I see people posting up these videos like "I'm 58 and have 1.4 million dollars, can I retire?" on youtube. The guy in the specific one I'm thinking of is affiliated with Oak Harvest Financial Group, but there are several different ones out there.

Example:

https://www.youtube.com/watch?v=yVY_9j_ovHE

Anyhow, these guys take the client info and plug it in to a program and it spits out several dozen potential outcomes based on potential changes in market direction, and in this case he tells you that yes, in 90-something percent of cases this guy CAN retire now, OR no he can't right this minute, but he can IF he does this and this and this. You get the idea.

My question is whether these programs are at all accurate, or whether they are simply a dolled up projection of the guesses made by the companies represented in these videos? I have some investments and would love to know when I can look to retire, and what steps if any need to be made to get to my final destination (retirement wise, that is). If something like this would work, I'd love to try it. If not, I still would love to find someone to trust locally that isn't a fly by night sheister. Input from the folks who do this for a living, or who've had this service done for them, would be much appreciated.

There is no substitute for learning on your own and meeting with a financial advisor. No program can tell you what to do. I have not seen the videos you describe. It depends on how much you need to live, how long you will live, what you expect from social security and taxes.
The best financial advisors have nothing to sell but their time. It is worth it.

Kinda what I was expecting to hear, but for someone who knows nothing of the financial market, investments, and the rest, it is intimidating.

I've had some investments with Edward Jones, for example, but often those guys seem to be learning as we go...

How do I go about finding an advisor that is truly good (great) versus one that's just playing along like everyone else? I don't feel comfortable asking my banker friends, because they just advise me to talk to their affiliates, and that seems maybe less beneficial to me and more to them?

There is no substitute for learning yourself.
Most of those folks are selling snake oil in my opinion.

I’d say specifics matters. Just for starters, it’s best to go into retirement with lower costs, like no home, vehicle or other loans. An exception could be, you locked in cheap rates that later rose.


Think of some health scares, without a level of coverage an event could easily decimate a nest egg.

There’s a distant couple, zero clue about money, always spending more than they make. Their lifestyle is obvious & ridiculous. As an example, with the upcoming trip to Disney Word an average visit isn’t enough, they have multiple reservations for dinner with the characters. The whole thing is $7-8k worth.

They just started seeing a ‘financial coach’ to make ‘sense’ of it all.

It's just math. As far as math goes, the models are reliable.

The issue is that the variables you plug into the formulas, and the underlying assumptions you have to make to get to a variable, are just wild ass guesses.

In that respect, none of the models are reliable. At all. Past results do not guarantee future outcomes. Even the most basic assumptions are thrown out the window when something truly unexpected happens (car accident, pandemic, divorce, accidental kid, etc).

If you surround a model with enough conditions, you can predict anything accurately... ("assuming that rate of return is...and that you live until...and that your healthcare costs only increase by...and inflation is less than...and you don't get divorced...or an earthquake doesn't take out your house...or they don't tax your withdrawals...").

I'm not a financial advisor, but if I were, my advice would be everything in moderation, never keep all your eggs in one basket, and to make sure that you got a couple sources of income in case the end of the road actually becomes a long haul. And don't have kids that suck or let them marry assholes.

I've watched a lot of retirement finance videos on youtube. I have an MBA and I'm a numbers geek, myself. As a matter of fact, I'm in the middle of creating my own Excel spreadsheet in order to optimize taxes by figuring out how much to convert each year from my IRA to a Roth IRA.

Obviously, the video you linked to along with with others are using it to promote their services. I think of all the channels, the best number cruncher that is practical and implementable is Safeguard Wealth Management. I can't find a video at the moment where he shows a similar calculation but he does have them. If I was going to use someone's help, I would go to this company.

But to answer your question, the guy in your video and most others like it, uses what is called a Monte Carlo simulation.

There are two kinds of projections - static (which is what I'm doing with my Excel sheet) and Monte Carlo simulation.

