How Much Money Can I Spend in Retirement? - YouTube

i've saved a lot for retirement i'm heading  into retirement how do i figure out how  

much i can spend this is actually one of the  biggest questions we get on a constant basis  

actually is just you know how much money can  i spend in retirement uh i think there's a  

compliment to this is how much money do i need to  support this amount of spending you know so but  

those are flips of the same question to a certain  degree so now i'm heading into retirement or i'm  

just retired or whatever along those lines and  i kind of want to figure out what my budget is  

and what not and there's all these different  rules that you can use you know you can take  

a four percent withdrawal and but if you really  dig into the four percent withdrawal there's some  

there's some caveats to it you know you're  looking at you have to be the right age you  

kind of need a 30-year retirement for that to  work uh but let's say you're 85. i mean you  

take more than four percent most likely right  and so that's where the monte carlo simulation  

comes in and again you know i'll share that uh  with everybody here as far as that goes again  

here we go right somebody wants to know how much  they can spend and so we put in all of their  

expenses that they've got now as much as possible  that we can identify we build in you know all of  

their incomes that are coming in social security  pensions rental income those type of things  

and then we look at you know what their asset  base is and how that's constructed and where it  

is how much is in the banks how much is in stock  market how much is in the bond market we get all  

that in there and then we can run this monte carlo  simulation and you guys have seen this before but  

essentially we push this button and we're able to  run a thousand scenarios and in this particular  

case 960 of them were successful yeah right and so  what would we do if we want to figure out the max  

they can spend so if we want to like you know  push the limits we would solve for 85 percent  

and so we have like kind of a super solid  functionality and it essentially takes our  

inputs and says what can we do spending wise and  i'll usually bump up your spending a little bit  

and then i'll get your 85 but longer the  time horizon like longer your retirement is  

less that bump will be so if you have a really you  say you're 85 and you expect only to live to 100  

that 15 years versus someone that's  in their 70s and expects to live 100  

that bump's gonna be different yeah  we literally have a super solve button  

in this particular program and we can say solve  for 85 percent probability of success and we can  

have it just solve for how much money  can be spent per year to make that happen  

and we can update that and continue  to look at that or what have you but  

some people really like that they just want to  know the budget and know that they can feel like  

okay that works because when they're traveling you  know budget for travel right okay i'm gonna pick  

three trips one's expensive one's medium and  one's cheap which one can i really afford  

because it sure makes that trip a lot more fun  when you can go knowing what you can afford  

that's a huge deal yeah a guilt-free trip what's  that guilt-free trip yeah that's right because  

that's just my personal thing whenever you make a  purchase that's above and beyond what you probably  

can really afford it could be anything uh car i've  done that before uh you know trips and those types  

of things you know you're driving around in this  nice car but then you have this whole feeling  

of well i can't really afford this car or i'm at  this great trip but man we probably overdid it and  

i can solve for this let's say at 85 and say  okay i can actually afford this and man that i'm  

telling you that's that's a big part of the trip  i mean the whole object of the trip for me is just  

mental relaxation so knowing that i'm you know can  afford it it really does help and maybe i'd go on  

a better trip than i might have thought right just  because okay i can really do this and and maybe  

i'd enjoy that so i i think it's a great question  it's there's lots of different ways of solving it  

but i wouldn't do it any other way than monte  carlo simulation personally just again we've  

had so much experience with this over the years  and it really seems to work i mean real life it's  

not just oh we did this plan and we never see  these people again we redo these for year after  

year after year and we're getting to see okay  this works you know it has been pretty accurate  

and whatnot and then we can see what happens in  these big downturns and keep pushing these buttons  

i think it's worth looking at yeah so if you're  close to retirement i think it's time to start to  

like uh go into the details you know dig into the  weeds with your retirement and figuring out how  

you have to spend because you know when you're  saving that money you can have like a rough you  

know napkin math to figure out how much money you  need for retirement but when you actually get into  

it and you want to retire at a point you can't  really go back to work and that's when you kind of  

want to make sure that you're in a good spot yeah  i actually can make this argument for almost any  

age too i mean you know we don't get asked this  all the time because people are pretty happy with  

their standard of living uh and they're let's  say they're at 96 percent like we just showed  

okay good good good um but it would be interesting  you know for those people that are wondering what  

they could spend to solve at 85 percent uh it's  very easy you know we can do it uh and it will  

give them an idea of what they could spend uh  because sometimes things come up and i've got  

clients that could afford more and they don't do  it because they don't think they could afford more  

so and that's okay there's nothing wrong with that  but maybe there's something you're missing out on  

that you might have been able to do you know go  back to visit your kids you know a few more times  

or something than you thought you could  whatever it might be right everybody's  

got different things that are important to  them so anyway i think you know solving for  

maximum income you know spend i think it's useful  it would help it helps me that's for sure yep