November 4, 2024 • 17 mins
Ever wondered how much you need to spend $25,000 a month in retirement, or how to make sure your savings don’t run dry? This episode of the Early Retirement Podcast tackles these questions head-on, offering a deep dive into retirement budgeting for various spending targets. From $6,000 to $25,000 a month, we cover it all, drawing on listener comments, personal stories, and the infamous cauliflower analogy to explain the intricacies of tax optimization and risk management. Whether you’re aiming to maintain a modest lifestyle or live large in retirement, this episode provides practical advice tailored to different financial goals.
We then shift gears to explore the dynamic nature of retirement spending, especially for those planning to spend between $15,000 and $25,000 a month. Learn why assessing your portfolio’s sustainability is crucial and discover the concept of a dynamic withdrawal strategy. We'll introduce you to the "retirement smile," which illustrates how spending changes during the different phases of retirement, and analyze real-life portfolios to highlight the importance of a sustainable withdrawal rate. With an emphasis on flexibility, careful planning, and the benefits of smart tax strategies and charitable giving, this episode equips you with the tools to optimize your retirement funds and achieve financial peace of mind.
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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to the podcast, a special episode today
how much money do you need tospend $25,000 a month in
retirement?
Now, some of you and youalready know I'm laughing are
like what the heck would I dowith $25,000 a month?
Others go you know what?
I could find a way to spend itif you really said I was in a
spot to do it, but I reallywould rather probably retire
(00:22):
earlier.
Maybe I don't spend $25,000 amonth, maybe it's $6,000 or
$7,000 or $8,000, $10,000 amonth, but it means I don't have
to work 10 more years.
Yeah, that's more attractive tome.
Now that's where most of youfall.
So why am I making this video,this podcast?
Well, because there's a largeamount of people that listen to
this show because of you guys,and I will often get asked a
(00:46):
question and then sometimesthere will be comments after I
asked this question.
And that's what happened inthis instance, where I had put
out a video on YouTube and thiswas a few months ago now saying
how much do I need to spend12,000 a month in retirement,
and some of the comments looklike this.
Now I'm going to explain it.
If you're just listening, perusual on the podcast app, all
(01:07):
good, and if you want to watchthis on YouTube, you can see
what I'm talking about.
So this comment here 12,000 amonth in California, that just
covers your mortgage.
Other comments here hey, thiswas great.
I'm 44, withdrawn 5 millioninvested in just some Vanguard
stuff.
Can I withdraw 3% per year?
Just so many good.
(01:28):
Different comments Some peoplehere 12K a month WTF.
I'm not going to say whatthat's for and you can see a
comment followed up sayingthat's not outlandish.
Another person no, it's not.
Other people go, I agree, alittle low, right For me 15,000
a month minimum just to get inthe parking lot of the ball
field.
25,000 a month is more like itfor a smooth retirement.
(01:52):
So you can see I'm very late onthis comment, but I replied
five months ago.
I said, hey, you'll like thevideo I've coming out.
In the next few weeks I endedup releasing a different style
video.
This one is directly inrelation to that comment.
So this is you're wondering howmuch money do you need to be
able to spend 25,000 a month inretirement?
(02:13):
That's what this case study,this podcast, is all about.
Now, if you don't already know,my name is Ari Taublieb.
I am the host of this podcast,the Early Retirement Podcast.
I am the vice president at RootFinancial Partners and I'm a
certified financial plannerwearing this dopey shirt.
How many of you guys know thisshirt Now?
If you're listening right now,I know you can't see it.
(02:34):
I'm wearing my cauliflowershirt.
For those of you new to the show, you will be so confused right
now.
I can only imagine what you'rethinking.
For those of you that have beenlistening for a few years
saying hey, ari, yep, love thecauliflower, I'm going to
explain what the heck this is.
This is an awesome gift givento me.
My favorite gift of all time,my second favorite gift of all
(02:55):
time is right here.
I'll highlight it in light ofkindness today.
This you can see here if thecamera zooms in.
It says anti-cookie cutter jar,love the pot.
Why?
Because I don't believe in just.
Hey, what's your risk toleranceon a scale of 1 to 10?
It's like okay, you're a 2 andyou're an 8.
Great, go retire.
Well, guess what happens when Iask that couple their risk
(03:16):
tolerance when markets are down?
Very different answer.
So I want to give you an examplewith this whole cauliflower
thing, which is most of you ifyou've saved and invested well,
you're going to pay a lot intaxes.
You could say, hey, I'm notgoing to worry about that taxes
stuff until later.
I just paid taxes for most ofmy career.
