Posted: 7/3/2026 10:01:54 PM EDT
I thought Erin hit it out of the park with this one: The Surprising Number Where More Money Stops Helping (Lower Than You Think) She explains why having a significant Pension/SS retirement income feels safer than having a equivalent portfolio and where money stops being as big of a concern. Of course I watched it and thought there is no way I would stop at $4M, but I do plan to leave something significant behind for the family, etc. |
per aspera ad astra
|
Yes, that is well explained. The point money doesn't buy enough additional happiness to be worth the time spent to acquire it is going to be vastly different depending on the person. Watching some of my relatives spend retirement watching cable news 12+ hours a day and generally being miserable tells me that money is only one piece needed for a great retirement. These folks can afford to take multiple vacations a year sleeping in 4 star hotels yet rarely leave the house other than to buy basic necessities. |
|
Surface level? fine. But fundamentally her main argument in the video is flawed. A large part of her premise is that emotionally, "portfolio income" and "income" feel different to spend, but in reality, they are not. It's all in our head so someone's level of comfort spending their retirement money is different based on its source, and 4 million is what is needed for people to FEEL like they have permission to spend their money, despite not actually needing that much in reality. Attached File However, her definition of "portfolio income" is principal. "People treat principal, the assets in the portfolio as dangerous to spend and they treat income as safe to spend even when mathematically those two things are equivalent." Equivalent =! same One carries risk, the other does not carry risk. Nothing you spend today risks future pension/SS checks coming in like clockwork at their fixed amount. That isn't the case for principal. She actually makes [and incorrectly dismisses as emotional/irrelevant] the argument early in the video: "But here's what often happens inside retiree A's head every single month: Should I really be spending this? What if the market drops 30% next year? What if inflation stays high? What if we live to the age of 95? What if one or both of us need long-term care? And this is really where behavior becomes so fascinating because mathematically these retirees, more likely than not, are completely fine." "But emotionally, they may still feel cautious or even fearful because it doesn't feel like they're spending income. It feels like they're spending their savings, their net worth, a pile of cash that they should be protecting, and that changes behavior. The wealth is there, but the permission to spend doesn't always follow." The difference is that if you're spending principal, you're sacrificing future growth and once you spend it all, you're done. If your retirement plan is to spend down until you die with $1 left to your name, then you have to plan very meticulously and have no unanticipated elements. Any of those things she mentioned may effectively fuck you. It's by nature a more risky strategy than only living off of "income" and never touching principal - whether that income is in the form of pension/SS, or dividends, growth from your principal, etc. So this isn't just a psychological block people have, it's a coherent and reasonable approach to consuming the only source of income you can expect for literally the rest of your life. And as I highlighted in red above, if you're on the outside looking in at the statistical probability of [a retiree] needing to be more cautious in spending their investment principal, that's MUCH different than being [the retiree] who is on the hook if your situation ends up being an exception. "More likely than not" doesn't mean anything to the "less likely but true" case. A $4 Million portfolio generates roughly $78,000 - $109,000 in after-tax annual income...before Social Security kicks in. That is the amount in initial principal where the revenue generated FROM the principal becomes enough to live on comfortably without spending the principal. At which point you're now just getting "income" like you would with SS or pension, so of COURSE your spending patterns start to look the same. |
|
$4M has been my savings goal for a long time, and I am well on pace. I can “feel” what she’s saying about spending savings versus spending an income. The challenge is pensions are rare now and most of us will just have savings. |
If you don't have a plan, you can't change it.
