What’s the Real Magic Retirement Number?

Our 2 Cents – Episode #172

What’s the Real Magic Retirement Number?

We are back this week with a pensive episode of Our 2 Cents with Steve and Gabriel. They take a deep dive in discovering the magic number for retirement and explore a new AI invention that will having you thinking! Listen in now using a link below!

  1. Gabriel’s Quotes of the Month:
    • “I’m going to retire and live off my savings. What I’ll do the second day, I have no idea.” – Unknown 
    • “A good plan, executed now, is better than a perfect plan next week.” – George Patton
  2. What’s the Real Magic Retirement Number?:
    • Discover that the magic retirement number is not what you may think.
    • People tend to overestimate the amount they need to retire, and we’ll share why that is.
    • We’ll discuss how you can calculate your own retirement number.
  3. Humane AI Pin:
    • Learn about the Humane AI Pin, a new artificial intelligence (AI) product designed to potentially replace your smartphone.

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Podcast Transcript

Announcer: You are listening to Our 2 Cents, with the team from SGL Financial, Building Wealth for Life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies and more.

Gabriel Lewit: Welcome back to Our 2 Cents everybody. You’ve got Gabriel Lewit here, Steve Lewit, and our production team in the background, doing a great job as always.

Steve Lewit: They should be singing a song, the company song.

Gabriel Lewit: They do keep us on task here-

Steve Lewit: They do.

Gabriel Lewit: For our do for our agendas for the show, and for our time horizons. They get the show going.

Steve Lewit: They are being task-masters this morning.

Gabriel Lewit: Yes, they do a good job. Well, we hope you’re having a great start to your day out there.

Steve Lewit: Or doing a great job, if you’re still working.

Gabriel Lewit: Whatever you’re doing, maybe you’re doing it well. We’ve got, I think, a great show, of course, lined up for you here today. Just to start things off because we haven’t done them in a little while. I thought we’d start off with a couple quotes.

Steve Lewit: Good. I love quotes.

Gabriel Lewit: I love some quotes here. Here’s one that jumped out to me when I saw it. It says, “I’m going to retire and live off my savings, what I’ll do on the second day, I have no idea.”

Steve Lewit: I love that.

Gabriel Lewit: Well, has anybody ever thought about what would you do if you had to spend a million dollars in a day?

Steve Lewit: Well, it just reminds me of another quote that I have to insert here. It’s like, “DO you know how to make a million dollars real quick?”

Gabriel Lewit: Win the lottery?

Steve Lewit: No.

Gabriel Lewit: I’m always bad at answering questions for jokes and riddles and stuff.

Steve Lewit: You invest very aggressively $2 million in the market.

Gabriel Lewit: I have heard that one before, yes. That’s a good one. I like that. Well, I was actually thinking about this the other day, I forget why, but it was talking about how… we were just talking about if Suze Orman here says you need $20, $30, $50, $100 million to live comfortably, I think I would argue about the word comfortably, which we’ll get into that a little bit later here today. If you had $100 million, and you earned 6%, which you could get guaranteed, you would have-

Steve Lewit: Now you can get it guaranteed.

Gabriel Lewit: $6 million for the year.

Steve Lewit: Yes.

Gabriel Lewit: Which, divided by 12 months, would be $500,000 per month.

Steve Lewit: I might be able to get by.

Gabriel Lewit: My question, I was talking to someone here, I was like-

Steve Lewit: What on earth would you buy?

Gabriel Lewit: What would you even buy with-

Steve Lewit: $500,000 a month?

Gabriel Lewit: I don’t know what you could buy.

Steve Lewit: Well, you start buying ships and boats.

Gabriel Lewit: Ships? So, you could buy a ship?

Steve Lewit: I guess you could buy a ship.

Gabriel Lewit: Finance your ship, I guess.

Steve Lewit: There’s one for sale that went into a bridge.

Gabriel Lewit: $100,000 of your money each month is a ship payment.

Steve Lewit: I guess I could think of what to buy, but it would be obscene.

Gabriel Lewit: I don’t think I could spend that much if I wanted to. You could buy a new house every month.

Steve Lewit: But here’s the deal, most lottery winners go broke.

Gabriel Lewit: Yeah, I don’t get it.

Steve Lewit: Well, they give away money. Everyone borrows from them. They think they’re super rich, and they’ll never run out of money, and they do.

Gabriel Lewit: Exactly. Well, who said that quote, by the way? The website I went to said unknown. He or she was a wise person.

Steve Lewit: I know him or her.

Gabriel Lewit: Yes.

