Can you retire with $500,000? | FinTips

[Music] hey dustin tibbetts here financial advisor with jazz wealth managers how's it going today you ready here's a question of the day uh qui uh someone asked me how much do i need to retire john john was actually his name i remember the name god it's just amazing okay john asked me uh it was an email and not a customer he said well i got 500 dollars i'm about to retire um i'm thinking within the next four or five years and he's almost 60 years old his wife happened to be 57 i just remembered that so i included it uh and he said can i retire on 500 000 dollars uh we went over some estimates in social security and everything he gave them to me and um i said yeah sure i i mean i i can't tell you perhaps you know absolutely if you can but uh have i done that for customers absolutely so what i did is i essentially took some of john's information in there and we modeled it out and i want to show you how he's on the border but how do we fix that how do we address this here so what we're going to do we're going to use our sample here louis armstrong louis armstrong is a sample customer that we put in inside nest egg because you know jazz wealth right there so we're referencing jazz and i'm going to overview this and i'm going to go over all the geeky details here to kind of show you how we improve the odds of him not running out of money with about five hundred thousand dollars all right so louie is currently 59 and lucille his wife in real life there's 57 or was in real life and here we go so we're going to look through their expenses pre-retirement living expenses now john told me he wanted to live on just about 50 000 total a year if it could be a few dollars more that'd be great but we started off 50 000 so monthly expenses right around 50 000 a year and that's going to be taxed by the way so that's not after tax all right looking at the savings this is very very close minus the hsa so we've got louie in here six percent going into his 401k gets a match up to six percent still does so that's in there lucille puts in five percent of her income and gets a primary match up to five percent that's it nothing after that he's got a roth here with us at jaz wealth puts in 1500 bucks a year he's going to increase it by two and a half percent a year and it's going to stop at his retirement lucille's got a roth she's putting more focus there five thousand dollars a year and it's going to stop when louie retires that's a key one there she's not saving until her retirement they're going to stop when louie retires she's increasing it by three percent and this won't make a large difference here but they've got an hsa putting in 1500 bucks a year louis will continue that until he retires all right moving on income louis currently makes seventy thousand seventy five thousand dollars a year lucille makes sixty thousand dollars a year we're estimating social security i'll show that in a second uh but for now it's all going to be based on the estimates and they're working years inside of that goals all right so john told me and i'm using louis but said about 65 lucille couple years before that which so they'll retire together and they're looking for uh retirement expenses i think i just said a minute ago that their retirement expenses were 50 000 that's what their current expenses are they want to spend 50 000 in retirement so they're comfortable living off of that got some health care costs in there and they've elected not to go with long-term care insurance now if we look at their total net worth we could just skip the banking stuff they got some bank accounts savings accounts you can see it if you want uh checking savings 1500 and emergency funds 1600 or 16 000. they've got debt 25 000 it's on one credit card i'm just overviewing this quick here uh investments right about 500 000 where they stand now between the roth 401k old 401 k and a couple other accounts inside of that the taxable account which they're not really doing a whole lot with at the moment but they've got about 490 000 this is important because most of you have different types of accounts so i want to highlight a few interesting things here all right so going through the only other thing they've got is a home mortgage loan paying 22.80 on the home mortgage loan five and a half percent uh not considering a refinance or anything the property currently worth three hundred fifty thousand dollars and we've got taxes included in there with their original purchase price and everything they are in new york okay so if we take a look at that let's see what their probabilities are of retiring successfully uh currently sitting at 53 percent this is their current plan right here off to the right-hand side uh it's it's close right looking like they're going to end with 28 000 they are cutting it close and when we look at the sort of graphical version of that if they make it to their life expectancy they're just cutting it by they could get there if basically the world works out as a as an average right in almost every scenario they're going to be just fine there are some outlier scenarios which are highlighted in the different shades of blue down there or purple depending on your screen and so we don't like that there's a chance that inflation's more taxes are more social security is less all these different things are what we're figuring out here so we've got to improve this a little bit now when we go over to the analysis what we're doing is trying to get this over 65 preferably somewhere near that or anywhere higher would be great down here at the bottom we're going to try a few different things here all right so currently i'll put this back to normal this is everything we just reviewed incomes retirement ages contributions and we've got different strategies over here the first thing i want to do is look at social security the current strategy is estimated by the system and just says well you know we're going to go with whatever we think is kind of best for the moment unless you put something in there the optimal strategy makes a little bit of a difference here and i'll show you that in just a second that should bump you up a little bit all right 56 percent what did we do what was the optimal strategy well if we take a look over here at social security what it's doing is saying your current strategy is in gray that's what's happening by the system if we override that and delay social security until 70 for both of them just raw general look and there's a lot