Hi everyone this is Dr. Nitin Chhoda welcome to this video training on how to
achieve early retirement with a simple retirement calculator. Something that's
way better than the 4% rule. So let's talk about the 4% rule is very common
and speaking of common you know if you follow some common sense investing
guidelines which I'll talk about in this video you will be able to achieve early
retirement. Now let's talk about the 4% rule because you know everyone talks
about that the 4% rule states that if you have X amount of money set aside for
retirement you should be able to withdraw 4% of that money every year for
25 years before the money runs out. So let's say you have I'm just going to
throw out a number let's say by the time you're 60 you have set aside I don't
know $100,000 you can withdraw $4,000 a year for 25 years that means you should
be able to survive on $4,000 a year up to the age of 85 now obviously that's
not going to happen but that was just a simple example but that gives you a
sense of how much money you really need to save because let's say you need it
$25,000 a year for your retirement which i think is still not enough you should
have set aside now get this based on the 4% rule in fact you know what let's take
a let's take a simpler number let's take $40,000 if you had $40,000 that you need
it for during retirement then you would
have to set aside a million dollars because 4% of a million dollars is
$40,000 so think about this you need to have a million dollars set aside
according to the 4% rule in order to be able to withdraw $40,000 a year over 25
years so that the money doesn't run out. This is presuming you retire at the age of
60 and you know the money lasts you till the age of 85 but here's the interesting
thing that the 4% rule does not take into consideration which is why I think
there's a better solution in the 4% rule. The 4% rule doesn't take into
consideration the fact that your million dollars or whatever you set aside is
actually earning interest every year depending on how you invest it of course
because for most of us there's a pre-retirement rate of return presumably
you're a little bit more aggressive let's say you buy stocks or you know you
use the money you run your own business if you're a small business owner or you
tend to be a little bit more aggressive because you try and
push a little harder and you take a few Morris but as you get closer to
retirement you want to take less risks with your money presumably you want to
invest in bonds, presumably you want to you want to maybe just keep the money in
a savings account that's fine because at the end of the day you should invest
money in whatever makes you comfortable whatever psychologically gives you that
sense of comfort so you can sleep well at night but the point is there's a pre
retirement rate of return and then there's a post retirement rate of return
Now the fact is your money should be earning some rate of return even after
retirement and if you take that into consideration the 4% rule doesn't really
doesn't really take that into account. Now like I mentioned earlier if you
follow some common sense investing principles you should be able to enjoy
the benefits of early retirement. Now I know a lot of other channels give you
excellent information on financial freedom, personal finance things like
that so instead of giving you the same old boring financial advice that you get
on another financial freedom, financial independence channels I wanted to focus
on a simple retirement planning calculator that I use myself on a daily
basis. I'll show you the calculator it's free you can download it and I'll even
show you how to use it and the psychology of how to use it the correct
way so that you can start to plan your retirement goals using this simple and
easy financial planning calculator. So I use this calculator as the basis of my
financial independence and early retirement goals now I know there are a
lot of vocal supporters out there of the 4% rule of the financial freedom fire
movement that's all fine but for me financial independence and financial
freedom and the ability to retire early knowing how to retire early comes down
to personal decisions, comes down to things that are important to me and I'll
give you three factors that are important that'll help you plan for your
financial retirement for your financial successful retirement. Now financial
planning for early retirement requires that you answer three questions. How do
you want to live in retirement? How do you want to spend your money in
retirement? That's number one. Number two, do you want to retire early at what age
do you want to retire? Number three, what's a safe withdrawal rate so at what
rate? should you withdraw your money so you don't run out of money
you even have a little bit of money left over to leave it to someone when you're
gone so the app that I'm talking about actually answers all of these questions
and I love this app because I actually refer to it on a daily basis. So let's go
ahead and show you that app okay so I'm gonna go ahead and get started so the
app that I really like is called the MSN Money app as you can see it's available
for free I use an iPhone so I'm presuming you'll have the MSN money app
on the Android on Android devices as well. So once you open up the MSN money
app what do you want to do is right at the top of the app you see different
tabs you want to go straight to the tab that says tools once you're on the tab
that sells - that says tools you want to click on retirement planner before I dig
into some of these numbers let me again go over those three questions that I
asked the three questions that impact financial planning for early retirement
so the three questions are, How much can I spend in retirement? In other words how
do I want to live in retirement, do I want it to be a lavish lifestyle, do I
want it to be a simple minimalistic lifestyle, do I want to follow some
simple common-sense investing principles, do I want to follow the financial
freedom fire movement that's entirely up to you after all retirement spending is
going to be different for each one of us. Do I want to retire early? How do you
retire early? Do you want to retire young? So you know how to retire young those
are all questions you need to ask so you need to have an age at which you retire
as you can see on your screen that is actually here on the screen so I put in
my retirement age let's just say at 42 and then the third question is what
should my retirement withdrawal be. In other words what's a safe withdrawal
method or a safe withdrawal rate. So let's start working on this app and
let's see how it works so let's just say your current annual income let's just
say it's $45,000 your savings are $10,000 your current age let's just say
is 42 and you want to retire at the age of 50 and you expect your life
expectancy to be up to the age of 80 now your goal in this case is "hey, I want
$40,000 in retirement income" your pre-retirement return let's just say
it's 8% how you get that 8% that's a topic for a different video and your
post retirement rate of return is also 8% in just this example again before you
start posting in the comments below my god is not possible to 1 and 8%
rate of retirement let's not go there let's focus on the numbers here as far
as how you get that I'll be covering that in future trainings I'll talk about
my real estate investing strategies, my stock market investing strategies. So
please subscribe to the channel and I'll show you how it's possible to achieve a
higher rate of return than what you get in a bank and what you get in a savings
account through safe and logical investing principles and what I used in
order to be able to achieve my financial freedom. But right now let's take a look
at this and let's just hit calculate and you'll see that the system says to
retire at the age of 50 with an annual income of $40,000 each year you'll need
to save 90 percent of your income so let's say you're earning $45,000 it says
you need to save $40,596 now obviously
this is not possible no one can save 90 percent of their income unless you know
there are no expenses but let's just say your current savings let's play with
this a little bit or $20,000 so let's go
$20,000 those are your current savings
let's see your current annual income is $60,000 okay and let's
say you're younger and you know it this depends obviously on your age so let's
say you are 34 years old and your retirement ages let's just say it's
45 this is where things start to get really interesting and life
expectancy I'm going to leave it at 80 for now and I'm going to say the
retirement income is let's just actually leave it at $40,000 and
let's assume the pre-retirement rate of return is 9% and the post
retirement rate of return let's say you start to get conservative at the age of
45 is much lower let's say it's only 6% and let's hit calculate.
