Category: Tips for Retiree’s
The 4% Rule for Retirement: What You Need to Know!
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
one of the most common retirement planning
questions people have is how much money can I pull from my portfolio every year and live on
in retirement and that's where the four percent rule comes in handy and it basically says that
if you can pull four percent or less from your Diversified portfolio invested in things like
stocks and bonds and live off of that amount while keeping the rest invested then there's
a good chance that your money is going to last 20 30 years or more and as a frame of reference
if you had a million dollars then four percent would be forty thousand dollars if you had
five hundred thousand dollars it would be twenty thousand dollars per year and it's not
set in stone it is based off a study that was done many years ago and has held up well over
time but there are instances where people as they get older could pull more or if they retire
early maybe they want to consider even doing less than that but it's a really good way to get
a frame of reference on looking at how much you've saved and what that can translate
into in retirement as far as income goes
7 Ways One Simple Action Improves Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
– In this video, I'm
going to blow the lid off of the most common
mistake made in retirement and in the process bring
clarity to your next move if you carry a lot of debt. Coming up next on "Holy Schmidt." – Holy Schmidt! (object splats) – Recently, I ran into a friend of mine at a hotel lobby in Chicago. He's someone I hadn't seen in years, but someone that I had always
meant to keep in touch with, so it was great seeing him. We got on the subject
of debt and it was clear that he had read a lot of the
books out there on finance. He talked about good
debt, bad debt, no debt, an emergency fund, all of it. But the problem was, in the discussion, it was clear that he was
misapplying many of the concepts. He had read the words in the books, but he actually had not
applied them correctly. One particular point in the
conversation was very tense. He said to me he would rather have $50,000 in low-risk securities
and $30,000 in debt, even credit card debt, as
opposed to having just $20,000 invested in low-risk securities.
When I asked why he thought this, he used some strange
end-of-the-world example and said to me that, "If
we're all living in caves, and this is the end of the world, I would rather have $50,000
in cash than $20,000 in cash because the credit card companies would have a lot more to worry
about than little old me." (thunder claps) "Okay," I said, "But if you're living
life in the real world, you have real credit card companies that have debt collectors that go out, and they try to collect the debt. They actually put a judgment against you. And if you have a judgment against you, they can put a lien on your assets, particularly your checking account, at which point you won't have any cash because everything in there
will go to pay down your debt.
He looked totally confused.
So I help him translate. "If what you're saying is that you would rather pay your grocery bill than your credit card bill, I get it. That will last about a month, maybe two, before things start to go horribly wrong. But let's assume that you are
not being hunted by zombies. (zombies snarling) And you're not trying to determine what the best currency
is in the apocalypse. (knife sharpening) Debt is real, and it needs to be paid." Here's why you should have
no debt in retirement. By the way, if you have
debt, even a lot of debt, I've got you covered. There's another video
that I have, outstanding. I'll put a link in the
description below that you can use to get rid of your debt
very, very quickly. But I digress.
Let's
get back to this video. First, for those of you
who think like an investor, you'll know that the higher the return, the higher the risk, generally speaking. If for example, you invest
in US government securities, that means your investment is as safe as the US government itself, that is, if you hold your
bonds until maturity, and you don't sell them
in a choppy market. (cow bell ringing) But assuming you hold your
government investments until maturity, the five-year US government
note is currently paying (keyboard clicking) 3.39% as of five seconds
ago according to Bloomberg. On the other hand, if you invest in high-tech
Silicon Valley startups, your return could be
15, 20, 30, 50% or more, or you could lose it all. That's how high-risk investments work. But what if you could get
US government type risk and Silicon Valley type returns? (cash register rings) Well, that is the best of both worlds, and there's only one way
you can really do this, and that's to pay off your
outstanding credit card debt.
Let me explain. Imagine that you had $10,000 to invest, and you could either put it
towards a dividend paying stock that paid a 4% dividend. That would be a very good
dividend, by the way. Or you could use it to pay
down your credit card debt, and let's make the math
easy for this example. Let's assume that your credit card company only charges you 4% on your credit card, but whether you had a
4% dividend paying stock or you had a 4% credit card, your cash flow would look about the same. You would just use your dividends to pay off the interest
on your credit card. Of course, dividends are
actually paid semi-annually or annually, and credit card
payments are paid monthly.
But let's ignore that for just a moment because the point of this is not that. The point of this example is that if you had $400 of dividend income and you use that to pay off the
interest on your credit card or you didn't have $400 of
interest on your credit card, the cash flow would
look basically the same. Now, this is where people
get confused. (blows) Earning $400 of dividend
income is not better than avoiding $400 of expenses, and credit card companies don't charge 4%. In fact, they charge between
18 and 23% on average. In fact, the average according
to Wallet Hub is 19.07% as of today.
(whip whips) So your return on investment
is 19% in this example, not 4%, and it is as guaranteed as the government interest
on the government bonds, maybe even more so 'cause if you don't owe debt, you don't have to pay interest on debt. That's guaranteed. Is the dividend guaranteed? Nope. In fact, the company can
cut the dividend tomorrow, or they can go out of business, and you can lose all of your money. Now here is the sinister
part to all of this.
If you receive a $400 dividend, do you have to pay taxes on it? In most cases, unless it's in a Roth IRA, but if you avoid $400 of expenses, do you have to pay taxes on
the expenses that you avoid it? No. In almost every example,
you'll have more spendable cash if you avoid paying a dollar of expense rather than receiving a dollar of income. Now add a bunch of zeros onto that, and it becomes real money, which brings us to the next point. Even a modest improvement in cash flow improves your retirement
picture pretty dramatically.
Here's why. When you're living your life, the fun discretionary stuff usually comes from the last 5, 10, maybe even 20% of your monthly income. The average retiree who carries debt spends 38% of their income
to service that debt. Now imagine what you could
do with 38% more income, particularly noting that the
last part of your cash flow is what's used to pay
for all of the fun stuff. Then, and this is big, if you
have an extra 38% in income, this is a great margin of safety cushion in case something goes wrong. This happened to many of us recently. In 2022, the average retiree
lost between 15 and 20% of their account value if they had their assets
in a target-based fund, which is over 80% of retirees, by the way. If this was that type of year,
(warning bell alarms) and you didn't have that cushion, this would mean that you'd
have to continue to sell assets at a reduced price and
crystallize the losses just to sustain your life. But if you're like my friend
Rulph from the Chicago Hotel, you're going to use that extra cash flow to build your apocalypse fund.
The rest of us call it an
emergency fund, by the way, but whatever you wanna call it, it's something that you
can designate as extra cash in case the world changes
on you all of a sudden. Importantly though,
you're using your assets to pay down your debt, so
that's taking a step back, but that will allow you to
take multiple steps forward because you're not paying
high interest on that debt, and you have extra cash flow to rebuild your emergency
fund the right way. Next is just the effect of
having debt in your life and the effect it has on
your health and wellbeing. Let me explain. I am personally in the middle of several weeks of a very
challenging point in my life.
Now these challenges are good challenges because I'm pushing ahead on
projects that are important and the end result is that they will yield some incredible outcomes for both me and for other people. But it is really stressful,
as you can imagine. And while the outcome will be great, this is a lot harder than
just doing regular work. But here's the most important thing. At the end of these projects, there will be a lot of celebration (fireworks exploding)
both for me and for others. They will have a very
positive outcome at the end, but if the stress wasn't due to something that would conclude at a point
in time and conclude well, imagine having to deal
with that level of stress every single month. This is what I'm talking about. The debt holder is worrying
about how to afford life. It's not a carrot, it's a stick, and this worry goes on at the
end of every single month.
This can very quickly affect your physical and mental health. Next, this will improve your relationship with family and friends. Imagine being able to
spend more time and money on those that you love, your spouse, your kids, your friends, being able to go out more
often, do more things. Most relationships that end
end for one of a few reasons, money being one of the big ones. So if you're taking the
money issue off the table, or at least moving it to
the side a little bit, relationships tend to get better. We talked a lot about credit card debt and personal debt in this video, but the question always comes
up when talking about debt, what about mortgage debt? Well, there are two answers here. The first is the mathematical answer, and the other is the personal side answer. Mathematically, if you have a mortgage that's 3 or 4%, and
inflation is running at 6%, well, there is an argument to be made to keep that debt outstanding
as long as possible, but imagine how you would feel
if you had all of that debt from the mortgage
redirected into your life.
That's the personal side, and that's the side that most
people actually care about. If you like this video,
check out that video. It's a video on where retirees spend 80% of their income in retirement, and it's one of my most popular. This is Geoff Schmidt.
Thanks for watching..
