Not knowing your expenses in retirement is a huge planning error. I show what people often miss in this video and show the impact of this mistake — it’s bad! Can I retire now? retirement planning.
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Retirement Tool Link I reference and highly recommend — New Retirement. Free 2 week trial. $120/yr after. You will buy this after trying (I have purchased for 3 years).
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retirement planning is a crucial aspect of financial management that can often be overlooked or underestimated. Many individuals focus on accumulating savings and investments for their retirement years, but one common mistake that can derail even the most well-prepared retirement plan is not fully considering all expenses that will need to be covered during retirement.
The number one planning mistake for retirement is not thinking through expenses. Many people assume that their expenses will decrease in retirement, as they will no longer be commuting to work, paying for work-related expenses, or supporting children. While this may be true to some extent, it is essential to remember that other expenses may increase during retirement.
Healthcare expenses, for example, tend to rise as individuals age and may become a significant portion of one’s budget in retirement. It is essential to consider the costs associated with insurance premiums, deductibles, co-pays, prescriptions, and long-term care when planning for retirement. Additionally, other expenses such as travel, hobbies, home repairs, and assisting aging parents or children may also need to be factored into one’s retirement budget.
Not properly planning for expenses can lead to financial stress and the risk of running out of money in retirement. It is crucial to take the time to review your current expenses and estimate what your future expenses may look like in retirement. Consider working with a financial advisor to help you create a comprehensive retirement plan that takes all potential expenses into account.
In conclusion, don’t let this happen to you! Avoid the number one planning mistake for retirement by thoroughly thinking through all expenses that will need to be covered during retirement. Plan ahead, budget wisely, and seek guidance from a financial advisor to ensure a comfortable and secure retirement. Your future self will thank you for taking the time to plan ahead and avoid unnecessary financial stress.
The expenses is where I've spent most of my time since start-up of plan. I've been over it many times including with my wife. Lots of room for cuts but still have a strong outcome.
Thanks Joe – appreciate the walk through. Can you clarify – I can’t see in the detail. When you delayed their social security they were picking up that additional $3K month they were getting from social security from their resources or did you assume they reduced their expenses?
New retirement really helping organize this. Ty Tampa,Fl
Joe, in NewRetirement, I'm setting my spouse's social security to begin at age 62 based on her own benefit. But when I later file for my own benefit (at my age 70, and she'll be 71), hers will increase to get the "spousal benefit" which is far higher than her original benefit she began getting at her age 62. How can I make NewRetirement increase her SS when I hit age 70 and she begins getting her higher spousal benefit? It seems to only allow us to enter her first benefit at age 62, and I can't add in her spousal benefit when I claim later on. Help please!
Serious mistake having bonds in a brokerage account and stocks in a tax advantaged account. They will have their long term capital gains and qualified dividends taxed as ordinary income when they withdraw funds from the tax advantaged account.
Excellent video and topic. Thanks, Joe!
This is non-sense. It hits the heart of retirement planning.
If you fail to plan, you plan to fail. Having said this, let's examine what it they are selling us with Monte Carlo simulations and probabilities.
In math, probabilities significant range from 0 (impossible) to 1 (certain).
What's the problem? Well, 0 is possible, and 1 is not actual. Both of them are circumvented by randomness.
This means that 100% does mean something is going to happen. It only means that it is certain or closer to happen. The same goes for impossible.
Monte Carlo is a back test simulation that generates a probability, which by definition is not actual. It could likely but not a predictor of actuality.
IMO, it is a good old salesman snake oil technique that cures everything and makes you feel good. Like a note from your doctor about how sick you were yesterday while playing golf. Main point, it's not real. It's only a trend based on history that might or might not actualize.
Nothing beat reading, learning, and doing your own financial plan. Even a plan with so-called mistakes is better because it is yours, and by definition, you would know the underlying assumptions.
The best part about the 20% off ($96 per year) deal on Newretirement is that it stays that rate for as long as you keep it (and most of us will keep it forever) so that’s a $2 per month perpetual savings. Either way I’d pay many multiples of $96 or $120 per year for this life changing, game changing software that Joe turned us on to.
There is another point you make in this video that may be one of the top 3 most important decisions to make in retirement planning. The timing for when to take social security. I found a tool called Open Social Security that has proven to be very beneficial in determining the best timing. A CPA by the name of Mike Piper developed the free tool. It has several valuable features to help you decide such as parents with Disabled Adult Children and spouses with different ages. I confirmed the output by visiting my social security office to confirm the outputs… This is a very good tool in my opinion.
Must put in several unexpected expenses to stress out the plan. I put in three in mine, ranging $5k, $10k, $20k throughout my retirement. Now, I may never face these unexpected expenses but I am prepare if it happens. If not, I have more play money later in life. Thanks Joe for the great videos. Bob ~ Kfar Yona, Israel
Hey Joe, I signed up for New Retirement about a year ago on your recommendation and love it! It has really given me the peace of mind and confidence I needed to pull the trigger on retirement (last July). I initially had “big trip“ travel expenses, $18 – $20,000, entered as a monthly expense of $1,500, like you show here, but found that when I moved them to one time expense, yearly, it made a significant difference in cash flow and % of success
Excellent! We have worked with our investment advisor to make sure this type of spending is included and accurately projected. It makes a big difference! We often play with it to make sure any changes will result in a positive outcome.
