How Much Do I Need To Spend $25k/Month In Retirement?

I could find a way to spend it if you really said I was in a spot to do it , but I really would rather probably retire earlier . Maybe I don't spend $25,000 a month , maybe it's $6,000 or $7,000 or $8,000 , $10,000 a month , but it means I don't have to work 10 more years . Yeah , that's more attractive to me . Now that's where most of you fall .

So why am I making this video , this podcast ? Well , because there's a large amount of people that listen to this show because of you guys , and I will often get asked a question and then sometimes there will be comments after I asked this question .

And that's what happened in this instance , where I had put out a video on YouTube and this was a few months ago now saying how much do I need to spend 12,000 a month in retirement , and some of the comments look like this . Now I'm going to explain it .

If you're just listening , per usual on the podcast app , all good , and if you want to watch this on YouTube , you can see what I'm talking about . So this comment here 12,000 a month in California , that just covers your mortgage . Other comments here hey , this was great . I'm 44 , withdrawn 5 million invested in just some Vanguard stuff .

Can I withdraw 3% per year ? Just so many good . Different comments Some people here 12K a month WTF . I'm not going to say what that's for and you can see a comment followed up saying that's not outlandish . Another person no , it's not .

Other people go , I agree , a little low , right For me 15,000 a month minimum just to get in the parking lot of the ball field . 25,000 a month is more like it for a smooth retirement . So you can see I'm very late on this comment , but I replied five months ago . I said , hey , you'll like the video I've coming out .

In the next few weeks I ended up releasing a different style video . This one is directly in relation to that comment . So this is you're wondering how much money do you need to be able to spend 25,000 a month in retirement ? That's what this case study , this podcast , is all about . Now , if you don't already know , my name is Ari Taublieb .

I am the host of this podcast , the Early Retirement Podcast . I am the vice president at Root Financial Partners and I'm a certified financial planner wearing this dopey shirt . How many of you guys know this shirt Now ? If you're listening right now , I know you can't see it . I'm wearing my cauliflower shirt .

For those of you new to the show , you will be so confused right now . I can only imagine what you're thinking . For those of you that have been listening for a few years saying hey , ari , yep , love the cauliflower , I'm going to explain what the heck this is . This is an awesome gift given to me .

My favorite gift of all time , my second favorite gift of all time is right here . I'll highlight it in light of kindness today . This you can see here if the camera zooms in . It says anti-cookie cutter jar , love the pot . Why ? Because I don't believe in just . Hey , what's your risk tolerance on a scale of 1 to 10 ?

It's like okay , you're a 2 and you're an 8 . Great , go retire . Well , guess what happens when I ask that couple their risk tolerance when markets are down ? Very different answer . So I want to give you an example with this whole cauliflower thing , which is most of you if you've saved and invested well , you're going to pay a lot in taxes .

You could say , hey , I'm not going to worry about that taxes stuff until later . I just paid taxes for most of my career . Maybe I retire in the next five years and I could spend way less , but who cares , I already paid so much . I'll deal with it when I'm later . Maybe I'll let my kids let the leeches deal with it .

When I'm later , maybe I'll let my kids let the leeches deal with it . Just kidding , some of you guys don't like when I say leeches , but anyway . So the point here is I want you to avoid only having to eat cauliflower in the future . Some of you are like I love cauliflower . This is a horrible example . Relax , all right .

Some of you are like , oh no , I get it If I eat a little bit of cauliflower , maybe a little bit each year , pay a little bit in taxes , fill up a certain bracket each year . That means in the future I'm not going to only have to eat cauliflower , I'm going to get to eat whatever I want .

Now I don't want you to convert so much that there's no cauliflower in the future . I want you to make sure you're optimizing your taxes . It's dopey , I know it's dopey , but I try to do things in a certain way so that you can remember it . So let's look at this example Now . I'm going to explain it once again , but some of the concepts .

If you want to see what I'm talking about , you're going to want to be on YouTube . Now I am , of course , a podcast listener myself . I listen to a few podcasts where they say you know , you should really go over here to listen to this and go over here . I'm like no , I get that , but I like listening here . It's easier . Youtube has ads .

It's more annoying , I get it . I want to make sure I'm helping all of you to the nth degree . I personally pay for YouTube premium . So if that's something that you guys want to do , I get no commission by saying that , but just something to keep in the back of your head . I personally , youtube is my new cable , so I YouTube everything .

Now , if you YouTube everything , let me know in the comments . Just kidding . Okay , you can if you want to . So this is a case study that you're looking at Now . This couple you can see here . They are 59 , and they have $3.8 million . Now their graph doesn't look so good . It looks like it's coming down .

If you're looking on the screen here , it's showing that if they were to spend $25,000 a month , every single month , from right now , 61 when they retire , 61 and 58 . So if they both retire in a year , they spend $25,000 a month , every single month , for the rest of their life they will pass away right at 91 .

Now let's assume that investments don't do well , just hypothetical . Or they say you know what we want ? More of a balanced approach . Well , now it's not 91 , when they run out of money , it's 76 . So why am I showing you this at all ? The reason I'm showing you this is if you want to know how much you can spend .

