Currently working overseas but will return to my home country in the near future. I'm a landlord. I invested in property at the age of 22. Value has soared and renting out. Will live on the rental income I receive and live with my aging parents for the time being. At 60 I can withdrawal from my superannuation (401(k)). Have savings and eligible for the Australian pension at 63. In the future I may downsize, sell the property and buy cheaper property and add the left over money from the sale to savings. Lots of options for me. The way I see it if you have $1m at some point, that’d be enough to create a portfolio that would pay you between 50k-70k in dividend income...
@@freedomisEexpensive-08 I completely agree; I'm 60 years old, recently retired, and have roughly $1,250,000 in outside retirement funds. I have no debt and very little money in retirement funds compared to the total value of my portfolio over the last three years. To be honest, the Fin-advisor's can only be neglected, not rejected. Simply conduct study to identify a reliable one
Although I've been actively working toward early retirement and financial freedom by saving money and investing, the economy's decline since the epidemic has largely depleted my $3 million portfolio. In these uncertain circumstances, should I continue adding to my portfolio or should I look into alternate sectors?
Well that would be impossible to do considering I'm in my late 50s and I'm more interested in investments that could set me up for retirement in my 60s, my goal is at least $2million.
Very true, If you're looking for help building a retirement nest egg, you most likely want a certified financial planner with expertise in retirement planning. With the aid of a coach, I grew my reserve from $160k to almost $600k during this Red season.
@@helenoliver4838 How can one find a verifiable financial Planner, I buy the idea of employing the services of a Financial Advisor because finding that balance between saving and living requires counsel.
@@helenoliver4838 I just looked up this person out of curiosity, and surprisingly she seems proficient. I thought this was just some overrated BS, I appreciate this.
My average income the last 35 years was $35000 a year. Yet I managed to live a comfortable life, paid off my mortgage 10 years ago, have no debt. It’s not how much money you have, it’s how you spend it. Still managed to go on vacations and have a decent 401k. Things I bought I used and didn’t have to have the latest version of things. You don’t need a million dollars to retire. Know lots of people who retire on less. Hard to find a retirement video for the blue collar worker
I wasn't high net worth, but pretty well off as a software engineer. 20 years ago when I was still earning a salary I was spending about $4500/mo (included a mortgage). In the past 15 years my spending has been $600/mo (no mortgage, health insurance paid by Medicaid, free smartphone). I always thought the concept that a high earner "needed" to spend a lot to be happy. That's insanely silly to me. The entire idea that a person needs some percentage of current income is crazy. It misses the entire point of retiring. My most fun thing retirement has given me as been to take 2-4 hour walks everyday. You know how excited a dog gets to go on a walk, that joy? Me too. I had time to tinker in my shop and I've invented 2 products that I built and sold for awhile until they became a job. Retirement is a chance to reinvent yourself. My SS would be $2400/mo if I took it. No need yet.
That is great. I am frugal but not that frugal. I have. my pension which clears what I cleared when working when I worked I saved about 10,000 a year from my net. Nowadays it is only 6,000 a year I save. Hoping social security security will take care of inflation when I pull it.
Ha! So true, @Water Bug ! You don't need to spend at any certain level relative to your income. However, most people do! It's kind of like a personal finance version of Parkinson's Law -- spending will expand to fill the income available for it. Kudos for realizing that contentment doesn't cost a thing! 🙌 Great comment!
Great info. Are you not seeing your living expenses increasing annually due to inflation? I assume inflation in my retirement projections, and over a 15-year period expenses get really high.
If you are a renter you do need to spend to spend alot to be happy, apartment rents are skyrocketing. You can live on alot less if you're house is paid off. This is a huge problem for the younger generation house prices have risen so much that only long time home owners with alot of equity can afford to buy, many young people are locked out of the market.
It's my third month being retired now. And life hasn't been so difficult as I thought basically because I put my head down and made ways for other source of Income. I'm a huge fan of earning more money, and I think everyone should have a side hustle. Side hustling can allow you to earn that little bit of extra money that can help you achieve your financial goals faster - whether it's paying off student loans or saving for retirement.
I wish I could like this comment million times. I always tell people that it's better late than never. Therefore, If you want the chance to maximize your income, you will need to explore investing your money
@@richardyepesdiego5702 I've been considering buying ETFs/SCHD stocks for retirement, I have set asides $100k but somewhere along the line, I get cold feet maybe because I'm a rookie and have no idea what I'm doing, please I could really use some guideline
@@richarddiego3424 ket today? There are good names out there, people that have shown consistency. Like Karen Marie Emma, she's currently my coach. Lookup the name , you can reach her through her home page.
I'm 61, wife 56 both retired. 20 years paying ourselves first in 401k & 457 with maximum contributions. 401k had company match. S&P index fund over 20 years. Living below our means. Results...Priceless 🤑
I’m interested to hear how you handle market volatility. Do you shift funds based on market conditions? For example, how did you handle the 2008 crash?
