Can I Retire at 55? How Much Do I Need To Save To Retire at 55?
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- čas přidán 20. 07. 2024
- Can I Retire at 55? How Much Do I Need To Save To Retire at 55?
In this video I want to help answer the question, How much money do I need to save to retire at 55? We have looked at many can I retire at 55 scenarios, but never how much in retirement savings and retirement investments do I need to retire at 55. I also want to take into account inflation throughout retirement starting with retiring at 55 and the average social security benefit starting at 62.
Retirement income strategies and retirement income planning are two big pieces to anyones retirement planning calculator. Whether you are wanting to know strategies for "retirement planning at 30", "retirement planning at 40", "retirement planning at 50", or even "retirement planning at 60" understanding how much retirement income that you want versus how much you need gives you a roadmap to follow to and through retirement.
Here at Pearl Wealth Group, we run a trademarked retirement investment and retirement income plan for individuals and families who are wanting to retire called "Your Financial EKG™." What we are trying to visualize is how long a persons retirement savings are going to last throughout retirement. If you are looking for early retirement planning tips or trying to saving for retirement in your 50's, You Financial EKG™ is a great tool to help you understand where you are retirement planning. Retirement planning and retirement income strategies shouldn't be complicated. They should just be done right.
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very very good video Drew, not many folks on YT go down to this level. keep up the good work !
John, thank you so much sir 🙏! I really want to reveal the thought process and planning behind retirement planning. Appreciate your continuous engagement with the channel!
Very good video. This is close to our situation currently.
Glad this video gave you some insight where you are currently. Thank you so much for engaging with the channel!
I really appreciate your channel. You have really helped me as I plan my retirement in the near future. May God bless your family as you have blessed mine with the knowledge you have given me.
You are so welcome!
Everyone. Drew is absolutely the real deal. We've met with several investment firms. None have come close to what Drew and team have done for our family. Reach out and just speak with Drew. You will hear for yourself what we learned and know.
Drew and team, thank you for being such a blessing to us. Please continue being a positive and trusting beacon of light. You are doing great things!
Paul, thank you so much for the amazing comment! We really enjoyed visiting and getting to know you and K. Hope you have wonderful week sir!
Great video. I would love to see these numbers with taking Social Security at 70 too.
Great idea Shawn! 💡
Another great video!! Do you ever factor pension income into your video scenarios?
Yes I do!
your math is wrong. not only did you factor the total inflation for every year, you have not growth on the money you still have invested. 1600 in SS today is not 1600 SS in 7 years. also at age 55 to have 1.1mil at 62 that would be about 550k-600k. So the real number needed at age 55 would be closer to 1.1million not 1.6 million.
You didn’t take into account that social security goes up every year and your investments will grow from age 55 to 62. I’m sure the present value of what you need is much lower than 1.6 million.
Rob, thank you for your comment! I don’t calculate SS increases seeing the SS will need a major adjustment between now and 2033. Investments do grow over time but I did use a future cash flow calculation which includes rate of return, inflation, periods, and present value to arrive at 1.6 million. Thank you for engaging with the channel!
Thanks for the video and explanation. $1.6mm net worth for a 55 year old isn't likely for many people in this country. Can someone at age 55 retire with $500k net worth but reducing annual expense to $40k a year? In your calculation, I assume you factor in the growth of your portfolio, right? With 4% rule, someone can live on $1mm net worth with $40k annual withdrawal amount perpetually and still keep $1mm at the end of his/her life. For your calculation, how much is left at the end of that person's life?
Great question! You have given me a great idea for a new video. Thank you so much for that. I do factor in the growth of the portfolio in all of my scenarios. Remember with the 4% rule it's 4% plus inflation for that year. So it actually could be much more than 4%. Thank you for the engagement!
@@yourfinancialekg I might assume higher market return as 8% year over year, which was achieved by performance of S&P 500 over many years(long term average at 10.5%). so 8% - 3%(assuming long term inflation rate) = 5% > 4% withdrawal rate. I'd love to see if you can use those numbers(net worth $500k to $800k retiring at age 55, possible for a lot more people) for a new scenario play . Thank you for the awesome video, btw.