Pay This Off Before You Retire – Retirement Planning Tips
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
in this video we'll look at what expenses you should think about getting rid of before retiring and a few mistakes that retirees make when it comes to expenses in retirement there's a few things that you may want to say goodbye to before you say goodbye to that wage or that work income we're going to cover this in three parts it's going to look like this first we'll go over needs and wants and then what i'd call highway robbery and then also what to ear mark in retirement we've seen that the retirees that can get rid of these expenses before retiring have a little bit more breathing room and they feel better about their retirement plan because when you're planning for retirement we usually think about really two types of expenses it's the needs which are the essentials the absolute must-haves to just live you know as you think about my maslow's hierarchy of needs those things at the base layer and then there's the wants which are the the nice to have things but then there are other types of expenses that really don't fit into that category of needs or wants those are the things that we need to be done with before retirement and by the way i'm dave zoller and me and my team we run streamline financial it's a wealth management firm focused on retirement planning and we've been helping people personally for 13 years and streamlines been around for 22 years and we created this channel to share what's working with our clients so that you can benefit too so if you're close to retirement be sure to subscribe because i share one new video each week to make your retirement a little bit better i also put some free resources in the description below like my favorite diy retirement planner if you're more of a do-it-yourselfer so let's get into the list and then as you're watching if i leave something out please share it in the comments below i'd love to hear from you and then also i'll try to reply back to depending on how many comments i get so the first two you will probably agree with but you might not be thinking about the other ones and i want to show you ways to prepare and just make sure that your retirement is a little bit smoother by using our retirement planning software the first one which you already know is to pay off high interest debt which i sometimes think of as highway robbery it's when those interest rates are just so high and they're charging people it just seems unfair right that high interest debt i'm referring to is usually credit card debt and sometimes it's student loan debt and you'd be surprised at the number of people who in their first year of retirement they still have a large monthly payment towards credit card payments or student loan debt and this should be the number one thing that we should focus on to really reduce before we say goodbye to that job income or that wage because if you retire with credit card debt and then you get serious about paying it off in retirement then that means you've got this bigger amount that you got to take from investments which could alter your retirement plans i helped a woman recently who's not a client but she was looking at her plan and she wanted some help and she had about 20k of credit card debt she also had over a million dollars and her regular expenses adding on this 20k of a lump sum expense to her plan it really made quite an impact and once we looked at that together it gave her the motivation to work a little bit extra and extra hard to get this debt payment down to zero or get the credit card debt down to zero before retiring because she'd have a greater peace of mind and it would just increase her confidence as she was going into retirement that peace of mind it's key right i'm sure you're feeling the same way i actually want to share a little bit more about how to achieve this before you retire and during retirement and i share that at the end of this video so stay tuned the next ones are expenses that you can either pay early or at least you want to earmark these in your retirement plan and i'll show you what i mean when i say earmark that just means setting aside funds for specific purposes and either not including those funds in your retirement plan or including them but at least showing the specifics within the plan and i'll show you some images coming up of a retirement plan and how to do this number one thing to earmark is any big travel expenses that you're looking forward to that first year of retirement or really the first few years of retirement a lot of people kick off retirement and they'll really have a big special trip that they've always wanted to take or a place that they've always wanted to go to and lots of times that vacation it's going to cost more than the typical vacation that you might take on a regular year it's really that cap to uh ending work and then really doing a bigger than normal trip some clients choose to take one of those european uh river cruises that are pretty popular and they can cost 10 to 20k or more and knowing that this is a bigger than normal expense or a lump sum expense coming soon into retirement you can either pay that ahead of time like actually many of the cruise places make you do or you can at least earmark it in the plan and make sure that it all works with everything and i'll throw it in there as an example coming up soon here's an example of a retirement plan that's based on annual expenses going up each year three percent regular inflation rate and then over on the left side we can add some expenses that are bigger and irregular you know not the regular every year expenses but things we can earmark so that we can see the impact of on the plan before actually spending the money and doing it this way we can add some peace of mind to your retirement plan and your confidence as you're spending money and so you can just feel that it's a good decision and feel good about that vacation or whatever it might be a few other bigger than normal one-time expenses we've seen are related to your adult kids if you have them whether it's final college expenses or maybe a wedding that you want to help out with or future gifts maybe towards a home purchase or something like that for those you're not really able to pay those before you retire because we don't know when they're going to happen so earmarking them is the next best step and setting funds aside to make sure that these potential expenses that you might have in the future are ready and available ready to deploy when needed one mistake that we've seen some retirees make getting close to retirement is not factoring in these one-time expenses and then getting caught a little off guard when it's time to pay for them especially if we're in a market like we are now now you might be thinking one big expense that i did not mention and before i share that one if you enjoyed watching this video so far and you found it helpful please click the like button so this can hopefully spread to other people who are like you and might find it helpful as well so that one big expense that you might be thinking of that i didn't mention yet is paying off your whole mortgage before you retire and this is a big one for many people as you've heard before behind every financial decision there's also an emotional one as well and many people they feel very strongly or maybe adamant on on being debt-free in retirement and that's a really good feeling for for many people for others depending on their financial decision it actually a mortgage could actually make sense in retirement some people see it as a fixed expense which doesn't go up with inflation it actually gets cheaper as everything else increases with inflation and as one dollar can buy less and less over time which is basically what what inflation is it may be at really attractive interest rates as well and some people want to have a little bit more flexibility in their retirement accounts by keeping some funds available in their non-retirement accounts versus using that money to pay off the mortgage the more important thing to to think about when deciding whether this makes sense whether to pay it off or not is try to measure first just the emotional feeling or comfort with debt you know yourself and then also your spouse if you're married and then step two is map out both scenarios what does it look like that plan that we're just looking at over here what does it look like if you pay off debt early or don't pay off the mortgage at all look at the difference see which one's okay lots of times it comes down to the strength of the emotional feeling around debt for one person in the relationship or if it's just you then it's just whatever you prefer when we're thinking about paying off expenses or earmarking things in retirement get help from a financial professional a cfp could be a great place to start but i'd like to hear from you what did i not mention as we're thinking about these different expenses in retirement i'd love to hear your thoughts about these expenses and especially the thoughts on mortgage having a mortgage in retirement and i want to share another video about how increasing peace of mind and making sure that you get both parts needed for a successful retirement the sad thing is that in this industry the financial industry most of the time they focus on one thing but here's a video to watch that'll help you think about and prepare for both sides of retirement so hopefully i'll see you there and if you haven't already subscribe and then i'll see you in future videos take care you
Retirement: I’m 60 Years Old with $900K in Savings. Can I Retire Now? What is My Risk Capacity?
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
so you're 60 years old with nine hundred thousand dollars saved and the question is can you retire in today's video we're going to look at a few different decisions that could be made the impact those decisions have on the plan with the overall goal of not running out of money hi I'm Troy sharp CEO of Oak Harvest Financial Group a certified financial planner professional host of the retirement income show and a certified tax specialist in today's case study we're going to look at a situation that's not too dissimilar from what we normally encounter in our day-to-day operations here at Oak Harvest Financial Group so we have James who's 60 years old he comes in and he says Troy I want to spend about seventy thousand dollars and I'm just tired of working I want to to this year to be my last year so I want to spend seventy thousand dollars I think I'm going to live to about 90 years old pretty good health and I want this fifty thousand dollars to increase with inflation over the course of my retirement but for the first 10 years and what I hear you talk about in this go go spending phase I want to spend an additional 20 000 per year bringing that first 10 years of spending up to 70 000 per year then that go go spending goes away and then we have the inflation adjusted 50 000 to plan for from age 70 to age 90.
Hey just a brief Interruption here to ask you to subscribe to the channel now what that does for you is that puts us Oak Harvest Financial Group and all the content we produce in your little TV Guide so you have a much easier way to come back and find it later share this video with a friend or family member and also comment down below I love to respond to the comments now if you have any questions about your particular situation or you'd like to consider becoming a client of Oak Harvest feel free to reach out to us there's a link in the description below but you can always reach out to us and give us a call and have a conversation to see if we might be a good fit for each other James tells us that since he wants to retire as soon as possible he he thinks it makes sense to take Social Security the first time available so claiming at 62 a little more than two thousand dollars a month at twenty five thousand dollars per year he also has that nine hundred thousand dollars broken out to four 401K money of 700 Grand then 200 000 in a taxable account or what we call non-qualified outside of the retirement account very important to point out here that the tax characteristic of these two accounts and the Investments inside them and the interest and dividends and the withdrawals from them are taxed differently so that's part of an overall tax plan now James also has a home that's completely paid for and worth six hundred thousand dollars but he's told me that I don't want to use this to fund any of my retirement goals I've lived in this home for a long time I want to stay in the home but we know from a planning perspective that we do have that in our back pocket if it's needed down the road so James's total net worth here is about 1.5 million looking at the paid off home of six hundred thousand the 700 Grand inside the 401K and the 200 000 of non-qualified or taxable account assets now as part of the process to understand where someone is and where they're trying to get to we have to understand how is the portfolio currently allocated so James tells us that Troy I know I've wanted to retire so I've been investing aggressively and trying to get ahead of the game but here we are in 2022 and the markets have pulled back some so that double-edged sword is starting to kind of rear its rear its head but we see James's 93 stock so one of the questions that we have from an internal planning perspective is if we keep this same level of risk while we retire and start taking income out of the portfolio what does that do for what we call the risk capacity or the portfolio's ability to take on risk while Distributing income in the retirement phase so we have to look at the guard rails and guard rails are essentially a statistical calculation of probabilities of the portfolio returning this much on the high side and a good year and this much on the downside in a bad year if these guard rails are too far apart and we're taking in income out if we run into a bad couple of years that bump up against that bottom guardrail but we significantly increase the risk of running out of money so part of the analysis of the planning is is this an appropriate guard rail for this type of portfolio given the desired income level so with everything we've looked at so far the question is if James continues doing what he's currently doing and retires with the desired spending level the assets that he's accumulated living until age 90 what is the probability that he has success well it comes in at about 61 so that's probably not a good retirement number it's something we want to see if we can work to improve so I'm going to pull up the what if analysis here and start to look at some of these different decisions that we could make and see if we can get this probability to increase okay so now we have the what if analysis where we have two different columns up here on the board right now they're identical we're going to keep this one the same as the base case everything that we just went through but now we're going to start to change some of these variables to see what the impact those decisions have on the overall retirement plan and this is much more of an art at this stage than it is a science because we want to start to explore different scenarios and then see what is most comfortable for you once you understand the impact of these different decisions you can take some time to kind of way think about them weigh the the pros and cons and now we're starting to work together to craft you a retirement plan that gives us increased probabilities of success but also something that you feel very very comfortable with so the first couple of options we have which are the most simple and usually have the biggest impact on the plan is that we can either work longer or spend less so James says no I don't want to spend less I have a specific plan I want to get my RV I want to travel the country I want to play some golf I've done my budget I need to spend that 70 000 for the first 10 years so the first thing we'll look at is the impact of working another couple of years so I've changed the age here to 63 as far as Retirement the only variable we're going to change at this time I don't want to change too many variables at once I want to see the impact of different decisions how they impact the overall plan okay so that gives us a bit of an increase but the next thing I want to look at here is social security so Social Security is a very valuable source of guaranteed lifetime income first it's an increasing stream of income it increases with inflation but two no matter what happens with the stock market that income is always going to be coming in so instead of taking the 62 and having a significant reduction in the lifetime income that we receive because I don't want to change spending we still have the 50 and 20 in here I want to change the Social Security from taking it a 62 to taking it at full retirement age okay so changing the Social Security election day gets us up to 76 we're definitely moving in the right direction here after a conversation with James and he realizing that you know what I do feel really secure with that increased social security income because if the market doesn't cooperate I know I'm still going to have that much higher income later in life so that would lead us down the road to say okay let's look at adding more guaranteed lifetime income if we can get your Baseline income to cover a majority of your spending needs then we don't need the market to perform necessarily as well later in life so now we want to look at the impact of adding more guaranteed income to the plan which has the effect of providing more security later in life because if the markets don't cooperate we know we have a certain level of income being deposited every single month no matter how long we live so if you go to our website here it's Oak harvestfinancialgroup.com com we have up top an income writer quote where this is constantly searching for the highest amounts of guaranteed lifetime income that are available in the marketplace simply input the variables here so in Texas age 60 Ira money income starts we're going to start looking at seven years here and I know the dollar amount I would want to put in 300 000.