@Smoove J -- Aside from Friday, we haven't seen a lot of volatility recently. I'm sure that will change at some point. (It always does.) As far as handling any future volatility, I think now's the time to consider how a 20% - 30% pullback would affect your portfolio. Any given investor's risk tolerance can change drastically between bull markets and bear markets. So, I guess it would be situation dependent. I do think it makes sense to shift things tactically, but using a numbers-based process. Markets can certainly hang out in the "overvalued" area for longer than anyone thinks. If you make a tactical shift, you have to be patient with it. Does that make sense? In 2008, we stuck with our client strategies! It wasn't always fun, but it worked.
It’s eye opening how the right trade can make you rich over the next 12 months alone with Life-changing returns. I’ve fixed some funds on some stocks and took advantage of the crypto dip, I expect positive results soon.
I’ve allocated my capital in a safe and sustainable way but still leave room for excitement for individual stocks, cryptos and new exciting opportunities!
The crypto market currently provides an opening to multiply funds easily, this current dip is an opportunity for anyone who wants to double funds easily.
The most important thing that should be on everyone mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies
I worry about the average American's savings when I see these videos. Financial education is almost zero and getting people to understand that living 'below their means' is actually 'living within their means' if they ever want to retire.
My parents 67 and 64 both retired. Dad did 20 yrs enlisted in the Army and 23 yrs as police officer (captain). Mom a college professor for 30 yrs. Me and my brothers both earn academic and sport scholarships. My parents took the money that would have went to college for us towards investing in real estate. They bought +20 rental properties right after the housing crisis. Their net worth is +4 million. My wife a Associate Professor and Im a Army reservist/Civilian federal Case Manager we invest 20% of our salary toward our fed and state retirement. We own 4 rentals as well. We plan to retire when the kids leave the nest.
Just turned 49. 530k in the 401k. 300k house just paid off, so completely debt free aside from food, utility, insurance, and taxes. Will probably need 1 or 2 more vehicles before we retire. Saving for those right now since we just paid off the house. I'm with the guy worried about having enough money to retire on. I don't want to work to 65, men in my family rarely make it into their mid 70's. But wife's family is long lived. I need to make sure she has enough when I pass.
I'm 59 and I want to retire at 62. I have an ocean front condo that I plan to rent out. that would probably get me $2,500 a month clear after the mortgage and HOA dues are paid. Add Social Security to that at about $1,600 a month if I take it at age 62 and my spending would be about the same as it is right now. That does not even touch my investments. I want them to ride until I'm 71. I expect $200,000 to increase dramatically by then, plus equity in the condo. I will make it to 90 something.
Just don’t go into retirement with a mortgage. Remove that variable long before. Americans say no debt other than….house…..car… wake up. I’ve got a pittance left on mine at 49 years old, but an extraordinary low rate and have stopped over paying for now and pushed those payments into 2 funds. I’ve got 400k in Retirement and 115000 in liquid assets, 75% cash. All up equity 750k. Keeping head down and making hay while I can. Only now realise i live below my means and getting confident retirement should be good, whenever that comes. I just feel the need to make things happen now and prepare for the worst. Can’t stand people borrowing money for things they can’t afford.
@downburst1 -- Good comment. There are a few instances where having one of these low interest rate mortgages isn't going to hurt you too much. I made a video about this: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-YQlDg1MxJyo.html However, you definitely want to have a plan to pay off non-mortgage debt before you retire. Personally, I prefer being debt-free.
I retired on 1/3/2020, and I have more in my account than I did when I was working. Thats because of my working expenses, that I don't have to put out. I travelled when I was working, & I'm glad I did, when it was safe to do so. Although, I'm looking forward to doing so again, in the future. People are mislead by how much they need to retire. I would probably need more if I moved into a different home and had a different lifestyle, but since I have the same lifestyle and am staying where I am, my expenses are very low. Retirement is more achievable than people think. I can understand the fear of taking the first step, but careful planning will make it doable. Ms. L. Churchill
Congrats on your retirement! 🙌 You're absolutely right -- anyone can retire and spend less if they choose. It all depends on your goals. Thanks for the great comment, Ms. Churchill! 🙏
Yes this is actually a more important figure based on data trends as marriage and long-term relationships are coming to an end. People will need to assess expenses for a single person and logistically other factors of aging we will have to prepare to handle on our own. I feel this will be an ever growing issue over the next twenty years.
Overkill is underrated. I'm 67 years old and plan to retire in two years. Total net worth at retirement should be >$11MM. Not taking chances on my (our) lifestyle. Excellent video for young savers.
Great question, Yanni! I would say that home equity is certainly part of "saving" in general. But we all know from what happened in 2008/2009, there are liquidity and market issues with relying on that completely.
I’m a big “RU-vidr”- your videos are clearly my favorite. You hit all the marks we look/long for in a YT presentation. Professional production, interesting, to the point and easy to follow content. But what separates your efforts from other professional ones, is that you respond to EVERY comment, offering each unique question with generous and helpful information. Truly a masterclass production.🏆 Keep up the great work!
