Tag: early retirement
Early Retirement Success Story – How He Saved 12 Crores in His 30s | Fix Your Finance Ep 36
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
If you want to retire early, then this video
is for you. Today we'll meet a man who has a corpus of
more than 10 crores and has managed to retire completely before
the age of 40. We will learn how to start planning, how to
do the calculations for early retirement and what all things to keep in mind before
leaving your job. So watch this video till the end and to support
our channel, like the video right now. FIX YOUR FINANCE Hello and welcome to a new episode of Fix
Your Finance. Today I have Ravi Handa with me. Welcome to the show Ravi. Glad to be here. How's early retirement treating you? It has its good parts obviously. What are the good parts? You can spend time on things which you were
not able to do earlier. And what are some of the bad parts of retiring
early? You lose a lot of value and a lot of validation
that you used to get from a job.
You have described your retired life in 2023. Let's take it back to like 15-16 years back. So, what did you study? I have done engineering in computer science. And what was your first job? Where did you start working? I started working in the education sector
itself. I joined IMS Calcutta which is a CAT coaching
company. Okay. And what was your first paycheck? 25,000 odd rupees. When you retired in 2022, what were you doing
back then? Actually, before that, I used to run a business
from 2012 to 2021. Which was in the education sector. My company was acquired by Unacademy. So, the last 1-1.5 years of my working career, I was with Unacademy as director content sales. So, how many years did you work? I worked from 2006 to 2010. Then I took a year break. 2011 is when I got married. 2011 is when I joined this IT company called
Mindtical. What was the trigger to start your own thing? When I was working for IMS, at that point of time itself, I started making educational videos on YouTube
around 2008.
Gradually, they became popular. Not very popular. And this was CAT coaching for MBA? CAT coaching. First, I started with math. Then I went to GK through math. Then to LRDI, then to English. I kept on expanding. And how was the business? How did it work? Business was profitable from day one. Because there was no expense. Yes. In today's date, the cost of videos or ads
in EdTech has gone astronomically.
In 2012, it was extremely simple. Because I don't think anyone was doing it. Or even if anyone was doing it, they were not such a big player that you cannot
really compete. On an average, what was the kind of profits
or salary that you guys were drawing? We had good years when we did revenues of
3 crores as well. We had bad years when we did revenues of 25
lakhs as well. There was massive fluctuation. In 2021, your company got acquired. Correct. It got acquired and then there was that vesting
period wherein you had to work. Correct. And after that, you got an exit. Correct. So, were you actively looking for an exit? Yes. Again, I am telling you the same. So, during the COVID period of 2020, my wife was pregnant at that point of time, So, my wife and I used to sit and chat about
what to do with life. And this is what emerged that we have to sell the business at whatever valuation possible, whatever sort
of deal you get. Because getting out of business is the priority. After selling the company, there will be a
vesting period wherein you were working with Unacademy.
Correct. What was your compensation then? Exact numbers I can't reveal because of the
NDA. But my salary was a little above 1 cr. And the ESOPs of the vesting, that was another additional 50 lakhs or a
little more than that. Wow! So, you have a lot of money in Edtech, I am
guessing. Yes. But I didn't get this for my skill or my talent. Okay. This I got primarily because they were acquiring
my company and this is a way for them to pay out the
money slowly rather than on day one. What is your background? Which college did you study in? IIT Kharagpur. Did that also help in your, you know, starting your entrepreneurial journey? Absolutely. I am telling you, there are a few things which have helped me a lot in life. To take risks, to experiment. One, my parents were always independent. I have never had to give a single rupee to
my parents. The second thing which has really helped me
is my wife was very well educated and in a very good
job which allowed me to take a lot of risks.
The third is that I went to a good college and through that college, you build a network. I have friends in senior positions in multiple
places. This is it. You are the sum of your privilege, your background and the people that you have interacted with over your life. Okay, so now we will talk about your expenses. Do you live in a rented apartment or is it
an owned? It's an owned flat. I shifted to Jaipur in 2015 to be closer to
my parents and at that point of time, I purchased the
flat that I still live in today.
Did you take it on loan or did you pay in
cash? No, it was entirely in cash because at that
point of time, I had been doing business for 2-3 years. The second thing is your travel. So, do you have a car or do you travel in
cabs? I have a car but I don't really like to drive
that much. So, how much fuel do you spend on a monthly
basis? I have no idea. So, you don't track expenses in general? That way, no. So, The way I track expenses is at the beginning
of the financial year, I check how much money was in the bank account. Throughout the year, I just find out how much
money went out of your bank account. So, that's how I determine how much I spent
this year. So, on an annual basis, how much did you spend
in the last 3 years? Around 2 lakh rupees goes into maintenance. Society, maintenance plus the other property
that I own.
5-7 lakh rupees is the vacation. Another 2-3 lakhs would be eating out, drinking,
parties. Parties, not the pub parties. Parents' 50th anniversary, the first birthday
of the child. So, all these parties add up. 3 lakhs or a little more than that would go
towards the house help staff. These are the big hits. Now, it is time for the main thing, which is talking about your financial independence
and retirement plans. The first and main thing is figuring out your
FIRE number. How much money would I need to not work and can retire comfortably. So, in which year did you seriously start
thinking about FIRE? Which year? Covid, 2020. 2020 is when I actually sat down and did the
numbers.
Where I have this much money, I will put this
money here and there. So, it took me around 3 months, maybe 6 months to figure out how much money I exactly need,
how do I need to invest it. And then it took me a couple of years, 3 years
to execute that. So, if your annual expense is 25 lakhs, if you take a multiple of 30, it is 7.5 cr. Right? So, what are some of the milestones that you
took into account? There are two major chunks that I have kept.
One of them is nearly everyone likes and accepts
that you have to save money for your child's higher
education. So, I have earmarked 50 lakh rupees for that. Wow! I will give it to him at 18 or whatever appropriate
age. 7.5 Cr plus 50L. For this? Yes. 8 cr. Another 50L is what I wanted to keep as a
sort of play money for experiments that I would want to do. Angel investing is one of them. Crypto investments is one of them. I am doing a podcast right now, so it has
its own expenses. Yeah. You should check out his YouTube channel,
okay? Every month, two videos come up specifically
talking about how to achieve FIRE. Okay? There is a link in the description.
Definitely subscribe. That is 50 lakhs, your play money. How is that going by the way? Angel investments and other investments? I have lost a lot of money in angel investments. I have lost a little bit of money in crypto
as well. But the biggest problem in angel investments
is that it is extremely illiquid. There is no honesty. So, I had put 3 lakh rupees in a company in
2019. In 2021, it became 45 lakh rupees. Ravi Handa is happy that it is done. Did you get an exit? Exit? The company closed in 2023. It became zero. Oh shit. So, that is the problem with angel investment. That's why you have allocated an amount which you yourself have called play money. Correct. Any other milestones that you have covered? No, these two. 8.5 cr was your FIRE number. You said that you started investing a huge
amount since 2015. You started investing or saving more.
From 2006 to 2015, did you manage to save any portion of your
salary? Yes, we were always saving more than 50-60%. We used to save this much. So, it was business, revenue was high, that's
why you didn't save. It was something which was there. Your expenses were always lower than what
you were earning. So, have you accumulated the 8.5 cr ? A little bit more than that. Very nice. How much percentage of that, if you are comfortable
sharing, how much percentage has come from selling
your company and how much percentage of the proportion
has come from your savings? I would say that selling the company probably
gave me 20-25%. Which basically means that this was not a
result of a certain event. No, no. So, this was because my business was successful. The second factor was that my expenses were
very low. The third factor was that I always had substantial
investment in equity. The fourth factor is where I would say the
selling of the company comes in. The main money that was made was made by business. And let's say if you were doing your software
job, you would have been in the top positions, In that case, do you think this much wealth
accumulation would have been possible? If I was in India, then no.
If I had gone abroad, then I would have been
way ahead of this. Is that one of those things that you would,
you know, you look back and want to change? I regret it every week. If I had been a good student, if I had studied
in college, then I wouldn't have been in the coaching
line. I would have moved to the US or Canada or
Europe or somewhere after college. I can't believe that you are saying that you are not content with what you have achieved
financially. I am absolutely content with what I have achieved.
Because I have bounced back from the mistakes
of not studying in college. Yeah. The 8.5 cr that you have accumulated, that too, what are the percentages where you
have invested? My current net worth would be somewhere between
12-13 cr. Out of this, 1-1.5 crore rupees, which is
my 4-5 years of expenses, I keep it in absolutely liquid low risk investments. So, this is my cash bucket. In the medium term bucket, I have taken a
balance advantage fund. I have long term bonds, gilt funds, which is another 4-5 years of expenses. So, a mix of equity and debt. Third bucket, which is my long term bucket, another, I believe, 6-7 crores would be in
that and then there is a piece of land that I own
which is around 2 cr. Tell me one thing, how to go about it? Primarily if you are young you need to save,
develop as a habit sort of a thing but your focus should be on making money.
Where will you earn money from? Either you will grow in a job or you will
join risky jobs like startups to get ESOPs or you leave the country, you go abroad you
earn a lot more there, you save a lot more there and you come
back and you know you can be in a very good situation or what you do is you get a higher
degree. Suppose you have done engineering, MBA, Masters
in Engineering, there are plenty of avenues. Your main focus should be on making more and
more and more money. Because after one point your expenses can't
get less. So if you want to increase the alpha, the
difference in income and expenses that will only happen if you are constantly focusing on increasing
the top line. Let's say I have decided that I want to retire
early. What was the framework? What were some of the thought processes? One according to me even hoping for planning
for early retirement is sort of accepting a failure that you couldn't make your career
in your life better that's why you are going towards retirement.
Yes financial independence is important, early
retirement is not. If you are in a job that you like, that you
enjoy or I will say if you are in a job or in a career that you don't hate, do not think
about early retirement. Early retirement became important for me because
I wasn't liking what I was doing. So this is our quick finance round. You have to answer the questions as soon as
possible. If you had an unlimited budget, what would
you gift your wife? Vacation, luxury vacation. If money was out of consideration which in
your case holds true, what would you do for a living? I don't know I will keep experimenting with
it which is what I am doing right now.
And the last question is for people who want
to achieve financial independence and you know are seeking early retirement, what are
2-3 nuggets of advice that you would share with them? For financial independence, increasing your
income as much as possible that should be your priority. The second priority should be that bulk of
your savings should go into equity. If you are chasing early retirement, I think
that is a bad chase to have. That should be, that is like surgery, that
should be the last option. Try changing your job, try changing the city
you work in, try changing the country you work in, try changing your careers. If there is no avenue, that is when you think
about early retirement. Alright, that brings us to the end of the
episode. Thank you so much for sharing your journey. I am sure that a lot of people have learnt
a lot from today's episode and video.
Make sure to check out his YouTube channel. Every month at least 2-3 videos are made on
this topic. Subscribe to his channel and if you liked
anything in this video, subscribe to my channel as well. Goodbye..
Can I Retire at 55? Tips for Early Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
If you're thinking of retiring at 55, you want to be careful about where you get your advice and guidance, and that's because most retirement advice is geared toward those who retire quite a bit later, in fact… Most people retire at 62, but things will be different for you if you're going to retire at 55. So that's what we'll talk about for the next couple of minutes here, we'll go over where you can get the money from, and how that works with taxes as well as healthcare, then we'll look at some actual numbers and what it might look like for somebody who retires at age 55.
We might also want to get philosophical just briefly and ask the question, Why age 55? Yes, it's a nice round number. And there are some interesting tax strategies that are available around that age, but let's say you could retire a little bit earlier at 54, would you want to make that happen? Or if you worked a few more years… I know you'll think this is crazy, but if you worked a couple of more years and you could not impact your finances, but still take some of those dream vacations and spend time with loved ones, would that be worth it to maybe work until 59, for example? So we want to figure out exactly why you are pursuing a particular goal and then we can improve the chances of success for you, so let's start with health coverage, this is a tricky one because you're retiring quite a bit earlier than most people who might be near that Medicare age, so you have a number of different options to continue being covered, and it is a good idea to have real health insurance coverage just in case something happens.