|
You'll never need more than 4 million until -Your "conservative" politicians inflate your currency to zero -the cost of living skyrockets (See point 1) -your property taxes increase 200% -etc... I'm 43 and I have a nice 401k, but I'll never have that sweet unlimited gov pension like my mother. My "retirement" will look much different. |
|
Originally Posted By Daggertt: A $4 Million portfolio generates roughly $78,000 - $109,000 in after-tax annual income...before Social Security kicks in. Your number seems low. A $4 million portfolio should generate about $160,000 before taxes @ 4%. Effective federal tax rate on that income would be around 17% leaving roughly $132,000 in income before state taxes. |
| I think i read less than 10% of people retire with more than half a million. Many people are just barely staying above water. Many people could save but would rather live the highlife now. I hope to retire in 4yrs with 2million. At 5% thats 100k before taxes. I am fortunate to have a pension plus ss I should be fine. |
|
Originally Posted By Primetime_1: You'll never need more than 4 million until -Your "conservative" politicians inflate your currency to zero -the cost of living skyrockets (See point 1) -your property taxes increase 200% -etc... I'm 43 and I have a nice 401k, but I'll never have that sweet unlimited gov pension like my mother. My "retirement" will look much different. Where you live makes a huge difference. Where I live is near the lowest cost of living. My 1974 Brick ranch, walk out basement on 4 rural acres, 1992 24x36 pole barn today is valued at $200K. My property tax is $1800 a year. Many places in the US the value would have one or two more zeros on the end. Same for the tax. ETA: I live 30 minutes from Dayton, OH, hour from Cincinnati, 1.5 hours to Indy so not in some poor BFE area. |
|
Originally Posted By hammer1995: Your number seems low. A $4 million portfolio should generate about $160,000 before taxes @ 4%. Effective federal tax rate on that income would be around 17% leaving roughly $132,000 in income before state taxes. Either way with 4 million, a couple can live comfortably without touching their principal and treat the interest as "income" that doesn't put their future at risk, so they'll be comfortable spending it. |
|
Originally Posted By Daggertt: even better, except I am thinking lower than 4% to avoid eroding the principal and hopefully keeping growth more aligned with inflation. Either way with 4 million, a couple can live comfortably without touching their principal and treat the interest as "income" that doesn't put their future at risk, so they'll be comfortable spending it. Short of a major and unprecedented market crash, even a 4% withdrawal rate will ensure you never run out of money. The conventional wisdom is the money will last 30 years. But in reality, if you structure your withdrawals well, at a 4% withdrawal rate you’ll never run out of money. Realistically, you can withdraw quite a bit more although that does increase the risk of running out of money before 30 years. Still, with a HYSA holding your cash to avoid being a forced seller in a down market, you might have to tighten your belt slightly during down years (meaning spend a little less money that year) and then fill up your cash account when the market recovers. It only really matters if you plan to leave a large sum of money to your kids after you pass. If that’s extremely important to you, then preserving your money is more important than enjoying yourself. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
|
Originally Posted By ColtRifle: Short of a major and unprecedented market crash, even a 4% withdrawal rate will ensure you never run out of money. The conventional wisdom is the money will last 30 years. But in reality, if you structure your withdrawals well, at a 4% withdrawal rate you'll never run out of money. Realistically, you can withdraw quite a bit more although that does increase the risk of running out of money before 30 years. Still, with a HYSA holding your cash to avoid being a forced seller in a down market, you might have to tighten your belt slightly during down years (meaning spend a little less money that year) and then fill up your cash account when the market recovers. It only really matters if you plan to leave a large sum of money to your kids after you pass. If that's extremely important to you, then preserving your money is more important than enjoying yourself. Originally Posted By ColtRifle: Originally Posted By Daggertt: even better, except I am thinking lower than 4% to avoid eroding the principal and hopefully keeping growth more aligned with inflation. Either way with 4 million, a couple can live comfortably without touching their principal and treat the interest as "income" that doesn't put their future at risk, so they'll be comfortable spending it. Short of a major and unprecedented market crash, even a 4% withdrawal rate will ensure you never run out of money. The conventional wisdom is the money will last 30 years. But in reality, if you structure your withdrawals well, at a 4% withdrawal rate you'll never run out of money. Realistically, you can withdraw quite a bit more although that does increase the risk of running out of money before 30 years. Still, with a HYSA holding your cash to avoid being a forced seller in a down market, you might have to tighten your belt slightly during down years (meaning spend a little less money that year) and then fill up your cash account when the market recovers. It only really matters if you plan to leave a large sum of money to your kids after you pass. If that's extremely important to you, then preserving your money is more important than enjoying yourself.  