to the point...
Need $2.5MM net worth. Single guy in HCOL.