The Personal Finance Podcast - How to Figure Out How Much You Will Spend In Retirement (By AGE!)

Episode Date: November 4, 2024

In this episode of the Personal Finance Podcast, we're going to talk about how to figure out how much you will spend in retirement by age. How Andrew Can Help You:  Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel! , Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Monarch Money: Get an extended 30 day free trial at monarchmoney.com/pfp Thanks to Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. This show is sponsored by Better Help. Go to betterhelp.com/pfp and be on your way to your best self. Go to joindeleteme.com/pfp20 for 20% off!  Links Mentioned in This Episode:  The 1-3-6 Method For Building & Managing Your Emergency Fund How to Run the Numbers When You Buy a House! (Total Cost of Ownership!) Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise.

CBC News. Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center.

Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, how to figure out how much you will spend in retirement by age. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew founder of mastermoney.com. And today on the Personal Finance Podcast, we're going to be talking about how to figure out how much you need to spend in retirement by age. If you guys have any questions, make sure you join the Master Money newsletter by going to

mastermoney.co slash newsletter. And you can respond to any of those weekly newsletters that come out. And don't forget to follow us on Spotify, Apple Podcasts, or whatever your favorite podcast player is. And if you're getting value out of this show, consider leaving a five-star rating and review on your favorite podcast player and or leaving a thumbs up over on YouTube. We are Andrew Ginkola on YouTube. Now, today, I'm going to be diving into how to figure out how much you will spend in retirement by age. And you guys love these by age episodes. And I love doing them because there are very different scenarios in each decade that you need to consider when you are doing financial planning. When you're planning out your personal finances, it's really important to make sure that you

are tracking this stuff over time. Now, figuring out how much your expenses will be in retirement, even if you are decades away, is really important. Why is this really important? Because this is going to tell us how much we need to build up and save for retirement. This helps us. This helps us figure out what our retirement goal is going to be and what our freedom number is going to be. And so when we think about how we are going to be doing this, we want to consider and factor in all the expenses in retirement. There are a number of different questions that you were going to have, and we'll cover this more as we get to this episode. But some of the questions you may be asking yourself is, hey, how am I going to cover health care expenses? Am I going to have a mortgage or not?

Am I going to have housing expenses? Do I need to plan on not having a mortgage and paying that off over time? or am I going to have a mortgage? Another consideration is am I going to be living and spending the same way as I do right now and or am I going to be spending a little bit less? Do I want to travel? Do I want to take vacations? What are some of the things that I'm going to be doing in retirement? Now, this is going to evolve over time. And the reason why I like starting this conversation, even when you're young in your 20s, is because as this evolves, you can make those tweaks and adjustments slightly. And it's to be so much easier and you're going to be so happy that you started doing this process early on in life because small tweaks are easy to make but making large massive tweaks because you never

thought about this stuff is so much more difficult and so starting early and starting when you are younger is really important for those who are listening who are younger now those who are older we're going to get into some of the things that you need to consider as well and how you can maybe fast track yourself and accelerate your path to retirement if you did not start yet so no worries it is never too late to start investing in saving your dollars for retirement. I want you to believe that deep down your heart. I want you to change that mindset that's telling you that you can't retire. You're too old. Those are not true. So we have an action-packed episode. Without further ado, let's get into it. All right. So the first group is the folks in their 20s. And most folks who are in their 20s have like

40 years before they reach retirement age. Now, your goal may be to achieve financial independence early and your goal may be financial independence, you know, in your 30s, your 40s, your 50s. And that is a fantastic goal. That is the goal I had in my 20s was to try to get there as fast as I possibly can. And it really accelerated my path to wealth because I made that choice. But even if that is your path, you can map this out over the amount of time that you have and what you are thinking through. So if you're in your 20s or you have 40 plus years to retirement, there's a lot of different

things that you can do. Number one is I want you to start by estimating your current living expenses. Now, the thing about this is, is the reason why I want you to start with your current living expenses is these are going to change over time. And so if you have your number in place with those current living expenses, try to factor in, hey, do I plan on getting married at some point in my life? Maybe you never do. Maybe you don't know.

