October 18, 2025 • 13 mins
The real question isn’t “Can we retire?”, it’s “On how much, and when do the big costs fade so our savings can breathe?”
In this episode, James walks through one couples' retirement plan to show how timing, travel, and housing choices can turn a shaky forecast into a confident glidepath.
He highlights the income canyon most people miss (the stretch between retiring and starting Social Security) where withdrawals rise sharply, then ease once benefits begin and the mortgage is gone. By front-loading travel for the first ten “go-go” years, delaying Social Security, and planning a mid-70s downsize, they achieve nearly the same security as working three extra years without giving up their best health and freedom.
James explains why the 4% rule can mislead, how to align income with evolving expenses, and what it takes to keep a plan sustainable through market swings and lifestyle shifts.
Key Takeaways:
• The income canyon between 65–70
• Smarter spending vs. working longer
• Front-loading travel without straining savings
• The “retirement spending smile” in action
• When downsizing adds flexibility and security
If you’re in your 60s wondering when your savings can finally breathe, James lays out a clear, practical path to a confident “yes” on retirement.
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The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
If you're in your early 60s with a couple million
dollars saved for retirement,you're probably starting to ask
yourself, is now the time toretire?
Should I do it now?
Should I wait till 65?
What's the right decision forme?
Well, that's exactly what we'regonna show in today's case
study.
We're gonna show you how theseseemingly little decisions can
have huge implications over theduration of your retirement.
And instead of just telling youabout it, I'm gonna show you an
(00:21):
actual case study to illustratethis.
So what we're gonna do is we'regonna take a look at Michael and
Lisa's plan.
This is Michael and Lisa.
Michael and Lisa have a couplemillion dollars saved between
their retirement assets.
They have a joint investmentaccount, so a brokerage account
here.
They have a 401k, Lisa's IRA,Lisa's Roth IRA.
You can see their ages today are62.
They have a couple milliondollars.
They also have about$900,000 orso of equity in their home.
(00:43):
Now, as of today, that's equity,that's value, but it's not
necessarily something they'regonna live on in retirement, at
least not initially.
So they have equity in theirhome, they have a couple million
dollars in their 401k, andthey're asking themselves, can
we do this?
Can we retire?
So they want to retire at 65.
That feels like the age they'resupposed to do it.
Medicare kicks in, that seemslike a traditional age to do so.
(01:04):
So that's what we're startingwith to see is 65 the right age
to do so.
And their expenses, if we lookat a simple projection of what
they're spending right now, are$14,000 per month.
Now, don't get too tied up onthe specific expenses.
Your expenses might be$4,000 permonth, or your expenses might be
$24,000 per month.
Regardless of what they are,look at the framework that we're
gonna go through as we walkthrough this.
(01:25):
So their core expenses are$14,000 per month.
We have a separate travel budgetright here.
I'm keeping that as a zero rightnow, and you'll see why in just
a couple minutes of why I'mdoing that.
But$14,000 per month, which tothem covers their travel.
They spend about$50,000 peryear,$48,000 per year or so on
travel.
And the other$10,000 or so permonth is actually core living
expenses for them.
(01:46):
Then beyond that, they havetheir medical expenses.
If they were to retirepre-Medicare, they would need to
be able to plan for$9,600 peryear for each of them for
medical costs.
After age 65, they have theirMedicare Part B and part D
premiums.
And then they're estimating anadditional$4,000 per year of
out-of-pocket costs beyond that.
So these are their expenses,these are their goals.
(02:08):
Their income today is theirsalaries.
So they make a healthy incometoday.
This is supporting all of theirneeds.
When they retire, of course,that goes away.
But Michael will have his socialsecurity at age 70.
You can see we're planning for$4,000 per month for Michael.
Lisa will have her benefit at$70,000 of$3,900 per month.
And then they expect aninheritance.
There's probably somethingthere, but we're showing zero.
(02:29):
We want to see can you retire?
Can you make this happenregardless of whether or not you
receive anything in aninheritance?
Then we can illustrate whatwould the actual impact of that
inheritance be.