Steve Lewit: Yes.

Gabriel Lewit: Now, the next one I’m going to just slightly tweak, because it’s a war quote from George Patton, I guess. “A good plan executed now,” I’m skipping a word. “A good plan executed now is better than a perfect plan next week.”

Steve Lewit: Yes, I like that.

Gabriel Lewit: What say you about that?

Steve Lewit: What say I? I say a good plan executed now… I agree. In other words, if you’re going to plan for next week when you could plan today, why are you waiting till next week?

Gabriel Lewit: Yeah, and obviously, I’m going to compare this to retirement planning. If you’ve been putting off your retirement plan, “I’ll get to it when I have the time. It’ll be better when I have the time next week, or next year,” but then you never do it-

Steve Lewit: Or never.

Gabriel Lewit: Because time goes by fast, and we have other things on our plates, so maybe now is the right time, and get started. The good news, at least if you work with SGL Financial, not only will now give you a good plan, it will give you a great plan now versus even a great plan later. Why have a great plan later if you could have a great plan now?

Steve Lewit: There’s a second page to that, Gabriel. The second page is, if you do a war plan, I’ve read a little bit about this, once the war starts, the plan goes out, not goes out the window, but everything changes.

Gabriel Lewit: Well, isn’t that a Mike Tyson quote?

Steve Lewit: Oh yeah, it is.

Gabriel Lewit: Everybody has a plan until you punch them in the face.

Steve Lewit: Until you punch them in the face, right.

Gabriel Lewit: Until you get punch in the face, yeah.

Steve Lewit: That is absolutely correct.

Gabriel Lewit: Yeah, I’ve heard that before.

Steve Lewit: Well, financial plans are not quite that violent, but financial plans are the same way. You have a retirement plan, but once you get into the game, things change. A plan has to have that flexibility in it to change with the times.

Gabriel Lewit: Well, I had a client who had a plan, and then all of a sudden, their mom had to come live with them because she was sick. That was not in the original plan that we had mapped out, for example. Sometimes life throws us curve balls, and a good plan and a good advisory relationship is going to be able to help you navigate those successfully in a way that, of course, maximizes your wealth.

Steve Lewit: Yep.

Gabriel Lewit: Those are just some quotes to kick off today, hope you enjoyed those. The other thing we’ll talk about in just a little bit, we’ll save it for last, is some interesting tidbits about AI. Going to give you some examples of how AI is-

Steve Lewit: That means Artificial Intelligence.

Gabriel Lewit: Artificial Intelligence, yes. It’s one of the buzzwords right now, so we’ll talk about a invention that somebody’s working on, and you’ll be the judge whether or not you think it has legs or not.

Steve Lewit: It must be an AI invention to monitor AI.

Gabriel Lewit: Nope.

Steve Lewit: I got that wrong?

Gabriel Lewit: Correct. It’s not correct.

Steve Lewit: Not correct.

Gabriel Lewit: To start things off, I mentioned last time on our show, last week, that we were going to talk about this magic retirement number.

Steve Lewit: Yes.

Gabriel Lewit: I was picking on Suze a little bit, where Suze Orman had said, and I’ve got her article here… she might’ve been specifically referencing the FIRE movement, it’s not clear, but she has a quote here. Hold on, let me just find it.

Steve Lewit: Now you have to explain what the FIRE movement is.

Gabriel Lewit: Well, the FIRE movement was Financial Independence, Retire Early, where people want to save up a large amount of money and then retire.

Steve Lewit: Real quick and retire at 40 or 50 years old.

Gabriel Lewit: Correct, yes. Sooner than most people would retire, at 60 or 65.

Steve Lewit: Like you and me.

Gabriel Lewit: Not happening.

Steve Lewit: Not happening.

Gabriel Lewit: Not me. No interest in that. She said, if you have $20, $30, $50 or $100 million dollars, be like me.” That was her exact quote. Her wealth enables her a lifestyle she believes is crucial to face the uncertain future without monetary stress. She’s implying you need to have $20, $30, $50 or $100 million dollars to not have monetary stress, which again, is where I would disagree.

Steve Lewit: We know people that have that kind of wealth and they are stressed out.

Gabriel Lewit: Well, yeah. Money doesn’t equate no stress. But at the same token, I have a handful of clients that have retired mid-fifties, early fifties, with well less than $20, $30, $50, $100 million dollars, and have done so very, very successfully. I think it all comes down to the plan that you have.

Steve Lewit: And the lifestyle you want. $20, $30 million, most people can pretty much spend whatever they want to spend and be happy about it.