So a couple of your choices include, number one, you can continue your current benefits from a job if you have them for up to 18 months in most cases, and that's under COBRA or your state's continuation program, that can get quite expensive because you're going to pay the full price, if you weren't already doing that, plus perhaps a teeny little bit extra for administration, but it is a way to continue with the program that you currently have, so that can be helpful if you are mid stream in certain treatments or if it's going to be hard to get certain benefits that you currently have on a different health care program, unfortunately, that's not usually a long term solution because we need to get you until age 65, which is when most people enroll in Medicare, and you should see your costs go down quite a bit at that point, maybe depending on what happens, so another solution that a lot of people look at is buying their own coverage, and that happens typically through a healthcare marketplace or an exchange, and that's where you just by coverage through an insurance company.
So you can go directly to the insurers, but it's often a good idea to go through… Start at healthcare.gov, and then go through the marketplace or the exchange, and that way you can shop some plans and potentially, depending on your income, you can potentially get some cost reductions that make it a lot more affordable, I'll talk more about that in a second, but another option is to switch to a spouse's plan, if you happen to be married and that person has coverage that's going to continue for whatever reason, that might also be a solution for you, when you leave your job, it could be a qualifying event that allows you to get on that person's program, but let's talk more about saving money on health care expenses before age 65, most people are going to buy a policy based on the factors that are most important to them, so that could be the premium or the out of pocket maximum, the deductible, the co pays, certain areas of coverage, all that kind of thing, you can select a plan that fits your needs.
Now, you might find that those tend to be quite expensive, and so if your income is below certain levels, you might be able to get effectively a reduction in the premium, it might be in the form of a tax credit or a subsidy, so here's just a preview of how things could look for you, let's say your income is, let's say 50,000 in retirement, and you need to look at exactly what income means, but there is no coverage available from a spouse, we've got one adult, and let's say you are… As our video suggest age 55 here, so you might get a benefit of roughly 422 a month, meaning you could spend that much less each month, and that's going to make it a lot easier to pay for coverage on these plans, if we switch your income down to 25,000 per year, the help is even bigger, so as you can see by varying or controlling your income, and this is something you might have some control over if you retire at 55, you can also control your healthcare costs, we'll talk about some conflicting goals here, where you might not want to absolutely minimize your income during these years, but this is important for you to know if you're going to be paying for your own coverage, and if you're experiencing sticker shock when you see the prices…
By the way, I'm going to have a link to this and a bunch of other resources in the description below, so you can play with this same calculator yourself. Now, once you're on Medicare, the cost should drop quite a bit, this is a calculator from Fidelity where we can say, let's say you are a female, and we're going to say you're eligible for Medicare at this point, so we'll bring you up to age 65.
It is going to be quite a bit higher cost, if you look at it before age 65, and that's because you are paying for those private policies from insurance companies, let's say you're going to live until age 93, and so you might expect to spend roughly 5800 6000 bucks per year, depending on your health and your location and other factors, it could be more or less, but this is an estimate of what somebody might spend, a single woman each year in retirement, of course, that number is going to increase each year with inflation and deteriorating health issues.
But this is a ballpark estimate of what you might be spending in the future, now we get to the question of, do you have the financial resources to retire at 55? And that comes down to the income and the assets that you're going to draw from to provide the resources you need to buy the things you want and need, and one way to look at this is to say We want to avoid early withdrawal penalties because again, you are retiring at an age that's earlier than the typical retiree and most retirement accounts are designed for you to take withdrawals at 59.5 or later, to avoid those penalties, fortunately, you have a couple of options, so with individual and joint accounts, just taxable brokerage accounts, you can typically withdraw from those without any penalties, but you may have capital gains taxes when you sell something, those taxes may be at a lower rate than you would pay if you take big withdrawals from retirement accounts, but you just want to double and triple check that, but that can be a liquid source of funds.
You. Can also typically withdraw from Roth accounts pretty easily. So those regular contributions come out first, in other words, you can pull out your regular contributions at any time with no taxes and no penalties, what that means is that's the annual limit contributions you might have been making her by year, so the 7000 per year, for example. That money would be easily accessible, but if you have other money types like Roth conversions, for example, you're going to be very careful and check with your CPA and find out what all of that could look like. There. Are other ways to get at funds that are inside of pre tax retirement accounts, and it might actually make sense to draw on those to some extent, we'll talk more about that in a minute, but these are some of the tricks you can use to avoid an early withdrawal penalty yet still draw on those assets before age 59.5.
The first one is the so called rule of 55, so this applies if you work at a job with, let's say a 401K, and you stop working at that employer at age 55 or later, if you meet certain criteria, then you can withdraw those funds from the 401k so they go directly from the 401k to you. They don't go over to an IRA, you could withdraw those funds without an early withdrawal penalty. A complication here is that not every employer allows you to do that, so 401k plans can set a bunch of their own rules, and one of them might be that they don't let you just call them up and take money whenever you want, they might make you…
Withdraw the entire amount, so if that's the case, this isn't going to work, so be sure to triple check with your employer and the plan vendors and find out exactly how this would work logistically or if it will even work. Next, we have SEPP that stands for substantially equal periodic payments or rule 72. This is an opportunity to draw funds from, let's say your IRA or a certain IRA that you choose, but before age 59 and a half without getting early withdrawal penalties. Now, this is not my favorite choice. I don't necessarily recommend this very often at all, and the reason is because it's easy to slip up and end up paying tax penalties. The reason for that is in part that it's really rigid, so when you establish this, You calculate an amount that you have to take out every year, and it has to be the same amount every year, and you have to make sure you do that for the longer of when you turn age 59 1/2 or for five years.
And even that sounds kind of simple, but it's still easy to trip up, and you also have to avoid making any kind of changes to your accounts, so it's just really rigid and can be difficult to stick to you, so… Not my favorite choice, but it could be an option. Those of you who work for governmental bodies, maybe a city organization or something like that, you might have a 457b plan, and those plans do not have early withdrawal penalties before 59 and a half, so you could withdraw money from that and use some income, pre pay some taxes, and have some money to spend fairly easily, this by the way, is an argument for leaving money in your employer's 457 versus rolling it over to an IRA, because once it goes over to an IRA, you are subject to those 59 1/2 rules and a potential early withdrawal penalty.
So that could end up leaving you with 72 to work with, for example, which again is not ideal. So you might be asking, well shouldn't I just minimize taxes and hold off on paying taxes for as long as possible? And the answer is not necessarily. So it could make sense to go ahead and pre pay some taxes by getting strategic, the reason for that is that you will eventually have to pay taxes on your pre tax money and it might happen in a big lump, and that can bump you up into the highest tax brackets, so it could be better to smooth out the rate at which you draw from those accounts and hopefully keep yourself in lower tax bracket, at least relatively speaking.
So when your RMDs or your required minimum distributions kick in after age 72 under current law, that could possibly bump you up into the highest tax brackets, maybe you want to smooth things out and take some income early. So let's look at the question of, Do you have enough with some specific numbers, and before we glance at those numbers, just want to mention that I am Justin Pritchard. I help people plan for retirement and invest for the future. I've got some good resources, I think, in the description below, some of the things that we've been talking about here today, as well as some general retirement planning information. So if this is on your mind, I think a lot of that is going to be really helpful for you. Please take a look at that and let me know what you think of what you find. It's also a good time for a friendly reminder, This is just a short video, I can't possibly cover everything.
So please triple and quadruple check with some professionals like a CPA or a financial advisor before you make any decisions, so let's get back into these questions, Do you have enough? As we always need to mention, it depends on where you are and how much you spend and how things work for you. Are you lucky to retire into a good market, or are you unlucky and retiring into a bad market? All of these different aspects are going to affect your success, but let's jump over to my financial planning tool and take a look at an example. This is just a hypothetical example, it's the world's most over simplified example, so please keep that in mind, with a real person, we've got a lot more going on. The world is a complicated place and things get messier, but we're keeping it very simple here, just to talk about an example of how things might look, so this person has one million in pre tax assets and 350,000 in a brokerage account, and if we just quickly glance at their dashboard here, pretty high probability of success, so let's make it a little bit more interesting and say…
Maybe that IRA has, let's say, 700,000 in it. What is that going to do? And by the way, this is still a lot more than a lot of people have, but again, if you're going to be retiring at 55, you typically have quite low expenses and/or a lot of assets. So let's keep in mind here that retirees don't necessarily spend at a flat inflation adjusted level, and I'll get into the assumptions here in a second, but let's just look at if this person spends at inflation minus 1% using the retirement spending "smile," that dramatically improves their chances, and I've got videos on why you might consider that as a potential reality, so you can look into that later at your leisure, but as far as the assumptions, we assume they spend about 50,000 a year, retire at age 55.
The returns are 5.5% per year, and inflation is 3% per year. Wouldn't that be refreshing if we got 3%… So we glance at their income here age 55, nothing, and then Social Security kicks in at 70. They're doing a Social Security bridge strategy. I've got videos on that as well, or at least one video, the full year kicks in here later, and then their Social Security adjust for inflation, looking at their taxes, we have zero taxes in these earlier years because they are just not pulling from those pre tax accounts. Maybe not getting much, if anything, in terms of capital gains, maybe their deduction is wiping that out, so we may have an opportunity here to actually do something and again, pre pay some taxes and pull some taxable income forward.
In fact, if we glance at their federal income tax bracket, you can see that it's fairly low from 55 on, maybe they want to pull some of this income forward so that later in life, they are drawing everything out of the pre tax accounts all at once. It just depends on what's important to you and what you want to try to do, and that brings us to some tips for doing calculations, whether you are doing this with somebody, a financial planner or on your own, you want to look at that gap between when you stop working and when your income benefits begin from, let's say, Social Security, there's also that gap between when you stop working and when Medicare starts, and that's another important thing to look at, but what are your strategies available there? Should you take some income, and exactly how much? That's going to be an area where you might have some control, so it's worth doing some good planning.
We also want to look closely at the inflation and investment returns, and what are the assumptions in any software that you're using, for example? These are really important inputs and they can dramatically change what happens… You saw what happened when we switched from a flat inflation adjusted increase each year to the retirement spending smile, just a subtle little adjustment has a big difference on how things unfold, and in that scenario, by the way, we would typically have healthcare increasing at a faster rate. But like I said, we use an over simplified example and didn't necessarily include that in this case, but you do want to click through or ask questions on what exactly are the assumptions and are you on board with those assumptions? You may also need to make some adjustments, and this is just the reality of retiring at an early age when you may have 30 plus years of retirement left, a lot can happen, and there really is a lot of benefit to making slight adjustments, especially during market crashes, for example, so. If things are not necessarily going great, some little tweaks could potentially improve the chances of success substantially, that might mean something as simple as skipping an inflation adjustment for a year or two, or maybe dialing back some vacation spending.
These are things you don't want to do, that's for sure, but with those little adjustments, you can potentially keep things on track, and that way you don't have to go back to work or make bigger sacrifices. And so I hope you found that helpful. If you did, please leave a quick thumbs up, thank you and take care..
