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More than 60% of respondents in a 2026 Goldman Sachs survey of 5,106 working and retired Americans said they had … Read more
Don’t miss an episode of our podcast, Personal Finance for Long-Term Investors. Available on all podcast players. Here’s the latest episode: I was recently watching this video from Rob Berger. [embed]https://youtube.com/watch?v=vMwfcu1W3u4&feature=oembed[/embed] The short summary of the video is that Rob discusses Jean Chatzky’s new book, The Forever Paycheck, and Rob specifically shares his opinions on annuities, and compares them to other fixed income options – one being a TIPS ladder. I agree with Rob’s feelings. I’m not a big fan of annuities in this situation. I wanted to add some mathematical reasoning, though. TIPS ladders are simply a better objective choice. The Rate of Return Argument We need to create an apples-to-apples comparison here. Let’s imagine two identical soon-to-be retirees. They are 60 years old, and have $1M available to create fixed income with. Retiree 1 builds a 30-years TIPS ladder. Retiree 2 buys a single-premium immediate annuity (one of the few types of annuities even worth considering, in my opinion). TIPS Returns Based on the current TIPS yield curve, the implied nominal return on a TIPS ladder is between 4.5% and 5.0% between Years 1-15, and then a implied return of 5.25% (or even a bit more) for most of years 16-30. A simple way of thinking about it: if Retiree 1 dies at any time in this 30-year period, he can expect that he would have received a ~5% annualized return from his TIPS ladder, including a full return of the initial invested capital. While the specific inflation rate over the next 30 years will affected Retiree 1’s returns, it has the potential to affect the returns in both directions (up or down). Thus, using the breakeven inflation number as part of the assumed returns makes sense. What about an single premium immediate annuity? SPIA Annuity “Returns”? I compared some annuity payouts for Retiree 2, a 60-year-old male here in New York state. His likely payout for a $1M SPIA is $5,860 per month, or $70,320 per year, or 7.032%. Vitally, this is not a rate of return. This is a payout rate. The difference is that Retiree 2 has, essentially, “sacrificed” his initial $1M to purchase the SPIA. After, say, 5 years, Retiree 2 will have received ~$350,000 in payouts…but will still be $650,000 underwater due to the initial $1M purchase. It will take ~14 years before Retiree 2 has received his initial $1M back. He only achieves a positive rate of return starting in Year 15. His long-term rates of return look like this: IRR of Retiree 2’s Annuity By Year 30, Retiree 2 has actually achieved a rate of return of ~5.7% per year. This is even better than the TIPS ladder return! But we need to ask another important question… Probability of Death What are the odds that our retirees, both age 60 today, live to see age 70? Or
The popular image of a FIRE practitioner is someone eating rice and beans, clipping coupons, and driving a car older than their kids. All luxuries are shunned in order to grow their wealth as large as possible to break free sooner. FIRE folks are cheap and should enjoy life more critics say. There’s some truth […] The post The Cheap FIRE Stereotype Deserves To Be Retired appeared first on Financial Samurai.
Reading is important during retirement despite what Alix Earle may say. Learn more in this week’s terrific links. Questioning everything is a superpower. A Teachable Moment Facts about retiring in America. Agglomerations What you lose when you retire. Dan Haylett Change causes fear. Seth’s Blog There is a lot of fear mongering regarding social security. Of Dollars And Data …The post Everyday Is Like Sunday…..When Is My Retirement? appeared first on A Teachable Moment.
By the time you retire, you may have spent thirty or forty years arranging your financial life around getting money into retirement accounts. You increased contributions when you got a raise, weighed traditional versus Roth contributions, and watched your balances grow. A brokerage account, if you had one, was where you invested whatever was left after taking advantage of the accounts with better tax treatment. Once you begin spending those savings, the brokerage account deserves […]
A few weeks ago, this tweet set off a firestorm on Twitter/X: JUST IN: 🇺🇸 US boomers overwhelmingly support higher taxes on younger workers to maintain current Social Security benefits, poll shows. After the usual boomer bashing, the conversation quickly turned to a question I often get from younger readers: Can I count on Social Security in retirement? It’s a fair question. If you’re in your 20s, 30s, or 40s, you’ve probably spent most of your life hearing about how Social Security is going bankrupt. You’ve been told that the trust fund is running dry. While technically true, does it mean that you should plan as if Social Security won’t exist? Not exactly. While the retirement trust fund is projected to run out in 2032, according to the 2026 Trustees Report, benefits will still be paid out, just at a lower percentage. How much lower? 78% of scheduled benefits. That’s a 22% reduction, which is real. But it’s not a 100% reduction! The average Social Security benefit today is around $2,000/month. So, if the trust fund were to run out tomorrow, the average benefit would be around $1,560/month [78% of $2,000]. That’s not great, but it demonstrates that something will continue to be paid even in such an undesirable scenario. Given this, the question isn’t whether Social Security will exist in the future (it will), but how much of it can you count on when you hit retirement? Let’s take a look at the numbers. What Happens After the Social Security Trust Fund Runs Out of Money? Social Security benefits are paid out from two sources: taxes on existing workers (i.e., payroll taxes) and the trust fund. Well, technically, there are two trust funds. The main one is Old-Age and Survivors Insurance (OASI), which pays retirement and survivor benefits. And the other is Disability Insurance (DI), which pays disability benefits. The DI fund is in good shape, projected to pay full benefits through the end of the 75-year projection window in 2100. But OASI isn’t. That’s the one estimated to run dry in 2032. While these two funds are often quoted together as OASDI, money can’t move between them without Congress passing a law. Let’s assume that doesn’t happen, so OASI is what we will focus on for retirement benefits. And OASI has been running out of money since 2021. That was the first year where benefits paid to retirees exceeded the total payroll taxes collected from workers plus interest income on OASI. As a result, principal had to be withdrawn from the OASI trust fund. This will continue until the trust fund runs out in 2032. What happens then? Since Social Security can’t borrow funds, it can only pay out what it takes in. So once the trust fund is empty, benefits would have to be brought down to whatever payroll taxes can cover. Right now that estimate is 78% of scheduled benefits in the first year. After that, the percentage declines as the ratio of workers to retirees continues
The secret to finding happiness in retirement may not be where you think it is. Read more in this week’s terrific links. How does your net worth look compared to your peers? Of Dollars And Data Should you take social security earlier to squeeze more life out of it? Best Interest Spreadsheets don’t contain all the answers regarding your retirement spending. Spilled Coffee Maybe taking naps in retirement isn…The post I Don’t Like Mondays…..When Is My Retirement? appeared first on A Teachable Moment.