I'm saying that spending the principal involves risk of future availability of funds, whereas spending monthly pension/SS payments doesn't. And that risk is the source of the behavior she's describing. And then I'm pointing out that around 4 million is where you can start to treat investment revenue (however you've structured it) basically like fixed income because the future fund risk profiles become much more similar, and therefore the spending habits look similar. It's not about marginal utility as she posited - it's about risk profile. Spending down over 30 years is still not the same risk profile as collecting a pension because if you live 40 more years, then your last 10 years (which might require specialized care services) are going to be funded with whatever is left after you weren't planning to be here anymore. |
|
One of Erin's past videos indicates that at the high end, most people only spend $140K-to-$180K in retirement. That's a decent planning target. It doesn't sound like it factors in my hobbies, living well in an urban area, or global travel, but it would be enough to be comfortable. If you structure your portfolio to survive inflation, that's probably enough for most people. |
per aspera ad astra
|
Originally Posted By R_S: One of Erin's past videos indicates that at the high end, most people only spend $140K-to-$180K in retirement. Last year was the first full year of tracking very detailed expenses. This is the 2nd year. This range seems to be on mark. |
TBD
|
Originally Posted By Primetime_1: You'll never need more than 4 million until -Your "conservative" politicians inflate your currency to zero -the cost of living skyrockets (See point 1) -your property taxes increase 200% -etc... I'm 43 and I have a nice 401k, but I'll never have that sweet unlimited gov pension like my mother. My "retirement" will look much different. Wow, that's a pretty bitter post, it's got it all, veiled TDS, anti-boomer, anti-pension ( they're not unlimited BTW) are you a collectivist by chance? FWIW, I'm with you on inflation and property tax increases. |
Member
Joined:
May 2022
Posts:
4386
EE: 0% (0)
ND, USA
|
Originally Posted By OregonShooter: Yes, that is well explained. The point money doesn't buy enough additional happiness to be worth the time spent to acquire it is going to be vastly different depending on the person. Watching some of my relatives spend retirement watching cable news 12+ hours a day and generally being miserable tells me that money is only one piece needed for a great retirement. These folks can afford to take multiple vacations a year sleeping in 4 star hotels yet rarely leave the house other than to buy basic necessities. Yup, I’ve seen this too. People like that are just miserable anyway and are just lumps of flesh taking up air. They just need to end it. |
|
One thing I learned once I planned for retirement is that there is no shortage of information like this that has one singular purpose: generate clicks and views for the author. Minutia like how different people define “principal” vs “income” on investments is silly because it’s all relative. Income becomes principal when it reinvested, so spending income wastes your principal. See how easy it is to wordsmith things to say what you want? The only thing useful in her videos is that she calls attention to the psychological aspect of money in retirement and that is very important for most people. Her videos are also much longer and wordier than they should be. Different things work differently for different people. Only you can really know what will work for you. |
|
Originally Posted By Morgan321: One thing I learned once I planned for retirement is that there is no shortage of information like this that has one singular purpose: generate clicks and views for the author. Minutia like how different people define “principal” vs “income” on investments is silly because it’s all relative. Income becomes principal when it reinvested, so spending income wastes your principal. See how easy it is to wordsmith things to say what you want? The only thing useful in her videos is that she calls attention to the psychological aspect of money in retirement and that is very important for most people. Her videos are also much longer and wordier than they should be. Different things work differently for different people. Only you can really know what will work for you. 100% agreed on all points. |
|
Originally Posted By Morgan321: One thing I learned once I planned for retirement is that there is no shortage of information like this that has one singular purpose: generate clicks and views for the author. Minutia like how different people define “principal” vs “income” on investments is silly because it’s all relative. Income becomes principal when it reinvested, so spending income wastes your principal. See how easy it is to wordsmith things to say what you want? The only thing useful in her videos is that she calls attention to the psychological aspect of money in retirement and that is very important for most people. Her videos are also much longer and wordier than they should be. Different things work differently for different people. Only you can really know what will work for you. A longer video has room for more ads boosting revenue for the owner of the channel. Yes she is funding her own early retirement dream by telling others how to save for retirement.