Maybe you are unsure. But if you think it any way, shape, or form that you will get married, we need to kind of factor in that that's going to cost a little more over time. But using your current living expenses is at least a good starting point to figure out where you're going to land. okay so once you have that baseline of those current living expenses make sure you're factoring in rent you're factoring in your groceries transportation discretionary items look at how much you spend on hobbies are you going to be playing a little pickleball maybe you're playing a little golf out there maybe

you're doing some tennis maybe you are doing yoga i don't know what you're going to be doing but try to factor in some of those hobbies so that you have dollars available for some of this stuff and so estimating your current living expenses adding maybe a little bit on top of that is going to be really important now when you are in your 20s there are some of the something that you need to factor in that we're going to be looking at here in a second, that is going to be very, very important. But number two is you can use something like the 80% rule. Now, I am more prone to not using the 80% rule because I am very conservative when it comes to planning retirement. But the 80% rule is something a lot of people have used successfully in order

to plan out their expenses. Now, the way that this works is you take your current expenses and you just multiply that by 0.80 to get 80% of those expenses. And that's typically what people spend in retirement is they spend a little less in retirement. Now, the reason for this is because in your early years, studies have shown that in your early years of retirement, now these are people that retire at traditional age from their late 50s, early 60s, and even early 70s, they spend more because they are prone to traveling more and staying more active and doing more things. Past their early 70s, they start to spend less because they're spending more time at home. They're not going out as much. And so that spending model shifts a little bit.

Now, this is how it's been historically. I do believe that, you know, our society is getting healthier over time, and the health span of society may be extended over time in the near future. Now, this is just a prediction. I don't have a crystal ball. I don't know what's going to happen. But the health span means later on in your life, how active can you actually be? There's lifespan and there's health span.

Health span is how active can you actually be. And if you have a good health span, you can live a decade longer in some situations. Dr. Peter Attia has some really good content on life span. versus health span. He has a book called Outlived that I absolutely love. And it actually pertains to retirement in a number of different ways. So I would actually check that book out. It's a health book, but I would definitely check that out. So the 80% rule is a guideline that you can use, but I would not live and die by what your current expenses are. Next, factoring in inflation. This is going to be the number one thing that I want you to do, especially if you're in your 20s, 30s, 40s is factoring in

inflation and really at every level because inflation is going to really surprise you on what your dollars are going to be worth in the future. Now, the beautiful thing about this is, is we increase our contributions when we invest our dollars by at least the inflation rate every single year. That's what we talk about here all the time. And so if you're doing that, you're maintaining pace with inflation. And the second thing is, you need to be investing your money. Once you start to run these numbers, you're going to see exactly why. If you do not invest your money, you will never be able to keep up with inflation. If you hide your money in a mattress like a drug dealer, you will never be able to keep up with inflation. If you put your money in a shoebox and you'll never be able to keep up with inflation.

If you put your money in a shoebox in your closet, you will never be able to keep up with inflation. If you just put it in a savings account at Chase Bank, you will never be able to keep up with inflation. You must invest your money. You will never be able to retire, I promise you, unless you are saving millions and millions and millions of dollars enough to be able to last you whatever you want to spend every single year. Investments will help you grow and outpace inflation. It's really important to do that. If you've never thought about investing, check out our course Index Fund Pro, it walks you through that. If you go to mastermoney.co slash courses, it is the perfect course if you're new to investing.

So thinking through that process is very, very important, making sure you factor in inflation. Now, how do we factor in inflation? We're going to go to my favorite calculator, which is completely free. It's from smartasset.com. If you go to smartasset.com slash inflation calculator, that will show you a really easy to use inflation calculator, honestly. That is just really, really helpful. And I've found it to be really helpful.

We've used it in past episode as well. but it's really, really helpful for a lot of people. And you can look at stuff like over the course of 20 years, okay? $100 in 2004 would be worth $166 in 202024. So it changed 66.08 percent over the course of 20 years. Let's look at 30 years. It changed over 100 percent over the course of 30 years. And then over the course of 40 years, it changed 200 percent. Now, this can be a daunting thought if you are trying to save money over the course of 40 years because $100 in 1984, you would now have to make $300 to make up for the same value as $100 in 1984. This is why inflation eats away at your dollars.

Every single year, your dollar is worth a little bit less. And every single year, if you do not invest your money and allow it to grow over time, inflation is going to erode away those dollars. This is why I never want you to put it in a regular savings account, at least put it in a high-yield savings account that is going to help you pace with inflation, So your dollars are worth the same amount every single year, even if you just are holding cash. So this is one of the most important things. So use this smart asset calculator to kind of help you figure out what you want to do.

And it'll even do some predictions for you, which I'm not a huge fan of predictions, but what it basically does is figure out, hey, here is what the inflation rate has been historically over the course of X amount of years, and then it will kind of help you try to figure that out. This will get you two steps ahead of just getting this started out so that you can figure out how you want your dollars to operate. Now, when you start to use these inflation calculators, some people will get discouraged. I do not want you to get discouraged. I want you to be educated on these things so that you understand going forward. This is a big, big factor for you to be able to make sure that you're putting in to your life. Next is consider lifestyle changes. So like we were talking

about earlier, if you're in your 20s, your life is going to change. You may get married. You may have kids, for example. So your expenses will rise over time. And a lot of people in the 30s are like, man, I used to live in the same way I did in college when I was in my 20s. And then now as I'm in my 30s, I have so many more expenses. Or there's a lot of people in the millennial generation who spent a lot more money in their 30s. They're now quickly realizing, hey, taking 10 crazy trips every single year without having the dollars to pay for it is not really as important as it would be to take one trip a year and then putting more dollars towards my financial future.