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How we Retired at 40..💰7 tips to succeed for Early Retirement💰
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
hey guys retired at 40 I'm going on a
little road trip today just me and Murph and last week I reached a milestone on
my channel and I hit a million views total and 10,000 subscribers in the same
week since I've been getting requests for quite a long time about how I
retired at 40 and I'm on a long road trip right now I figured what better
time to share the story so without further ado here's the retired at 40
story so before I get started I want to say that this is not in any way a brag
story in fact I'm definitely not a showy type guy I enjoy very simple things in
life and money to me is more of just a vehicle to be able to retire young and
have my family live a comfortable and an easy life and to be able to enjoy lots
of life experiences and be comfortable in life before I'm old and gray so
really the journey began in about 2002 graduated from Iowa State University
with a degree in marketing and business and by that point I have met my wife
Kelly she had already graduated from school and she was kind of waiting for
me and we wanted to move west out of the Midwest to move west see some new
territory and get closer to the outdoors so I grabbed my degree ran out the door
packed up my 1987 Ranger fully equipped with eight foot hay racks full of all of
my personal belongings and we drove to Littleton Colorado and at this point in
my life I had $200 in my pocket and Kelly had about the same so being
completely naive and basically completely broke but with a degree I was on the search for the best suit and tie job that I could possibly find
so I bounced around for a couple months just working some kind of halfway jobs
and I quickly realized that I did not want to wear a suit and tie and I wanted
nothing to do with the man and working a nine-to-five job well Kelly had found a
job in a real estate office working the front desk and she had become friends
with a couple of the big-time Realtors there one of which you caught wind that
I had some handyman type skills but he made me a deal that if he paid cash for
a house and I fixed it up that he would split the profit with us 50/50 and at
this point in my life all I saw was dollar signs if I was completely blown
away that there was someone that could pay cash for a house
this is coming from a guy who had less than $200 in his pocket at this point it
was pretty much scraping by I tried to hold back my excitement to him but
naturally I said yes please let's do that I was working the graveyard shift
at Target stocking shelves I'd worked for 10 hours I would go home grab a
little bit of breakfast and I'd head over to the property and work on it for
another five or six hours I try and catch a few hours of sleep and then I
would rinse and repeat it was at this point in my life that I learned a few
different things one you really have to dig deep to reach your goals in life
because I was not getting paid by the hour and at this point I didn't know how
much money I was gonna make I didn't know if I would make $500 when this was
all done or if I was going to make $5,000 when this is all done so I
learned that a lot of things that can benefit you financially you have to put
in the work upfront without knowing what your final outcome is going to be
after about three months which seemed like an eternity of working seven days a
week for sometimes 15 sometimes 20 hours a day on this house the house was ready
to go on the market and it was all finished it looked great and then before
you knew it it's sold and then the house closed and at this
point I still didn't know what we were gonna make off it but for me it didn't
matter the hard part was done I didn't have any of my own money into it I just
had my time basically so the guy we were doing the investment with hands me an
envelope and I opened it up and at $8,000 being twenty-two years old and having
$8,000 I might as well have hit the lottery and that brings me to my second
valuable lesson that I learned and that is being responsible with money so when you have $8,000 and you're 22
years old a lot of people would go buy a new car they'd go buy some flashy
things some pretty things but to me I had realized that if I can make $8,000
once I can make $8,000 again and again and again and again so I can either go
p*&% the $8,000 away that I had worked my a#* off for or I can take that $8,000 and do exactly
what he did but do it myself and potentially make twice or three times as
much money so my wife being in a real estate office we became acquainted with
quite a few smart people financially smart people we learned a lot about real
estate very quickly because we were willing to learn which is my next
valuable life lesson is that you never stop learning so we
took our $8,000 we put a small down payment on a condo in Littleton
because we realized that giving someone else our money was you might as well be
throwing it away we wanted to be working towards something and it own something
on our own so we took our other four or five thousand dollars and we started our
search for a real estate investment that we could do all of our all on her own
and get a hundred percent of the profits so after some searching we did find a
place we found a small town home it was not in as nice of area as we were living
it was smaller it needed lots of work but that takes us to our next light life
lesson that we learned and that is to sacrifice for a greater payoff in the
future so we had only lived in our condo for a very short time but we realized
that if we moved into the real estate investment that we could rent out the
place that we are living at and move into the place that we were fixing up
that we'd have to be paying a mortgage on anyway we had our first real estate
investment and we had our first rental so being 22 years old and owning two
properties and carrying two mortgages and at this point I'm still working at
Target was a pretty scary proposition in life but all I could see was that $8,000
check they had started to change our lives I also want to point out and kind
of give a shout-out to my parents and to my wife's parents because
neither one of our parents ever handed us anything in life they
always made us work for what we achieved in fact when we move we tried to
convince my parents to co-sign on our mortgage for the condo that we bought
and they said no way at the time I was very very mad at them and I thought I
would never forgive them in hindsight it was one of the best
things they've ever done for me because it just made me have that fire
in my belly and really just want to work to get what I wanted so back to having
two mortgages that was a completely scary thing in my life I was making
something like 10 dollars an hour at Target
I think Kelly was making $13 an hour at the real estate office she was working
at we could barely afford the condo we had but now he had two.
God bless the
banks lending money to anyone at that point on the very plus side of that we
learned that someone else can pay our mortgage and we're basically getting
that money for free and then later we figured out that there are many many
many tax benefits and huge benefits of owning a rental property so we quickly learned that trying to pay
for materials and the things needed to fix up an investment property on just
barely over minimum wage is not easy to do the thing that happened next couldn't
have come at a more perfect time so all of a sudden I had money to spend to fix
up this house and it would just get me to that next
big paycheck that much quicker so that's what we did we fixed up the house we
doubled our money we rolled it into the next one so we kept bouncing from house
to house quite a few times and that sacrifice of from going from a nice
house to live in to going to a crappy house to live in to fix up to making it
nice again to going to another crappy house to fix up it became pretty
stressful but we always had our eyes on the prize "are you still with me Murph?"
after doing this two or three times I remember getting a check for the last
one and the check was forty one thousand dollars
so at that point it didn't make sense to work at Target anymore so I just started
doing it full-time but we never took the big proceeds from the real estate and
put it into our actual living we always rolled it into the next property and
that kind of gave us the baseline of even how we live today we always live
well below our means we take the money that we make and we put it into things
that will make us an income not into something that will lose us money but
you do have to treat yourself every once in a while otherwise there's no reason
to make the money in the first place Kelly saw many of the high producing
Realtors making large amounts of money so she decided to get a real estate
license and she created her own real estate business so now we really felt
like we had the world by the balls because we were getting paid a
commission to buy the property and then we were saving half of the Commission
when we sold the property and I was fixing him up so we just get rolling our
profits in rolling our profits in rolling our profits in until family we
were able to buy a house and now that we could get a house we were playing with
the big boys the profits were much larger but so was the risk and we really
didn't want to lose all the way it worked for for the last couple of years
so we did a few houses and we made some great money but instead of selling them
and pulling out our profits we kept them as rentals and it was at this point that we really
started building up our rental inventory at this point it was about 2006 or 2007
and real estate was starting to slow down a little bit but we have purchased
a large house I'm a courage that was really a big risk for us it was a large
house to fix up it was our biggest project for sure it took us the most
money to fix it up and we had the most money into it so we lived in this house
for about 8 months while we were fixing it up and we kind of decided after doing
about 12 properties that the moving all the time was starting to get kind of old
and we were kind of getting older ourselves and we decided that we wanted
to have kids and kind of settle down a little bit Murph are you with me? sometimes I feel like I'm just talking to myself so after the eight months was up we
finished the house we sold it and shortly after the real estate market
completely crashed the bubble had burst and Colorado was one of the hardest hit
States we got out of the house just in the nick of time and not only did the
real-estate market bubble burst we found out that we couldn't have kids and it
seemed like a real low point in our lives but around 2007 when all this
happened we realized our next lesson with every negative there is a big
positive that can be gained from it and you can just use it as fuel for your
fire so the recession was tough we thought
our great life had come to an end we thought we were gonna have to get
regular jobs you know people were losing their jobs left and right people were
losing their houses Colorado was hit very very hard one of the worst states
during the recession and we learned that what goes up must come down
and in this case it came down hard in many cases not just real estate when
things are bad that's the time to invest and if you're smart with your money and
you've been saving while everyone else spending that's the time to benefit
though from about 2008 to 2012 we were buying rentals so we were able to adapt I started doing
contracting because that's pretty much what I was doing before but now I had to
be doing work for someone else and Kelly's always been a mover and a shaker
and even a bad real estate market she was able to keep her business moving we
were buying things for pennies on a dollar and even though we were not
making great money and in some cases losing a little bit of money on rentals
we were able to stick it out and after lots of lots of years of lots of lots of
heartache and lots of lots of doctors we were able to have two boys so about 2014/2015 real estate started
creeping back up again prices kept going through the roof and just when he
thought it was the peak they just kept going up stuff was flying off the
shelves you could list a house and it would have multiple offers within 24
hours so we had about age 35 we were
completely debt-free we had several rentals that we were cash flowing we
didn't owe any money on the rentals so all that money was just rolling into a
bank account when you have no bills and you have an income coming in your net
worth starts to grow very quickly so we rode out the storm Kelly's business was
doing great my contracting business was doing great
we have liquidated a lot of our real estate in Colorado we had capital to
play with we had two beautiful young boys and then I fell to my knees crying
like a little baby I had herniated a disc in my back and I
was on a walker for about a month contracting for me was out of the
question I didn't even want to think about picking something up so I took
some time off and I raised our kids which at first I thought would just be for a few
months and then a year passed and then another year passed and I decided that I
kind of liked it we had rental income coming in Kelley's business was doing
better than it had ever been in fact she had started her own she had several
people working for her and just as a little side income I got to do what I
love to do which is antiques I was just buying and selling antiques so we were
trying to be very strategic at this point because we owned a fair amount of
property in Colorado but we knew that our ultimate goal was to retire at 40
and at the rate things were going up we didn't want to sell too early because we
didn't want to miss out on that upside but we didn't want to sell too late
because we didn't want to risk the chance of taking a step back so as some
regret we sold the majority of our properties in around 2017
but this was a game-changer because we were able to make cash for every rental
that we purchased so we loaded up on rentals in Iowa we actually purchased
our property that we're going to move into which is actually where I'm headed
now and that kind of brings us up to speed
to current date I take care of our 10 rentals which keep which keeps me pretty
busy just in itself i buy and sell antiques i get to see my kids all the
time we have a good rental income coming in now we do youtube oh yeah we also do
a couple fix and flips every year Kelly has her real estate team with about 10 employees
and in June of 2020 we're going to retire at 40 so all in all life is great
I have a wonderful family I have enough assets and passive income to live a
comfortable life I don't need Ferraris and yachts to make
me happy in fact for me it's quite the opposite so if you're new to the channel
take a moment to subscribe click the bell to get notifications and new videos
we like to live life simple on this channel if you like the content we
provide give us a thumbs up I'm almost always available to answer questions and
I love hearing from you guys I'm glad you were able to enjoy my roadtrip with
me I'm just pulling into the house right now in the meantime this is retired at
40 remember to live life simple I'll catch next week
You’re Retiring. Now What? Retirement Planning: A Reassessment [2022]
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
[Music] Consuelo Mack: On WEALTHTRACK, why a reassessment
of retirement planning is in order. Christine Benz: Given how elevated the market
is and low return expectations for fixed incomes securities for stocks, the tricky part is
that people embarking on retirement today need to probably take less than that four
percent, they would probably need to start more in the range of three percent. [Music] Consuelo Mack: Morningstar's personal finance
guru Christine Benz joins us with her checklist on Consuelo Mack WEALTHTRACK. Announcer: Funding provided by ClearBridge
Investments, Morgan Le Fay Dreams Foundation, First Eagle Investment Management, Royce Investment
Partners, Matthews Asia and Strategas Asset Management. [Music] Consuelo Mack: Hello, and welcome to this
edition of WEALTHTRACK. I'm Consuelo Mack. One of the biggest changes of the past year
has been the record number of Americans who are quitting their jobs. It is so pronounced that it has a name. It's called the Great Resignation. The so-called quit rate has exceeded pre-pandemic
highs for months. Millions of Americans have walked out the
door. A sizable number are starting their own businesses. According to the Wall Street Journal, since
the pandemic began, the number of unincorporated self-employed workers has risen by more than
half a million to nearly 10 million, one of the highest levels in years, and the number
of applications for federal tax ID numbers to register new businesses soared to nearly
five million, the highest number on record.
Another huge contributor to the Great Resignation
is the surge in retirement. Since March of 2020, the number of adults
55 and older who retired was nearly two million more than the rate was pre-pandemic. What the Great Resignation means for retirement
planning is just one of the items on Christine Benz’s Financial To-Do List this year. Morningstar's Director of Personal Finance
is joining us for the 4th year in a row to help us get in personal financial shape. Benz, a WEALTHTRACK regular, is an acknowledged
personal finance guru. She has held the title of Morningstar's Director
of Personal Finance since 2008. She writes daily personal finance columns
for Morningstar, does interviews and podcasts, and is the author of several books, including
30 Minute Money Solutions, A Step-by-Step Guide to Managing Your Finances, and The Morningstar
Guide to Mutual Funds: Five Star Strategies for Success.
