Watch Out! Can I Retire At 58 With $2 Million?

[@think_ffs3934]

10:38 "Does it really matter in this case when you take social security? No." Sorry, love your stuff, and your overall point is fair, but that statement just seems wrong. I get that your point was to move on to the more important thing is getting his expenses relative to investments & returns under control, but it DOES matter. Running out of money 86 after delaying social security to 70 is a materially better outcome than it was taking at 65 even though he still runs out of spendable assets at 86 either way. As you pointed out earlier, waiting to 70 will leave him with a significantly more social security income which continues on from 86 until death, so he'd have a significantly smaller gap to cover with home equity or other sources or a smaller drop in lifestyle if he makes no changes. It's not ENOUGH but it absolutely MATTERS.

[@yourfinancialekg]

Thanks for commenting!

[@Moneymanmick0804]

Drew, I watched this entire video. Before I watched it, I had signed up on your website for a call with you guys. However, I am really thinking of not doing that now. I have a very similar situation to your example in this video…including expenses of $7000 a month. My returns alone cover that $7000 without SS. I have no idea why you would have someone running out of money at 85. I am in the finance industry as well and I know so many people that never touch their principal balance and yet you have this poor guy going broke at 85…geez dude. Reverify your range to target. His investments alone should easily bring him 6-7% return. Yes, he may need to tap principal at some point, but run out at 85? Should not happen.

[@yourfinancialekg]

Thanks Tincupping. Principal is only as good as the interest that can be earned. Taxes and inflation also play a big part in the draw down of assets. All of this should be considered in a plan. That is what we do. Inflation, taxes increasing over time, and ROR in the lower single digits because you know from being in the finance industry that rates are coming down. Just wanting to be prepared. Thanks for your thoughtful comment!

[@Moneymanmick0804]

@@yourfinancialekg thank you! I’ll stick to my advisor. When rates were down, I did even better. $2mil and a paid off house….the guys is just fine. He will turn 6% with both eyes shut with lower rates. Invested in preferred stocks and some tax free bonds he can sleep with both eyes shut or HE needs a new advisor.

[@2012srp]

Good for him for having $2 million dollars at age 58, but shame on him for having such high expenses after retiring. He should have continued to work at something or sold some things to pare those expenses way down before he retired. Glad you addressed that.

[@yourfinancialekg]

Thanks for commenting and watching!

[@hejiranyc]

I am single and am about to turn 55 in three hours and I am seriously considering retiring at the end of the year I turn 57 (2026). I am currently in contract to sell one of my homes and will have about $3 million total in cash and investments after settlement. I plan to save/invest with a vengeance over the next 2.5 years and will hopefully have close to $4 when I finally hang it up. One advisor I spoke with told me to look into whole life/cash value life insurance to minimize taxes and manage risk in retirement. I would essentially be "borrowing" from the plan in retirement, which is not taxed or counts towards income. This will enable me to maximize Roth conversions within the lowest marginal tax brackets while also providing income in the form of loans that technically do not need to be paid back (but the death benefit is lowered). Can you do a video scenario that includes whole life insurance as part of the retirement income strategy? I have never seen this being used in a retirement scenario. Dave Ramsey hates these life insurance products, which probably means they must be really effective!

[@yourfinancialekg]

Thank you for the suggestion and idea

[@2012srp]

I hope you don't do the whole life thing. Terrible idea. Ramsey is not right about everything, but he's right about that. You can just buy index funds with that $4 million and never run out of money. You could take 5% of of that each year for $200,000 and still watch the pile grow. If you need more than $200,000 a year to live on, then you need to downsize. Great job, and good luck!

[@hejiranyc]

@@2012srp The problem with just buying index funds is all of the taxes and the potential for epic losses in a down market. I currently have ZERO in Roth and will have around $1.5 million in pre-tax IRA/401(k) that I have to convert to a Roth IRA before RMDs kick in. The cash payments from a whole life policy, if done correctly, are not considered normal income (not taxed), which means I get to convert more into Roth while staying below the 22-24% marginal tax bracket. Don't get me wrong... I'm not 100% sold on the whole life insurance idea just yet since I don't fully understand how it works. I do know that there are a lot of fees/commissions involved with it, and it takes 5 to 10 years for it to "break even," but if set up properly, it can theoretically turn into an automated self-renewing money-generating machine that never goes down in value due to market volatility. If I understand it correctly, I could "borrow" money to live on (tax-free) and never actually pay it back; the life insurance policy, if set up correctly, actually pays itself back through earned interest/dividends, which replenishes the cash value over time. Very, interesting stuff that, again, I need to learn more about. If I were much older and/or I had reasons to believe that I would not have a long life, then this is probably not a good idea due to the long timeline involved. But based on family and personal medical history, barring some kind of freak accident, I do plan to live a very, very long time after retirement (40 + years), and I don't want to spend any of that time fretting about the market.

