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$2.5M Saved. But How Much Can You Actually Spend? · TaylorMade Retirement with Taylor Demars, CFP®

• 0:00
  SPEAKER_01: Today's content is pulled from Taylor's YouTube channel.
• 0:04
  SPEAKER_01: If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description.
• 0:13
  SPEAKER_01: Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life.
• 0:20
  SPEAKER_01: With third generation certified financial planner Taylor DeMars.
• 0:28
  SPEAKER_00: If you save$2.5 million and you're still afraid to retire, that fear may be more rational than you think.
• 0:34
  SPEAKER_00: Not because$2.5 million is automatically too little, but because$2.5 million is not a retirement plan, it's a statement balance.
• 0:41
  SPEAKER_00: And before I'd tell a 60-year-old with$2.5 million, yes, you can retire, there are three pitfalls I'd want addressed: taxes, healthcare before Medicare, and whether the right dollars are doing the right jobs.
• 0:54
  SPEAKER_00: I'm Taylor Demars, CFP and third generation financial advisor, and I've helped hundreds of families navigate the transition into and through retirement.
• 1:02
  SPEAKER_00: And I'm not going to tell you whether your number is enough.
• 1:05
  SPEAKER_00: Anyone who tells you that in a video without seeing your situation is just guessing.
• 1:09
  SPEAKER_00: But what we are going to do is walk you through the three pitfalls and the three questions that decide the answer.
• 1:14
  SPEAKER_00: So by the end of this video, you'll know what to ask, what to look for, and how to start finding out whether your real number is there tonight.
• 1:21
  SPEAKER_00: The first pitfall is assuming your account balance is the same thing as your spendable retirement money.
• 1:26
  SPEAKER_00: When you log in and see two and a half million dollar portfolio, it's natural to get excited about that big round number.
• 1:33
  SPEAKER_00: But as you know, some of that may be in a 401k or an IRA or in a Roth account or a taxable brokerage account, some of it may be in cash.
• 1:42
  SPEAKER_00: And all those dollars count towards your net worth, but they don't all spend the same way.
• 1:47
  SPEAKER_00: As you know, in your working years, you know your whole salary is not your whole take home paycheck.
• 1:52
  SPEAKER_00: You make 250 grand, not all of that is banking it to the checking account.
• 1:56
  SPEAKER_00: Taxes come out, benefits come out, retirement contributions come out, and your gross number gets filtered before you even spend or see the money.
• 2:03
  SPEAKER_00: But here's where retirement gets interesting and exciting.
• 2:06
  SPEAKER_00: When you were working, you don't have as much control over that paycheck.
• 2:10
  SPEAKER_00: In retirement, you have more control than you may realize.
• 2:13
  SPEAKER_00: You can decide which account to pull from first, you can decide when to start Social Security, you can decide whether to use the cash, taxable money, pre-tax money, or the Roth money in a given year.
• 2:23
  SPEAKER_00: You may have a window between retirement and RMDs where your income is lower and your bracket has some headroom to work with.
• 2:30
  SPEAKER_00: I like to think of these options as designing your income like you're going to a soft serve ice cream machine and being able to pull the different levers of strawberry, chocolate, or vanilla for the blend that you specifically want for your personal situation.
• 2:43
  SPEAKER_00: That control can be highly valuable.
• 2:46
  SPEAKER_00: Not because there's some magic trick, but because at some point you have to pay the piper.
• 2:51
  SPEAKER_00: But the order in which you do so matters.
• 2:54
  SPEAKER_00: When you're trying to figure out whether two and a half million is enough, the order of this withdrawal can affect how much of that money actually turns into your net lifestyle.
• 3:02
  SPEAKER_00: That's why hitting 2.5 million of savings for retirement isn't the answer.
• 3:06
  SPEAKER_00: But the better question is how much of that$2.5 million is truly spendable, and how do we create that in the right order?
• 3:14
  SPEAKER_00: For example, imagine couple A has$2.5 million, but almost all of it isn't pre-tax retirement accounts.
• 3:20
  SPEAKER_00: They've done a fantastic job saving, maxing out their 401ks and deferring those taxes for decades, and they built a big number.
• 3:28
  SPEAKER_00: But now every dollar they pull out from that pre-tax bucket shows up as taxable income.
• 3:33
  SPEAKER_00: Another couple, we'll call them couple B, also has$2.5 million, but their money is spread out across some pre-tax accounts, Roth dollars, maybe some taxable brokerage accounts, and they have the same balance, but they have different levers to work with.
