Here's When it's Time to STOP Saving for Retirement
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- čas přidán 21. 07. 2024
- You shouldn't always save for retirement...as you would be missing the whole point of all of those years of saving!
In today's video, you'll learn how to understand opportunity cost and compound growth and how that impacts when you should consider stopping to save any more dollars for retirement.
Timestamps:
00:00 - Introduction
2:43 - Portfolio Growth
4:57 - Optimizing Time
7:13 - Opportunity Cost
10:08 - 3 Reasons To Stop Saving
11:55 - Avoid Regret
13:10 - Work With Us
Learn the tips & strategies to get the most out of life with your money.
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It’s refreshing to hear someone say you don’t have to keep saving at some point.
Totally agree with you, I’m 55.
I retired at age 45.
Watching you from Canada.
From my first job, I always saved 40% of my income.
And thanks to the power of compounding, I was able to retire early in my life.
When you have read too many obituaries of folks that didn't make it to retirement. I finally reached the point where the benefits of working, were less than the what I was missing out on.
Glad it helped!
That happened to me when I was 50. There was an empty lot next door that was to be the retirement home of some friends of ours. He worked until 65 and they started construction on a beautiful home. The first night they moved in we were wakened at 2AM by sirens and flashing lights. He had had a heart attack in his sleep and died. I had years earlier watched my dad die in the same way about a year after retiring. I decided money wasn't the most important thing. Bought a modest house where I wanted to live and now spend most days fishing, hiking, working in the garden and hanging with friends. Can't afford the travel I once dreamed of, but that's ok. You can't travel dead either! And we've still enjoyed a few trips now and then.
I keep hearing about people who are making into there 80’s and beyond
Retired at 56 to help my mother who until then was the sole caregiver for my father who has Alzheimer’s. Best decision I made.
Why are so many people you know dying at a young age?
What are you doing?
Eating?
Ingesting?
I retired as of 1/1/23 after 25 years in law enforcement. I have seen too many coworkers pass away with less than 5 years into retirement. Life is too short and every day is precious. My parents are in their 80’s and I want to enjoy time with them. It is important to stay healthy and take care of yourself. You can have all the money in the world but if you need to be healthy enough to enjoy it.
Glad it was helpful!
Wow James! You’ve convinced me that I should retire earlier, not end of next year. I just turned 60 three weeks ago and my wife is 55. My wife and I have accumulated a net worth of $7.3M as of last week (not including inheriting $820k in December 2023). Dedicated savers and especially investors in Silicon Valley since our mid-20s, we’ve done well, but it’s mentally difficult to just end my engineering career. I am trying. We’ve traveled internationally and domestically about four times a year despite our careers for 30 years. We occasionally buy a Toyota and just picked up Ford F-350 (always cash for everything) but we did splurged on an Airstream during the height of the pandemic in 2021 and will buy a larger one next year for months on the road after retirement . The “opportunity cost” not only applies to wealth creation and “money as a tool” arguments convinced me it’s time. You have among the best CFP videos I’ve pursued! Thank you from the bottom of my heart. My wife will thank you too!
Your #5 "tax benefits" are the reason I kept saving full-on until I retired (i.e. I was in a high tax bracket when working). However, the rest of your video is why I went part-time at 57, and retired at 59:
The young person has lots of time & energy, but little $$.
The middle-aged person has $$ & energy, but little time, always looking at the watch.
The old person has lots of time & $$, but is sitting on a park bench leaning on the cane with no energy.
I wanted my time while I still have my energy & plenty of $$ because I learned about compounding 35+ years ago.
This is great advice if Health insurance wasn’t involved. It’s the high cost of insurance that keeps going up every year that can make you poor fast. If greed wasn’t a factor in the Health Insurance industry and would give us reasonable costs that the average person can afford, than you wouldn’t have to worry about saving so much.
💯 a real issue here in the states
My mother is 93 and is still saving. Some people just cannot change their mindset.
My parents are 95 and 86 and are the same, lol.
Great show as usual. Im 63 and recently reduced my 401 contribution from 16% to 8%. Im trying to build up my cash emergency fund while still getting the free company match. Your show always seems like good advice and thank you for putting all this info out there.
Bill Perkins book, Die With Zero! Great read.