But for now, we're planning forzero so that we don't bake that
into their initial plan,planning scenario.
So that's their income.
They're both saving 10% to their401ks.
And what we want to know is, arethey on track to do all this?
(02:52):
So I'm going to go to theirretirement tab and go to cash
flows.
The cash flows is the lifebloodof everybody's retirement
strategy.
If you want to know if you canretire, the question is: do you
have enough income flows comingin to meet your expense outflows
going out?
Here's how we look at this forthem.
For the next few years, Michaeland Lisa have their salary.
So they're good.
That salary comes in that meetsall their expenses, but then
(03:14):
that goes away.
And you can see a whole bunch ofzeros here from age 65 until age
70.
And at age 70, what happens istheir social security benefits
kick in.
But in the meantime, there'snothing that we're projecting in
income outside of any moneythey're pulling from their
portfolio.
They do have expenses though.
You can see these expenses righthere.
This is the$14,000 per monththat we're planning for.
(03:36):
In addition to that, we areshowing mortgage payments
separately.
The reason I'm showing thatseparately is because that
$14,000 per month, that's theircore lifestyle expenses.
That's going to continue on ago-forward basis.
Their mortgage, their propertytaxes, the insurance piece of
this will last forever, but theprincipal and interest piece at
some point gets paid off.
And you can see for them thatgets paid off right around age
(03:56):
70, and we no longer need toplan for that.
But, anyways, if we go back tothe expenses, we can start to
see how their expenses areprojected to play out each year.
Core expenses, taxes, if you addall this up, the total outflows
is the combination.
This is the amount Michael andLisa need to pay taxes, to pay
their mortgage, to have theequivalent of$14,000 per month
(04:18):
in today's dollars left over tospend throughout their
retirement.
This net flows is what I want tofocus on for them.
This shows how much do they needto pull from their portfolio to
supplement their income sources.
Their income sources in thesefirst five years, nothing.
There's no salary, there's nosocial security.
So that means if their totaloutflows are 252,000, that full
(04:41):
252,000 must come from theirportfolio.
But here's the interesting thingwith that.
And this is actually where somepeople get tripped up when they
think about retirement via can Ispend 4% per year of my
portfolio or 5% per year of myportfolio, thinking that it's
some consistent amount they'regoing to be pulling.
Well, look at Michael and Lisa.
It's an amount that actuallystarts to grow quite large for
(05:01):
the first few years, but thenthat amount gets cut by almost
half.
And the reason it gets cut byalmost half isn't because all of
a sudden they stop spending.
It's because Social Securitykicks in for both of them.
And by the way, it's age 70.
So they both have strongbenefits, and their mortgage is
paid off.
So it's a combination of outsideincome sources increasing while
simultaneously their expensesare decreasing.
(05:23):
So the pressure that's put ontheir portfolio drops pretty
dramatically here.
But as we look at all of this,the question is: can their
portfolio support this?
We know they have a couplemillion dollars on their
portfolio today.
We know they're saving about 10%per year towards their 401ks on
a go-forward basis.
Are they projected to be in aposition that they can support
pretty significant withdrawalsin those early years?
(05:43):
That's where we go to this pageright here to see.
Here's what that's projected tolook like for them.
Here's their portfolio today,that couple million.
They save, they grow, they save,they grow, they retire at the
end of their 64th year, so goinginto their 65th year, and they
gradually spend their assetsdown.
Now, they have enough to meettheir needs, but not all the way
throughout their retirement.
And you see they're projected torun out sometime in their 80s.
(06:04):
Now, we of course don't know howlong they're gonna live, but
also we don't know if there'sgonna be a major market
downturn.
There likely will be a majormarket downturn sometime during
their retirement years, whichcould increase or magnify the
impact of this drawdown fortheir retirement years.
If we look at their probabilityof success, it's not good.
It's not a high probability ofsuccess.
It's not something that Michaeland Lisa are gonna look at and
(06:26):
have a really high degree ofconfidence saying, yeah, we're
good to go, we're gonna retireat 65.
So that's where we startedplaying with different options.
