I challenge many of us face is we don't know how much money we need to retire and when we can reasonably expect to get there I've been a fee only financial advisor for over 20 years and in today's video I'm going to walk you through that process step by step and towards the end I'm going to share with you some key risk that you need to be aware of and at the very end of the video I'm going to share with you a free online calculator that makes the whole process a lot easier okay let's jump in let's go for a walk and talk about this you know the goal is to create a nest egg where you can live off of the money that it generates and have the nest egg be invested in a way that's comfortable and consistent with who you are and overall where the income it generates is something that gives you a lifestyle that that's comfortable for you that you're looking forward to okay so how do we actually do this and what we do is we start at the end and then work our way up right so I just mentioned three items so let's start with the third one a lifestyle that's comfortable and you're excited about right so the money from your portfolio is going to be designed to generate that income so so how do you do that well first we need to know what that lifestyle is right I mean I think all of us you know hey a million dollars a year would be nice but very few of us are in a situation where we can do that so how do you determine how much money is reasonable uh and will give you the lifestyle so let's start with the lifestyle question how do you determine um how much money that you need to maintain your lifestyle there's really two approaches one is to go from the bottom up and kind of list all the things that that you need and the first what you need and then you know higher priority wants and then some aspirational ones and really put them into those three categories so in the need category is going to be lodging and food and if you're below 65 if you're not Medicare eligible is going to be health care right how are we going to pay for that so list out your wants I'm sorry your needs and then list out your wants and add that up and then you know what are some of the aspirational wants you know uh traveling around the world and you know what is that cost and you know there's we're adaptable we're human so you know our budget may not allow us to to travel around the world every year or even every three years but you know what we can still have a really fun retirement so the first thing is figure out what the cash flows are so figure out what that's going to be now the next question this is really really important this is step two remember we're kind of going backwards through that list that I I shared at the beginning of the video the second one that I said was it's invested in a way that's comfortable for you and consistent with who you are and that's really important because you don't want a portfolio that's going to be too scary for you because if you have a portfolio that's going to be scary for you and you know what I mean by that is you know if you have a 100 stock portfolio for most people I'm not saying for everybody but for most of us that volatility is going to cause us to lose sleep at night I mean if you look at 2008 2009 you know could a correction like that happen again where the market was down over 50 percent 5-0 you know if you have a hundred percent of your retirement in a portfolio like that it's going to be hard to stay the course so usually people as as we get older you know we won't have a hundred percent stocks probably doesn't make sense for you to have a hundred percent bonds you know and and bonds can be stable or they can be fairly risky when I talk about Bonds in in my videos I mean stable bonds that that pay a reasonable rate uh high quality Bond short duration so what is the right mix of that to buffer out the volatility so if the Market's down 50 60 percent hopefully your bonds are you know they might be down a little bit for a short period of time but if you get bonds that are three years in duration two years in duration one year in duration and they're they're from very solid companies that have great credit scores those should be fairly stable now there's no guarantees in life and nothing I'm sharing with you here is financial advice for you I recommend that you work with a fee only financial advisor yourself or hire an accountant to help you go through this but high level generalities you want an Investment Portfolio that's consistent with who you are now at the end of the video I'm going to share a free online calculator and you can see how your asset allocation really has a huge impact on what kind of lifestyle that that you can maintain in retirement so you do want to be thoughtful about it um you don't want to have quote you know no risk in your portfolio you know having it in in CDs at the bank because it's likely not going to beat inflation and you want it you want your Investment Portfolio to at least keep up with inflation and hopefully beat inflation so you can have compounding uh working in your favor okay so that's that's the second point and then the first point that I I talked about is being able to live off of the income that it generates right and so think of think of your Investments as as uh the goose uh and Dave Ramsey uses this analogy I think it's pretty good you know your Investment Portfolio is the goose and then you're living off the golden eggs that it hatches so the more risk in your portfolio the more stock uh exposure likely there's no guarantees but likely uh those golden eggs are going to be a little bit bigger or use another analogy you're going gonna get more of those eggs but if it's too risky you know you might end up killing the goose and and you don't want to do that okay so that's that's how we look at the portfolio and and let me give you an example let's say that uh you want to live off of a hundred thousand dollars a year and let's say between your other sources of income you're you're let's say you have a rental property or Social Security whatever it is you've got half of that hundred thousand a year coming in from those sources so to use our analogy the Golden Goose only needs to provide fifty thousand dollars a year uh for your retirement now um fifty thousand dollars a year you know if you have five hundred thousand dollars saved up or that's what you're going to end up with before you retire you know fifty thousand a year it's probably not realistic you're probably gonna run out of money uh before you run out of life and and none of us want that so um at a million dollars uh can you afford to take fifty thousand dollars a year out maybe you're getting closer right you you there's the rule of four percent uh William