You should incorporate Brandonflation into your calculation
😂
Well, this is me...only age 65 to age 70 as I am delaying taking SS til age 70 and taking IRA / 401k distributions and doing Roth Conversions in those 5 years.
Ron, I am glad this retirement scenario hit home for you! 🤛 Thank you so much for your comment and engaging with the channel!
Great video. Perhaps you covered it...but did you account for COLA on SS?
David, great question! I tend to shy away from COLA increases with social security because I’m concerned what social security is going to look like in 5-10 years. I would rather make really conservative projections and if it’s still in its current form then our planning is really good. Thank you so much for your comment and engagement!
@@yourfinancialekg I figured that would be the case. But COLA is historically about as sure as betting on SS itself. It doesn't quite cancel inflation, but it is close! So many variables to consider! I do agree with the conservative approach....and simulation results depend on where you position the guardrails!
@@daveharness70 You are correct sir. I am having a harder time professionally telling someone in their 40's or early 50's that SS is never changing and everything will be status quo. I would rather prepare for the hurricane (Florida analogy) and not get hit than not prepare and be crushed. Thank you so much for your engagement and conversation!
Good video to get people thinking about calculating what they will need in retirement. Plus they can adjust their numbers from your example to make their own spreadsheet. I caught a little math error though when I did this. You only need $434,078 in total from 55 to 62, which is the total desired income adjusted each year after year by 3%. You took the total inflation impact of $12,643 and multiplied by 7, instead of just adding each year's total inflation adjusted amounts for the 7 years. Year 1 income = $55,000, Year 2 income = $56,650, Year 3 income = $58,349.50 ... Year 7 = $67,643.06 and then just add all 7 of those incomes together. Right?
Joe, great comment! Yes I took the 12k and multiplied by 7. Maybe I forgot to mention in the video that I always over estimate. That’s just the conservative nature in me when I do retirement income planning. Thank you so much for the engagement and great comment!
I like how you went backwards for this to figure out how much you need to retire at 55. In your example, do you run out of money at 72? I know social security is still there, but are retirement savings gone at 72 in your example?
6:06 - There's a major issue with the way you're calculating the future retirement income. You said retirement need has gone from $55,000/year today to over $67,000 in the future. You then subtracted $19,000 social security income from the $67,000 to get the future yearly amount shortfall the investment portfolio would have to cover of about $48,000. The major issue is you didn't inflate the social security payout. Social security does increase with inflation. Assuming 2.5% average annual increases, the future value of that annual social security would be about $25500. $67,000 - $25500 = $41,500. This means the future portfolio needed is about $1,037,500.
Great comment! Yes! Social Security does increase with inflation but I do not calculate Social Security COLA in my projections. This is the same in all my videos. The main reason is we don’t actually know what Social Security is going to look like after 2033 so because of that I am very conservative in my estimations. Thank you so much for the great comment and addition to the channel!
He missed the penalty for taking social security early, if the median was $1600/mo, he should have used a number closer to $12k per year. He also missed paying taxes, if someone needed $55K of income they probably needed to generate $60-$65K of total income. So his calculation is likely too low. This creates the likelihood that social security is taxable, and the need to pay healthcare premiums which pushes income needs even higher.
@@jerrylabat550 Thanks for the comment. Median Social Security check of $1,600 does include individuals taking at 62 and all different ages. This is just median, not individual specific. Median retirement income figure does include taxes as well. Thank you again for the great comment!
@@yourfinancialekg Right, but 62 is not the median age for taking social security, so you should still reduce the benefit as $1600 per month is not the median amount for those claiming at 62. It is the median for all recipients, including those taking it at 70. I would bet you don't use $1600/mo for your calculations for people retiring at 70.
@@jerrylabat550 good point!
Great video I want to retire at 55 but I am stumped on health care
Mike, maybe consider private insurance and putting those premiums into your income plan. Asses that for 10 years until Medicare and see where you land. That’s always a thought.