It's not the graph I'm playing around with right now . This is the graph that looks aesthetically pleasing . What you want to think about if you want to retire early and spend $15,000 or $20,000 or $25,000 a month is can my portfolio support it ? So let's do some really basic math . I'm pulling out my calculator right now .

Let's assume you want to spend $25,000 a month . Great , well , that's $300,000 a year . That would allow you to live really comfortably . I'll stop and tell a client you're not going to spend that and they're like what are you crazy ? Like you don't sleep next to me , like how could you know what I want to spend ?

I'm like you're probably going to spend more during the first few years of retirement , then less , then maybe more at the end . They're like what's your point ?

I said , well , if you have a dynamic withdrawal strategy meaning spend more at the beginning than a little less , maybe help a kid with a wedding then all of a sudden you're like hey , I'm going to gift this property whatever it is . Now you're in a spot that your plan is going to look very different .

So this concept that you're just going to spend 300,000 every single year for the rest of retirement , it's unrealistic . So what you're going to see me put on now , if you're watching on YouTube and I'm going to explain it , it's called the retirement smile . This is not done by me , I didn't invent this .

But if you think about a smile , you have what are called your go-go years . Your go-go years is you enjoying retirement . I want you to be spending it . Then you have your slow-go years . You're still spending , but if you're in your 70s or 80s , you're probably not going to be traveling to the same degree .

Then you have your no-go years , where you still want to meet your needs , but you're probably just naturally spending less . So let's assume I just turn that on . Well , what does an average look like ? It's not perfect , because not everyone is going to be an average spender in retirement , but watch what I just did . So here's a couple with $3.8 million .

They were on track for zero . Now they're on track for 5.6 million at 93 . Well , what happened there ? What happened is I'm asking my client to be dynamic and I'm saying when markets do well , I want you to spend even more than 300,000 . And when markets do poorly , I'm going to ask you to spend a lot less because I want you to optimize your retirement .

So I want you to think about it like being a retirement boxer . I put this on the last podcast episode , but sometimes you might need to hear it again to fully sink in . Let's assume you're a business owner . Okay , market's doing well , business is doing well . You might go hire employees . You might say I'm going to buy a new piece of equipment .

You might do a lot of different things , but let's assume your business does not do well . Are you still going to go buy equipment and hire 20 employees ? No , that doesn't make any sense . So what you're going to do instead is spend a little bit less . I want you to think about your business as your portfolio .

Your portfolio is going to have times when it does really well , like this year , markets are doing well . Then there's going to be other years where markets don't do as well and I'm going to ask you to spend a little bit less not spend $300,000 , maybe spend $200,000 or $250,000 .

Because if we do another tax strategy at the same time , it might yield way more money , and that's what can lead to these massive differences you're seeing on my screen and that I'm explaining for you .

So I know you guys want a nice cookie cutter answer of hey , if I want to spend $300,000 a year and I'm looking at a 4% withdrawal rate , how much money do I need ? Well , 300,000 divided by 4% , seven and a half million dollars .

But I'm showing you a couple that doesn't even have $4 million that I would say , if they wanted to spend 25,000 a month , they're in a spot to make it happen , not saying they get to go , do it , because this takes a lot of work and we need to make sure their withdrawal rate is sustainable , which is what I care about .

And if I look at the withdrawal rate here . Look at this 11% , 9% , 7% , 6% . That's not sustainable . They will run out of money . So even though their graph might look good here , this doesn't tell the whole story .

So let's assume this couple says you know what , 25,000 months , good , but to be honest , 15,000 a month , like 180,000 a year , that's more than enough , like I could do everything I want to do .

Well , they might see they're on track for an absurd amount of money 20 , $30 million and then they go to their withdrawal rate and they look at it and they go , okay , what does it say ? Well , it shows it's starting at 8% , which is very high , and then 6% , and then 5 , then 4 , and then 3 , and now it's in the 2s .

Now , here they are in their 70s with a 1% withdrawal rate . Do you know what happens when I have a client with 1% ? I yell at them . I'm just kidding . I don't yell , but I say , hey , you're not spending enough . I cannot imagine you're enjoying your retirement .

Or if you are and you're spending what you want to spend , we better be doing some charitable giving . Or we better do another tax strategy , because if we don't , do you know how much money you're going to have and when those required distributions are going to come whack you in the face . So the point here is any type of planning .

If we're looking at tax strategies , for example , let's look at this couple and I'm going to explain it as well . If this couple is optimal with their tax strategy , they will generate 1.2 million more dollars . At the end , they will have saved two and a half million dollars in taxes and they will have ultimately optimized by about 4 million total tax dollars .

So the point as to why I show someone this is because some people get so invested in the taxes they go this is awesome . I mean , look at this a million more dollars in taxes . Because I'm just smart with my tax planning . Why would I not do that ?

And I'll say , well , you could do that , or you could spend more and enjoy your life more , or maybe you could do part-time income , or maybe you could determine and it's gonna be very difficult for a lot of you and I know that to say , hey , maybe I get more massages in retirement or I go to a different physical therapist that is going to cost more out of

pocket , but I'm in a spot to do so . So if you want to start dreaming and understanding what position you're in . Of course , you can play around with this tool , but ultimately , what I want you to know is this is not a cookie cutter thing . Okay , let's assume you want to spend $25,000 a month and you have a pension that covers $10,000 .

