A highlight from Should You Stop Saving at 25%?

The Money Guy Show


What's your number for financial independence. It's great to us income when you have your twenties and thirties. Because you just don't know what your future self is going to look like. It's not like you can look at yourself in the marinko future self. What am i going to do late forties early fifties. When i think i'm retiring or even sixties so that's what we give the guidance an income i know we get some flack from the fire movement on that because the but i think as you progress to you're planning it does become as you're landing. The airplane is. We often say approximately five years before retirement. You wanna start basing everything off of your living expenses because you are going to know what yourself looks like five years on a future and so somebody who has a pension that covers sixty plus percent of their current income first of all. You're already checking the box that when we do a lot of modeling somebody who makes six figures sixty percent is going to be extremely powerful. Especially if you think about down the road you probably have access to social security plus the medicare covering your healthcare costs. You're not to save that way powerful. So it's one of those things where. I think you take your living expenses in retirement your anticipated living expenses. But you're going to subtract out all the given income streams that will be coming your way including pension and then what's left of that number is what you now need your portfolio to be able to generate for you. That's how you kind of break this off into different chunks to figure out how successful or what your likelihood of success is going to be in retirement so. Let me play darth vader here a little bit because brian. You always do a great job of telling our young folks. Hey enjoy the president live life. Now don't be a miser. Don't save all of your money and let your life get away from. I agree with all of those things. But let's say that arc. Al goes the exercises and he's like man. I'm going to have a sixty three percent pension. And all this. And i know how much i think i'm going to spend so are really need about seven or eight percent savings rate. So what i'm gonna do. Is i'm going to draw my savings right down to seven or eight percent. I'm just start spending like a banshee. I think what you're saying is it'll probably be okay. Assuming your numbers are right. But don't miss here and think that you have to do that. My opinion is if you're doing the things you want to be doing and you're not having to sacrifice so much and you're still have a healthy lifestyle joined the president. There's nothing wrong especially at thirty six years old to be saving aggressively to be building your wealth more quickly than you need to be building it because what that's going to do as you get into your forty s and as you get into your fifties it's going to give you maximum flexibility maximum options. I don't think that just because the math suggests. Oh i should stop spending money. Stop saving money. They you should go on trying to find ways to start spending more. Would you agree with that. You're going to do but i've got a caveat. It just hit me. If i was doing your financial plan. Here's something i would probably do go to. Pb pension benefit guaranty pbgc dot g-o-v e. That's the pension benefit guaranty corporation. That's the same thing like fdic insurance government protections of backstop. Incase your your provider of your pension goes kaput. Yep you know figure out what the maximum guaranteed benefit because somebody who's making six figures and has a sixty two percent pension europe above the pbgc coverage. I would use that number in your calculation instead of your full calculation while you're young now look five years into close to retirement. I think you can use your full pension because you'll be close enough or no the financial solvency of the company but this far out use the maximum pbgc benefit as. You're backing into formula. Because i get nervous. I saw this with delta remember we're from atlanta originally delta's headquartered in atlanta we had a lot of delta pilots had six figure pensions seguin's great 401k's and then to two thousand eight crisis happened and delta was like yeah. I don't think we're gone or all those pensions the same way. So they did some some. They kind of shed a lot of that responsibility. I think a lot of companies are constantly looking for ways. It's just part of our where we are now in the world that i would just try to put some backstops or conservative assumptions. In there. so that you don't do. His bow had a great point. I don't want a thirty six year old saying man i'm in such great shape was pulled this thing down to seven percent from twenty plus percent that i'm currently at and then you get there and go. They changed the rules on me what what happened. Let's put some conservative assumptions in there in that pension benefit guaranty could be a big part of that equation. Look this is the fun part of being a financial advisor. We have a lot of clients. Now who have pensions. that are coming in between pensions. and maybe social security other sources of income thought. All of my living needs are met. So i have this large seven-figure portfolio over here that i'm not gonna to tap. Well that's great. Well then they get to think about really exciting things they can do for family trips or once in a lifetime. Opportunity being or legacy planning again. It affords you opportunities to do a different level of planning. I don't think that that's a bad thing necessarily great question. This next question is from christian and christian said how should we approach advising family members on investing an inheritance. I am hesitant to recommend something like a target date fund with the market at all times at all time highs. Any suggestions would help so. I have to rule questions for you brian. How should i think about investing what sums of money right now when the markets at an all time high question one and question to our target date retirement funds always the answer is not always the best solution for investment portfolio. Well i would handle this first of all. You have to set expectations. When you're trying to an educator of the wonderful world of the wonderful world of finance because i mean every relative around me our friend when i find out their kids are good at math. I'm always like go into a wonderful way to finance. This is the greatest profession in the world. Because i just love how the the math in the can can tell a story and the first lesson. I think this is part of deferred gratification. As part of consistency. Is that if you go into investing you have to know. This isn't a ham. The gift ten thousand dollars here do five thousand here. This is a behavior a habit that if you're not willing to give this twenty years to take traction you're doing it all wrong and the reason. I say that we don't have the slot in front of us. We've done this slot a bunch of times. I show people on how consistency is rewarded. Is that when you start investing in creating your army of

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