And so there is a massive amount of the millennial generation that regrets not saving enough. Gen Z and everybody else in your 20s, make sure you start to save today. It is really, really important. So consider those lifestyle changes. Your career is going to progress. Your income should increase over time. And so as those lifestyle changes happen, then you've got to make sure that you're factoring those in.

Next is we need to make sure that we begin estimating health care and housing. Both of these are really, really important. And we just want to think through this process a little bit. If you want to pay off your mortgage and you want to be mortgage-free, which I am a big advocate of in retirement. If you hit retirement age, why have that extra expense going on? I'd rather pay off that mortgage unless you have some crazy low interest rate or something like that. I am just more so a person that once my income stops, I do not want the extra liabilities that I have to worry about. And so because of that, when I hit retirement age, my goal, my plan is to make

sure I have zero mortgage debt at retirement age. And so because of this, I would consider that if I was even in my 20s on developing a plan to start paying off my house. or how am I going to do that? Secondly, is healthcare. Healthcare rises, and I've talked about this a number of times on this podcast, is healthcare has been rising at 7% a year. And so because of that,

we got to start factoring in health care into our plan. The HSA is one of the most amazing counts. And even if you're in your 20s, I would love for you to consider and look more into the HSA and do your research here. Because the health savings account is a triple tax benefit account, meaning that money goes in tax-free.

You can invest and grow that money tax-free. And you can pull the money out tax-free as long as you have a qualified medical expense. It is the super retirement account. It is so amazing what you can do with this thing. You can invest the dollars in the HSA. My favorite place to open one is that Fidelity, if your company does not offer one, but Fidelity has the lowest fees and they have the best investment options in my personal opinion. And so that is one place that you can look as well.

And then once you hit age 65, your HSA basically turns into an IRA. It operates us in a similar way. So that is something that can really, really help you with health care expenses because you can reimburse yourself completely tax-free for health care expenses down the line. You can invest those dollars so they can grow and pace with inflation. Very important as health care just continues to rise over time. Health care is getting better in terms of the care that you can get. And people are living longer because of that. But at the same time, it is getting much more expensive to pay for that stuff, especially as inflation rises. Healthcare lately has been outpacing inflation, which is very, very interesting. Now, some key, key, considerations for those who are in their 20s is I want you to start saving early and taking advantage of compounding. You need to take a portion of your income and start to save for retirement. Now, you could do this by making sure you follow the 136 method. The way that that works is you save one month of your expenses in an emergency fund in a high-yield savings account, and then you pay off all high-interest debt, so any debt above a 6% interest rate. Then you get to three months of expenses

in your emergency fund. And so you save that up. and then you can start investing. And what I want you to do is when you start investing, I want you to try to at least invest 20% of your income if you can. That is going to be the number one goal that you want to get to because you will have to work way less than most people if you can get to that 20% number over time, meaning that you're not going to be working for 40 years.

You could actually reduce that down to less than 30 years if you can get that 20% number going. Okay? And then bumping it up to 25% to 30% as your income increases is really, really important. Now, if you can't get to that number, We have the 1% rule that we talk about all the time where you increase your investment contributions by 1% per month or every other month or per quarter until you can get to that 20% role and you can adjust it over time. Now, focus on growth in retirement accounts. For most people, depending on what

your risk tolerance is, you'd be better off having a more aggressive portfolio in my personal opinion. This is just my opinion. But you'd be better off having a more aggressive portfolio, having more stocks than bonds, because they will grow over time. And that's going to be something that is really, really important for a lot of people. So looking to invest in your HSA, a Roth IRA and a 401K, all three of those are really important. Get that 401k match first. Then I like going to the Roth IRA and or HSA.

I like them both. Honestly, I like the HSA a little more. But with the HSA, you have to have a high deductible health plan, so it's not for everyone. Then the Roth IRA or HSA, and then going to back to the 401K to max that bad boy out is the route I like to go or the pre-tax accounts. There's a bunch of them.

If you are a government employee, you get the 403B or the 430. So there's a bunch of stuff there. And so this is going to be the key considerations for a lot of people in factoring in some of those numbers is making sure you're doing some of this stuff. Now, let's jump to the 30s. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy.

Clothes don't fit anymore and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in. PolicyGenius is an insurance company.