Maybe I retire in the next fiveyears and I could spend way
(03:37):
less, but who cares, I alreadypaid so much.
I'll deal with it when I'mlater.
Maybe I'll let my kids let theleeches deal with it.
When I'm later, maybe I'll letmy kids let the leeches deal
with it.
Just kidding, some of you guysdon't like when I say leeches,
but anyway.
So the point here is I want youto avoid only having to eat
cauliflower in the future.
Some of you are like I lovecauliflower.
This is a horrible example.
Relax, all right.
(03:58):
Some of you are like, oh no, Iget it If I eat a little bit of
cauliflower, maybe a little biteach year, pay a little bit in
taxes, fill up a certain bracketeach year.
That means in the future I'mnot going to only have to eat
cauliflower, I'm going to get toeat whatever I want.
Now I don't want you to convertso much that there's no
cauliflower in the future.
I want you to make sure you'reoptimizing your taxes.
(04:19):
It's dopey, I know it's dopey,but I try to do things in a
certain way so that you canremember it.
So let's look at this exampleNow.
I'm going to explain it onceagain, but some of the concepts.
If you want to see what I'mtalking about, you're going to
want to be on YouTube.
Now I am, of course, a podcastlistener myself.
I listen to a few podcastswhere they say you know, you
(04:39):
should really go over here tolisten to this and go over here.
I'm like no, I get that, but Ilike listening here.
It's easier.
Youtube has ads.
It's more annoying, I get it.
I want to make sure I'm helpingall of you to the nth degree.
I personally pay for YouTubepremium.
So if that's something that youguys want to do, I get no
commission by saying that, butjust something to keep in the
(05:00):
back of your head.
I personally, youtube is my newcable, so I YouTube everything.
Now, if you YouTube everything,let me know in the comments.
Just kidding.
Okay, you can if you want to.
So this is a case study thatyou're looking at Now.
This couple you can see here.
They are 59, and they have $3.8million.
Now their graph doesn't look sogood.
(05:21):
It looks like it's coming down.
If you're looking on the screenhere, it's showing that if they
were to spend $25,000 a month,every single month, from right
now, 61 when they retire, 61 and58.
So if they both retire in ayear, they spend $25,000 a month
, every single month, for therest of their life they will
pass away right at 91.
(05:43):
Now let's assume thatinvestments don't do well, just
hypothetical.
Or they say you know what wewant?
More of a balanced approach.
Well, now it's not 91, whenthey run out of money, it's 76.
So why am I showing you this atall?
The reason I'm showing you thisis if you want to know how much
you can spend.
It's not the graph I'm playingaround with right now.
(06:04):
This is the graph that looksaesthetically pleasing.
What you want to think about ifyou want to retire early and
spend $15,000 or $20,000 or$25,000 a month is can my
portfolio support it?
So let's do some really basicmath.
I'm pulling out my calculatorright now.
Let's assume you want to spend$25,000 a month.
Great, well, that's $300,000 ayear.
(06:27):
That would allow you to livereally comfortably.
I'll stop and tell a clientyou're not going to spend that
and they're like what are youcrazy?
Like you don't sleep next to me, like how could you know what I
want to spend?
I'm like you're probably goingto spend more during the first
few years of retirement, thenless, then maybe more at the end
.
They're like what's your point?
I said, well, if you have adynamic withdrawal strategy
(06:47):
meaning spend more at thebeginning than a little less,
maybe help a kid with a weddingthen all of a sudden you're like
hey, I'm going to gift thisproperty whatever it is.
Now you're in a spot that yourplan is going to look very
different.
So this concept that you'rejust going to spend 300,000
every single year for the restof retirement, it's unrealistic.
So what you're going to see meput on now, if you're watching
(07:07):
on YouTube and I'm going toexplain it, it's called the
retirement smile.
This is not done by me, Ididn't invent this.
But if you think about a smile,you have what are called your
go-go years.
Your go-go years is youenjoying retirement.
I want you to be spending it.
Then you have your slow-goyears.
You're still spending, but ifyou're in your 70s or 80s,
you're probably not going to betraveling to the same degree.
(07:30):
Then you have your no-go years,where you still want to meet
your needs, but you're probablyjust naturally spending less.
So let's assume I just turnthat on.
Well, what does an average looklike?
It's not perfect, because noteveryone is going to be an
average spender in retirement,but watch what I just did.
So here's a couple with $3.8million.
They were on track for zero.
(07:50):
Now they're on track for 5.6million at 93.
Well, what happened there?
What happened is I'm asking myclient to be dynamic and I'm
saying when markets do well, Iwant you to spend even more than
300,000.
