Untucked Episode 88 $5M in retirement
Meghan Tait: [00:00:00] Uh, so for Coach’s Corner, we’re gonna talk about an article from the Wall Street Journal called, Here’s What a 5 Million Retirement Looks Like in America. This was shared, uh, by a client of ours. Um, it’s a profile of four couples or, or people, individual people in different parts of the country with roughly 5 million in retirement savings each, and it just, their income expenses and gives us a sense of their retirement lifestyles.
Was there anything about any of these people specifically or the article more generally that stood out to you guys? I think the
Jeff Mastronardo: majority of people that we meet that are millionaires or multi millionaires, it’s like across the board, all of them are like, I never could have imagined I would have amassed this much wealth.
Yes. Like all of them say that. And then they have trouble spending that wealth because they’ve just saved and saved and saved. Um, [00:01:00] if you can accumulate 5 million bucks, And I’m thinking of like a normal suburbia lifestyle, I think you are, you, you’re well set. Like I don’t think you have much to worry.
Assuming it’s like, you have a house, maybe a small condo at the beach, Um, you can probably live a very, very comfortable lifestyle. Assuming that. Your lifestyle is fairly normal. You don’t have these high aspirations of like leaving each kid 3 million bucks or anything like that. Just taking care of you and your partner for the rest of your lives.
I think 5 million is absolutely
Meghan Tait: plenty. And you’re saying that for like Someone retiring today,
Jeff Mastronardo: right? Someone retiring today, right? They want to drive BMWs. They want to go to the beach. They want to travel. They want to just live an unbudgeted lifestyle. I don’t see how 5 million can’t do that for them.
Mike Traynor: I don’t know if I agree.
I think a couple things. 5 million is very different if it’s in your 401k and IRA accounts. [00:02:00] And 0 outside of that, or if the 5, 000, 000 is really all in after tax money because let’s say you sold a business or you just saved it, it’s a very, very different number because of the tax piece of it. But also 5, 000, 000 can, can safely, roughly generate 200, 000 a year in cash flow without having to worry too much about running out of money.
So even if that was give
Jeff Mastronardo: or take, even if that was all IRA, you net one 50 at the low end.
Mike Traynor: Yeah. So if you’re taking like expensive vacations, driving BMWs and like in the current world, the cost of life has skyrocketed. I would worry that maybe it’s not enough. It’s enough for, for someone who’s lived a frugal life and is going to continue to do that for the most part and maybe not be called upon to help a kid or something in a big way financially.
I, I don’t, [00:03:00] five million isn’t what it used to be for sure. Like, and I think it’s, the answer is it just depends. It just depends.
Jeff Mastronardo: I mean, I feel like 80, 90% of the people that have that, that are the people that you and I are describing, I don’t think it depends. 4% gives you 200, 000, net 150, 000 if it’s all IRA plus probably another 30, 000 to 50, 000 of social security is 200, 000 a year.
Easily. No mortgage. Yeah, cars, going out to eat, travel, but you don’t have to keep that 5, 000, 000 until you’re
Mike Traynor: 90. Yeah, yeah, yeah. But you’re saying no mortgage and you’re saying, you know, lots of… Previous expenses are off the books now. That’s the huge difference. Yeah, I
Jeff Mastronardo: mean, well, obviously every person every couple every individuals Circumstances completely different.
I’m just talking about like the average retired client that we see live on about 150 to 250 a [00:04:00] year Depending. Most of their homes are paid off. They want to drive nice cars. They want to travel. Like a 20, 000 to 40, 000 travel budget per year. Dude, I think, like, unless they wanted to leave the 5 million to their kids.
You take your 4% and you spend it down over the next 30, 40 years. And yeah, you can live a pretty rockstar lifestyle. Even if you had a mortgage, I think like I’m accounting was spending down the 5 million, which by the way, none of them would want to do. Right. Right. None of them will be comfortable with it.
