Retirement at $1M, $2M, $3M, and $5M

20:45Brian Preston:And this now at this level does make you more mobile. If you have different family members spread across different parts of the country, it's probably not incredibly arduous to go visit them on a fairly regular cadence without having to worry about the dollar and cents of that decision. I like to think about the daily lifestyle and the fact that you're probably going out to eat without too much stress. You might even have some social membership clubs, country club or This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

21:26Brian Preston:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. Propel Fitness Water. With Gatorade electrolytes, zero sugar and vitamins, Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. Personal trainer. These are the things you get a little more flex in the system. It lets you live a little better so that you can actually feel like those sacrifices and that discipline that went into those early years, you're now seeing the fruit from that.

22:05Brian Preston:I think when we think about focus areas, for folks that are retiring with$2 million. So often in our financial journey, it starts out, we're willing to trade our time for money, trade our time for money, trade our time for money. When you've amassed a portfolio of$2 million, now you really do get to trade your money for time. I'm willing to spend money to be able to do things the way that I wanna do them on the cadence and schedule that I wanna do them. So at this level of assets, you really need to spend time not just thinking about, okay, what am I retiring from? What am I moving away from? What are the things that I don't want to do?

22:39Brian Preston:And what are the things I actually want to do? If I have financial resources, if I have extra capacity, how am I actually going to spend my time? I do think at this asset level, you're beginning to think and focus more attention there. Well, you know, it's the whole thing is having resources is now you get to buy the time. So money is time. And that's really important when you think about health expenses because look, we don't live forever. So that's why you have to understand we got to work on building. How do we make memories? Because these things blossom. How do we make sure we spend time with loved ones?

23:14But a really cold water moment is when you realize that for a 65-year-old retiree, they can expect to expend about$185 ,000 later in life for medical expenses. That's daunting. So you just need to plan accordingly and just make sure that you have enough resources to where you not only get to build the memories, but you also can cover your expenses on the medical side.

23:37Brian Preston:Yeah, and I don't want this to be funny, but we start off the show by saying the median amount of retirement savings for folks 65 and older is$198 ,000. Well, if you have$198 ,000 saved up and you can expect on average to spend$185 ,000 in medical expense, those two numbers don't add up. So it's something you certainly want to consider. And obviously, if you're someone who's young, if you're someone who's not 65, investing in your health now before you get to financial independence, before you get to retirement, likely makes a lot of sense. It doesn't seem like it's a financial metric, but if you can do things now and make decisions today to drive down those future medical costs, you're likely gonna set yourself up for success.

24:18Brian Preston:Because another thing that's gonna happen that is a little bit outside of your control is inflation. We don't know exactly what's going to happen with inflation, but we can feel pretty confident that whatever a basket of goods costs us today, the loaf of bread, the gallon of milk, the gallon of gas, it's likely going to cost us more in the future. And at$2 million, we want to make sure we understand how much that purchasing power is today. Are we making decisions and considering how do we maintain that purchasing power for the next 10, 20, 30, maybe even 40 years of retirement? Well, the good news is the safe withdrawal rate kind of builds that in.

24:56And also a lot of you, when you cross that threshold of retirement, you're going to be working to do a annual stress test to make sure this all works. But it is important to understand that just inflation as a whole, even at a reasonable rate, like 3%, the cost of goods are going to almost double over a 20-year retirement.

25:13Brian Preston:So that$400 grocery bill is going to be an$800 grocery bill. So Bo is spot on that you need to plan accordingly. But I like to, when I get excited, and like I said, this is supposed to be motivation for especially those that are decades from retirement. Let's look at what the path to$2 million looks like. Bo has already shared with you, the earlier you start, the easier this is. So set it early and do it often. And early and often for a 30-year-old means you need to save about$680 a month. Compare and contrast that to a 45-year-old who just now realizes, aha, I need to be saving for the future.

25:45You have to save and invest$3 ,612 a month. That's somewhere between five to six times what the 30-year-old had. It's almost 10 times more than the 25-year-old who's just having to do 368, I want you to plan accordingly. You can control what your future life looks like. Don't be like the typical American, actually use discipline. You live on less than you make so you have margin and then give it enough time so you have success.

