Podcast | Season 1 | Episode 48

The Description

The 4 steps that Randy Morris covers in this mini episode creates a simple formula for figuring out when you will be able to retire financially. Listen now. 

Host: Randy Morris, CFP®, ChFC®, AIF® | CEO

After graduating from the University of Colorado in 1982 with a business and organizational management degree, he worked in Denver, Colorado, for two years as Vice-President of Executive Economic Services, Inc.

In 1985, Randy founded Executive Financial Planning, Inc. (EFP), one of Mississippi's first financial planning firms. EFP became one of the nation's largest financial planning firms during his tenure as founder and CEO.

In 2002, he created Summit Wealth Group (SWG) out of a desire to provide additional wealth management services for clients. Randy serves as the firm's CEO. Summit Wealth Group currently works with clients in 46 states with client assets under advisement of more than $1 billion as of February 2021.

(719) 633-4033 | 13710 Struthers Road, Suite 115, Colorado Springs, CO 80921
 Securities and Advisory Services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network.

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The Transcript 


"Randy Morris, Certified Financial Planner and CEO of Summit Wealth Group, is the host of today's mini episode."


"So how do I know when I've saved enough for retirement? How do I know what the magic number is, in essence? I'm going to give you a simplified math formula, simplified in the sense that there's four steps.

So the first one is Take a look at your annual expenses, uh, that, and again, break them down in terms of essential and, uh, and also a discretionary. Uh, make sure those, um, expenses are allocated for, and you've thought through what's going to fall off once you retire and, uh, what's going to be added, you know, once you retire.

You might have additional travel expenses, for example. So that's step number one is your is your annual expenses. Step number two is identify your fixed income sources. Often these are pensions. They could be social security, could be annuities. Those provide fixed income for you during your retirement years.

The third step is subtract number two from number one. So subtract your income sources from the expenses. And the answer you get there is the amount of income you need your portfolio to generate for you. Step number four, again simplified math, is divide that number by 4%. So let me give you an example.

Let's say your annual expenses are 200, 000 and your fixed income sources are 100, 000. That gives you 100, 000 you need to have from your portfolio. If you divide that by 4%, you need 2. 5 million. to retire, uh, very comfortably. And that would provide you with 100, 000 of investment income from your portfolio.

Now, why 4%? The rule of thumb is at 4%, you can take withdrawals against your portfolio for your lifetime and have a 99 percent chance of never running out of funds. Uh, we like the 4 percent rule very much here at Summit. Uh, we also allocate, uh, roughly 2. 5 to 3 percent toward inflation. So our target returns, uh, should be in the neighborhood of about 7%.

We feel like with that type of portfolio, we can generate enough income for you to take care of what your needs are. But provide you some increases in the future because inflation is going to be something we need to all reckon with. The final point I would like to make regarding this simplified math solution is that this is simple.

Your situation may be much more complex. Be sure to meet with your financial professional and take a look at some of those areas of your life that may be a little more complicated than this. Your fixed income sources, for example, uh, may not keep pace with inflation. Uh, social security often goes up very little compared to inflation.

And so factor that into your long term investment planning for retirement."


"Thanks for listening to a mini episode of the Reach Your Summit podcast by Summit Wealth Group. If you'd like to help support the podcast, please share with others and subscribe so you don't miss an episode. Thanks again."