James. Thank you for the time you invest in helping older folks. You are a wonderful person. With a kind heart, like yours, you will always be successful. Thank you for clarifying and taking away some of the fear people may have to finally stop working.
Thank you!
What a great video coming from a young guy. Totally makes sense.
great video. Having to save & invest during the last 40 years its a hard habit to break. I understand your point. Im 68 with a 2M portfolio with no debt. But i still continue to invest because I like it , not so much for the money but the sense of being successful
I think his point is that your investment is accomplishing the investment now. :-) Go well, you've aced financial life already.
So true! My wife and I hit the savings hard before we had kids, then backed way off when the kids were old enough to appreciate and remember doing activities together. It has worked out great, because we made sacrifices early I get to retire at 54 and we have lots of great family memories as well.
Great perspective! So true James, best savers are the worst spenders. It’s difficult to change gears for the retirement squirrels out there. Another way of phrasing it is “money unspent is life unlived” …..Let’s live a little you deserve it!
That’s a great way of phrasing it. Thanks Andrew.
I’m totally guilty of being a great saver and horrible spender, but I’m learning!!
I got really emotional when you wrote "Money unspent is life unlived." So true. Thank you for the remider.
Read the book 'Die with Zero'. It will give you a different perspective on life & money. It really helped me.@@jalferrer7973
An interesting video and this is something I've struggled with. For me, I keep going for the tax savings and because we really don't need the money now. Thanks to our continued saving for retirement our tax liability is completely eliminated and I can make substantial Roth conversions completely tax free. Additionally, I can't seem to find ways to increase our spending in ways that meaningfully increase our happiness. I finally decided to stop worrying about it and that if something comes along we'll do it but I'm done trying to find things.
A perfect example is that a few years ago in the midst of the pandemic we saw a documentary about supper clubs. I asked my wife if when the pandemic was over if she'd like to start going every week to a supper club. She wasn't interested as I'm a pretty good cook and she said "When you can cook this good at home, it really is just stupid to eat out". Instead I decided to recreate the experience at home. I was already making NY strip steaks and bone in pork chops once a month each so this was a natural to expand in the "Supper Club Dinning at Home" evenings. Starting at 4pm I head into the kitchen to make a relish tray with crudites, made from scratch dip, crackers, cheeses, sausage, etc and salads with a homemade dressing. We then enjoy these and chat for about 45 minutes while a classical music video with a slideshow of European art, nature and architecture plays quietly in the background. Around 5:30pm I head back into the kitchen to make the main course and sides...we're done eating at 7pm and it's extremely relaxing, a much better experience than an actual supper club. Twice a month is the perfect frequency for us. I simply identified the key aspects to recreate, such as an extended, relaxed dining experience, everything made from scratch and using high quality meats from a local butcher. I also have "Friday Pizza and Movie Nights", "Burger, Fries and Shakes" and "Soda Shop Dessert Nights" as well.
This can be applied to pretty much everything else in life too, often the less expensive option being the better one as well.
Cheers!
Love your channel. I've shared with my 2 sons. You explain things very well.
You make so much sense!!!
This opportunity cost thing is exactly the conversation I was having with myself last year, and which I re-evaluate ever time I get frustrated at work. I grew up without much money and have been obsessed with work and saving since I was 10. I realistically probably shouldn't be contributing to my 401K any more, but I continue to max out because I'm obsessed with the tax mitigation aspect of it. Worse, I can't really spend the money I make now, at least not while working full-time.
I've spent years getting to this point, and don't know how to stop. These are problems and concerns that ultimately sound like "humble bragging," but it really has me wondering "now what?" I purposely took a few months off last year to test the waters, and did nothing but drive my wife and myself insane, so I took another job. You can't just change habits built up in a lifetime.
I feel like a dog whose been chasing a car, and now the car has stopped and I'm not sure what I'm supposed to do next. My latest obsession is travel, so that has allowed/required recalibrating how much I will need to spend in retirement and given me a new goal. I guess we'll see how I respond when I get there.
Thanks for sharing your experience. It’s difficult to change habits/identity.
Part time work is a good stepping stone when you've probably saved enough already. I still do IRA and 401k contributions for tax mitigation (because funding the feds is immoral) but I don't invest much beyond that anymore. I have more time to enjoy life, and the extra income from working that I probably don't need makes it easier to justify spending.