26:10Brian Preston:And now keep in mind, these dollars, these numbers, they're assuming you start at zero. If you're someone who's 30, 35, 40 years old, and maybe you're not starting at zero, but you want to know, hey, am I on the path? Am I on track? We have a great calculator available for you. You go out to moneyguide.com slash resources and check out our Know Your Number calculator. You can put in how much you have, how much you're saving, what age you want to retire, what your current age is, and it will let you know, okay, am I on the path to$2 million? Am I going to be able to hit this metric? And if not, what do I need to change in my situation to be able to get there?

26:45All right, Beau, before we move on, let's do a shameless plug for Abound Wealth.

26:50Brian Preston:I have no shame because I'm mighty proud of the work that we get to do for our clients every single day. Here at Abound Wealth, we're fee only. We're fiduciary advisors. That means we're legally required to work in your best interest. And we love helping our clients optimize their army of dollar bills so they can live their best life. And before you leave a mean comment about us self-promoting, keep in mind, Abound Wealth helps us keep this entire thing going, creating free content, growing the team, and changing the financial landscape. We're honored you're watching and listening. and we hope you use this content to help you learn, apply and grow your army of dollar bills.

27:28And when your financial life gets complicated, it'll happen. We'd love for you to come back to where it all started. That's the Money Guy Show and Abound Wealth.

27:37Brian Preston:If you're ready to take the relationship to the next level, check us out at aboundwealth.com or click the link below. Now, Brian, I already said this in the first part. You know, you can't get to two million unless you get to one million. Well, you can't get to three million unless you get to$2 million first. So$2 million, again, is not anything we're scoffing at. But there's been a lot of studies, Brian. I know one of the most formative books in your financial life was The Millionaire Next Door. You said that, man, in the late 90s, it was this wonderful thing that if you hit the two-comma club, it was this beautifully significant thing.

28:07Brian Preston:Well, there's been a lot of research and analytics done since The Millionaire Next Door. And they have determined that over the last roughly 25 to 30 years, the new million dollar threshold, or the equivalent of what a million dollars was in 1996, is probably closer to$3 million today. So we're gonna talk about what is a$3 million portfolio. Well, yeah, I mean, I think that this is what, and then look, you see it all over the comments. So he's like, do you guys talk about inflation? Yeah, inflation has caused this to what used to be aspirational in a million and is now three millions where you're starting to feel like, you know, Robin Leach or Cribs, whatever your generation's version of what wealthy people have, this is probably starting to feel a little plush.

28:52I mean, there's no other way to put it, because look at what happens when you just compare this to a safe withdrawal rate. $3 million, 4%. That's$120 ,000 a year. That's$10 ,000 a month without even taking into account Social Security. You stack in Social Security, that$50 ,000. Likely, if you have this much, your earning potential through the years is going to put it even higher than this. but just go with our conservative assumption here. That's an annual retirement income of 170 grand or just under$15 ,000 a month. That's$14 ,166 a month. That's feeling really plush in retirement in my eyes.

29:28Brian Preston:It's really interesting. If you have$3 million of liquid assets in your investment portfolio right now today, that puts you in the top three to 5 % of American wealth. It is, as Brian said, it's fairly elite company, but what it allows you to do is it allows you to now begin to have much more control over what your day-to-day, month-to-month, year-to-year lifestyle looks like, and it allows you to be much less afraid of the unknown, unknown events that could come your way. So when we think about housing and where you live, a really good chance at this level of assets that you have a paid-for home, and you likely have a nicer home.

30:09Brian Preston:This is probably not the home that you started your life and it's not a starter home. And there's a good chance at this level of assets, you've been able to choose where you want to live. Perhaps you're in a medium or maybe even a high cost of living area because you have a portfolio that can sustain that. I think if you go beyond housing to actually the travel, what's interesting is that I said that once you get to 2 million, you don't have to really worry about eating out. You can just cover that. I think when you start crossing the three million territory, the same type of thing happens for you with travel.

30:40Now you can go on more luxurious vacations. You can take the entire family. Maybe your dream is, hey, I want to take my kids and grandkids to like the Grand Canyon or to the Disney World. Maybe that's a little too bridge too far. There are limits to what three million can do. But still, this is an exciting time where you can really kind of unleash your retirement to enjoy vacationing and making those blossoming memories.