Their first inclination was tosay, okay, well, if that doesn't
work, then it probably means weneed to work longer.
What if it's not 65?
What if we both retire at age68?
What does that mean?
Well, we can refresh theirprojection here and we can see
the impact of that.
(06:47):
Working three extra years has apretty significant financial
impact.
The probability of success goesfrom 24% to 65%.
So that looks good on paper, buthere's what that doesn't take
into account is those are thethree best years in terms of the
health they're gonna have, theenergy they're gonna have, the
vitality they're gonna have.
So that might be necessary, butevery year you work longer, yes,
(07:08):
it helps the financial side ofthings, but what does it take
away from your ability toactually enjoy and do the things
you want to do in retirement?
That's where financial planningcomes in.
What's the balance of beingfinancially prepared without
risking too much of working toolong, saving too much that you
miss life along the way?
Now, by the way, if you want torun your own projections, you
can get access to the same exactsoftware in the Retirement
(07:29):
Planning Academy.
Link is in the show notes below.
But as we go back to this, holdthis in your mind.
Think of this that yes, if theywork three more years, they're
good, but that shouldn't be thefirst thing that we looked at.
I'm gonna reset this for asecond.
And if you recall, I mentionedthat$14,000 per month is what
they want to spend.
But that was just looking at asnapshot in time right now.
And I mentioned that of that$14,000,$4,000 was really for
(07:51):
travel, which comes out to$48,000.
We'll round it to$50,000 peryear for travel.
And the remaining$10,000 is whatthey actually want to spend.
So in conversations, do youthink you're gonna be spending
$50,000 per year for travel inyour late 70s and your 80s and
beyond?
The answer is no.
The answer is really can wespend that amount for the first
10 years or so of retirement?
(08:11):
So that's why I put this cardhere.
I said, what if we take thattravel budget?
Instead of making it zero, butyou can see here that goal ends
after 10 years.
What if we do this?
What if we take$4,000 per monthfrom here and we put that into
their annual travel budget?
So in other words, nothingchanges for the first 10 years.
You're still spending everythingyou want to do, but from 75 and
(08:32):
beyond, you're not spending thesame amount on travels.
So if we refresh the plan withthese numbers here and plan for
the same spending for the first10 years, but then less you're
spending 10 years out, what yousee is things look the exact
same for the next 10 yearsbecause again, nothing has
changed with how much they'reactually spending there.
What does change is from 10years and beyond, their
(08:53):
portfolio is projected to staymore stable.
Their portfolio is projected togrow more.
Now, this is in no way aguarantee.
This is assuming some averagerates of return of about 6.5%
per year with our portfoliovalue throughout retirement.
Not a guarantee, simply anassumption that we're making to
illustrate some potentialoutcomes.
Their probability of success, bythe way, goes from 24% to that
(09:14):
same 65%.
So that was the same exactprobability of success that they
had if they had worked threemore years.
So put off retirement from age65 to 68, or in other words,
equal outcomes, equal impact ofworking for three more years and
not retiring versus simplydialing in the budget to say
what's a more accurate, what'smore realistic assessment of how
much we might actually spend.
(09:35):
Now, here's another thing thatcould be a potential huge
benefit for people's retirement,but isn't always taken into
account.
When you look at these numbersright here, all these numbers
are assuming, so let's assumethat 10,000 per month for core
living expenses.
We're assuming that goes up byinflation.
So 3% every single year is theassumption that we're making
here.
In reality, there's somethingcalled the retirement spending
(09:58):
smile, where the averageretiree, you talk about the
phases of retirement, the go-goyears, the slow go years, the
no-go years, they're not assharp and distinct as that.
It's not like for a few yearsyour spending is here and then
it drops here and then it goesup again because of increased
medical expenses.
It's more of a gradualprogression.
What research actually shows isthat it's more of this gradual
(10:18):
projection where if inflation'sincreasing by 2% per year, your
spending as a retiree is morelikely to increase by 2% per
year if you're that averageretiree.
