Category: Retirement Planning
A Jaw Dropping Court Decision Just Changed Nancy Pelosi’s Retirement Plans
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Nancy Pelosi and the Democrats were heading into 2020 facing an uncertain future. It figured to be a watershed election that altered the face of the Democrat Party for good. But then a jaw dropping court decision changed Nancy Pelosi’s retirement plans. Democrats won the House in 2018 thanks to supercharged liberal turnout and a depressed GOP base. With Donald Trump at the top of the ticket in 2020, that dynamic would no longer exist and Republicans see a real chance to win back the majority in the House of Representatives. Pelosi and her allies are gritting their teeth in the face of a more difficult political environment. And some experts believe if Republicans oust Pelosi as Speaker in 2020, she may retire from Congress altogether. However, the left isn’t planning on staging a fair fight. Liberal activists see they may not be able to win with the current electoral playing field, so they are trying to rig the election. Democratic groups around the country are filing suit in red states to have their Congressional district maps thrown out on the grounds that they are unfairly “gerrymandered” to benefit Republicans.
The left’s latest victory on this front came in Ohio where a three-judge panel in Cincinnati unanimously tossed out the state’s Congressional map and ordered a new one drawn before 2020. “We join the other federal courts that have held partisan gerrymandering unconstitutional and developed substantially similar standards for adjudicating such claims,” the judges wrote. “We are convinced by the evidence that this partisan gerrymander was intentional and effective and that no legitimate justification accounts for its extremity.” “Performing our analysis district by district, we conclude that the 2012 map dilutes the votes of Democratic voters by packing and cracking them into districts that are so skewed toward one party that the electoral outcome is predetermined,” the ruling held. Democrats secured a similar win in Michigan where judges threw out the map Republicans had drawn after the 2010 census.
And the left needs all the help they can get in Ohio. Ohio – which was once the ultimate swing state that decided Presidential elections – is trending steadily toward the Republican Party. Since 2006, Sherrod Brown is the only Democrat to win a statewide election. And Republicans hold 12 of the state’s 16 Congressional seats. A new map in the Democrats favor would give them a chance to steal a seat or two. Despite what the fake news media writes about Donald Trump’s approval numbers, 2020 figures to be a difficult election for the Democrats. A recent CNN poll found Donald Trump with a record level of approval on the economy. President Trump is a better than even money favorite to win re-election. If Trump wins re-election, he could carry House Republicans over the finish line and back into the majority.
That’s why the Democrats are pushing judges to rig the 2020 election by redrawing maps that keep them in power. .
As found on Youtube
Read MoreHow To Invest Money In Your 20’s
user 0 Comments Retirement Planning Tips for Retiree's
Hey, what’s up guys? Kris Krohn here. Yes, it is winter. Yes i’m driving with the top down. It is one of my favorites. I am totally impervious to the cold. But today I want to jam with you in real estate and I want to talk about why 90% of all millionaires make it in real estate. And there’s very, very specific reasons why. and so what I want to do is break it down for you. I really want to give it to you in in like the deeper science than I have in the past. And I think you’re really going to appreciate it. So, check it out. I’m up here at my mountain home. It is snowy, it’s cold. But a super exciting day. You know, as I’ve started this YouTube channel, I’ve been really honing in. What is the information that would create the highest level of value for you? And today, I want to give it to you in one straight shot. How you invest in your 20s, so that when you’re in your 30s, not your 40s, not your 50s, not your 60s. You can really living be living life on your terms.
To me, it doesn’t matter whether you have money, whether you don’t have money. You have good credit, you have bad credit. Frankly, it really doesn’t make much of an impact at all to me. So, here’s what I want to help you understand. There’s a number of strategies when it comes to the world of real estate investing. In fact, there’s 32 main strategies out there. The first thing I need you to understand is that most strategies, they’re not good. You shouldn’t do… There’s tax deedsm there’s flips, there’s a lot of things that are popular.
There’s multifamily. There’s rentals. And I don’t do those things and I don’t think you should do those things. I think you should do what makes the most money that takes the least time in the least effort and has the least risk. Because dude, no one likes to start over, no one likes to lose and when you invest, there is some risk. The reason why I retired at the age of 26 is because I followed a very specific formula. And I want to detail it out very specific for you because there are 3 things that you do need to know about making money in the game of real estate. And if you follow these 3 things it’s gonna be a total game changer for you.
So, let’s head over to the whiteboard and I want to document this for you. Because I want you understand that when you get in the game of real estate, you want each property to be a win. When I found out that you could make 50 to 100 thousand dollars per deal, I got to tell you. That was something that was super exciting for me. Because I realized if I want to make a million dollars, then I just need to be able to count to 10, right? I got 10 finger. So, so much easier than some of the other ways and methodologies are out there. And so I want to ask you how many deals do you need to do before you’d say, “Wow, I’ve made it. I’ve arrived.” And with what I’m about to show you.