Joe, I also use New Retirement software based on your recommendation… 🙂 One thing I learned in one of their discussion sessions was that one-time expenses are not inflation adjusted….We need to anticipate what we believe the roof or furnace cost may be in the future. A reasonable watch out for us!
Joe – I’m 56 and planning to retire in four years. I’ve been binge watching your videos while on the stationary bike. By far, the most relevant that I have seen. On future expenses such as roof or furnace, should those expenses be input based upon today’s cost?
I’m still using the basic budgeted in New Retirement. Have plugged in future expenses like a roof and cars, etc. I do like the tip of layering expenses to see what I can actually afford. One thing my first go with the budget missed is my food expense with this new inflation at the grocery store, so I’m tweaking my food budget. I want to jump into the detailed budget next. I’ve re-arranged all my budget categories in the budget software I use (YNAB) and plan to input those budget categories into the new retirement software.
Love the “New Retirement” examples! Keep them coming!
Another great video Joe! Don't let any of the haters stop you because you are really making a difference to those of us who are planning on retiring within the next few years. Thanks for running through these scenarios Joe. Remember – YOU ROCK!!!
Hi Joe
Just started following your Channel
I am too a Mech engineer but have been working in construction sector and I am located as
an expat in GCC region. Currently 54 and very much tempted to retire within 2025.
Just for info, most
of the material and software do not apply to those who are not in the US or US citizens or those who plan to retire in countries where neither all the Taxes related deductibles are applicable nor those pension payment, 401k , etc…
An appliance by it's self isn't much but if all are same age, it adds up. It's not just the plumbing and gas lines, furnace, medical, etc., that are big all by themselves. As always, adding at least 3% inflation rate, annually to the price of every thing and remembering to perpetually 3% the 3% inflation of each previous year. (also check at 4%) In distant driving more, home more, etc., vehicle costs up and utilities up. Not turning heat down 10 degrees or turning off AC for 12 hrs 5 – 6 days a week, etc. It all adds up. Plus I'm still doing all the appliance, car, house repairs, construction, etc., but when I'm near end of life, having to pay someone to do them will add to those costs. All figured in expenses and more.
An appliance by it's self isn't much but if all are same age, it adds up. It's not just the plumbing and gas lines, furnace, medical, etc., that are big all by themselves. As always, adding at least 3% inflation rate, annually to the price of every thing and remembering to perpetually 3% the 3% inflation of each previous year. (also check at 4%) In distant driving more, home more, etc., vehicle costs up and utilities up. Not turning heat down 10 degrees or turning off AC for 12 hrs 5 – 6 days a week, etc. It all adds up. Plus I'm still doing all the appliance, car, house repairs, construction, etc., but when I'm near end of life, having to paying someone to do them will add to those costs. All figured in expenses and more.
They should add a “make it fail” button to that software which gives you a target percent or age at failure.
Thanks for the New Retirement demonstration! I hope to see more.
After two months, my expenses have only been $990. That's everything. Last three years I have averaged $12,000. That is less than 1% of my retirement portfolio. Will retire in a couple of months and will give myself $60,000 a year to account for travel, medical, and larger one-time expenses. Hobbies are cheap. Running, cycling and hiking. Keeping my MAGI under $60,850 keeps me under the 22% tax bracket and gets me a fully subsidized ACA Bronze plan plus the ability to open an HSA account.
I enjoy your channel very much and am a big fan and user of NR. I notice you use Basic rather then Detailed budgeter. If you use detailed you could put some of these expenses as monthly with a start and stop date rather then one time. For example on the car. Do the car payment monthly for 3, 4 or 5 years then stop with the assumption of having shopped for a good interest rate. This way you are not pulling such a large lump sum from the retirement account. Perhaps some of the other items could be done this same way via home equity loans etc. for big ticket home items. Isn't it better mathematically and psychologically to pay a monthly payment then to draw such a large amount from the nest egg. Or are you saying the NR algorithm will play it out the same either way. Thanks!
Thank Joe, This is a nice feature for 1-time expenses. I'm still in my spreadsheet and include these things in my "base" expenses, so I did not miss them, but New Retirement seems to be more flexible and better at target and maximize the buckets to draw from. I think people would benefit from have a reminder list of these types of 1-time expenses (maybe New Retirement can provide a list (Weddings, Gifts (birthdays/Xmas/graduations/births), and travel both luxury and family (I'll set $$ aside to fly kids to me especially in Slow Go years), typical home repairs (hot water heaters, furnace/HVAC, Roofs, etc). As for the car, I'm buying new the year I retire and when it dies, hopefully between 13-15 years, then lease until I stop driving.