How long would $500k last you?

@budgeters_anonymous

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Why it worked

The video uses a relatable question about retirement savings and provides clear, easy-to-understand calculations for different spending scenarios. The visual aid of writing on a sticky note makes the information digestible and engaging, prompting viewers to consider their own financial future.

Summary

This video calculates how long $500,000 would last in retirement based on different monthly spending amounts. It highlights that with a conservative withdrawal rate and investment growth, the money could last indefinitely, while aggressive spending significantly shortens its duration.

Structure

1Introduction: How long would $500k last in retirement?
2Calculation based on median salary and after-tax income.
3Scenario 1: Spending $48k/year without investment growth.
4Scenario 2: Investing in the stock market with assumed growth rates.
5Scenario 3: Realistic withdrawal rate of 5% ($25k/year).
6Scenarios with increasing monthly withdrawals ($3k, $4k, $5k, $10k, $15k) and their impact on duration.

Product placement

The video discusses investing in the stock market, specifically mentioning 'SPY' which refers to the SPDR S&P 500 ETF Trust, a common investment vehicle. This is mentioned as a way to grow money for retirement.

On-screen text

How long would $500k last you? SALARY IS $60,000 PER YEAR. AFTER TAXES, THAT'S PROBABLY CLOSER TO LIKE $48,000 A YEAR. $500k = 125 month (10.5 yrs) SPY = 11% 8% = $40k/yr 5% = $25k/yr $3k/mo $3k/mo = 29 years $4k/mo = 21 yrs $5k/mo = 15 yrs $10k/mo = 6 yrs $15k/mo = 3 yrs

Original caption

#retirement #retire #retirementplanning

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Transcript

How long would $500k last you? This is how long that $500,000 would last you during retirement. Today the median salary is $60,000 per year. After taxes, that's probably closer to like $48,000 a year. If you were to spend $48,000 per year, it would take you about 125 months to completely for about ten and a half years. Any normal person would keep this money invested. Just keeping this in the stock market means that it'll grow at 11% a year, 8% if you factor in inflation. So you would be able to technically spend $40,000 per year without that balance ever going away. But you do have to account for market downturns and an increased cost of living, and so it's probably more realistic to withdraw 5% of this balance. Really, you could withdraw $25,000 per year and this money would last forever. Let's say that $25,000 a year is enough money. Well, if instead you were to withdraw $3,000 per month, means that your money would actually last about 29 years. Basically all of retirement. $4,000 a month, this would drop down to 21 years. At $5,000 per month, this would actually drop down to 15 years. Got really aggressive and you went for $10,000 a month. Compound interest would have almost no effect, and you would have no money in about six years. If you set it up to $15,000 a month, compound interest would basically do nothing and you would have no money in three years.