• 3:47
  SPEAKER_00: The second couple may have more flexibility around how their income shows up on the tax return.
• 3:52
  SPEAKER_00: And yes, the first couple may be still in great shape, but their plan probably needs to be more intentional because their spending and their taxable income are tied so closely.
• 4:01
  SPEAKER_00: And this is the real tax pitfall.
• 4:03
  SPEAKER_00: It's not how much taxes will I pay because you know you're going to pay an amount.
• 4:07
  SPEAKER_00: It's the real pitfall is not knowing how much of that translates to actually improving your lifestyle.
• 4:13
  SPEAKER_00: How you address taxes translates to how much of your Social Security benefits become taxable, how it affects your required minimum distributions, how it affects your Medicare-related costs later on.
• 4:22
  SPEAKER_00: It affects how much flexibility you might have in a bad market year.
• 4:26
  SPEAKER_00: And most importantly, it can affect a surviving spouse.
• 4:29
  SPEAKER_00: That's almost one scenario that almost no plan models, and it's one that hits the hardest.
• 4:34
  SPEAKER_00: Because when one spouse passes, the surviving spouse will not necessarily cut their lifestyle in half, but the tax code treats them like they do.
• 4:42
  SPEAKER_00: Tighter brackets, half the standard deduction, more Medicare-related thresholds, and even though their income didn't change much, the tax treatment does overnight.
• 4:51
  SPEAKER_00: It's not about asking, do I have enough if everything goes perfectly?
• 4:54
  SPEAKER_00: It's about do I have a workable plan if life takes a turn in the wrong direction?
• 4:59
  SPEAKER_00: So it's tempting for me to do a deep dive into a Roth conversion analysis of how to address these concerns, but that's a separate conversation.
• 5:06
  SPEAKER_00: Suffice it to say, before you retire, you need to answer these three things about the tax side.
• 5:12
  SPEAKER_00: What kind of dollars do you have?
• 5:13
  SPEAKER_00: What order do you need to be withdrawing them?
• 5:16
  SPEAKER_00: And what future tax problems could be building quietly if you're not proactive about it now?
• 5:21
  SPEAKER_00: Because retirement doesn't happen on the gross number, it happens on the spendable number.
• 5:26
  SPEAKER_00: So here's a small step you can take tonight.
• 5:28
  SPEAKER_00: Look at your NASDAQ of savings and see how much is in pre-tax, post-tax, and tax-free funds.
• 5:35
  SPEAKER_00: And that's the start of seeing your full spendable picture and what levers you have to pull.
• 5:40
  SPEAKER_00: Now, if this gross to net issue is making you wonder what your real number actually looks like, that's what we help people figure out.
• 5:47
  SPEAKER_00: If you want us to run through that exercise with you, the first link in the description gets you on a quick call with me to see where we would suggest you start to tackle this issue.
• 5:55
  SPEAKER_00: But even if you nail the tax side, there's another cost and pitfall that hits long before Medicare ever shows up.
• 6:02
  SPEAKER_00: And it's one that keeps a lot of 60-year-olds on the sidelines away from pulling the trigger to retire.
• 6:07
  SPEAKER_00: And that pitfall is the healthcare gap before Medicare.
• 6:11
  SPEAKER_00: Because if you're retiring at age 60, that gap for a lot of people is the specific concern keeping them working longer than they need to.
• 6:18
  SPEAKER_00: Not can I afford to retire someday, but can I afford this stretch of five years before Medicare?
• 6:24
  SPEAKER_00: Because when healthcare is a vague concern, it feels huge.
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  SPEAKER_00: You can spend 35 years with an employer health insurance plan and barely think about the real month-to-month cost.
• 6:35
  SPEAKER_00: Then the retirement suddenly shows up and healthcare is a land item you have to own.
• 6:40
  SPEAKER_00: The mistake is treating that uncertainty like a reason to keep working by default.
• 6:45
  SPEAKER_00: Because many times people feel working longer is the right move, but you owe it to yourself to base that decision based on numbers and not fogginess.
• 6:52
  SPEAKER_00: So here's how I would think about bridging that healthcare gap.
• 6:55
  SPEAKER_00: You don't want to bury it inside of a generic retirement spending estimate.
• 6:59
  SPEAKER_00: We like to be able to pull that number out and distinguish it to say, well, if you're going to spend around 12 grand a month and if you have healthcare tucked in there somewhere, it's probably not good enough for you to say that you can retire.