The good news here is you can input any of these different variables we don't ask for your information so it's a calculator tool that you can play with on your own Single Life payout and we get quote okay so here's the output screen we have all of these different companies over here when you see the same company twice it's because that company offers multiple different products with the same income Rider so an income writer is just an addendum or an attachment to a contract that guarantees no matter what the stock market does a certain amount of Lifetime income based on the specifications you input so about thirty three thousand dollars here so that's about 11 percent of the initial deposit with that income starting in year seven this is why we call it a deferred income annuity because it gets a guaranteed growth to calculate a guaranteed lifetime income that you then would incorporate into your plan so in this what-if analysis we come down here we I've already inputted so three hundred thousand dollars and then we just calculate these scenarios okay now we're up to 87 percent here so now things are starting to look a little bit better let's make a couple of different adjustments here because remember when I talked about the guard rails that's too aggressive of a portfolio given the income need especially in the beginning years but now that we've added some deferred income into the plan the portfolio's capacity for risk increases later in life and all that means is because there's so much income coming in the portfolio can withstand a bit more volatility later once Social Security and the Deferred income annuity kick on because you're needing to take less from the portfolio so let's make a couple more adjustments here so after retirement we don't want to keep the the current investment strategy let's get a little bit more conservative here go from an aggressive plan to something a little bit more conservative and then you know what let's also say now that we're starting to move in the right direction instead of retiring at 63 what happens if we retire at 62.
Get your retired one year earlier than some of these other numbers okay now we're at 83 percent retiring at 62. I want to look at one more variable here because you may want to get a part-time job James may want to be a starter at a golf course maybe he wants to work in the church and he can get ten thousand or fifteen thousand dollars a year maybe just wants to work two three months out of the year so the next thing I want to look at is if we've done all this now what happens if during this first 10 years of retirement he decides he wants to work three months out of the year or maybe just a part-time job and work one or two days a week so instead of needing twenty thousand dollars per year we just need another ten thousand let's say from the portfolio so really that's only earning ten thousand dollars extra in retirement income you could do that driving Uber many different choices there you know what I'm just going to decrease this no I'll leave it there now with James deciding to maybe work part-time here to reduce that spending need in the first 10 years let's see if we can also get them retired at 61.
Okay so now James has decided that working part-time and hey we're talking 10 grand here so this isn't a lot of money now I want to see what happens if we go back to the original goal that James had of retiring as soon as possible at age 61. so we're going to change this back to his original goal 61 calculate all scenarios and now this gets us up to 94 so we started at 61 if where James was originally at whenever he came in if he kept doing whatever he was already doing we got him up to 94 percent here okay I want to take a minute before we finish the final Concept in this video to discuss some of the adjustments we've made so far to get James from 61 to 94 so first and foremost we adjusted the Social Security election strategy secondly we added that deferred income annuity thirdly James has decided to work part-time to generate ten thousand dollars per year in those beginning years to help reduce the burden of taking out an additional twenty thousand dollars of retirement income and then finally we've brought the guardrails in on the Investment Portfolio which helps to eliminate very bad outcomes that could happen with his original 93 allocation to stocks we haven't totally went to bonds or cash we've just brought those guard rails in by reducing our Equity exposure in the beginning years of retirement we can always adjust that later now last thing I want to do is look at what we call the combined details all of these things together in a spreadsheet just so we can see how these different pieces are working together and then look at what we call different Monte Carlo analyzes so now I want to share with you some of the individual trial analysis that we run just like we would for a normal client to help identify not only where the weak spots are in the portfolio but how these different decisions that we're making impact the overall client balance and it's not just looking at what we call an average rate of return it's looking at a thousand different simulations we're going to look at a couple here and the Order of the return so check out the video if you want to understand more about this concept you can click the link up above and the title of the video is how eleven percent average returns could destroy your retirement and that'll really get home that concept of it's not about what you average but it's about the order in which you realize returns over the course of your retirement during the day distribution phase so here we have this individual trial and we're gonna it's the median scenario out of a thousand different scenarios so I just want to go through this fairly quickly with you and based on some of the adjustments to the portfolio we see the investment return column here so all of this I think averaged out to I think it was about four and a half percent gross returns I can go back and double check that in a second but you see it's it's never four four four four four four four four or six six six six this is what it looks like in the real world so James retires essentially the beginning of 2023 we have the Deferred income annuity clicking on here we've changed Social Security to click on here so if we add these two together come heck or high water there will be minimally 74 000 almost 75 000 deposited into his bank account every single year now if we look at the retirement need it's about sixty one thousand dollars plus the discretionary Go-Go spending is about twelve thousand two ninety nine so about seventy three thousand dollars but what this does is because we're getting so much from these two sources it really reduces the need for the portfolio to perform and if we kind of go out go on out through retirement you see Social Security isn't increasing income so later in life now we're up to about 89 almost 90 000 of income and our ninety thousand dollars inflation adjusted retirement income need is covered by the amount of guaranteed lifetime income that we have in the portfolio which then allows our portfolio balances to stabilize because we're not needing it to support our lifestyle later in life so this is just one example here but we see the ending portfolio value even though it spends down a little bit in the beginning years okay it starts to stabilize because the income provided from the decisions that we've made put us in a situation where we don't have to withdraw so much from the portfolio Okay so now I want to look at a different trial and just to confirm here the 500th scenario was an average of 4.6 but you saw the different order of those returns and how we actually got to 4.6 okay so if we slide this up here let's assume it's a pretty bad scenario this is going to let me change it here find a worse return okay so this brings the average down to 3.05 and we still see in bar graph form here that the portfolio value still is stabilized and it's primarily because that change in the Social Security decision and adding the Deferred income annuity it still puts us into that position to where if the market doesn't perform we have enough income from guaranteed sources that we're not dependent on the stock market to provide us income in retirement especially later in life when we typically are more conservative and most people that I've worked with don't have the same stomach at 80 or 82 to stay invested in Big Market pullbacks as they did when they were 52 or 62.
Now what I want to show you is the comparison to what we just looked at in the individual trial analysis to the original plan that came in at 61 percent with all the original inputs so if James just wanted to retire not go see anyone make any adjustments I want to show you what that looks like on the individual trial analysis so remember in this scenario we kept Social Security at 62 no job so the spending stayed at seventy thousand twenty thousand was that go go spending no change to the portfolio so we still have the aggressive portfolio which brings in the possibility of some pretty bad outcomes and no deferred income annuity here to help stabilize the income generation later in life as well as the volatility impact on the portfolio so when we when we look at this so here we go um had James has a 900 000.
