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Mastering Retirement: Crunching Numbers on a $1,000,000 Nest Egg

is a million dollars enough to retire on I'm Clark adbury I'm a financial adviser for the last 30 years I've been helping individuals and families manage their Investments and plan for their retirement if you've accumulated a million dollars in retirement savings congratulations well done you've done some serious retirement planning in this video I'm going to answer the question is a million dollar enough to retire on let's talk about it in order to answer this question we have to address a few variables what's your cost of living going to be in retirement have you got a retirement budget have you factored into your retirement budget potential future expenses like medical expenses not covered by Medicare or long-term care expenses also depending on your investment strategy for retirement your Investments may have different rates of return don't forget to factor in taxes to the equation for example if you were to say to me Clark I want to take out $5,000 a month from my retirement accounts is that 5,000 before taxes or 5,000 after taxes let's take a look at a few different scenarios to tile this together to help you understand what's a safe withdrawal rate how much can you take from your retirement savings and not run out of money during your lifetime in all these scenarios and illustrations we're assuming a retirement age of 65 but if you can retire sooner all the better if you were to say to me Clark our retirement budget is $7,000 per month next thing we want to look at is your other sources of income let's assume you have social security of $2,000 per month if you subtract the $2,000 a month from your $7,000 per month retirement budget that leaves you with $5,000 per month you need to be able to take from your retirement Savings in this illustration we're taking up $5,000 per month from your retirement savings we not giving you a cost of living adjustment in this scenario that means $5,000 a month at 65 and $5,000 a month at 85 we're assuming a 3% rate of return and under these circumstances the money erodes over time and last till about age 88 one big problem with this first scenario is that it does not give you a cost of living adjustment if you're really taking the same monthly income at 85 that you were taking at 65 you're going to have a tremendous drop in your standard of living your purchasing power will have eroded due to inflation so let's run another scenario in which you do give yourself a a 3% per year cost of living adjustment that's to keep up with the long-term average rate about 3% per year for inflation let's see what happens then in this scenario we're taking out $5,000 per month initially we are giving you a 3% perear cost living adjustment each year this still assumes just a 3% per year rate of return because of that cost living adjustment the fact that we're taking out more each year for your retirement savings we see that the money erods more quickly and this case runs out at age 82 but again that's with only a 3% rate of return let's look at another scenario where we have a higher rate of return and also have that cost of living adjustment in this scenario we're taking up $5,000 per month initially giving you a 3% per your cost of living adjustment the difference in this one is we're earning 6% as opposed to 3% that you're earning in the last scenario and this time instead of the money lasting at only 82 because we're earning 6% the money lasts until age 88 that was at a 6% rate of return on your retirement savings let's run it again this time using an 8% rate of return in this scenario we're starting out with 5 ,000 per month we're giving you a 3% Pere cost of living adjustment but this time instead of 6% we're earning 8% as you can see now the money lasts all the way until age 97 let's look at one more scenario in this one I work backward to see how much we can take out safely from your retirement savings and not run out of money before you're 100 years old in this scenario we've gotone back to a 6% per year rate of return and your retirement savings we're still giving you 3% per year cost of living adjustment we want the money to last to to 100 we find that you can take out $5,300 per month and give yourself 3% per year raise every year and have the money last all the way until you're 100 if you're do it yourself I hope this has been helpful to you if you're the kind of person likes help with your investment management and retirement planning well that's what we do for our clients reach out to us if we can help for nine great reasons to retire early and one to maybe not watch this video next

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