She has also been named to Barron's List of
100 Most Influential Women in U.S. Finance for the last two years. I began our conversation by asking her about
the impact the Great Resignation could have on retirement planning. Christine Benz: Well, I think there are a
few things that people who are hanging it up from work need to be thinking about with
respect to retirement planning. One is that there's, sort of, the standard
rule of thumb for thinking about whether you have enough for retirement, and that's called
the Four Percent Guideline. And it basically means, could you live on
four percent of your portfolio plus whatever income sources you might have? So if you're taking Social Security, you'd
have that too. The tricky part is that given how elevated
the market is and low return expectations for fixed income securities, for stocks, the
tricky part is that people embarking on retirement today need to probably take less than that
four percent.
They would probably need to start more in
the range of three percent. So I think people who are looking upon, drawing
upon their portfolio for their living expenses need to use that as a quick and dirty starting
point for assessing the viability of their retirement plans. Consuelo Mack: That's a big drop, Christine. I mean, from the four percent has been the,
kind of, the traditional assumption that you should plan on taking four percent of your
retirement savings, whatever, and that will last you for 30 years.
And, certainly, if you retire early, you're
going to have a longer retirement plan, but you're saying three percent, in general, now
that's the new standard? Christine Benz: Our research concluded that
if you have a 30-year time horizon, a balanced portfolio and you want to have like a 90 percent
probability of not running out of money during that 30-year time horizon, 3.3 percent is
a good starting point, that's probably overly precise I think if you were to be in that
three and a half percent range. But, certainly, people who have extended time
horizons, so people who expect to be retired for 40 or 50 years, and this would apply to
people in their 40s who are retiring today, they'd want to set that withdrawal rate even
lower, probably in the realm of two percent. And there, that starts to begin looking more
challenging in terms of, could you live on that amount? Consuelo Mack: And Christine, as far as the
Great Resignation is concerned and more and more people being self-employed, I mean, that
means they're not going to have a regular paycheck.
So the impact on retirement planning for someone
who's self-employed, what should they be thinking about? Christine Benz: Well, certainly, people who
are embarking on self-employment do have some vehicles that they can use to continue to
fund their own retirements. So IRAs, SEP IRAs for self-employed individuals. Health care, though, is a big wild card for
self-employed people, as you know.
And so I think it does make sense to really
make sure you have a good health care plan. I think that's one big impediment to people
being more entrepreneurial, that they're worried about how they will do for health care coverage. But oftentimes you do tend to see this trend
when people embark on self-employment, investing in their business comes first, and oftentimes
they do tend to short shrift their own retirement. So it's super important to keep that in mind. If you are self-employed, make sure that those
ongoing retirement plan contributions are part of your budget. Consuelo Mack: Christine, thinking about the
new three and a half percent withdrawal rate, there are some more flexible strategies that
you're suggesting. What are they? Christine Benz: Well, the name of the game
is that you want to be able to withdraw less if you happen to encounter a down market,
and that's particularly important in the early years of retirement.
There's this phenomenon that retirement researchers
call sequence of return risk or sequencing risk. And that basically means that you retire and
then encounter a lousy market environment right out of the box. That's the thing you worry about, and one
way that you can protect yourself against that is potentially taking less in those down
markets. So in our research, we tested a number of
different flexible strategies, and that's really a commonality among them. They help new retirees take a little bit more
initially than that 3.3 percent or 3.5 percent that we talked about, in exchange, though,
the trade-off is that as a retiree, you have to be prepared to take less.
So, one really simple tweak to, sort of, the
fixed real withdrawal system that underpins that four percent guideline or the 3.3 percent
guideline in our world is to simply forego inflation adjustments. So forgo inflation adjustments in the year
after your portfolio has endured a loss. We found that that is a really simple strategy
that actually does help enlarge retirees’ portfolios over their lifetime. There are a number of other, more complicated
strategies. Another one we looked at is called the guardrails
system. This was developed by financial planner Jonathan
Guyton and William Klinger, who's a computer scientist. It's a little bit more complicated. It ensures that the retiree takes less in
down markets, but in exchange, he or she can take more when the portfolio is up. So in environments like right now, you'd be
able to get a little bit of a raise because the market has been good. That strategy is more efficient. It means that the retiree consumes more of
his or her portfolio over the lifetime, but it also tends to leave less at the end.
So for people who are really bequest-minded,
such a strategy wouldn't be a great idea. Consuelo Mack: Talking about flexible strategies,
obviously we would take into account if we are eligible, our Social Security income stream,
which is inflation protected. But also, what about annuities, which in the
past have gotten a bad name, but that's another possible income stream possibility that we
should consider, right? Christine Benz: Absolutely. I think job one, even before you start thinking
about withdrawal rates, is to look at your non-portfolio income sources. Looking at Social Security, looking at an
annuity, possibly. And the reason is that we've got more and
more folks who are coming into retirement without the benefit of pensions. So the name of the game is to look at your
fixed cash flow needs, and then try to match them to non-portfolio income sources.
Annuities do have a bad name, and I think
rightfully so in some respects, largely because you've got some incredibly opaque, expensive
products, but there are also some really good annuities that do offer lifetime benefits. I tend to favor the very simple, plain vanilla
annuities that fixed immediate annuities or fixed deferred annuities where there's a lot
of transparency. For consumers, they tend to be lower cost
and you can easily comparison shop.
And I would also say, if you're thinking of
an annuity as part of your toolkit, don't go straight to the insurance company, go to
a fee-only financial planner. Get some objective guidance on whether that
makes sense for you, given your situation. But the important thing about annuities is
that, as an annuity purchaser, you benefit from what's called longevity risk pooling,
meaning that you are in the pool with other people. Some will die younger than expected, some
will live a lot longer. You hope you'll be one of the longer-lived
ones. And in so doing, you'll be able to enjoy a
larger sum of money out of that annuity than will people who die earlier.
Consuelo Mack: One of the criticisms of annuities
recently, even the fixed income annuities, is that interest rates are so low, so the
returns historically are low. Christine Benz: Well, that is a risk factor
that interest rates are very low, so, arguably, you're locking in a fairly low payout. So there are a couple of workarounds, one
would be to do a series of annuity purchases over a period of several years. But one other risk factor that I think does
loom large with annuities is inflation risk, which is certainly front and center for a
lot of people today, especially retirees. Most annuities do not offer an inflation adjustment
in that payout. So if we do see inflation run much higher
than it has historically, that would be a risk factor for new annuity buyers.
The main benefit of annuities is that longevity
risk pooling, and that does tend to elevate payouts from annuities quite substantially
above what you get with fixed rate investments. Consuelo Mack: Talk to us about of how we
protect ourselves and our portfolios against inflation. Christine Benz: Yeah. It's a huge topic today, obviously. I think it makes sense to kind of think of
this problem as two sides of a ledger. So I would start by looking at your expenditures,
and I often think about this column that Jason Zweig wrote probably a decade ago. He called it me-flation, and the idea is that
we don't experience inflation as CPI. We each have our own consumption basket, and
some people might have higher inflation because the stuff they're spending on is inflating
at a higher rate than CPI. Some people may have lower rates of inflation. So, really, take stock of how you're spending
your money.
If you're a homeowner, the nice thing about
that is that at least your housing costs are somewhat inflation protected. You may have sort of ancillary housing costs
if you're paying people to do things around your house or your home heating costs may
be going up, but at least your, sort of, main big ticket housing expense is locked down. Health care costs have historically been inflating
higher than the general inflation rate. The good news is that, right now at least,
health care costs do appear to be running below CPI, which is somewhat rare and it may
— Consuelo Mack: It is.
Christine Benz: — sort of reverse itself. So think about how you're spending your money
and then turn your attention to whether you are protected in terms of where you're getting
your income. So if you are someone who is earning a paycheck
and you're eligible for cost-of-living adjustments, well, those are, at least in part, making
you whole with respect to inflation, they're helping you keep up with CPI. In a worst-case scenario, say you are a retiree
and you're drawing exclusively from a portfolio of fixed rate investments for your withdrawals,
for your income, you're not at all inflation protected.
And you really need to think about, well,
how can I protect this plan? How can I protect my withdrawals from inflation? And that's where I think stocks serve a great
role. They're by no means any sort of direct inflation
hedge, but they, over time, do tend to have higher returns than inflation, which is one
reason why I think even older retirees would probably want to make room for stocks as a
component of their portfolio. Within the bond piece of your portfolio, if
you're retired, especially, I think it makes sense to consider Treasury Inflation Protected
Securities or i-bonds. And these are basically Treasury bonds that
give you a little bit of a nudge up in terms of your principal and in turn your income
when we see inflation running up. Consuelo Mack: Another suggestion, Christine,
that you've sent me on your to-do-list is the fact how essential it is to look at your
portfolio and consider rebalancing your portfolio.
U.S. stocks have done really well, U.S. growth
stocks have done really well and stocks in general have done well versus bonds. Is this a good time to rebalance? Christine Benz: I think it is. I'll keep banging this drum. I think I said that a year ago, too, and yet
we've seen kind of a similar performance pattern. U.S. stocks have performed very, very well,
but I do think that this is a nice way, without having to get too cute about timing the market,
this is a nice way to ensure that your portfolio's risk level stays in line with your targets. Annually, take a look at your asset allocation
relative to your target. If you're retired, I think the good news is
that we've had a strong stock market and your cash flow needs for the next couple of years
are probably hiding in plain sight in terms of your appreciated equity assets. Think about taking some money off the table
there, plowing it into safe investments that you can live on and that will give you peace
of mind, you'll leave a good share of your portfolio in stocks and it will give you peace
of mind to be patient with them if they do encounter some volatility.
Consuelo Mack: We're talking about rebalancing
and taking profits in a highly appreciated asset class and shifting them over to one
that hasn't appreciated as much, but that's going to involve taxes. Christine Benz: Right. Consuelo Mack: So talk to us about the tax
considerations. Christine Benz: It's crucial to be thoughtful
about this and to the extent that you have tax deferred or other tax advantaged assets,
it really does make sense to focus those activities in those accounts because you can trade all
day long. Not that you should, but you could trade a
lot and not incur any taxes, even if you're selling appreciated winners. So the good news is that, for many retirees,
the bulk of their assets do reside in tax sheltered vehicles where they can make those
changes.
They might owe taxes on the distributions
that they take, but the repositioning would not entail any taxes. If you're a younger investor, not yet retired,
focus those rebalancing activities within your tax-sheltered accounts. Also take care with respect to converting
IRA assets, traditional IRA assets, to Roth. You sometimes hear that that's a good strategy. Be careful about doing that when the market
is elevated, because the taxes that you'll owe on those conversions will depend on your
gains, the size of your balance and the amount that you're converting. So get some tax help. Whether you're doing this repositioning to
get your portfolio back into balance or whether you're doing IRA conversions, get another
set of eyes on what the tax implications might be.
Consuelo Mack: And another tax friendly strategy
is, of course, charitable donations, right? Christine Benz: So true. Consuelo Mack: Yeah. Christine Benz: The charitable contributions
of appreciated securities. You can do that at any age. You can actually get a donor advised fund
into the act where you can donate those appreciated securities, even employer stock to a donor
advised fund. And the beauty of that is that you can take
your time and be deliberate about making those charitable contributions. You can direct those contributions over time. Older adults who are required to take minimum
distributions from their IRAs can also use what's called a qualified charitable distribution,
where they donate a portion of their RMDs to charity. There's a little bit of a disconnect with
the ages, you can start the QCD, the qualified charitable distribution, at age 70 and a half.
RMDs kick in at age 72. So if you're 70 and a half, start looking
at this strategy, it's absolutely phenomenal and it is a way to lower your tax bill and
also lower the amount of balance that will be subject to required minimum distributions
down the line. Consuelo Mack: For those still working, you
check your retirement plan contributions. So talk to us about what's changed this year
from last year. Christine Benz: We're seeing a little bit
of an increase in 401K, 403B, 457 contribution limits. So going up to 20,500 in 2022 for people who
are under age 50. If you're over 50, you can take $27,000 in
terms of 401K contributions. So if you haven't revisited those contributions
that you're making, check to see if you're on track to make the maximum allowable contributions.
IRA contributions are staying the same for
2022, but take a look at whether you are on track to max out your IRA contributions. I love the idea of automating those just as
you do with 401K contributions, where you're signing on the dotted line with your IRA provider
to make ongoing contributions. The nice thing is, is that you can just invisibly
make those contributions. It doesn't give you time to equivocate about
whether it's a good time to make those contributions.
