Let’s be real, the last thing any of us want to do after retirement, is end up working as a greeter at Walmart when we’re 85, right? If you want to get out and have something to do, that’s great, but usually, that’s not where we may see ourselves down the road.
You’ve worked your whole life-saving in your 401k, getting your match, maxing out your contributions, and now, when it’s time to ride off into the sunset, all they hand you is your saddle and a check. A check is excellent. No one will look that gift horse in the mouth, and heck, this is YOUR money, but now what? You’re just supposed to put that in the bank and hope that you can make that last for the rest of your life? It’s a scary thing to think about and can be daunting. The good news? It can be done. Now, there are many things to consider, and it’s a humbling process, but it also reminds you how to think and plan realistically for the rest of your life.
In today’s episode, we’re going to teach you how to do it. We will go step by step, so you know where to start and how to set yourself up for true retirement success.
That includes:
- Understanding your income streams, what do you actually have to work with?
- How much can you safely withdraw?
- What are the risks that people face when determining how much they can withdraw?
- How much do you need to live on? Um, that’s a biggie!
We want to help you feel confident and secure moving into your next phase of life in retirement. So, we’ll even dive into budget, diversification, how to not let emotions get involved, how to not let your KIDS take over your retirement nest egg, and how to maintain the right investment mix for what you need and want to accomplish. So, grab our Know Your Possibilities Guide, start listening to today’s episode and get ready to thrive in your golden years.
P.S. Looking to meet with Richard or Angela? Want to discuss more of what you heard in this episode? Wondering where the heck you need to get started or what all of this means for your retirement plans? Scheduled free 30-minute session and find the peace of mind you deserve for the rest of your life.
“Protecting yourself is, is number one, because it's like when you're in an airplane, put your mask on first and then do your baby’s mask. That's a great analogy. It's put your mask on, keep your draw rate low, then do everything else you can to help your children."
Did you mention “Guide” above? Why yes, yes we did. We’re proud to present you with our “Know Your Possibilities Guide,” a tool and free resource for you to take notes, review, keep on hand, or even share with your friends and family. So grab your copy, click the play button and follow along. You’re just minutes away from discovering your next Place of Possibility.
A Glance at this Episode:
0:00 Introduction
03:16 Is it really possible to retire and live on a lump sum of money? Yes, it is! In this episode, we’ll tell you how, so let’s get started!
04:47 The first thing you need to do is add up your nest egg’s total amount with all your income streams included. This is the amount you have to work with before determining what you can take out to live on each year.
05:28 Now that your lump sum is calculated, what is a safe amount of money to take out annually? The percentage is about 3 to 5%– or think about dividing your nest egg by 20 as a general rule of thumb. For more on why this number is important, press play here.
06:40 There are some risks when it comes to living off your retirement. One big one relates to your investment strategy. Is it too aggressive, or is it too conservative? If you’re earning too little from your portfolio while taking too much, you’ll eventually start to draw from your nest egg. On the other hand, if your portfolio is too aggressive, it could be hard to predict your earnings. Let’s discuss how to find that “sweet spot.”
8:54 Diversification is vital when it comes to your portfolio. Often, we see people who’ve worked for a publicly held company “fall in love with the stock that’s done them right” and have a big chunk of it in their portfolio. Your portfolio could take a major hit if something goes wrong with that company. Our recommendation: there should be no more than 10% of any one position in your portfolio.
11:30 Don’t make big moves based on the stock market. If you take risks when the markets get scary, you will likely make the wrong decision at the wrong time. An example is cashing out your stocks when the market is down. Instead of being fearful, and making sudden changes, it might be a better time to rebalance. Press play here to learn why.
14:28 If you have a diversified portfolio of about 40% stocks and the rest as bonds or other “safe money,” let’s take a look at how much you can expect to earn in returns each year by pressing play now.
16:09 Controlling your withdrawals is another major consideration when living off a lump sum. Can you control yourself from taking from your nest egg, especially if you have a good year? Listen in for more on why you shouldn’t do this.
17:20 It can be hard to say no to helping others financially, especially in cases where family members or children need money. This will permanently affect your future income, so try to avoid giving unnecessarily when possible. By helping your children now, you could become a more significant burden to them in the future. Listen in to hear why this is a risk you don’t want to take.
19:55 How do you determine how much money you actually need to live on? Setting a realistic budget is important because spending tends to go up once retirement begins, but don’t worry, we’ve got you covered. Tune in here for an explanation of how to figure this number out.
21:00 Making two budgets for retirement is one solution to identifying your annual retirement spending amount. One is an “ideal” budget that includes traveling, gifts, and other extra expenses. Then you have your “bare bones” budget, which is the least amount you need to live on. Somewhere in between these two is where you want to be.
21:47 Taxes are another risk factor to consider. If you want $5,000 per month to spend, you really need to plan for $7,500 to account for taxes as well. Richard and Angela explain why having your wealth manager help you with the math is important.
23:00 Properly accounting for the inflation rate is another thing to consider: having inflation-adjusted income amounts. Will taking $5,000 a month now cover what you need in 10 years? Probably not.
25:22 Did you know that the average person spends about 4 years with some sort of care at the end of their life? The average cost for this is about $10,000 per month. Listen to Angela explain why this makes the size of your lump sum and future planning even more important.
27:42 To wrap things up, Richard and Angela share two case studies highlighting some of the mistakes one couple made with their lump sum, while another comes out ahead.
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Every client that walks through our door is family. Your goals are our goals, and that’s why we work hard to provide a true Place of Possibility™, so we can help you meet and exceed them. Our wealth management services work to navigate life transitions and take advantage of unique planning opportunities that leave you feeling calm and confident. We offer solutions based on you and your needs, not strategies that make us a quick buck. No matter how life unfolds, we’ll help you connect the dots and always have your back. The door to our Alamo, CA-based headquarters is always open. How can we assist you? Call us at 925.736.6410, send an email to Info@APlaceOfPossibility.com or jump right into our calendar and select a date and time that works for you and let’s talk.
