Mistake number seven out of ten when saving for retirement.
In this episode, I'm addressing the question. What mistakes do people make when saving for retirement?
Now, there are many mistakes I've selected the top ten and this is the seventh mistake people make
when saving for retirement. I want you to avoid it or correct this mistake before it's too late.
So, my name's Doug Andrew and I've helped thousands of people prepare for retirement so they don't
outlive their money and many times when people would come to me with their hard-earned money
that they've socked away oft times in traditional accounts like IRAs and 401ks. I would look at their
money it was still in the market and that was the first mistake it was subject to volatility.
They thought they were going to be in a lower tax bracket and they're not. They follow the herd and
put money in traditional IRAs and 401ks and then they don't start tapping into at age 59 and a half
when they should. They take RMDs at age 70 and a half. Well, here is a big mistake that I witnessed
for many many retirees. They would come to me and they would have saved $400,000 maybe
$600,000 sometimes a million. I've had people come to me and they've saved 4.6 million
and they make the mistake of thinking that that nest egg is going to sustain them and
allow them to not outlive their money at the same standard of living that they've been accustomed to
and all too often. It's not nearly enough and I ask, "So, what rate of return do you think you will
likely average on your nest egg where it's at if you leave your money in those IRAs and 401ks in
the market?", and many times they would go, "Well, I earned 7 or 8 one time I got 12 percent",
I said, "Do you think you're averaging that?", "Well, I don't know. My advisor says I'm doing pretty good."
I would do an analysis and I would look at all of their deposits. This is a complicated
calculation of times. I would look at all of their deposits and I would put it into my calculations
my programs and then I would look at how much they had accumulated and I would show them that their
average return was only like three and a half percent. Maybe 4 or 5 percent it's not near
what they thought it was and so then they say, "Well, I've got a million dollars", I go okay, "So, if you
continue to earn three and a half or four percent", which by the way is the average for most Americans.
Most retirees who have money in the market are only averaging 3.49% according to the analysts like
Delbar. So that means if you wanted to just live off of the interest and not deplete your principle
you should only be pulling out 35,000 a year. That's about 3,000 a month and people go,
"Well, that's not my lifestyle. I need a hundred thousand a year", "Well, then one of two things need
to happen. You need to either be earning 10 percent because 10% of a million is 100,000 if that's what
you're going to withdraw. If you're only earning three and a half or four percent and you pull out
10% you will be out of money in less than a decade. You will outlive your money." "Well
I thought a million dollars was a lot of money", "It is but if you're gonna pull out a hundred thousand
dollars a year and you're only earning forty thousand in interest you're dipping into your
principle sixty grand but it's going to go down down quicker and people outlive their money."
Sometimes people have said, "Wel,l I have four hundred thousand, I have six hundred thousand",
"Well, how much money do you need a year to live on?". "Well, let's see on top of social security I
need at least 50,000. Well, 400,000 bucks isn't gonna cut it. You're gonna
be out of money in less than a decade. Do you have longevity in your family?". "Oh yeah, my father
my mother they lived into their 80s and 90s", I said, "Well, you're going to be relying on social security
charity welfare or your children for support then", and they think, "Well, I have hundreds of thousands",
that's not gonna last very long when you need 60,000 and then because of inflation
in less than seven years definitely in less than ten years
you're going to need a hundred and twenty thousand to buy the same gallons of gas and
loaves of bread that 60,000 used to buy because of inflation. Which is the mistake number three
and so the biggest mistake is people thinking that they are going to be able to retire comfortably
when they only have a fourth or a third or half of what they need to have and that doesn't
even account for inflation. Unless, they link their returns they're earning on their money
to inflation so that they can outpace inflation most people don't. Most people like I said are
unfortunately only earning about three or four percent and yet they want to
withdraw eight percent and they think somehow magically it's going to last as long as they do.
The two biggest things that short out people's retirement batteries so to speak are taxes and
inflation. Because taxes going up people have to pull out 50% more money in a 33% bracket
to have the same net spendable income. Did you understand that? If not, before I explain this.
If this is intriguing you and you know somebody who ought to be watching this video because
they're making the same mistake. Be sure and share, post a comment, click like, subscribe to this three
dimensional wealth channel. I have over 500 educational videos and I post at least five
new educational videos every single week and at the end of this episode. I want to gift you a copy
of my most recent best-selling book the laser fund which will teach you how to diversify and create
the foundation for a tax-free retirement. Now, let's say you have a million-dollar nest egg and you
need a $100,000 net to buy gas and groceries. You could have gotten by on 50,000 maybe
seven years earlier but the cost of living has doubled. Now, I've seen gasoline double in the last
100 days since the day of recording this episode. So, inflation can be your fuel your energy it can
be food. But folks, inflation at 10 percent which is the true rate of inflation is over 10 percent.
The cost of living will double about every seven seven point two years. So, if you thought you could
get by on 50,000 in about seven longer than 10 years you'll need a 100,000
to buy what 50,000 used to buy. To net a 100,000 out of a tax-deferred IRA 401k
in a 33% bracket, tax bracket you have to pull out 50% more money. You have to pull out 150,000
pay tax of a third 50 to net a100,000. A 150,000 is fifty percent more
than a hundred. This is why people run out of money because their nest egg isn't big enough. They have
to pay tax and taxes are going up. That shorts out people's retirement batteries. So many financial
advisors try to charge up your retirement battery. So, hopefully, it won't go dead before you do.
The other thing that shorts out the battery is inflation like I've indicated taxes and inflation.
What you need to do to avoid this mistake is save enough money by earning decent rates of return
but get rid of the dangers of taxes and inflation and you'll be able to have twice the income or
twice the rate of return and you'll be able to be immune from taxes because you're using tax
free vehicles and you're linking your returns to the things that inflate. So, the secret is
accumulate more than enough money so you will never outlive your money. But when inflation and
taxes cause people to outlive their money you're immune. Because your money is not subject to tax
and if inflation goes to five hopefully you'll earn 10 or more. If inflation goes to 10 you'll
earn 15 or more that's what I've always been able to do. Historically is average returns about five
percent greater than the rate of inflation, outpace inflation. If you want to see actual examples
historical examples of how this works. Study and read both of these books. Wait, yeah this
is two books. This side the white side is about 200 pages 14 chapters with all the charts and graphs
that will help you understand this. How much money you will need so you do not outlive it based upon
the rates of return that are like double what most traditional IRAs and 401ks earn. If you learn
more by stories and examples you flip it over and you read this side. 100 pages 12 chapters with all
kinds of stories of clients who have corrected or avoided these mistakes that I'm talking about in
this series. So, don't make the mistake of thinking that you know 400,000 or 600,000 or a million is
going to cut it unless you plan on dying sooner than later. Folks, empower yourself click on the
link below contribute a nominal amount towards the shipping and handling. I'll pay for the book. I'll
fire it out to you. There's also options there to listen and learn and watch and learn and I
can point you to the financial professionals that can help you establish what I call the laser fund.
So that you avoid not only this mistake but all of the other 10 biggest mistakes in this series.