• 7:10
  SPEAKER_00: That bridge deserves its own line item where you want to identify the realistic coverage path, premium, out-of-pocket exposure, and then connect it to your overall income plan.
• 7:20
  SPEAKER_00: So here's how it gets practical.
• 7:23
  SPEAKER_00: The question isn't simply is healthcare expensive?
• 7:26
  SPEAKER_00: Because we know it's probably going to be that.
• 7:28
  SPEAKER_00: The question is, have we priced it out and then built it in?
• 7:31
  SPEAKER_00: Because expensive is not the same thing as unaffordable.
• 7:35
  SPEAKER_00: One client I recently started working with said expensive health insurance pre-Medicare is just the cost of freedom.
• 7:41
  SPEAKER_00: So what you need to do is find that realistic number to then test and see how it affects where it comes from in your portfolio, how it affects taxes, and then find out if it changes the retirement date.
• 7:50
  SPEAKER_00: Now I need to be clear about my lane here.
• 7:52
  SPEAKER_00: I am not the right person to be choosing the exact health insurance policy and plan for you.
• 7:58
  SPEAKER_00: That's why we pay for a partner platform where our clients get one-on-one help to compare networks, deductibles, plan designs specific to their health needs, and done by people who live in that world every day.
• 8:10
  SPEAKER_00: Their job is to run through that exercise so they can get the output of the clear numbers for us to plug into our clients' plan and see how the bridge to Medicare actually works.
• 8:19
  SPEAKER_00: This is why some people retire with plenty on paper, but still feel like the first five years of retirement, they're financially suffocating.
• 8:26
  SPEAKER_00: So here's the question to ask tonight.
• 8:28
  SPEAKER_00: If you do retire now, what would your healthcare actually cost and where would that money come from to fund it for that gap?
• 8:36
  SPEAKER_00: Once that bridge gets priced, retirement can look a loss lot less mysterious.
• 8:40
  SPEAKER_00: But even after you nail the tax side and the healthcare bridge, there's one more pitfall to address.
• 8:45
  SPEAKER_00: And it's one that makes people afraid to spend even when the math says they can, because they don't know which dollars are safe to touch.
• 8:52
  SPEAKER_00: This third pitfall is having the wrong dollars do the wrong jobs.
• 8:56
  SPEAKER_00: This is where market downturns and rising costs both show up in your plan, where retirement is creating two opposite fears at the same time.
• 9:04
  SPEAKER_00: Because today you need the bills paid.
• 9:07
  SPEAKER_00: But 85-year-old you will likely have some significant healthcare costs.
• 9:11
  SPEAKER_00: So the better question isn't should I put my money in that which is safe or let it grow?
• 9:16
  SPEAKER_00: It's about understanding which dollars need safety and which dollars need time.
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  SPEAKER_00: And here's how that shows up in real life.
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  SPEAKER_00: Because I had a client couple recently where they were both in their early 60s and had been recently retired from careers in corporate America.
• 9:30
  SPEAKER_00: And the husband's biggest fear wasn't that he would run out of money in his 90s.
• 9:34
  SPEAKER_00: It was about the next downturn of the stock market and having to sell things that had dropped in value just to cover their grocery bill.
• 9:42
  SPEAKER_00: And he wasn't wrong to be worried because, as I find, every retiree is fighting two battles at the same time.
• 9:48
  SPEAKER_00: The first battle is the next big market drop.
• 9:51
  SPEAKER_00: The second battle is inflation.
• 9:54
  SPEAKER_00: It's the quiet one, the silent tax that eats away at your pet purchasing power over and over.
• 9:59
  SPEAKER_00: And here's the catch: the thing that protects you from one battle is the exact thing that costs you at the other.
• 10:04
  SPEAKER_00: And that's why so many people end up feeling stuck about their asset allocation for retirement.
• 10:09
  SPEAKER_00: They see their money as one big pile and not sure how to get it to stop doing too many jobs at once.
• 10:15
  SPEAKER_00: Because it needs to pay this month's bills, support spending over the next few years, survive market downturns, keep up with rising costs, and might need to support a surviving spouse for many years to come.
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  SPEAKER_00: And then you might want to leave something behind.
• 10:29
  SPEAKER_00: That's a lot of jobs to ask from one undifferentiated pile of money.
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  SPEAKER_00: So the way we like to think about this is through a bucket's income methodology.
• 10:37
  SPEAKER_00: The basic premise starts with the first bucket, as we call it the pantry.
• 10:41
  SPEAKER_00: This is the near-term money.