You see we have none of the annuity income here Social Security starts out at about 26 000 for him a little more than two thousand a month now look at the investment returns here because it's a more aggressive portfolio the range the guard rails are increased here and then finally the spending we have the fifty thousand plus twenty thousand increasing for inflation with the Go-Go lasting 10 years so in the first 10 years of retirement we see things are going pretty well even at this spending level because we have some pretty good returns in here even though we have a couple bad years but what happens is the income because of inflation the income need increases later in life and we see it really just takes a couple of bad years here minus 21 minus 12 we go from a million to 755 and then it's pretty much all downhill from there in this particular scenario running out of income except for Social Security which is now only up to about forty four thousand dollars per year compared to the other plan with the Deferred Social Security so full retirement age and the Deferred income annuity we were at I wanted to say it was around 85 88 000 um of income not dependent on the stock market here we're only at 45 in the mid 80s so that means we have to take more out of the portfolio so it's more susceptible to bad returns later in retirement now the big takeaway here is this is what a good retirement planner does it's not necessarily about the investment returns it's about determining how much money you should have in the market when you should take Social Security we didn't even get into taxes here additional benefits could be provided through tax planning but what you should do with taxes and identifying those spending goals and those needs in order to get you retired and stay retired and then staying connected to this plan over time that's what a good retirement advisor does it's not about outperforming the market it's about finding a plan that gets you and keeps you retired just a brief reminder here to subscribe to the channel now what that does is that puts us in your TV Guide here on YouTube so it doesn't cost anything but if you subscribe to the channel you can come back to us much more easily down the road make sure to comment down below and also share this video with a friend or family member that you think could benefit from what we're talking about today [Music] foreign
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Retirement Part 1: Why have a retirement plan?
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
in today's presentation retirement part one why have a retirement plan we will discuss the benefits of offering a retirement plan for your child care business the information contained here has been prepared by civitas strategies and is not intended to constitute legal tax or financial advice the civitas strategies team has used reasonable efforts in collecting preparing and providing this information but does not guarantee its accuracy completeness adequacy or currency the publication and distribution of this information is not intended to create and receipt does not constitute an attorney client or any other advisory relationship reproduction of this information is expressly prohibited whether it is just for you as the sole owner or for a large center with many employees retirement is an increasingly critical benefit for child care businesses there are three key reasons to start your retirement plan having enough money to retire retaining your employees including yourself and keeping your hard-earned money having enough money to retire takes a great deal of saving Financial experts estimate that most individuals will need up to 80 percent of their pre-retirement income to maintain their standard of living once they stop working that means if you are making thirty five thousand dollars today you will need to have twenty eight thousand dollars a year every year from when you retire onward however the average benefit paid by the Social Security Administration is only fourteen thousand four hundred dollars a year leaving a large gap for many people to retire comfortably fastest way to get the savings you will need relies on compound interest where the money you make on your savings is reinvested here's how compound interest works let's say you decided to have one less Mill out a month and you put that fifty dollars into your retirement savings instead let's also assume you have six and a half percent interest rate which is the average for 2022 for retirement accounts in the first year you will have saved six hundred dollars and made 18.20 in interest now in the next year you have 618 dollars and 20 cents in savings your original six hundred dollars plus the interest of 18.20 and with interest and the monthly contributions you'll end the year with 1277.81 cents as this continues over 30 years you will have saved eighteen thousand dollars and accumulated thirty seven thousand three hundred eight dollars and ninety cents in interest for a total of fifty five thousand three hundred eight dollars and ninety cents because retirement savings is critical and can add up over time it can be a great tool for retaining your staff in a Morgan Stanley 2022 survey ninety three percent of employees consider retirement programs a draw as they decide where to work having a retirement Savings Program can help you keep the employees you have and attract new ones in this competitive labor market remember this also includes yourself if you are the sole owner and employee you need a retirement plan too and many child care providers have been tempted to leave the profession for other jobs with retirement benefits by providing yourself with the benefits you need you can stay in child care and prepare for your future a key benefit of business retirement accounts is the opportunity for business contributions or matches where the child care business makes additional retirement contributions or matches employee contributions to the employee's retirement as we will discuss further in the next section most plans allow or even require companies to provide some contribution to the employee's retirement these contributions can be a set amount a percentage of the employees compensation or a match which means that the employer will contribute the same amount that the employee contributes often up to a certain percentage for example an employer may offer to match the money contributed to a retirement account up to three percent of the employees salary this could mean that for a person earning thirty thousand dollars a year and contributing nine hundred dollars annually which would be three percent their employer would also contribute or match the nine hundred dollars increasing the total contribution to eighteen hundred dollars this match is essentially free money for the employee and is an incentive for employee retention since they are getting additional funds beyond their regular compensation however the money is oftentimes not available until the employee is vested vesting is the time it takes for the business portion of the retirement account to be fully owned by the employee and can vary from business to business es can choose for employees to become vested upon hire or require that they are employed for a certain amount of time up to six years to become vested for example let's say you make a six hundred dollar contribution in 2022 and you have a three-year vesting schedule typically that would mean if the employee left your business at the end of 2023 they would only have one-third or two hundred dollars the rest would return to the business because in this case they would be considered partially listed if they left at the end of 2024 still only partially vested two-thirds or four hundred dollars would follow them it wouldn't be until the end of 2025 that they would have the full six hundred dollars if they changed jobs as at that point they would be fully vested implementing a vesting period can also encourage employees to remain employed at your child care business so that they are able to access a hundred percent of the employer contributions to their retirement most business contributions are on average 4.3 percent of the employee's annual salary however there are a few additional considerations first you should check what other child care providers are offering in the area a retirement contribution is like any other form of employee compensation you want to keep up with or even surpass the other businesses in the area so employees don't leave turnover can be costly an estimated 1.5 to 2 times an employee's salary according to LinkedIn when you factor in the time needed to recruit and hire for the open position overtime hours needed from other employees to feel the Lost capacity and the time and cost of onboarding regularly checking on the retirement Plans offered by other area providers can help you keep your staff and reduce the cost of turnover second the majority of employers in the U.S if their retirement plan allows it opt to require matching and vesting a match means that an employer will contribute only if the employee makes one as well typically matches are 50 percent of the employee's contribution to a certain level for example let's assume an employer has a 50 percent match for up to three percent of the total salary if an employee makes thirty five thousand dollars and contributes three percent of their salary for retirement that is one thousand fifty dollars the employer will only contribute 525 dollars further employer contributions are often vested where possible vesting is the amount of time it takes for an employee to entirely own an employer match or contribution to their retirement usually this is based on how long they continue to work for the business as an incentive to stay in our example above if the employee had to wait three years to be vested and left after two years they may just get a portion of the employer contribution so maybe 75 percent of the 525 dollars through regular contributions and compound interest this becomes a great incentive for employees to stay with your business finally you can keep more of your profit through retirement savings between the tax benefits and potential credits from the federal government there are savings for employers and employees There's an opportunity to save in three ways contributions your business makes to the plan and the cost of maintaining it are deductible even if it is just for yourself retirement plans are tax favored and retirement contributions can get you tax credits contributions your business makes to the plan and the cost of maintaining it even if it is just for yourself or deductible this will cut the amount of Revenue taxed by your business which also lands on the personal income tax return retirement plans are taxed favored that means that the government gives you tax benefits to encourage you to save some retirement uses pre-tax money this means that the money you put in now is taken out of your income so it isn't taxed today however whatever money you make in the account over the increased value of the investment will be taxed so for example the five thousand dollars you invest in a SEP IRA today won't be taxed but the additional fourteen thousand three hundred and fifty dollars you may gain over the next 20 years in investments will be when you retire retirement contributions can get you tax credits specifically the Savers credit and the retirement plan startup costs tax credit the Savers credit is a non-refundable credit available to adults over the age of 18 who are not dependents of someone else or students the program will give you a credit worth up to fifty percent of your contributions to your retirement up to one thousand dollars in credits if you are married and have an adjusted gross income less than seventy three thousand dollars you are a head of household making less than fifty four thousand seven hundred and fifty dollars or single and making less than thirty six thousand five hundred dollars remember your adjusted gross income is typically less than your total income so even if your salary is higher than the limit you may still qualify the retirement plan startup cost tax credit is open to employers who have retirement plans that include W-2 employees who are not owners the credit was just updated in December of 2022.