[@2012srp]

@@hejiranyc Keep researching annuities (whole life insurance). Almost no one recommends them at all for retirees as investment vehicles because of the high fees and low return you get over your life. The only people who do well with annuities are the people who sell them. If you are concerned about the market, then keep $3 million there and $1 million out of the market very liquid like in a high yield saving account or even CDs. Take from those places (and eventually Social Security) when the market is down. Really though, you should not be afraid of the market. The market historically goes up 73% of all calendar years and averages more than 10% growth annually. How much do you need annually in retirement? Start out by taking just 2.5% of your $4 million pile for $100,000 a year until you start taking Social Security if you want. Don't retire until you are 100% debt free including either a paid-for house or housing secured for as long as your are able to live without assistance. Get long-term care insurance. With 3-4$ million in the market, you should not ever have to fret about how the market does. The worst market crash in my working life (I am about to turn 58, and the crash began in October 2007) took three years to recover for me. If I had been in retirement during that time, I would have relied on Social Security and/or my three YEARS of emergency fund expense money. Super easy to plan for a big market crash like that in your position. Annuities are terrible. No tax breaks from them make up for how bad they are.

[@2012srp]

@@hejiranyc Also, just to maybe calm your fears a little bit more, if you put $4 million under a pillow (and no I'm not saying to do that), and you live 40 years in retirement, you can take $100,000 per year before running out of that money...and that doesn't count Social Security (assuming you are an American and eligible). Honestly, $4 million is enough to never run out of money and even die with much more than that if you want to.

[@markbajek2541]

I know a few people who retired at 58 with around 600K , but they live a relatively frugal life. No extra income streams. And if you are doing the 58-64 years via mostly"cash" savings and not via income from investments, as long as you keep your MAGI under around 20K you'll qualify for state medicaid in most states so your medical costs are mostly covered. Once they get to 65 and go on MedIcare their costs will actually rise. But they'll have SS to pull from if they want to at that point.

[@yourfinancialekg]

Thanks for sharing!

[@islandnard]

It seems like a lot to me too! They must be living the high life.

[@yourfinancialekg]

High high

[@jameschaves5723]

David is not being realistic. $90K in retirement is ridiculous. It’s not like he’s been living that lifestyle already!!

[@yourfinancialekg]

Thanks for sharing!

[@mallardcutter7209]

$90k a year in expenses? What is this guy doing ?? That seems awfully high unless he’s got a mortgage.

[@DWilliam1]

He’s living his best life…

[@yourfinancialekg]

Living a really good life

[@7SideWays]

Focus on the $90k in expenses more than a few hundred in social insecurity already.

[@yourfinancialekg]

True

[@mallardcutter7209]

It’ll be interesting to see how this works out. With $2 million you should be able to have multiple income streams.

[@yourfinancialekg]

Spending and how the money is invested is going to be the BIG factor in this video

[@BlindArmyVetern]

Inflation is never going to stop increasing or even keep goods and services at the current prices and proof is below with historical averages of the cost of living increases that beneficiaries receive in the past 48 years. The cost of living increase for Social Security Benefits between 1975 to 2023 is 3.8%. Of course, that'sj just the average. There were some yearsi with 0% increases (most recently, 2015) and some with double-digit increases (1980 andi 1981). There has been no increase of 6% or more since 1983 -- except for 2022, which featured an 8.7% hike. That means that inflation rate increase total of 182.4% over the past 48 years! Which in 1975 the average benfit was $257 and if that individual lived in 2023 their benefit would be $1540 a month. In saying that not being proactive and not planning personal finances for future inflation of goods and by budgeting, eliminating debts, and saving for the future unexpected expenses will lead to financial hardships.

[@yourfinancialekg]

Thanks for sharing!

[@mark7035]

Any idea what’s going on with the Social Security Estimator tool? It’s one (or was) of the best out there. Even did WEP/GPO for my former school teacher wife. It’s been down for over a month.

[@yourfinancialekg]

I'm having the same issue. Not sure honestly.