They're an online marketplace that helps you compare life insurance quotes from some of the top insurers in America, all in one place for free. And their licensed team works for you, not the insurance companies. So they help you find the right coverage for your situation without all the guesswork. And they walk you through everything. Answer your questions, handle the paperwork, and help you get the coverage that actually fits your life today and where it's going. So protect your family with a policy that grows with your life. With PolicyGenius, you can see if you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage. Head to PolicyGenius.com to compare life insurance quotes

from top companies and see how much you can save. That's PolicyGenius.com. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, Indeed is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs help you stand out and hire faster. Your post jumps up to the top of the page, making sure it reaches the right candidates. And it makes a huge difference. Sponsored jobs on Indeed get 45% more applications than non-sponsored ones. And there's no need to wait any longer. Speed up your hiring right now with Indeed. and listeners of this show will get a $75

sponsored job credit to get your jobs more visibility at Indeed.com slash personal finance. Just go to Indeed.com slash personal finance right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash personal finance. Terms and conditions apply. Hiring, Indeed is all you need. Amazon presents Jeff versus Taco Truck Salsa.

Whether it's Verde or Roja or the orange one. For Jeff, trying any salsa is like playing Russian roulette with a flamethrower. Luckily, Jeff saved with Amazon and stocked up on antacids, ginger tea, and milk. Habaniero, more like habanier yes. Save the everyday with Amazon. The ride that steals the spotlight every time it hits the road, that's the Volkswagen Tiguan. Its sleek exterior makes a first impression you can't ignore.

Step inside to find available full leather seats and wood accents. Under the hood, the available 201 turbocharged tors power engine gives it a fun to drive edge. The refined Tiguan, you deserve more style. Visit vw.ca to learn more. SuvW, German engineered for all. All right, so the big jump from the 20s to the 30s is going to be that costs are probably going to start to rise. it gets wacky and wild in your 30s, especially if you start to get married, then life is going to change dramatically. Maybe you start to buy a house because you got married and you have dual

income coming in. And so that's going to change your life dramatically and your expenses significantly. If you've ever run the numbers on our total cost of ownership calculator, you know how expensive houses can be. And then next, you may be having kids too. A lot of people have kids in their 30s who decide to have children. I'm in my 30s and I am having my third next week. And so this is something where I am in the crazy, messy time of the 30s. And the 30s can be something that really will change your lifestyle. They will increase your expenses dramatically. But you got to know that this is a season. And a lot of times for most people, this season is something that they have to reassess and think through as they go through this. So the first thing I

want you to do is reassess your living expenses. Your lifestyle and spending may have changed. It may have increased over time. And you want to think through a number of different. things. One, how old are your kids and how old will they be when you retire? Are they going to be in college? Are they going to be already graduated? If you do have kids, think through that process first to see if that's going to be an additional expense that you have in your early retirement years. Secondly, start forecasting based on lifestyle shifts. You know, what hobbies are you getting more interested in? A lot of times people get interested in specific hobbies in their 30s that stays with them throughout their lives. For example, I know people who get into golf usually will start

in their 20s or their 30s. And then that will stick with them for. their entire life or someone who really gets into fitness might start in their 20s or 30s. And how much money is that going to cost you over time? You just got to make sure that you are factoring in some of those costs. And then planning on some of that future spending, you know, your kids college, if you're going to do that, make sure you take care of your retirement first before you take care of your kids college. But your kids college could be one of them. It could be something like planning on purchasing an even bigger house. Maybe you are in your starter home now and you plan on having your forever home. What's your plan on that? Do you plan on

paying that off thinking through that and see how that might impact. your retirement goals. And then we're going to continuously adjust for inflation. In each level, we want to keep adjusting for inflation. And really, that's why it's good to kind of think through these numbers every single year as part of your yearly review is because you want to make sure that you were factoring in inflation and seeing where the number is. If you tweak this number every year just slightly and kind of look at it and reassess every single year as part of your year in money checklist, then it will be something I think that can help you in a ton of different ways because you're just making minor tweaks each year. It's not like you're waiting every decade and

then all of a sudden you got to make this massive tweak. No, you do it every single year and you think about this, then you're going to be able to kind of make some of those minor tweaks and it's not going to be a big deal whatsoever. You're not even going to notice it and you're going to have tweaked it a bunch of times over the course of 30 years and it will be something that'll be very, very easy to do. Now, one thing a lot of people don't do is they don't factor in some of these long-term goals. Are you going to relocate? Are you going to travel more? And so because we talked to, we talk about this in our 20s, but you might have a better idea as you enter your 30s. And even when you start to get to your late 30s, for example, your ideas of what you're going to be doing in retirement

might shift from what you thought in your 20s. And so I want you to kind of plan for those long-term goals. And then obviously continuously planning for health care costs. If you have not already done so in your 30s, please either get a health savings account or start saving for retirement at that increased volume and or start saving for retirement and making sure that you're factoring in those health care costs. You got to. have a plan to cover those health care costs. You're sure we have Medicare and sure that may be helpful for your insurance side, but you're still going to have health care costs and those costs will rise in retirement. As our bodies get older and as our body's age, we have to plan for this.