So you're still giving yourselfcost of living adjustments, but
as you start to do less and lessover the course of your
retirement, your spending's notquite keeping up with inflation.
Not because you're sacrificing,but because you're just not
(10:39):
doing as much in your 80s as youwere in your 60s.
So if we look at that and say,well, what would the impact be
of not just adjusting ourspending for inflation, but
adjusting it based upon thisretirement spending smile,
increasing spending at 2% ifinflation increases at three,
you can see the probability ofsuccess here starts to get
pretty high.
Let's take this one stepfurther.
(11:00):
We showed that Michael and Lisahave almost a million dollars of
equity in their home.
They've got a great home rightnow, that's where they raise
their family.
They don't know that they'regonna spend or that they're
gonna live there forever.
In fact, one thing we modeledout is we said, what if you
downsize your home at somepoint?
If the value today is about 1.1million, what if in about 15
years you downsize to somethingthat's worth$700,000?
(11:21):
So they're 62 years old today,so this means in their mid-70s,
they're downsizing.
What does that look like?
Well, if we illustrate that,what we're gonna see is it's
going to have a prettysignificant impact on their
plan.
You can see how dramaticallytheir probability of success has
increased without that much of achange.
It's simply more accurate inputinto what we're planning for.
(11:42):
So this is a point that I wantto illustrate.
Going back to those of you whoare in your early 60s with a
couple million dollars, can youretire?
The answer almost certainly isyes.
The bigger question is on howmuch?
How much can you spend?
What do you want your lifestyleto look like?
Depending on where you are inthe country, depending upon your
needs and your desires, thatcould be a very low number, that
could be a very high number.
(12:02):
So the question is it depends.
But what you must understand iswhat does your cash flow look
like?
How do you convert thatportfolio value into an income
stream?
How do you take that portfolioand understand what can this
create an income, and how doesthat compare to the expenses
that I have?
Take it a step further to whereyou should actually be thinking,
how do I treat the income frommy portfolio as just one income
source stacked on top of socialsecurity, stacked on top of
(12:25):
potential rental income,pension, whatever other income
sources you have, to say how dothese total income sources
compare to these total expenses?
And how might these totalexpenses change throughout my
retirement if I travel more orless at the beginning, if I
start to spend less as I age, ifI have goals that maybe aren't
consistent, but maybe I want tosupport a child's education or
(12:46):
wedding or grandchildren orwhatever that might be.
When you can build a plan thatshows you how much your
portfolio can create in incomeand how that compares to the
actual expenses you personallywant to have throughout
retirement, that's what's goingto give you the clarity to
understand can you retire atyour age with your given amount
of assets?
If you're in your early 60s with a couple million
dollars saved for retirement,you're probably starting to ask
yourself, is now the time toretire?
Should I do it now?
Should I wait till 65?
What's the right decision forme?
Well, that's exactly what we'regonna show in today's case
study.
We're gonna show you how theseseemingly little decisions can
have huge implications over theduration of your retirement.
And instead of just telling youabout it, I'm gonna show you an
(00:21):
actual case study to illustratethis.
So what we're gonna do is we'regonna take a look at Michael and
Lisa's plan.
This is Michael and Lisa.
Michael and Lisa have a couplemillion dollars saved between
their retirement assets.
They have a joint investmentaccount, so a brokerage account
here.
They have a 401k, Lisa's IRA,Lisa's Roth IRA.
You can see their ages today are62.
They have a couple milliondollars.
They also have about$900,000 orso of equity in their home.
(00:43):
Now, as of today, that's equity,that's value, but it's not
necessarily something they'regonna live on in retirement, at
least not initially.
So they have equity in theirhome, they have a couple million
dollars in their 401k, andthey're asking themselves, can
we do this?
Can we retire?
So they want to retire at 65.
That feels like the age they'resupposed to do it.
Medicare kicks in, that seemslike a traditional age to do so.
(01:04):
So that's what we're startingwith to see is 65 the right age
to do so.
And their expenses, if we lookat a simple projection of what
they're spending right now, are$14,000 per month.
Now, don't get too tied up onthe specific expenses.