if a business has 100 or fewer employees this credit covers up to five thousand dollars in administrative costs for the first three years of a new 401K 403 b profit sharing SEP IRA or simple IRA plan additionally businesses was with less than 50 employees can get a credit of up to one thousand dollars per employee in the first year of the plan for contributions they make for employees who earn less than one hundred thousand dollars this credit continues for three more years with the credit decreasing by 25 percent in each subsequent year so if you had an employee making thirty two thousand dollars a year and you contributed one thousand dollars a year to their retirement over five years you would get a total credit of two thousand and five hundred dollars let's look at two examples of how these savings can benefit you kashana is a family care business owner and sole proprietor who made thirty eight thousand dollars over the course of the year she put two thousand dollars into a simple retirement account we will cover the types of plans later in part two of this guide the two thousand dollars will save her three times over first she will save 15.3 percent in self-employment tax and 12 percent in income tax for a total of five hundred forty six dollars second she qualifies for the Savers credit so she gets a tax credit for 50 percent of the contribution in this case kashana has two thousand dollars for her retirement and after the money saved and the credits the cost to her was only 454 dollars Estelle has a center with 15 employees and she decided to use some of her stimulus money to start a 401k her business is an LLC that declared to be treated as an S corporation so the profit goes on to her personal tax return which is taxed in the 22 percent bracket still contributes at five percent of the salary of each employee one thousand five hundred sixty dollars per employee for a total of twenty three thousand four hundred dollars between the fees and the cost of her time to set up and have her bookkeeper help her with the 401K she paid 2 550 dollars between her contribution to the retirement and the administrative cause Estelle paid a total of twenty five thousand nine hundred fifty dollars however Estelle was able to save money in three ways first since the 401K is new she gets 100 percent of her administrative costs back that's two thousand five hundred fifty dollars second since our employees make less than one hundred thousand dollars she can get up to a thousand dollars for her contributions per employee for a total of fifteen thousand dollars this is a total of seventeen thousand five hundred fifty dollars in tax credits third she gets the deduction for the contributions and administrative costs which saves her another five thousand seven hundred nine dollars all in all Estelle's benefit cost her twenty five thousand nine hundred fifty dollars but she saved or received credits for a total of twenty three thousand two hundred fifty nine so she really only spent two thousand six hundred and ninety one dollars plus a stale can share information on the Savers credit for her employees so they will receive their tax credit and greater benefit setting up a retirement plan through your business will help you and your employees prepare for a successful retirement provide additional retention incentives and help you save money in the long run to learn more about selecting a retirement plan see retirement part two how do I choose the right retirement plan thank you for joining me as I mentioned stay tuned for part two of this guide and if in the meantime you are interested and other helpful resources information or guides visit childcare.texas.gov to find these on various topics in both English and Spanish there you can also sign up and register for free one-on-one business coaching
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45+ and Have NOTHING Saved for Retirement?
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
The other day, I was catching up with an old
friend and I realized we'd been friends for 27 years. I never thought I would have a
friendship that long, but that's how life works. The older you get the faster time seems
to fly by. And when retirement is looming, well, boy, does it start to speed up! So, if
you haven't started saving for retirement, don't panic. It is possible to start saving
when you're 45, 50, even 60, and still be able to retire, but you have to treat it like
the house is burning down. So pay attention. I'm Britt Baker, co-founder of Dow Janes, and today I'm giving you seven steps
to catch up on saving for retirement. First step is to get real about your
current situation. How much have you saved for retirement so far? How much will you
get from Social Security? Plug those numbers into a retirement calculator to see how much more
you need to save each month to be able to retire.
The next step is to start saving dramatically.
If you're 50 and you haven't saved anything for retirement, and you wanna be able to retire,
you need to start saving and investing 50% of your income each month, which means that
you're probably gonna either need to reduce your cost of living or increase your income.
If neither of those options are possible, you need to get real about your alternative,
which we'll talk about later in this video. Okay. Third step is to pay off any high-interest
rate debt that you have and build an emergency fund. You wanna do these two things before you
actually start saving for retirement.
The reason for this is that the high-interest rate debt is
costing you more than you're gonna make by having your money invested or even sitting — definitely
sitting — in a savings account, so if you try to start saving for retirement
before you pay off your debt, it's a bad idea. So if you have any savings
sitting around in a savings account, use it to pay off your high-interest rate debt
ASAP. Then you'll wanna build up an emergency fund. But note, if you have a backup plan,
this emergency fund, doesn't have to be huge. You wanna start saving for retirement as soon
as possible, so don't let this step hold you back if you have family or your children who
will support you in case of an emergency. Four is max out your contributions. So, at this
point, saving for retirement should be your number one priority. So you wanna contribute as much as
you can to your retirement accounts. If you have an employer-sponsored retirement account, like
a 401(k )or a 403(b) and your company offers matching contributions, you wanna make sure that
you're contributing as much as your employer will match.
This is free money, so take full advantage
of it. If you don't already have an IRA, set one up and max out those contributions as well. And if
you're self-employed open a solo 401(k) or SEP IRA and max out those contributions too. If you're
getting the theme, the idea is maxing out your contributions. All of these ways that I'm talking
about also allow you to lower your tax rate, so it's especially helpful.
The final way to do
it is if you have a high-deductible health plan, you can open an HSA and max that out too.
Basically, you wanna save as much money as you can in your various tax-advantaged accounts. And
know that if you're 50 or over, you're allowed to contribute a bit more than the standard maximum.
So look up the maximum amount and contribute that. Fifth step is to invest your savings.
So, even though you're starting late, it's not too late to start investing.
I hear this a lot — is it too late for me? Is it too late to start
investing? But it's absolutely not. One thing that's really helpful to remember
is that you don't have to take all of your retirement money out when you turn 67, if that's
the age that you choose to retire. As soon as you choose to retire, you only need to take out enough
to live on each year, really, even each month, so that you still can let the rest of the money stay
invested in your accounts so that they will grow for as long as they can, which you know, could
end up being another 30 years after retirement.
Next is to plan for your realistic retirement.
So once you've done the exercises in step one to figure out the actual situation you're in,
find out if you're going to have to work longer than you planned, you might need to be making
income for longer than you expected and just know that. The sooner you know that, the more you
can prepare for it. The next thing to consider is will you have to move somewhere with a lower
cost of living? This might be why some people choose to retire in Mexico.
Cost of living
is really expensive in the United States, especially in some cities. So if it's gonna make
your retirement a lot easier and a lot happier, consider a change in lifestyle.
Speaking of changing lifestyle, you might also have to downgrade what you are
used to to be able to afford to stop working. So consider the trade-offs. Would you rather work and keep up your lifestyle
or would you rather retire spend time with your grandkids and maybe not
go on the lavish vacations that you're used to? Whether you wanna travel or take art classes
or spend time with family, you wanna be able to enjoy your retirement without stress.
If you
want some extra support on your journey towards saving money so you can actually retire, check
out our free class, Think Like an Investor. I'll put the link in the description below, and
remember it's never too late to start. So, even though you're getting a late start, it's
okay. There's absolutely hope. You have time. Just make sure you start saving, re-watch this
video, and remember the steps that you're supposed to do things in, and if you want some extra
support, feel free to join our member community, The Million Dollar Year.
We support tons of women
as they are just starting to save retirement in their forties and fifties, so we've
got you if you want the extra help..
Retirement Financial Advice: Money Lessons You Need to Know in Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
once your earning years are over and you've built Your Nest Egg for retirement you need to be smart about so many decisions now we're not financial planners and we make that very clear with everyone but we are retired and we do spend time making sure we're doing the right thing financially with our own money because oh bad financial habits and lack of knowledge can actually ruin your we have we have a couple they're good friends and he felt like he knew what to do with the marketplace with his Investments and he clearly didn't because he had his money in stocks when it when they went down and he pulled it out and put it into cash when it went up so for eight years he was on the wrong side of every single one of the stock market moves and because of that he lost a significant amount of his retirement assets and that's really difficult and today we find that they're struggling many of their dreams have vanished and they both actually had to go back to work now there's nothing wrong with work but it's just not what they had planned so we can't emphasize enough right out of the shoot having a financial planner is so important because it gives you a plan it gives you a vision it gives you an idea but it also does this which I think is most important it takes the emotion out of the marketplace which can get the best of you think you know what's going to happen at a new presidential election and frankly you don't that's right so let the experts help you with that because we don't want to have what happened to them happen to you today we want to share some practical ideas that may maintain or even improve your financial situation and again the number one lesson today is don't manage your money without a financial planner and we don't mean a stock broker what we mean is someone who has a fiduciary responsibility to make recommendations that are are really good for you not good for them and they talk to you about the strategies and you might say well sure they do but they also talk to you about withdrawal strategies right how much should you be withdrawing each year in order to preserve your nest day how much do you need each month and then they pull it from the smartest place it needs to come from using tools like tax loss harvesting you can't just take money out of a stock because you want to because you're going to have capital gains right right and you know we're not a big fan of multiple planners but we'll leave that part up to you so the first one is make sure you get a financial planner somebody you're comfortable with the second is keep your emergency fund intact kind of no matter what you need to have emergency savings that doesn't disappear when you retire it's more important than ever to have accessible cash set aside for any type of emergency so two three four months of expenses in a cash account that way your financial planner can invest the rest of your money and always always be thinking about you're going to need more money in 60 days so what can they put you into short term so you want to have this cash account so you can cover any kind of emergency expenses or just if you want to leave stuff in the market a little bit longer you've got some cash or even if you have any big purchases that are coming down the pipe that's true making sure your financial planner knows that you're ready for that so the second thing is the emergency fund now here's another um here's another way that you can get into trouble or you're also a way to dig yourself out of trouble you want to take a look at all your luxuries and make sure that they haven't become a burden because frankly that happened to us we both had jobs we were both working gosh 15 years ago we bought our first boat and we bought four boats over the next 15 years but we could afford it because we both were working we both had money and it was our floating vacation home so to speak I I call the last one that we had a lifestyle about because we went away on that one a lot it was a little bit larger but once we were tired all of a sudden it was like well we don't really want to go out on it the weather isn't good you know we'd rather stay home we'd rather be with for the price of diesel or the price of gas you know the price of storage the price of hauling the price you know all of those things have to be factored in when you have a fixed income yeah and we didn't have the same earning capacity to kind of keep up with the luxury so we stopped using it and then it became a burden like why aren't we using it and it was a year ago now that we decided to sell it and it's sold within a month because we kept really good care of it but the thing is if you have luxuries it's really important to take a look at them and say that's something we're really getting a lot of satisfaction of