Gabriel Lewit: Yeah. Well, let’s go back to our study here, the new magic retirement number. There is a study here done by Northwestern Mutual, lots of companies do studies, this is just the one we’re choosing to talk about here today. Their study showed that it would take somebody $1.46 million to retire comfortably, and that is up from what their study showed last year, $1.27 million.

Steve Lewit: I don’t know how they come up with these numbers. They call it a magic number, and I agree, it is a magic number. I don’t know where it comes… it’s like pulling a rabbit out of the hat. How do you pick $1.46 million? It depends on your lifestyle, and so many other things.

Gabriel Lewit: Well, there’s a quote here from someone named Teresa Ghilarducci, I’m probably not saying that right.

Steve Lewit: Terry.

Gabriel Lewit: Who’s an economist at the New School for Social Research in New York City.

Steve Lewit: Yep.

Gabriel Lewit: She says that people, which I would agree with, really don’t know how much money they will need in retirement, and often overestimate it.

Steve Lewit: She’s one of my peeps, and she’s absolutely right.

Gabriel Lewit: Teresa, we applaud you.

Steve Lewit: Yeah, we do.

Gabriel Lewit: Because I think you’re spot on.

Steve Lewit: Kudos to you.

Gabriel Lewit: Yeah. It’s interesting, I think I mentioned this last time, but I had a client that came to me recently, saying, “I need to have $3 million saved up.”

I said, “Well, where in the world did you get that number?”

Steve Lewit: Where did you get the number from? “I don’t know. I read about it.”

Gabriel Lewit: I just talked to a new client yesterday, and she says she has $1.5 million, and she needs to grow it very aggressively. I said, “Well, can I ask you a question?” She said, “Sure,” and I said, “Can you share with me, what is the main reason you’re growing this money, or want to grow it aggressively? I’m assuming, correct me if I’m wrong, that you feel it needs to be larger so that you can retire comfortably,” and she said yes. This goes back to what Teresa here in this article said. I don’t know where she got that number, that idea that maybe $1.5 million is not enough, but she didn’t have a plan yet. She hadn’t assessed it or analyzed it. She hasn’t looked at different income strategies. She has, really, no clue whether or not that money is going to be enough for her.

Steve Lewit: That’s right.

Gabriel Lewit: That is the very first step to figure out. Is where I’m at today, or on track to be at, sufficient for me? You might have all the money you need. I had another client, I felt so bad, he had $1 million, came to me a couple of years ago, was very aggressive, and we’re a little more conservative. We have aggressive options, don’t get me wrong, but most of our clients are retirement age. They want to be a bit more conservative. I suggested to him, maybe you should take some of these winnings he’s made off the table, and he didn’t, and a couple of years later he had mentioned to me he had lost a lot of money, and now, he was going to have to push back his retirement because of the losses he had sustained.

I think this goes back to a couple of things. One, let’s figure out how much you really need. If you’ve got enough to retire, in other words, if you’ve won the football game, if you’re ahead, maybe it’s time to not throw Hail Mary passes, and risky plays that can be intercepted, or don’t go for things that’ll result in a fumble. Play it safe when you’ve already got the game won in hand.

Steve Lewit: Gabriel, how many times do we say to a client, “you’ve won the game.” The game is over, you’ve won, you’re celebrating. You got the champagne open in the clubhouse, and they turn to you and say, “Did I really? I don’t think I won the game.”

Gabriel Lewit: People are very skeptical to think that they have enough money, and I think that’s human psychology. It’s why people always think they need more and more and more. Part of what we do is… there’s a chance you might need more. Don’t get me wrong. I’m not saying everybody listening here is ready to retire.

Steve Lewit: Some people need more, but a lot of people come in and say, “I think I need more,” when they don’t.

Gabriel Lewit: And that’s of the first things we figure out, is how much you really need. That’s what we’re going to talk about here. How do we figure out how much you need, whether or not you have enough or not enough? It’s really designed through various income strategies. In other words, how much you need to have saved will vastly vary depending on what future retirement income strategy you choose to use. Now, let that sink in a little bit.

Steve Lewit: And the quality of life.

Gabriel Lewit: That’s why a magic number is so hard to be a magic number, because what possible way could these 4,600, however many people that did this survey, they could all be planning very, very differently for their income, so that could make this number be vastly different for every single person.

Steve Lewit: You have to explain efficiency and using money to produce income-

Gabriel Lewit: I will explain it.

Steve Lewit: Really clearly at this moment.

Gabriel Lewit: Yes, I will.

