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Retirement Planning: I'm 66 Years Old With $800,000, Can I Retire? - YouTube
Channel: Oak Harvest Financial Group
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we all want to know do we have enough
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can we retire
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and how long will our money last well
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the key in retirement is to compound
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good decision after good decision and
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what that does is that helps to optimize
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your overall retirement assets and
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increase the probability that you do
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have enough and you can retire
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and most importantly you don't have to
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to live with anxiety
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throughout retirement worrying if you
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have enough or not in this video we're
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going to look at
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a 66 year old with 800 000 saved and
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really get into some of the nuances
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of different decisions that have to be
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made in the potential outcome
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of those various decisions
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[Music]
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hi i'm troy sharp ceo of oak harvest
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financial group certified financial
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planner professional
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host of the retirement income show and
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certified tax
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specialist the purpose of these videos
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is to help
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get you thinking along the lines of what
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decisions need to be made
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and how they are all interrelated from
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social security to health care to
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investments in asset allocation to
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managing risk to taxes
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to really get get you thinking about all
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the decisions that have to be made and
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how
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one decision impacts other decisions as
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we go through these
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what you'll start to see with retirement
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is that it's just
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as much an art as it is a science
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because everyone's situation is so
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unique everyone's circumstances
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are so different so we're going to look
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at some different variables here
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but we're going to start out with some
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very basic ones so first we have john
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and jane
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just a sample case male female both age
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66
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and just retire now we're in texas
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so we put texas as a state residence but
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obviously if you live in a state with an
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income tax a state income tax there
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would be a little bit different scenario
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but that's why the customization is so
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important
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okay so retirement period so we like to
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assume
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a long life expectancy and the reason is
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that the
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age 85 population segment in this
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country is the fastest growing
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population segment out there
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also according to pew research which i
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brought this article up here
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when we look at the projection of growth
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this is
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the estimated number of people over 100
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years old
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over the next 30 years in 1990 there
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were 95 000 people over
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age 100. in 2015 451 thousand
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by 2050 this is a pew research study by
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the way
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3.6 million people estimated to be
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over the age of 100. this is advances in
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science and technology and medicine
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and treatment to help people overcome
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various diseases that they may
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they may find themselves with in
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retirement so
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underestimating life expectancy is a big
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mistake for a retirement planner because
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if we plan for 95 or 90
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and you don't make it that far well you
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have that money you're secure
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but if we plan to 82 and you make it to
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90 well guess what that's a big problem
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so when we talk about life expectancy
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this is one of the pieces of financial
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planning that is specialized to you and
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yourself
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you know your health you know your
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longevity you know what
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health problems you may or may not have
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of course we can customize this
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for your particular situation but most
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people
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from my experience underestimate the
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advances in medicine
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technology and science that will
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continue to extend our lives
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as time progresses we have treatment
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right now for various diseases and
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cancers that
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even five ten years ago we didn't have
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so underestimating our life expectancy
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is one of the big mistakes that people
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make
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now if you do have health conditions if
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you smoke if you drink you're probably
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not making it to 95
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that would be customized for your
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particular situation but
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generally speaking i'd much rather plan
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for you to live to 95 and you don't make
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it there
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then plan for you to live to 85 and then
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you make it to 95
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and then the plan obviously would be
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insufficient because there wouldn't be
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enough money
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to pay for health care to keep up with
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inflation taxes etc
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so that's why we put the life
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expectancies at 95.
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okay this particular couple what we're
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trying to do is account for
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spending and retirement of sixty
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thousand dollars per year of course this
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is after tax
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so if most of your money is inside a
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401k or an ira
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there is a tax problem there to get 60
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000 out we have to pull
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more than that after taxes to be left
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with 60.
