How Much Do I Need to Retire? 3 Numbers You Need to Know Before Retiring

Рет қаралды 29,204

Күн бұрын

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To retire comfortably, you need to focus on three essential numbers: your expenses in retirement, your fixed income sources, and your portfolio value. Surprisingly, these numbers aren't about your current age or salary.
Becky, 67, wants to retire and enjoy gardening, pickleball, and family time. She has a $275,000 401(k) plan, a $387,000 rollover IRA and a standard investment account of $69,000.
Becky's projected monthly expenses are $5,000, including rent and other costs. Her fixed income from Social Security is $2,700 per month. This leaves an annual shortfall of $27,600, which her portfolio must cover.
To sustain a 6% annual withdrawal rate, Becky risks depleting her savings quickly. Adjustments are necessary:
Work Longer: Working another year increases Social Security benefits and grows her portfolio.
Reduce Expenses: Lowering expenses from $5,000 to $4,500 decreases the amount her portfolio needs to cover.
Combine Strategies: Working longer and reducing expenses offers a balanced approach.
Additional Options:
Becky could consider downsizing or relocating. By moving to a less expensive area, she would be able to save more in expenses. Another option is to adjust her portfolio allocation to better align investments with her risk tolerance and goals. Finally she could look at a supplementary income. This could come from part-time work or income-generating hobbies.
Retirement planning focuses on these three numbers, helping you create a plan that meets your needs and aspirations. By understanding and adjusting these key variables, you can achieve a fulfilling and secure retirement.
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⏱Timestamps:⏱
0:00 - Meet Becky
1:15 - Becky’s investments
2:29 - Expenses and fixed income sources
4:44 - Portfolio value needed
7:28 - The problem
8:46 - Possible solution - working longer
11:17 - Possible solution - reduce expenses
12:45 - Making tradeoffs
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Пікірлер: 39

@M22Research 26 күн бұрын

This scenario inadvertently demonstrates the benefit of owning a home and having the mortgage paid off in retirement. That home equity can contribute nicely to long term care costs, perhaps enabling self-insuring rather than paying the crazy high LTC insurance premiums.

@jameswitte5676 25 күн бұрын

That is also my plan. No mortgage and self insuring for potential long term care.

@1515cando 26 күн бұрын

Work until you die. Had a friend that was still working at 71. He was drawing full SS at 70. He was finally planning to retire at 75 in 2026. Well, in the summer of 2022 at 71 years old, he was diagnosed with esophageal cancer. He died in March of 2023 at the age of 72. He would never stop chasing the $. He bragged he would bring in more money after retirement than he ever made while working. Father Time and Cancer imposed themselves upon his plan.

@ebbss4 23 күн бұрын

That’s very sad to hear. I’m glad to be in my 20s and to have the info now, so I can plan down the future.

@chiburu_uchinanchu 27 күн бұрын

i've watched a number of your videos. I think you have some of the most informational videos on YT

@garretraczkowski 26 күн бұрын

Thanks James, appreciate you taking the time to do these videos. Very helpful 😊

@markb8515 24 күн бұрын

Thanks James, the video was very informative.

@GroovyCycleworks 26 күн бұрын

Solid and necessary info James 👍🏻

@TrueMarketLeader 26 күн бұрын

you r a good at financial planning - I am a CFP and I enjoy your videos 😊❤

@dforrest4503 27 күн бұрын

Looking at her expenses of $1,000/month for dining out and groceries, it definitely seems like she could get by on $4,500/month. Nice video.

@tcwaz 15 күн бұрын

Great Video James. Clearly explained the possible decisions and trade offs to get to retirement.

@shenabui8367 27 күн бұрын

Thank u

@Lolatyou332 26 күн бұрын

I would not want to retire without a paid off home

@jasonclift7253 24 күн бұрын

Great content again! Love your videos. It's not always what everybody wants to hear, but the math is the math and what I think I needed to see most was that if my savings didn't meet the monthly income I needed, I had to work another year or two or change my expenses - Thanks!!!

@raffybbc 27 күн бұрын

#4 Root Financial number.

@danoberste8146 26 күн бұрын

The "Cash Flow Planner" spreadsheet is missing a couple of equations. In the blue box for Monthly Gifts, type in =C31/12 and the blue box below that (for Property Taxes...) type =C32/12 These are needed to break down the yearly totals you entered in column C by a monthly total. Thanks James!