Thank you so much, Ted! You made my day! I really do hope that I can help people make retirement easier. Plus, there are a lot of smart people who leave comments, so I find it fun to engage with everybody. Thanks for the kind words! 🙏
Thank you, @Bob House ! It's been a wonderful surprise to see how much my channel has grown since I made this video. Unfortunately, it's now getting to the point where there are so many comments that I can't answer them all, which bums me out a little bit. I'm going to do my best to keep up with as many comments as I can going forward. Thanks for all the positive support! 🙏
I’m 69 years old, single, no kids, no debt, own my home, good health….have SS and small pension… been retired for five years although had a small PT job for two years… my retirement funds are at 1.8 million and have hardly touched it…I need to get out of the fear of outliving my retirement…travel is my passion but with COVID that has been on pause although I did go to Italy and Argentina in 2021…I think I should be OK
@Hump -- you can't take it with you! There's a middle-ground between being diligent with your finances and enjoying them during this one life that we all have. I'm glad you were able to travel last year! 🙌
Thanks for the informative video. A pandemic layoff forced my retirement at 65. I'm debt free, own my home outright, have a high social security balance and small pension that I don't want to claim until 70. My retirement investment is about $1.7M and I have about 1 years worth of cash on hand. The problem is I can't shake the concern about having enough money to survive. After 50 years of saving for retirement I'm having difficulty with the idea of spending my hard earned savings. I know it's crazy but I fear being elderly and poor. How do I learn to become comfortable with living on diminishing assets? To many people I'm well off but I'm having difficulty spending $6 at McDonalds because I'm paranoid that at 90 years old I won't be able to pay my bills. Thanks again, I really value your videos.
@Lockman 04 -- You're bringing up a very important issue here. There's a middle-ground somewhere out there that makes sense as far as retirement spending goes. We must plan to live a long time, but then again, none of us are promised tomorrow. Based upon what you've written here, you sound like you're in a very good financial place. Have you thought about hiring a financial planner to discuss this stuff with every year? Not a brokerage firm, but a true, fee-only financial planner that is a member of NAPFA or the XY Planning Network. Having someone run the numbers can be reassuring. You also bring up some of the psychological difficulties of retiring. Worrying about the worst that could happen can be pretty dang stressful. It's something I've considered for a future video or two, but also a difficult subject to get my arms around. I don't know the specifics of your situation, but I've worked with plenty of clients who are similar to you. My guess is that you will be okay. I think, maybe, the best thing you could do would be to take action on running the numbers. My guess is that your odds of running out of money are pretty low. Whether it's me or someone else who is a better fit, I'd recommend talking to a fee-only planner to go over your numbers and get some reassurance. I hope this helps! 🙏
If you’re among the small percentage of the population that actually makes it to 90 years of age, your needs will likely consist of a one bedroom apartment with a small kitchenette and an easy chair strategically positioned in front of the tv! Quit your bitching and “super size” your freaking McDonalds order…….🙄
@@ddellwo According to several sources on the internet, there is about a 35% chance an American male 65 years old will live to be 90 years old. And I'm good with living a minimalist life style. The real wild card is medical costs and the cost of assisted living if it's necessary (hopefully not). Also my reluctance to spend money is a psychological condition from saving for 50 years and now being good with diminishing retirement assets. And, yes I will take your advise and super size my happy meal.
@@lockman004 I can certainly understand your mindset as I have a similar one. I think prana wealths of running the numbers is solid. While I think the advise to super size the happy meal is more a metaphor for enjoying life, taken literally it’s a guarantee to incur increased health costs. How about run the numbers and find some enjoyable activities to keep moving and stay healthy. Better chance of keeping health costs in line that way not to mention a quality of life. And ok, once in a while indulge in the super size. Best of luck to you…I agree, it sounds like you are in good shape.
The average annual expenses you gave was for a couple but we know it’s not half of that for singles. However, income is halved. More and more Americans are single, in fact over 50% so please share the numbers for singles. Thanks
Jen -- my video for single retirees comes out this Thursday! So be sure to watch out for it! The numbers were actually somewhere in between the two. The study said that there were 1.7 people per household, on average. So it seems that, while most households were couples, there were some singles thrown in there as well.