I am 60 w $380K (was $450K then Recession hit!) How do we calulate the Pension ar Retirement then Soc Sec at 65-67? Don't want to wait ubtil 70?
Thanks for the question. Ask yourself when do you want to retire. From there calculate how much your retirement expenses would be and how much of that would be covered by the pension. Then from there you can determine should you take SS at 65, 66, or 67. Hope this helps! If you want more detailed help, please contact us pearlwealthgroup.com
Joseph, if you go to SSA.gov sign in and they have a estimater that you can play with to see what the difference is. Making more money at the end of the career unless you have less than 35 years worked won't affect it much. But when you take it will. For me 63.5 is the time to take it. hope this helps.
What do you allocated for ins.
Depends on each situation. Single/Married. 800-1200.
I read all the comments, but I'm still confused as to how the 65,103 (62 to 72) equals 1,136,379 over 10yrs. To me it should be 651,030. Bringing the total to 473,501+651,030 = 1,124,531 over the age 55 to 72. No? You mention in another comment "future cash flow calculation" and to age 100? Curious because I am 55. thanks.
Tom, thank you for the comment and question. I used a future cash flow calculation to get the final number. With a financial calculator you already have years, rate or return, future value, and payment. The only thing left is present value. The present value is the final number needed in order to never run out. I also counted for inflation but not cola increases on social security. Thank you!
@@yourfinancialekg thank you for the quick answer.
@@tomg4892 Anytime!
@@yourfinancialekg so you are saying they can take out the $55,000 plus inflation in perpetuity not run out if they have the $1.6?
you don't explain how $1,136,379 is derived?? Please advise. 62 to 72? 62 to xx??
Great question: I wanted to show how exactly to factor income from 55-62. From there we can use the same formula but instead I stated that I used a future value calculation on my calculator. That gets you from 62-100. Thank you so much for the comment!
Is healthcare costs in your equation?
Yes, it’s built into the expenses. Obviously that’s going to fluctuate per person and family.
32 million… gotcha!!!
Yup!
My (very diversified) 401K has been greatly shrinking since Biden got his governmental policies up and running…3% inflation…its been WAY higher recently.
Market fluctuations are inevitable and political risk is certainly a main theme to market losses recently. Staying diversified and continuing to invest is the best thing you can do!
@@yourfinancialekg yes! When the markets are down…everything is at a discount…stocks are “on sale”. Plus apparently my house is worth about 40% more than 2 years ago! So not all bad.
@@OdintheGermanShepherd Love the mindset! Yes, on sale for sure!
You only included one SS check.
Challenge: Pay yourself as much as you pay Uncle Sam. Save and invest as much as you pay in taxes each year (Federal, State, Local and FICA).
If you can pull that off you'll be wealthy.
Great advice!
I am going to roll the dice at 55. Lol. I have one more year.
Awesome! Excited for you!
Is that 55000 income before or after taxes?
Kevin, the $55,000 is the before tax figure. I pulled that number from the median retirement income. Hope that helps!
@@yourfinancialekg thank you
@@kevincooper2619 No problem!
Are people really this simple? no investment income calculated.
Yes, this is a simple strategy to help individuals save for retirement. Thank you for watching!
“Invested” in a checking account with no growth. Bad advice.
Dan, thank you so much for your comment and engagement with the channel!! I appreciate your feedback and opinion. Have a great day!
I was under the impression that he assumed a 7% return after the age of 62 (4% rule + 3% inflation), I wish a checking account would generate that :-).
@@jerrylabat550 I’d take 7% safe any day!
Your initial calculation for inflation of 3% is way off. You've added in 7 years of 3 percent inflation to all 7 years... If you properly add only 3 percent each year, your yearly inflation numbers for the initial 55,000 become... 56650, 58349.50, 60099.99, 61902.98, 63730.07, 65672.88, 67643.06, leaving you a 7 year total of $434078.48 (Nearly $40,000 less required "nest egg")
Thanks for your comment and engagement! The board is just a base calculation. Once we have that figure, then we go to the software to get an even more detailed figure. Great comment!