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healthcare this is the average medicare
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cost
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for a 66 year old couple in this country
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now it may be a little bit more a little
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bit less for you depending on your
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prescriptions and various out-of-pocket
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costs
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but this 9 400 this is the average
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including medicare premiums
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out of pocket costs for health care
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expenses for a 66 year old couple in
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this country
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okay so social security john has
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he will file his normal application at
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sixty six and a half and receive thirty
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six thousand dollars
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jane will then file spousal benefits in
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this scenario which is
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um a lot of times what we see working
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with clients
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where the husband files social security
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and then the y files for spousal
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benefits of course your situation may be
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different again
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this is where customization comes in but
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36 000 and 18 000 are the social
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security benefits
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now here's something very important when
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we look at the breakdown in assets this
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is where
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retirement planning starts to get very
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very fun for us because it start it's
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putting that puzzle together
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but where it becomes very complicated
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for for most people
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because they don't understand the
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challenges
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that come with having too much money
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inside that 401k
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so we did a breakdown here six hundred
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thousand inside the 401k and 200 000
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inside the brokerage account
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there are literally millions and
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millions of different ways that you
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could take retirement
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income from this breakdown of accounts
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you could take x amount from the 401k
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take x amount from the brokerage account
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brokerage of course when you say this
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this is a non-retirement account a
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non-ira
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optimization comes into play when we we
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are we identify what is the
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appropriate amount to take out of that
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401k and what is the appropriate amount
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to take out of the non-ira
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in order to not just reduce taxes today
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but look at the impact over the course
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of your retirement
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which income distribution strategy makes
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the most sense for not only today but
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over the next 20 to 30 years
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so this is the breakdown here we're
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going to when we look at the tax
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analysis in a few minutes
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it's going to make a lot more sense
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we're going to look at the top 100
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different income distribution possible
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strategies
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and the impact that they have over a
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long period of time
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okay so very simple we're not looking at
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real estate here so a net worth of eight
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hundred thousand dollars
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because yes when you have equity in your
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home
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it's a great thing to have you can pull
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that out for emergencies later
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we just want to isolate the financial
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assets that this couple has saved
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look at them spending sixty thousand
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dollars a year after tax with inflation
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uh inflation by the way we have it two
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and a quarter percent i'll touch on that
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in a little bit because we received some
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comments about
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inflation and health care costs now
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health care obviously is increasing a
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lot more
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than general inflation in the economy
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but we just want to isolate with these
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financial assets is that enough to
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answer the big questions
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can i retire stay retired and maintain
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my standard of living
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so when we
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look over here at
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a monte carlo analysis so this button
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what we're going to do is we're going to
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hit it it's going to run a thousand
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different simulations looking at a
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thousand different
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market returns over the course of time
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we just have them in a basic 60 40
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portfolio again
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asset allocation is a big part of a
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successful retirement but we're just
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trying to
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to provide information based on what the
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majority of people out there
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are currently doing with retirement
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okay so this comes in at about 87
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percent
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so 87 percent you may be saying well is
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that a good number is that a bad number
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the truth is it doesn't really matter
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too much it's just a snapshot in time
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what's most important with a financial
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plan and a retirement plan
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is that you stay connected to this over
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time when markets are up or down and you
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have various returns over time
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and you're spending money as well you
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run into what's called
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sequence of returns risk which is the
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combination of taking money out
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and market losses if you take out five
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percent you lose
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20 you're down 25 percent in a single
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year
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now if that happens in consecutive years
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that's where the sequence of returns
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risk comes in when you're in the
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distribution phase of retirement
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so yes 87 percent i would feel
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comfortable myself retiring
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if this came in at 87 percent for me
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because that means 870 out of a
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thousand simulations i die with money
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now it's more nuanced than that of
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course but what's most important
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is that we're tracking this over time is
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it staying at 87 percent
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is it going up is it going down that's
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what's really important this is nothing
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more than a snapshot in time
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now when we start to look at before we
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get to the tax analysis
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i want to come over here to what's
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called the play zone in this particular
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software that we use
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and i like this because it shows what
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happens if we spend a little bit more
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money
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or less money how does that impact our
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probability
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of success so right now we have this
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couple spending sixty thousand dollars
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after taxes let's say they wanted to
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spend seventy thousand though
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seventy one look at the impact that this
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has it drops it from 87 to 41
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that is a massive change in probability
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of success
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now what we would do in this situation
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if somebody wanted to spend 70
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000 of course we can customize a plan
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where
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seventy thousand is spent maybe in the
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first five years seven years ten years
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with the intention of eventually
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tapering it back down to an
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inflation adjusted sixty thousand per
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year so inflation adjusted sixty
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thousand per year what does that mean
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well 60 000 today if you take that out
