How Much Do I Need To Retire? Why I Disagree With Fidelity. Think Twice When Planning For Retirement

how much to retire is a big question and it seems like when you search online for just a few minutes you get all sorts of different answers and what we've seen is that the people that i talk to is that all these differing viewpoints and opinions can wind up confusing people to the point where they don't know what to believe so when i saw fidelity's article titled how much do i need to retire i wanted to read it because they're a big name in the investment space and and they're very influential but what i read in my opinion doesn't seem like a great strategy to follow again fidelity is a great company but this one article was worth thinking twice before following it so i wanted to at least point it out to you so that you don't start planning your retirement in a way that could cause an issue in the future if i haven't met you yet i'm dave zoller and i run streamline financial it's a wealth management firm in the chicago suburbs with tim and luke and sean and the rest of our team and we created this channel to help people like you who are close to or in retirement and if you're a do it do-it-yourselfer planner and you're planning your own retirement without the help of a financial advisor check out the diy retirement plan below so i'll pull up this article and then show you the main points related to how much do i need to retire and then i'll show you the actual visual representation of the sample retirement plan something that's not in the article just so you can get an idea of what this would actually look like and how you might get into trouble if you use this rule of thumb planning technique again this is my opinion and it's not advice so please consult with your own wealth management team before making any decisions so here's the article i'll first review the highlights and then focus on the 67 year old who's retiring now and let me just jump into the article here so this is it from fidelity and the the main thing that you see here is save 10x your income by age 67. well let's see what they're they're talking about here of course factors that impact personal savings goal will include age and when you plan to retire and the lifestyle you hope to have in retirement so here's the example that they're using they've got one person here actually they're suggesting different age-based milestones so that's the rule of thumb so age 30 you should have one times your income and then all the way up to eight times your income by age 60. and the example that they give here is amy who wants to retire at 67 so she'll need to save 10x her pre-retirement income now is that really a good idea let's look at some of the details here here's the same same example elizabeth planning to retire 67 so to maintain her lifestyle in retirement her savings factor is 10x so let's take a look at the fine print here down below one a few key things to look at is this retirement age of 67 you're planning through 93 and then the replacement annual income target is 45 of pre-retirement annual income so what does this actually mean i wrote down these numbers that they're giving some of the assumptions and then including included them all here so let's take a look at what this is and then we'll look at the actual plan the visual representation so she's 67 retiring now let's say that the income she's making is 170 k and she saved 10x that which is 1.7 and then here's just a few for the sake of this uh illustration and visual representation we've got a million in 401k 200k in roth 400k in the brokerage and then 100k in cash the growth rate we're we're putting down is six percent social security at 3 000 a month and then expenses is going to be 45 of the pre-retirement income which is 76 k and let me just make sure that that math is correct yep 76 500 and i'm just rounding down to 76 000 and then we're picking a state of florida there's no state income tax and then living till 93. so what does this actually look like in a retirement plan at first glance this plan looks pretty good and just to give you a quick intro to this this software these blue bars are each one is a year so we're starting in 2023 and she had about 1.7 saved and then all the behind the scenes things that you don't see are those numbers that we looked at previously which were these ones over here so all of these are in the background they're working and the result looks something like this so you can actually see her investable assets are growing each year and going up even though she's spending money she's spending that 67k per year and things look pretty good so many people might think oh well this rule of thumb 10x my income saved for retirement i should be fine but just think a little bit more about this what if her expenses wasn't 45 of her pre-retirement income what if it was more what if she wanted to spend 100k per year how would that change the plan if she spent 100k per year and we can see it has quite a impact on the end result here and the number here the difference would be 1.7 again using all these assumptions and what we've seen with our clients is that a lot of people they actually keep their expenses the same after they retire especially those first 10 years while they still can travel easily and enjoy their 60s and early 70s so what if she wanted to spend just a little bit more each month well the things look a lot worse as you can see or maybe her expenses stay the same at that 76k number but she doesn't have the right asset allocation and then her growth rate uh is less than than what she was expecting maybe it would look like this so expenses stays the same in those assumptions but whatever growth rate was really only three and a half percent instead of six percent you could see quite an impact so as you can see all these factors can really change the plan quite a bit and your plan is unique as well it has a lot of different factors that go into it so using this rule of thumb number or the 10x your income number maybe it's a good start just as you're you know the first day you're thinking about these things but as you're planning uh there's there's really more that you could be doing just to make sure you've got more confidence and security in your plan i want to share a few things to take away from this video but first if you like this video and if it's been helpful please click the like button so that you might be able to help someone else who's thinking about their own retirement and if you know you don't want to work with a financial advisor check out the diy retirement plan below so the main points are that your life and financial situation is unique and you want to be careful before following some of these rule of thumb planning techniques because you're not amy or whatever the name was of the person in the article and you want to be sure that you can have a plan that you can continue to update as life changes for example that plan in the beginning may look great but then life may change for that fictional character and the plan should change too if too many of these little changes happen without an adjustment to your plan then it could end up looking something like this and you've seen things where you've got an ideal outcome that you're going for but there's small changes that happen and they cause drift and if you're not making these course corrections to get back to where you previously were then things would look a lot worse and would be a lot farther than what the ideal outcome is so remember that the retirement plan it's really not that valuable but the continual process of planning is i hope that video was helpful for you just to get an idea an example of of what planning looks like for this example what to watch out for when you're you're reading and studying out there if it was helpful please like and subscribe and then i'll see you in the next retirement focused video take care

Channel: Streamline Financial

Views: 416,191

Keywords: retirement calculator, retirement planning, retirement income, retirement investing in your 50s, financial planning, how to retire, 4% rule, retirement, roth ira, investing, 3 buckets strategy, how to withdraw money in retirement, how much to save for retirement, financial advice, social security retirement, how much do i need to retire, retirement withdrawal strategy, retirement planning at 60, retirement planning at 50, Chicago financial planner, naperville financial planner

Id: Cu8vNmeGcJ8

Length: 7min 34sec (454 seconds)

Published: Wed Mar 02 2022