Steve Lewit: Okay.

Gabriel Lewit: I will, but hopefully everyone’s with me so far.

Steve Lewit: Don’t change your plan to the next moment. You have to do it this moment.

Gabriel Lewit: I will. Just to recap so far, we’ve talked about the magic number, supposedly, is $1.46 million. Sorry, Suze. It’s a little less than $20 million. Now, I do still like some of Suze’s advice, by the way. I just think she got taken out of context on that one.

Steve Lewit: She must have been.

Gabriel Lewit: Or caught off guard on her quote, I think. The question is, is that really a magic number? I don’t think so. We’re going to talk to you about how to actually calculate what number you may really need, and unfortunately, it’s not a quick, simple number to calculate. That’s step one, is understanding, to do it right, you’ve got to follow a systematic process. Unfortunately, it’s not one of those calculators where you just take a percentage of your income multiplied by a certain number of years, and I’ll give you examples why. What you want to do, step number one to calculate how much you need to have saved is, you have to have a budget for what you think your future retirement lifestyle will look like.

Steve Lewit: All right.

Gabriel Lewit: That’s step one.

Steve Lewit: My budget is $100,000 a year I’m going to spend.

Gabriel Lewit: What a lot of people say is, that’s what I’m spending right now.

Steve Lewit: Yeah.

Gabriel Lewit: To spend just a tiny bit of time on this, to do it the right way, you have to not only start with where you’re spending today, but then assess, will all those expenses be there in the future? What will be in my budget in the future that’s not here today?

Steve Lewit: For example, travel.

Gabriel Lewit: Extra travel, extra healthcare.

Steve Lewit: Money to the grandkids.

Gabriel Lewit: Or what won’t be in my budget in the future that is in my budget today, like my mortgage, or a car payment, or a handful of other things.

Steve Lewit: Yes.

Gabriel Lewit: That’s going to give us our target retirement lifestyle, because our income we need for retirement is not based on our budget today but is based on our future budget when we retire.

Steve Lewit: Yes.

Gabriel Lewit: Now, if you’re already retired today, that’s a little easier. You just have the one step, which is, what are you spending today?

Steve Lewit: Yes.

Gabriel Lewit: But then, if you’re already retired, you’re not trying to figure out how much you need to retire.

Steve Lewit: Yes. I’m yessing you.

Gabriel Lewit: Yes. You are a yes man right now.

Steve Lewit: Right now I am. I agree with everything you’re saying.

Gabriel Lewit: Okay, so step two-

Steve Lewit: You still haven’t gotten to money efficiency.

Gabriel Lewit: I’m absolutely getting there. I’m absolutely going to get there.

Steve Lewit: You’re meandering.

Gabriel Lewit: I’m painting the story, sir.

Steve Lewit: You’re setting up the scene.

Gabriel Lewit: Yes.

Steve Lewit: Like a movie producer.

Gabriel Lewit: We’re building this brick by brick here.

Steve Lewit: Yes, I’ve got it.

Gabriel Lewit: Okay. So, part two is, then you have to project a forward-looking cash flow for retirement.

Steve Lewit: What does that mean?

Gabriel Lewit: Cash flow is going to be a combination of your income and your expenses, showing you what your net surplus or deficit is in any given year.

Steve Lewit: Do I have enough, or am I short?

Gabriel Lewit: Let me give you a quick example. Your budget is $75,000 a year, and you have $40,000 a year from Social Security coming in, your wife is going to have $20,000. You have $60,000 coming in, no pension, $60,000 coming in, and you need $75,000.

Steve Lewit: $60,000 coming in less taxes.

Gabriel Lewit: Less taxes.

Steve Lewit: Now you’ve got $50,000 coming in.

Gabriel Lewit: $50,000 coming in.

Steve Lewit: And you’re spending $75,000.

Gabriel Lewit: Spending $75.000.

Steve Lewit: So, you are short $25,000. That has to come from where?

Gabriel Lewit: Your investments.

Steve Lewit: Somewhere.

Gabriel Lewit: Somewhere, yes.

Steve Lewit: Savings, investments, something.

Gabriel Lewit: That is step one, creating a cash flow is just plugging in numbers like that, but then you have to do it year by year, because those cash flows can vary. What if you’re older or younger than your spouse? They start their Social Security sooner, you start yours later, you have a small pension that kicks in in 10 years.

Steve Lewit: You’ve got a wedding coming up. You buy a new car, you need a new roof on the house, new windows.