Right. But in reality you’re either going to do that or you’re 5 million bucks. Who the hell wants that?
Meghan Tait: Yeah. And I think the purpose of this article. Um, and it’s probably a combination of what you’re both saying, is that like because they have five million, their lifestyle has not dramatically changed than what it was to accumulate five million, so they haven’t like gone, okay, now I have this amount [00:05:00] of money.
I’m going to take the. Super expensive vacation. I’m gonna buy the newest nicest cars. I’m gonna buy the second home, right? They’ve maintained Most of what at least based on the article that you know the information they shared most of the lifestyle decisions and choices that got them to this point, but they’re also like I mean, some of them have pensions, right?
Some of, like, there’s social security. One of these people is still working. So there’s other factors beyond the retirement that’s like, is five million enough for these people? Probably, right? Assuming nothing big or different than what we shared, but I think it was more a look into like, And you said this yesterday, Jeff, it used to kind of be like the million bucks, right?
it felt like a million bucks was a mark in which if you got there you were set you were set and We know that that’s not the case and is five million the new bogey Maybe maybe not for these [00:06:00] people it’s sufficient. But again, there’s pieces of their plans pensions specifically that Aren’t going to exist for retirees beyond this day
Mike Traynor: and age.
Yeah. And I think that’s, yeah, I’m glad you brought that up because that’s rare. Um, most people have to figure whatever I save plus social security is it. There’s no other source of income because the value of a pension is enormous. We see it with our clients that have it. So maybe that’s where I’m kind of leaning towards.
It needs to be ratcheted higher. And five seems like your points, right? Jeff, like for those, so for those who lived reasonably frugally their entire lives while they saved, invested and accumulated the five, they’re likely not going to change their spending habits very dramatically. Because that’s just who they are.
You don’t turn, you don’t go from a frugal saver to a buying three vacation homes and traveling, you know, six months out of the year and [00:07:00] ripping through five million bucks in no time. That just doesn’t happen. If
Jeff Mastronardo: you bust your ass with a savings platform. To accumulate five million dollars, you’re not gonna have any idea how to spend five million dollars.
Yeah, I agree Yeah I mean it’s just because when you think about like I think about my personal life and what we make and then where it all goes And I’m like, Oh my God, what’s going to have, what’s going to happen when I don’t really care to accumulate non IRA money. I don’t have to put money in a 401k.
I don’t have to fund 529 plans. I don’t have to pay for life insurance. There’s a lot of categories of savings that happen. And you get accustomed to like, okay, well I make 150. But you really, you really don’t, you’re putting 20 to 401k, you’re sending kids to college, like when that all gets behind you, 150 goes a lot further when you’re retired.
Mike Traynor: Yeah, that’s, that’s a good point. Um, most definitely.
Meghan Tait: I, I mean, I thought it was interesting, but you know, the different parts of the country, like The [00:08:00] couple living in Bozeman, Montana, or the couple, which is, I know it’s Montana, but it’s a very popular kind of, I’ll say, touristy destination, so cost of living there is going to be more expensive.
Irvine, California, the cost of living there is going to be more expensive, but then you have a couple in Cary, North Carolina. We spend 130 grand a year, right? Like there’s influences beyond even just our intentional spending or savings habits that impact this too, right? A lot of our clients who live and work in the kind of Philadelphia or surrounding areas.
You know who decide to move typically move to lower cost of living areas Not every not all of them, but but most of them and that changes things Obviously, there’s health like there’s a lot of variables that aren’t detailed in this In these profiles, but it it was interesting I think if someone’s looking for like a do I fit this mold or am I similar to this person?
it maybe [00:09:00] gives them like a persona to attach to
Jeff Mastronardo: that cost of living thing really hits home when you’re watching like HGTV and are like Johnny and Sally are buying a house in Danbury, North Carolina. They put it on the screen. You’re like, oh my god It’s like a five million dollar mansion. Like it’s a hundred Yeah