Well , you don't need $25,000 to be generated from some portfolio , because you already have 10 coming from a pension . You now need 15 to be generated from your investments . Let's assume that you have a home and you're going to downsize and it's going to generate $2 million more . Well , great , I mean , that's available for investment purposes .

Let's assume you surrender an annuity . Let's assume you don't buy long-term care . I could do this on and on and on . What I want you to really do , and the purpose of this is most of you don't want to spend $25,000 a month . I recognize that Now some of you are going to be like no , I do , I just don't have the financial means to do it .

I get that I don't have the financial means to do anything like this , but I want you to know if you're wondering hey , could I ever possibly truly spend $25,000 a month ? Just watch this example right here . Let's assume that , just for example's sake . Okay , this couple's like look , I would love to spend $30,000 a month . Okay , just hypothetical .

Okay , $30,000 a month , that's $360,000 a year . Okay , that's a lot of money . Now I have some clients that live in Malibu . I call them characters , okay , because they're a little odd . You know Nice people , okay . But some of my character clients are like I want to spend $30,000 a month , every month . No matter what you say .

I'm like yeah , that's just not realistic , like you might have to work way longer . And they're like all right , I don't care , I like what I do . So look at this graph for me and I'll explain it as well . Here's a couple same couple 59 , $3.8 million . They're on track to run out of money at 77 if they want to spend $30,000 a year .

But what if they're like you know , I kind of like what I do and I , what if I just did what I'm doing now ? I get I'd have to work longer . But what if we worked a few more years ? Would that change things ? And they're able to run the projection and go wait a second , wait a second .

So if I work three more years excuse me , four more years each , we're on track for like $9 million . Well , that's if that means we could spend $30,000 a year , every single year , that'd be really attractive to us . They might go know , thirty thousand is a lot , but I think it's just too much . Maybe twenty eight thousand a month is kind of our sweet spot .

And then they rerun the numbers and go well , you know , that's awesome , but I don't need thirteen million dollars . Maybe we retire instead , you know , just a little bit earlier and they're able to play around with this tool in a really cool way , so that they can determine where's their sweet spot , and that's what I want you to really do here .

They are spending $28,000 a month . So $28,000 a month times 12 . Guys , here's $336,000 a year . Now you can see they're still running out of money at 90 , but they'll go . Oh , so what if I work one more year from there ? The reason that one more year helps so much is it's one less year that you're pulling from the portfolio .

It's one less year of saving to your 401k and adding money to your brokerage account . So , yes , it's powerful to work one more year , and the biggest mistake I see I'm begging you not to do this is to go . Oh , I'm going to wait . And the biggest mistake I see I'm begging you not to do this is to go . Oh , I'm going to wait . Oh , one more bonus .

Oh , six more months . How much longer are you going to tell your spouse that ? Because most people come to me going oh , yeah , that's me . Yep , I just keep pushing it back and I don't like to , but I just don't know . You know what if markets go down , or what if Social Security gets reduced , or what if inflation ? And I'll say well , test for that .

Like , still run the numbers . Like , only retire when you fully are confident , but don't cheat yourself and just go . You know I'm 55 and my neighbor is not close to retiring , so I don't think I'm going to be able to make it happen . Don't do that . Like , really understand the position you're in .

Work with an advisor I don't care if it's me , I don't care if it's another advisor Just understand the position you're in . Something like 0.00012% of people that watch our YouTube videos work with me . So I recognize that most of you watching this video are not gonna work with me . Maybe you're gonna use the tool that I'm showing you right now .

Maybe you're gonna keep listening to the podcast and go hey , that's good enough for me . I get my education here . I don't know what you're gonna do , but I wanna help you , regardless of where you're at in your journey . So if you don't have three , 4 million bucks , you're going to one day and you're going to want to know how much income that could support .

Use a tool like this and understand how you can start optimizing and going . Okay , this makes sense , and oh , maybe I switch this trade off and really get a good sense . Don't over optimize , which I see people do . What if markets drop by 90% and social security is never there ? It's ? Hey , let's not be unrealistic with this .

Let's just be conservative as we look at planning . So hopefully this video case study podcast was helpful and if so , please subscribe , like this video and share it . If you want access to the tool I'm showing right now or you want to work with my team , you can see in the description of this video and podcast where you can go to do just that .

Thanks , guys . Thank you for listening to another episode of the Early Retirement Show . If you have a question that you want answered in a future episode , you can always go to my website , earlyretirementpodcastcom . That's earlyretirementpodcastcom , and you can go ahead and submit a question that I'll look to answer in a future episode . Thank you all for listening .

Please do rate it , review it and share it with someone who you think would benefit from this information . If there's anyone out there that you know , I certainly appreciate it and I will see you all each week . Hey guys , it's me again . Please be smart about this . Nothing in this podcast should be construed as financial , tax or legal advice .

Consult with your tax preparer or financial advisor before taking any action . This podcast is for informational purposes only .