Think of it as reaching FI instead of retirement. You want to have a plan for when you reach FI, and that plan can include working.
Why not set a travel goal for the first quarter of 2023 and another travel goal for the second quarter?
You may find that the travel doesn't give you the fulfilment you are looking for; or you may find it so enjoyable that you decide to give up work; or decide to find work that allows you to work only 6 months of the year; or choose to work two or three days a week.
You may also find it helpful to have some sessions with a life coach to work out what you must want to do; and then calculate the annual cost of your desired lifestyle post retirement.
Then see a financial planner to work out a plan to make it happen tax efficiently.
I live in the UK. In my case I semi retired at 52 with a small real estate portfolio. Most years in the last 10 I had a low income, but massive control over how I spend my time.
Now at 62 I want to reduce it to 2 houses. Mostly I want to stay at home and read, but I have increased my activities at my church and I want to take 2 or 3 two week vacations a year to Italy.
If you are a person who likes to stay busy but doesn't need the money from being employed, try volunteerism! Work in a homeless shelter, delivering meals to shut-ins, read to those whose eyesight is lessening... you get the idea. You can be helpful to others and have some satisfaction from a 'job' well done.
Excellent! A subject that is not usually discussed. You're giving your clients a much need perspective they will not get elsewhere.
Great Video! Often, people fail to realize that an individual needs to balance the need for saving with the future with the opportunity costs of not using those resources today. Living intentionally helps. Knowing what really makes you happy so you focus on today's funds on those items and also save for the future helps.
I have watched several dozen of your videos so far and have learned a great deal. That said, I think this one is my favorite.
Thank you so much!
Great conversation....one we seldom or never have
Very very good point James! Thank you!
Thank you!
Thanks for that excellent thinking, James!
Thanks David
Amazing communicator you are!
Thank you!
Your guidance on retirement money is absolutely fantastic! Your instructions are clear, concise, and incredibly clean, making complex financial concepts feel approachable and manageable. It's evident that you put a lot of effort into delivering high-quality content. Thank you James for making the path to financial security so much clearer and easier to navigate! Love this video so much!
Excellent James. So enjoy your video content!
Glad to hear that!
Retired 21 years at 45. Didn't have a pile of money so it was a little scary. More importantly to me than a pile of money was my skill set. I had been a software engineer. Would have been super easy to jump back into earning a lot of money.
I added skills in retirement. I found I enjoyed remodeling my home and got into slow flipping my house. Now working on house #4. That's another skill that gives me security. Got into gardening/landscaping. Another useful skill.
That was a great feeling last year when my financial advisor said I could retire and I could stop investing. I still do the match my company provides, because it’s free money, but the rest I moved to cash in a high interest savings account to build up my emergency fund. Would like to have a year set aside of expenses.
Good thinking and ty for sharing
True thanks!!
Great information.
Great point of view; you nailed all the key considerations. Great work.
Thank you kindly!
Powerful by including the implications of two major factors. Compounding interest and opportunity cost.
Glad it helped!
Over here in the Uk we receive a basic state pension when we reach 67,, which is £9600 a year,, providing you have paid into the system for 35 years,, I plan to retire when I’m 57 and live on my savings for 10 years which will be in February 2023,, 🥳🥳🥳,, my 2 brother in laws both passed away in their early 60’s and didn’t receive one penny of pension, so I want to enjoy the best years of my health and say,, yes I can go to that family meal or meet up with friends or simply pursue new hobbies ,, life is precious and if you can afford to give up work and enjoy doing what you want to do then great,, a younger person starting out may jump at the chance of working more hours,, see, I’m thinking of others not myself , lol,,
Best wishes, Lisa
Life expectancy is 86, I don’t want to be looking for a part time job because I’ve run out at 80, Good Luck
Glad it helped!
@@neilcook1652 that’s true, but how much money will you need at 80 ? Not as much as 60 ,, I think it’s a clever person who has just £1 in the bank when they die ,,
Great video James. Watching from the UK - surprising how relevant much of what you say has to us over the pond. I am certainly looking at if I've saved enough already, and can retire already. Keep up the good work.
Thanks for tuning in from the UK!
Thanks, this was helpful. It gave me an important perspective.
Glad to hear that.
Nice job James!👍🏽
Thanks JP!