31:05Brian Preston:And again, the thing that's happening here is it's about control. When we think about your daily expenses, you're rarely worried about making sure the bills get paid. You're not worried about the grocery bills. You're not worried about running out of money. If you get invited to a high-end dinner, you're likely not thinking about, okay, how do I fit this in the budget? How do I make this work? and you can even pick up hobbies that aren't just one-time hobbies, but even hobbies that might have ongoing costs. Maybe this is a club membership or an expensive gym or some other organization that you wanna be a part of.

31:37Brian Preston:At this level of assets, you're beginning to be able to make those decisions and not have to worry about, oh, can I afford this? Am I going to be okay? So let's talk about what you gotta focus on. For a$3 million area, look, you're wealthy. Tax management's gonna be super important. For a lot of you, you literally could have a required minimum distribution bomb sitting there waiting to blow up on you. When you get into your mid-70s, when you have those required minimum distributions, you need to plan accordingly. Yeah, think about this. If you had$3 million in a traditional IRA or in a 401k and you were age 73 this year right now, your required minimum distribution would be$113 ,000 that you would need to pull out of that portfolio.

32:23Brian Preston:Well, maybe you've done a good job of building and you've built up your three tax buckets and you have resources or you have social security, you have other means that are coming in and you don't want to pull out$113 ,000, the government says, too bad. You have to. We're going to make you pull out that money. We're going to make you pay tax on that. You begin to lose some control. So if you're someone who has a multi-million dollar, multiple seven-figure portfolio, and you're in retirement, thinking about how you're going to navigate requirement distributions and those tax bombs that could hit is going to be important to make sure you don't lose control of your tax situation.

33:01Another area to focus is, man, find your purpose. Look, one of the saddest things for me is financial mutants that go into financial miser territory where they think, hey, you know what I need to just create happiness? Is if I had$3 million in the bank without a why attached to it. You know, a lot of when I was writing Millionaire Mission, if you go read the last two or three chapters where I get into my why, I do talk about what I did with my money, you'll see a lot of extra effort goes into thinking about, hey, what wakes me up in the morning where I feel like, hey, I'm part of something bigger than me.

33:33And that's why we say generosity is rewarding, but you also have to know what are the things you're going to do away from work? What are your hobbies? What are things? Find your purpose, know your why so you can live your best life, not only financially, but also in the memory making and waking up with every day feeling like you've got something really exciting going on.

33:53Brian Preston:Now, another thing that we want you to think of, and this is going to be unique and a lot of people are going to like scoff at this and poo-poo, but we think it's really important, especially at this asset level, to think about how you're building your community. Not just do you have enough money and can you spend money, but who are you actually spending your time with? Who are you surrounding yourself with? Do you have other people? Because frankly, it can be isolating. Just because you can afford to go on a trip and just because you can afford to international travel doesn't mean that your close friends can.

34:26Brian Preston:doesn't mean that they've made the decision. So do you have people in your life that are in a similar position that can do those things? Or are you in the place where if you have family, you can create environments and opportunities for you to be able to create those memories? There is no value in leaving this earth with a giant bucket of money left behind, not having actually used that money to focus on the things in your life that truly matter to you. Yeah, so let's get you, let's make the, Let's create the excitement, the motivation, and actually create a path to$3 million. You know, this weekend, my wife and I were shopping.

35:01We were at the local Nordstrom Rack. Okay. Because if you want Nordstrom stuff, but you only want to pay it, you know. Down the rack prices? The rack rates, you know, 40%, 60 % of what you'd have to pay at Nordstrom. I had, after we had paid and we were walking out, and by the way, the alarm went off because I bought this new sports coat for going on this trip to Scotland that we're going on. and this young, this guy couldn't have been older than 22, 23 years of age, came running up. He said, I just, hey, we're freshly minted, just came from California, moved from LA. We moved here last night.

35:35You are the reason that I've started saving and investing. And I told him just dead out of my mouth, I was like, dude, if you are already saving and investing because you watch our show, you are literally going to be loaded based upon your age. And I see that when you say the path to wealth, look, for a 25 year old, you only need to save$552 a month. For a lot of you, especially when we say we want you to save 20, 25 % of your gross income, in your 20s, that's aspirational. But for those of you who discover this content early enough, you might only need to do your employer to the match plus your Roth IRA.

