I don't get the adjust for inflation. Depending on what withdrawal method you use I guess it could make a difference. But using 4% plus inflation you simply increase your portfolio every year by whatever inflation is. You have to assume that your portfolio will keep up with inflation. Historically using 4% plus inflation has worked, of course there are no guarantees and I suggest you have a little flexibility in case things go south. The best way to fight inflation is to be as heavy in stocks as you can stomach.
Hey James. So a few some months ago I was ready to retire based on 4 percent rule. I know it is a general guide. Today though after the market dropped, my chances are reduced based on the same rule. So 6 months ago I was ready to retire, but today less so. How would a person handle such a situation ?
Don't retire until your savings balance is 30% over your planned retirement savings balance. This way, you're protected from 'sequence of return' risk (if there's a stock crash shortly after retiring).
Over the last 6 months the market has dropped 10%. You had to know this was going to happen. If you Google stock market corrections, they happen on average every two years. 4% plus inflation withdrawals are the worst case scenario in almost every scenario you end up with more money than you started with While this isn't the best scenario you could dream of it's extremely common. You may want to think about working with a fee only advisor to help you through these and all the future turbulent times
@@larryjones9773 Maybe if you're in the FIRE movement. I would tell Johny JSL to look a alternatives other than the 4% rule. James has a good video at czcams.com/video/gS42j3u37AY/video.html.
One more important thing. This analysis is to determine if you can retire with the same kind of lifestyle or standard of living as pre-retirement. Assume your calculations show you can't. You have to make sure you're not going to live in poverty so project into the future what the poverty line will be to ensure you're above the low water mark. If you're somewhere in between poverty and your current lifestyle, you're safe but have to make adjustments.
Hmmm ... how bout when you make $38k a year? I plan to work part-time after retirement, but I'm pretty sure I will still be below the poverty level. Depressing to think about. I hope to have about $100k in my IRA's so, any suggestions?
You figure out your tax liability and add that to your budget. You should be doing this at least 10 years or more before retirement You need to know your tax liability in retirement so you can make a decision on Roth and traditional retirement accounts. You want to take advantage of the standard deduction and lower tax brackets and retirement of traditional and then put the rest in a Roth If you mean how do you pay it you simply have the fund company withhold the money or you file quarterly tax payment.
Opps. $40,000 sustainable income makes you what a 2 - 5%er in retirement not sure but when you consider the number of Americans and 50 and above whom have less than $25,000 you see why Walmart is so successful and Nieman Marcus is not.
If your current lifestyle includes travel and vacation, then it won't be that much more in retirement if you're going to travel and vacation the same way. So you won't need to add that much. But health insurance premiums for Americans will increase for seniors.
But you'll no longer have to pay social security tax or save for retirement. There are many expenses you won't have in retirement that you did working. That being said you need to figure out your budget and leave some wiggle room for health insurance premiums to rise along with everything else
Only $20,000? That is an effective tax rate of about 17%, which is actually pretty high for that income. Remember, if that's a married couple filing a joint return, the first $24,000 is tax free!
Very clear walkthrough of the calculations, thank you
You’re welcome, Jim!
Very clear and helpful..watched it twice and took notes. Thank you for helping me feel more in control 👍🍁
Really helpful overview!
Thank you, Phillip!
Great video. Getting close and starting to really zero in on the retirement income sources. Thank you.
Thank you for watching! Glad you liked the video!
Very useful video! Thanks
You are most welcome, Dorothy!
I don't get the adjust for inflation. Depending on what withdrawal method you use I guess it could make a difference. But using 4% plus inflation you simply increase your portfolio every year by whatever inflation is. You have to assume that your portfolio will keep up with inflation. Historically using 4% plus inflation has worked, of course there are no guarantees and I suggest you have a little flexibility in case things go south.
The best way to fight inflation is to be as heavy in stocks as you can stomach.
Hey James. So a few some months ago I was ready to retire based on 4 percent rule. I know it is a general guide. Today though after the market dropped, my chances are reduced based on the same rule. So 6 months ago I was ready to retire, but today less so. How would a person handle such a situation ?
Don't retire until your savings balance is 30% over your planned retirement savings balance. This way, you're protected from 'sequence of return' risk (if there's a stock crash shortly after retiring).
Over the last 6 months the market has dropped 10%. You had to know this was going to happen. If you Google stock market corrections, they happen on average every two years.
4% plus inflation withdrawals are the worst case scenario in almost every scenario you end up with more money than you started with
While this isn't the best scenario you could dream of it's extremely common. You may want to think about working with a fee only advisor to help you through these and all the future turbulent times
@@larryjones9773 Maybe if you're in the FIRE movement. I would tell Johny JSL to look a alternatives other than the 4% rule. James has a good video at czcams.com/video/gS42j3u37AY/video.html.
One more important thing. This analysis is to determine if you can retire with the same kind of lifestyle or standard of living as pre-retirement. Assume your calculations show you can't. You have to make sure you're not going to live in poverty so project into the future what the poverty line will be to ensure you're above the low water mark.
If you're somewhere in between poverty and your current lifestyle, you're safe but have to make adjustments.
Very concise video explanation.
Thank you!
Great Video!
Thanks for watching!
Hmmm ... how bout when you make $38k a year? I plan to work part-time after retirement, but I'm pretty sure I will still be below the poverty level. Depressing to think about. I hope to have about $100k in my IRA's so, any suggestions?
At 63 I am right on track to retire very comfortably, at 103.
My property taxes and homeowners ins keep going up along with everything else.
Excellent explanation! Considering right now if we should hire your partner Ari to be our financial advisor.
How do you take out takes when your retirement is not tax free?
You figure out your tax liability and add that to your budget. You should be doing this at least 10 years or more before retirement
You need to know your tax liability in retirement so you can make a decision on Roth and traditional retirement accounts. You want to take advantage of the standard deduction and lower tax brackets and retirement of traditional and then put the rest in a Roth
If you mean how do you pay it you simply have the fund company withhold the money or you file quarterly tax payment.
Opps. $40,000 sustainable income makes you what a 2 - 5%er in retirement not sure but when you consider the number of Americans and 50 and above whom have less than $25,000 you see why Walmart is so successful and Nieman Marcus is not.
If your current lifestyle includes travel and vacation, then it won't be that much more in retirement if you're going to travel and vacation the same way. So you won't need to add that much.
But health insurance premiums for Americans will increase for seniors.
But you'll no longer have to pay social security tax or save for retirement. There are many expenses you won't have in retirement that you did working. That being said you need to figure out your budget and leave some wiggle room for health insurance premiums to rise along with everything else
Very helpful!
Thanks for watching!
$20K a year is WAY too little taxes. I pay that at a little over half of that $120K salary. That's totally unrealistic.
Increase tax sheltered contributions.
That would depend on your investments. For instance a Roth is not taxable. Plus don't forget you'll no longer pay social security tax
Only $20K in taxes on $120K salary????
And one needs to pay taxes on 401K withdrawals too.
Only $20,000? That is an effective tax rate of about 17%, which is actually pretty high for that income. Remember, if that's a married couple filing a joint return, the first $24,000 is tax free!
He was just using that $20k as example.
@@jdgolf499 until one of them dies.
wow is that how little tax u pay in usa
The 'little' we pay is far too much.
20% on $120,000 that would just be federal taxes. You also would have state taxes to pay
@@lovelife7343 don't forget sales tax, tolls, gas tax, etc.