A static projection is just that - it projects your assumptions as stated straight through. For example, let's say you assume a portfolio growth rate of 7%. If you further assume your expenses each year is 5% of your portfolio, then you can simply project your portfolio to grow at a net 2% each year. A Monte Carlo takes your basic assumptions like portfolio growth, inflation, etc and makes further assumptions about their variability over the years.

However, we know (if you're invested in stocks even just partially), your growth rate won't be a dependable consistent 7%. Some years it may be higher or lower or even be negative. So you can actually take the history of the stock market and characterize how much higher or lower than 7% will your growth rate be and the probability of each actual growth rate will occur.

After you set up your assumptions along with the probability of variation for each assumption, then the program simulates what the assumptions could actually be in one scenario. Then the result is whether your money will outlive you or the other way around. For this one scenario, each variable assumption changed for each year of projection.

The program then repeats the projection a number of times. Each time the result is whether your money lasts and my how much. If it runs 1,000 times and 950 of those scenarios show you have money left at the end of the projection, then your plan has 95% probability of succeeding. They usually also show the average "net worth" for each of those years and what the median net worth is also. The median net worth would be what was the net worth showing for the scenario exactly in the middle of the scenarios.

Mathematically they work and they are better than "static" projections. I'm working on a static projection because the calculations are complicated enough as it is plus you need a program to actually run the random variability of the projections and to tally the results. Besides, my projection is more for near term calculations but I still need to project it out through end of life to guide my decisions. The idea is to run the calculations with the assumptions randomly changing within their parameters so many times and the most likely outcome will appear most often.

In short, yes, those simulations are valid assuming the variability estimates are realistic (such as stock market growth rate variability.

I don't know what help you may think you need but I'd like to share what I've learned. You actually need at least two kinds of retirement planning that I've realized. I'm sure there are others like elder living care planning.

But, definitely, the first one is retirement income stream planning if you're planning on your assets such as your 401k to finance your retirement.

The second is retirement tax planning which is what I'm working on now for myself. I'm sure some companies may say they can do both for you but I think the skills for "making your money grow" is not the same as teh skills for "minimizing your taxes." Maybe if the company was big enough, then they'd have a separate department and different people. This retirement tax planning is as important because you want to minimize taxes. But if you have a sizable tax deferred account like an IRA, those required minimum distributions that begin at 72 will push you into higher tax brackets and higher medicare premium surcharges.

As a neutral third party, if i was going to recommend someone for myself or for someone else, I would recommend the guy on my link for the tax retirement planning part. For the first part which is getting help to make sure your assets continue to support you in retirement by growing, then when you start interviewing financial advisors, I'm sure you'll come across those simulated projections soon enough. I bet there's a company selling that software to these different financial advisors.

My experience is that none of these advisors do a great job because they have preconceptions and what I call a math bias.

For most people, retirement is an active and potentially expensive time for a few years, but then expenses reduce as they travel less and simplify more. Assuming you arrive debt free, you can live on very little $. Assuming you are willing to downsize your home, vehicles, & luxuries, you don't need much income.

The advisors assume you will live a long time and keep spending as you do before retirement. They also calculate cold math rather than consider real life. e.g. when to start taking social security.

Dave Ramsey has solid advice. Live modestly, save like crazy, invest in well diversified LOW COST funds. Fees kill your returns. Not saving, and not diversifying are bad.

The calculators are imho tools to sell you their product.

If you put 15% of your gross income into a diversified portfolio, you'll probably be in very good shape. Fund your retirement before saving for kids' college. Do as much ROTH as you can. Take full advantage of any employer 401k match. Aggressively get debt free.

All so complex. Simply, save your money.