more we can do here but by doing this it adds more cash to their pile it adds more to their net flows on a yearly basis so for now they're saying the optimum way to do this is 70. we can tinker with it but for now i'm just i'm just trying to make some quick adjustments so i can report back to louie and lucille and tell them what's going on there all right so that helped that was 56 it's not great there uh you know we'll see what happens there but that that's that's where we're going with that now there was a little debt right so this is what we're going to model inside the debt you may have seen a previous video we did on louis armstrong's debt he only has that credit card and you remember from a previous video we said you've got extra money right they still have extra money at the end of every month here so what we can do is we can say make an additional hundred dollar payment to your debt right this blue over here is what their what their debt plan would look like the green is if we make an extra hundred dollar payment to this credit card with a 19 interest rate and at the same time when we're calling it a refinance but what we're doing is moving to a two year zero apr credit cards we're going to take that hit we're going to shift everything over there to 25 grand so he's going to be paying zero percent interest for two years if we can pay an extra 100 bucks we'll knock it out before he pays any interest that saves him a ton of money right he's going to pay it off a lot sooner too rather than just paying the same 382 every month that he's been paying so now what we want to do is say okay that's our plan for the debt does the debt strategy changing it to my proposal help him out in any way maybe a point or two what are we gonna well okay there we go okay so the reason that changes a lot is because now they've got extra cash to save in their taxable accounts which the system saves any liquid cash it just saves it in your savings there so they've got extra taxable income there i like that okay so we're up to 64 now if we look at the graph all right not bad we don't we don't get to death or propose death with next to no money we've got a little extra money there a respectable amount of money and we're able to weather through some of the outlier events see how that darker shaded blue we don't run out of money until maybe in the early 87 86 age there we're doing a little bit better but we still got some problems to work through here next thing i want to look at is the way we take out money you've heard me say this numerous times that the way you withdraw your money from these accounts makes all the difference in the world you don't just blindly start taking remember he needs fifty thousand a year we don't just start taking fifty thousand from whatever account we want to we gotta strategize there too so what we're gonna do is we're gonna go over here to the distributions area and we're gonna see how that money's coming out right now here's the current distribution relative to the tax rates and what we're doing is let's just say that we go with the system right we just go with the normal way that the that's kind of automated in the system here this is what his distributions looks like and his tax rates what we want to know is what if we do it like this we withdraw from taxable accounts first then we go to our iras and pre-tax accounts then we go to the roth problem is we end up with less money we don't we don't have room to do things like that so no matter what he wants to leave to kids or or charities and things we don't really have room to do that just yet next thing we're going to do is say let's simulate if we do taxable first because remember now he's saving taxable money by paying off that debt early does that help no it's better than spreading it but not right now it doesn't work taxable accounts first then the roths then the pre-tax accounts still not good we're better off just spreading it evenly all right next we're going to look at taxable and the pro rata which just basically means taxable accounts first then when we um when we deplete those then we're going to go evenly between the tax deferred pre-tax accounts and our roth accounts there this accounts for twenty three thousand dollars more so i'm thinking that's the strategy for now let's check tax deferred and then from there nope that's the worst so we don't want to take from pre-tax accounts first and i know this is a simple way of looking at it but you can actually highlight where the cash comes from in here something we review in our classes so don't don't don't assume this is just kind of oversimplified i'm just trying to make a quick video okay so here's what we're going to do we're going to say all right louie look we're trying to pinch every penny here what we're going to do is when you start taking out money it's going to come from all your liquid cash first then your pre-tax then your tax-free accounts um together right what that'll look like is here we go i'm going to go down here we're going to say retirement age whoops there we go all right so we've got the details of the plan here income from taxable accounts that is almost able to make up their income at the retirement age is there now you see when they run out of money in their liquid savings then we go over to tax deferred and then we go to roth right so we're just slowly eating that 50 000 up which is adjusted for inflation and everything along the way that's the method of taking money out of the account so now what i want to do is see how that changes your success rates i'm just going briefly through this don't don't think it's really this simple in real life okay so distribution strategy what we're going to do is say let's use that proposal that we just came up with all right so we'll go in here see what happens how we doing 64 stays 64 but we've got more money did you notice it go up there that's good that may be the best that we're going to get here actually but let's see what we can do so confidence level all right so we're doing better now the somewhat outlier events push us up to 89 we end our end of life here with extra money i'm actually kind of happy with that if we were planning for that i wouldn't be stressed about that at all you know why think of what this is doing this is accounting for you spending the same amount every single year uh we're here in florida and so we have a lot of retirees as customers i can testify and right here in front of you that retirees do not spend the same amount of money