A 60-YEAR-OLD couple has shared their retirement black hole despite having $1,000,000 in the bank.
Luckily, a financial pro was able to show them how two more years of work and the “retirement smile” would give their savings a huge boost.
James Conole is a Certified Financial Planner and the founder of retirement-planning tool, Root.
In a recent YouTube video, he took a look at a 60-year-old couple’s financial outlook.
John and Jane were hoping to retire, and they had $1,000,000 in their portfolio, plus a $750,000 home.
They wanted to live off $8,000 a month and would be able to tap into both their retirement investments and Social Security to make this happen.
But when James plotted out the numbers, he realized this $1,000,000 was not going to be enough to sustain their lifestyle over the years.
Luckily, the couple had a plan B.
They were open to working full-time for two more years, and then part-time until they were 70, earning approximately an extra $20,000 each per year.
“Now there’s a night and day difference,” said James, as he plugged in the numbers.
He also explained a concept that would likely make John and Jane better off down the road, known as the “retirement spending smile.”
‘RETIREMENT SPENDING SMILE’
The rule says: “You spend more upfront, and that starts to dip as you get a little bit older and travel less, and you’re less active,” according to James.
Often, spending increases from year to year are lower than the rate of inflation.
When factoring in the additional years of work and the retirement spending smile, James told the couple they could also likely afford a $30,000 travel budget to take their dream trips.
And their investment portfolio would likely outlast both of them living until 90 and spending around $8,000 a month.
This change in plans would create an extra $1.7 million in funds.
John and Jane had a solid retirement plan with the help of Root, but not everyone is in such a good spot.
Many Americans find themselves facing a financial black hole as they approach their golden years.
One woman called into The Dave Ramsey Show to reveal she was “so panicked” due to her low income.
And Dave gave another caller a very clear strategy to follow as he was 48 with no retirement plan.