@Kayla11113 26 күн бұрын

What if she used her investments until 70 and then takes SS so she gets max amount?

@giemt1654 24 күн бұрын

thanks for the video James. may i ask what is total income the taxes were based on?

@susanbibeault 26 күн бұрын

For the software that we'd get access to with the Retirement Planning Academy, I assume it takes into account that Roth distributions are tax free and how much of SS is taxable, etc? A big drawback of online calculators I've found is they seem to ignore the taxation issues.

@jrcozens 26 күн бұрын

Started watching your videos and I’m enjoying them. Retirement Is still a good ways off for me but I had a question. If your assets are significant enough that adding Social Security would not change your life style in retirement. Do you ever recommend to your clients to hold off on taking social security and have it as a back up if the market or other things don’t go as planned?

@1515cando 26 күн бұрын

@ryanccc777 27 күн бұрын

Great video!! Would you be able to have a review on an income based portfolio where someone plans to live off of a high yielding dividend portfolio e.g. covered call ETFs, BDCs, mREITS, closed end funds? My request is totally self serving 😂 my plan is not to abide by the classic “4% rule” but to create a steady income stream / cash flow and not even touch the principal unless absolutely needed.

@user-vl1qf3qc9s 26 күн бұрын

Extremely useful. The use case is the best way to explain these concepts. It is kind of a "story telling". Thanks for sharing

@LJSinWA 26 күн бұрын

What percentage probability of success do you like to see?

@clbcl5 20 күн бұрын

Gardening, playing pickle ball, spending time with family. In other words...a life. A life everyone has many while working. 40 hours a week working leaves a lot of free time. Gardening, playing pickle ball, spending time with family is not a full time occupation.

@purpleeagle88 18 күн бұрын

Overall very good content, did not hear a discussion of the fact that expenses could moderate or go down in the later years of retirement. She may not be spending the projected amounts after she is in her 80s, though healthcare expenses will likely go up.

@ggigi3453 26 күн бұрын

and health care expense, that is huge

@ericmorrison6996 26 күн бұрын

the investment % assumption of 6.5% is low. It could be double or triple that amount which would increase the success %. She could also increase the amount of money she has in her taxable account to draw from when the markets are not doing so well in any future year.

@logicae4096 27 күн бұрын

Hmm there doesn't seem to be any real fixed income sources anymore besides SS. Seems to be a really hard definition...

@mitchbandalan9450 22 күн бұрын

That is kinda scary at first glance. There isn't a lot of people with passive income streams or a fixed income stream after they retire. Most pensions are a thing of the past. This is a real life example I wanted to see. Someone who didn't get a chance to pay off a house or own a house outright and have to factor that in. Even with a 700K portfolio, she was faced to work longer. That's telling.

@PorscheSpeedster-kz6nc 27 күн бұрын

How much does the Retirement Planning Academy cost? And what is the cancellation/refund policy?

@tomasGerardoRomeo 24 күн бұрын

$197, but I paid two days ago and did not receive access to the software. I sent two emails, no response, maybe a glitch somewhere but the email address I try to log in with is the email where I received the payment confirmation from Root. Yet it says email not registered. My credit card charge posted. I read on the "Academy" comments that those who did receive software access state that the software is a pared down version missing features shown in the videos. Of course I have not seen that for myself because I can't get in.

@MKF1205 26 күн бұрын

Very informative video. I think you are going to get a lot of people mad at you. The median saving for 65 years is around $300k I believe. Many on KZfaq are doing well with $500k or less at their late 50s or early 60s. You are asking someone 67 years old with Medicare and FRA SS plus $750k to work two more years?

@tomasGerardoRomeo 24 күн бұрын

Based on their projected monthly expenses, yes. It all boils down to math you see....

@avinashnarine7070 26 күн бұрын

Becky trying to work less not more 😅

@MKF1205 26 күн бұрын

Becky is making $88k a year. Since her take home is probably less than $5000 a month, spending 5k a month after tax is not reasonable. I saw $600 groceries and $400 dinning out. That is a lot for one person. Because she has saved $750k with $80k income, she must have been pretty frugal. This story just does not add up.