@@PranaWealth thanks I’ll watch for it! Do we know that the .7 person is an income making person? Households often have an adult dependent. Google says 50.2% of adults are single and that number increases for women as their spouses pass over time. It seems a single persons annual expenses would be similar to a married couple but you won’t have that 70% extra income from the .7 of another person. It’s either one or the other so it really skews. And doubtful that .7 person if living in the household has the same income rate as the 1st. 🤷♀️
Jen, these are great questions! Unfortunately, there's no way to parse out whether or not there are non-income earners in each household. The data is just one long PDF of averages, so it's impossible to break things down in this way. I'm sure the BLS has the data, though. Look for the video tomorrow at 3:00 p.m. EST! Thanks for watching and thanks for the great comments! 🙏
I retired 20 years ago at 45 and divorced 5 years ago. Everything about life depends on each individual of course. In my case being single has been much less than half. This is because I like a simple life and that became a problem for my ex. She wanted to eat out a lot but it was making us fat and unhealthy as well as costing a lot. So I stopped wanting to eat out which pissed her off. Sitting on a couch watching cable TV wasn't healthy either. I wanted to cut cable, she didn't. The day she moved out I threw out the couch and TV. On and on. Depends on what kind of life a person wants. Now I'm moving to the Philippines. Nice climate, much lower cost of living, better medical and assisted living options for later. She never would have agreed to move there. Plus as a single American dating young Filipinas is very easy. Finding a great young slim wife should be very easy. Single can be way less than 1/2 the cost. Or it can be more. Your choice.
@@MrWaterbugdesign why would you be excited to go find a young slim woman in a poverty stricken country? Should I want to leave my kids and friends to go find a young man to spend my senior years with on the beach? I think living in the US as singles is more logical for the majority and should be used when calculating costs for most of us. Lifestyle can be a huge factor but generally speaking housing costs for 1 vs 2 are similar. Insurance and cell phone and streaming etc is not usually double for 2. Currently with half the population single, and the other half sharing accommodations, that means 67% of households are single.
My last 8 years of working was with the post office as a technician repairing mail sorting machines, this happened after my job was sent to China. China didn't take the job it was sent over there by because those in charge decided they could make more money by using foreign labor. While working there I contributed to the TSP and they matched 5% of my pay, the fund choices were index funds that have VERY low expense ratios so all that money went to work for me. I was also able to buy me three years of army time back so that gave me 11 years of service when I put my payments in. That pension (11% of my pay) is indexed to inflation just like social security is so it almost keeps up with inflation, it's not much but that let me retire at 62 without having to eat ramen for the rest of my life. Ive been out for 12 years now and things are going along fine my retirement savings are growing a little every year so I've managed to stay ahead of inflation so far.. It's important you know exactly what your expenses will be in retirement so you can plan things out. It's also a lot easier if you can retire debt free
@dell177 -- glad to hear you're making it work out. Yeah -- globalization has not done any favors for normal Americans over the last few decades. My grandfather was in the Army and also worked at the Post Office. Thank you for your service. 🇺🇸🙏
Wants and needs are completely different. Saving beyond what you need will cost you time. Time can't be replaced or purchased back once spent. So think very carefully about what your wants and needs are.
I've been retired 20 years. IMO there's no way to predict your retirement lifestyle. If 20 years ago someone had told me how I would live today and how happy I'd be I would have thought them insane. You can have an idea, but I think that rarely comes to pass.
Good simple help, but biggest error in this is assuming a 7% retirement investment return. When retirees have only 50% in stocks (approximate average if not less), they will not get a 7% average return. 4.5% is way more realistic. Additionally, many experts think the next 10 years of returns will be way below average. Only about one in 10 have a pension.
Jerry, you may be right. Given current market valuations, I would certainly expect that forward 10 year return expectations would be lower than long-term averages. However, it's hard to say what an average return would be for a 30 year retirement, too. Or who knows, things might actually be different this time? 😉
I understand your calculation of $16,673 divided by 4% equals $416,825. What I don’t understand is that your comments and math don’t take into consideration any growth from that $416,825 over the years. Is the assumption that the savings of almost $417,000 will not be invested but stuck in a non-interest bearing bank savings account or worse, shoved under the mattress?
That's awesome, Jeff! Keep it up. Also, that 457 can come in handy -- there's no 10% penalty for withdrawals before age 59-1/2 if you retire before then. Good stuff!
Just as average income is skewed by a very small % of extremely wealthy households... avg spending is also skewed. You are better off looking at median and top/bottom 25 percentiles spending which is more reflective of you YT audience.
Social security is a better (of a bad) deal to the average wage earner. It is designed to replace about 40% to them. On the higher side, use SS cap income, and that replacement drops to about 25%. The third bend point really changes the formula output. Yet everyone who thinks they are intelligent giants want to remove the cap making the system true welfare. The fact is anyone who gets to SS age, irrespective of income level, will take out more than they paid. In effect SS is a generational redistribution scheme. The best fix is to stop allowing non working spouses to get 50%. Single Bob get 100% his benefits but married Jill with a non working spouse will get 150% of the benefits. That just isn’t right. Jill’s spouse can collect the full benefit if she passes first.
The national average of Americans that have a pension type job is about 20%. I suppose you can argue that is 'a good many people but the reality is most do not have a pension type job. For those who have a pension type job and manage to work it 30 rears or even more it plus Social Security should guarantee you a nice retirement if you have little to no debt. For those who do not have a pension will have to save and invest that much harder to have a nice retirement. Just my opinion anyway.