Your expenses might be$4,000 permonth, or your expenses might be
$24,000 per month.
Regardless of what they are,look at the framework that we're
gonna go through as we walkthrough this.
(01:25):
So their core expenses are$14,000 per month.
We have a separate travel budgetright here.
I'm keeping that as a zero rightnow, and you'll see why in just
a couple minutes of why I'mdoing that.
But$14,000 per month, which tothem covers their travel.
They spend about$50,000 peryear,$48,000 per year or so on
travel.
And the other$10,000 or so permonth is actually core living
expenses for them.
(01:46):
Then beyond that, they havetheir medical expenses.
If they were to retirepre-Medicare, they would need to
be able to plan for$9,600 peryear for each of them for
medical costs.
After age 65, they have theirMedicare Part B and part D
premiums.
And then they're estimating anadditional$4,000 per year of
out-of-pocket costs beyond that.
So these are their expenses,these are their goals.
(02:08):
Their income today is theirsalaries.
So they make a healthy incometoday.
This is supporting all of theirneeds.
When they retire, of course,that goes away.
But Michael will have his socialsecurity at age 70.
You can see we're planning for$4,000 per month for Michael.
Lisa will have her benefit at$70,000 of$3,900 per month.
And then they expect aninheritance.
There's probably somethingthere, but we're showing zero.
(02:29):
We want to see can you retire?
Can you make this happenregardless of whether or not you
receive anything in aninheritance?
Then we can illustrate whatwould the actual impact of that
inheritance be.
But for now, we're planning forzero so that we don't bake that
into their initial plan,planning scenario.
So that's their income.
They're both saving 10% to their401ks.
And what we want to know is, arethey on track to do all this?
(02:52):
So I'm going to go to theirretirement tab and go to cash
flows.
The cash flows is the lifebloodof everybody's retirement
strategy.
If you want to know if you canretire, the question is: do you
have enough income flows comingin to meet your expense outflows
going out?
Here's how we look at this forthem.
For the next few years, Michaeland Lisa have their salary.
So they're good.
That salary comes in that meetsall their expenses, but then
(03:14):
that goes away.
And you can see a whole bunch ofzeros here from age 65 until age
70.
And at age 70, what happens istheir social security benefits
kick in.
But in the meantime, there'snothing that we're projecting in
income outside of any moneythey're pulling from their
portfolio.
They do have expenses though.
You can see these expenses righthere.
This is the$14,000 per monththat we're planning for.
(03:36):
In addition to that, we areshowing mortgage payments
separately.
The reason I'm showing thatseparately is because that
$14,000 per month, that's theircore lifestyle expenses.
That's going to continue on ago-forward basis.
Their mortgage, their propertytaxes, the insurance piece of
this will last forever, but theprincipal and interest piece at
some point gets paid off.
And you can see for them thatgets paid off right around age
(03:56):
70, and we no longer need toplan for that.
But, anyways, if we go back tothe expenses, we can start to
see how their expenses areprojected to play out each year.
Core expenses, taxes, if you addall this up, the total outflows
is the combination.
This is the amount Michael andLisa need to pay taxes, to pay
their mortgage, to have theequivalent of$14,000 per month
(04:18):
in today's dollars left over tospend throughout their
retirement.
This net flows is what I want tofocus on for them.
This shows how much do they needto pull from their portfolio to
supplement their income sources.
Their income sources in thesefirst five years, nothing.
There's no salary, there's nosocial security.
So that means if their totaloutflows are 252,000, that full
(04:41):
252,000 must come from theirportfolio.
But here's the interesting thingwith that.
And this is actually where somepeople get tripped up when they
think about retirement via can Ispend 4% per year of my
portfolio or 5% per year of myportfolio, thinking that it's
some consistent amount they'regoing to be pulling.
Well, look at Michael and Lisa.
It's an amount that actuallystarts to grow quite large for
(05:01):
the first few years, but thenthat amount gets cut by almost
half.
And the reason it gets cut byalmost half isn't because all of
a sudden they stop spending.
It's because Social Securitykicks in for both of them.