I don’t want you to be thinking in terms of like, you know, “I want to be a millionaire so I need a million dollars. I need to do 10 deals.” it’s actually a lot simpler. You don’t need a certain amount of money. What you need is a certain amount of properties producing a certain amount of residual income. You’re not striving for a certain net worth. You’re striving for your real estate to perform in a manner to give you enough residual income that you don’t need to work.
When I say I retired at 26, truth is I didn’t really retire I just became financially independent. And I quit my job and I got to live life on my terms. And it’s because of what I’m about to show you. There are 3 things in particular that you need to be aware of. Every time you do a deal in your backyard and it doesn’t have to take money. Some of these deals take nothing or maybe 1,000 or 3,000 dollars.
Very little. And the first thing that I want you to know is that you should be making around $5,000. just for consummating the deal as in finding $5,000 is what you get paid up. Now, up front is really important because who wants to be in the game of real estate and say, “Hey, I’ll work today but I want to get paid in years.” You need to get paid now. The second thing that’s important is that when I buy single-family homes, I buy them underneath the median. I buy them with my specific system. Which by the way it’s in a book that you can get for free. You can download it. If you click the link or the one that’s popping up on the screen right now, you can get my book for free that will go into deep detail on this. What I want you understand is that you get paid 5 grand up front and then you’re getting 500 on average freedom dollars every single month.
Now, this $500 is really important because if you buy 10 homes and those 10 homes are each paying you 500 a month. 500 a month times 10, that’s $5,000. You might not be able to retire on $5,000. But guess what you can do? You can walk away from a job that’s paying less. And if you figured that out, dude then why not do 20 more why not do 100. Especially when I show you how you don’t need to access your own money to make this happen. The third thing though that you do need to understand is while there is upfront money, this money is along the way.
You just keep on getting it. There’s another kind of money that you get when you sell this home in 2 3, 4 or 5 years. And it’s tens of thousands of dollars. If you’re buying it buildings the median, I’m guessing for all intents and purposes. And I use this as an example sometimes. $30,000. It could be 50,000, it could be 80,000. It could be 20,000. But probably not less. And if you start adding the upfront money, the $6,000 on average that you’re getting every year and this money, you start making 50 to $100,000 on every deal that you do. And my friend, that’s that’s the part of this whole game that I want you to have an understanding for. Is that if you’re getting paid upfront along the way and at the end, then the cool thing is…
And here’s the secret: You can multiply this. You do 2 or 3 or 4 of these deals. And it’s… So your ROI, your return investment is so high that you’re going to start attracting a very special kind of people. These people are called partners. And a partner is an individual that says, “Hey, I’m into my career. But I’ve been saving up some money. I don’t want to learn what you’ve learned. Can we go in 50/50?” And this is when you hit the big time and this is when you can do. Right now, I can do as much real estate as I want. I have a goal of becoming a billionaire. I want to be a billionaire philanthropist the second half of my life. And right now, I’ve got assets growing like crazy.
But I followed the system to get started to recreate my financial independence. And then my partnering system which you’ll also learn about in the book is what has taken me from independence to true financial freedom. Did you know there’s a difference between those 2? Financial independence just means you got out of your job and you’ve replaced it. But financial freedom means that you’re now living the lifestyle that you want. So, living where you want, donating the way that you want, giving to charities the way you want. You know, being able to take the travel and the trips and vacations. It’s a very real byproduct of all the real estate investing that we’re talking about here. So, what I want to do right now is I want to share with you how you can get my book for free. I want to share with you what’s in it and first of all, it’s called Unstoppable.
It’s a brand new book. And it’s different than any my others. Because I took out all the fluff and I Shrunk it really small. I just can grab a drink here by my absolute favorite drink. If you ever come visit me, just bring me a six-pack of apple beer. It’s not beer but I got to tell you it’s really tasty and I know the carbonation is not good for me but… So.. So, here’s the deal on the book. It’s called Unstoppable. And what it does is it documents your custom journey to get a particular realistic game plan to go from nothing to millions.
And here’s what I want you to understand about that: Whether you are… Whether you would say you’re too young or too old, whether you would say I don’t have enough money or I don’t have any money, dude that doesn’t matter. In my matrix of the book, I actually show how all those combinations of people can get in the game of real estate. And dude, it if you come out to my live events which you very well might, you’re going to meet all sorts of people, successful investors that are out there crushing it and doing it.
Right now, the book is free. We’re going to do that for a period. All you got to do is click the link below, get your hands on a copy of the book. And it’ll even come with a consultation if you want. You can talk to remember my team and basically say, “Okay. I’m reading this book. I’m getting my custom game plan. I’m figuring out my next steps.” And having a member of my team contacting you it’s just to make sure you understand the book in its principles. And if you get stuck then we want to finish customizing the process so that you’re completely clear on exact steps you need to do to make your next million or your first million in real estate.
