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How much money do you need to save for retirement? It’s always been a lot of debate on that. I remember a show when I was growing up, on TV, came on at 2:30 every afternoon. I think it was called The Millionaire, and the gist of the show was some anonymous donor would always give $1 million to somebody, and it totally changed their life. Many times for the worse and not the better, but they gifted them $1 million tax-free. And then over a period of years, when I’ve been in the financial industry now for 28 years, I’ve always heard, if you have a million dollars, if you’re a millionaire, that’s what you’re striving for. To be worth $1 million and $1 million is not nearly as big as it used to be.
I remember just three years ago, one of the big box firms had a big sign on the 55 Freeway right here in Orange County, California, and it says, “Do you have your $1 million saved?” And I remember about six years ago in The Orange County Register, which by the way, that was a newspaper we used to get delivered to our front door. That Orange County Register said, “Will the $1 million people need for retirement last in Orange County?” So $1 million, it was always there. But look, in the last two years we’ve had 13, 14% inflation. So now people are asking, will $1 million do it or is it $2 million doing it? And some of the large investment firms are saying, we really need you to save $2 million.
The Monte Carlo model that they use for disbursement, which when you think about Monte Carlo, when I ask in my seminars, almost everybody says, Yeah, I think about gambling. It is a gamble. There’s even a certain percentage chance that you’ll be successful, but if you leave your money invested in the market and you have $1 million, you can take out $32,000 a year to be safe that you’re not going to lose your money. I said, why would that happen? Well, if you lose 20% of your money and you’re still taking $32,000 out, then instead of $1 million, you’ve got $770,000 or so. So you got to really be careful about the disbursement if you leave it all at risk in the market.
So let’s bump up to $2 million. Wow. You can take out $64,000 a year or a little over $5,000 a month before you pay the tax on it out of your IRA or your 401(k). Some of you are sitting there and you’re saying that won’t do it. Well, I want to look at it in an entirely different way because here’s what, your lump sum, that 1 million or 2 million is your lumber yard. I want you to see that as like we’ve been collecting lumber to build a retirement house. A house we can live in and be sure about and to be certain that we’re not going to run out of money because there are plans that you can put into place and you can have that and you can know that.
And I want to be really adamant about it. Mosley Wealth Management, Tom Mosley and all of our advisors, we go about retirement planning in an entirely different way than the hope strategy. Put your money in the market and hope it lasts. That is not our strategy. What we do is we take that 401(k), 403(b), IRAs, the pension, everything that’s your lump sum that you’re going to have and what we do, the key to your retirement planning is not the lump sum, it’s not the lump sum, but it’s turning it into a stream of sufficient income so that you don’t run out of money. One lady told me about two months ago, she said, “Tom, the reason I’ve always liked to work for you is you’ve been just as concerned that I can go to Venice, Italy when I’m 65. You’ve been just as concerned that I’m still going to be able to go to the grocery store when I’m 85.”
So when you build a 20 or a 30-year plan, you’ve got to address that and taking $1 million or 2 million or $3 million and just leaving it invested in the ups and downs of the market, that is not a plan that’s going to give you any kind of certainty. It’s a hope strategy and we like to deal in more certainty. Now, what do we do? We take that lumber yard, that lump sum and we turn it into… The number one thing we do when we build a retirement blueprint is we address your income. Are you going to have four things guaranteed, increasing because it’s got to be increasing because of the second one, because of inflation and it’s got to last as long as you do. You can’t spend all your money in your 60s or your 70s and run out of money and have to live off of just a flat social security in your 80s. It might not be here.
So guaranteed, increasing income that will last as long as you do. And if you’re married, fourth thing, last as long as the surviving spouse. You say, why is that important? Well, your tax brackets go from married filing jointly, to single. Your taxes are going to be higher when you’re single at the end. And also your required minimum distributions and your needs are almost going to be the same. So your expenses stay the same when one of you goes away, you lose one of the social securities if you both have social security and your tax brackets go down. So it actually takes a lot more money right there a bubble at the end for the surviving spouse. So again, your income needs to be guaranteed, increasing, that will last as long as you do, and if you’re married as long as the surviving spouse.
Then you want to address your investments. If you’re 25 years old, you don’t need to be investing in a conservative way for retirement, because you have at least 35 years until you reach 59 and a half and then you’re going to start using your retirement money. So put your money in the market that’s got all of its gyrations, but overall it’s got an upward trend, at least historically, all the way back to 1896 when we first had a stock market. So when you’re 65, put your money in the market. If it goes down, it’ll come back up. Just give it time. You don’t have time, okay? And you’re not putting money in. It’s not a buying opportunity like when you’re 25 when the market’s down. It’s a really bad opportunity when you’re 65 and you’re drawing money out and it’s depreciated 20% like last year, and you’re taking a lot more units out.
So your investments need to be to your risk level, and then you’re going to have to deal with taxes. It was great putting that money away in the 401(k) and not having to pay tax on it when you were 20 and 25 and 30 and 35, but now that you’re taking the money out, it’s coming out as regular income. And taxes are in 2026, we know for a certainty taxes are going to be higher than they are right now, because the tax cuts that we had six years ago are going away starting January 1st, 2026. So your plan needs to address your income for inflation that will last as long as both of you, if you’re married or one of you if you’re single, your investments need to be to your risk level.
Your taxes need to be considered because like a client was in my office yesterday, they have $984,000. Sounds good. It’s all in an IRA. They do not have $984,000 because to spend that money, it’s got to go through the grid of the U.S. tax system and they’re going to lose about 15 to 20% in most cases of that money just to pay the taxes. And then you’ve also, in a permanent retirement blueprint, you’ve got to consider your healthcare because you can have all of the other bases touched and not have your healthcare taken care of. And it can unravel every single thing you’re trying to do financially because your loved ones are going to try to spend everything they can to take care of you. And healthcare, if you’ve not passed that risk off properly to an insurance company to take care of you, you could really be in trouble.
And then let’s talk about those loved ones. How do we leave the money that’s left when we’re done with our retirement blueprint and we exit this life? How do we leave that money to our family? And I don’t mean Uncle Sam and Aunt Iris, IRS, but we leave it to the loved ones that we want the money to go to. That’s what a retirement blueprint is all about. Now, if you’ve got questions about this, how much money do I need to save? Well, it’s not so much the lump sum, but it’s making sure that you’ve got those digits and those things on that retirement blueprint set aside. It’s the income that’s more important than the lump sum.
For instance, we’ve had people in our office who’ve had over $3 million and they were in trouble for retirement. And we’ve had people in our office who have $180,000 and they’re pretty secure in retirement because the people who have $180,000 aren’t used to spending $32,000 a month. Like the people who have $3 million. $32,000 a month will eat into $3 million a lot faster than $500 a month will eat into $180,000. So it’s your income and what you need for income and where that income is coming from that’s far more important in retirement than your lump sum. How much money do you need to save for retirement? That all depends. It all depends on your particular blueprint. You want one? Let us know email@example.com, M-O-S-L-E-Y.
You can call us at (714) 421-4288. If you’ve got a question, shoot it to us firstname.lastname@example.org. We’ll be glad to answer it. If you like this podcast, if you like this YouTube, send it to somebody else. Subscribe to it, like it, give us a good review. All of those things help us get the word out to more people that we can help you build a plan that will give you a great deal of ability to sleep at night in retirement and not worry about running out of money.