And by the way, it's age 70.
So they both have strongbenefits, and their mortgage is
paid off.
So it's a combination of outsideincome sources increasing while
simultaneously their expensesare decreasing.
(05:23):
So the pressure that's put ontheir portfolio drops pretty
dramatically here.
But as we look at all of this,the question is: can their
portfolio support this?
We know they have a couplemillion dollars on their
portfolio today.
We know they're saving about 10%per year towards their 401ks on
a go-forward basis.
Are they projected to be in aposition that they can support
pretty significant withdrawalsin those early years?
(05:43):
That's where we go to this pageright here to see.
Here's what that's projected tolook like for them.
Here's their portfolio today,that couple million.
They save, they grow, they save,they grow, they retire at the
end of their 64th year, so goinginto their 65th year, and they
gradually spend their assetsdown.
Now, they have enough to meettheir needs, but not all the way
throughout their retirement.
And you see they're projected torun out sometime in their 80s.
(06:04):
Now, we of course don't know howlong they're gonna live, but
also we don't know if there'sgonna be a major market
downturn.
There likely will be a majormarket downturn sometime during
their retirement years, whichcould increase or magnify the
impact of this drawdown fortheir retirement years.
If we look at their probabilityof success, it's not good.
It's not a high probability ofsuccess.
It's not something that Michaeland Lisa are gonna look at and
(06:26):
have a really high degree ofconfidence saying, yeah, we're
good to go, we're gonna retireat 65.
So that's where we startedplaying with different options.
Their first inclination was tosay, okay, well, if that doesn't
work, then it probably means weneed to work longer.
What if it's not 65?
What if we both retire at age68?
What does that mean?
Well, we can refresh theirprojection here and we can see
the impact of that.
(06:47):
Working three extra years has apretty significant financial
impact.
The probability of success goesfrom 24% to 65%.
So that looks good on paper, buthere's what that doesn't take
into account is those are thethree best years in terms of the
health they're gonna have, theenergy they're gonna have, the
vitality they're gonna have.
So that might be necessary, butevery year you work longer, yes,
(07:08):
it helps the financial side ofthings, but what does it take
away from your ability toactually enjoy and do the things
you want to do in retirement?
That's where financial planningcomes in.
What's the balance of beingfinancially prepared without
risking too much of working toolong, saving too much that you
miss life along the way?
Now, by the way, if you want torun your own projections, you
can get access to the same exactsoftware in the Retirement
(07:29):
Planning Academy.
Link is in the show notes below.
But as we go back to this, holdthis in your mind.
Think of this that yes, if theywork three more years, they're
good, but that shouldn't be thefirst thing that we looked at.
I'm gonna reset this for asecond.
And if you recall, I mentionedthat$14,000 per month is what
they want to spend.
But that was just looking at asnapshot in time right now.
And I mentioned that of that$14,000,$4,000 was really for
(07:51):
travel, which comes out to$48,000.
We'll round it to$50,000 peryear for travel.
And the remaining$10,000 is whatthey actually want to spend.
So in conversations, do youthink you're gonna be spending
$50,000 per year for travel inyour late 70s and your 80s and
beyond?
The answer is no.
The answer is really can wespend that amount for the first
10 years or so of retirement?
(08:11):
So that's why I put this cardhere.
I said, what if we take thattravel budget?
Instead of making it zero, butyou can see here that goal ends
after 10 years.
What if we do this?
What if we take$4,000 per monthfrom here and we put that into
their annual travel budget?
So in other words, nothingchanges for the first 10 years.
You're still spending everythingyou want to do, but from 75 and
(08:32):
beyond, you're not spending thesame amount on travels.
So if we refresh the plan withthese numbers here and plan for
the same spending for the first10 years, but then less you're
spending 10 years out, what yousee is things look the exact
same for the next 10 yearsbecause again, nothing has
changed with how much they'reactually spending there.
What does change is from 10years and beyond, their
(08:53):
portfolio is projected to staymore stable.
Their portfolio is projected togrow more.
Now, this is in no way aguarantee.