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Read MoreHow much do you need to retire
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My father retired in 1991 after 39 years as a high school teacher. His pension, along with my mother’s pension and their social security checks, added up to more than they spent every month. Dad never had to ask himself whether he’d saved enough to retire. He simply needed to work enough years to get his pension. In 1991, most people with pension plans had traditional defined benefit pensions, pensions that paid a monthly income until you died. These days, most workers with pension plans have defined contribution plans, such as 401(k) plans. Workers own the money in their retirement accounts. But they have to figure out for themselves whether it’s enough to retire. How much retirement savings you need to retire is going to depend upon how old you are when you retire, how much social security you collect, what additional income you have in retirement, and how much you spend each year. Let’s look at an example of how to calculate retirement saving needs.
Jocelyn is 55 and single. Her annual total salary is $44,000 a year. She plans to retire on her 70th birthday. To estimate how much money she needs to save to retire at 70, Jocelyn first writes down her current annual spending by category. Your own categories may be more or less detailed than hers. Jocelyn goes through her financial records, including her checkbook and her credit card statements for the last year, to figure out how much she spent on what. On the W2 form that her employer sent her at the beginning of the year, she sees that she paid $3,366 in FICA and Medicare taxes. Her state and federal income taxes were $4,000. She contributed $6,000 to her 401(k) retirement savings. She funded her rainy day account years ago and didn’t add to it last year. Jocelyn’s employer currently pays for her medical and disability insurance. Her out-of-pocket medical expenses last year, including medications, were $1,000. Rent, $15,600. Phone and utilities, $2,400. Groceries, $3,600. She spent $1,200 eating out and $1,000 on entertainment and travel. Auto maintenance cost her $1,000, auto insurance, $800, and gas, $1,000. She spent $1,200 on clothing and personal items. Jocelyn spent $600 on gifts and gave $600 to charity.
Her renters insurance and other expenses were $634. Jocelyn now goes through her list and asks herself which expenses are likely to change after she retires. She won’t pay FICA and Medicare taxes after retiring. That’s one big savings. Her state and federal income taxes will be lower. As we’ll see, most of Jocelyn’s retirement income will be her social security benefits. And at Jocelyn’s income level, less than half of her social security will be subject to federal income taxes. After she retires, Jocelyn will no longer contribute to her 401(k) retirement savings account. However, she does plan to set aside $3,000 a year for unexpected expenses.
She will pay $1,500 a year for her Medicare Part B and D coverage. And her out-of-pocket medical expenses will likely increase as she ages. Jocelyn expects most of her other expenses to stay about the same after she retires. Two exceptions are that she’s going to spend less money on gas, since she’ll no longer be driving to work, and she plans to spend more on travel. All together, Jocelyn expects to spend about $37,134 a year after she retires. Jocelyn looks up her projected social security benefits on the Social Security website. If she starts claiming benefits at age 62, she’ll receive $11,700 in today’s dollars each year. If she claims at 67, she’ll get $17,556 a year. And if she waits until 70 to receive Social Security, she’ll receive $22,320 a year.
She’ll get nearly twice the annual income if she claims social security at 70 rather than 62. Jocelyn is healthy. And her mother lived into her 90s. Her biggest financial fear is that she might outlive her savings. Waiting until 70 to claim social security is one of the most cost effective ways to provide additional income in old age. And that’s what Jocelyn decides to do. Jocelyn will spend $37,134 a year in retirement and receive $22,320 in social security benefits. That leaves her with $14,814 to fund out of her retirement savings.
That’s in today’s dollars. When Jocelyn retires in 15 years, everything will cost more because of inflation. Fortunately, social security benefits are indexed to inflation. So her social security income will rise about as fast as her expenses do. However, in 15 years, she will need more than $14,814 to make up the difference between her social security and what she plans to spend. How much more? Over the last 25 years, inflation in the United States has been about 2.5% a year. If that trend continued, Jocelyn’s $14,814 in annual expenses will be about $21,500 in 15 years.
You can calculate that by multiplying 14,814 by 1.025 to the 15th power, which equals 21,455. Alternatively, you can use one of many future inflation calculators available online. Jocelyn decides to be a bit more conservative in her projections. And she assumes that her expenses will go up by 3% a year, not 2.5%. Let’s use an online calculator to see how much $14,814 will grow to in 15 years with 3% inflation. Enter the expected inflation rate of 3% a year for 15 years and a starting amount or a present value of $14,814. With inflation of 3%, Jocelyn will need about $23,000 a year in income beyond her social security when she retires in 15 years. So how much savings will Jocelyn need to provide $23,000 in income when she’s 70? In a video on spending in retirement, I suggest that people apply the RMD spending rule.