|
|
Originally Posted By Morgan321: One thing I learned once I planned for retirement is that there is no shortage of information like this that has one singular purpose: generate clicks and views for the author. Minutia like how different people define "principal" vs "income" on investments is silly because it's all relative. Income becomes principal when it reinvested, so spending income wastes your principal. See how easy it is to wordsmith things to say what you want? The only thing useful in her videos is that she calls attention to the psychological aspect of money in retirement and that is very important for most people. Her videos are also much longer and wordier than they should be. Different things work differently for different people. Only you can really know what will work for you. Like you said "income BECOMES principal when it's invested." That's pretty cut and dried. Nothing to wordsmith. Any money from any source becomes principal when it's invested. If you invest your pension/SS payments every month, then those become principal in your portfolio. What you're actually describing is the concept of "opportunity cost" which is "what else could I have done with this money?" If you spend it you can't invest it and you miss out on future gains. And vice versa. It's similar to but different from the concept that we're discussing...a lump sum of principal needed to provide security of present and future outflows while allowing withdrawals that provide a comfortable standard of living. If someone is saying $4million with a 3% Safe Withdrawal Rate will allow comfortable living and not risk the principal, then spending that "income" does not, in fact "waste your [needed lump sum required to maintain that standard of living and growth] principal." Words do mean things, but yes, they are easily used to manipulate if the audience doesn't understand enough to know what they are hearing. |
|
Originally Posted By Primetime_1: You'll never need more than 4 million until -Your "conservative" politicians inflate your currency to zero -the cost of living skyrockets (See point 1) -your property taxes increase 200% -etc... I'm 43 and I have a nice 401k, but I'll never have that sweet unlimited gov pension like my mother. My "retirement" will look much different. County assessment raised our property taxes ~46% in 5 years... I've been fighting it and got a little relief this year... but only because I could show the counties assessment was factually incorrect... arbitration ignored my comps completely |
per aspera ad astra
|
Originally Posted By JThompson: Last year was the first full year of tracking very detailed expenses. This is the 2nd year. This range seems to be on mark. Originally Posted By JThompson: Originally Posted By R_S: One of Erin's past videos indicates that at the high end, most people only spend $140K-to-$180K in retirement. Last year was the first full year of tracking very detailed expenses. This is the 2nd year. This range seems to be on mark. 
