The 3 Most Important Mindset Shifts to Make Going Into Retirement
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- čas přidán 5. 08. 2024
- In this video, James invites you to reframe the way you view risk, how to shift from a focus on maximizing return to maximizing resiliency, and the importance of a spending mindset in retirement.
Learn the tips & strategies to create your secure retirement.
⏰ TIMESTAMPS
00:00 - Introduction
1:04 - Purchasing Power Risk
3:13 - How Much Is Too Much Cash?
5:58 - What's The Greatest Risk?
7:13 - You Win By Not Losing
13:05 - Example of a Portfolio
14:42 - Shifting Mindsets
15:34 - Spend On What's Most Important To You
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Great stuff as usual!
What I needed to hear, well done .
I use buckets for cash and it varies between about 50k and 70k. Buckets are for doodads, property taxes, vacation, new auto, home repairs and emergencies. I put in about $2k/mo but when a bucket is full that monthly saving can decrease and when I empty a bucket (like to buy a car) then I start saving in that bucket again. And those bucket goals will have to change and increase with inflation.
I like it!
I’m getting close to retirement, and my goal will be to have a cash bucket with enough when combined with my pension to last about four years without having to cut back on expenses. A second bucket with balanced funds that could last another four years or so, and the rest (about 80%) in stock funds. The goal is to never have to touch those, as if the stock funds have dividend and capital gains distributions that should allow me to either spend those (since I’m already paying taxes on them) or replenish the cash bucket if needed after down years.
I realized a few years after passing 59 1/2 that I didn't need the ready cash cushion that I had maintained during my working and child rearing years. The main reason I ever let sums of money lose buying power sitting in a savings account was as insurance to not pay tax penalties for using 401K money during a financial or health emergency. If it was a job loss it could coincide with a stock market downturn and if I robbed my 401K the value may not get returned fast enough to ride the next recovery. So, since I no longer have the same scenarios to protect against we're spending down the emergency "cash" to delay an extra year before filing for Soc Security. In a sense we're getting 8% on the liquid cash as we spend it because we get that much more from SS each year we delay starting SS. I was fortunate to have never needed to touch the emergency cash during that prior phase of my life. Now if I need more money I can withdraw from 401K at a low tax rate and without penalty.
Nice perspective. Thank you.
@@RootFP Thanks, that's reassuring.
I also realized that when I hit 59.5. I started putting in way more than I need in my 401k to lower my taxable income and keep me out of the 22% tax bracket and my Roth IRA is now my emergency fund.
I have about two years of living expenses in cash and I bond when I started my early retirement journey late last year (2021) All is well so far , but Now I feel 3 years of cash and bond would make me feel safer.
I am retiring in one year. Right now I have two years projected withdrawals in cash but I intend to work a bunch of overtime in my last year and put away a third years worth.
2-3 years in cash. Some in bonds and the rest in S&P index fund.
Thanks for sharing, Marie
I'm thinking 2 to 3 years cash with another 2 to 3 years in bonds.
Thanks for sharing, Stephen.
Thank you for all the great info you create and share. Your second point really is an eye opener. I was under the impression that having 2-3 years in cash or a money market and the rest in something like VTI or VOO was sufficient. It didn’t occur to me that pulling 4-5% per year from the VTI/VOO portion could exhaust our savings. I assumed 4% would be a fairly safe withdrawal rate. I have a question, is there an illustration or graphic that shows the resilience of different allocations over a period of let’s say 30 to 40 years? for example 95% VOO and 5% cash, 80% VOO, 10% bonds, 10% cash or 60% VOO, 20% bonds, 20% cash etc. Thanks again!
You’re welcome, thank you for watching. I’m not sure if there are graphics out there that illustrate this exact allocation, but there are a lot that show similar investment mixes.
1 year in cash/ checking account, 3 years in cash equivalent cd ladder, 10 years in conservative mutual fund vanguard wellesley income fund, then the rest in gold, sp 500, more risk asset. that be 20%, 40%, 40%.
Thanks for sharing, Gary
I'll add that retirees approaching RMD age may want to have cash set aside to pay the taxes on their RMDs. I prefer not to deal with RMDs at all, so I'm doing Roth conversions now, while I'm still working. Many people do their conversions in that sweet spot between retirement and RMD age, but I would rather pay the taxes while I still have an income and the ability to work an extra year or 2 if I need to beef up my retirement savings. I feel the amount I'd save by waiting and converting when I'm in a lower tax bracket will be eaten up by my having to pay those taxes on a greatly-appreciated balance.
2 years of expenses should be in cash at all time
Thank you for sharing
15% cash!
Thanks Jeff!
I really enjoy your videos and watch most all … but these last few the audio sounds like you’re talking through a pipe , with almost an echo …. Just an FYI …. I’ll watch them either way , and thanks again !
I’m sorry! The next couple of videos will be this same way because they’ve already been recorded, but it will be back to quality audio after that!
Either move your microphone closer - perhaps not possible if you are relying on the mic in the phone - or cover more of the HARD surfaces in your office where sound can bounce around. Hanging a curtain or light sheet in front of your desk, while filming, can make a big difference.
The audio sounded fine to me....
I respectfully disagree with your point number three. I retired 15 years ago at age 57, and our net worth has approximately doubled. During that time we moved to a nicer home ( condo), and traveled through large parts of the world. We are fortunate in that we can do what we want to do. By no means are we "wealthy", but we have done okay. Our goal is to live well, and the way we wish to live, for the rest of our lives. Perhaps some of the money will be used for long-term care, or to leave a legacy. Having a goal of spending all your money before you die might sound good in theory, but does not work out in a real life scenario. Financial advisors push this all the time, but it is generally not the goal of retirees.
Lastly, like always , keep the Canole and leave the gun..😊 . Nice video.
I agree with you that everyone’s goal shouldn’t be to spend ALL their money. That’s hard to do in reality without risking running out of money. I was more referring to people who have more than enough but still don’t allow themselves to spend on things that would bring more quality of life
I put 10k in I bonds every year so that As I get closer to retirement my cash balance is higher and I don’t have to worry about it losing out to inflation
Sounds like a good plan
Unless you're in the 0% tax bracket you definitely have to worry to losing to inflation. I Bonds are guaranteed to lose to inflation after taxes
And the return of your I bonds compared to the return of the S&P 500 what did you lose?
The right amount of cash for us is 3 years worth of expensive
Thanks for sharing!
Wait from 60 to 90 years old to see the growth in shares if u live that long
6 mos in cash. This for me would be 30k
People worry to much about things they cannot control.
S an P crashed-- none left