because it's going to cost you money well there are also luxuries that you have and then there's luxuries you provide for others right so we have six children and we were providing cell phones homeowners insurance auto insurance airline tickets for them and their significant others are partners and you know that was all fine when we were dual income but as they aged and as we aged and as we came into a fixed income place we needed to start peeling some away and giving those responsibilities back to them and they can afford it they all have great jobs and if they're ever stopped but it was a luxury it was to be able to do that for him but but frankly it also gave us a lot of satisfaction a lot of fulfillment to be able to help them right so it was hard for us to Pivot to in our mind take these things away from the kids but they you know at some point they've got to be to stand on their own two feet so and we needed to reduce the support so we sold the boat we paid off two car loans we came to an agreement with the kids and slowly weaning them off of some of these things we've always paid for you know because they they can't afford it and you know they they they're fine with it right they even they say it's kind of silly that you're paying my cell phone bills so it's it's another cord to cut that um you know it's hard to do but we want to encourage you to do it yeah so that was the third one the fourth one is you know really trying to figure out how to live a little below your means you know and that's new for us for our entire career as our income went up our living style and our cost of living and everything we did went up with it you know hard work learning and growing you know we were climbing the corporate ladder Mark was building his business you know it was easy to have your lifestyle kind of follow you yeah and you know we both come from humble beginnings and we improved our lifestyle as we went up but then then it's sort of when when you retire you have to think okay well my income's not going to keep going up as a matter of fact it's going to go down so how do we want to live what are some things we can do to live within our means and even underneath our means so and there were a couple things we had to agree to right so you know I call it shopping for sport right so there's there's no more you're better at that than pickleball kind of just opening up and saying oh you know look what just came into my feed I'll take a look at those earrings or that bracelet or those dresses or those sunglasses I think about it I kind of have a little bit of a sunglass addiction so so you know there was you know we agreed that we would do no more shopping for sport yeah it was one of Instagram Amazon it's so easy to spend money today and you get hooked on this new game you don't even leave your house you don't even leave your house you know keeping up with the Joneses that's not necessary anymore right you know who are the Joneses anyway today it's other retirees we're not taking on any more debt we've paid down most of our debt you know again we have a financial planner and you know we have a more modest wardrobe I mean our fancy or fanciest clothes are for our YouTube channel right and we're eating out less we made the agreement that for health and economic reasons we would eat out less so leave living below your means is something you can control and it's something that you can put some time and intention into so another really important thing to get to know is everything about social security and we we don't know that much about it so our financial planner and our accountant has said you don't need to take it yet and that's kind of all we're thinking about at this point they'll let us know when it makes sense and when it makes sense it'll make sense but you have to really understand or have someone coaching you on what's important because everyone's financial situation is different yeah and I really believe the more you know about it the better off you'll be even if you do your own investigation you know Social Security was not meant to be your primary source of income as you age in America it was meant to be a supplemental income so you have to understand the amounts you can get at what future ages and can you still work and does your state tax it or not you know there's a lot of rules around Social Security and my recommendation would be just get to know your rules in your state around your age just for the knowledge I don't know but I think there's a certain amount of uh you can't earn a certain amount of money and still get Social Security I don't really know but you have to know that's I guess that's the point you really need to know everything about social security check with your account and your financial plan right here's a big one for us and it should be for you too I think you know money will never buy you happiness and we've heard that like our whole lives and so we actually did a little bit of research and you know what really defines happiness for us and we came across this quote and part of it is from Warren Buffett but it says you know we want to do what we want when we want with whom we want for as long as we want and that to us will Define our happiness you know now some of what you do will require money but it's not all about buying stuff and things you know most of what we do for happiness now is experiences I I would think that for us and tell me if you agree but the something we just spent money on is giving us more happiness now for a very low value than anything else I remember paying forever you know what it is your pickleball racket pickleball so we joined the YMCA uh for like eighty dollars a month for the family we bought a pickleball racket for 100 bucks and six balls for eighteen dollars and we're getting like five or six hours of use out of that each week yeah that's happiness that really is making us happy it's not a new car it's not a new set of golf clubs right it's not what we're used to thinking that was um would create happiness and we're also looking at vacations differently right now that we have the full seven days to ourselves many vacations to visit friends or family you know they become Tuesday Wednesday Thursday versus the high traffic weekend Friday Saturday Sunday so many vacations Beach days lunch dates you know we just renting a boat for a day we're doing that with company comes we're renting pontoon boats now for the day to take companies out it's three hundred dollars for a day which in one respect sounds like a lot but it's a lot cheaper than owning a boat right that's true so we still get out on the water now look you clearly need money in retirement we all can agree on that but how much do you need and how much is enough you've got to figure out how much you have how much you can pull out each month and how long it's going to last those are key questions you need to work through with your planner and your account yep and paying attention to some of these things that we just shared will help guide you and keep you out of trouble now we hope you enjoyed this video and if you did you're going to like this next one called the truth about early retirement what they don't tell you it's one of our most popular videos and you know we're not getting any younger so why steal these fabulous years from ourselves our family and our friends watch this one next
Mastering the FIRE Method: The Ultimate Guide to Early Retirement & Financial Independence
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
at some point of time you would have thought of retiring early or maybe you're thinking of it now and truth be told retirement is not about abandoning work there are very few who would say I won't work any further but what we yearn for is the freedom to operate to live life in the way we want and that brings us to the five moment now fire stands for financial Independence retirement it's a very catchy acronym and to put it in a nutshell it's a program that's designed around saving aggressively investing in high return instruments like equities and disciplined withdrawals which put together ensures you have enough money to cover your living expenses for the rest of your life and therefore retire early in this video I shall be explaining the concept in Greater details we look at the implementation steps some calculations and why fire needs to be a deliberate part of your financial life this might be a short video but it's a very powerful concept so let's begin the concept of fire was popularized in a book titled your money or your life it was built around self-sufficiency control over one's time moderate consumption and of course living life outside the nine to five for instance this guy Pete atney who is better known as Mr Money Mustache applied the fire principles which allowed him to retire from his job as a software engineer at the age of 30.
He's 48 now and he continues to live comfortably of his Investments after so many years and it's not just Pete there are writers bloggers people traveling the world software developers and even YouTubers who are using these principles to lead a more open life and have attached some articles and videos in the description to that effect some of these stories are really inspirational and it proves the fact that a little bit of planning on the financial side can have a profound impact on other aspects of one's life and in a very positive way now there are three parts one needs to address when implementing a fire strategy the first step is savings and the hardcore fire disciple is expected to save anywhere from 50 to 70 percent of one's monthly income this is of course easier said than done and probably where a lot of people make up their mind that this is not their cup of tea but from what I have read and what I've experienced the saving need not be always defined as a percentage and we can also work with absolute numbers which we'll see when I come to the calculations part now when we hear the word saving our first reaction or response is on reducing our expenses however money can also be saved by upping one's income which is what I suggest and it does make sense right I mean there is a limit to what one can save but income generation has a much longer Runway and in our case it can include taking a part-time job doing some consultancy work asking for a pay hike changing jobs for a better salary reskilling oneself or of course starting a side hustle which can be a mix of active and passive work in fact I have a friend in Bangalore who works as a data scientist from Monday to Friday and then on the weekends he takes classes on an edtech platform and also does some consultancy work to put it in numbers what was earlier a monthly saving of 50 000 Rupees is now easily over 2 lakhs a month and this guy has absolutely changed his life around by leveraging what he knows so he's on fire metaphorically speaking and the the fire strategy encourages us to find creative and better ways of increasing our savings rate the Second Step under the fire strategy is to spend wisely notice I didn't say don't spend I said spend wisely which means you need to identify what is an essential expense and what can be tagged as discretionary now people who practice Fire have a ton of helpful advice for us these include driving a good used car instead of a new one renting versus buying a house cooking at home rather than eating out track your daily expenses cancel unnecessary subscriptions Etc from what I've read these small steps can reduce your monthly expenses by up to 30 percent which if you choose to look at it differently is like getting a 30 incremented salary so you don't have to be stinky when it comes to your expenses but try to be a bit more rational about it and the third and final pillar in the fire system is the investment part now on a basic level the system requires advisors to invest as much money as you can and as early as possible so it's the principle of compounding at work here and this table here is a handy guide to how well your Corpus expands when you give it the necessary capital and a decent amount of time to grow now the fire method keeps this investing part ridiculously simple one you invest some money every month or as we call it you set up an sip a systematic investment plan and secondly this money is invested in a low cost Index Fund or ETF which in our case is either the nifty 50 or maybe a slightly broader Nifty 500 Index so essentially the focus here is to participate in the equity markets rather than actively trying to beat it which by my Reckoning should Fetchers and analyze return of 12 to 13 percent again the idea here is to maximize the returns which is why equities have been suggested but if that makes you a little uncomfortable then you can also settle for a mix of different asset classes which is something I explained in my video on asset allocation a few weeks back yet another investment you can make which is encouraged under the fire movement is on account of passive income dividends from stocks interest from your fixed deposits income from your blog your podcast YouTube channel monetization rental income are just some ways of making an Roi from physical or virtual assets now notice I have put this part under Investments and not income because passive income does require a lot of upfront work but once you do the hard work and you do it well one can expect a continuous stream of income over the next few years which will not only support your early retirement Ambitions but will also act as a safety net in fact there is something called an fi Ratio or the financial Independence ratio which largely means if your passive income is greater than your expenses then you're making some great progress on the path to financial Independence so to sum it up remember fire has three simple principles that you need to work on which is save more spend less and invest wisely if you're getting good value from this video then please do give this video a thumbs up and if you aren't a subscriber yet then do consider becoming one as I can then serve you videos as soon as they are released and also share with you some investing strategies tips and stories that are continually Post in the community section the original fire formula is based on the four percent rule which is the amount of saving you can safely withdraw every year without worrying that your money will run out for example let's say you are 29 years old and your monthly expenses are around 50 000 rupees if you want to retire at 40 then you have 11 years to accumulate a retirement fund so here's the math if household inflation is likely to grow by eight percent per annum then the 50 000 you spend now will rise to 1 lakh 16 000 rupees by the time you're 40.