Gabriel Lewit: It’s very hard for it to be just one simple, easy number. We have to go through that process of really mapping it out and modeling it, and then we’ll see very clearly… here’s the key. If the budget is accurate, we can feel very, very confident in this forward-looking cash flow.

Steve Lewit: Okay.

Gabriel Lewit: This will give us exactly how much money we’re going to need to draw from our investments year over year, going forward for the next 20 plus years.

Steve Lewit: Gabriel, you’re a mean budget machine. You like to get those budgets to the penny.

Gabriel Lewit: Here’s why. If we haven’t solidified the budget, and confirmed that it’s accurate, and it turns out that you’re spending $20,000 more, or $15,000 more than we actually thought, then everything we’re trying to solve for is wrong. I could say you need $1.5 million to spend $75,000 a year. If you’re actually spending $95,000, you would need a higher amount. For example, your plan would be very off track if we didn’t have that confirmed.

Steve Lewit: Agreed.

Gabriel Lewit: It’s important to confirm it.

Steve Lewit: I’m yessing you again.

Gabriel Lewit: All right, so that’s all part one, just creating your cash flow, and we’ll get a sense of how much we need to generate from our portfolio each and every year. Now, we’re pretty close to getting to where you wanted to get to, which is how much money you need to have saved.

Steve Lewit: Which you promised you would tell us about eventually.

Gabriel Lewit: Let’s say that you need $25,000 a year plus inflation to draw from your portfolio for the next 20 years, 25 years, let’s say. We can now figure out, how much money do I need to generate that $25,000 a year? I’m going to start off with a very simple rule, which is very traditional. This is one that you probably have heard about before. If not, if you Google it, tons and tons of articles are going to pop up. It’s called a 4%-

Steve Lewit: 3.5% now.

Gabriel Lewit: It’s still called the 4% rule.

Steve Lewit: Okay.

Gabriel Lewit: We’ll talk about that in a second. It’s called the 4% rule, and what it says is, if I need to generate $25,000 a year plus inflation over my lifetime, I need to take no more than a 4% withdrawal rate from my portfolio to generate that amount of money. I’ll take $25,000 here, divide it by 4%. I would need, in this case, $625,000 to generate that $25,000 a year plus inflation for the rest of my life.

Steve Lewit: What that means, folks, is that you have to take $625,000 out of your assets, earmark it for your income, and take 4%, invest it in a 60/40 portfolio, which is what the 4% rule is based on, which is really now a 3.5% rule, which would mean you need more money, but let’s use the 4%. Earmark that, put it on the side, just let that money work and take 4% out every year.

Gabriel Lewit: I’m going to explain what Steve means by earmark, because let’s say you have that $625,000, it’s generating you 4% of that, $25,000 a year, and then you take $100,000 to go buy your dream Chevy Corvette.

Steve Lewit: I like it. A good choice. I like it.

Gabriel Lewit: A convertible Corvette.

Steve Lewit: I like it.

Gabriel Lewit: Now, you have $525,000, and you’re saying, “I’m going to take out of that my same $25,000,” so $25,000 out of $525,000 is now a 4.8% withdrawal rate.

Steve Lewit: Oops, I’m too high. I’m going to run out of money because it’s higher than the safe money withdrawn.

Gabriel Lewit: Now you’re taking out a higher than a safe withdrawal rate, which is going to greatly increase the likelihood of you running out of money in retirement. Instead, you’d have to take 4% of $525,000, which would be $525,000 times 0.04. Hold on, 525… I did this wrong.

Steve Lewit: This is hard. Folks, this is very hard calculations for a financial advisor.

Gabriel Lewit: $21,000.

Steve Lewit: Good job, he did it. Round of applause.

Gabriel Lewit: I used my calculator.

Steve Lewit: Good for you.

Gabriel Lewit: Now, you get $4,000 a year less.

Steve Lewit: Yeah.

Gabriel Lewit: The point is, if you’ve got your money earmarked, you can’t actually use it.

Steve Lewit: Well, you’re using it for income.

Gabriel Lewit: Well yeah, it’s earmarked for the rest of your life for income. You can’t take a big chunk of it today and go spend it.

Steve Lewit: And go play, yeah.

Gabriel Lewit: You can’t touch it, because if you touch it, you generate less income.

Steve Lewit: If you have $625,000… let’s put it this way, Gabriel. If you have $625,000, and that’s all you have, and you have that shortfall of 4%, you have no play money. All that money you have has to go to your income, otherwise, you have to lower your lifestyle.

Gabriel Lewit: Yes.

Steve Lewit: Okay, so we’ve got that.