@Skott62 -- I have a pension video in the queue! Hopefully that will be helpful to those folks out there who do have a pension. Thanks for the great comment! 🙏
I like your videos, but we need more videos for single men. I think the divorce rate is over 60% these days and rising. I find it kind of weird that there are not any videos on RU-vid for single men budgeting and retiring under 55 years old. The finance videos that I did find for a single person, said you need to budget 6K to 10K a month. I don't see myself spending over 120K a year as a single man in retirement. I'm debt free and enjoying life. Please don't post "What if..." scenarios.
Seriously, the average American does not have a pension or guaranteed stream of income for retirement. The average American will be relying on a combination of social security and perhaps 3-4'% of their 401 k or Roth retirement savings. Stop with the Polls Anna bullshit. It is time to get real
By the way, if you want to run these numbers for yourself, I've created a spreadsheet you can download and fill out! 📊 Check it out here: pranawealth.vipmembervault.com/products/courses/view/17
@@SimonEllwood As someone whose spouse has a pension I can tell you that Pablo’s comment was just meant to be a jab because people who don’t have pensions HATE those that do and out of sheer jealousy they will say just about anything to make themselves feel better.
Uh I just turned 65 in May of this year but I don't reach FRA until next September (66 +4 mths), which is one of the reasons I will continue to work until at least next summer. Shouldn't any assumptions be made based on people 's FRA?
Dennis, you bring up a great point here. I think a little over half of retirees apply before their FRA, with about 1/3 applying at 62. So the data won't completely line up with FRA, but it should be somewhat representative. I wish they would provide more detail, but it's broken up into 10 year age groups. Also, it's just a PDF they publish, so we can't examine the data ourselves.
Interesting. I am 59, single, no kids and NO debt in good health. My current retirement portfolio is 840K and I plan on working 6 more years and retire at 65. I figure my monthly expenses to be about 3,750 per month. Looks like I am in good shape.
Crimson Pearl, no debt always sounds like a good plan! Congrats! Just based on this, you do seem like you're in great shape, but a financial plan may be a good investment. Something to think about...
@@PranaWealth and I bet Prana Wealth would be more than happy to be your "advisor". These are nothing more than infomercials. There is no "average" American.
@Dennis D, I agree. There is no average American and I said as much at the end of the video. I'm an independent, fee-only financial advisor and proud of it. And if things a great fit, of course I would love to work with someone who finds me here. After all, I am running a business. Is that so bad?
In today's world, when you talk of a pension, you could also add any passive income to that. Few people have pensions, and more should be working on creating passive income to supplement their income without working. As noted by Jerry Pascale below, a 50%/50% mix of stocks and bonds doesn't really work in today's retirement since the return are so low. A 7% return with passive/pension income is reasonable, but not if you need a 50/50 mix to ensure constant income.
If cutting it close, consider the value of delaying social security. Up until age 70 the increase in annual payment is the cheapest way to get more guaranteed income you can find.
Sylvan, with those cost of living adjustments, waiting can be beneficial if you don't need the cash flow early in retirement. I agree with you -- if you're on the fence about waiting, maybe do it. Good comment! 🙌
I agree too and am doing the same, cutting it close too. But as long as I have no use for the extra money I see no reason to take SS now. I'm 65. Taking it at 62 would have been $1800, now $2400 and $3300 at 70. Cost of living adjustment @ 5% would be $90 for $1800 and $165 for $3300. Over 15 years that's $16,200 more if I wait until 70. I know of no other investment that pays a cost of living adjustment.
Why not take SS early & put it into a stock trading acct. & buy dividend paying stocks? If you didn't touch it, the total would still be your family's, even if you died early!
@@rongendron8705 That's a perfectly reasonable choice. The reason to delay is because dividend paying stocks are not guaranteed, and social security is. Having guaranteed income is a valuable safety net, especially if you do not die early. It's obviously a personal decision, and the individual needs to weigh the pros and cons and make the best decision for themselves.
You know, it might have been a good idea to start a while back. Since you're not really familiar with the market, I suggest reaching out to a financial expert for some advice or assistance in creating a realistic and attainable plan.
Hi I just turned 25 and so I’m starting to think of saving for retirement… I think that will be the first in my list of things to save for once I buy my first home.
my wife and I are retired at 60 and 64, with our income from SS/retirements/rentals, is 18K /month. but we spend 10K/month for mortgages all utilities /food/ins ect. we still have leftover 8K. we don't touch our mutual funds /ira etc. worth 800k, also two house paid for clear title worth 1.1m and 1st house and 2nd house being paid by the 10K. just sharing and see if you think we need to get advice from profesionall finance adviser.
@REP -- it sounds like you're doing a great job on your own. A "real" financial advisor (a fee-only fiduciary one) could help you maximize returns, minimize taxes, and think of potential unforeseen risks. However, the way you're cash flowing, you sound like you're in good shape. Great job! 🙌
Would like to see this run with 3.5% inflation, and 5-6% return for the coming decade, and a 3.25% withdrawal rate (numbers based on predictions from Morningstar, Fidelity, and others). The 4% rule was based on a 5.2% return from bonds. We are in a different world now.