And when markets do poorly, I'mgoing to ask you to spend a lot
less because I want you tooptimize your retirement.
So I want you to think about itlike being a retirement boxer.
(08:12):
I put this on the last podcastepisode, but sometimes you might
need to hear it again to fullysink in.
Let's assume you're a businessowner.
Okay, market's doing well,business is doing well.
You might go hire employees.
You might say I'm going to buya new piece of equipment.
You might do a lot of differentthings, but let's assume your
business does not do well.
Are you still going to go buyequipment and hire 20 employees?
(08:32):
No, that doesn't make any sense.
So what you're going to doinstead is spend a little bit
less.
I want you to think about yourbusiness as your portfolio.
Your portfolio is going to havetimes when it does really well,
like this year, markets aredoing well.
Then there's going to be otheryears where markets don't do as
well and I'm going to ask you tospend a little bit less not
spend $300,000, maybe spend$200,000 or $250,000.
(08:56):
Because if we do another taxstrategy at the same time, it
might yield way more money, andthat's what can lead to these
massive differences you'reseeing on my screen and that I'm
explaining for you.
So I know you guys want a nicecookie cutter answer of hey, if
I want to spend $300,000 a yearand I'm looking at a 4%
withdrawal rate, how much moneydo I need?
Well, 300,000 divided by 4%,seven and a half million dollars
(09:20):
.
But I'm showing you a couplethat doesn't even have $4
million that I would say, ifthey wanted to spend 25,000 a
month, they're in a spot to makeit happen, not saying they get
to go, do it, because this takesa lot of work and we need to
make sure their withdrawal rateis sustainable, which is what I
care about.
And if I look at the withdrawalrate here.
Look at this 11%, 9%, 7%, 6%.
(09:43):
That's not sustainable.
They will run out of money.
So even though their graphmight look good here, this
doesn't tell the whole story.
So let's assume this couple saysyou know what, 25,000 months,
good, but to be honest, 15,000 amonth, like 180,000 a year,
that's more than enough, like Icould do everything I want to do
.
Well, they might see they're ontrack for an absurd amount of
(10:05):
money 20, $30 million and thenthey go to their withdrawal rate
and they look at it and they go, okay, what does it say?
Well, it shows it's starting at8%, which is very high, and
then 6%, and then 5, then 4, andthen 3, and now it's in the 2s.
Now, here they are in their 70swith a 1% withdrawal rate.
Do you know what happens when Ihave a client with 1%?
(10:25):
I yell at them.
I'm just kidding.
I don't yell, but I say, hey,you're not spending enough.
I cannot imagine you'reenjoying your retirement.
Or if you are and you'respending what you want to spend,
we better be doing somecharitable giving.
Or we better do another taxstrategy, because if we don't,
do you know how much moneyyou're going to have and when
those required distributions aregoing to come whack you in the
face.
So the point here is any type ofplanning.
(10:48):
If we're looking at taxstrategies, for example, let's
look at this couple and I'mgoing to explain it as well.
If this couple is optimal withtheir tax strategy, they will
generate 1.2 million moredollars.
At the end, they will havesaved two and a half million
dollars in taxes and they willhave ultimately optimized by
(11:08):
about 4 million total taxdollars.
So the point as to why I showsomeone this is because some
people get so invested in thetaxes they go this is awesome.
I mean, look at this a millionmore dollars in taxes.
Because I'm just smart with mytax planning.
Why would I not do that?
And I'll say, well, you coulddo that, or you could spend more
and enjoy your life more, ormaybe you could do part-time
(11:31):
income, or maybe you coulddetermine and it's gonna be very
difficult for a lot of you andI know that to say, hey, maybe I
get more massages in retirementor I go to a different physical
therapist that is going to costmore out of pocket, but I'm in
a spot to do so.
So if you want to startdreaming and understanding what
position you're in.
Of course, you can play aroundwith this tool, but ultimately,
what I want you to know is thisis not a cookie cutter thing.
(11:54):
Okay, let's assume you want tospend $25,000 a month and you
have a pension that covers$10,000.
Well, you don't need $25,000 tobe generated from some
portfolio, because you alreadyhave 10 coming from a pension.
You now need 15 to be generatedfrom your investments.
Let's assume that you have ahome and you're going to
downsize and it's going togenerate $2 million more.
(12:14):
Well, great, I mean, that'savailable for investment
purposes.
Let's assume you surrender anannuity.
Let's assume you don't buylong-term care.
I could do this on and on and on.
What I want you to really do,and the purpose of this is most
of you don't want to spend$25,000 a month.