Now this is where things start to get really interesting to retire the age of
45 with an annual income of $40,000 each year you need to say 50%
which equates to $30,000 so this is where the math gets
really interesting because now if I click on chart. This is the chart this
sort of that shows you the breakdown of how much you need to save versus your
retirement income which if you notice if you look towards the bottom starts to
get rid drawn at the age of 45 but let's click on schedule this is
where the magic really comes in so at the age of 34 let's say your
savings were $20,000 so your ending balance is just
$20,000 but at each year if you said if you
actually save that $30,000 that I talked about you go from year one which is
20 to year two which is 51,886 so you're adding that 30
basically every year you're going to be setting aside $30,086
not to mention the money is earning a 9% return so let's
go back to the schedule in this example again your example is going to be
specific to you which is why I recommend you get the app but by the age of 45
you'll have more than half a million dollars set aside now when you
start withdrawing that money notice that the money does not decline
by $40,000 a year so let's look at the
$574,726 even though
you're withdrawing $40,000 it's not like it goes from you know from
574 to 534 it drops to 569 the reason for
that is that money is earning a rate of return which by the way is why I
think the 4% rule doesn't really take this into consideration I
think this chart is great by the way if you are earning money during your
retirement years then it's even better this chart simply assumes you have NO
income other than you know the compounding of your money after
retirement just you know I love this and obviously my numbers are different
because I have I have more savings and I'm 42 years old I actually retired 5
years ago because I had decided at the age of 35 that I wanted to retire at the
age of 38 which I achieved because you know I've been retired for 4 years
now and 42 years old but again these numbers are individual to each person so
you can see that at the age of 45 if you start withdrawing $40,000 you can
actually live up to the age of 80 and at the age of 80 BAM you'll run out of
money. Not too bad if you start to plan your finances
assert me now obviously you know let's cover one more example let's just say
that you've got big you know you've got a greater amount of savings so let's say
you've got $40,000 in savings okay and let's say your current annual income
let's leave that at 60 and let's say you're a bit younger let's say you're 31
and let's say you want to retire the age of 50 not 45 this is where things get
really interesting you would calculate okay so you only need to set aside
$7,495 a year in this case. That's it so
the earlier you start and the longer you work the easier it is
to retire again. The earlier you start and the longer you work it's easier to
retire. So again going back to financial principles I mean just look at this so
let's go back to the schedule here I talked about how much you can spend
during retirement. In this case I'm using 40,000 as a benchmark after all the time
and spending will be different for each one of us I talked about do you want to
retire early I mean by all accounts the age of 50, 51 can be
considered early but you know obviously there's there are people who want to
retire even sooner. By the way speaking of retirement I don't think well you
know when you retire you're gonna you know sit at home watching TV you're
probably going to be do some sort of work presumably be productive contribute
to society and you might even earn some income, there you might pursue a hobby
that you're good at. Heck, you might start teaching other people how to retire so
you know there's there's obviously the potential for income during retirement
because you know 50 it's a young age. So do you want to retire early how to
retire early, how to retire young that's your consideration and what should your
withdrawal rate? In this case I assume $40,000, let's just say I said all right
let me do a withdrawal rate of $75,000 a year and let's
say my pre-retirement rate of return was 10% and my post retirement rate of
return is also 10% in case you're wondering how's that possible
it's possible using single-family real estate for example which is what I do
I'll cover that in another training. Please subscribe to get more of my
trainings, a lot of work goes into these trainings, a lot of thought, a lot
of effort so if you can like the video and if you can subscribe that would mean
a lot to me. What would your retirement withdrawal rate be I talked about that
in other words what's a safe withdrawal rate in this case I'm you know not
thinking 4% I'm just saying I want $75,000 a year in retirement and that
would be my safe withdrawal rate let's hit that Schedule here. By the way
notice that if the money continues earning a 10% rate of return to
retire at the age of 50 with an annual income of $75,000 okay you only need you
only need to say 15% of your income if you're 31 years old
earning $60,000 and have $40,000 to begin with
you only need to save $9,000 a year and in fact you'll be able to retire
comfortably and you'll be able to withdraw $75,000 a year and by the way
if you need to adjust these numbers. If you think oh my
god you know there's inflation I need to withdraw more money that's fine you can
always withdraw a little bit more and work these numbers and sort of adjust
these numbers up and down but this retirement simple retirement calculator
in my opinion is better than the 4% rule and this is how you can achieve early
retirement thank you so much for watching this video. I appreciate you all
being here I appreciate you all watching the video. Please like, please subscribe
for future updates it really helps you it really helps a youtube algorithm and
go ahead and comment down below I read the comments I'm happy to give you any
advice in any input as best as I can I appreciate you watching the video and
I'll see you in the next training. Thanks!