36:11Oh, that's less than a max of the Roth. And you're already in this. Yeah, that's less than the Roth with 552. Act accordingly. Typical American,$1 ,000 a month. will get it done at 30 years of age. Guys, this is exciting stuff. You do not have to be the statistic like the typical American where you have a little under$200 ,000. You can be a multimillionaire if you set it and forget it early and often will get it done.

36:36Brian Preston:I have to ask a question and I'm sorry, but I got to ask this. What did setting off the store alarm have to do with the guy running up to you? It was just embarrassing because I didn't want to look like we had shoplifted. I thought he was a security guard. We were talking to this chatty, chatty, you know, cashier. Okay. Who for some reason was telling us he was moving from Tennessee to Virginia to open up a new store. Okay. And we got his whole life story. But he didn't take off the censor. After you just bragged that he was really good at taking off the censors. But it was just one of those. I was giving the context.

37:09A good storyteller gives you, you know, or I just give you random. No, no, that was great.

37:14Brian Preston:Okay, so the alarm goes off. God runs up to you and he tells you. I was just trying to say young, it makes me excited when I see young people saving and investing for the future, because that is going to set you up for this next one. This is definitely aspirational because we're going to give you the demographic stats on this to the typical American. But what is it like to retire with$5 million? Ka-chow. Like, here's the deal. No amount of money is completely worry-free. There's not a sum where you're going to remove all your worries. But at$5 million, you start getting close, honestly. because at$5 million, you're pretty much in the position where there's not a whole lot of stuff that you can't do.

37:52Brian Preston:There's not a whole lot of contingency that you don't have built in. Because when you just run through the simple math, a$5 million portfolio with a 4 % withdrawal rate is$200 ,000. If you then add a$50 ,000 household social security benefit, you're now pulling in a quarter of a million dollars a year every single year in retirement. That's almost$21 ,000 a month. It is difficult and it is unusual and it is uncommon to be able to spend$21 ,000 a month. This is a robust retirement lifestyle. Well, let's talk about how rare this is though, but it is definitely something. Be aspirational, shoot for this.

38:33Definitely if you're young enough, you can make this happen. A lot of our audience, we see the demographics, we see your incomes, we see what your potential is because this is sad stat sets the context. 49.5 % of Americans have literally zero saved for retirement. One in two. If you want to know who has a dollar to a million dollars, man, is that a broad, broad swath there? Because there's a big difference between$1 ,999 ,000 versus a dollar. But that's 47.3 % of America. And then if you look at who's a million dollars to$5 million, that's 3.1%. To say somebody has over$5 million, we are talking, this is not one percenters.

39:15This is one-tenth of one percent. That's right. That's an amazing feat to have this. So this is, like I said, aspirational, but let's still go through the numbers and say, what is it like to live this type of lifestyle?

39:28Brian Preston:Yeah, when you think about housing, this is the level of wealth where you likely own multiple properties. You may have your primary residence and you may have some sort of secondary residence or a vacation home. cost of living areas are not really a concern. If you want to live close to water, if you want to live close to mountains, if you want to live close to a major metropolitan city, you can choose that. And even the costs associated with that, whether it be renovation projects or maintenance costs or association dues, you are likely in the position where you can pay those expenses and not have a ton of anxiety around.

40:05And let's face it, your travel, let's go ahead and get the pinky ready to start ordering the grape coupon. I mean, you're doing this. This is where you actually get to ride business class when you go across the pond. You're doing extended travel. Blah, blah, blah. Everybody knows this is living your best life at this level. It's definitely aspirational, but I'm excited. It's back to my Morrow moment. I mean, if I can show somebody who's in their 20s or 30s this, you don't have to be the stats like the typical American. You get to shoot for this type of goal.

40:36Brian Preston:Yeah, what happens is that at this level, you feel like you're literally protected from almost all standard financial risks. I mean, there's certainly those cataclysmic things that could happen, but you're able to make your decisions and you don't have to worry about, is this going to be the thing that breaks me? If I have a medical thing, I can cover it. If I have an expensive hobby, I can cover it. If I want to help friends, want to help family, I can do that. So one of the things that really happens for folks that we see at this echelon is they actually have a really hard time spending money.