every year it just doesn't happen i don't know how else you want to say it but you tend to spend more money in the front part of your retirement but you spend less as you age and that makes sense you don't want to go places as much you don't have as much to do you're kind of fine just hanging out having memories instead of having things it's very normal that happens to every one of my retirees here and i get to watch it in real time with us so but the problem with the system here is if we go to the current or we're going to use the proposed plan sorry if we go into the system it's going to say that you're spending the same amount every year we can fudge it and make it to where you spend less as you age but if i look at the income flows once this loads here there you go it's going to assume that you're spending the same amount that's just not going to happen i promise you that it's just not how it works in real life so i'm actually okay with where they stand because i know their income won't they won't be spending that much the rest of their life we could now move on to taxes try to find ways for them to save taxes there remember they also have the ability to relocate they've got some equity in their home i i don't know if they want to move or anything but they don't owe more on their home they're making consistent payments there so there's a chance we could put in a relocation where they take some of the equity move to something smaller a condo in florida maybe or i don't know there's there's things that we can do there so i'm okay with that in general also if you've seen previous videos louis armstrong isn't invested quite the way he could be we could make an adjustment there in his investment so we could even take it further to say hey you're a little bit out of whack here you've got a lot in bonds if you've ever seen me review his portfolio he's got a lot in bonds he didn't know that he just he's got a lot going on there we could take some of that money and then we could you know maybe take a little bit of risk with some of it go for more consistent growth and the rest so if we say in this asset allocation if right now it's saying just use what he ex he has in his accounts what if we say just take a moderate approach we're going to go some growth we're going to go some aggressive and things like that let's see if that makes any difference actually he was set to growth so we got to go to growth let's say that we take his account will go to growth growth by the way is not the most aggressive in the mix there you can see the break oh sorry uh there you can see the breakdown when we say growth we're not talking about as aggressive as possible so 70 30 split it gives them a little bit of a boost there naturally because the increase returns so something in this ballpark i'm open to having a conversation and saying like you know there's some changes we can make nah now notice not once did i say louis you're going to have to retire later louie you're going to have to put more money away louie you're going to have to save more in your accounts with me right that's the easy answer that's what all financial advisors say is put more money away it stresses you out tell them to do their job look inside of their software or whatever they're using and go hey fix it see what you can do get me fine-tuned so that then if i have to put a few dollars away it's a little bit less right he could save a little bit more money watch the impact here let's see um where can we save this money let's say in the roth by the end of a year after he pays off the debt let's just say he goes another thousand dollars right after the debt proposal in here so that we're gonna sort of fudge this a little bit a 67 right anything over 65 i'm happy with so we're just getting a little bit better but if we didn't do all of this watch the effect of not doing any of this we use the current strategy screw the debt nobody's going to pay attention to your distribution method and all the advisor's saying is put 2500 more away currently has a 53 chance up here what happens if we didn't pay any attention to that stuff and just put another thousand away it doesn't even help look at how barely he has any money so the advisor is going to say you need to max out your roth ira he's over 50 so let's go 7 000. lucille oh you need to give us some more money right help us out here you want to see these numbers go up you just know other advisors say that that's i'm getting frustrated and it doesn't even help so you're saving money and it we can quantify the fact that it's just not even helping you so we've got to take a deeper look into some of this stuff i know some of you don't find this exciting but as you get older if you think all i have is 500 000 someone's got to make it work for you there are so many little things that i just showed you that adjust how you get to keep some of your money pay less taxes right how you choose to take social security despite what you may see online and how you spend your money that's probably one of the biggest things that i would take away from this is people don't spend money linearly through retirement just doesn't happen i say what you want but that's uh where we're at there so can you retire with only five hundred thousand dollars at age 65 as a fly in here uh yeah you certainly can it's not going to be luxurious it's not going to be you're going to be worried about market fluctuations you're going to want to really be fine-tuned into your withdrawal strategy and your investment strategy but can you do it absolutely and we just showed you one way to go about it with louis armstrong do you like these kind of videos do you like when we go deeper with things like this i could talk about this stuff all day long but if it helps you i'll keep focusing on things like this like we do with our customers here and if it did help you maybe you'll hit the subscribe button i really appreciate when you do that and i wish you a great rest of your day thank you so much for watching [Music] you

Channel: Jazz Wealth Managers

Views: 136,963

Rating: 4.9102311 out of 5

Keywords: retire, how much to retire, how much to retire early, how much money needed for retirement, how much needed for retirement, retirement investing, retirement planning, retirement planning dave ramsey, retirement planning at 50, retirement planning at 60, retirement investing in your 50s, retirement investing in your 60s

Id: x4fKGjSdnQo

Length: 17min 42sec (1062 seconds)

Published: Wed Nov 04 2020