What ReyHRH said above about the Monte Carlo simulations. I know from working with the Fidelity software that it will run it at rates based on "Standard Deviations" from historical norms. So for example , it includes the market average and 1 or 2 Standard Deviations below that. So it's basically backed up by Statistical data and not just a WAG. Now the market can always perform below that but the assumptions are based on currently valid data.

quote:

Originally posted by slabsides45:
Kinda what I was expecting to hear, but for someone who knows nothing of the financial market, investments, and the rest, it is intimidating.

I've had some investments with Edward Jones, for example, but often those guys seem to be learning as we go...

How do I go about finding an advisor that is truly good (great) versus one that's just playing along like everyone else? I don't feel comfortable asking my banker friends, because they just advise me to talk to their affiliates, and that seems maybe less beneficial to me and more to them?

I won't hire anyone who's an employee as my Financial Advisor as if he knew how to create wealth, he wouldn't be an employee, he'd be an owner. I've told a couple of people that same thing when they wanted to be my Financial Advisor. I also ask them if they're millionaires, another indication that they know what they're doing although it's not altogether dependable as a gauge of competence.

Finding the correct one involves some luck, either in knowing someone who knows one or in stumbling onto one yourself, which is how I found mine.

I started him off small with some money to invest and waited a year to see how he did. He did great, so I gave him more and ultimately gave him half my money to invest. I handle the other half myself.

He does better than me, but then he should because that's what he does for a living. I've been working with him for around 25 years to this point.

He has a unique approach to the whole thing. He doesn't advertise at all and he doesn't take just anyone who comes along as a client. He wants someone who fits with his company and his philosophy.

Here's his mission statement:

Who We Serve
Goals can change with life circumstances – we are here to assist you in making smart financial decisions. What makes us different is our commitment to our family of clients. Acting as diligent risk managers and thoughtful stewards of your wealth, we choose to work with a select number of families. This enables us to focus more fully on you – your life, family, goals, legacy, and any other significant issues strategically impacting your financial decisions.
We look forward to working with you.

See if you can find someone like that in your own area.

quote:

Originally posted by Flash-LB:

quote:

Originally posted by slabsides45:
Kinda what I was expecting to hear, but for someone who knows nothing of the financial market, investments, and the rest, it is intimidating.

I've had some investments with Edward Jones, for example, but often those guys seem to be learning as we go...

How do I go about finding an advisor that is truly good (great) versus one that's just playing along like everyone else? I don't feel comfortable asking my banker friends, because they just advise me to talk to their affiliates, and that seems maybe less beneficial to me and more to them?

I won't hire anyone who's an employee as my Financial Advisor as if he knew how to create wealth, he wouldn't be an employee, he'd be an owner. I've told a couple of people that same thing when they wanted to be my Financial Advisor. I also ask them if they're millionaires, another indication that they know what they're doing although it's not altogether dependable as a gauge of competence.

Finding the correct one involves some luck, either in knowing someone who knows one or in stumbling onto one yourself, which is how I found mine.

I started him off small with some money to invest and waited a year to see how he did. He did great, so I gave him more and ultimately gave him half my money to invest. I handle the other half myself.

He does better than me, but then he should because that's what he does for a living.

Let me give you the gun version of what you're asking for. I want to be able to protect myself so I want to buy a gun and a book on self defense. I don't want to go shoot it at the range of take any lessons, I just want to be competent.

I suspect to get the one you describe is going to be one that caters to large accounts. Unless you just luck out through a personal reference you may have a hard time finding that person. Then you would have to pay them.

That's why you need to develop some understanding of the subject yourself, not to become an expert, but so you can have a better understanding of the true expertise of an individual.

I'm now in retirement age myself and never found any of the bank or brokerage referrals to be anything other than salesmen with enough knowledge to sell their own particular product.
The calculators to plan are just fancy spreadsheets with some data attached. They don't account for things like the recent run-up in real prices, not the official 7% inflation they claim.

That's where you have to have a true seat of the pants understanding of the real financial world and commission salesmen aren't going to do that for you.