41:06Brian Preston:They've been so good at accumulating. And so just because we tell you can live this lifestyle, live this lifestyle, live this lifestyle, a lot of our folks that actually attain this level of wealth have a very, very difficult time flipping the switch and actually learning how to spend those dollars. Yeah, for these people, this is why you have to be careful of drifting into financial miser territory. if you're one of those people, this is when I think, yeah, reading something like a die with zero where you're going out there making more memories. So, because also you're going to hit the realization, I'm in my 50s right now.

41:36And I saw an interview with Brad Pitt, who's in his 60s now. He's like, man, I wish I could go tell my 50 something year old, go do more because he says, I just, I'm not that same person. And that's what we hear that from clients. Also, if you're going to go do all the travel where you have to go up a gazillion stairs in Europe or was it Montepiccio, Pichu, I'm probably saying that all wrong. No, you got it. You're going to have to go way up some, you know, you have to do all kinds of hiking for miles. Make sure you plan accordingly to do this. This is definitely aspirational, but you can live your best life, but you got to learn to spend.

42:08Get out of the miser, but stay in mutant territory so you can actually pay it forward because that's where legacy mode, being generous, estate planning, all these things kind of go together.

42:19Brian Preston:Yeah, you want to make sure at this level, you're not focused just on the dollars, but you're more focused on what can the dollars do? And maybe for you, it's not flying first class or buying the second home, but maybe it is leaving a legacy. What am I gonna do with these dollars to positively impact the world around me, the people around me, the people that I care about? How can I use it and how can I make sure that it's structured as effectively and efficiently as possible? And what I think is wild is$5 million is a lot of money. It's so much money, but it's not crazy if you think about, okay, a 25-year-old, if you could just save a thousand bucks a month, which is not easy.

42:54Brian Preston:That's not a simple thing to do, but it's only a thousand bucks a month,$12 ,000 a year. That can get you to$5 million by the time that you retire. For a 35-year-old, it's saving$3 ,000 a month. That'd be someone who's maxing out their 401k and then maxing out two Roth IRAs. That would get you that$5 million level. It's a big number, and it's not going to be one that you get to by accident, but it doesn't have to feel impossible. It's very much inside the realm of attainability if you're willing to live on less than you make and save a little bit for tomorrow. Think about this. I'm going to do this in public math you have to be careful of, but if you did 920 a month times 12, divided that by 0.25 to see what the income, that's for a 25-year-old.

43:38That's somebody who's saving 25 % who's making$44 ,000. Now, look, I know cost of living, housing, that stuff, more than likely that's not possible. It's more aspirational, but still it's worth noting. 30 years of age,$1 ,700 a month times 12 divided by 0.25. That's somebody making a little under$82 ,000 a year could do that. 35-year-old, 3 ,030 times 12, 36 ,000 divided by 0.25. That's somebody making$145 ,000 a year. Guys, we see the demographics. We see you out there. Yes, I know that's above what the typical American makes, but if you are in that situation, don't be average. be extra, be somebody who actually creates something that goes beyond your life.

44:23Yes, I know you can't take it with you, but man, oh man, what if you can pay it forward to your children? What if you can pay it forward to live your best life, to create memories so your children and grandchildren don't have as much struggle? What about the charities that we want to support? All these things are understanding that money is nothing but a tool, but man, oh man, if you plan accordingly, there is a better way to do this. And that's why we work with clients all across the country. I invite you, if you get to, if you have a simple situation in your life, you're trying to figure out what the basics are, go to moneyguy.com slash resources.

44:57We will load you up. But when life starts getting complex from success, please remember who planted the seed. I'm your host, Brian, joined by Mr. Bo. Money Guy team, out. The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show.

45:30The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The Viore Core Short moves with you. With everyday versatility and classic athletic fit. It's the one short for everything your day brings.

45:57Brian Preston:Invest in your happiness and get 20 % off your first purchase at viore.com slash core20. That's V-U-O-R-I dot com slash K-O-R-E-2-0. Exclusions apply. Visit the website for full terms and conditions. Thank you.