Amazing James. I didn't find any other you tube video, showing this perspective. This is just second video, I saw at your channel and you got me to like and subscribe this channel.
Thank you! Welcome to the channel.
An excellent, thought-provoking video!
Thanks, Jeffrey!
One of the Best video....!! Thank you so much for covering all sides...!!!
Thank you!
I’m 2 years from retirement and less than $100K from my retirement goal. I’m going to contribute enough to get the match the next 2 years. It’s semi retirement time and time to balance experiences and saving for the future.
I’m in the same situation. Two years til retirement. Just contributing matching amount and stacking cash.
You’ve reached a twist on FIRE: Financial independence; recreational employment.
Well said!
@@genxx2724😊
No matter how much one save, sometimes the uncertainty of the economy such as inflation, health, and expected cost can drain your savings. I wish I saved since I was in my 20s and 30s. During those times, I was not bringing home much income so saving was very difficult when you’re still in school making minimum wages.. This is the best advisory channel.
I have gone through several financial planners who really don't know how to manage money but only know how to push products. I think you are the most knowledgeable and articulate financial person I have ever listened to. I wish you were driving distance from me and I wish I knew about you 10 years ago! I have had to navigate tax decisions on my own and not sure I need much help anymore but it sure would be nice to have a trustworthy person to refer to!
Well said!
You really nailed it. It took me awhile to figure it out…
Thanks Chris
Ur very well informed James! I may be calling you!! Thanks !
I’m sure he’ll sit by the phone as he’s expecting your call 😂
Thanks Keith! We’ll be here.
Read your policy first to see if you need to be adding due to small fine print about how often you should add to it to keep your other components viable. Insurance cover may not continue on certain products in the folio if you stop adding a certain amount into your account if you become ill, or your employer is not paying the required amount in a timely manner, failing to pay due to bad business behaviour. Always keep a check on any new policy changes or company restructure, employment redundancies and possible additional things that you may need to change in case of terminal illness, pregnancy or death of a partner, spouse etc. These are also very important issues that would have significant change to your retirement, and don’t forget ‘Hardship’ as the economy is now in high flux world-wide.
Very good video. The other thing is that many people that are used to saving for retirement are not used to withdrawing the money even when they hit retirement and they continue to live on a shoestring budget even if that was not the original plan.
Thank you!
Thanks for sharing awesome tips! I’m financially free and currently growing a solid retirement plan. It takes a positive and consistency to learn new things, unlearn the old habits ms Important to get a mentor/coach to lead you all the way. It’s great to start young too!:)
Fantastic!
James, I found your content really useful. I am 30 years old, recently immigrated to USA, single, and just starting saving for retirement. Thank you for your videos!
Pinoy?
This is such a great video. It's the same concept as finance articles or advice that tell you to never drink Starbucks coffee or drive a new car. You shouldn't nickel and some yourself your whole life if you're financially secure.
I think everyone who commented on this video is correct. The fear of portfolios dropping is I think the biggest fear in stopping the investment. That said, even if you have a couple of hundred thousand in cash that can buffer a potential for market over the next two or three years, there’s still the unknown of how long that poor market will last and where will you sit after that time. I’m 64 and I’ve been working in the professional world for my whole life and saving my whole life, and all I wanna do is fix watches, play my guitar on stage, hang out with my grandchildren, and provide advice to other professionals as they build up their career. I can do that now while I’m still working, but only using slices of time.
Then there is the issue of transitioning from saving to spending. I know of quite a few retired people who continue to save. My parents were definitely that way. They lived well below their means and saved until their deaths. Transitioning from saving to spending can be a very difficult transition to make.
Yep! That mindset is difficult to change
We are closing in on that point. It is a very difficult transition. I find myself thinking how I can keep working part-time to cover day to day expenses so I do not have to withdraw, even though I know we are in good shape. I did watch my dad go through several hundred thousand with a medical crisis in short order. That keeps playing in the back of my mind...
Interesting, I also thought I might have the same problem. However, now whenever I think about the fact that I only have a few good years to truly enjoy the money, the problem goes away
Love the principles but at the moment with portfolios dropping in value it’s more difficult to stop saving, and it’s ‘sale’ time for shares.
If your time horizon is more than ten years, you shouldn't worry about the market dropping.
Glad it helped!
Yea, portfolios arent making 8%, so what you put in still matters.