If I was going to use your approach, I'd go to Fidelity or Vanguard and use their age based planners with low fee mutual funds.

Not a financial advisor, but spent a lot of time on this subject when I was getting ready to retire.

The key is not so much how much you have, but how much you spend. A lot of people don’t have a handle on their spending. If you don’t know how much you’re spending now, it’s going to be tough, if not impossible, to determine if you have enough to retire on.

That being said, here is a link to one of the best financial calculators I know of: https://firecalc.com/

quote:

I've had some investments with Edward Jones, for example, but often those guys seem to be learning as we go...

Run from Edward Jones. They are like sleazy used car salesmen.

quote:

Originally posted by CoolRich59:


The key is not so much how much you have, but how much you spend. A lot of people don’t have a handle on their spending. If you don’t know how much you’re spending now, it’s going to be tough, if not impossible, to determine if you have enough to retire on.

boom. totally agree.

doesn't matter if you have $15M -- if you spend like a drunken sailor -- you'll run out quick (lottery winners who go broke for instance...). and healthcare expenses are a big 'X' factor and hard to calculate for.

and of course -- if you know for certain how long you had left to live -- the equation would be easier.

might die at 75... might live to 98... that's a big variation to account for.

----------------------------------

Regardless of the accuracy of various projection techniques, and in the specific case of "when can I retire?" There is one overwhelming factor that rules, and cannot be ignored. That is, "for how long do you need the money?" If you can divine the day and year of your death, ie. when you will stop drawing down on the money, the whole calculation becomes much simpler. A little morbid, but there it is. The only truly safe way to retire is to have enough invested that you can maintain your desired lifestyle on the earnings. I figure a round $100,000,000,000,000.00 ought to do it, sadly, I don't expect to get to that figure, not to mention that inflation may not make it sufficient after all.

quote:

Originally posted by CoolRich59:
Not a financial advisor, but spent a lot of time on this subject when I was getting ready to retire.

The key is not so much how much you have, but how much you spend. A lot of people don’t have a handle on their spending. If you don’t know how much you’re spending now, it’s going to be tough, if not impossible, to determine if you have enough to retire on.

That being said, here is a link to one of the best financial calculators I know of: https://firecalc.com/

I forgot to mention debt but it another very important consideration.
Be out of any major debt. Mortgage, cars, big boy toys, and especially revolving credit.
If you own your home, have cars that are serviceable for a number of years, are at Medicare age so you can limit medical and medical insurance expenses,that's a huge part of the number.

The other thing that can have a major impact is inflation. Sure, over 50 years it has a number, based on history. But what if you in one of those 15-20 year periods where things don't follow the charts? Also, those numbers they show you are the government numbers based on who know what. they say it was just over 7% last year but gas has almost doubled in 12 months, food prices and home prices are way beyond that and they are a big part of your living expenses.

Ha! Republicans want to steal enough for themselves and maybe a little for their friends. Not good. Democrats want to steal enough for their voters to elect them. Worse.

quote:

As a matter of fact, I'm in the middle of creating my own Excel spreadsheet in order to optimize taxes by figuring out how much to convert each year from my IRA to a Roth IRA.

I'd really like to hear more about this as I plan to do the same thing, but have no idea of the optimum amount each year.

From personal experience I know that the guys stating its not what you have its what you spend are on the correct track. I have a close older relative worth millions. Stocks, real estate, cash, the whole package. They can live off rental income and SS and a tiny pension. Probably 5k a month in income. Have money left over every month. I always joke to my friends that if my wife got hit by a city bus tomorrow I could retire the next day. It's a joke but it's also entirely true. I could downsize and live on peanuts and be completely content. My wife likes new pillows, new furniture, stuff, stuff, stuff. I budget for that which is the only reason its not a problem. Spending can be the devil.

Its all (mostly) about the spending baby. Don't go into retirement with debt either, that's huge.

Learn the numbers yourself and you can do those calculations easier and much more trustworthy.