I recognize that Now some ofyou are going to be like no, I
do, I just don't have thefinancial means to do it.
(12:35):
I get that I don't have thefinancial means to do anything
like this, but I want you toknow if you're wondering hey,
could I ever possibly trulyspend $25,000 a month?
Just watch this example righthere.
Let's assume that, just forexample's sake.
Okay, this couple's like look,I would love to spend $30,000 a
(12:55):
month.
Okay, just hypothetical.
Okay, $30,000 a month, that's$360,000 a year.
Okay, that's a lot of money.
Now I have some clients thatlive in Malibu.
I call them characters, okay,because they're a little odd.
You know Nice people, okay.
But some of my characterclients are like I want to spend
$30,000 a month, every month.
No matter what you say.
I'm like yeah, that's just notrealistic, like you might have
(13:17):
to work way longer.
And they're like all right, Idon't care, I like what I do.
So look at this graph for me andI'll explain it as well.
Here's a couple same couple 59,$3.8 million.
They're on track to run out ofmoney at 77 if they want to
spend $30,000 a year.
But what if they're like youknow, I kind of like what I do
and I, what if I just did whatI'm doing now?
(13:37):
I get I'd have to work longer.
But what if we worked a fewmore years?
Would that change things?
And they're able to run theprojection and go wait a second,
wait a second.
So if I work three more yearsexcuse me, four more years each,
we're on track for like $9million.
Well, that's if that means wecould spend $30,000 a year,
every single year, that'd bereally attractive to us.
(14:07):
They might go know, thirtythousand is a lot, but I think
it's just too much.
Maybe twenty eight thousand amonth is kind of our sweet spot.
And then they rerun the numbersand go well, you know, that's
awesome, but I don't needthirteen million dollars.
Maybe we retire instead, youknow, just a little bit earlier
and they're able to play aroundwith this tool in a really cool
way, so that they can determinewhere's their sweet spot, and
that's what I want you to reallydo here.
They are spending $28,000 amonth.
(14:29):
So $28,000 a month times 12.
Guys, here's $336,000 a year.
Now you can see they're stillrunning out of money at 90, but
they'll go.
Oh, so what if I work one moreyear from there?
The reason that one more yearhelps so much is it's one less
year that you're pulling fromthe portfolio.
It's one less year of saving toyour 401k and adding money to
(14:52):
your brokerage account.
So, yes, it's powerful to workone more year, and the biggest
mistake I see I'm begging younot to do this is to go.
Oh, I'm going to wait.
And the biggest mistake I seeI'm begging you not to do this
is to go.
Oh, I'm going to wait.
Oh, one more bonus.
Oh, six more months.
How much longer are you goingto tell your spouse that?
Because most people come to megoing oh, yeah, that's me.
Yep, I just keep pushing itback and I don't like to, but I
just don't know.
You know what if markets godown, or what if Social Security
(15:14):
gets reduced, or what ifinflation?
And I'll say well, test forthat.
Like, still run the numbers.
Like, only retire when youfully are confident, but don't
cheat yourself and just go.
You know I'm 55 and my neighboris not close to retiring, so I
don't think I'm going to be ableto make it happen.
Don't do that.
Like, really understand theposition you're in.
Work with an advisor I don'tcare if it's me, I don't care if
(15:35):
it's another advisor Justunderstand the position you're
in.
Something like 0.00012% ofpeople that watch our YouTube
videos work with me.
So I recognize that most of youwatching this video are not
gonna work with me.
Maybe you're gonna use the toolthat I'm showing you right now.
Maybe you're gonna keeplistening to the podcast and go
hey, that's good enough for me.
I get my education here.
(15:56):
I don't know what you're gonnado, but I wanna help you,
regardless of where you're at inyour journey.
So if you don't have three, 4million bucks, you're going to
one day and you're going to wantto know how much income that
could support.
Use a tool like this andunderstand how you can start
optimizing and going.
Okay, this makes sense, and oh,maybe I switch this trade off
and really get a good sense.
(16:16):
Don't over optimize, which Isee people do.
What if markets drop by 90% andsocial security is never there?
It's?
Hey, let's not be unrealisticwith this.
Let's just be conservative aswe look at planning.
So hopefully this video casestudy podcast was helpful and if
so, please subscribe, like thisvideo and share it.
If you want access to the toolI'm showing right now or you
(16:39):
want to work with my team, youcan see in the description of
this video and podcast where youcan go to do just that.
Thanks, guys.
Thank you for listening toanother episode of the Early
Retirement Show.
If you have a question that youwant answered in a future
episode, you can always go to mywebsite,
earlyretirementpodcastcom.