We are having the same issue. Our portfolio seems to have stagnated so we're not seeing it generate it's own growth. Because of that, we just keep maxing out our investments and live with smaller paychecks. I'd like to think that once things turn around we'll see our portfolio explode but it's so hard to envision that right now.
@@jimboandkrishopefully,you are very happy now as market reached new highs!
James, thank you for this. It is so easy to focus on money and to forget why we save.
Your welcome, John!
"...focus on money and forget why we save."
I retired at 59 1/2 but I kept my saving until the end. I downsized, and starting working on reducing expenses. I also considered that without even thinking, I would automatically need less than 70% of my pre-retirement salary to maintain life style (i.e. 6.2% Social Security, 1.45% Medicare, 20% 401K/IRA, and mortgage 5% no longer a drag on income). Actual expenses are closer to 65% even with lots of travel.
Great video, I found a good balance between FIRE and "Die With Zero".
Great!
I took somewhat involuntary retirement at 49. Now 60. I fund all my needs and most important wants. I also enjoy saving and investing so still buy stocks with whatever excess cash I have at the end of the year. That way, my money is always available, and I can leave what I don't use to orphans.
Using a 4% draw, $1M gives you $40K a year, enough pay 50% tax on your SSI (over $44K, 85%).
With one of the big unknowns is future tax rates (I live in CA, double whammy). One thing I wished I had done was convert more of my 401k / IRA to Roth. This is even more important in a married couple if one spouse is likely to pass well before the other. The increased taxes during the Roth conversion are then compared to taxes when filing single.
I maxed out my 401-k and therefore was able to retire early. There was no opportunity cost from my perspective as I thoroughly enjoyed life while working. For me time is more important than money and working 40-hours a week did not give me the time I have now after retiring early and enjoying life even more.
Great topic and video. Thanks. What are your thoughts about retirement during a bear market?
Thank you. I did a video on this very subject a few weeks back. The answer is it depends on a number of factors but it shouldn’t hold you back if you have the right plan in place.
Smart video. Life isn't infinite.
Thank you
Your videos are great, but you might want to consider changing the background color by filming in a different room because the color of this room doesn't contrast much with you, and it makes you kind of disappear into the image.
We’ve saved steadily for retirement but enjoyed life along the way… going to Europe and doing vacations. We’re also putting kids through college. If we didn’t take vacations every year or pay for kids college, probably be retired now at age 52. I have no regrets though and have enjoyed my family and taking time to do enjoyable things along the way.
I’m single and 57 years old. I watch a lot of retirement videos and you have a wonderful, sensible way of explaining things that I really appreciate. I feel like I’m cheating on my financial planner 😂
Saving typically results in you earning a lower return but with virtually no risk. In contrast, investing allows you the opportunity to earn a higher return, but you take on the risk of loss in order to do so
James, you are wise beyond your years.
Thank you
Good topic no absolute answer! Young people don't have money either ( 22 years old for $10K). Long term nursing home care or life expectancy is difficult to estimate too. (if you don't want to burden your family). You will not know you have enough to retire because: A) life expectancy unknown. One could live to 72 or 102: B) long term disability care cost unknown. My aunt was a vegetable in hospital bed for 7 years because she couldn't be terminated.
I have always wondered how many people kept investing in and maintaining their home as part of an asset for retirement (as a tool for savings for retirement.) VS.just saving cash/investments etc....
This exact question came across my mind when I started investing for retirement when I was 28 .. I still believe one should take his foot off the saving throttle when nearing retirement, because the portfolio itself will do the heavy lifting through compounding. Other reason is you don't want to continue contributing to the retirement account nearing retirement because that will increase the average cost price of your portfolio. That's just my opinion, and thanks for the video, you got yourself a subscriber.
Thank you for subscribing!
I totally agree with you and probably could have eased up 2-3 years ago but then the government decided to print money like a rapper in a video. My portfolio still hasn’t recovered, not even mentioning the maxing out I’ve been doing since then.
So good :) i think this is why Dave Ramsey says 15% once you are out of debt and have an emergency fund. 15% isnt that much, so you can actually have a decent chunk to enjoy life once all your other expenses are covered. I am investing a lot long term at the moment, but I have a plan to double my income by setting up my own business which I am effectively doing at the moment anyway.
Thank you!
