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Jul 1, 2021

We’d all love to be able to go back in time and apply the lessons we’ve learned through experience, but of course that’s not possible. What we can do, however, is use the information we’ve gained and apply that to our decision-making moving forward. This is very true of financial planning as well.

The reason we bring this up today is because a recent question came into the office about how much a person needs in savings. The general rule you often hear is 15-20x your annual salary. The expectation is that will cover you throughout retirement. Then you can apply the long-accepted 4% rule that says withdrawing 4% of your account each year will leave you with enough to last.

But many of these guidelines were put in place 20-30 years ago and a lot has changed. Just think back through the past two decades and you see how tumultuous it’s been for investors. Imagine retiring in 2000 and going through the devastation of 9/11 and then the collapse of 2008.

We have to be able to adjust a plan as life changes. The two main instruments pre-retirees utilize today are stocks and bonds. Even though stock prices might not be too different, the bonds are much more expensive. So you can’t do what’s always been done, which is what we talk about in-depth on the show today.

So to get back to the question that got us on this subject. Everyone’s savings number will be different and that depends on a variety of factors. But you have to start with a nest egg, whatever that number is for you personally, and then you have to lay out a plan to make sure that will help you meet your goal and enjoy a comfortable retirement.

Check out the full episode or use the timestamps below to hear a specific segment.

1:31 – Inspiration for today

2:37 – The 4% rule

5:06 – Record-low bond yields

6:03 – Someone that retired 20 years ago and relied on 4% rule

8:05 – Recent study findings

10:04 – Doing the math today

12:07 – ‘If You Can Dream It’

16:32 – First two decades of this century

17:32 – The dangers right now

19:38 – How we solve the problem


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