That'searlyretirementpodcastcom, and
(17:01):
you can go ahead and submit aquestion that I'll look to
answer in a future episode.
Thank you all for listening.
Please do rate it, review itand share it with someone who
you think would benefit fromthis information.
If there's anyone out therethat you know, I certainly
appreciate it and I will see youall each week.
Hey guys, it's me again.
Please be smart about this.
Nothing in this podcast shouldbe construed as financial, tax
(17:23):
or legal advice.
Consult with your tax prepareror financial advisor before
taking any action.
This podcast is forinformational purposes only.
Welcome back to the podcast, a special episode today
how much money do you need tospend $25,000 a month in
retirement?
Now, some of you and youalready know I'm laughing are
like what the heck would I dowith $25,000 a month?
Others go you know what?
I could find a way to spend itif you really said I was in a
spot to do it, but I reallywould rather probably retire
(00:22):
earlier.
Maybe I don't spend $25,000 amonth, maybe it's $6,000 or
$7,000 or $8,000, $10,000 amonth, but it means I don't have
to work 10 more years.
Yeah, that's more attractive tome.
Now that's where most of youfall.
So why am I making this video,this podcast?
Well, because there's a largeamount of people that listen to
this show because of you guys,and I will often get asked a
(00:46):
question and then sometimesthere will be comments after I
asked this question.
And that's what happened inthis instance, where I had put
out a video on YouTube and thiswas a few months ago now saying
how much do I need to spend12,000 a month in retirement,
and some of the comments looklike this.
Now I'm going to explain it.
If you're just listening, perusual on the podcast app, all
(01:07):
good, and if you want to watchthis on YouTube, you can see
what I'm talking about.
So this comment here 12,000 amonth in California, that just
covers your mortgage.
Other comments here hey, thiswas great.
I'm 44, withdrawn 5 millioninvested in just some Vanguard
stuff.
Can I withdraw 3% per year?
Just so many good.
(01:28):
Different comments Some peoplehere 12K a month WTF.
I'm not going to say whatthat's for and you can see a
comment followed up sayingthat's not outlandish.
Another person no, it's not.
Other people go, I agree, alittle low, right For me 15,000
a month minimum just to get inthe parking lot of the ball
field.
25,000 a month is more like itfor a smooth retirement.
(01:52):
So you can see I'm very late onthis comment, but I replied
five months ago.
I said, hey, you'll like thevideo I've coming out.
In the next few weeks I endedup releasing a different style
video.
This one is directly inrelation to that comment.
So this is you're wondering howmuch money do you need to be
able to spend 25,000 a month inretirement?
(02:13):
That's what this case study,this podcast, is all about.
Now, if you don't already know,my name is Ari Taublieb.
I am the host of this podcast,the Early Retirement Podcast.
I am the vice president at RootFinancial Partners and I'm a
certified financial plannerwearing this dopey shirt.
How many of you guys know thisshirt Now?
If you're listening right now,I know you can't see it.
(02:34):
I'm wearing my cauliflowershirt.
For those of you new to the show, you will be so confused right
now.
I can only imagine what you'rethinking.
For those of you that have beenlistening for a few years
saying hey, ari, yep, love thecauliflower, I'm going to
explain what the heck this is.
This is an awesome gift givento me.
My favorite gift of all time,my second favorite gift of all
(02:55):
time is right here.
I'll highlight it in light ofkindness today.
This you can see here if thecamera zooms in.
It says anti-cookie cutter jar,love the pot.
Why?
Because I don't believe in just.
Hey, what's your risk toleranceon a scale of 1 to 10?
It's like okay, you're a 2 andyou're an 8.
Great, go retire.
Well, guess what happens when Iask that couple their risk
(03:16):
tolerance when markets are down?
Very different answer.
So I want to give you an examplewith this whole cauliflower
thing, which is most of you ifyou've saved and invested well,
you're going to pay a lot intaxes.
You could say, hey, I'm notgoing to worry about that taxes
stuff until later.
I just paid taxes for most ofmy career.
Maybe I retire in the next fiveyears and I could spend way
(03:37):
less, but who cares, I alreadypaid so much.
I'll deal with it when I'mlater.
Maybe I'll let my kids let theleeches deal with it.
When I'm later, maybe I'll letmy kids let the leeches deal
with it.
Just kidding, some of you guysdon't like when I say leeches,
but anyway.
So the point here is I want youto avoid only having to eat
cauliflower in the future.
Some of you are like I lovecauliflower.
This is a horrible example.
Relax, all right.