They just come right out of your checking
account. Consuelo Mack: We've had a 10 year — longer
than 10-year bull market now. For retirement planning, what are the risks? I mean, are there psychological risks to having
this prolonged bull market? Christine Benz: I think it's a good news,
bad news story. So we were talking earlier about that lower
withdrawal rate that is in order. The good news is it's a lower withdrawal rate
on a larger balance for many retirees. So it may translate into a higher dollar withdrawal
than would have been the case 5 years ago, because if you've been investing, if you've
been in the stock market, you've enjoyed that nice appreciation, but it is a lower percentage.
But I do think the psychological aspect of
this is huge, Consuelo, because a lot of retirees have been through many market downdrafts. And so their risk tolerance, their comfort
level with risk is higher than it will ever be during their lifetime, just as they're
embarking on retirement. The problem is their risk capacity, their
ability to absorb that risk, as they get into drawdown mode, as they get into drawing upon
their portfolios, that's actually diminished a little bit. So it's an odd disconnect, and I think it's
important to keep in mind the distinction between risk tolerance.
It may be high at retirement. Risk capacity is lower because you're going
to be starting to draw upon that portfolio, and you certainly don't want to be drawing
upon a 100 percent equity portfolio. You want to have safer assets that you could
draw upon if a bad market materializes especially early on in your retirement. Consuelo Mack: So the common wisdom is as
you get closer to retirement is to increase your defensive assets, and even though bonds
don't feel like they're defensive, that that's what we should be doing, and cash, certainly,
which has been really criticized and kind of diminished as far as Wall Street is concerned,
its value, but it can be quite valuable. So that type of strategy is still in place
as you get closer to retirement or in retirement is to increase your defensive assets.
Christine Benz: Very much so. The way I think about it is, given how low
yields are, it's not return on capital. You will not get much in terms — Consuelo Mack: Right. Christine Benz: — of a yield or a return
from these investments. In fact, current yields are really good predictor
of what you're able to earn from fixed income assets over the next decade. Well, that's a low return, but it is return
of principle that we know, especially during equity market downdrafts, we know that high
quality fixed income securities tend to hold up relatively well during those periods, and
that's really what you're looking for. You're looking for something that will hold
stable during that period when you're needing to spend from it. So I do think that the rule of thumb or the
thought about de-risking a portfolio as retirement draws close absolutely still holds up Consuelo Mack: One investment for a long term
diversified portfolio, Christine, what would you have us all on some of? Christine Benz: Well, we've been talking about
inflation protection and worries about inflation, and so I do think that people who are looking
at retirement and getting close to spending from their portfolios might consider an investment
in Treasury Inflation Protected Securities.
And one fund I like of this ilk is Vanguard
Short-Term Inflation Protected Securities. It is a very low-cost product. It's very conservative, so your return will
not be great over your holding period, but it will do a good job of defending against
inflation. And unlike some other Treasury Inflation Protected
Funds, it tends to not be very interest rate sensitive, so it invests in short-term Treasury
Inflation Protected Securities. So it tends not to be buffeted around by interest
rates. And that's a good thing, especially if you're
worried about inflation. We often see higher interest rates go hand
in hand with inflation. And so in such a product, in a short-term
TIPS Fund, you'll be relatively protected from some of the interest rate related volatility
that often accompanies longer term TIPS Funds. Consuelo Mack: All right, Christine Benz,
thanks so much for joining us — Christine Benz: Thank you, Consuelo. Consuelo Mack: — with your annual to do list. Christine Benz: It's my pleasure. Consuelo Mack: It’s always our pleasure
as well. Thanks, Christine. Christine Benz: Thank you so much. [Music] Consuelo Mack: At the close of every WEALTHTRACK,
we try to give you one suggestion to help you build and protect your wealth over the
long term.
This week's Action Point is think twice before
joining the Great Resignation Movement. As we just discussed, retirement tends to
be longer and more expensive than most of us realize. Early retirement can really put a dent in
your retirement income. Self-employment is very appealing, but it
does have some drawbacks. Lack of a regular paycheck, benefits and matching
401K contributions, plus all of the backup services we take for granted. Offices, supplies, tech support, etc. are
expensive. It pays to do some hard analysis with family,
friends and advisors before walking out the door. Next week, Social Security guru Mary Beth
Franklin updates us on managing that crucial retirement program and other strategies to
maximize retirement income. In this week's extra feature, what keeps Christine
Benz motivated as the incredibly busy multitasking head of personal finance at Morningstar.
For those of you active in social media, please
follow us on Facebook, Twitter and our YouTube channel. Thanks for sharing your precious time with
us. Have a super weekend and make the week ahead
a healthy, profitable and productive one. [Music].
The 5 Most Important Years Of Your Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
as a parent when you have your first child there's no shortage of people to remind you just how important the first five years are of your child's development unfortunately there's no similar Network there's no similar information source for us as we retire what are the most important five years of your retirement so I'm gonna hope to break that with today's video let's go for a walk and I'll I'll share my thoughts with you with you having been a fee only financial advisor for over 20 years now and I'll I'll cut right to the chase I think the most important years just like with your child are the first five years and I want to share that you know this is a big transition if you're thinking about retiring if you're getting close to retiring this is a big transition you think about like you know a long time ago maybe when you first left home whether you went to college or you developed a trade and you went off on your own to start quote unquote adulting the transition from high school to college where you put everything you own in a couple suitcases and you say goodbye to the the people that have been nurturing you for for your entire life that's a big big transition I'm sorry that background noise is a train you really can't see it but it's there okay so that's a big transition and the transition to retirement is every bit as big right I mean it's it's the whole world that you've known for a long long time and just like with a teenager uh or a young adult heading off to college your identity is about to change as well so you know the it's a big transition but it's important that you jump in with both feet it's important that you start off on the right track and you know one of the keys is is to understand what your goals are what your hope you know what you're going to stand for what you're hoping to do in retirement not that you have to have a to-do list but you know these are the things that are important to me as I retire and you can update them for instance for me um for me I I kind of when my day comes to retire I'm not retired yet but when my day comes to retire the things that I have thought about that are going to be important to me and are important to me now are number one relationships um you know when you work unfortunately you're not able to spend as much time with the people that you love and you care about so I'm hoping to spend more time with my adult children I'm hoping to spend more time with my wife and with with friends that mean a lot to me that unfortunately right now I'm not able to spend a lot of time with so I want to spend a fourth of my time on relationships I want to spend a fourth of my time on my health having your health is really key once you lose your health you know it's a retirement's gonna look very different for you so doing what I can to eat in a healthy way to work out regularly to keep my health is going to be important then I've always been a lifelong Learners so I want to continue to learn so a fourth of my time on relationships a fourth of my time on my health a fourth of my time just learning I just love learning and then a fourth of my time as a teacher and that's part of what this YouTube channel is is is giving back and and sharing with folks I'm fortunate what I've spent my life my life's work is something that uh brings value to a lot of folks it's not it feels like common sense to me because I've been doing it my whole adult life just like whatever you've been doing most of your adult life probably feels like common sense to you so it's important to jump in with both feet it's important not to be frugal you don't have a financial plan and know what your goals are and you know many regular viewers of my channel right we're good Savers um we're good at identifying what our goals are and saving towards those but I don't want you to be frugal and it's natural I'd say well over half of people you know whatever their budget is whatever their plan says that they can spend they end up you know still saving 25 or 30 percent of that and don't do that right it's it your whole life has been a balance between current you and future you and now this is your future your uh the future you so be sure to spend that money and enjoy it these are your healthiest most active years uh I also think it's uh it's it's good to have a financial plan if you don't have a plan boy it's really hard to know how much money you can spend and you know a lot of people are sacrificing unnecessarily you don't want to do that you don't have to do that so have a financial plan and have a plan a time plan um that I already talked about right think about how am I going to spend my time 24 hours a day is a lot of time right a significant part of our life has been spent at work okay other reasons why the first five years are super important there's some big decisions that need to be made in the first five years let's say you're 60 and um and you're retiring early a lot of viewers of my channel are hoping to do that or you're 62 or 63 you know there's some big decisions that need to be made between you know let's the first let's say 60 to 67 60 to 68 even above that but you know Medicare Medicare is not as easy as just raising your hand saying hey government you know I'm 65 years old now I'd like my medic I'd like my medicare right you have to decide do you want your uh traditional Medicare or do you want what's called Medicare Advantage which is a great marketing name uh traditional Medicare is provided by the government Medicare advantages is provided by a private company and you can change your mind on that but if you go with traditional Medicare uh it has a twenty dollar deductible for Medicare Part B and you can you can buy Medicare gap insurance and normally outside of a few exceptions you have to go through medical underwriting to be approved so if you have a pre-existing condition an insurance company can deny you the meta the Medigap insurance but when you first qualify for Medicare I am not a Medicare specialist but you have a six about a six month window where you don't have to go through the medical underwriting you get an exemption for that so that's a big decision also when you're going to start taking Med uh when you're going to start taking social security is a big decision so the first five years are important another reason is because you've got these big decisions that you have to make and then unfortunately this is just a reality that we all face in the first five years we Face what's called sequence of return risk it turns out that having negative returns having bad stock market returns in the early years of our retirement are have some of the biggest impact as to whether our financial plan is successful or not and none of us know what the first five years are going to be like but that's one of the reasons that the first five years is so important another thing that's important if you're interested in this topic is to watch this video up here that talks about five reasons to uh it talks about I'm sorry average income for retirees and this video down here that talks about five reasons to retire as soon as you can thanks for watching bye bye
How Much Money You Should Have Saved At Every Age | Retirement Savings By Age
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
hey everyone this is lauren mack with hack in the rat race when it comes to retirement and strategies for saving for retirement people often ask how much money should i have saved at every age in order to reach my retirement goals this can be a very difficult question to answer because so much depends on one's lifestyle age in which they want to retire goals during retirement and so on in this video i'm going to talk about how much money you should have saved at every age for a typical american planning for retirement if you stay until the end of this video i am going to share with you a tip that you might be able to use in order to dramatically reduce the amount of savings you will need in retirement and possibly reduce the amount of time you'll have to work in order to get there additionally if you watch this video and think you're behind or maybe you haven't even started saving then i have created a workbook called from xero to retirement which walks you step by step through getting your finances in order and saving for retirement i'll put a link to it in the show notes below so let's jump right in the key to having enough money to live comfortably in retirement is to start saving as early as possible this means starting in your 20s most people in their 20s are just embarking on their careers whether that's freelancing in the digital economy starting a business entering a trade or finishing up college and starting a career either way people in their 20s usually have very little save for retirement and more often not can find themselves in debt due to school loans training startup costs or even entering the workforce and that is okay if you happen to be someone in your twenties who has managed to avoid debt and have money saved then congratulations you are ahead of the curve the best piece of financial advice i could give someone in their 20s is to start creating good financial habits while in your 20s because it will be a tremendous benefit throughout your life at this age there really is no specific amount that you should have saved although the more the better i usually recommend that if you're in your 20s you should at least have an emergency fund of one to two months worth of expenses saved up the reason having an emergency fund is that it can help you avoid falling into the debt trap i actually recommend that people of all ages have an emergency fund set aside that is easily accessible in cash so this is a good habit to begin early speaking of debt many people in their 20s are fresh out of school finally making some good money and it can be very tempting to rush out and finance and purchase a fancy car maybe some designer clothes or even a sweet bachelor pad but avoid the temptation to do that of course when you're just starting out there are necessities such as getting a car to get you to work or maybe suitable clothing for work however it's important to try not to live beyond your means or max out your credit cards many times when you do get your first job one of the benefits offered to employees is a company sponsored retirement account like a 401k oftentimes the company match meaning to a certain percentage the company will match the amount you put in so if the company match is 5 then if you put in 5 they will match your 5 i always recommend signing up for a corporate sponsor retirement account in my videos and i always suggest contributing at least up to what the company will match because this is like getting free money and it's considered part of your compensation package what if you work for yourself as a freelancer entrepreneur or work for a company that simply doesn't offer a retirement account then i recommend opening an ira or roth ira and contributing to the annual maximum limit ira stands for individual retirement account if you want to learn more about the difference between 401ks iras and raw diaries i created a video called roth ira versus traditional ira versus 401k i'll link to it above and in the show notes below to sum it up life in your 20s should be all about establishing good money habits make sure you have an emergency fund of at least one to two months of expenses three to six months would be ideal set up a retirement account either through an employer-sponsored 401k or your own ira or roth ira and lastly make sure to avoid the debt trap live within your means the more you can start investing early on as possible the sooner you'll be able to retire so now let's talk about your 30s by now you've most likely been in the workforce for a while and hopefully things are progressing well with your chosen occupation many experts recommend by the time you reach 30 years old you should have one year of salary saved up so for example if your annual salary is fifty thousand dollars a year then you should have fifty 000 saved up and invested this amount of savings should be in addition to the three to six months of savings that should be tucked away in your emergency fund in order to protect you from falling into the debt trap because of job loss medical bills car repair speaking of debt by the time you reach 30 you really should try to eliminate what i consider bad debt some examples of these are credit card debt car loans student loans etc paying on these types of debt each and