How Much Do You Really Need to Retire?

Today's topic is how much you need to retire. I know this is a money topic, but I’ll cover more than just that, because that’s what I do—I can free-form this. So, how much money do you really need to retire? Let me tell you, it’s very simple. The only thing complex in the financial services industry, especially the annuity world, is the agents and advisors selling it, and how they present it. Annuities or contracts? Simple. Just like Social Security, another annuity you already own. You just need to decide when to turn the income on. That’s it. And it will increase. It’s the best inflation-protected annuity on the planet.

Understanding Retirement Beyond Money

Before we get into the specifics of annuities, let’s talk about retirement. Retirement is a tough word. In fact, it hasn’t even really been used much except in America. It’s practically its own industry now. My wife is always asking, “How is retirement going to work for you?” I don’t know. I’m scared for her too because I don’t know. I’m always up and ready to go. You probably notice that I drink a lot of coffee, right?

But retirement isn’t just about money—it’s a much broader concept. And yes, I know what you’re thinking: “Stan, you look vibrant, there’s no way you could be close to retirement.” Well, I don’t plan on retiring. I’ll keep doing this as long as the camera’s rolling. I’ve got a great team in my primary office in Las Vegas and multiple other offices.

The Income Floor Concept

Retirement and money all come down to the “income floor.” What is the income floor? Great question—glad you asked! The income floor is the amount of money hitting your bank account every single month. We’re not talking about market performance or risk here. We’re talking about Social Security, dividend income, pensions (another form of annuity if you’re lucky), interest from CDs or MYGAs (the annuity version of a CD)—any income hitting your bank account that isn’t affected by politics, etc. That’s your income floor.

This is where annuities come in because everyone has that budget for the income floor.

Creating a Retirement Budget

Sidebar: My wife says, “It’d be nice to have a retirement budget since we’ve never really had one.” I get it—I'm a little wild with ideas. But what is a budget? It’s the income floor. It’s the amount of money you need to live on, including going out to eat, traveling, going on cruises, or buying a new car. What is that amount? Is there a gap between that amount and what you’ve got coming in each month that annuities can help fill?

Some people say, “I don’t want an annuity because when I die, the annuity company keeps the money.” That’s a myth. Let me clear that up. We can structure contracts in a way where if you pass away, the income continues for your spouse. Or, if both of you pass away, the money goes to your beneficiaries. The annuity company doesn’t keep a penny, even though they’re on the hook to pay.

The Cake and the Icing

Yes, you can have your cake and eat it too—well, the cake is the lifetime income, and the “eat it too” part means the annuity company doesn’t keep any money after you and your spouse are gone. They know life expectancy and can make those calculations. That’s how they stay profitable. But remember, property and casualty insurance companies aren’t as profitable because they don’t know when the hurricane or fire will happen. On the other hand, annuity companies know when you’ll pass, which is why they can offer these guarantees.

Understanding Retirement Expenses

Looking back at the big question, how much do you need to retire? You’re probably thinking about it now. For you non-budgeters, you need to get the pencil out and communicate with your family or spouse about what you’re spending, how you’re spending it, and what you need. What are the potential increases in the future?

You can use The Annuity Man to reverse engineer quotes. For example, “Hey, Stan, we need an additional $722 per month.” Then, you can input that into the site and figure out how much money it will take to create a lifetime income stream for you and your spouse—starting in 30 days, a year, two years, or five years. What’s the least amount of money it will take to create that income stream? That’s the way I want you to think.

The 4% Rule Is Dead

Now, let me say something that may upset some advisors, but I’m 6’6” and about 225 pounds, so bring it on. I'm kidding—I’m a harmless fuzzball. But here it is: advisors might say, “You don’t need to buy an annuity. You can just keep the money with me, I’ll charge you a fee annually, put it in the market, and you can take 4% off the top.” That is absolute nonsense. The 4% rule is dead.

There’s a down market the first year, and that whole strategy falls apart. Don’t believe me? Look up Wade Pfau, P-F-A-U. He’s been on my Fun With Annuities podcast and factually destroyed the 4% rule. He didn’t play basketball at UCF, but he went to Princeton. But listen to Wade. The 4% rule is not a reliable strategy.

The Annuity Solution for Retirement

When it comes to retirement, how much do you need? It’s simple when you reverse engineer the numbers using annuities. I always ask people two questions: “What do you want the money to contractually do? When do you want those contractual guarantees to start?” This will determine the type of annuity we use to solve for that income goal, and then we shop all carriers for the best contractual guarantee.

We’ve made annuities simple—no whistles, no bells, just contractual guarantees. Eventually, everyone will do it like us because clients will be happier. We’re not selling hypotheticals—we’re selling reliable, contractual guarantees.

Conclusion

So, how much do you need for retirement? It’s easy when you reverse engineer the numbers and use contractual guarantees to solve for that income floor. Got it? Good!

My name is Stan The Annuity Man. I’ll see you on the next Stan The Annuity Man blog!