(03:58):
Some of you are like, oh no, Iget it If I eat a little bit of
cauliflower, maybe a little biteach year, pay a little bit in
taxes, fill up a certain bracketeach year.
That means in the future I'mnot going to only have to eat
cauliflower, I'm going to get toeat whatever I want.
Now I don't want you to convertso much that there's no
cauliflower in the future.
I want you to make sure you'reoptimizing your taxes.
(04:19):
It's dopey, I know it's dopey,but I try to do things in a
certain way so that you canremember it.
So let's look at this exampleNow.
I'm going to explain it onceagain, but some of the concepts.
If you want to see what I'mtalking about, you're going to
want to be on YouTube.
Now I am, of course, a podcastlistener myself.
I listen to a few podcastswhere they say you know, you
(04:39):
should really go over here tolisten to this and go over here.
I'm like no, I get that, but Ilike listening here.
It's easier.
Youtube has ads.
It's more annoying, I get it.
I want to make sure I'm helpingall of you to the nth degree.
I personally pay for YouTubepremium.
So if that's something that youguys want to do, I get no
commission by saying that, butjust something to keep in the
(05:00):
back of your head.
I personally, youtube is my newcable, so I YouTube everything.
Now, if you YouTube everything,let me know in the comments.
Just kidding.
Okay, you can if you want to.
So this is a case study thatyou're looking at Now.
This couple you can see here.
They are 59, and they have $3.8million.
Now their graph doesn't look sogood.
(05:21):
It looks like it's coming down.
If you're looking on the screenhere, it's showing that if they
were to spend $25,000 a month,every single month, from right
now, 61 when they retire, 61 and58.
So if they both retire in ayear, they spend $25,000 a month
, every single month, for therest of their life they will
pass away right at 91.
(05:43):
Now let's assume thatinvestments don't do well, just
hypothetical.
Or they say you know what wewant?
More of a balanced approach.
Well, now it's not 91, whenthey run out of money, it's 76.
So why am I showing you this atall?
The reason I'm showing you thisis if you want to know how much
you can spend.
It's not the graph I'm playingaround with right now.
(06:04):
This is the graph that looksaesthetically pleasing.
What you want to think about ifyou want to retire early and
spend $15,000 or $20,000 or$25,000 a month is can my
portfolio support it?
So let's do some really basicmath.
I'm pulling out my calculatorright now.
Let's assume you want to spend$25,000 a month.
Great, well, that's $300,000 ayear.
(06:27):
That would allow you to livereally comfortably.
I'll stop and tell a clientyou're not going to spend that
and they're like what are youcrazy?
Like you don't sleep next to me, like how could you know what I
want to spend?
I'm like you're probably goingto spend more during the first
few years of retirement, thenless, then maybe more at the end
.
They're like what's your point?
I said, well, if you have adynamic withdrawal strategy
(06:47):
meaning spend more at thebeginning than a little less,
maybe help a kid with a weddingthen all of a sudden you're like
hey, I'm going to gift thisproperty whatever it is.
Now you're in a spot that yourplan is going to look very
different.
So this concept that you'rejust going to spend 300,000
every single year for the restof retirement, it's unrealistic.
So what you're going to see meput on now, if you're watching
(07:07):
on YouTube and I'm going toexplain it, it's called the
retirement smile.
This is not done by me, Ididn't invent this.
But if you think about a smile,you have what are called your
go-go years.
Your go-go years is youenjoying retirement.
I want you to be spending it.
Then you have your slow-goyears.
You're still spending, but ifyou're in your 70s or 80s,
you're probably not going to betraveling to the same degree.
(07:30):
Then you have your no-go years,where you still want to meet
your needs, but you're probablyjust naturally spending less.
So let's assume I just turnthat on.
Well, what does an average looklike?
It's not perfect, because noteveryone is going to be an
average spender in retirement,but watch what I just did.
So here's a couple with $3.8million.
They were on track for zero.
(07:50):
Now they're on track for 5.6million at 93.
Well, what happened there?
What happened is I'm asking myclient to be dynamic and I'm
saying when markets do well, Iwant you to spend even more than
300,000.
And when markets do poorly, I'mgoing to ask you to spend a lot
less because I want you tooptimize your retirement.
So I want you to think about itlike being a retirement boxer.
(08:12):
I put this on the last podcastepisode, but sometimes you might
need to hear it again to fullysink in.
Let's assume you're a businessowner.
Okay, market's doing well,business is doing well.
You might go hire employees.
You might say I'm going to buya new piece of equipment.
You might do a lot of differentthings, but let's assume your
business does not do well.
Are you still going to go buyequipment and hire 20 employees?
(08:32):
No, that doesn't make any sense.