every month prevents you from investing the difference and limits your ability to further invest and contribute to grow your nest egg as you saw in the earlier example in your 30s it can be tempting to keep up with joneses and live beyond your means many of your friends and acquaintances will take out large loans to buy an expensive home they'll borrow large sums of money in order to buy a luxury automobile in order to give the illusion of wealth avoid falling into this trap and feel tempted to compete with these people by making the same mistakes 98 of the time these wealthy people are actually highly leveraged and truly broke the best way to get out of the rat race meet your retirement goals and even retire early and wealthy is to live frugally and within your means okay so now you've reached 40 and you've managed to not succumb to the debt trap that so many people fall into in their 30s you should be more financially stable than you were in your 30s so how much should you have saved for retirement by now well most experts recommend that you have three times your annual salary saved up so for example if you make sixty thousand dollars a year you should have a hundred and eighty thousand dollars saved up and invested in addition to this should be maxing out your contributions to your retirement account that we've been talking about that is really important not only to help grow your investment but contributions to your retirement account can decrease your overall tax liability it is also a good idea at 40 to buy a house home ownership is really important because home values tend to rise over time if you buy a home at age 40 with a 30-year mortgage and make all your payments your home will be paid off by the time you're 70 and you've reached retirement therefore reducing housing expenses in retirement once your home is paid off then it becomes an asset this also gives you the option of selling it once you reach retirement downsizing paying cash for a new property that's worth less than the value of your home therefore giving you the extra cash to help you pay for your retirement another benefit of owning a home or rental properties is leverage which is the mortgage if you put twenty thousand dollars down on two hundred fifty thousand dollar house and the value rises ten percent then your returns twenty 25 000 instead a 10 return on 20 000 is 2 000 as you reach 50 years old many people are well established in their career and hopefully have managed to get a few raises over the years and are now making even more money at this point you should save around five times your annual salary so if you make sixty thousand dollars a year then you should have three hundred thousand dollars saved for retirement you should really be noticing the compound interest effects now due to all that diligent savings over the years once you turn 50 years old the irs allows you to start making catch-up contributions to your retirement accounts which means you're allowed to contribute higher limits to the annual contributions so you should be taking advantage of this in order to grow your retirement account quicker and also reduce your overall tax liability another recommendation at this age is to continue to remain debt free live frugally and continue to pay down your mortgage by age 60 now you're getting close to retirement by this age it is recommended to have seven to eight times your annual salary saved up so if you make sixty thousand dollars a year then you should have four hundred and eighty thousand dollars saved for retirement you're probably debt free now and really enjoying watching your savings and investments grow at this point it might be tempting to start dipping into your retirement savings however avoid doing this keep up the study savings pace many people are still working and earning great incomes in their 60s and can really boost their retirement accounts if they have fallen behind in the early years hopefully by now your home is either paid off or close to being paid off which should give you peace of mind as of now you should be eligible for social security benefits but you might want to put that off as long as possible to be able to receive the maximum amount of money you can go to the social security website they have a form where you can enter your information and it will give you estimates of what to expect at different ages i'll put a link to it in the show notes below you'll be able to determine at what point it makes sense to take it out and how much will be added for waiting and if you're just starting out saving for retirement and you're still relatively young don't assume you will have social security benefits when you reach your 60s or 70s many experts debate whether they'll actually be enough money to pay out those benefits in the future now for the bonus tip like i said at the beginning of this video having enough money for retirement depends mostly on your lifestyle cost of living and retirement in america however these days more and more people are choosing to retire outside the united states where the cost of living is dramatically less and they can have a much better standard of living for substantially cheaper than the us the thought of retiring abroad might sound frightening to some people and i get it but i have traveled to over 58 countries and lived all over the world and i can tell you that you might be quite surprised retiring abroad is not unusual in fact many americans choose to either retire early to stretch their retirement savings even further by joining the ever growing list of american expats who are deciding to retire abroad many countries around the world entice retirees by offering retirement visas to come spend their golden years enjoying the beaches golf courses and laid-back lifestyle in their country i personally know so many people who have chosen this option and none of them have regretted it you're probably thinking oh lauren what about the health care overseas it cannot be as good as the u.s well my husband and i have received medical care in numerous countries all over the world including emergency surgeries from countries in southeast asia south america mexico europe and i can tell you that every time we receive medical care it has been as good or better than the care we received in america and the bill was certainly much less expensive if this sounds appealing to you then take a few scouting trips to some countries where you think you may want to live and spend some time checking it out and meeting up with some expats that live there to get their impression of what it's like to retire abroad in the country that you're considering now i want to hear from you in the comments section would you like me to do a video on retiring abroad have you been considering moving abroad to retire if so where let me know in the comments below if you're watching this video and you're thinking lauren i am so far behind or i haven't even started is it too late then watch this video right here
5 Easy Tips To 💰Save Money💰…Money Saving Hacks
Jason 0 Comments Tips for Retiree's
I’m going to do a video on 5 simple things you can do to help your financial situation and I realized that I need to do a follow-up to the retired at 40 story video because there’s a huge need for financial education in this country and really everywhere it pertains to every single person doesn’t matter what your financial status is you can always use help and there’s always little tip tips and tricks that and things that you can do to better your status it always amazes me how scared people are to talk about their finances to put something on paper to basically take a look at where their money is going what’s getting saved and how everything is getting spent and I’ve met people time and time again that are highly educated very smart people but they know nothing about finances and they are terrible with money management so before we get into the 5 tips I want to strongly urge you to make a financial statement for yourself figure out where your money is going currently and figure out how much you’re saving and basically figure out where you can trim the fat for so many people a financial statement or just finances in general is like a bad word they’re just terrified of it but the only way that you’re gonna be able to improve your finances is to face the music alright so now that you’ve had a chance to go through your financial statement you definitely know where your money is going but how can we save more and what you really need to aim for is about 6 months of reserves especially if you’re getting ready to invest money into something or if you’re doing some kind of career change or some life-changing thing and all of these five tips will more than likely be a line-item on your financial statement so let’s go to financial tip number one hey I’m going to have to call you back I’m shooting a video right now so this first thing is something that we’ve all become very very accustomed to in the last 10 to 15 years and that is a cell phone and people tend to spend absurd amounts on their cell phones whether it’s the bill or the cell phone itself mainly the cell phone itself so that’s my first financial tip is shop on eBay or Amazon for a cell phone that’s refurbished or used or one this may be just a couple years old I actually just purchased a cell phone on ebay because I’m having trouble with my current one and I got on to my cell phone providers website and the most expensive phone that’s like mine now is $1,200 that’s insane to me so I got on eBay I found one that’s similar to the one I have right now it’s new but it’s a couple years old and I got it for less than $200 another thing that you can do is ask for some kind of loyalty benefit from your cell phone provider cell phone providers are constantly trying to earn your business and if you’ve been with them for a long time and you can convince them to keep you around by offering you some kind of benefit they’ll jump on the chance just by going into my provider recently I have a cell phone bill that was about a hundred and ten dollars a month I told them that I’ve been with them for close to 15 years they knocked it down to sixty-seven dollars and I have unlimited everything now tip number two is what I call going to youtube University or getting a YouTube education we live in the most amazing time ever right now there is information everywhere and it’s so easily accessible don’t ever stop educating yourself it’s so easy to find out how to do things these days you’re doing yourself a huge disservice if you don’t take advantage of that so how does that pertain to saving money well you can save money by doing tons and tons of things yourself instead of paying someone else to do it just look at the platform that you’re watching right now for instance you’re watching a video on how to do something so that how-to can be anything from changing brake pads on your car to changing the oil on your car to fixing a leaky faucet or the toilet flapper not working on your toilet all the way to how to the meal which brings me to my next point number three so food is a necessity in life but is it a necessity to go out to eat or go to Starbucks once or twice or every day the amount of money that people spend on food and going out to eat fast food Starbucks McDonald’s it really adds up quick and I don’t think that people realize how much money they’re actually spending on it because it’s just five or six or seven dollars here and there but if you add that up over the course of a month or a year or five years or ten years I think the result would be pretty staggering cook your meals at home pack your lunch for work make that fancy coffee at home it’s not that tough to do there’s so many great ideas and resources on YouTube and Pinterest and vlogs and blogs this channel included if you need a place to start scroll through my channel I have lots of cooking videos if you want to take that a step farther you can start growing your own food and if you don’t have a big green house like this you can grow a lot of food just in five gallon buckets even on a little deck if you don’t know where to get started see tip two number four is something that really hits home for me because me and my wife are both self-employed and we have been for 15 plus years so number four is insurance and although I don’t like insurance companies because I think they’re a giant scam it’s a necessary evil and you can also use that to your advantage you can put them against each other insurance companies much like cell phone companies are begging for your business and they’re constantly trying to outdo each other with with certain benefits or promotions so make them put their money where their mouth is and put them up against each other constantly and not just insurance companies you can do this with all kinds of different companies you should always be price checking these companies the ball is in your court make them earn your business all right I’d saved the best for last tip number five is taking advantage of bank account and credit card bonuses and this tip is begging for a separate video all on its own because I could go on about this for a long time but if you’re not taking advantage of credit card bonuses for sign ups or credit card cash back or travel miles or if you sign up for a bank account a lot of them will give you a large sum just for putting your money with them now I want to be clear I’m not promoting just going out and spending a bunch of money on a credit card but more putting the things that you already spend money on into the credit card it’s money that you’re spending anyways put your mortgage on a credit card if you can insurance is a good one it’s not super expensive but at least we’ll get you a couple hundred bucks on your credit card unless of course it’s health insurance and then you’re talking in my case thousand to twelve hundred dollars a month here’s another good one groceries it’s something that you always have to have and depending on how much you go to the grocery store it could add up to three or four hundred bucks a month sometimes six hundred maybe even more no-brainer here put your gas on a credit card you can always put your utilities on your credit card too if your utility company will allow it next from tip one your cell phone bill now depending on how much some of these are and if you are allowed to actually put them on your credit card you’re talking some pretty major money that you can get a bonus from if you’re getting two percent cashback that really adds up not only that but you’re increasing your credit score while you’re doing that so as long as you’re financially responsible and you pay this every month you’re reaping a large benefit a lot of credit cards will give you a 2% cashback they’ll give you a $500 signup bonus that’s free money in my opinion the free bank bonuses or even better than the credit card in my opinion because the bank account is something that you have to have anyway a lot of them will give you $500 for a small deposit as long as you put your direct deposit with them all the way up to I’ve seen $1,000 before and if you have a little bit more money to play with some of the online money market accounts like Capital One will pay you up to 2% or some even up to 2.5% just for keeping your money with them so some of these things may not seem like it’s saving you a ton of money but when you take up those extra fives and tens and occasional hundreds and you put them to work for you as opposed to something that you’re normally spending you’re not only saving the money because you’re not spending it but you’re putting it to work and doing something else with it and you’ll find that your your finances will start to collect very quickly so if you found the video helpful and you enjoyed the content take a second to give me a thumbs up it really helps out the channel and it helps the YouTube algorithm get this video out to people who actually need to see it also don’t forget to subscribe we do some gardening some frugal living some food preservation and cooking some gardening and you get to join me and my family on our retirement at the age of 40 after you’ve clicked subscribe click the bell notification also and it will notify you every time a new video comes out and it’ll keep you in the loop of the community all right I appreciate you sticking with me through this whole video so I’m gonna give you an extra bonus tip with an extra 100 or 200 or 300 or more dollars per month that you’re saving with just cutting back on a few things you take that extra money and you pay down debt with it the faster you get out of debt the closer you’re going to become to financial freedom and whenever you’re paying off debt always choose the smallest balance first because it gives you that extra little boost and if you can pay it off faster it gives you that extra bit of confidence to rock into the next one so once you’ve paid down your smallest debt move on to your next smallest debt take that money that you’re saving from the smallest debt that you’re not having to pay any more and add it to the money you’re saving from the 5 tips that I’m giving you and apply it to the next smallest debt and when that one’s paid off you roll it into the next one you roll that one into the next one and so on and so on in the meantime this is retired at 40 check out these other helpful videos if you have a minute remember to live a life simple and we’ll catch you next week oh hey I’m gonna have to call you back and shooting a video right now this is right my god get out of debt
As found on Youtube
Read MoreCan I Retire at 55? Tips for Early Retirement
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
