The Shockingly SIMPLE Retirement Plan [FREE Calculator]

[00:00] There's one question that I receive more than any other question. Can I afford to retire? And if not, what do I need to do? Well, today I'm going to help you answer that question in under five minutes.

[00:13] I originally called this the 15-minute retirement plan, but when I showed it to my team, they said this should be called the five-minute retirement plan. It's very simple and it can clearly help you know how you're doing on your journey towards retirement

[00:27] without multiple spreadsheets or binders full of statements or even weeks of analysis. And you're going to want to watch to the end because I'm going to give you exclusive access to a calculator to help you build your five-minute retirement plan.

[00:42] But first, my name is Kevin Lum. I'm a certified financial planner, and this channel is dedicated to helping a million people retire without worry. Okay, let's not waste any time because this is the five-minute retirement plan.

[00:54] Let's start putting this plan together. Now, before you touch a calculator, you need to ask yourself, what do I want my retirement to feel like? Or what do I want to do in retirement? Do you want to travel?

[01:06] Do you want to spend more time with your grandkids? Maybe you want to start a second act in life and do work you really love doing. Whatever it is, you need to get clear on what you're retiring to.

[01:19] Without a clear purpose, your retirement plan is just a bunch of numbers on a page. And what's really important to understand is that money is just a means to an end. You have to give it a purpose. And so when people come to work with our firm, we always start by asking, what do you want

[01:32] to do with this money? Do you want to die with zero? Do you want to leave a large legacy? Do you want to spend more money early in retirement and then less later on? Like, what do you plan on doing with your money? So the first step to your five minute retirement plan is what do I want to do with this money?

[01:47] Step two, figure out how much it costs you to live. And this shouldn't be the bare minimum to survive. This is the amount that covers the lifestyle you want. Now, there's a couple of ways to get to this number. You can start with what you spend today and then you can subtract work costs commuting costs all the things you have to do because you going into a job contributing to a retirement plan all of those things And then add in new costs travel hobbies healthcare and early retirement That

[02:14] going to give you an estimate of what it's going to cost you to live in retirement. And this number is the foundation for the rest of a retirement plan. Now, as a general rule of thumb, because we're trying to do this quickly. For most people, this number is about 75 to 80% of what you spend

[02:31] today. So if it costs you $10,000 a month to live today, maybe estimate somewhere between $7,500 and $8,000 a month. So first, what does it cost to live? Second, stack up your guaranteed income,

[02:45] social security, pensions, any annuities you might have. This is your predictable income or your predictable paycheck in retirement. Compare that number to the amount of money that it costs you to live. Now what you're going to do is you're going to take your expense number, how much does

[03:00] it cost you to live, and you're going to minus your guaranteed income. If your guaranteed income covers that amount, you know, if you need $5,000 a month to live and you have $5,000 a month in guaranteed income, great. You are on your way to retirement. If you're like most people and those

[03:16] numbers do not add up, right? You need $10,000 a month to live and you only have $5,000 a month coming in, don't panic. It just means you'll need a plan to fill the gap. And this is where your investment portfolio comes into play. This is the money you've saved in your 401k, your IRA,

[03:33] your taxable brokerage account. It's there to fill the gap between guaranteed income and what it costs to live, and also to help you keep up with inflation over time. But the exact number depends on your

[03:45] age, your taxes, your risk tolerance, your portfolio, a bunch of things go into it. But just as a general rule of thumb, let's say between four to 5%. Now what we're going to do using the calculator that I've created, we're going to put all

[03:57] those numbers together and create our five minute retirement plan Now you need to remember the five minute plan isn a full plan It is a starting point but in less than five minutes you going to have an idea of how you doing on your journey towards retirement then how much you spend what income you can count on

[04:15] and what investments you're going to need to retire. And from here, you can decide, am I in good shape? Am I close to retirement? And if the answer is yes, then you probably want to either hire a financial planner or get some software to help you really finalize the plan.

[04:29] And if not, we're going to give you a short action plan to help get you on track. Now let's look at the calculator. And at the end of this video, I'm going to give you access to the same calculator so you can put your numbers in and figure out how you're doing on your journey towards retirement.

[04:42] Okay, so here is our five-minute retirement calculator. So you're going to come in here, put your age. Let's say this person is age 55. They want to retire at age 62. The retirement expenses, they assume it's going to cost them about $75,000 a year to live.

[04:57] You can either enter your monthly number and it'll calculate an annual number, or you can just enter an annual number. I'm going to put $75,000. Then the next question is, how much inflation-protected income do you have coming in? For most people, this is going to be Social Security, but it could also be a tips ladder or a pension with an inflation rider.

[05:14] So this person has $36,000 a year in Social Security income coming in. And then the next question is, do you have any guaranteed income outside, say, Social Security that doesn't have an inflation rider? And what we're going to do is going to discount this number a bit. Now, this is not a fancy

[05:29] retirement calculator, so we can't exactly get this right, but we're going to discount the non-inflation protected amount just a bit in our calculations. So in this case, they have an annuity,

[05:41] an income annuity that's going to pay out $12,000 a year. And then they have about $400,000 in investable assets, and they're currently saving $500 a month. They're close, but they're going

[05:53] to need some additional savings to make this plan work. So let's look at the numbers. So they need $75,000 a year to live, and they have about $45,000 in guaranteed income coming in when they retire including reducing that non protected amount by a bit So they have about a gap to make their plan work meaning they going to need to save about using the 4

[06:18] rule. Now the 4% rule is very conservative. I've done other videos basically showing that most people who use the 4% rule will have as much money when at the end of their retirement plan as they do at the beginning. But part of the reason I went a bit more conservative is because

[06:32] there are a lot of assumptions that go into that. And this is a very basic plan. This is not take into account taxes or long-term care or things like that. So I just went a bit more conservative. So in this plan, this person needs about $750,000 to close that income gap. Now, based upon what

[06:50] they're saving currently, they should have about $694,000, almost $700,000 in savings at their retirement, meaning they're about $60,000 short of where they need to be. That's pretty close.

[07:03] So what do they need to do to get back on track? Well, they need to save about $569 a month to be able to do that. In addition to the $500, they're already saving. So we're going to go $169. So they need to save about $12,000 a year. And now their plan, I think, let's see, should just be about

[07:20] ready. There we go. Now the plan works. Now the five-minute plan is not a full retirement plan. It's a starting point. But in less than five minutes, you know what your retirement might look like, how much you'll spend, what income you can count on, and what your investments need to be.

[07:37] From here, you can decide, am I close? Am I getting close? And if you are, you might want to use retirement planning software or hire a financial planner. And if you're not close, hopefully now you'll have a good idea of how much money you need to save to help get you back on track.

[07:52] But like I said, this is not meant to be a full retirement plan because a great retirement plan doesn't just get you into retirement. It helps you enjoy that retirement without worry. Now, I put together a playlist with a bunch of things to consider as you're thinking about retiring and

[08:07] as you're asking the question, can I retire? And so you can watch that playlist now.