Also, along those same lines, if you're in your 30s and you have not got your health together yet, I would highly, highly, highly encourage you to do so in your 30s. It is still not too late to do so. Even in your 40s, obviously, and we'll talk about that when we get to the 40s, but it is really important, it's actually going to reduce your cost significantly when you hit retirement age. If you do not take care of your health, you are going to have to spend way more money on health care. Now, money is not the reason to take care of your health. It's not the only reason, but it is one reason. It is a reason that actually can motivate some people. And so making sure that you start to take care your health. What does that mean? That means, number one, 90% of this battle is eating right.

And so it is the hardest thing for most people is making sure you eat right. And a quick tip, by the way, that I just discovered, and I was going to share this on Health Corner, I still might. Sometimes in our money Q&A's at the end of the show, we do a Health Corner. But I started using this app, and this is not sponsored, called Nourish. And it's free through your health insurance, depending on what health insurance you have. I think like 90% of people get it covered free. And you can actually meet with a dietitian as frequently as you want to every single week, completely for free. And I've actually loved it.

Like, it's been a really, really cool experience to go through that process. And so I've been using that for the last couple of months. And it's been a game changer for me. I've actually kind of thought through, hey, which foods actually bother me, which foods do my body react well to? What diet is kind of best for me? And it's kind of given me more mental clarity.

It's helped me change some of my lifestyle with all the exercise that I do. And so I think it's really, really cool to be able to use something like that. But as these start to rise, you just want to make sure you're taking care of, A, your diet, and B, getting that exercise in. Now, on the exercise side, you got to make it a habit. I made it a habit early on in my teens just from playing sports and then

carrying that over to in college. I just wanted to get buffed for the ladies. And then after that, then over time, then I just kind of continued to have it. So I started the habit early. So for me, it's a little bit easier because I started the habit early. If you haven't started the habit yet, just get started and try things that are kind of fun to do at the same time. So you can, lifting weights is really important, I think. And I'm going on a tangent here. But lifting weights is really important, I think. But in addition, making sure that you get some movement. So doing, you know, walks. You see people all time on TikTok doing hot girl or hot guy walks. You can do walks all the time. Pickleball is one of the most fun forms of cardio ever. I like it so much about a pickleball business.

And so there's a lot of things there that you can definitely consider in adding into your repertoire, but just making sure you're doing that. Now, some key considerations for folks in their 30s is you need to be maximizing your employer retirement contributions to start building that emergency. If your emergency fund is not built up yet, it needs to be built up to six months. In your 30s, you need to have that six-month the emergency fund built up and making sure you are protecting your wealth. These are precious wealth building years and we do not want to get derailed from that. Secondly, is continuously maxing out those retirement accounts and taking advantage of those employee benefits.

And then consider something like term life insurance is great, especially when you have people depending on you. You got to make sure that you have that available. Really cheap. I got through PolicyGenius. We linked up down below. They are a sponsor of the show, but that's where mine is from. And so you can get term life insurance.

and then consider things like disability if it applies to you, those are also very important. Now, let's jump into the 40s. So the 40s is a time that is imperative to make sure that we get our financial house in order. And the reason for this is we are approaching our 50s in retirement age, and this is going to give us the boost and the supercharge as we start to go towards retirement. So if you have been saving in your 20s and your 30s and you hit your 40s, you are probably hitting your highest income years for most people. And so when you hit your 40s, unless you're a business owner, then those income years will kind of

continue in your 50s. And so for most people, this can supercharge your retirement if you can take extra dollars and start to put them towards retirement. And so as we're thinking through our retirement goals, we're going to have a much better idea of what the heck we want to be doing in retirement in our 40s because we are starting to approach that age of what we want to be doing. Now, you may be saying to yourself, Andrew, I'm listening to you saying that and I have, I'm in my mid 40s or I'm in my late 40s and I have no idea what I want to be doing in retirement. And that's, okay. We can develop that over the next couple years. But what I'm saying is most people start to have a much better idea than they had in their 20s of how their life is shaking out. You already know most likely

how many kids are going to be having. You already know how to plan for some of the hobbies that you have picked up and you've been doing for a long period of time. You already know what your expenses are most likely going to be. You might be in your long term house and or either you're trying to decide, hey, am I going to stay in this house or if my kid's going to leave the house eventually and then I'm going to downsize. I'm trying to think through that process. So you have more thoughts to kind of base some of these assumptions on. And so as we start to look at our retirement number, we want to say, hey, what is 25x what I am spending right now? Let's multiply the number that I'm spending right now if I'm happy with that number. And I want to multiply that by 25x. And when you do that,