That is, each year spend no more from your retirement savings than the required minimum distribution mandated by the IRS. The rule can also be used to estimate how much savings you need to provide a level of income. To do so, look up the RMD withdrawal factor for the age at which you plan to retire. You can find this on RMD calculators such as the one on investor.gov. Or you can look it up on the IRS website. Multiply the annual income you’ll need by the withdrawal factor. And that gives you the amount of savings you’ll need to generate that annual income under the RMD rule. In Jocelyn’s case, let’s keep things simple and assume that her birthday is in January. Her RMD withdrawal factor the year in which she retires, also the year in which she turns 70 and 1/2, will be 27.4.
times $23,000 is $630,200. So Jocelyn’s going to need about $630,000 in savings plus her social security to support her anticipated expenses when she retires. Put differently, the year she retires, Jocelyn’s required minimum distribution will be 3.65% of her retirement savings. And $23,000 is 3.65% of $630,200. So that’s it. Estimate how much you’re going to spend in retirement. Subtract your estimated social security benefits from that, as well as any other income you’re going to have in retirement. And that gives you the expenses that you need to fund through your savings. Adjust these expenses for inflation between now and when you retire. And multiply by your RMD withdrawal factor the year that you retire. This will give you an estimate of how much money you’re going to need when you retire.
Of course, your situation may be more complicated than Jocelyn’s. For example, if you own your home and have a fixed rate mortgage, your mortgage expenses won’t increase with inflation and will end when you pay off your mortgage. So calculate future mortgage expenses separately from your other expenses. Furthermore, if you own your home this gives you additional savings. What if you plan to retire before 70? Required minimum distributions start the year you turn 70 and 1/2. If you are thinking of retiring a few years earlier, I suggest using a withdrawal rate of 33.
That is, multiply the annual expenses you’re going to need to cover from your retirement savings by 33 to get the amount of savings you’ll need. If you are planning to retire many years before you turn 70, you’re probably not watching this video. What if there is no way for you to save enough to fund the retirement you’d like? That’s a tough problem, but not an uncommon one. To have more income in retirement, wait until 70 to claim social security benefits. Also, consider working a few more years before you retire, looking for part time work after you retire, taking in a roommate, or reducing your spending. Planning for retirement is much harder today than when my father was teaching at Mahtomedi High School. The change from traditional defined benefit pensions to 401(k) retirement plans has shifted the responsibility and risk of funding retirements from employers to individuals. You have to decide how much to save, how to invest your savings, and how much you need to retire. This video may help you figure out the minimum you’ll need to retire. But you will continue to bear the risk that your investments do poorly or that you live longer than expected.
So if you possibly can, try to retire with more than the minimum. .
As found on Youtube
Read MoreWhen are you hoping to retire? Retirement financial tips
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– When will you retire? There’s been much social
and political debate since the federal government
pushed out the age that you can access the age pension. Although most occupations don’t have a legislative retirement date, there’s no doubt that when
you can access an age pension does have an impact on the retirement date for many people. So, here’s a few examples around when you might choose to retire. The first one is when I
can access the age pension. Unfortunately for many people, this will be the only option. If you don’t have significant
assets behind you, superannuation, investment properties, savings, you may not be able to retire until you’re eligible for the age pension. This is going to be age 67 by 2023. If the government’s
current proposal is passed, it will be age 70 by 2035. If your retirement plans don’t line up with when you would be
eligible for an age pension, you may choose to withdraw
funds out of superannuation for a year or two until you become eligible
for the age pension to help subsidize your income. You might choose to stop work as soon as you can get your
hands on your superannuation. For most people, this is age 60. However, if you were
born before the mid-’60s, it can be as low as 55, increasing to 60 over that timeframe. There are other options
you may wish to consider if you wish to retire this early or earlier as well and that is using assets
other than superannuation. This is because you are still taxed on accessing superannuation
until you’re age 60. So, in a lot of cases, it can make sense to wait. So, that’s the third option. Waiting until you can access
your super tax free at age 60. The downside of retiring early is that your retirement savings have to last a long time. So, this generally means you either have to have a large balance to begin with or have a low amount of drawings to ensure it’s going to
last a long enough period and generally retirement
there’s three phases. The first phase of retirement is when you’re the fittest
and healthiest usually and you start to do the things perhaps on your bucket list. Do the travel thing, great nomad thing, maybe go overseas, do all the things you’ve wanted to do but haven’t had time because maybe you’ve had
kids growing up at home, had a mortgage to pay and obviously time taken
up by paying the bills and working your job. However, with the right advice, there can be effective strategies that we can use to make sure that you can retire when you want to retire
and live the lifestyle you want to live. If what you’re trying to
achieve isn’t feasible, it’s important to speak
with somebody’s who’s going to tell you exactly that as well. The decision on when to hang up the boots for the last time is a challenging decision both
financially and emotionally. I can assist in helping ensure that the day you choose puts you in the optimal position. (upbeat music)
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Read MoreFactors That Can Reduce Retirement Income
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There are many different factors that can reduce retirement income. The first may be fairly obvious, but it’s the effect of death. For two spouses when there’s a pension involved, the death of a spouse could mean the loss of a pension income. Now if there’s a survivor benefit, that income may continue, so it’s important to evaluate your options when making pension decisions. A lot of people use insurance to protect against this type of income loss. Another way death can reduce retirement income has to do with Social Security. When two spouses are receiving Social Security and one spouse passes there will be a loss of one of the benefits. Now, the surviving spouse will receive the higher of the two benefits, but there still will be some loss of income. The final way that death can reduce retirement income has to do with taxes. Moving from married filing jointly to now filing single can push the survivor into a higher income tax brackets. The reason for this is that the income thresholds for married filers is about twice what it is for single filers. This can have a major impact on the surviving spouse’s net after tax income in retirement.
