Transcript:
Easan Arulanantham:
How much money do I need to pull from my retirement accounts to live comfortably? So a bit of a loaded question, but we can try our best to answer it.
Tom Vaughan:
Yeah, that’s an interesting question that how much money do I need to pull from my retirement accounts to retire comfortably? Well, the first thing I would think about there is what do you need in dollars to retire comfortably? You know, that’s, that is somewhat of a question that has to be answered by you. Because that is quite different. I mean, we’ve got clients that live off of 50,000, quite comfortably and other clients that are living off a 500,000. So it’s a, you know, depends on who you ask, as to what dollar amount you need. Generally speaking, we actually go the other direction, we try to determine what that dollar amount is, that makes somebody comfortable by going through a process and what have you. And then we see is that possible, within the parameters of what other income sources they have, what assets they have, and, you know, if they’re withdrawing this amount of money, how is that going to work? And of course, we use the Monte Carlo simulation to determine that. And because you can answer that kind of going backwards the other way, and say, Well, you need, you know, 70,000 to live off of, or whatever it is. But if we put 70 in there, it doesn’t work, maybe 55 works. What do you think, can you live off of that or not? Right? And so, and again, you know, all these numbers are different for everybody, as far as that goes, but that’s that that question? Yeah, I would probably answer the other way, just in the sense of, you know, figuring out what you could withdraw, is that enough to accomplish, you know, what you’re trying to accomplish? Right, that makes sense.
Easan Arulanantham:
You know, like, one really simple way that may, it’s just kind of like a generalization is, you could take whatever expenses, you have, you know, a yearly expense. And then you kind of take that, and then you multiply it by 25. And so in a sense, you’re kind of, that’s how much nest egg you need, isn’t. It’s like, you got a 4% withdrawal rate. And that’s a really rough way that you can estimate it. Because most people tend to keep the same amount of expenses when they hit retirement versus when they’re working.
Tom Vaughan:
Yeah, well, that’s what we’ve seen lifestyles very difficult to change. So we’ve seen people can kind of continue along with that same path. And, you know, the 4% rule has been knocked around quite a bit. But it’s not a bad place to start, you still want to, you know, verify everything with the MonteCarlo simulation inside of a retirement plan, much more sophisticated analysis, before you pull the plug, and retire. But it does give you some ideas, you know, where you want to go in a simple, simple term. Yeah.
Yeah, and a lot of people say, in retirement, you spend less money. But a lot of times as we shift our time, and our time goes a little bit more expensive, maybe some more expensive hobbies, like maybe I’m fixing up restoring a car, and I’m putting way more time into that. And now that becomes a bigger expense than it was before
travel. That’s a big one, we see travel expense go up, there are some expenses that go down, you know, clothing, gas, car maintenance, some of those things, you know, back when we used to actually drive to work, go to work. We’ll see if that comes back. But, you know, honestly, most of the times we see similar lifestyle. The one thing that people do save in a way is the fact that they’re not saving, so if they’re putting away 20 30,000 a year to get ready for retirement, you know, there they weren’t living off of that before. So it’s really that net, you know, after savings that they probably still need. And so yeah, it’s it’s pretty straightforward from that from that point.