Austin -- these are some great points. The spread between interest rates and inflation is the largest it's ever been. I'm not sure how much longer that spread can keep going. I may have to do a completely different video just playing with inflation rates in these calculations.
4%" rule"was not based on 5.2% bond returns. It was based on the years 1926 through 1995 and it ran every scenario using them dates. Look at interest rates from 1934 to 1956 which was part of the study. Your statement is absolutely false Look Trinity study if you don't believe me
Though I'm going to be ok at retirement age of 65 once your in your late 50's early 60's you quickly realize how some of your "stupid years" really cost a person!! Save early,save often,& save steady!!!
For sure! I'm certainly as guilty as anyone of this. I look back and wonder why I spent money on some of the things I did. There's no "perfect" in the game of personal finance.
Dan, I can't remember where I read it, but I believe that about 1/3 of people do indeed start collecting Social Security benefits at age 62. I think another 1/3 waits until their full retirement age and the remaining third is spread.
Less spending after retirement? I have increased spending due to increased medical costs like drugs and having to pay others to do what I used to do myself; both are significant costs. The only decrease I have had is no debt whatsoever, like mortgage, car loan and other loans. No one should retire with lots of debt.
Virginia -- you're not alone in spending more after retirement. I've seen it happen before. Everyone assumes your spending drops -- and in some cases it does -- but not always.
I think the pension idea is moot for younger generations. I will def not be receiving one. I basically created my own with rental properties and now I am diving hard into monthly dividend ETF's as the world of nursing (I am one) is so crazy right now, that I am focused on income in my 40's rather than saving the large chunk. Nurses are getting so abused that I'd rather phase myself out and work less vs amassing a lump sum and hope I win in the end. I am more fortunate than many nurses I know as I built my rentals through the years. Many will either suffer or leave. Thoughts on income replacement while building a smaller portfolio? I know it might be easier to plan if you don't have multiple pieces of a pie to draw income from, but I think it's more ideal for younger people to have more than 1 job and are building passive income
Dan -- I have a couple of friends who are nurses. Based on what I've heard, I'm not surprised that you're exhausted at this point. Building up a portfolio of rentals is something that I've seen several people do well over the years. I think it may take some time to do that, but I've seen it work before. I really do think that having a side-hustle is a great idea for younger people these days. Everything is so expensive and it's hard to make ends meet for what younger people are getting paid these days. I think the answer is to work hard, spend less than you make, and invest the rest. Not sexy, but it works!
Why be "average" when it's so easy to flip the script and juke the stats? We're in our late 40's/early50's with no mortgage, vehicle or credit card debt. Currently we're spending $2,000/month as we have been for the past 5 years, dodging inflation like we're in "The Matrix". This is less than what social security will be, even after the shortfall is accounted for so basically, we need no additional income or portfolio. Fortunately, this wonderfully frugal lifestyle has had us shoving money into retirement accounts for the past 30 years simply for the tax savings alone. With our working days done we're now in the long process of converting ALL of our tax deferred accounts to our Roth IRA accounts, slowly and under taxable limits...solely thanks to our low cost lifestyle. Of course we "have" to make sacrifices such as cooking every meal at home from scratch for the very best food at the lowest cost. We don't go on expensive fly-away vacation and instead take several car trips to the North Woods which we prefer anyway. Instead of dropping a couple grand on things like a new mattress I get to follow my thoughts and experiment by instead getting a zippered mattress case and a few slabs of high quality foam for the best mattress not sold at any price for just a few hundred dollars. I haven't had to buy a "new" laptop in years as I get relative's old ones when they upgrade. My current one is a 6 year old Dell that would no longer charge. The charger was toast but I had a replacement on hand and the charging port was also shot but $7 and 90 minutes or so had it fixed. I'll be able to use it for several more years with Windows and then I'll switch to Ubuntu for several more years and finally it will become another project like a wall mounted jukebox or maybe a MAME arcade. My last laptop is now hooked up to the Yamaha receiver that was another free relative's home theater discard after they upgraded to HDMI. The old laptop is an awesome MP3 player and streams online content as well, driving the tunes through a $35 pair of Polk Audio bookshelf speakers from Craigslist. Needless to say, I have a lot of fun with projects and new ideas. This is the kind of old school retirement that brings rock solid financial security. Why be normal?
Great point, @tomj528 ! When it comes down to it, we can choose to live however we want. Being content is a choice! You can have anything, but you can't have everything. 🙌
Victor -- fantastic question. Yes, taxes and healthcare expenses are included in the data from the study. The detail they present is pretty fascinating -- I encourage you to check it out. It's hard to tell from the data, but my guess is that many retirees in the study are living an austere retirement. www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/reference-person-age-ranges-2020.pdf
My wife and I are 35, we're both worried social security won't be around when we retire. I hope we're wrong. I also worry that housing is so expensive that our peers are unable to buy and will be stuck as renters their whole lives. Have any of you had similar worries?