Gabriel Lewit: Can I add another layer of complexity to this?

Steve Lewit: Yes, you can.

Gabriel Lewit: Folks, hopefully you’ve been following this, but the other trick is, what if that $25,000 that we’re being required to generate from our portfolio is coming from where most people have their money, which is a 401k?

Steve Lewit: Or IRA?

Gabriel Lewit: Or an IRA?

Steve Lewit: 457?

Gabriel Lewit: Pre-tax, typically. Well, remember, we need $25,000 net to pay our bills. All bills and expenses are paid with after-tax dollars. To generate $25,000, if you’re in the 20% tax bracket, you actually have to take out $31,250. Let me give you the quick math. $31,250 reduced by 20% in taxes, it goes right to the IRS when you take the withdrawal, leaves you with your $25,000 that you need for income.

Steve Lewit: If I have to take out $31,000, my number isn’t $625,000 anymore.

Gabriel Lewit: No, it isn’t.

Steve Lewit: What is it?

Gabriel Lewit: $31,250 divided by 0.04, you now have to have $781,000 earmarked of your 401k or IRA to generate your retirement income, using the 4% rule.

Steve Lewit: This is a very simple, traditional approach that many people use. They use the 4% rule. Some people suggest it’s a 35% rule. Gabriel, using your magic calculator-

Gabriel Lewit: My iPhone.

Steve Lewit: If it were 3.5% withdrawal, and I needed to take $31,000 out, how much would I need?

Gabriel Lewit: At a 3.5%?

Steve Lewit: Yep.

Gabriel Lewit: You would then need $892,000.

Steve Lewit: You see what’s happening here, folks? We’re calculating the need based on the income and the withdrawal, how the money is withdrawn for income.

Gabriel Lewit: Yes.

Steve Lewit: You can’t say, okay-

Gabriel Lewit: We’re working backwards.

Steve Lewit: Well, we’re actually working forwards. Working backwards-

Gabriel Lewit: Backwards from working forward.

Steve Lewit: Yeah, working backwards is saying, “I need $1,400,000,” when we don’t know. We’re calculating that number.

Gabriel Lewit: Well, we’re trying to figure out how much we need to have saved based on how much we’re going to need in the future.

Steve Lewit: Now, Gabriel is going to talk to us about income efficiency.

Gabriel Lewit: Well, now we have all the building blocks we need to understand-

Steve Lewit: The bricks.

Gabriel Lewit: The bricks to understand income efficiency here. Just to recap, if you get 4%-

Steve Lewit: You’re going to recap, now.

Gabriel Lewit: If you get 4% from your investments, you need less money earmarked for income than if you get a 3.5% withdrawal rate.

Steve Lewit: Is this called building drama?

Gabriel Lewit: Now, let’s say you could get a 5.5% withdrawal rate from your portfolio.

Steve Lewit: Here we go, finally.

Gabriel Lewit: We need $31,250 divided by…You would only need $568,000 to generate the income that you need.

Steve Lewit: If I go from a 3.5% withdrawal rate to a 5.5% withdrawal rate-

Gabriel Lewit: I need $300,000 less.

Steve Lewit: Less money-

Gabriel Lewit: Earmarked.

Steve Lewit: And that’s called income efficiency. It’s finding a way to get higher withdrawal rates more safely. You need less money to sustain yourself, and then the extra money becomes never use money.

Gabriel Lewit: Yeah, let’s talk about the leftover money. Let’s say, for example, you have $1 million. We’ve now decided, if you get a 5.5% withdrawal rate, you need to have $560,000 earmarked, versus a 3.5% withdrawal rate, you needed basically $900,000 a earmarked.

Steve Lewit: Yep.

Gabriel Lewit: One of those leaves you with $450,000 of extra reserve money, and the other approach leaves you with $100,000.

Steve Lewit: Which one would you prefer? Hard choice, multiple choice. Tough decision.

Gabriel Lewit: Yes. Well, I think I would choose-

Steve Lewit: Unless, for people that don’t playing and traveling and golfing, and giving gifts away.

Gabriel Lewit: Or if they want to have more financial stress because they have less wiggle room. Here’s what this all means. A higher, more efficient withdrawal rate that you can get, and this is done through proper income planning, and different strategies… and by the way, this is possible. You can get 5.5% safe withdrawal rates not using a traditional approach, but using some of the alternative approaches that we use day in, day out here, and do so with safety and security and predictability, and everything that you would like from your retirement income plan.

Steve Lewit: That’s correct.