Taxes in general is another area that a lot of people overlook when it comes to retirement income. The reality is that taxes will take much more from you than the market ever can. For instance, going back to 2008 during the Great Recession, the average portfolio might have declined 20 to 30 percent, assuming it was well diversified, of course. That might have taken a couple of years to recover, but taxes in retirement can easily cost anywhere from 30 to 40 percent. And that’s money that will never come back. So it’s really important to consider where your different sources of income are coming from in retirement. Would it all come from pensions, Social Security, IRAs, 401(k)s, sources that will be taxed at ordinary income rates? Or do you have good tax diversification where you can choose from pulling money from maybe a Roth IRA raise or non-qualified accounts and really get a lot of control over your taxes in retirement? And finally, inflation. Inflation is absolutely something that can reduce your income in retirement. And it does this by reducing the purchasing power of your dollar in retirement.
Inflation isn’t just something that happened in the past – things will continue to cost more in the future. So let’s look back 30 years. 30 years is about the average timeframe for most people in retirement. So in 1989, the average cost of a first class postage stamp was twenty five cents. Today that same stamp will cost you fifty five cents. Also in 1989 the average cost of a new car was $15,000. Today the price of a new car will set you back on average $37,000. So you need to look at how well your different sources of income will keep up with inflation during retirement. For help optimizing your retirement income, visit us at PureFinancial.com. .
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Read MoreThe 4% Rule for Retirement (FIRE)
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If you have spent any time researching retirement planning online, you have heard of the 4% rule. If you haven’t heard of it, the 4% rule suggests that if you spend 4% of your assets in your initial year of retirement, and then adjust for inflation each year going forward, you will be unlikely to run out of money. To put some numbers to it, if you wanted to retire and spend $40,000 per year, adjusted for inflation, from your portfolio, you would need to retire with one million dollars to adhere to the four percent rule. This rule is alternatively described as the requirement to have 25 years worth of spending in your portfolio to afford retirement. 1/25 equals 4% – it’s the same rule. While it is simple and elegant, the 4% rule is probably not the best way to plan for retirement, especially if you plan on retiring early. I’m Ben Felix, Associate Portfolio Manager at PWL Capital. In this episode of Common Sense Investing, I’m going to tell you why the 4% rule is not a rule to live by.
The 4% rule originated in William Bengen’s October 1994 study, published in the Journal of Financial Planning. Bengen was a financial planner. He wanted to find a realistic safe withdrawal rate to recommend to his retired clients. Bengan’s breakthrough in determining a safe withdrawal rate came from modelling spending over 30-year periods in US market history rather than the common practice of simply using average historical returns. Using data for a hypothetical portfolio consisting of 50% S&P 500 index and 50% intermediate-term US government bonds he looked at rolling 30-year periods starting in 1926, ending with 1992. So, 1926 – 1955, followed by 1927 – 1956 etc., ending with 1963 – 1992. The maximum safe withdrawal rate in the worst 30-year period ended up being just over 4%. From this simple but innovative analysis, the 4% rule was born. More recently Bengen has adjusted his spending rule to 4.5% based on the inclusion of small cap stocks in the hypothetical historical portfolio.
