Discover Your Personal Rate of Return

Hey, welcome to this segment on discovering your perfect rate of return. So what I’ve been doing over the last few years is figuring out what happens with all of the different data that people want to give us. What happens if you were just to make 0% rate of return? Let’s look at your plan like you took everything that you’ve saved, You buried it in your backyard. And then when you needed some money, you just went and took from it. Okay, so that’s the framework in the in the discovery at the very beginning. So recently I had a client come in. They were 59 years old and they said, hey, we’re thinking about retiring in a few years. We’ve saved up about 500,000 in our 401 K, and we have $50,000 in a Roth and $50,000 in our, say, you know, at the bank. And they said, what would it look like to retire at 62? So I put all this in to a really cool program that we use that crunches all the numbers, gives us projections that are very interactive. It’ll give us legacy stuff, tax planning stuff, income gap, you know, and it’s all right there. So you’re going to get some visuals today for that. And so by using a 0% rate of return we get to see what they would have to make in order to never run out of money. And so the first example, we just said, well, let’s look at what happens. You know, if you retired at 62, so they yeah, like I said, they saved 500 grand in a 401 K, 15 in a Roth, 15 in a bank, they have a $300,000 house. Okay. And they’re protected asset column. Their goal was to spend $5,000 a month with a 3.26% inflation. So that spending would just grow every single month. So you see your net monthly expenses. By the time they would retire, it would be $5,232 a month going out, which would give them an income gap of $3,102. That’s what they would be pulling from their portfolio savings at a 0% return. That would last them until they’re 77 years old. They said, well, I don’t want to run out of money at 77, okay. In order to do that in the upper right hand corner, you’ll see they would need to make 6.82% every single year for the rest of their life. So then the natural question is, well, can I get 6.82% every single year for indefinitely? Well, let’s talk about risk, right? What kind of risk do you want to try to get that. And they said well you know I don’t. But that seems that seems higher than our comfort level. I said, okay, all right. How much do do you like your job? Do not like your job. Yeah, I kind of like my job. It’s still fulfilling my mission in life right now. So what if we went and looked at me working until I was 65? Okay, so then what we did is we, said, all right, let’s look at, 65, but let’s tweak the spending just a little bit. Your debt free, you know, and, by working a little bit more, you can pay off any little debt, save up a little bit more. And so now we tweaked it where they’d be spending $4,500 a month after tax with a 2.5% inflation. Then what happens is that would kick, their money all the way out until they were 93 and 92 years old. And in order to never run out of money, they would have to make 0.84%. And they said, okay, well, that seems like very, very possible, very likely we could do that. And it’s like, yeah, okay. I don’t know if I want to work that late that, you know, that long. I said, okay, well, let’s go to the next scenario and let’s say, what if we looked at what 63 would be. So we, we said, we are retiring at 63. We’re going to keep the 4500 a month, spending after tax and then a 2.5% inflation that got their, savings all the way out till they were, 82 years old. And in order to never run out of money, they would have to make 3.94%. And they said, okay, that seems way more feasible, you know, and then we talk about what the market options from no risk to market risk and everything in between. And so then they have a much better way of how they could structure their portfolio with, retirement age of 63. And we didn’t even talk, and I didn’t even get to show you because it’s such a time crunch here. What tax planning looks like. Okay. If you start putting tax planning and you start getting tax efficiency in there, then these numbers get even better. And then the final one is, okay, let’s just look at what a 4% rate of return. So this very last screen here’s what happens at 4%. Keep all the same variables. We go back to age 82. And they still have $585,000 in their spendable asset column. So when it comes to long term tax planning, when it comes to legacy planning, income planning, when you want to figure out what the best, most optimal rate of return that you might be shooting for, you give us a call, no obligation. And, we can sit down. We can crunch your numbers and give you the rate of return that might be best for you. Thanks for watching.