So what you're going to doinstead is spend a little bit
less.
I want you to think about yourbusiness as your portfolio.
Your portfolio is going to havetimes when it does really well,
like this year, markets aredoing well.
Then there's going to be otheryears where markets don't do as
well and I'm going to ask you tospend a little bit less not
spend $300,000, maybe spend$200,000 or $250,000.
(08:56):
Because if we do another taxstrategy at the same time, it
might yield way more money, andthat's what can lead to these
massive differences you'reseeing on my screen and that I'm
explaining for you.
So I know you guys want a nicecookie cutter answer of hey, if
I want to spend $300,000 a yearand I'm looking at a 4%
withdrawal rate, how much moneydo I need?
Well, 300,000 divided by 4%,seven and a half million dollars
(09:20):
.
But I'm showing you a couplethat doesn't even have $4
million that I would say, ifthey wanted to spend 25,000 a
month, they're in a spot to makeit happen, not saying they get
to go, do it, because this takesa lot of work and we need to
make sure their withdrawal rateis sustainable, which is what I
care about.
And if I look at the withdrawalrate here.
Look at this 11%, 9%, 7%, 6%.
(09:43):
That's not sustainable.
They will run out of money.
So even though their graphmight look good here, this
doesn't tell the whole story.
So let's assume this couple saysyou know what, 25,000 months,
good, but to be honest, 15,000 amonth, like 180,000 a year,
that's more than enough, like Icould do everything I want to do
.
Well, they might see they're ontrack for an absurd amount of
(10:05):
money 20, $30 million and thenthey go to their withdrawal rate
and they look at it and they go, okay, what does it say?
Well, it shows it's starting at8%, which is very high, and
then 6%, and then 5, then 4, andthen 3, and now it's in the 2s.
Now, here they are in their 70swith a 1% withdrawal rate.
Do you know what happens when Ihave a client with 1%?
(10:25):
I yell at them.
I'm just kidding.
I don't yell, but I say, hey,you're not spending enough.
I cannot imagine you'reenjoying your retirement.
Or if you are and you'respending what you want to spend,
we better be doing somecharitable giving.
Or we better do another taxstrategy, because if we don't,
do you know how much moneyyou're going to have and when
those required distributions aregoing to come whack you in the
face.
So the point here is any type ofplanning.
(10:48):
If we're looking at taxstrategies, for example, let's
look at this couple and I'mgoing to explain it as well.
If this couple is optimal withtheir tax strategy, they will
generate 1.2 million moredollars.
At the end, they will havesaved two and a half million
dollars in taxes and they willhave ultimately optimized by
(11:08):
about 4 million total taxdollars.
So the point as to why I showsomeone this is because some
people get so invested in thetaxes they go this is awesome.
I mean, look at this a millionmore dollars in taxes.
Because I'm just smart with mytax planning.
Why would I not do that?
And I'll say, well, you coulddo that, or you could spend more
and enjoy your life more, ormaybe you could do part-time
(11:31):
income, or maybe you coulddetermine and it's gonna be very
difficult for a lot of you andI know that to say, hey, maybe I
get more massages in retirementor I go to a different physical
therapist that is going to costmore out of pocket, but I'm in
a spot to do so.
So if you want to startdreaming and understanding what
position you're in.
Of course, you can play aroundwith this tool, but ultimately,
what I want you to know is thisis not a cookie cutter thing.
(11:54):
Okay, let's assume you want tospend $25,000 a month and you
have a pension that covers$10,000.
Well, you don't need $25,000 tobe generated from some
portfolio, because you alreadyhave 10 coming from a pension.
You now need 15 to be generatedfrom your investments.
Let's assume that you have ahome and you're going to
downsize and it's going togenerate $2 million more.
(12:14):
Well, great, I mean, that'savailable for investment
purposes.
Let's assume you surrender anannuity.
Let's assume you don't buylong-term care.
I could do this on and on and on.
What I want you to really do,and the purpose of this is most
of you don't want to spend$25,000 a month.
I recognize that Now some ofyou are going to be like no, I
do, I just don't have thefinancial means to do it.
(12:35):
I get that I don't have thefinancial means to do anything
like this, but I want you toknow if you're wondering hey,
could I ever possibly trulyspend $25,000 a month?
Just watch this example righthere.
Let's assume that, just forexample's sake.
Okay, this couple's like look,I would love to spend $30,000 a
(12:55):
month.
Okay, just hypothetical.
Okay, $30,000 a month, that's$360,000 a year.
Okay, that's a lot of money.
Now I have some clients thatlive in Malibu.