There are loans where ups only need 3-5% down to get a mortgage. But words of caution, have 3-6 months loss of income fund set aside for emergencies due to the lack of equity in the home. That way off for some reason you have to sell the house at a loss it won’t be a foreclosure.
@Chad Z -- I agree with Michael on this. Definitely keep that 3-6 month emergency fund. Also, the 80/15/5 mortgage setup is an option, but just be sure that your housing costs are less than 28% of your total income (a.k.a. don't buy too much house). At some point, valuations will come back down. You could always save up some dry powder and wait for that. As far as Social Security goes, things aren't looking great. At your age, there's a good chance that things will be sorted out by the time you get to retirement. Unfortunately, something might have to break between now and then before it gets fixed. Unfortunately, reconfiguring these entitlement programs is the third-rail of politics. Nobody's going to do it proactively. For now, maybe plan on 80% of your benefits.
Francis -- you're not kidding. Private health insurance is really pricy. It can be a huge cash-flow drain early on if you retire before 65. Great comment! 🙏
A lot of people do not have pensions like me. Was not in a job long enough or the company did not offer pensions but a 401k instead. So your assumptions are off a bit.
Thanks for this interesting and helpful video! I’m wondering how to figure out WHEN we will be able to retire? Here’s a quick summary: Ages 54, 48 Combined 401k balance: 600k (in S&P index IRAs, Contributing 23% annually) My pension balance: 350k Combined annual salary: 225k Emergency savings: 65k 11 year’s remaining on 15yr mortgage. (170k equity) Expecting over 2k monthly SS benefit each at age 67 yrs Zero debt except low interest mortgage
Dennis -- I believe that is indeed factored into these numbers. The study is pretty detailed, if you want to check it out. The data is fascinating. www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/reference-person-age-ranges-2020.pdf
Great question, Paul -- it's average spending per household. I forget the average number of people per household, but I think it's somewhere around 1.7 or so.
@orangecrush455 -- some people don't learn this stuff until they're 60! Glad you're getting some of this relatively early when you still have plenty of time to do something about it. 🙌
Patrick, I enjoyed the video. And I understand your point, that is, the younger one starts to save for retirement, the less than need to set aside each period, or month for ex, in order to build a given nest egg over time. However, in you examples, if the CPI rate is 3%, doesn't the amount saved for each case need to be the same going forward in order for each group to maintain the same standard of living. To compare apples to apples, the calculations need to be based on time, not on their age. In other words, in order to maintain the same standard of living, for the 65 year old to keep up with the 55 year old, the balance in all three retirement accounts in 2032 would need to be the same; $560,177 dollars. Thoughts? Comments?
Other then our 401k’s and IRA’s, I decided to open up a brokerage account with Schwab. I’m not huge finding the correct funds to invest in, so I decided to keep on throwing money in the SWPPX fund which is Schwab’s S&P. Hopefully in 20 years I will get a decent rate of return.
Thanks for subscribing, Lawrence! I've been swamped with my practice over the last couple of months, so I'm hoping to get back to posting weekly and replying to comments daily soon. Thanks for watching! 🙏
I sure do hope your facts and figures are correct. I have always contributed to my 401 and before that my 457, and if your numbers are right, I am working for nothing……Thank you you’ve just made my day! I just found you on RU-vid and am now a faithful subscriber
I retired 7 years ago at age 62. My wife followed 2 years later when she was 62. To date, we have not touched any of our retirement savings. We had no problem living off just our Social Security with no change in our lifestyle. The key for us was to be debt free by the time we retired. So we went in with no house payment, no truck payment, no SUV payments, no RV payments. It is amazing how far your Social Security will go when you are debt free. If I can talk the wife into purchasing a New Motorhome that could change. The good news is if we go that way we will most likely pay cash for the Motorhome. Not bad for someone who is just a Thousandaire.
Do you think the market will return an Average of 7% over the next 10 years considering the market conditions at the moment? I do believe that returns could be historically low for the next decade or perhaps even longer than that. Remember The Japanese stock market hasn't been able to return to its 1990s high for almost 3 decades now and during the years after the great depression the Dow Jones industrial average stayed flat for 25 years. It's quite possible for the stock market in the US to peak and then stay flat for a two decade period which would literally be 2 thirds of someone's entire working age. Scary but perhaps we have to think of other retirement strategies other than the market.
Dane -- I'm using 7% here because it's a round number and somewhat close to historical averages for a diversified retirement portfolio. What happens over the next 10 years is anyone's guess. Valuations are incredibly high, so you'd expect returns over the coming 10 year period to be lower than historical averages. But you never know. If you look through history, markets can hang out in overvalued territory for a long time before they come back to earth. That being said, the current spread between actual inflation and interest rates doesn't bode well. Japan is certainly a cautionary tale. They've had the same demographic issues that we're about to experience. Don't forget that there are plenty of long stretches of history where Treasurys out-performed the S&P 500. The truth is that nobody really knows what's going to happen. Unfortunately, with yields so low, being cautious can be uncomfortable given current inflation.