• 10:43
  SPEAKER_00: It's there as a rainy day fund and for any anticipated large short-term expenses.
• 10:49
  SPEAKER_00: It's the money you do not want exposed to the market swings because you might need it soon.
• 10:54
  SPEAKER_00: The pantry isn't trying to be exciting, it's trying to be dependable.
• 10:58
  SPEAKER_00: The next layer is your bond bunker.
• 11:00
  SPEAKER_00: This is the stability layer.
• 11:02
  SPEAKER_00: It's not the same as cash, but it's not risk-free.
• 11:05
  SPEAKER_00: The bond bunker is designed to help support withdrawals during the inevitable rougher market periods, so the growth part of your portfolio has time to recover.
• 11:15
  SPEAKER_00: That matters because when the market falls, the danger isn't just seeing the account balance drop, it's being forced to sell depressed assets to fund spending or because you don't have a backup plan.
• 11:26
  SPEAKER_00: This turns a temporary market decline into a more permanent planning problem.
• 11:31
  SPEAKER_00: Then the third layer is the growth bucket.
• 11:33
  SPEAKER_00: This is a money that still needs to work for the long term and where people sometimes get tripped up emotionally.
• 11:39
  SPEAKER_00: Because after you retire, it's natural to want to have everything feel safer.
• 11:43
  SPEAKER_00: But safe doesn't always mean sitting still, because future years are going to face higher grocery costs, insurance costs, housing costs, and care expenses that are not part of your life today.
• 11:55
  SPEAKER_00: Bottom line is different dollars need different jobs.
• 11:58
  SPEAKER_00: The pantry is there to give short-term confidence.
• 12:01
  SPEAKER_00: The bond bunker is to give a buffer through rough markets, and the growth bucket is to give your future dollars a chance to keep up with rising costs.
• 12:09
  SPEAKER_00: Once we see clients' money organized that way, they start to breathe a little easier.
• 12:14
  SPEAKER_00: They're no longer saying, well, I got two and a half million and I hope it works.
• 12:18
  SPEAKER_00: They're saying instead, here's how we avoid selling the wrong thing at the wrong time in order to maintain our ideal lifestyle through thick and thin.
• 12:26
  SPEAKER_00: That's a plan.
• 12:27
  SPEAKER_00: Your statement tells you what you have, but it doesn't tell you what each dollar is supposed to do.
• 12:32
  SPEAKER_00: Once you start sorting your money out by when you'll need it instead of just where it is, that whole picture starts to feel different.
• 12:38
  SPEAKER_00: And when you don't know what each dollar is supposed to do, every withdrawal can feel like damage or even cannibalizing your life work.
• 12:45
  SPEAKER_00: Now that you've been spending your whole life saving and watching the number go up, retirement's asking you to do something that feels backwards and start unraveling and spending that money.
• 12:54
  SPEAKER_00: And when the spending in the plan feels vague, it can feel irresponsible, even if the math works.
• 13:01
  SPEAKER_00: But when the plan is clear, spending feels like you're following the plan instead of betraying it.
• 13:05
  SPEAKER_00: Now you came into this video wondering if$2.5 million is really enough to retire on.
• 13:10
  SPEAKER_00: Now you know the answer isn't just a number.
• 13:12
  SPEAKER_00: It boils down to three questions.
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  SPEAKER_00: What does that money actually become after taxes?
• 13:17
  SPEAKER_00: What does the bridge to Medicare really cost?
• 13:19
  SPEAKER_00: And what are the right dollars doing the right jobs over a 30-year retirement?
• 13:24
  SPEAKER_00: Until those three questions are answered with your actual numbers, the fear isn't irrational, it's just information.
• 13:30
  SPEAKER_00: That's exactly what we do for our clients, building a retirement readiness roadmap, building a plan around these pitfalls, and more.
• 13:37
  SPEAKER_00: You can scan the QR code on screen or click the link in the description to book a call with me to see if we're the right fit for you.
• 13:43
  SPEAKER_00: And if you're not ready for a call yet, a second link in the description gives you free access to a simplified version of Write Capital, the same financial planning software we use with our clients.
• 13:54
  SPEAKER_00: You can run your own numbers tonight and come back when you're ready.
• 13:57
  SPEAKER_00: And while you keep thinking through this, watch the video on screen now that describes the difference between retiring at 55 versus 65.
• 14:05
  SPEAKER_00: Because sometimes the real question is not can I retire?
• 14:09
  SPEAKER_00: It's what's the actual benefit of me waiting?