Gabriel Lewit: And, here’s what’s so interesting about this. Not only is it a safer way of generating income, you also have more play money left over, which, if you wanted to, you can invest more aggressively because you have your money for income already earmarked.

Steve Lewit: Now, if you want to go play, you go play. You can play in the market, you can play with crypto, you can play whatever you want. You can spend it.

Gabriel Lewit: Or you spend it.

Steve Lewit: You can gift it away or give it to charities. It’s really play money. You can do whatever you want with that money.

Gabriel Lewit: All started with more income efficiency. To circle all the way back to where we started, we will figure out what your actual magic number is for retirement for you, based on your future income strategy that you’re going to use, personalized and exact for your cash flow needs and future retirement projections.

Steve Lewit: Folks, that’s where we find, with all of our clients, you get, really, a tremendous amount of peace of mind, because you see it all on paper. You see your goals, you see where your income is coming from. You know that you’re using a very efficient way because we compare them all, so you can see the efficiency, and then you have that extra money. In our world, we’re hoping you can put your head on the pillow at night and you go to sleep, and you don’t worry about your income.

Gabriel Lewit: If we find out that you already have the game won, well, we’ll tell you that, and say, “Hey, you have the game won. Now, let’s win it. Let’s not take extra risks. Let’s not throw interceptions, let’s not fumble the football. We have the game won.”

Steve Lewit: Are we going to give our, how do you spend money classes on Sundays, that you and I were talking about, for folks that have the game won and could spend double what they’re spending but won’t spend it? Are we going to do that?

Gabriel Lewit: Well, we could take them shopping and say, “Take your credit card and you swipe it, and you walk out with the bag.”

Steve Lewit: We should have the SGL shopping club.

Gabriel Lewit: With the bag of items that you’ve purchased, if you feel like being material. If you just want to donate it all to charity, you could spend it that way, too.

Steve Lewit: For sure.

Gabriel Lewit: All right, so I mentioned we would end today’s show… actually, before that, if you have questions on that, call us, of course, (847) 499-3330, or go to our website, sglfinancial.com, or email us any questions, thoughts, comments at info@sglfinancial.com. We would love to hear from you. Hopefully, you found this topic of income efficiency very interesting, because it really is at the crux of good financial planning.

Steve Lewit: For sure.

Gabriel Lewit: Yep. Okay. All right, so to end today’s show, I talked about AI. Apparently, there’s a company coming out with what they are hoping is the smartphone killer, but it’s probably not going to be. Sorry, I started off with a little bias, here. It’s called the Humane AI Pin. Now, it’s supposed to pin to your clothes.

Steve Lewit: Humane? You said Humane?

Gabriel Lewit: That’s what it says. It says, “Humane.” Not human, but Humane.

Steve Lewit: Humane, folks.

Gabriel Lewit: It looks like an Apple Watch without the band.

Steve Lewit: Oh, a little square thing?

Gabriel Lewit: A little square thing with the screen pinned to your shirt. It actually looks quite ridiculous, if you look up the pictures, and I don’t think anybody in their right mind would want to wear one, personally, but that’s just me. I think that’s a bad start for the Humane AI Pin.

Steve Lewit: They could always implant it in your skin, or something.

Gabriel Lewit: Well, that would be pretty darn weird, too. Then, you’d have to walk around without a shirt, to utilize its features. The idea here was, let’s say people are feeling burned out about their phones, and the screens, and they just want the help of AI at their fingertips.

Steve Lewit: Connectivity, yeah.

Gabriel Lewit: You’re connected to the AI world.

Steve Lewit: Yes.

Gabriel Lewit: What you do is, you can tap on this pin and speak to it, and it does cool things for you.

Steve Lewit: Does it give directions?

Gabriel Lewit: Yeah, it could speak to you directions.

Steve Lewit: Does it do massage therapy?

Gabriel Lewit: You can even talk to it, and you can ask it what it’s seeing, and it’ll tell you what it sees. I don’t know when you would ever use that, but it’s cool. Maybe it’s nighttime, and it has infrared vision, and you can ask it to see ahead of you in the nighttime.

Steve Lewit: I’m trying to imagine this, and I’m not coming up with much. I have a pretty good imagination.

Gabriel Lewit: The CEO says you can use it to make phone calls and send text messages, but we already do that.

Steve Lewit: Well, it’d be nice to have something where you just… can’t you do that on your wrist?

Gabriel Lewit: Well, yeah.

Steve Lewit: I am not getting this.

Gabriel Lewit: Well, neither does the person writing the article.