Current market conditions have very little to do with future returns over the next 10 years. The biggest consideration is what will happen in the next 10 years. Future stock returns are based on future events that haven't happened yet. We have no idea
I retired to Ecuador at 50 this year, $2k/mo. gets you a very comfortable standard of living. Plus it is a lot more interesting, to me, living in a different country.
Straightforward and easy to understand numbers. Married couples need to add in planned life expectancy and the impact of one spouse dying on the social security income and also on taxes when you lose that second standard deduction. I retired two years ago and my biggest regret financially is I still have a mortgage. I could pay it off but prefer not to pull that much out of my investments in a down market. I love being retired! My financial plan in this down market sits at around 75% chance of success to not run out of investment savings by age 95 for surviving spouse. Realisticly, we both know neither of us will live to age 95 so a 75% success rate on that end goal is perfectly fine. Even without investment left, there will still be income from Social security and my small retirement plan income. In addition to panning your savings, invest time in maintaining your health ahead of retirement. Exercise and try to eat healthy. Good health impacts the quality of your retirement as much as good savings. Thank you for a great video.
Excellent presentation, thanks. Being 57 years old and wife 56, we start thinking about that time....retirement. Talking about inflation, if you started paying 4,500 in home taxes and 18 years later is 10,100 dollars, how much inflation is that?
Thank you, Isidro! Just some rough calculations puts that inflation rate at around 4.9%. 😳 Let's hope your property taxes don't keep going up at that rate! 🤞
And if you move to a state with lower property tax how much deflation is that. Once you retire property tax is an option, not a requirement. I moved to Phoenix and pay $1600/yr for a $500k house. In a few months I'm moving to the Philippines where property tax is very low. Rents are also very low.
Another great video. I think it is critical for people to understand this basic math of retirement planning. One thing one also needs to factor in is any tax. For example if investing in a 401K, the amount you withdraw is subject to income tax. While inflation is problematic today, retirement covers a very long time horizon. So 3% is a fair starting point. Historically US stocks have returned about 6% over inflation, bonds about 2% over inflation, so a basic 50/50 portfolio has returned about 4% over inflation; your 7% value. So this seems to me to be a very good baseline back of the envelop exercise. Again, so important for people to master at least this basic exercise. Only thing I would like to add is that it would be good for one, once they have mastered this, to go back and see what happens if we are unfortunate and inflation is higher, say 4% (on average over the next 30 years), or if returns are worse (our starting valuations as of today are worrisome for both stocks and bonds) say 5%. This helps to understand some of the uncertainty in the process, and some of the risks going forward. If you want to feel good try a return of 9%! (But do not plan on it. 😀) I look forward to more of your videos!
Thanks, @Rodc ! The thing with these assumptions is that we'll only know if we're right in hindsight. I'm actually working on an online course that will allow everyone to run through these calculations for themselves. I hope to have it done around Thanksgiving. Thanks for watching and thanks for the great comment! 🙏
@@Dud-in9iu Last decade has been great. No doubt. And for that I an grateful. Allowed me to retire a little early. But the math of retirement has to account for average or poor returns in the future. Typical volatility. Inflation. Taxes. Healthcare. All sorts of things. The next ten years may be very different. Make sure you will be ok if that happens. Best of luck to us both!
@@Dud-in9iu the past decade should definitely not be expected for the decades of retirement. It was fueled by recovering from the Great Recession & accommodative monetary policy. You should expect regression to the mean as we enter a different phase of the economic cycle.
I was just lucky that I have a pension,am a retired RN.Family emergencies keep cropping up making it’s difficult to save Since I had the credited years of service to retire with a full pension, I lucked out in that manner .After legally retiring at age 53,I worked for two years in a deferred retirement plan .The state pension system offered this option to those in the pension plan who retired and were under age 55. The deferred retirement called DROP( deferred retirement option plan) me a nice little chunk of change as money from a 457 B account.The fortune of having a monthly pension and the Social Security benefits I claimed at 62 are game changers. Am not rich but fairly financially comfortable.
Great video. Your approach should give hope to those that are behind in savings but still in a reasonable position to get there. Too many focus on a crazy high number that is out of reach for most people asking the questions.
My wife and I are in our mid-30s, trying to save for retirement while balancing the demands of current financial needs. Do you think social security will be around in 30 years? Should we even factor that into our calculations? Also, these averages are nice but how would you calculate savings needs based on above or below average icome/ spending/lifestyle and goals?
Dan -- you're bringing up a valid concern here. We really do have some issues with our entitlement programs. At some point, things will need to be restructured. I'm less worried about Social Security than I am about Medicare. Maybe assume you'll get 80% of what you're supposed to get? Hopefully, we'll all be surprised (to the upside). I'm 48 and I'm not planning on 100% of it being there when I retire. It'll be there in some form or fashion, but who knows how much it'll be.
I know most people come in pairs of older folks. I rather resent that this sort of information is rarely done for a single person. We single people have a very different circumstance lacking shared costs in our lives. Please address this when seeking to educate the public about this topic.