Don’t miss an episode of our podcast, Personal Finance for Long-Term Investors. Available on all podcast players. Here’s the latest episode: Jay wrote in and asked: I’m curious if you’ve gone over DINK (double income no kids) options for those that don’t feel the need to pass on any money to future generations either. For example, if we eventually have no mortgage on our house a reverse mortgage sounds appealing. Let’s cover the basics of reverse mortgages, share some of the pros and cons, and ultimately discuss when they might be worth looking into. The Basics of a Reverse Mortgage Standard reverse mortgages are a special type of home loan available to homeowners aged 62 or older. They allow these homeowners to convert part of their home’s equity into cash without selling the house or making monthly mortgage payments. So far, it sounds a little too good to be true. The homeowner keeps their house and receives a lump-sum payment? Yes, but there’s a catch. The homeowner is now indebted to a lender, just like in any other mortgage. And the debt grows over time due to interest and fees. The loan is typically repaid when the homeowner sells the home or passes away. At that point, the proceeds from the home’s sale are used to pay off the loan, with any remaining equity going to the homeowner or their heirs. Reverse mortgages can be a lifeline for retirees needing extra income. But they also reduce home equity, come with interest and fees, and can complicate estate planning. The Pros of a Reverse Mortgage Most financial products are a combination of heaven and hell, and reverse mortgages are no different. Let’s start with heaven. What are the pros of a reverse mortgage? There are no monthly payments. You can stay in your home without a monthly bill, freeing up cash flow in retirement You keep your house and you can age in place. The title still has your name on it and you can’t be forced out as long as you meet the terms of the loan. The proceeds are tax-free. The money doesn’t count as income so it generally doesn’t affect retiree taxation concerns. The loan is non-recourse, which is a fancy way of saying that neither you nor your heirs will ever owe more than what the home is worth. Even if the loan balance ends up exceeding the home value, FHA insurance covers the shortfall. Your heirs will have options. They can keep the home by paying off the loan or by paying 95% of the home’s appraised value (if that’s a lesser number). The Cons of a Reverse Mortgage Heaven seemed nice! What about hell? There are high upfront costs. Commonly, there’s an initial FHA mortgage insurance premium (2% of the home’s value), origination fees (many $1000’s), and closing costs. It’s an especially expensive proposition
I get a guest-post pitch almost every day and decline about 99.5% of them. This one got through because of a single line in the email: “15.3 million American seniors now live alone, up 32% in a decade.” Justin Lindholm, who runs The Canny Vulture, mined U.S. Census data to unearth that number. A second line from his email stayed with me too: “7.4 million people over 65 report serious difficulty doing errands on their […]
The Canadian Financial Summit kicks off this week. Kyle at the Summit puts it this way – This Virtual Summit will cut through the fog of confusing financial jargon and build the confidence needed to seize control of your personal finances. Each speaker will pull back the curtain on their unique area of expertise. With their actionable advice and attention-grabbing speaking styles, these experienced Canadian gurus will help take your money game to the next level – […]
This post was inspired by Rhys Martell the founder of Well Built Wealth. Rhys does a wonderful job of educating Canadians on all things retirement. I’ve learned a bunch from Rhys and several other advice-only planners. Rhys offered a video (shown below) offering six ways we can lower our taxes in retirement. While it’s a fantastic video, it’s also a good opportunity to ‘put it in writing’, and at times with a little more context. […]
Below are estimated United States retirement savings statistics by age for 2026, from the Federal Reserve’s 2025 survey (the newest data we have until roughly late 2029). You’ll find the average retirement savings by age, along with median, and top 1% of savings. For a fuller accounting of net worth as opposed to only savings for retirement, see our net worth by age research. Retirement savings benchmarks by age in 2026 The following chart summarizes […]
On this page are estimated United States retirement savings. Statistics are for households headed by adults aged 32-61 at the time of the survey (the Federal Reserve’s 2025 survey, released in 2026). It’s the newest United States data until roughly late 2029. You’ll see average retirement savings, median retirement savings, top 1% retirement savings, and a retirement savings percentile calculator to rank a savings amount versus the adult population. Perhaps more relevantly, later see our […]