If you'' re thinking about retiring at 55, you intend to beware concerning where you obtain your advice and support, which'' s since a lot of retirement guidance is geared toward those who retire quite a bit later, as a matter of fact … Most individuals retire at 62, yet things will be various for you if you'' re going to retire at'55. That'' s what we ' ll talk concerning for the following pair of minutes right here, we'' ll go over where you can get the cash from, and just how that functions with tax obligations as well as health care, then we'' ll appearance at some real numbers and also what it might look like for someone who retires at age 55. We might likewise intend to obtain philosophical simply quickly and ask the question, Why age 55? Yes, it'' s a good round number.And there are some fascinating tax methods that are readily available around that age, however allow ' s state you could retire a little earlier at 54, would certainly you wish to make that take place? Or if you worked a couple of more years … I recognize you ' ll believe this is insane, yet if you'functioned a number of even more years and also you could not influence your finances, but still take a few of those dream holidays as well as hang around with loved ones, would certainly that be worth it to maybe function until 59, for instance? So we want to figure out specifically why you are pursuing a specific goal and after that we can boost the opportunities of success for you, so let ' s begin with wellness insurance coverage, this is a challenging one because you'' re retiring a fair bit earlier than lots of people that could be near that Medicare age, so you have a variety of different options to continue being covered, and also it is an excellent concept to have actual medical insurance coverage simply in case something happens.So a couple of your options include, top, you can continue your present advantages from a job if you have them for as much as 18 months in many instances, and that ' s under COBRA or your state ' s continuation program, that can get quite pricey due to the fact that you ' re mosting likely to pay the full price', if you weren ' t currently doing that, plus possibly a teensy little bit additional for administration, but it is a way to proceed with the program that you currently have, to ensure that can be handy if you are mid stream in certain treatments or if it ' s mosting likely to be hard to get certain benefits that you currently have on a different health and wellness care program, however, that ' s not normally a long-term service due to the fact that we need to obtain you till age 65, which is when the majority of people enroll in Medicare, as well as you must see your prices drop a fair bit at that factor, perhaps depending on what occurs, so one more solution that a great deal of people check out is getting their own insurance coverage, which happens generally via a medical care industry or an exchange, and also that ' s where you just by coverage with an insurance policy company.So you can go straight to the insurance providers, yet it ' s typically a great suggestion to undergo … Begin at healthcare.gov,
and also after that experience the industry or the exchange, which means you can go shopping some strategies as well as potentially, depending upon your revenue, you can possibly obtain some cost decreases that make it a great deal extra inexpensive, I ' ll talk much more regarding that in a second, yet an additional choice is to switch over to a spouse ' s plan, if you occur to be wed which individual has coverage that ' s going to proceed'for whatever reason, that may additionally be a solution for you, when you leave your'job, maybe a certifying occasion that allows you to get on that person ' s program, however allow ' s chat even more concerning conserving cash on healthcare expenditures before age'65, the majority of individuals are going to get a policy based on the aspects that are most vital to them, to make sure that could be the costs or the out of pocket optimum, the deductible, the co pays, specific locations of protection, all that kind of point, you can pick a plan that fits your needs.Now, you could locate that those often tend to be fairly costly, as well as so if your revenue is listed below particular degrees, you may be able to get successfully a reduction in the costs, it may be in the form of a tax obligation debt or an aid, so right here ' s just a preview of just how things can seek you, let ' s claim your income is, allow ' s say 50,000 in retired life, and'you need to look at specifically what income means, yet there is no insurance coverage readily available from a spouse, we ' ve obtained one adult, and also let ' s claim you are … As our video recommend age 55 below, so you may obtain an advantage of roughly 422 a month, suggesting you might invest that much less every month, which ' s mosting likely to make it a great deal easier to pay for'insurance coverage on these plans, if we switch your income down to 25,000 per year, the assistance is also bigger, so as you can see by varying or regulating your revenue, as well as this is something you might have some control over if you retire at 55, you can additionally control your healthcare expenses, we ' ll talk about some conflicting goals here, where you may not wish to definitely lessen your income throughout these years, however this is essential for you to understand if you ' re mosting likely to be paying for your own insurance coverage, as well as if you'' re experiencing sticker label shock when you see the prices …'By the means, I ' m going to have a web link to this and also a bunch of various other sources in the summary listed below, so you can have fun with this same calculator yourself.Now, once you ' re on Medicare, the expense must go down a fair bit, this is a calculator from Integrity where we can'say, let ' s state you are a woman, and we ' re going to claim you ' re eligible for Medicare at this point, so we'' ll bring you'approximately age 65. It is mosting likely to be quite a little bit greater expense,'if you look at it prior to age 65, which ' s due to the fact that you are paying for those personal policies from insurer, allow ' s claim you ' re mosting likely to live until age 93, therefore you may expect to invest approximately 5800 6000 dollars per'year, depending on your wellness as well as your area and also various other aspects, it might be essentially, but this is a price quote of what someone may invest, a solitary female each year in retired life, naturally, that number is going to boost annually with rising cost of living and also deteriorating wellness issues. This is a ball park estimate of what you might be investing in the future, now we get to the inquiry of, do you have the economic resources to retire at 55? Which comes down to the earnings and also the possessions that you ' re mosting likely to draw from to offer the resources you require to buy the important things you'want as well as require, and also one method to look at this is to claim We intend to avoid early withdrawal fines due to the fact that once more, you are retiring at an age that ' s earlier than the regular senior citizen and also a lot of retirement accounts are made for you to take withdrawals at 59.5 or later on, to stay clear of those fines, the good news is, you have a number of options, so with private and joint accounts, simply taxed brokerage firm accounts, you can normally withdraw from those with no charges, however you might have funding gains taxes when you sell something, those taxes might go to a lower price than you would certainly pay if you take big withdrawals from pension, yet you just wish to double and also three-way check that, yet that can be a fluid resource of funds.You. Can also generally take out from Roth accounts pretty conveniently. So those routine payments come out initially, simply put, you can draw out your normal payments at any type of time without taxes as well as no penalties, what that indicates is that ' s the yearly restriction payments you may have been making her by year, so the 7000 per year, as an example. That cash would be easily obtainable, but if you have various other money types like Roth conversions, for example, you ' re going to be really careful and get in touch with your certified public accountant and also discover out what every one of that could look like. There. Are various other methods to access funds that are within pre tax retired life accounts, as well as it might actually make good sense to draw on those somewhat, we ' ll talk a lot more regarding that in a minute, yet these are a few of the tricks you can make use of to stay clear of an early withdrawal charge yet still attract on those assets prior to age 59.5. The very first one is the so called guideline of 55, so this uses if'you work at a work with, allow ' s state a 401K, as well as you quit working at that company at age 55 or later, if you fulfill particular requirements, after that you can withdraw those funds from the 401k so they go straight from the 401k to you.They wear ' t go over to an individual retirement account, you could withdraw those funds without a very early withdrawal fine. A difficulty below is that not every employer allows you to do that, so 401k strategies can establish a lot of their own guidelines, as well as among them could be that they wear
' t allow you just call them up and take cash whenever you desire, they may make you … Withdraw the whole amount, so if that ' s the situation, this isn ' t going to work, so make sure to triple contact your employer and also the plan vendors as well as figure out exactly just how this would certainly function logistically or if it will also function. Next, we have SEPP that stands for significantly equivalent periodic repayments or rule 72. This is a chance to attract funds from, let ' s say your IRA or a certain IRA that you choose, but prior to age 59 and also a half without getting early withdrawal penalties.Now, this is not my preferred selection. I don ' t always suggest this extremely typically in all, as well as the reason is because it ' s simple to slide up and also end up paying tax obligation charges. The factor for that remains in part that it ' s truly rigid, so when you establish this, You compute a quantity that you have to take out yearly, and also it has to be the'very same quantity every year, as well as you have to make certain you do that for the longer of when you turn age 59 1/2 or for five years. And also also that seems type of simple, yet it ' s still simple to trip'up, and you likewise have to stay clear of making any type of modifications to your accounts, so it ' s simply truly rigid as well as can be hard to stay with you, so … Not my favorite option, but maybe a choice. Those of you who work for governmental bodies, maybe a city company or something like that, you could have a 457b strategy, as well as those strategies do not have early withdrawal penalties prior to 59 as well as a half, so you can withdraw cash from that as well as utilize some income, pre pay some taxes, and also have some money to spend relatively conveniently, this incidentally, is an argument for leaving cash in your employer ' s 457 versus rolling it over to an IRA, because once it visits an IRA, you undergo those 59 1/2 policies and a possible early withdrawal penalty.So that could end up leaving you with 72 to deal with, as an example, which once more is not optimal. You might be asking, well shouldn ' t I just reduce'tax obligations and also hold off on paying taxes for as long as possible? As well as the response is not necessarily. It can make sense to go ahead and also pre pay some taxes by obtaining calculated, the reason for that is that you will at some point have to pay tax obligations on your pre tax cash as well as it could occur in a huge lump, as well as that can bump you up right into the highest tax obligation brackets, so it can be far better to smooth out the price at which you attract from those accounts as well as with any luck keep yourself in reduced tax obligation brace, at least reasonably speaking.So when your RMDs or your required minimum distributions kick in after age 72 under present regulation, that could potentially bump you up into the highest tax obligation brackets, possibly you want to smooth points out as well as take some income early. So let ' s take a look at the inquiry of, Do you have enough with some specific numbers, and prior to we eye those numbers, just wish to mention that I am Justin Pritchard. I help individuals prepare for retirement and also spend for the future. I ' ve got some great resources, I think, in the description below, several of the important things that we ' ve been chatting regarding right here today, as well as some general retired life intending information. If this is on your mind, I believe a great deal of that is going to be really useful for you. Please have a look at that and also allow me recognize what you assume of what you discover. It ' s also a great time for a pleasant pointer, This is simply a brief video clip, I can ' t possibly cover whatever. Please three-way and quadruple check'with some experts like a Certified public accountant or a financial consultant before you make any type of decisions, so allow ' s get back right into these questions, Do you have enough? As we constantly need to discuss, it depends upon where you are as well as exactly how much you invest as well as how things benefit you.Are you fortunate to retire into a good market, or are you unfortunate and also retiring into a negative market? All of these different facets are mosting likely to affect your success, but allow ' s jump over to my monetary preparation tool and also take a look at an instance. This is just a theoretical example, it ' s the world ' s most over streamlined example, so please keep that in mind, with a genuine individual, we ' ve got a lot much more taking place. The world is a complex place and
points get messier, however we ' re keeping it very easy below, just to chat about an instance of how things might look, so he or she has one million in pre tax possessions as well as 350,000 in a brokerage firm account, as well as if we just swiftly look at their dashboard right here, quite high likelihood of success, so allow ' s make it'a little bit'extra interesting and state … Maybe that individual retirement account has, let ' s state, 700,000 in it. What is that going to do? As well as incidentally, this is still a great deal greater than a great deal of individuals have, but once more, if you ' re going to be retiring at 55, you usually have rather low expenses and/or a great deal of assets.So let ' s remember here that retirees wear ' t always invest at a flat inflation changed level, and I ' ll get right into the assumptions below in a second, yet let ' s just take a look at if this individual spends at rising cost of living minus 1 %using the retired life costs “smile,” that significantly improves their opportunities, and I ' ve obtained video clips on why you may consider that as a potential reality, so you'can check into that later on at your leisure, yet as for the presumptions, we presume they spend about 50,000 a year, retire'at age 55. The returns are 5.5 %per year, and also inflation is 3%per year. Wouldn ' t that be freshening if we got 3%… So we eye their earnings below age 55, absolutely nothing', and afterwards Social Safety and security starts at 70. They ' re doing a Social Safety and security bridge method. I ' ve got video clips on that particular as well, or at the very least one video, the complete year starts here later, and also after that their Social Protection change for rising cost of living, considering their taxes, we have absolutely no taxes in these earlier years since they are just not pulling from those pre tax obligation accounts. Maybe not getting much, if anything, in regards to capital gains,'perhaps their reduction is wiping that out, so we might have a possibility right here to in fact do something and also once again, pre pay some tax obligations and pull some taxed revenue'forward.In reality, if we eye their federal income tax bracket, you can see that it ' s fairly reduced from 55 on, possibly they desire to draw some of this earnings ahead to ensure that later on in life, they are drawing whatever out of the pre tax obligation accounts simultaneously. It just depends on what ' s essential to you and what you intend to attempt to do, and that brings us to some tips for doing calculations, whether you are doing this with somebody, an economic coordinator or on your own, you intend to consider that space in between when you quit working as well as when your earnings advantages start from, allow ' s say, Social Protection, there ' s also that space between when you stop functioning and also when Medicare starts, and also that ' s an additional essential thing to check out, yet what are your approaches available there? Should you take some income, and precisely how much? That ' s going to be a location where you might have some control, so it ' s worth doing some excellent planning.We also desire to look very closely at the inflation and also investment returns, and also what are the assumptions in any kind of software application that you ' re making use of? These are truly important inputs and also they can considerably transform what takes place …'You saw what happened when we switched over from a level rising cost of living modified boost annually to the retirement costs smile, simply a refined little adjustment has a big distinction on how points unfold, as well as in that circumstance, by the means, we would normally have healthcare boosting at'a much faster rate.But like I said, we use an over streamlined example and didn ' t necessarily consist of that in
this case, yet you do intend to click via or ask concerns on what exactly are the presumptions and also are you on board with those assumptions?'You might additionally need to make some changes, and also this is just the fact of retiring at an early age when you may have 30 plus years of retired life left, a lot can happen, and there really is a whole lot of benefit to making small changes, particularly during market collisions, for example, so. If things are not necessarily going terrific, some little tweaks might possibly enhance the possibilities of success considerably, that might imply something as easy as avoiding a rising cost of living modification for a year or 2, or maybe dialing back some holiday spending.These are things you put on ' t intend to do, that ' s for certain, however with those little changes, you can potentially keep things on the right track, and that method you put on ' t need to go back to function or make bigger sacrifices. And also so I wish you located that valuable. If you did, please leave a fast thumbs up, thanks as well as take treatment.