that's going to give you your retirement number. And you should be doing this with every single decade. Most people who listen to this show are very familiar with the 25x rule because we talk about a lot. but especially in your 40s, this is going to give you a pretty concrete number. So let's say, for example, you spend 100 grand per year. You spend $100,000 per year, multiply that by 25. That's $2.5 million. That's how much money that you need to have invested in your portfolio to be able to be completely free where you don't have to work anymore. That's how much money you need. 2.5 million invested over time. Now, what this is going to do is help you with the safe withdrawal rate. The safe withdrawal rate means that you can draw down 4% every single year within your portfolio, and you will,

will never run out of money historically. Now you preserve that wealth over time. If you are younger, let's say for example, you retire in your early 30s. I'd kind of dial that down probably at three and a half, three percent, somewhere in that range. If you are older, you might even be able to pick it up to five percent. So there's a little bit of a range there, but four percent's right smack in the middle for most scenarios of where we want to be. And so making sure you get that number and you have that number set of exactly what you want. Let's say you want to spend, maybe you want to spend 200 grand a year. You need 5 million. Maybe you want to spend 300 grand a year. You're going to need $7.5 million invested. Maybe you want to spend 400 grand per year. You're going to need 10 million bucks.

And so those numbers may sound way too high for you. Maybe you want less, but you just do the math based on your own personal situation. Now, the first step for all of us is every year we want to be reviewing those retirement goals, making sure we're on pace. We're doing that 25x rule. Refining your budget is another, the second thing. Now, in our 40s, maybe in our 30s, sometimes we can get a little sloppy because it gets really, really messy. We may be paying for daycares. We may be paying for kids' activities and sports and all these other extra things. In addition, we may be doing a bunch of other things that we just really don't value. In your 40s, it's time to buckle down a little bit and just figure out what you value. This is not buckling down and spending

less on the things that you love. I want you to spend more on the things that you love, which is why we are buckling down a little bit. So we're going to figure out, hey, where have I been spending habitually that I really just do not care about doing this stuff. Maybe you go on weekly trips to Target, for example, and you just kind of frivolously grab things in the aisles and put them in your basket and all of a sudden you walk out of Target every single week with $300 worth of spend. Well, that happens a lot to people. And if you do that, that's $1,200 bucks a month. Do you really care about doing that or you're just doing that to have an activity? If you don't care about doing that, you can save the $1,200 bucks, supercharge your retirement savings and start to really see.

massive benefits. Your 40s are the supercharge years. That's what I like to call them, because you can really take that high income and those extra dollars and put them towards your freedom, because you may be able to retire way earlier if you start to take those dollars and put them towards your freedom and start to supercharge those dollars. Now, early on in your 20s, those are worth way more. So those are the golden, most valuable years of investing is your 20s. In your 30s, it gets messy. Your spending gets higher. You are just trying to get by for a lot of people. And the same thing happens at your 40s, but you're just trying to get by. And as it starts to get messy, you're figuring life out. But as your income starts to increase, you can start

to take extra chunks and put it towards retirement. In your 40s, you can supercharge that because your income should continue to elevate. And as it starts to continue to elevate, taking 50, 60% of that income and putting it towards retirement is really important and taking the leftovers and putting it towards your lifestyle so you can enjoy your money is going to be the golden ticket to making sure that you hit those retirement goals. Okay. So this is the the key. I want you to be saving at least, again, 25 to 30% of your income when you're in your 40s and making sure that is going to retirement and then increasing that amount if you can. If you're making way more money, take even more of that. Save 50% of your income because this is going to make sure

that you have that security blanket that you need in retirement. Also, I want you to consider how much cash do I want on hand in retirement? What makes me comfortable here? I personally believe you need at least a year or more, really two years or more, in cash and retirement. This is going going to help you, A, if the market takes a dip and you're trying to draw from your portfolio and try to draw down with that safe withdrawal rate, well, if the market has some event like the Great Recession, for example, you could take a couple of months of cash and live off that, so you're not just tapping into your portfolio when it is down 50%. And so there's cool things like that that that you can do if you have extra cash on hand.