Matching is great to get but any extra could also be going to pay off your house or debt right before you retire also.
Very true!
I totally agree with you if you're retiring at a certain age.
But if you want to retire early and hit a certain amount you shouldn't stop saving until you hit your goal.
The bigger question is are you planning on retiring at a certain age or when you can?
Glad it helped!
Wow, it took me 50 years to figure out what you figured all out! Great job, agree with all you told here! And that in just over 13 minutes. I could have saved more, but what you told in the video about missing opportunities is so true, and I am glad I did quit a lot. If you only thinking in working and saving and enjoying later, then you miss youre life, and you won't have the psychological flexibility anymore to change it when you are hitting the 50ties. I stop in 3 years at 58 with working. Not because I hate my job, but because I like to shift to new challenges and a new phase. Ofcourse I can save more money by working longer, but I just figured out that I have enough by then to do the things I like. Budget travelling, low cost interesting hobbies like guitar playing, studying history and doing hikes all over europe, where I life One little point, 8% on average is quite a lot and I would always calculate a minimum of 2% of inflation into my calculations. Greetings from Switzerland and good to share youre knowledge and getting especially young people aware of this topic.
I’m smarter than Ronnie, I figured it out in 49 years.😅
Glad it was helpful!
@@chriscarter2138 I humbly bow to the king! 😅
This year I have backed off my 401k contributions to only what my company matches for this very reason.
I like it. Don’t leave free money on the table but also don’t devote everything to retirement savings.
@@RootFPgreat point James!
Yes, the growth for late contributions will be small but don't forget to factor in tax bracket differences between now and post-retirement. It's a real balancing act.
Been following James for a while and listening to his podcasts on the way to work whenever they dropped. Now I’m retired and I think this is his best message yet. When you get to that tipping point pull the trigger, get out and live your best life whatever that is.
Thanks, Tim. I appreciate you!
Hey there! Coming to you from the future…11/18/23…and James’ video posted today (The New Retirement Strategy that’s Changing the Game) is his best message yet! 😊 Cheers!
I hit my magic #$$$$$$$at 58. Retired best decision I ever made. I have yet to see a obituary that says I should have worked a few more years.
Congrats on retirement!
I agree in that you should enjoy life along the way. However, you should always save. I always paid my self first for retirement and lived off of 75% of my income 15% retirement, 5% emergency account and 5% fun account. These numbers would change if I purchased rental homes, but would return to these basic numbers after the purchase. Once a got a few rental homes I would save the income from them 80% and spend 20%. The way I based what I need in retirement was Using 1950 dollars and compare it to 1980 dollars and figured I would need about 3 million. $100,000. X 30 years based on Retiring in 2020, This was my guess in 1980 and of course I’ve corrected it along the way, but this was the way I started. I hit my retirement goal many times oven and retired at age 60 with a monthly income of about 15K. I’m debt free and have not decided when I will start collecting social security but at today’s dollars its about $4300 a month.
I’ve always taken one or two vacations per year, had nice cars and owned a nice home in a good area. I’ve always paid off my credit cards at the end of each month and paid cash for cars (most of the time), motorcycles and boats. I did live life, but I believe save first, then play and enjoy.
Glad it was helpful!
i like your content but maybe some charts would make it easier to visualize the concepts?
5 Million = Too old to do anything. Got it! Thanks!
i dont want to retire and do things , that i want to do when im still a little bit young. so balance is needed. you work and save but at the same time, try to enjoy life. coz i have a lot of friends, that is work, work, and never do anything to enjoy that money. you can enjoy life without spending too much money
I know some fellow retirees where it's an ego thing to keep building their nest egg. They want to leave the biggest one they can. No one is really going to care except the people who are going to be spending that money (family, charities, etc.), but to the deceased person it won't matter.
I plan on spending it down maybe leaving a buffer for end of life issues, but it's a tough transition and mindset change.
Agreed. Money should be used for a specific purpose.
Thanks James.
Life , liberty and happiness is the goal .
Not working to death.
Glad it helped!
I'm often commenting in retirement videos to encourage people NOT to be concerned with generation wealth and DON'T pay for kids college and be more concerned about maximizing you own life. That's why it was great to hear you recognize that some people don't have legacy goals. I hope it gets people to question why they would ever sacrifice years of their life so that other people don't have to.