So annually this comes to 14 lakh rupees and per the four percent rule it's 14 multiplied by 25 which means you need to accumulate a couples of three and a half crores to safely navigate through your retirement years or at least that's what the fire formula says now in my view there are some gaps with this four percent rule that I think we should all be aware of firstly this rule is okay for someone who has factored 25 maybe 30 years of retirement but if the retirement Horizon goes higher let's say 50 years for example then this formula starts getting a bit shaky and I've pinned a research study by Vanguard on this in the video's description secondly the four percent rule is a United States origination of the 1990s and has been tested on a historical basis when the yields on equities and Bonds were sufficiently high now we are not Americans and what works there will most likely not work for us which means there's an asset allocation and a market performance risk which needs to be accounted for and finally because each of us have our own preferences income goals saving patterns Etc I always felt it's important to have a customized fire implementation plan rather than picking something off the shelf which is why I created my own fire calculator which gives a clearer picture of how much I need to accumulate when can I idly retire how much withdrawals can I do on a monthly basis and at what point and in what circumstances my retirement money can run out so this obviously starts with the inputs and you need to type in your current age the age at which you want to retire and of course your life expectancy which I hope is strong and long then comes your current portfolio of Investments and this includes your mutual funds fds ppf EPF gold and other stuff and as a best practice kindly exclude the cost of the house where you will be staying post your retirement if you're still working then input the monthly savings and the annual increase you foresee input the expected returns from your investment the capital gain tax that can remain at 10 percent and finally have a view on how much will your expenses be in the first year of retirement and the expected household inflation rate and once we have these numbers keyed in as I have shown in this example the resulting output should clearly tell us three things one the amount of investment Corpus we need at the time of retirement which in this illustration is 2.2 crores at the age of 40.
Secondly we now have Clarity on how much can be spent on an early basis which starts from 12 lakhs so that's one lakh per month and it increases by eight percent every year and thirdly we get to know how sound or unsound this entire construct is like in this case our calculation shows that I'll run out of my money by the time I am 64 years old which is another way of saying that I need to rework my fire math which can include an increase in the monthly savings and the growth rate I can also consider extending my retirement age to a higher number let's say 45 years and finally I I can be a little careful with my expenses and instead of spending a lack of rupees maybe I can make do with 90 000. so there are many permutations and combinations you can look at but my suggestion is try to be a little conservative in your estimates especially when it comes to return on investment the inflation rate and the post retirement monthly expenses now for your benefit I have enclosed the link of this worksheet in the video's description it's a downloadable sheet all the formulas are open so feel free to change the numbers improve the formula if required add your own customization if it helps you but have a clear idea on when and where you need to be on the path to financial Independence so when I first heard and read about fire I was not a big fan of it I mean saving 50 to 7 20 percent of one salary is almost next to Impossible and I would have shut sharp had I not realized that as a method fire is quite flexible and can be used in many different ways so the calculator is one way and you can make a customized version of it but then there are more strategies there are more variants of the fire strategy and if you are interested then do read up on lean fire fat fire Coast fire and a few more of these in related articles that I've Linked In the video's description the point is and I myself realized a very late in life that many of us don't know when to retire how much is needed to retire which is why we continue working in a role or occupation that we don't enjoy much and that's where I think fire as a strategy might be the solution and it's just three things right increase your income and savings lower your expenses and get your Investments right so read up more about this concept in the Articles and websites I've added in the description and I sincerely hope you practice some sort of fire going forward if you found this video useful then do press the like button do subscribe to my channel share this video and I'll see you three days from now until then foreign
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6 Retirement Essentials (Most people only prepared 2 or 3)
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
I'm planning for retirement most people focus
mostly on marshaling together enough money you know Financial Resources so that they can last
the distance and then maybe at the back of their heads they have some vague plan right perhaps
two or three things to fill the time with a lot of the times this is stuff like travel family
well unfortunately I'm gonna say that's not quite nearly enough for Preparation we ourselves
have been retired for two years and going looking back on the past two years I kind of see like
six essential things that if you prep for it beforehand before your retirement starts I think
this can really make such a positive difference to your retirement so that's what I wanted
to bring up and discuss with you guys today number one first and foremost of course we have
to talk about money most people's concern is the amount of money that they have in retirement
whether it will last them till the end come comfortably and allow them to afford the Hobbies
like travel good food Etc but I actually think after going through the last two years building up
our financial Acumen is just as important if not more so what do I mean by Financial Acumen I mean
stuff like budgeting tracking projecting investing I mean if you think about it the money in your
bank account can always be squandered we all know that story I think more importantly what's
going to make your retirement more fireproof is having an ability to generate more money where
it came from in the first place so the second essential thing that you can prepare for so that
you have a wonderful retirement it's definitely the ability to be self-directing and disciplined
self-direction definitely helps so much with spending your retirement days meaningfully right
after all there are no more like work schedules or like demands from colleagues or bosses to help
shape your days anymore you have to be the person to take charge in retirement there's a study out
there actually that shows that for happily retired folks most of them actually have about 3.6 core
Pursuits that's what they say and the unheably retired folks tend to have less than 3.6 corporate
suits coming in at about 1.9 call Pursuits that's what the study reflected I guess it kind of just
shows in retirement you really need to fill your life to the brim and keep busy with activities
you love and that is a really great formula for happiness and self-direction will help you
to achieve that state as well as discipline because if you think about it like discipline
directly affects the state of your finances right it affects whether you stick with your retirement
planning whether you keep fit and active and you get to maintain your health in retirement even
whilst you're left up to your own devices even to find your cover suits if you don't have any
when you're starting or in your retirement so discipline and self-direction will be like
the building blocks for enjoying your life in retirement the third essential thing you might
want to work on and cultivate or happy retirement is people skills right so studies and research
have reflected very consistently that the main determining factor for happiness and Longevity
for most of us is actually relationships Human Relationships friendships relationship with
your spouse and with your family I guess if you look at most of us you know we all have
a little need of work on some social skills in some aspect I mean some of us are a bit shy
paper hats or graph or maybe socially anxious working on our people skills really will help us
to get along and live happily with our spouse and family members and also importantly to make
new friendships at whatever age we all know that making new friends gets a lot more difficult
as we get older I mean I haven't heard anyone say otherwise for me personally making new friends
as I get older is the biggest challenge there's this huge feeling that nothing can replace
friendships with people who have known you all your life but it is also a challenge as I
have chosen to exercise through Arbitrage in our retirement and we've moved away from home
so those friends aren't with us in our present I find that it takes a lot of intention I have
to consciously push myself to broaden my Social Circles and make the effort to get to know people
on a more intimate basis I am also very happy to be able to say that it has paid off in that for
the last two years in Bali I have actually made two or three new friends that I'm happy to say are
kindred spirits and not just social acquaintances so that's very nice and it's a huge Comfort to our
daily life here in a foreign land away from home now before we move on a big thank you to
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app will save you so much money already when you deposit at least a hundred same dollars and
start using the mobile app to trade you stand to receive cash coupons up to 128 Sing dollars
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MooMoo ad using my link in the description below now back to the video the fourth essential
thing that you can definitely work on and that will benefit your retirement tremendously it's
actually courage you're definitely gonna need lots of courage in retirement and I guess this isn't
a skill exactly it's kind of more of a quality but in retirement you need a lot of courage
to even plunge into retirement you need the courage to you know take that leap of faith to
stop putting it off due to fear of the unknown feel or financial insecurities so then it's all
about courage at that stage not let fear and insecurity rule your life and your decisions it
is also the courage to recognize that in life at the start at the end in the middle the Domino's
you need are never all nicely lined up you know at some point you just got to jump into it and
then learn to cross the obstacles as they come so for retirement long term I guess the
biggest issue most commonly is always money but my perspective on this is that hey budgets
can always be reduced money can always be earned or recouped or whatever happens so I still
think that you know it is actually beneficial to Advocate an approach whereby you get to
a point where you feel that you have most of your Ducks lined up you've planned well you've
prepped for it grab hold of your courage with both hands and then take the plunge people tend
to think of retirement as the end but it's not it's the start of a new phase where you should be
trying so many new things new Pursuits new ways to live and for each of these new adventures
you're gonna need courage to take action and once you have taken the plunge you'll find the
next fifth thing very very useful and that would be a mentality of resilience especially in early
retirement there are a lot more decades ahead of you you know and therefore a lot more chances that
they things can go wrong whether it be down to bad financial planning or perhaps an unexpected Health