bangans uh ruled a four percent that says you know you can take out four percent a year um and and have a high likelihood of not running out of money so that would be forty thousand so you're close you know could you pull out fifty thousand a year maybe I don't know it depends on what the returns are and it particularly depends on what the returns are in the early years but let's say you have 1.5 million dollars you know now you're solidly in the range that you you likely can and pull out fifty thousand dollars a year and not run out of money right so you have bangin's four percent rule the inverse of four percent is twenty five one divided by twenty five is that four percent so the easy math on this is you want fifty thousand dollars a year from your portfolio you multiply that by twenty five you get one point two five million and that gets you in the ballpark having a buffer is probably a good thing so you know 1.5 million I don't know your situation but you're in the ballpark it's it's reasonable okay um but what are the risks um that that you need to be aware of and I mentioned one of them earlier it's called sequence of return risk and it's the risk of you know what are your returns uh in the first couple years of retirement because that's when your balance is likely going to be the highest so you know looking at your sequence of return risk none of us have a crystal ball none of us know let's say I retire this year you know I don't know what my returns are going to be this year the next year the following year and and those are really important returns for me so you have to be adaptable you have to be able to to change as as Life Changes right so there and there's different techniques and you know I want to get back to that asset allocation and the fact that you have to be flexible I think this is one of the big reasons people should consider working with a fee only financial advisor is the asset allocation is going to have a big big impact on what kind of money that you can spend in retirement and I think you want to have a river guide right we all have our own lives that we live and I mentioned I've been a fee only financial advisor for over 20 years I have helped a lot of clients through this discussion and I've had the benefit of of seeing how things play out and you know over time not only do you have the knowledge but you have the wisdom that comes from working with many many families and and I I think most people would benefit from working with somebody that has that wisdom think of it as a river guy you know somebody to go through the Journey with you somebody that caution you for instance one of the questions I often give people is your views on risk are going to change as you retire you know if you're making good money now um and you've saved up a nest egg and the market goes up and down and you haven't reacted first off good for you for for for not blowing out of the market during scary times and in your lifetime in your investing career there's been some scary periods so if you've always stayed the course good for you that's hard to do um but risk is going to feel different for you when you feel retired and that's the kind of thing that somebody that's been through some Market cycles that has helped lots and lots of other people through this discussion and through this journey those are the types of things that uh the only financial advisors can help you with now all of these calculations you know I've gone through really high level but there are some great um online free online calculators to help you with this I I did a survey in my con Community polls asking people which custodian they use it was Fidelity Schwab Vanguard or other by far the the most common Odeon is Vanguard so in all three of the custodians are going to have free online calculators and you know vanguards is is is really really good and it's very approachable for for everybody so if you just do a quick internet search on Vanguard retirement calculator it'll walk you through the key um things that you need to think about and we'll give you an idea of how much that you're going to need in retirement and it also has a place for other sources of income which I like and then another question and this is where you can really see the impact of asset allocation if you Google Vanguard Nest Egg it will bring up a calculator that it has to help you think through how long your money will last based on how much you're spending your asset allocation and how much your beginning balance is I hope you found this video helpful if you did you're going to enjoy this video up here that talks about average income for retirees in America in this video down here that talks about five reasons to retire as soon as you can thanks for watching bye byeRead More
How much cash do you need to retire on? It'' s among the most usual concerns I hear. Now I wish i can offer you a straightforward solution. You may have heard you require a million dollars or that you ought to have sufficient
savings to supply a revenue state equal to about 70% to 80% of your final income. The most typically priced estimate figure is in fact.
based upon ASFA'' s retired life criterion. Now ASFA approximates that a couple age 65.
would certainly require to invest around $63,000 a year to live a comfortable lifestyle as well as around.
A single person would certainly need a little much less regarding $44,000 for a comfy retired life or $28,000 strange bucks for a small one.
of life you intend to reside in retired life. Rest down and work out a retired life spending plan. Start with the essentials like how much food, apparel, transport you anticipate to invest. And after that determine those nice-to-haves like dining out, holidays and also hobbies. The final element to look at is any type of luxury products that you might want to get like a caravan. Your next point is when do you wish to retire. The earlier you want to retire the more money you'' ll demand to fund that retired life. And also there'' s no collection old age in Australia. The decision is up to you yet benefiting longer also on a part-time basis can assist you retire stronger. Now finally is your life span. This one'' s going to be a little more trickier to predict but extensively speaking women today can anticipate to live to 85 and guys to 81.
Let ' s say for circumstances that you do the amounts and you locate your retired life lifestyle will certainly cost you around$ 40,000 a year. If you prepare to retire at 65 as well as you have a life expectancy of regarding 85, you ' re looking at 20. Consider talking to a qualified monetary consultant if you ' d like some assistance grinding these numbers.
It ' s complete of wise approaches to help develop. Download it today.