Definitely good things to question
while i agree in principle, one main issue is moving the goal post further. a person saving and living below his means gets used to a lower standard of living. if due to the portfolio growth seen and projected, one stops saving. the money for retirement now starts getting spent on fancier vacations/experiences, more stuff etc...you now have lifestyle creep that increases the retirement costs if this lifestyle is projected into retirement. how easy is it to rein in lifestyle creep once it occurs? i thought about this long and hard the past 3 to 4 yrs before starting my early retirement. even then my net worth was increasing 2 to 3 times my income per year on saving 30-35% of my gross. i kept saving.
even now at 1.5 yrs into retirement i am underspending by drawing only 3%.this is my margin of safety in this current market environment. i will relax this draw rate later but as it is, it is still more than what we were spending monthly after savings when i was working. i still save in that i put money in my hsa and pay medical costs out of pocket so long as we are spending within our monthly draw.
Well said.
TY
Glad it helped!
my savings portfolio makes nearly as much money as I do now. So, recently I am not required to work for 15 hours per week, I would enjoy the extra 1.5 days off each week and see how I like working for 30 hours a week instead, at 58 years old.
Another great video! Wish I would have have heard your messages about 20 years ago when I was in my 30’s.
Thanks for watching!
But it isn't, I'm afraid. My and my employers contributions and the gain/loss on my 403B are about equal. Are you assuming people are not using the stock market?
Your advice makes complete sense theoretically but can be a slippery slope for some
How so?
I'm likely a candidate for slowing down on the "max out your 401k" philosophy. I've been doing Roth 401k for the last ten years and since you don't get the tax savings while you're earning, it eats into your disposable income so Roth contributions require more discipline on spending habits. Another point not mentioned is social security. Social security helps too. I don't believe social security will neglect its commitment, perhaps it may not deliver the amount stated on your statement but it will be there and help ease the pressure of maxing out at the expense of opportunity.
FWIW, Roth is probably not what you want while you're earning, unless it's very little (like while you're a student). Take a look at the Mad Fientist blog posts on IRAs and (particularly the Roth conversion ladder concept).
Nice approach!
My financial guy kept telling me i needed $2 million. Then my friends retired and told me the bank is full of BS. They have been retired for 4 years and live a nice lifestyle, and literally live off their Tax free saving account dividends (Canada). Yes we have Healthcare in Canada so that's a significant cost savings there.
The one word I have not heard him say, inflation, if it keeps going at present day rate we are all screwed. But he is right, no sense in dying rich.
inflation historically 3%.
I wish my pension had grown 8% in the last year! 😔
Don't we all!
When my account started fluctuating each day by the amount I could contribute every year I quit contributing and used the money to pay off debt.
Well put! But what are your thoughts about paying Uncle Sam all those tax dollars at a higher tax bracket instead of deferring them in the 401k contribution? Even considering that the contribution principle will be taxed later anyway, it will probably be at a lower rate if retirement income is lower than working years income. This is what's causing me to hesitate to stop maxing out 401k contributions.
Great presentation. I've made this case many times before. However, I came to realize that this holds true for financially successful people. Unfortunately, most Americans are not financially successful. Most are struggling financially. And that takes away lifestyle choices, and forces people to work and save forever.
Thank you!
Do you have any books on early retirement and part time work or business online, I am trying to get overseas before I get too old
Check out Amazon for their favorite books! Great fields and options.
Good book - Die With Zero.
Don’t miss lifetime moments with your family.
Richest guy in the graveyard doesn’t really win.
Nary a mention of the impact of inflation on your standard of living. To wit, to combat runaway inflation, the Federal Reserve raised interest rates from 6.5% (late 1976) to 21.5% (Dec 1981), before trending downward to 6% (1992); roughly a 15 year period. Ergo, those saving for, or entering retirement, could potentially be wildly underestimating their future financial needs & goals. Sure, you gotta live, but always remember, it sucks to be poor, but sucks even more to be old and poor.
Also sucks to work until you die. Gotta balance working long enough to be well financially but not so long you miss out on life.
Most wait to draw social security until they're 65 or 67. They they die at age 70. They only experience a few years of retirement. They're really saving only for someone else to inherit it all. Sad hamster wheel.
Glad it was helpful!
No, most people take early SS retirement.
Very good video. A good perspective
Thanks Tony