This is assuming some averagerates of return of about 6.5%
per year with our portfoliovalue throughout retirement.
Not a guarantee, simply anassumption that we're making to
illustrate some potentialoutcomes.
Their probability of success, bythe way, goes from 24% to that
(09:14):
same 65%.
So that was the same exactprobability of success that they
had if they had worked threemore years.
So put off retirement from age65 to 68, or in other words,
equal outcomes, equal impact ofworking for three more years and
not retiring versus simplydialing in the budget to say
what's a more accurate, what'smore realistic assessment of how
much we might actually spend.
(09:35):
Now, here's another thing thatcould be a potential huge
benefit for people's retirement,but isn't always taken into
account.
When you look at these numbersright here, all these numbers
are assuming, so let's assumethat 10,000 per month for core
living expenses.
We're assuming that goes up byinflation.
So 3% every single year is theassumption that we're making
here.
In reality, there's somethingcalled the retirement spending
(09:58):
smile, where the averageretiree, you talk about the
phases of retirement, the go-goyears, the slow go years, the
no-go years, they're not assharp and distinct as that.
It's not like for a few yearsyour spending is here and then
it drops here and then it goesup again because of increased
medical expenses.
It's more of a gradualprogression.
What research actually shows isthat it's more of this gradual
(10:18):
projection where if inflation'sincreasing by 2% per year, your
spending as a retiree is morelikely to increase by 2% per
year if you're that averageretiree.
So you're still giving yourselfcost of living adjustments, but
as you start to do less and lessover the course of your
retirement, your spending's notquite keeping up with inflation.
Not because you're sacrificing,but because you're just not
(10:39):
doing as much in your 80s as youwere in your 60s.
So if we look at that and say,well, what would the impact be
of not just adjusting ourspending for inflation, but
adjusting it based upon thisretirement spending smile,
increasing spending at 2% ifinflation increases at three,
you can see the probability ofsuccess here starts to get
pretty high.
Let's take this one stepfurther.
(11:00):
We showed that Michael and Lisahave almost a million dollars of
equity in their home.
They've got a great home rightnow, that's where they raise
their family.
They don't know that they'regonna spend or that they're
gonna live there forever.
In fact, one thing we modeledout is we said, what if you
downsize your home at somepoint?
If the value today is about 1.1million, what if in about 15
years you downsize to somethingthat's worth$700,000?
(11:21):
So they're 62 years old today,so this means in their mid-70s,
they're downsizing.
What does that look like?
Well, if we illustrate that,what we're gonna see is it's
going to have a prettysignificant impact on their
plan.
You can see how dramaticallytheir probability of success has
increased without that much of achange.
It's simply more accurate inputinto what we're planning for.
(11:42):
So this is a point that I wantto illustrate.
Going back to those of you whoare in your early 60s with a
couple million dollars, can youretire?
The answer almost certainly isyes.
The bigger question is on howmuch?
How much can you spend?
What do you want your lifestyleto look like?
Depending on where you are inthe country, depending upon your
needs and your desires, thatcould be a very low number, that
could be a very high number.
(12:02):
So the question is it depends.
But what you must understand iswhat does your cash flow look
like?
How do you convert thatportfolio value into an income
stream?
How do you take that portfolioand understand what can this
create an income, and how doesthat compare to the expenses
that I have?
Take it a step further to whereyou should actually be thinking,
how do I treat the income frommy portfolio as just one income
source stacked on top of socialsecurity, stacked on top of
(12:25):
potential rental income,pension, whatever other income
sources you have, to say how dothese total income sources
compare to these total expenses?
And how might these totalexpenses change throughout my
retirement if I travel more orless at the beginning, if I
start to spend less as I age, ifI have goals that maybe aren't
consistent, but maybe I want tosupport a child's education or
(12:46):
wedding or grandchildren orwhatever that might be.
When you can build a plan thatshows you how much your
portfolio can create in incomeand how that compares to the
actual expenses you personallywant to have throughout
retirement, that's what's goingto give you the clarity to
understand can you retire atyour age with your given amount
of assets?
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