I'm 47 and Afraid I Won't Have Enough To Retire!

[Music] angie in san francisco starts off this hour hi angie welcome to the ramsay show hi thanks for taking my call can you hear me okay absolutely what's up perfect okay i i really appreciate taking my call i've been listening to you for about the last year and so i have a question for you dave um my husband and i are both 47 years old we have no debt other than our house which will be paid off next year but we got a really late start in life as far as just even making any money so we we have been saving 15 percent into our retirement since we found you um so i have my question is i'm wondering i hear you say all the time to people that are younger like oh gosh you're going to have so much money you know once your house is paid off i'm just wondering if it's going to be true for us at our age if i can just tell you what we have saved so far in retirement okay we have 20 000 in the emergency fund um and that's just socked away i have 80 000 in a traditional ira that was from like a it was a job a 401k and i just took it like you said take it when you leave so it's just sitting in an account um and i have started at my new job a roth per your instructions i've learned so much from you just in the last year i feel like i'm almost an expert and i have 12 000 in the roth my husband has 90k in his retirement and so what i'm wondering is when our house is paid off next year and we can start maxing out like how like you always say it doubles and all that but is that really is that really going to happen it's just hard to picture i've done all these retirement calculators and it's saying that we need like 2.1 million or 2.7 million to retire and it just seems like such a big number can you help walk me through the numbers again okay how old are you 47 we're both 47. okay good okay you're gonna be fine what's your household income it's about 200k okay all right and uh so you're going to be you'll be saving 30 000 a year until your house is paid for and once it's paid for then you'll be maxing out everything and saving even more than that right so yeah and if you say you know 15 years of doing that uh 17 years of doing that you're gonna be just fine that's a lot of money um now here's the thing about retirement calculators it you know the thing you don't know with that is what set of assumptions the calculator you're using is unless they're stated on the calculator okay right right there's a couple of factors that you need some some of the some of them automatically build in a an inflation rate okay what i personally do when i'm looking at my personal wealth and growth and i also recommend it for others is um i'm just going to save money and build wealth and so i'm just calculating if i make 10 of my money this is how much i'm going to have i make 11 12 of my money in mutual funds this is what i'm going to have okay and if the real estate does the say that i own does the same then my net worth will do be on this trend line okay and so if i just put in your case i put in 2 500 a month 30 000 a year and i do that for 15 years and i put that in the calculator and i just put that in at what you think you're going to make in your mutual funds what the historic data tells you on that i've been able to average up around 12 on mine now that causes the internet to melt down apparently but um but i've been able to personally do that so that's what i personally do okay the stock market has averaged 11 since it began okay that's the average and so um that that's the thing you want to do but uh uh yeah maybe it's just hard to see because we're just getting started and it's just crawling along but i guess yeah like this this year this year the market's up over 20 percent last year the market was up over 20 oh the year before it was up over 20 next year it will not be it's very unusual to have three consecutive 20 years in the market that's not realistic but that's the actual facts of what has happened the dow sitting at 36 000 today okay so you know you're you're fine in terms of rates of return and just put that in and then i say okay based on that i'm going to have two million dollars million dollars whatever it is okay then you say okay what inflation rate do i want to use to say not how much money i have at that time or its purchasing power i'm just going to say you know i'm 61 now when i'm 81 i'll have x number of million dollars okay then i say all right based on that when i'm 81 how much money do i think i want to live on a year well if i can make 12 on my money as an example you can use whatever example you want to do this is the one i personally use the consumer price index for 77 years has the measure of inflation including the carter years in the 70s when we had unbelievable double-digit inflation for multiple years in a row um including that time the average consumer price index for 77 years is 4.2 percent so i use four percent so if i make 12 on my money and i leave four in there after i if i want to live off of the money okay i leave i let it grow at four percent a year it's breaking even on its purchasing power after i retire does that make sense yeah that's what i never understood until i started listening to you about like the next so if you had a million dollars and it grows to a million 40 000 the next year then that would purchase about what a million dollars would have the year before so your your principal is giving you a cost of living raise every year but that's all it's doing so i'm gonna pull off the other eight percent and live on it so if i've got a million dollars and i leave four percent in there and i'm making 12 and i pull off eight you see what i did i didn't touch the principle if i pull off eight percent of a million dollars that's eighty thousand dollars a year okay and and so if you want to live on 200 000 a year at that time then you're going to need two million dollars i see i see you know to do that because yeah and we only started making this recently i made minimum wage up until five years ago my entire life so and here's the other thing about investment calculator here's the other thing about all the calculations you do and i do for 20 years from today none of them are going to turn out the way we calculated it right right none of them because one of the things you're assuming is i'm putting in the steady amount of money and you're going to put in more than that on average because now you're an investor not a debtor okay the other thing that's going to happen is inflation's not going to do exactly what we said and rates of return are not going to exactly what they said and so it turns out differently and so typically in in our experience in 30 years of working with people is they actually end up a lot wealthier than their calculator told them they were going to be because they actually are freaking paying attention now and so that's where they end up george yeah it's incredible i love using the investing calculator and start dreaming yeah but the the some of these investment calculators got you down where you're trying to live off three percent because they're trying to figure out real rates of return post tax and all this other stuff and too many sets of assumptions in there

Channel: Ramsey Everyday Millionaires

Views: 568,512

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Id: aAHmZdz_Dxo

Length: 7min 54sec (474 seconds)

Published: Mon Jan 10 2022