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24 replies
  1. Kryz
    Kryz says:

    Yes, your model makes alot of sense! I see retirement calculators where you input your current income and it tells there is a 50% shortfall and then there is an ad for a financial adviser next to it. Without even looking at the whole financial picture, it can't tell if mortgages(biggest chunk in the budget) have been paid off. We have retired neighbors in their 70's and after last year's European cruise, they are done travelling international.

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  2. Sergio Santana
    Sergio Santana says:

    As Josh is explaining the spending/ saving patterns I'm thinking of Dave Ramsey telling people to rice and bean it on 25 to 30% their of income and use the remaining income to pay off debt quickly, usually a 1to 2 year window ,so you can eliminate the debt faster to allow you to start investing more of your income once the debt is gone .

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  3. Steve
    Steve says:

    Well ……. so I was scared I was not saving enough 2 years ago and now I am scared I am saving too much and not living life…. I can’t win…. I need a crystal ball that can give me a better idea of my death date.. heard google has something in the works to let me know my estimated expiration date with machine learning algorithms powering it using medical historical data. I fear I am way to scared of the unknown and being a burden but maybe it’s unfounded.

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  4. Ralph Parker
    Ralph Parker says:

    I think your spending curve should rise with the income in the first years. Given that there is debt spending but hopefully your wise students won't spend at a target level much more than their income. Exceptions of mortgage debt/car loans that still within the wise zones for risk mitigation. For instance, mortgage loans are usually required to be less that a percentage of income. So you are capped on how much you would borrow for a house. At some point in my life I found my family didn't need the raises I was getting so I forwarded them on to a broker account (above and beyond the 401K type account). When we reach that point, we basically new what our retirement needs for general expenses would be. Yea, the 80% of your income is really the take home portion after taxes. But we were saving 20% of our gross salary after taxes when I retired.

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  5. Columbus1152
    Columbus1152 says:

    I agree 1000% Josh, spending tails downward as we get older. The explanation I see uses a little different terms to describe behaviors. Your second stage, I call mid to late career stage, and that's where we accumulate wealth. We can use that wealth to pay down debt, invest, save for retirement, so we're in that stage for maybe 20 years(?). Of course MSM, financial advisors, banks, politicians, etc., that is, anybody who profits from advertising, financial services, transactions, taxes, all have an incentive to push you to accumulate wealth through fear. They predict starvation, sickness, and homelessness if you don't follow the rules they set forth, when the reality is, your income never goes to zero. For certain, those who are better prepared will have a higher standard of living than those who do not, but with 20 years to prepare you have to have an idea of your future no matter what your income will be in retirement.

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  6. Mackie Johnson
    Mackie Johnson says:

    You stated "why would you use 80%?" Seems to me the Target Income line you drew is based on individuals who live on 80% of their income. Initially, individuals have a negative net worth (debts for house, kids college, cars, etc.) at the beginning of their working career and eventually have a positive net worth as they save for retirement and pay down debts. My guess is the 20% in question is the amount the person is saving for retirement, thus not using for everyday expenses (or their 80% target income). In retirement the 20% is no longer saved… As such, the person maintains the same standard of living in retirement and never dips below the Target Income since it has always been 80%.

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  7. Al Buckner
    Al Buckner says:

    Just retired in October, My only debt is a mortgage…. due to 3-setbacks over the last 20-yrs. It will be paid off in less than 4 yrs. That being said since when I stop working my expenses dropped 29%. No taxes, insurances premium, no $250 month in gas, no lunch or coffee to buy while working. Since I'm driving less insurance will decrease $86 a year
    My plan is to spend most of my 401-K the first 15-yrs, then slow down from having fun around 80-83…😄.
    I based my 401-K return at 4% over my lifetime left for cushion. When I'm 70 I will be debt free and living off of SS. My 401-K will pay for my fun times. Plus I will have still have 3-yrs cash for emergency. Plus my debt free home can be used for reverse mortgage.