While the 4% (and the 4.5% rule) may have basis in historical US data, there are substantial problems with these rules in general, and specifically in the case of a retirement period longer than 30 years. In his 2017 book How Much Can I Spend in Retirement, Wade Pfau, Ph.D, CFA, looked at 30-year safe withdrawal rates in both US and non-US markets using the Dimson-Marsh-Staunton Global Returns Dataset, and assuming a portfolio of 50% stocks and 50% bills. He found that the US at 3.9%, Canada at 4.0%, New Zealand at 3.8%, and Denmark at 3.7% were the only countries in the dataset that would have historically supported something close to the 4% rule. The aggregate global portfolio of stocks and bills had a much lower 30-year safe withdrawal rate of 3.5%. Considering returns other that US historical returns is important, but, in my opinion, one of the most important assumptions to be aware of in the 4% rule is the 30-year retirement period used by Bengen. People are living longer, and many of the bloggers citing the 4% rule are focused on FIRE, financial independence retire early.
In Bengen’s study the 4% rule with a 50% stock 50% bond portfolio was shown to have a 0% chance of failure over 30-year historical periods in the US. That chance of failure increases to around 15% over 40-year periods, and closer to 30% over 50-year periods. FIRE likely means a retirement period longer than 30 years. Modelling longer time periods using historical sampling becomes problematic because we have data for a limited number of historical 50-year periods.
One way to address this issue is with Monte Carlo simulation. Monte Carlo is a technique where an unlimited number of sample data sets can be simulated to model uncertainty without relying on historical periods. Even with Monte Carlo simulation, there is an obvious risk to using historical data to build expectations about the future. The world today is different than it was in the past. Interest rates are low, and stock prices are high. While it may be reasonable to expect relative outcomes to persist, such as stocks outperforming bonds, small stocks outperforming large stocks, and value stocks outperforming growth stocks, the magnitude of future returns are unknown and unknowable. To address this for financial planning, PWL Capital uses a combination of equilibrium cost of capital and current market conditions to build an estimate for expected future returns for use in financial planning. This process is outlined in the 2016 paper Great Expectations.
Using the December 2017 PWL Capital expected returns for a 50% stock 50% bond portfolio we are able to model the safe withdrawal rate for varying durations of retirement using Monte Carlo simulation. We will assume that a 95% success rate over 1,000 trials is sufficient to be called a safe withdrawal rate. For a 30-year retirement period, our Monte Carlo simulation gives us a 3.5% safe withdrawal rate. Pretty close to the original 4% rule, and spot on with Wade Pfau’s global revision of Bengen’s analysis. Now let’s say a 40-year old wants to retire today and assume life until age 95. That’s a 55-year retirement period. The safe withdrawal rate? 2.2%. I think that this is such an important message. The 4% rule falls apart over longer retirement periods. So far we have talked about spending a consistent inflation adjusted amount each year in retirement. One way to increase the amount that you can spend overall is allowing for variable spending. In general this means spending more when markets are good, and spending less when markets are bad. The result is more spending overall with a lower probability of running out of money. The catch is that you have to live with a variable income or have the ability to generate additional income from, say, working, to fill in the gaps when markets are not doing well.
We also need to talk about fees. Fees reduce returns. Fees may be negligible if you are using low-cost ETFs, but they become extremely important if you are using high-fee mutual funds, or if you are paying for financial advice. The safe withdrawal rate in the worst 30-year period in the US drops to 3.56% with a 1% fee, making the 4% rule the more like the 3.5% rule after a 1% fee.
Adding a 1% fee to the Monte Carlo simulation reduces the safe withdrawal rates by around 0.50% on average. In both cases this is a meaningful reduction in spending. Of course, fees need to be considered alongside the value being received in exchange for the fee. This value should be heavily tied to behavioural coaching and financial decision making. There have been two well-known attempts to quantify the value of financial advice, one by Vanguard and one by Morningstar. Vanguard estimated that between building a customized investment plan, minimizing risks and tax impacts, and behavioural coaching, good financial advice can add an average of 3% per year to returns. Morningstar looked at withdrawal strategies, asset allocation, tax efficiency, liability relative optimization, annuity allocation, and timing of social security (CPP in Canada), to arrive at a value-add of 2.34% per year.
PWL Capital’s Raymond Kerzerho has also written on this topic, finding an estimated value-add of just over 3% per year. Based on these analyses, one could argue that paying 1% for good financial advice could even increase your safe withdrawal rate. I would not go that far, but the point is that while fees are a consideration, they may be worthwhile in exchange for good advice.
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Read MoreHow Do You Create a Simple Retirement Income Plan?
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A retirement income plan is needed because life changes in retirement. Your retirement plan should account for every year in retirement, even past your life expectancy. For each year, make a list for you and your spouse that include social security income, pensions and annuity income. Also list earnings from investments and working part-time. List any other fixed and regular income sources. For each year, list your desired gross retirement income need.
Be sure to include taxes, the effects of inflation and potential medical expenses. Then for each year, determine the gap or surplus by subtracting expenses from income. If you see that you have gaps in your retirement plan, give us a call today. We can make sure you have a strategy to help you reach your retirement goals. .