Again, considering healthcare, kind of seeing where healthcare costs are now, you can start to factor in and get a really close idea of how to think through that. And then adjusting for inflation, you should be doing that every single year, no matter what with your retirement number and making sure you have that factored in. Now also what you want to do is consider taxation and consider your tax bracket. Taxes are very, very, very important when you get to retirement age. And so you're going to start to get an idea, hey, here's where my tax bracket is now. Where do I think I'm going to start to land as time goes on and start to follow up and see where you think you'll be? Now, some key considerations is continuously focusing on maxing out those retirement accounts is really

important. Is there additional income sources that you want to start investing in? Maybe you want to start buying real estate and you want to get some cash flow rental properties in your portfolio so that you have an additional income coming in and you can hedge against market fluctuations, those types of things? Great idea. Maybe you want to start to buy a small business that's a little more passive, like a laundromat or something like that that can kind of produce cash flow and give you a little fun job in retirement. That's another option that you can start to think through. And then maybe there's some other things you want to consider as well, but also making sure that you are factoring in as you start to approach getting closer to 50s, and we'll talk about this in a second,

is factoring in catch-up contributions, which are coming up when you are 50 or older. So we'll talk about that here in a second. But this is where I would think through this is you have time to retirement is 20-plus years in your 40s. And so making sure that you are really buckling down and taking those extra dollars that you are making and really accelerating your path to retirement is going to be very, very important. Let's jump to the 50s. All right.

In your 50s, you have 10 to 15 years to retirement. And so when you're thinking about your 50s, now it is time to create a very detailed plan. If you're in your 50s, you have an idea of what the heck is going to be going on in your retirement. And so it's time to create a detailed plan. And so we need to solidify our retirement plans. And we need to look where we need to be in terms of savings and investment returns. This is very, very important to do. If you have never done this before, then it's time to buckle down and really get serious about this.

It's very important. And then fine tune your projected expenses. Secondly, is we need to estimate retirement expenses more precisely. when you're in your 50s, you're going to see, hey, how are my kids doing? Are they going to be an expense in my life? Or are they going to go out on their own? Are they in college? What are they doing right now? How can I factor that in? So you can factor in some of the costs of your housing to you. You can see, hey, I'm in my current house now. It's paid off or it's not paid off. Am I going to have a mortgage and retirement? You can start to see those types of spending. You'll know much more about your social security benefits and saying to yourself, hey, am I going to have social security benefits coming in? How can I factor in that income? as I start to think through this. If you have pensions, you can think through your pensions. You can also think through your desired lifestyle and how am I going to live, what am I going to be doing? Those are all really important. So making sure that you multiply how much you're spending right now by the 25x rule, I think is super, super important. And so, again, if you're spending 100 grand a year,

multiplied by 25, you got $2.5 million is how much you need to get to to be able to live off your income in retirement. So getting really precise here is very important. Next, we got to think through health care and Medicare. So if you plan to retire before age 65, you need to estimate the cost of health care coverage until Medicare starts. So one thing you can do is you can research some additional Medicare supplemental plans to get an accurate projection of health care expenses as you start to get closer to that age. But you got to make sure that you factor in health care is going to be your biggest expense in retirement, probably outside of housing if you have housing costs, things like that. Health care is so

incredibly important. I cannot stress this enough. when it comes to making sure you estimate that expense. Number four is what considerations are you going to kind of think through? Are you going to downsize? Are you going to pay off your mortgage? Your housing is really, really important. Also, if you have any debt whatsoever, like high interest debt, for example, that needs to get paid off. You cannot have high interest debt going into retirement. That needs to be paid off. So any debt above a 6% interest rate is very important. If you have debt on a car loan or something like that, I'd also pay those off and try to have paid off vehicles in retirement. that is going to really help you reduce your stress and anxiety and all those different things

and drive those vehicles as long as you possibly can, if you can, really important to make sure that you keep those kind of costs lower. Who cares? We're not stunting anymore when we're in retirement. We are living our life. We're living the dream because we are time millionaires. And so that's really, really important to make sure you're thinking through that too. Now, planning for long-term care.

This is one that in your 50s, you may have an idea of, hey, my kids are going to be off on their own. How am I going to plan for long-term care? What is the thought process here? How am I going to live? Who's going to take care of me if I cannot take care of myself? Those types of things. Have some tough conversations with your family. Have some tough conversations with the people around you and see what you can all decide on kind of together as time goes on. These are tough, tough things to talk about. And I think for a lot of people, in your 50s, you still feel alive well and you're moving around really, really well, and it's not even close to your time yet. And so you don't really want to have these conversations, but it's better to have these earlier rather than later. And so I think for a lot of

people, planning on long-term care is going to be really important. So some key considerations that you should have is you need to max out catch-up contributions in your 50s. So when you're in your 50s, you have catch-up contributions for your retirement accounts, meaning you can contribute more into those retirement accounts. So for example, the Roth IRA, you can contribute an extra $1,000 per year compared to people who are 50 and younger. And so because of this, you got to make sure that you are taking advantage of those catch-up contributions. They change every single year. A lot of times they've been going up the last couple of years. So just make sure you look at the current year and what those catch-up contributions are based on the accounts that you're contributing to.