|
per aspera ad astra
|
Originally Posted By R_S: County assessment raised our property taxes ~46% in 5 years... I've been fighting it and got a little relief this year... but only because I could show the counties assessment was factually incorrect... arbitration ignored my comps completely While Texas loves them some property taxes your total tax burden isn't that high compared to the other 49 states. Texas ranks 36th overall among the 50 states for its total tax burden, taking a combined 7.69% of personal income. While it has no state individual income tax, it relies heavily on higher-than-average property and sales taxes to make up the revenue. Individual Income Tax: 0% Property Tax: 3.43% of personal income Ranks 9th highest nationally Sales & Excise Tax: 3.85% to 4.27% of personal income |
|
Originally Posted By Daggertt: Agreed in principle, but disagree with your example. Like you said "income BECOMES principal when it's invested." That's pretty cut and dried. Nothing to wordsmith. "………… Put another way, you did exactly what I said most of the investing/retirement advice on social media does. |
|
Originally Posted By Morgan321: You agreed with me then wrote a paragraph wordsmithing and expanding on details that nobody asked about. Put another way, you did exactly what I said most of the investing/retirement advice on social media does. But I disagreed with your provided example of "word smithing" and have a coherent explanation of why. Words actually do mean things and differentiation is not word smithing. |
|
Originally Posted By Daggertt: But I disagreed with your provided example of "word smithing" and have a coherent explanation of why. Words actually do mean things and differentiation is not word smithing. Sometimes differentiation matters and sometimes it doesn't. |
|
Originally Posted By Morgan321: It's not green, it's a mixture of yellow and blue! Sometimes differentiation matters and sometimes it doesn't. POTENTIAL principal." The point is "4 million is about an amount of principal where you can live comfortably on the income from it without impacting the 4 million original principal." |
|
Originally Posted By hammer1995: Your number seems low. A $4 million portfolio should generate about $160,000 before taxes @ 4%. Effective federal tax rate on that income would be around 17% leaving roughly $132,000 in income before state taxes. That strikes me as shockingly low. $132k a year ain't what it used to be. |
Callsign-ChuckYeager
That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885
That man is a homo and a liar-TrojanMan
Hell, a Ford just breaks down on you. It doesn't fall apart AND try to kill you at the same time-Bloodsport2885
|
Originally Posted By Chromekilla: That strikes me as shockingly low. $132k a year ain't what it used to be. 100% - even if you have no mortgage and no car payments, I feel like $132k/year would have you eating into your nest egg when you need a new roof, hvac, or major car repair. Add having to buy a car every once in awhile, and it just wont go all that far. Now, as soon as I am no longer feeding two high school football players my food budget will go a helluva lot further… -shooter |
|
Originally Posted By Chromekilla: That strikes me as shockingly low. $132k a year ain't what it used to be. But no one included Social Security or is based on retiring before 62? Single or Married and collecting at 62 should generated an extra $24k-$60k a year. |
TBD
|
Originally Posted By JThompson: But no one included Social Security or is based on retiring before 62? Single or Married and collecting at 62 should generated an extra $24k-$60k a year. Originally Posted By JThompson: Originally Posted By Chromekilla: That strikes me as shockingly low. $132k a year ain't what it used to be. But no one included Social Security or is based on retiring before 62? Single or Married and collecting at 62 should generated an extra $24k-$60k a year. $132k after taxes, plus SS with no mortgage or consumer debt? Coupled with not having my biggest expense today (which is saving for retirement): That's easy street. |
|
Originally Posted By shooter220: 100% - even if you have no mortgage and no car payments, I feel like $132k/year would have you eating into your nest egg when you need a new roof, hvac, or major car repair. Add having to buy a car every once in awhile, and it just wont go all that far. Originally Posted By shooter220: Originally Posted By Chromekilla: That strikes me as shockingly low. $132k a year ain't what it used to be. |
|
$4 million invested in a 50% equities and 50% fixed income portfolio, with $160,000 annual withdrawals has a 95% chance of never running out of money. FireCalc link Once you add in $4000 per month for social security, it goes to a strong 100%: FireCalc link You can bump up to $195k annual withdrawals with that mix before you break 100% odds of never running out of money: FireCalc link I think you can easily handle a roof, HVAC replacement, or the occasional newer vehicle with the extra $35k over plan. |
|
Originally Posted By R_S: One of Erin's past videos indicates that at the high end, most people only spend $140K-to-$180K in retirement. As mentioned above, I believe this to be accurate. With regards to the current discussion, based on the SS web site, we would get about $60k year if collecting at 62, so figure roughly $120,000 needs to come from retirement cash. Based on the 4% rule, this would put me at 3 million. This is probably worst case scenario with regards to funds as I am thinking $150k would be the top end so possibly could get by with less than that..... at least I hope. |
TBD