Will Your Retirement Savings Last 23 Years?

Will your retirement savings last 23 years?  That is the big question. How do we use our savings to generate income, and not see our balance go to zero before our blood pressure does. It’s a clear and simple way to define a basic level of financial success in retirement.

Video: Will Your Retirement Savings Last 23 Years?

Plan for A Better Retirement

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Tips to Help Your Savings Last 23 Years

Will Your Savings Last 23 Years

The Primary Reason People Run Out of Money

I’ve been doing this for 23 years, and there is a common theme for those who run out of money. It’s not bear markets or recessions, and we’ve seen two of the worst since the great depression in that span.The one common factor which led to people running out of money was spending too much.

When your withdrawal starts at 5% or more, you increase the risk of running out of money. And the chance of failure increases rapidly as you approach 6 or 7%.

The target number, if you’re wondering is 4%. So when you look at your numbers, focus on that level. In the coming weeks we’ll have a video about how to calculate that.

Will Your Savings last 23 Years

The Primary Obective is Growth of Income

Growth is important. Remember every year everything you buy costs more. Your income will need to increase as you move through the years. By the time you reach the 23rd year of your retirement, you’ll need nearly twice as much income as you do on day 1.

But modest growth is what you need. The big bear markets in the last two decades may not have been the primary reason people ran out of money. But they didn’t help either.

Distributions from your nest egg amplify the impact of any downturn–even the mild ones like last year. And those withdrawals also make it more challenging for your savings to recover.

Also beware of being too conservative. If your retirement savings isn’t growing, you are going to eat into your princpal faster. As you need more income over time…It makes that problem bigger.

Will Your Savings Last 23 Years

Time is Your Biggest Asset

Delaying retirement can help preserve your retirement savings.

For most of us, our retirement income will come from our savings and Social Security. The more you receive from Social Security the less income you’ll need from your savings.

How do you get more income from social security? you delay your retirement. Retiring early, means discounts to your Social Security benefits.

The same thing can happen with state and private pensions. Retiring early often means less income from those fixed sources.

By waiting, those discounts shrink, and your fixed income increases.  And if you delay beyond your normal retirement age, your social security benefits will actually increase. This means your savings won’t have to do as much of the heavy lifting.

Watch Other Episodes of Monday Morning Money

Catch up on the previous episodes of our weekly video series, Monday Morning Money.  You can also see them on our facebook page and our YouTube channel.

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A Million Dollar Coffee Habit? Really? Ep 12

About once a week, Susan and I will stop for a latté at Stoked Coffee.  Each one costs a little more than $3.00.  Some people stop far more often.  Will a daily latté result in a million dollar coffee habit?  We’ll talk about it in today’s episode of Monday Morning Money.

Video: A Million Dollar Coffee Habit?

Plan for A Better Retirement

We created Monday Morning Money with one goal in mind.  Give you information to inspire you to plan for a better retirement. 

We publish a new episode each week.  And, we will deliver it right to your inbox.

Don’t miss an episode, subscribe today!

Get Free Weekly Tips!

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Time for Some Math

So Suze Orman says the daily coffee habit equates to a million dollars over 40 years.  Is that accurate?

Three dollars per day is roughly $100 per month.  If you compound $100 per month for 40 years, how much will you have? We used 6%, 8%, and 10%.  The 90-year average annual return for stocks is about 10% per year. 

What did we get?

million dollar coffee habit

Not Quite A Million Dollars

To accumulate a million dollars saving $100 per month, you would have to earn nearly 12% per year.

Exaggerate much?

The Real Topic:  Opportunity Cost

Every dollar we spend costs what we pay today, plus the lost growth if it were saved. It’s called opportunity cost. Most people don’t consider it when they make any kind of purchase.

For most of us, money is a finite resource. We make what we make. We have to balance what we spend for the things we need and want today, with what we need to save for the future.

Ms Orman simply took something common, I see the cars lined up at Stoked…to exaggerate her point. The opportunity cost of some these little things add up to big amounts over a lifetime. I mean $350,000 isn’t chump change.

Does that mean you should give up your daily latte’? Not necessarily. If you are saving enough to gain financial independence and be able to retire the way you want, have your coffee.  Things will be fine.

But if you’re saving is out of balance with your spending, start looking at the little things. You may find they end up making a big difference in the long run.

5 Lessons for Financial Success – Ep. 11

Last week, my daughter graduated from college. Unfortunately, they don’t teach kids much about money in school. They learn some things from their parents. Others they learn from their own experience. I thought this was an appropriate “gift” for my daughter: 5 Lessons for Financial Success.

Video:  5 Lessons for Financial Success

Plan for A Better Retirement

We created Monday Morning Money with one goal in mind.  Give you information to inspire you to plan for a better retirement. 

We publish a new episode each week.  And, we will deliver it right to your inbox.

Don’t miss an episode, subscribe today!

Get Free Weekly Tips!

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My Daughter and My wife at graduation in 2019 and my daughter at 22 months old in 1997

She graduated with a degree in early elementary education from the University of Cincinnati.  And she did so with honors.

5 Lessons for Financial Success
Yes, my handwriting is bad.  I won’t be working as a calligrapher anytime soon.   But this is the card I gave to my daughter when she graduated.  I hope she keeps these lessons in mind as she embarks on her adulting journey. Click to enlarge the card.

5 Lessons for Financial Success

 

1. Spend Less Than What You Earn

Nobody has ever been able to get ahead if they spend twenty two hundred dollars a month when they only bring home two thousand.  This involves hard choices.  But those decisions are critically important to your future.

The best way to know you are doing this….KEEP track.  Prepare a budget. Know where your money goes, know what is coming in, and use that as your guideline.

2.  Make Saving a Priority

Whether it is building an emergency fund, saving for a down payment on a house, or socking money away for retirement.  Setting aside money now for later is very important.  The future is coming, and you’ll be glad you did.

3.  Pay Off Your Credit Cards Every Month

The convenience and ease of using a credit card makes them very appealing.  But when you don’t pay it in full, things snowball out of control very quickly.  The interest charges for many credit cards is in the double digits. And that adds a lot of extra expense.

4.  Get The Free Money

401(k) matching contributions are free money.  So are matching contributions to a health savings accounts.  Your employers are giving you money if you save some of yours.  Ignoring these opportunities will prove to be very costly down the road.

5. Avoid The Predators

This includes pay day loans, check cashing services, the rent to own furniture companies. They all offer what appears to be a fix for a problem.  But it comes at an enormous cost.

6.  Always Obey Rule #1.  Spend Less Than What You Earn

Spend less than what you earn.  It just can’t be stated enough.