I call them characters, okay,because they're a little odd.
You know Nice people, okay.
But some of my characterclients are like I want to spend
$30,000 a month, every month.
No matter what you say.
I'm like yeah, that's just notrealistic, like you might have
(13:17):
to work way longer.
And they're like all right, Idon't care, I like what I do.
So look at this graph for me andI'll explain it as well.
Here's a couple same couple 59,$3.8 million.
They're on track to run out ofmoney at 77 if they want to
spend $30,000 a year.
But what if they're like youknow, I kind of like what I do
and I, what if I just did whatI'm doing now?
(13:37):
I get I'd have to work longer.
But what if we worked a fewmore years?
Would that change things?
And they're able to run theprojection and go wait a second,
wait a second.
So if I work three more yearsexcuse me, four more years each,
we're on track for like $9million.
Well, that's if that means wecould spend $30,000 a year,
every single year, that'd bereally attractive to us.
(14:07):
They might go know, thirtythousand is a lot, but I think
it's just too much.
Maybe twenty eight thousand amonth is kind of our sweet spot.
And then they rerun the numbersand go well, you know, that's
awesome, but I don't needthirteen million dollars.
Maybe we retire instead, youknow, just a little bit earlier
and they're able to play aroundwith this tool in a really cool
way, so that they can determinewhere's their sweet spot, and
that's what I want you to reallydo here.
They are spending $28,000 amonth.
(14:29):
So $28,000 a month times 12.
Guys, here's $336,000 a year.
Now you can see they're stillrunning out of money at 90, but
they'll go.
Oh, so what if I work one moreyear from there?
The reason that one more yearhelps so much is it's one less
year that you're pulling fromthe portfolio.
It's one less year of saving toyour 401k and adding money to
(14:52):
your brokerage account.
So, yes, it's powerful to workone more year, and the biggest
mistake I see I'm begging younot to do this is to go.
Oh, I'm going to wait.
And the biggest mistake I seeI'm begging you not to do this
is to go.
Oh, I'm going to wait.
Oh, one more bonus.
Oh, six more months.
How much longer are you goingto tell your spouse that?
Because most people come to megoing oh, yeah, that's me.
Yep, I just keep pushing itback and I don't like to, but I
just don't know.
You know what if markets godown, or what if Social Security
(15:14):
gets reduced, or what ifinflation?
And I'll say well, test forthat.
Like, still run the numbers.
Like, only retire when youfully are confident, but don't
cheat yourself and just go.
You know I'm 55 and my neighboris not close to retiring, so I
don't think I'm going to be ableto make it happen.
Don't do that.
Like, really understand theposition you're in.
Work with an advisor I don'tcare if it's me, I don't care if
(15:35):
it's another advisor Justunderstand the position you're
in.
Something like 0.00012% ofpeople that watch our YouTube
videos work with me.
So I recognize that most of youwatching this video are not
gonna work with me.
Maybe you're gonna use the toolthat I'm showing you right now.
Maybe you're gonna keeplistening to the podcast and go
hey, that's good enough for me.
I get my education here.
(15:56):
I don't know what you're gonnado, but I wanna help you,
regardless of where you're at inyour journey.
So if you don't have three, 4million bucks, you're going to
one day and you're going to wantto know how much income that
could support.
Use a tool like this andunderstand how you can start
optimizing and going.
Okay, this makes sense, and oh,maybe I switch this trade off
and really get a good sense.
(16:16):
Don't over optimize, which Isee people do.
What if markets drop by 90% andsocial security is never there?
It's?
Hey, let's not be unrealisticwith this.
Let's just be conservative aswe look at planning.
So hopefully this video casestudy podcast was helpful and if
so, please subscribe, like thisvideo and share it.
If you want access to the toolI'm showing right now or you
(16:39):
want to work with my team, youcan see in the description of
this video and podcast where youcan go to do just that.
Thanks, guys.
Thank you for listening toanother episode of the Early
Retirement Show.
If you have a question that youwant answered in a future
episode, you can always go to mywebsite,
earlyretirementpodcastcom.
That'searlyretirementpodcastcom, and
(17:01):
you can go ahead and submit aquestion that I'll look to
answer in a future episode.
Thank you all for listening.
Please do rate it, review itand share it with someone who
you think would benefit fromthis information.
If there's anyone out therethat you know, I certainly
appreciate it and I will see youall each week.
Hey guys, it's me again.
Please be smart about this.
Nothing in this podcast shouldbe construed as financial, tax
(17:23):
or legal advice.
Consult with your tax prepareror financial advisor before
taking any action.
This podcast is forinformational purposes only.
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