And then also, thinking through your investment portfolio, if you want to start derisking your portfolio slightly, that is something also to think through is what is your asset allocation going to be in retirement? What are you comfortable with? Are you comfortable with a little more a bond exposure so it's less volatile in that portfolio or how do you want to handle that and then thinking through how much cash are you going to have on hand? Are you going to have a two to three year emergency fund or how do you think about that consideration? So this is why I like growing an emergency fund over time even more than six months is because once you hit retirement age, it's already grown enough to where you don't even have to worry about it. You're just growing it over time and allowing that

money to grow. Again, I like having more cash on hand than maybe some people in retirement. But the reason for that is I think cash is security and you can put it into vehicles like bonds or you can put it into vehicles like CTEs or high yield savings account. That's still going to get you some interest and outpace inflation. And so that's how I think about that cash is making sure you're thinking through this process. Now let's get into the 60s, which I normally don't do, well, let's get into the 60s. All right. So in your 60s, you need to be finalizing your budget. You need to be finalizing where you want to be if you're not retired yet and making sure you understand kind of where you want to land. I know plenty of people, you know, my parents' age, who are in their early 60s,

who are still working. And a lot of people who are in their late 50s or early 60s, and pretty much all of them I know are still working. So we are working a lot longer than we used to. And because of this, we want to make sure that we are actually calculating the exact retirement expenses that we have, really, really important stuff. Secondly, is we need to assess our income sources. Do we have, we have our portfolio that we start to build up over time. we also have additional sources that could be possible are things like social security. Most people will have social security coming in if they worked. And so if you have that, consider that income source and how that's going to work.

Also, do you have rental properties or do you have a business that brings an income? Consider those income sources. And then when you do that, review your tax situation based on that. You kind of need to know where you're going to be within your tax situation. And so hire a CPA to be in your corner in retirement. Very important. It just helps you through all this stuff. review and adjust investments. So reviewing your investments and your asset allocation, making sure you're

comfortable with where it is, making sure you're comfortable with how it heaps and flows. You're never going to be fully comfortable with how the market moves. You can't control it. But at the same time, just review those investments and adjust accordingly. Next, planning for taxes we just talked about, but really sit down with your CPA, talk through your entire tax scenario. And I want you to talk through tax strategy. I want you to talk through if you have a 401k, what your RMD is going to look like. Understand those implications of those patrols. look at all this kind of stuff really, really important because it will impact your social security. It'll also impact your entire tax situation and see if you can figure out ways to reduce those tax

liabilities as much as you possibly can. Now you're going to know what health care costs are even more so. So making sure you're planning for those health care costs and once you start to get closer to those benefits, taking advantage of those as well. So some key considerations for your 60s is ensure you have a plan for RMDs, making sure you talk to someone, have that plan for RMDs from your retirement accounts because those are going to start at age 73. And so you got to make sure that you think through that for your 401ks, your IRAs, those types of accounts. Solidify your estate plan. Now that's one thing we haven't talked about in each of these levels, but you should start to have an estate plan in your 20s and kind of solidify it as time goes on. This should be completely

solidified in your 60s, make sure it's available. And then finalize when you start to claim Social Security. There's an argument to claiming it early. There's an argument to claiming it late. Your personal situation, it's going to be an It Depends situation for most people. I am more so the camp of claiming it early. And there's a bunch of reasons why we've talked about it in a money Q&A. But if you are unsure, it is worth kind of taking the time taking through your own personal situation to see what the best benefits would be for you. And also considering your health span that we just talked about is very, very important when it comes to claiming Social Security. And so these are the steps that I would take in my 60s. These are the steps I would take in

every single decade to start making sure that you are planning and figuring out how much you're going to spend in retirement by age. If you guys have any questions, you guys have any questions, questions. Please reach out to us by going to mastermoney.co slash newsletter and reaching out to us via the master money newsletter. Can I thank you guys enough for listening to this podcast episode and thank you for investing in yourself because that's exactly what you're doing when you listen to this show. Listen, I truly appreciate each and every single one of you. I want to continue bringing you as much value as I possibly can. Send me feedback. Send me questions. Send me anything you want. My goal is to serve you. So thank you guys so much for listening to this podcast and we will see you on the next

episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Play Ojo. The online casino with all the latest slot and live casino games. What you win is yours to keep with no wagering requirements.

Instant payouts and no minimum withdraws. Hey, I just won. Woohoo. Feel the fun. Play Ojo. Honey, forget about the lasagna. Let's celebrate. 19 plus Ontario only. Please play responsibly. Concern about your gambling or that of someone close to you. Call 16-531-2600 or visitconXonctario.ca. Thank you.