Yes, it'' s a great round number.And there are some intriguing tax obligation approaches that are available around that age, however allow ' s state you could retire a little bit previously at 54, would certainly you want to make that occur? A problem below is that not every company allows you to do that, so 401k strategies can set a lot of their own policies, and one of them might be that they wear
' t allow you just call them up and take cash whenever you want, they could make you … Withdraw the whole quantity, so if that ' s the case, this isn ' t going to function, so be sure to three-way check with your employer and the plan suppliers and locate out precisely just how this would certainly work logistically or if it will certainly also function. It simply depends on what ' s important to you and also what you desire to attempt to do, as well as that brings us to some ideas for doing estimations, whether you are doing this with somebody, an economic planner or on your own, you want to look at that space between when you stop working as well as when your revenue benefits start from, let ' s claim, Social Protection, there ' s also that void between when you quit functioning as well as when Medicare starts, and that ' s one more essential point to look at, but what are your techniques readily available there? That ' s going to be an area where you might have some control, so it ' s worth doing some excellent planning.We additionally desire to look very closely at the inflation and also financial investment returns, and what are the assumptions in any software that you ' re using? If points are not necessarily going great, some little tweaks might potentially enhance the opportunities of success significantly, that might mean something as straightforward as skipping an inflation adjustment for a year or two, or possibly calling back some trip spending.These are points you wear ' t want to do, that ' s for certain, yet with those little changes, you can potentially keep points on track, as well as that way you put on ' t have to go back to work or make larger sacrifices.
Read More5 Retirement Tricks You Were Never Taught
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
these five ideas took me 20 years to find out as a financial advisor and also make sure to view them all since I don'' t recognize which ones are going to reverberate with you I can show to you number 5 is my personal favored but leave in the comments what your favorite is fine let'' s go with a stroll uh and the very first suggestion the initial suggestion uh that once again they didn'' t instruct us in college they didn'' t instruct us in secondary school and however life didn'' t educate me a lot of us these points we had to discover them on our own uh which is this is not our moms and dads retired life right we are healthier than our parents were uh travel is a fair bit more economical and easier today than it'' s ever been I ' ve been lucky in the last 3 or four years to be able to function from another location from 30 various nations and I can inform you my smart device had has actually made that experience so much simpler finding an area to stay obtaining from the bus or the trains terminal or the airport terminal to where I'' m remaining finding the the place that I desire to you recognize the cafe I wish to go to or the gallery or the basilica or you recognize whatever the visitor destination is it'' s a whole lot less complicated with the smartphone so uh this is not our parents retired life this is not uh resting around viewing tv and fishing I'' m not stating that every one of our moms and dads did that but the entire globe is open to us specifically publish covid ideal um is is travel is easier it'' s much less costly than ever before so product leading is this is not our moms and dads retired life if we considered our parents and claimed ah I'' m not exactly sure I ' m that excited about retirement I assume the sort of retired life we can have is is is is truly amazing and really interesting we have to do our homework to be prepared for it uh both financially along with mentally you recognize what does retirement resemble what are we passionate concerning what are we delighted concerning how are we going to invest the moment however if we do that research I think we have an actually fun-filled retired life to eagerly anticipate all right and second is is exactly what I simply shared which is you recognize we have to do our research and I I think we have regarding a hundred hours worth of reflective job that if we do that I believe we can uh really feel like we'' re well ready uh beyond the monetary facets for our return atmosphere and also then on top of that naturally the financial aspects are vital I would urge you to use a cost just monetary expert have a professional strategy prepared for you it doesn'' t have to be insane costly but you wear'' t intend to think that you ' re all right you'need to know that you ' re alright you ' re we economic advisors can not give you assurance however we can offer a lot of clarity simply Google cost only monetary expert near you I maintain claiming cost only monetary expert due to the fact that they have a fiduciary commitment to place your rate of interest ahead of their own 100 of the time as well as that'' s actually essential yet returning to second doing our homework it'' s not simply the finances of it you recognize it'' s what ' s your purpose going to be a great book to assist you consider your purpose is a publication called stamina stamina to strength by Arthur Brooks what are you going to do with your time you'' re mosting likely to have a whole lot of time in retired life and what are things that are really vital for you as well as simply check out the collection of videos that that I carry YouTube I'' ve I ' ve covered this topic uh several times and various other YouTubers have also so think concerning exactly how you'' re mosting likely to invest your time I can show to you high degree after doing a whole lot of reflective work as well as having actually guided other individuals via it right I indicate you simply can'' t aid yet also think concerning you know how does every one of this apply to my scenario the four areas that I'' m very fired up regarding during retired life is number one having time for connections I have a mom who'' s 87 years of ages lives a pair thousand miles away I was privileged adequate to be able to invest two weeks being a type of her key caretaker were my sis uh went on vacation finally it had been the pandemic because before the pandemic that she'' d been able to take a vacation so connections and also buying partnerships the time for that I'' m looking for or 2 as well as all for me every one of these are burglarized concerning a four so there'' s four of these the 2nd one uh is taking taking care of my wellness doing what I can to remain healthy because uh retired life is mosting likely to be a heck of a whole lot more fun if I'' m healthy so uh a 4th of my time on wellness and after that I'' m a long-lasting student I like learning so understanding is is continuing to discover proceeding to enroll uh proceeding to simply find out brand-new points I'' ve done numerous points I uh when I was much younger I was uh taking flying lessons and I'' ve actually obtained the score that you require to work for the airlines I instructed myself just how to code this YouTube thing so remaining to learn is essential to me and after that the fourth area is giving back as well as as well as for me that that suggests points like this YouTube channel right uh teaching as well as mentoring and mentoring and sharing the expertise that I have uh with people that I believe it can aid so those are the four areas for me that'' s what ' s right for me it'doesn ' t'mean that it ' s right for you um let ' s see and after that the the last one regarding preparing your research is you understand if you reside in the USA we need to think of what are we mosting likely to do for healthcare insurance up until we'' re 65 as well as you understand there are people that can aid you keeping that the only financial advisors can assist you with that said there'' s Professionals that focus on this area however there are remedies to that so however do your research before you make the leap you wish to see to it you'' ve got that base covered all right number three uh the number 3 concept um here that no one educated you regarding retirement uh as well as I suggested to it in the last thing which is wellness is more crucial than riches you understand actually actually do what you can we you know we can'' t prevent cancer cells we you understand we can do what we can we can eat right we can exercise we can do all of those things uh and as well as hopefully that will certainly aid maintain you healthy and balanced longer as well as with any luck fend off any of these terrifying illness that none of us desire alright so simply do what you can to remain healthy number number four is um you you don'' t need to fully retire right if you have a lot of stress at job um if if you'' re prepared for a change of pace if you'' re close financially and also you wish to make the jump you understand there there are part-time work out there there are side hustles out there that you can do side businesses that you can start uh so if you'' re close to retirement if you ' re like boy I ' d really like to retire earlier as opposed to later it doesn ' t have to be uh All or Absolutely nothing there'' s other means to make earnings and also the concern is you understand is is 50 totally free far better than no percent free on being retired you understand could you take a seasonal work as well as perhaps just work 3 months out of the year I stated in various other videos when my youngsters were more youthful I made use of to instruct a handful of weekends winter sports uh at a regional ski hotel so my whole family would obtain free ski tickets but there are these seasonal jobs and also is it much better to be 50 complimentary 80 percent free as well as work seasonally or function part-time work 20 hours a week so as to get health treatment advantages points like that so as well as there'' s no right or wrong solution it'' s just you know depends on um uh what'' s right for you fine number 5 as well as I'' ve obtained a Reward one below so put on'' t wear ' t uh disappear after number 5 uh before we obtain to number five if'you ' re enjoying this video please offer me a like uh the thumbs up it does assist the YouTube algorithm discover other individuals that ideally my channel can assist number 5 um is it'' s okay to have a back-up strategy you recognize pertaining to um number four you know maybe you think you have sufficient cash to retire or you intend to save uh a buffer and you'' re gon na work an additional two or 3 years to get this buffer uh and also you recognize what having a little money having this pillow makes a lot of feeling but you obtained to take care due to the fact that one year can conveniently develop into three or 4 years um so possibly you'' re in rather of having that buffer you have a backup plan where you'' re gon na have a part-time work you'' re mosting likely to have a you ' re mosting likely to develop a side rush if you need to in order to give yourself that barrier if if you hop on the unfortunate side of series of return risk which is when the market is adverse for very first couple years of of retirement or in the very first couple of years of retired life because that'' s when your sum of cash is the greatest uh it'' s when you ' re most prone to unfavorable returns and also as well as none people understand if if we'' re going to get hit with that or otherwise however perhaps the barrier possibly the insurance coverage if you will certainly versus that is a readiness to function part-time or to produce a side hustle business if you do get struck by that all right and afterwards the last thing I intend to leave you with and also it'' s it ' s a stating in my industry um you for lots of people they put on'' t require more money they just require a plan they need a tactical plan what are the important things that are vital to you what are those things mosting likely to cost and afterwards just how do you accomplish those and also you know I truly motivate you to connect to a cost only monetary advisor as well as state Below'' s my scenario can you aid me assume via am I am I shut to being able to retire are there things that I'' m not considering that might enable me to retire sooner as opposed to later on and to find a cost only monetary advisor just Google one I maintain saying charge only economic advisor because they have a fiduciary obligation to you as well as that'' s essential so I hope this video clip has actually been useful if you'' ve appreciated this one I understand you'' re going to enjoy this video clip up right here that speak about the ordinary earnings for senior citizens in America and also this video down below that talks regarding five factors to retire as quickly as you can many thanks for seeing bye bye
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