catastrophe or even sometimes natural disasters whatever comes I guess you will always need that
strength of Will and the resilience so that you can roll with the punches and then get back up
you want to know that you have the mental strength that even if things go pear-shaped you won't just
give up and lose hope and certain Corner you've got to Marshall what you've got inside you go out
there find Solutions perhaps if necessary you've got to go back to work but know that later on
you can return to retirement and try again so the sex essential thing that I believe will benefit
everyone in retirement is to cultivate an attitude of gratitude we all know life is a very long
journey hopefully at least and so much of what we Chase using most of our years actually doesn't
really matter in the big picture once you have taken a step back and then at that point is when
you start realizing the earlier you cultivate and attitude of gratitude and that appreciation for
the simple little things that are probably around you everywhere every day the happier you probably
will be and it sounds silly but it's not really automatic I mean we all live and grow up and
work and go to school in a society that kind of innovates us with messages that we need to reach
for more have more ambition gives us you know that High definitions of success in life that we
have to try to jump to reach and nobody sings the Praises of the pleasures of a simple cup of
tea you know the importance of family time with your loved ones or or just the pleasure of being
able to take an evening walk on the beach with your dog so I think that it's very important that
somebody reminds you that you know you can not overload what you already have what you're already
surrounded by growing that muscle of appreciation so that in each and every moment you are present
in your own life you see all the little Joys that you're surrounded with every day and if you
live life like that I think that will help you achieve contentment with just the small stuff
around you and that's what majority of your life in retirement may be about is just a small stuff
every day but in my own retirement here in Bali it is what makes me so grateful and so happy every
day that I am surrounded by my loving husband and very interesting and independent little dog
that's very very cute you know that we have very comfortable a bit simple house we have the ability
to enjoy good food even if it's simple stuff from the war rooms locally we have a garden and
beautiful things are growing around us every day the weather is great you know stuff is good yeah
I think this is one of the most essential simple things that's often overlooked simply because it's
a matter of mentality but I believe this essential quality or characteristic could make all the
difference for you so these are the six essential things that I believe are very very important for
you to cultivate and prepare for in the leader to actually taking the plunge into a return then I
think that if you have these six strong skills and qualities going for you you will be in a position
much more well placed to make the best out of your retirement however long that period may be let me
know what you think of my suggestions whether you agree or if you think they suck let me know why
but in any event I really appreciate you tuning in and sharing my thoughts for this week and
wherever you are in the world I'm wishing you a happy Saturday evening and let's speak again
next week till then you take care and bye for now
The 4 phases of retirement | Dr. Riley Moynes | TEDxSurrey
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Transcriber: Zsófia Herczeg
Reviewer: Peter Van de Ven Everyone says you have to get ready
to retire financially. And of course you do. But what they don’t tell you
is that you also have to get ready psychologically. Who knew? But it’s important
for a couple of reasons. First, 10,000 North Americans
will retire today and every day for the next 10 to 15 years. This is a retirement tsunami. And when these folks come
crashing onto the beach, a lot of them are going to feel
like fish out of water without a clue as to what to expect.
Secondly, it’s important
because there is a very good chance that you will live one third
of your life in retirement. So it’s important that you have
a heads up to the fact that there will be significant
psychological changes and challenges that come with it. I belong to a walking group
that meets early three mornings a week. Our primary goal is to put
10,000 steps on our Fitbits, and then we go for coffee
and cinnamon buns – (Laughter) more important. (Laughter) (Applause) So as we walk, we’ve gotten into the habit
of choosing a topic for discussion.
And one day, the topic was, “How do you squeeze
all that juice out of retirement?” How's that for 7:00 in the morning? So we walk and we talk, and the next day,
we go on to the next topic. But the question stayed with me because I was really having
some challenges with retirement. I was busy enough,
but I really didn’t feel that I was doing very much
that was significant or important. I was really struggling. I thought I had a pretty good idea of what success looked like
in a working career, but when it came to retirement,
it was fuzzier for me. So I decided to dig deeper. And what I discovered was
that much of the material on retirement focuses on the financial
and/or the estate side of things. And of course, they’re both important
but just not what I was looking for. So I interviewed dozens
and dozens of retirees, and I asked them the question, “How do you squeeze
all the juice out of retirement?” What I discovered
was that there is a framework that can help make sense of it all.
And that’s what I want
to share with you today. You see, there are four distinct phases that most of us move through
in retirement. And as you’ll see,
it’s not always a smooth ride. In the next few minutes, you’ll recognize
which phase you’re in if you’re retired, and if you’re not, you’ll have a better idea
of what to expect when that time comes. And best of all, you’ll know
that there is a phase four – the most gratifying,
satisfying of the four phases – and that’s where you can squeeze
all the juice out of retirement. Phase one is the vacation phase,
and that’s just what it’s like. You wake up when you want,
you do what you want all day. And the best part
is that there is no set routine. For most people, phase one represents
their view of an ideal retirement. Relaxing, fun in the sun – freedom, baby. (Laughter) And for most folks, phase one
lasts for about a year or so, and then, strangely,
it begins to lose its luster.
We begin to feel a bit bored. We actually miss our routine. Something in us seems to need one. And we ask ourselves, “Is that all there is to retirement?” Now when these thoughts and feelings
start to bubble up, you have already moved into phase two. Phase two is when we feel loss, and we feel lost. Phase two is when we lose the big five – significant losses
all associated with retirement. We lose that routine. We lose a sense of identity. We lose many of the relationships
that we had established at work. We lose a sense of purpose. And for some people,
there is a loss of power. Now, we don’t see these things coming. We didn't see these losses coming in
because they happened all at once.
It’s like, poof, gone. It’s traumatic. Phase two is also when we come
face to face with the three Ds: divorce, depression and decline – both physical and mental. The result of all of this is that we can feel
like we’ve been hit by a bus. You see, before we can
appreciate and enjoy some of the positive aspects
associated with phase three and four, you are going to, in phase two, feel fear, anxiety
and quite even depression. That’s just the way it is. So buckle up and get ready. Fortunately, at some point,
most of us say to ourselves, “Hey, I can’t go on like this. I don’t want to spend the rest of my life, perhaps 30 years, feeling like this.” And when we do, we’ve turned the corner to phase three.
Phase three is a time of trial and error. In phase three, we ask ourselves, “How can I make my life meaningful again? How can I contribute?” The answer often is to do things
that you love to do and do really well. But phase three can also deliver
some disappointment and failure. For example, I spent a couple of years
serving on a condo board until I finally got tired
of being yelled at. (Laughter) You see, one year the board decided
that we were going to plant daffodils rather than the traditional daisies. (Laughter) And we got yelled at. Go figure. I thought about law school,
thinking perhaps of becoming a paralegal. And then I completed a program
on dispute resolution. It all went nowhere. I love to write. So I created a program
called “Getting started on your memoirs.” That program has met
with “limited success.” (Laughter) It’s been a rocky road for me too,
and I told you to buckle up. Now, I know all this can sound bad. But it’s really important to keep trying and experimenting
with different activities that’ll make you want
to get up in the morning again because if you don’t, there’s a real good chance
of slipping back into phase two, feeling like you’ve been hit by a bus.
And that is not a happy prospect. Not everyone breaks through to phase four, but those who do
are some of the happiest people I have ever met. Phase four is a time
to reinvent and rewire. But phase four involves
answering some tough questions too, like, “What’s the purpose here?
What’s my mission? How can I squeeze
all the juice out of retirement?” You see, it’s important that we find
activities that are meaningful to us and that give us a sense
of accomplishment. And my experience is that it almost always
involves service to others.
Maybe it’s helping a charity
that you care about. Maybe you’ll be like the old coots. (Laughter) (Applause) Yeah. These folks took a booth
in the local farmers market and were prepared to give their advice
based on their vast years of experience to anyone who came by. So one of their first visitors was a kid
who wanted help with his math homework (Laughter) on his tablet. (Laughter) They did the best they could. Or maybe you’ll be like my friend Bill. I met Bill a few years ago
in a 55 plus activity group. In the summer, we golf together
and walk together and bicycle together.
And in the winter, we curl. But Bill had this idea that we should exercise
our brains as well. He believed that there was
a tremendous pool of expertise and experience in our group, and so he approached a number of folks and asked if they would volunteer to teach some of the things
that they love to do to others. And almost invariably, they agreed. Bill himself taught two sessions, one on iPads and one on iPhones, because we were smart enough to know
that a number of our members had been given these things
as gifts at Christmas (Laughter) by their children, and that they barely knew
how to turn them on. The first year, we offered nine programs,
and there were 200 folks signed up. The next year, that number
expanded to 45 programs with over 700 folks participating. And the following year,
we offered over 90 programs and had 2100 registrations. Amazing. (Applause) That was Bill. Our members taught us
to play bridge and mahjong.
They taught us to paint. They taught us to repair our bicycles. We tutored and mentored local school kids. We set up English-as-a-second-language
programs for newcomers. We had book clubs. We had film clubs. We even had a few golf clubs. Exhausting but exhilarating. That’s what’s possible in phase four. And do you remember the five losses
that we talked about in phase two? The loss of our routine and identity and relationships and purpose and power? In phase four, these are all recovered. It is magic to see, magic. So, I urge you to enjoy
your vacation in phase one.
(Laughter) Be prepared for the losses in phase two. Experiment and try as many different
things as you can in phase three, and squeeze all the juice
out of retirement in phase four. (Applause).
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