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Read More10 tips to ensure a successful retirement
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– Are you looking forward to retirement? Of course you are. Check out our top 10 tips to make sure you’re on track. The sooner you get started, the more likely you’ll have a happy and healthy retirement. Tip one is take stock. How do you want to live in retirement? Do you want to move to a new area? Do you want to do a bit of travel? How much is it going to cost? How much do you have saved? Are you on track? If not, what are you
going to do to get there? Tip two. Plan for the rest of your life. Most people are in retirement
longer than they expect. While your health and family history will influence the length of your life, most people are living longer. In fact, you could easily
live into your 90s. Plan for the long term and don’t forget that you may need extra
assistance as you get older. Tip three. Review your investments. For your savings to last
the rest of your life you need to have the right mix of growth and defensive assets and you also need to have something to bring in an income and also a bit of growth. Diversifying your assets across cash, fixed interest, shares and property can help smooth the returns. Tip four. Stick to your plan. Investments can quickly change in value and while it’s tempting
to sell out of shares when markets go south, this is often the worst
thing that you can do. It’s important to remain
focused on the long-term as they usually recover
if given a long enough period of time. Tip five. Get the structure right. By changing the way you own investments and the way you receive the income can reduce the amount of tax you pay and also increase the
amount of age pension or DVA pension you receive. Even if you aren’t
entitled to an age pension, you may be eligible for discounts which can save money over the long term. Tip six. Get your affairs in order. Estate planning allows you
to pass on the right assets to the right people at the right time. Unfortunately we are all going
to pass away at some point. The first step in a good estate plan is by getting a will. You should also speak with your solicitor about enduring power of attorney and advanced medical directive. And remember to review your estate plan every few years as
circumstances change over time. Tip seven. Stay fit and healthy. If you stay physically and mentally active you’re more likely to enjoy
a longer, healthier life. Take up a hobby, learn a new skill or maybe volunteer in the community. Tip eight. Rethink the move. Some retirees move to a new location that they’ve always wanted to retire in and it hasn’t measured
up to what they expected. If this is something you want to do, perhaps move there
temporarily just to make sure it lives up to your expectations. Tip three. Review your investments. For your savings to last
the rest of your life, you need to have the right mix of growth and defensive assets and you
also need to have something to bring in an income
and also a bit of growth. Diversifying your assets across cash, fixed interest, shares
and property can help smooth the returns. Tip four. Stick to your plan. Investments can quickly change in value and while it’s tempting
to sell out of shares when markets go south, this is often the worst
thing that you can do. It’s important to remain
focused on the long-term as they usually recover
if given a long enough period of time. Tip five. Get the structure right. By changing the way you own investments and the way you receive income, you can reduce the amount of tax you pay and also increase the
amount of age pension or DVA pension you receive. Even if you aren’t
entitled to an age pension, you may be eligible for discount. (upbeat music)
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HOW TO BECOME A MILLIONAIRE WITH $5 A DAY
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You know before making this video I was just thinking back to some of the greatest things that I learned in my days in school we sure did learn a lot of great stuff in school didn’t we for example if you give me the link of two sides of this right triangle here I can actually tell you the length of this third side right here pretty useful stuff huh I can also write in cursive play hot cross buns on a recorder and I can even spell boobs on a calculator my favorite lesson in high school though was how to become a millionaire with just five dollars a day wait a second I didn’t learn that in high school did I did you guys learn that in high school did anyone learn that important lesson in high school or was that just left out when we were learning how to cite a source using correct MLA format my point here is about 99% of what you learned in school is useless information and this is a very important lesson that was left out that I’m going to share with you guys today I’m going to show you how to become a millionaire with five dollars a day this is the magic of compound interest pretty magical all right so the first thing I want to point out to you guys is this you cannot save your way to millionaire status one of the most common things people tell you to do if you’re looking to grow your wealth is to save your money and put it in the bank that is the most stupid piece of advice anyone could give you because that is a guaranteed way to lose money I’m going to explain why that is so first of all if you have five bucks a day can you simply save your way to millionaire status absolutely not here’s an example let’s say for whatever reason you were able to save five dollars a day from the day you were born to the day you were a hundred let’s say you even lived to be a hundred years old if you save five bucks a day for a hundred years it will have one hundred eighty two thousand five hundred dollars that is a far cry from a million dollars so unless you’re planning on living past five hundred years old you cannot save your way to millionaire status second of all interest rates in a savings account do not keep up with inflation so you cannot put your money in the bank and expect it to keep up with inflation so in 2016 inflation was two point one percent okay the average checking account pays zero point zero five percent interest on the money you put in there so here’s just an example in terms of how much money you’re losing by keeping your money