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of your portfolio
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it will buy more goods and services than
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if you take 60 000 out of your portfolio
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in the future
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this is a basic time value of money
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concept inflation
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erodes our purchasing power over time so
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to have the same purchasing power
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in the future of 60 000 today we
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probably need to pull out 68 69 70 71
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000
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something in that range
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we'll actually look at this in a second
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but the 70 000 this assumes we spend 70
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000 today after taxes and it's just
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inflating at two and a quarter percent
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over time now i said i would talk a
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little bit about inflation and right now
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what's going on as i record this video
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is we are going through a period of a
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bit higher inflation in some areas
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other areas we absolutely don't have any
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serious inflation
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the truth of the matter is whatever you
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believe inflation to be
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when we customize a plan like this for
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you we can look at various amounts of
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inflation but if you start to put it out
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at four five six seven percent
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it's very likely you're not going to
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have enough money to keep up with that
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level of inflation
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unless the investment returns are that
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or greater
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now positive news there is typically in
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high periods of inflation
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stocks have performed well but when we
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look at
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inflation inputs and inflation estimates
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it's been 12 plus years where general
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inflation in the economy has been under
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2
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we are starting to see some inflation
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now most experts believe that it's
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transitory
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and by the time we get to next year
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inflation should normalize but we'll see
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most importantly again what we do is we
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stay connected if inflation does start
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to
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to sustain itself in a way that gets
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above two and a half three three and a
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half four percent
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well that's why we have a financial plan
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we start to adjust for those
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changes same thing with taxes same thing
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with markets same thing with everything
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in retirement our health
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our goals and in the circumstances we
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find ourselves in they change throughout
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retirement
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that's why when we look at something
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like this it's just a snapshot in time
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we need to be able
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to be flexible and pivot based on
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whatever circumstances come our way
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okay so taxes i want to look at taxes
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now
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we have this this is a different
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software that we use to look at taxes
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we'll overlay this software and the
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outputs from this one to the other
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software
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along with a few other ones that we use
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then of course the human element is the
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most important
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when combining all of this together but
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what we're looking at here is the top
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100 distribution strategies for this
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same couple
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number one tax planning and income
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distribution scenarios
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the number one ranked strategy of course
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is up top
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it shows an estimated ending balance of
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663 000
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and taxes paid over the course of
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retirement of 42
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sixty so ending balance of six sixty
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taxes paid of about forty two thousand
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if we come down here to the very lowest
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ranked strategy so i went to number
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eleven it's
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number 101 ranked cumulative taxes 156
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000 with an ending balance of 170.
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so that's over a 500 000
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or so change in an estimated ending
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balance
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and a hundred thousand plus in
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additional taxes paid
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what's cool about this software is it
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isolates everything else except your
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distribution strategy
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how much are you taking from the ira how
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much are you taking from the non-ira
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are you doing any roth conversions so
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being able to isolate everything else
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and just looking at those variables
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shows us very clearly
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that the tax planning and income
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planning component for this couple
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in this scenario john and jane is
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extremely important it's the difference
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isolating everything else between
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finishing with about a hundred and
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seventy thousand estimated
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or six hundred and sixty thousand so as
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you can see
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income planning tax planning play a very
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critical part
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in the overall retirement plan this
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software that we looked at over here
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this one is assuming what we call a
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conventional wisdom
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distribution strategy now this software
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is that's the software's weakness
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this does not do a great job tax
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planning but when we overlay
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the tax planning software with the
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financial planning software here
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when we get the 87 percent and we get it
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all done this gets it up to 90 95
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96 99 a lot of times the big takeaway
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here
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is that retirement is not just about
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your investments it's about having a
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plan
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that looks at your investments and
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manages risk but also generating
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income tax planning and health care
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planning
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along with estate planning estate
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planning is very important if it matters
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to you what happens to your assets when
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you're gone
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so we always keep a link in the
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description if you want to reach out to
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us set a consultation have a phone call
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and see if this type of planning is
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appropriate for you
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it may not be appropriate for you you
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may not be a good fit for what we do and
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that's okay
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hopefully we still can provide value and
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help you become a great
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have a greater understanding of
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retirement but if you do want to talk to
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us there's a link below you can schedule
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an appointment
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and of course share this video with a
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friend or family member hit that
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subscribe button
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and thumbs up if you liked it and if you
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don't like it hit the thumbs down that's
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fine too
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and if you leave a comment we're gonna
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make an attempt to address those
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comments in one big video
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of course we can't respond to every
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single comment or provide personalized
[947]
financial advice
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but feel free to comment below that
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helps you to know that there's
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engagement with this video and they'll
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help share it with others so they can
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learn
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as well
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