    People put to much emphasis on how much money you have to have to enjoy retirement my theory is to live off your Social Security and your 401k is your Mad Money. Then you can survive any market disaster.

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  8. Ross Macintosh
    Ross Macintosh says:

    Interesting subject Josh. When you were drawing the 'target income' line as a flat line I was thinking about the sequence of income needed to sustain most people's lives. It certainly isn't flat. You could start by drawing a more realistic income needs path. Those needs would rise with life events like having student loan payments, getting married, buying a starter house, having children, needing a second car, after-school activities phase, buying a bigger house, perhaps divorce, post-secondary education, etc. The second line relative to that is our actual incomes, which as you show sometimes doesn't meet or needs (debt grows) or that exceeds or needs (debt shrinks and savings/investments grow). That line would not be a smooth curve. It would have hiccups from job losses, parental leaves, big raises/bonuses at work etc. I'm thinking that with the more realistic paths, the results that you suggest happen in retirement would be even more clear.

    I think the people who watch Josh's channel already understand his message. (We like the confirmation & reinforcement). Sadly many others don't and don't use their income surpluses to pay down debt or save/invest. When Josh said he often thinks those under 40 don't need his services I think he's 100% wrong. They may not need the same planning services, but they do need to understand how their needs & income paths will affect their lives. They need to know to put those surpluses when they have them to good use & set themselves up for continuing success.

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  9. Jfhelwig
    Jfhelwig says:

    I lived on half my income and saved tons. Retired at 58 and still living on same amount I was used to. You're right that if we even use 80% it will be on our spending, not our income. I love the way you see things

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  10. John C
    John C says:

    Josh Scandlen: mythbuster! Been working for me this way since I put down my oar on Sept. 30, 2016. Have more cash and investments now than ever… and after having a wonderful ($$) vacation to Japan in October. Paying off all debt and delaying SSA benefits two key strategies to our plan.

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  11. vinyl1Earthlink
    vinyl1Earthlink says:

    As an experienced investor, I am willing to say I don't know what interest rates will be in the future. They may remain low, they may go back to normal, they may become very high. I think it is unwise to plan for retirement based on any particular future economic scenario, because you just don't know. The stock market may continue to rise slowly, or it may plummet like a stone. You have to be ready for anything, because experience has shown that unexpected events are continually happening.
    There's no law that says you have to stop saving once you reach retirement. If you're faced with a retirement that is potentially 40 years or more, it may be prudent to continue saving in your early retirement years. If your financial assets peak in your early 80s instead of your middle 60s, then you might be able to see far enough ahead to know that your future is secure. Peering into the future 40 years out is virtually impossible, which is what you have to do if you retire in your 60s.

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  12. Timothy Becker
    Timothy Becker says:

    Josh, going to retire soon : no SSA taxes, no medicare tax, no retirement saving contributions: in our case that's $2200.00 a month in immediate savings. Taxes lower too! Everything is paid for. Ain't worrying about retirement. Pest control, extended warranties, financial planning (not you Josh); is based on selling a person fear, fear that you cannot do it yourself. Yes you can, you just have to get educated and this is the best source for retirement planning. Tks.

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  13. ALCAN52
    ALCAN52 says:

    Yes its been wrong all this time. Its was designed to be wrong. You are 100% correct. I understood this decades ago. Hence why I retired at 47 eight months ago. Im on track to spend $33,000 my first year in retirement. Its more than I planned to spend but I had moving expenses, and setup expenses, along with obligations from when I was working like a couple trips I planed and partly paid for before I retired. Yet my gold and silver holdings increased by $40,000, one of my mutual fund accounts increased by $17,000, I had interest income of about $4,000, and I just received an inheritance of $178,000 which will be invested. And I got over $5,000 from my roommate toward the condo expenses. So even without the unplanned  inheritance, my net worth increased by 100% of my total spending. I do expect my spending to be less in 2020 (April 15 2020 – April 14, 2021). Also I prepaid $5000 on my HOA dues so Im paid up through May 2021 so that's where part of my overspending went. My target spending $25,000 to $29,000 a year.

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