in a savings account so ten thousand dollars in 2015 is equal to ten thousand two hundred sixteen based on that two point one percent rate of inflation now let’s say you had ten thousand dollars in your checking account over that year as well so you’re ten thousand dollars grew to an astounding dollar amount of ten thousand and fifty dollars at that point so you made fifty dollars okay also known as you just lost one hundred sixty dollars of value maybe that doesn’t sound like a lot of money but if you had a hundred thousand dollars in there you just lost sixteen hundred if you had a million dollars you just lost sixteen thousand dollars because your interest rates are not keeping up with the rate of inflation so that is why a savings account is a guaranteed way to lose money so when people recommend you save your way to retirement or you save your way to being rich that’s a guaranteed way to lose money there you’re basically guaranteeing that you’re going to fork over a lot of money because you’re not going to keep up with the rate of inflation with what these banks pay you as far as interest goes so what is the solution to this problem I’m going to give it to you right now I’m going to show you how to become a millionaire with five bucks a day all that I ask you guys to do is subscribe to my channel and drop a like on this video and help this message be spread to other people out there who are stuck saving money in a bank account all right guys here it is here’s how you become a millionaire with five bucks a day no this is not some course that I’m selling for a thousand dollars on how to become a millionaire that has 40 hours of video content this is this is four steps four steps guys and you can become a millionaire with five dollars a day okay here’s how you do it number one set aside five dollars each day I’m talking about the amount of money you probably spend at Starbucks every single day at the end of the month you will have one hundred fifty dollars saved up okay what you’re going to do with that money you’re not going to put it in your bank account you’re going to invest that money you’re going to invest in a diversified portfolio of blue-chip stocks and investment-grade bonds okay for those of you who don’t know blue chip stocks are these stocks of well-established companies they have a very high market capitalization they are things that have been investing in for many many years and over the last 100 years on average blue chip stocks have paid a 10 percent return you’re also going to be investing in investment grade bonds these are high-quality low-risk bonds over the last 100 years these bonds have paid out on average 6% what I recommend doing is investing 50% of your money in blue chip stocks and 50% of your money in investment grade bonds over the last 100 years on average this portfolio page you 8% return on your investment you’re never going to sell you’re going to leave it there and you’re going to let it compound over time you’re taking advantage of compound interest now you may not have enough money each month to invest but you’re going to save that money and when you do have enough money you’re going to buy more shares of blue chip stocks and you’re going to buy more investment grade bonds okay after 50 years now we’re talking 50 years I know that sounds like a long time but like we said before if you save five dollars a day for a hundred years you’ll have a hundred eighty two thousand five hundred dollars okay so now we’re talking about half the time 50% less time we’re talking 50 years okay you do this for 50 years and due to the magic of compound interest you now have a portfolio worth 1 million thirty two thousand seven hundred eighty six dollars and 28 cents you just became a millionaire for the price of a starbucks cup of coffee each day why is this lesson not being taught in school
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Read MoreAlice Cooks Up A Great Retirement with the Concordia Retirement Savings Plan 403(b)
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Alice is a school teacher at St. Paul’s Lutheran School. She recently had a conversation with her students about goals. While it’s a way’s off, she’s started thinking more about her own goals, especially with retirement. Away from school, Alice loves to bake. There’s nothing better to her than putting the right ingredients together and creating a tasty treat for her kids and their friends. Alice has started to look at retirement the same way she does baking. If you mix the right ingredients together and have a little patience, you’ll end up with something rewarding when the time comes.
Alice is smart. She’s knows the three key ingredients for retirement income. Let’s turn it over to our retirement chef to explain. Thanks Narrator Guy. So my first ingredient is the Concordia Retirement Plan pension fund. Check out that video out to see what an amazing benefit the pension is! The second ingredient is Social Security. I’ve been paying into this government fund since I started working. When I retire, I should receive money back to help me lead the life I want to live. But it’s the third ingredient that really helps me know I’ll have enough retirement income to meet my expenses.
It’s the Concordia Retirement Savings Plan 403(b). A 403(b) is the non-profit version of a 401(k), and the CRSP has some of the lowest fees available. That means I get to keep more for my retirement! As soon as the CRSP 403(b) began, I started investing because I knew this ingredient was in my control. I have my employer put some of each paycheck into the plan. I know that, if I need to, I can pause or change my contribution because the CRSP is so flexible. But even when things were tight or the markets were down, I still regularly saved something for retirement. It was like “set it and forget it and you won’t regret it!” I’m a baker, not a banker, so luckily Concordia Plans has top-notch experts who mixed my investments among the funds they offer. I didn’t need to be an investment expert, but when I wanted to learn more, CPS always had resources available to help. When I retire, I’ll still have expenses to pay for. Some of them, like medical costs, will probably rise. Thanks to my commitment to the Concordia Retirement Savings Plan, I’ll have enough money to pay for what I need.
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