3 MASSIVE Ways To Help Your Money Last Longer In Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Retirement is supposed to be stress-free!
you're enjoying life you step away from all of the nonsense of the workplace and all of the
frustration and you're enjoying your life you're sitting on the beach just chilling having a good
time it's all good but there's one stressor that I see with so many people that are retired
and that's making your money last the markets aren't easy to watch you're going to open up
your accounts and one day you're up you know $100,000 if you've got a million dollar you know
10% gain is $100,000 but then if you have a 10% loss that year you're down $100,000 that's hard
to stomach when you've built you worked so hard for all of this money for so long well we've got
to figure out how to make your money last even in a bad market so let's take a look here let's
look at retired Roger I built this out with Nest eg a software we use for clients here at Jazz
Wealth and if we're looking Roger looks great right this second he's got a 92% probability of
success of having about $11 million at the end of his life he's 61 years old he plans to live on
5,100 a year he's got $800,000 little bits 25% of that is in WTH the rest of it's in pre-tax just
to give you a breakdown of where he's at so if we're looking here he's planning to take Social
Security at 70 he's actually not and I'll show you a minute Ro Roger's one of those he's like
ah my dad died early I I think I'm healthier but I'm not giving that money to the government that
that was my Roger voice if you didn't catch that so if we're looking here and we say Okay Roger's
going to take Social Security early all right well perfect well let's go ahead and do that so we're
going to make this adjustment here and we're going to say he's going to take it early it gives him
about a you know 5% probability less here though you're not talking them big difference in money I
mean $32,000 roughly $33,000 is the difference so it's not a significant ific difference but what
happens if the market has a massive pullback if we see a massive pullback that's what we've got
to look at here with Roger and figure out what is best for his scenario now if we go right here
and we say the markets the equity markets Dro 30% he's going to go down to 64% well personally
as a planner I'm looking at 64% of probability of success you know when you're in your 70s 70%
80% you know it's not too bad because we're also looking at this number we're also looking
at something else called the cash flow the cash flow is going to show us a whole different
scenario when it comes to this where it's really looking at things and it's saying okay we've got
this as far as go it goes in a linear fashion so he's going to get you know let's say a 7% return
on his money every single year the money's coming in the money's going out that's what we're
looking at there but in this the Monte Carlo looks at a thousand scenarios and it gives us
this probability of success it's a little more conservative but 64% I'm not Ultra comfortable
telling Roger hey you know take Social Security at 62 years old the markets just fell 30% now
you would think that that's actually backwards because a lot of times advisers will tell you
hey take Social Security early if the market Falls that's the option this is where planning
comes into play because that's not always the best scenario and in Rogers if we look here and we
say well you know what Roger going to take Social Security at 70 instead there's a 30% pullback
he's now pushing 70% again we still have about a 5% spread on the probability of success in his
retirement but when you're in the 60s wouldn't you rather have a 69% than a 64% I'd much rather give
him that information and make him do that instead so now let's go back because there's other stuff
that Roger wants to do Roger wants to talk about hey you know what I want to be really aggressive
with my money and rightfully so if I'm looking at this plan here and I look here at Roger let's
get this back going he's sitting here and he says I want want this to be 100% in equities and here
is why I'm going to potentially have $2 million at the end of my life that I can leave my kids
versus 1.1 million and look here it's only a 1% probability difference now you're probably saying
well why is there a 1% Less in having $2 million the reason for that is if you're investing in
the stocks this probability of success and the way this looks at it the Monte Carlo is saying
there's 29 years of Rogers life still to cover that's you know until age 90 looking at that
specific scenario in his life there's 29 years of Market return projections this gets a little
bit risky if everything's 100% in the stock market versus if you have a little bit of bonds or maybe
some currently money market fund sitting in there you're not just overly saturated just in the most
aggressive portfolio that you can be and so in his scenario though he wants to leave this money
and he's looking at that well let's go ahead and take a look now and let's see what this could
look like now remember if he were to take Social Security at 70 and the current allocation which
is about a 6040 mix for his scenario here he would have a 69.6 probability of success well remember
he's got you know a lot of opportunity here he's wanting to leave his kids $900,000 more if he gets
aggressive but what happens if he gets aggressive and then the market pulls back you're talking
60% probability 9% difference 60% probability of success I'm not comfortable again telling Roger
hey man this is where you need to be so you've got to think through not just what today is coming
up with when it comes to your financial plan and your retirement you've got to really think through
the stress factors the stress test of what happens when the market Falls because ultimately the
markets will go down that's just an unfortunate scenario that's going to happen if you look dayto
day the markets go up the markets go down and historically they've always appreciated or went
up but in the short term there will be downfalls there and so one other thing we got to look look
at though is if you were wanting to make a big purchase because remember we're wanting to make
your retirement dollars last so what happens if you're wanting to make a large purchase in a down
Market well remember Roger had $800,000 well let's just say that you know a 30% pullback would give
him a lot a lot less money let's just say that we have a little bit of a pullback and Rogers
money is now $750,000 and he makes a purchase he had $800,000 he made a $50,000 purchase well
the next year when the market recovers Roger's going to have 82,500 on a 7% return so you know
eventually the markets fall they will start to recover it's all about delaying the purchase and
let me show you exactly why if you were to wait for the recovery to happen and Roger says I've
got $800,000 once the market recovers I'm back to my break even here I get a 7% return I make a
$5,000 purchase well he had $856,000 he's almost got enough money to cover the taxes potentially
depending on what tax bracket he's in and the actual purchase that $50,000 purchase so it's
really thinking through and trying to time when you're in a down Market trying to time when the
right time is to make this large purchase some people just get antsy and they say you know what
the Market's falling I want to get out of it I'm going to go ahead and buy the car now or buy
the the house or the RV in retirement because I don't even know if my money's going to be there
well that's not the best decision because you're making an emotional decision so instead you want
to make sure that you're removing the motion out you're looking look at a financial plan you're
not just looking at one scenario but you're really starting to think through this to determine what
is going to be best for you thanks for watching if you want to learn more about jazzwealth
and how we can help as fiduciary advisers go to Jazzwealth.com if you want more educational
content be sure to check out our videos here