Steve Lewit: Oh, really? They don’t see much of a future in this, either?

Gabriel Lewit: It’s always hard. How do you become the next big thing? You’ve got to try to reinvent yourself.

Steve Lewit: Well, I don’t think you can plan to be the next big thing. I think that those things just happen. Does this company have a lot of money, or is it a hot stock?

Gabriel Lewit: Some ex-Apple designers, or something like that started it.

Steve Lewit: Right.

Gabriel Lewit: Supposedly, you can use it to translate. That was one of the big-

Steve Lewit: Well, I guess if you’re in a foreign country, that would be nice.

Gabriel Lewit: I think you can speak to it, and then it’ll speak to the person that you’re talking to.

Steve Lewit: Talk to my hand. Talk to my lapel.

Gabriel Lewit: If you need a screen, it can beam pictures to your palm. You hold your palm out in front of it, and it will beam pictures to it. For what purpose, I don’t know.

Steve Lewit: It’s interesting, though.

Gabriel Lewit: Of course, it’s filled with AI, so you just talk to it, and it tells you everything using AI. It’s your AI assistant friend pinned to your shirt, and you can even have long, drawn-out conversations with it. “How was your day?”

“Great, I went to the park,” because it would know where it went.

Steve Lewit: Is this on the market? Can I buy one?

Gabriel Lewit: I think it’s 1.0 version, you can buy it right now.

Steve Lewit: How much is it?

Gabriel Lewit: I think it says $800-

Steve Lewit: No.

Gabriel Lewit: Yeah, $800 plus $24 a month for a subscription.

Steve Lewit: What?

Gabriel Lewit: Yeah.

Steve Lewit: To talk to an AI machine?

Gabriel Lewit: Well, this is the future.

Steve Lewit: No.

Gabriel Lewit: This is why people are pumping up AI stocks, man.

Steve Lewit: No. Do not buy this company, no.

Gabriel Lewit: I feel bad.

Steve Lewit: No.

Gabriel Lewit: Yeah, I’m not sure what it’s supposed to be for.

Steve Lewit: What does the writer in the article say?

Gabriel Lewit: They say that it’s “sleek and beautiful.” The fact that it can tell you what it’s looking at is cool. Apparently, it can look at your lunch and tell you how many calories are in the food that you’re eating.

Steve Lewit: Oh, that’s cool. See, I would use that.

Gabriel Lewit: I bet you that cannot be accurate.

Steve Lewit: I would use that.

Gabriel Lewit: How would it possibly know?

Steve Lewit: If it’s a McDonald’s-

Gabriel Lewit: If it’s a boxed meal that you get anywhere, like a McDonald’s burger.

Steve Lewit: Well, it could look at the plate and say, there’s a rib eye and mashed potatoes, and french fries. Does it tell you if you’re hungry or not?

Gabriel Lewit: Well, how does it know if it’s cooked in low-fat oil versus high-fat oil? You can’t know that.

Steve Lewit: I agree. $800.

Gabriel Lewit: People are coming up with AI glasses now. Google has tried to do this, and-

Steve Lewit: Failed miserably.

Gabriel Lewit: I don’t know. It’s going to be an interesting world with this AI. I think it’s starting off with all this hope.

Steve Lewit: Let me ask you a question. Do you use AI in any of your searches on the internet?

Gabriel Lewit: I don’t, and here’s why. There’s still a very high percentage of time when the answer it gives is wrong.

Steve Lewit: That’s exactly right.

Gabriel Lewit: The moment you realize it’s not reliable, then you just get past it to go to the actual sources that it might be pulling from, and just make your own conclusion. I’m not going to just blindly trust an AI robot that says, “Drive off this bridge that’s not here.” I’m not going to follow it blindly. I’m going to do my own research.

Steve Lewit: That’s what happens with me. I get the AI first when I go onto the web, I get the AI and I say, “Well, that’s not enough,” and then I go down below like I would normally do anyway.

Gabriel Lewit: It’s going to be interesting. I don’t know, I think it might end up being a phase, and a fad. I hate to say it. It’s definitely cool. Then there’s the guy out there that’s 99.9% convinced that AI will become the end of humanity as we know it. Given the risk there, maybe we just pull back the reins on it a little.

Steve Lewit: He needs a wearable to tell him the truth.

Gabriel Lewit: Well, who knows, man?

Steve Lewit: Folks-

Gabriel Lewit: Now, there are supposedly uses for it. AI can write code almost as well as human coders.

Steve Lewit: That I could see.

Gabriel Lewit: That’s cool.

Steve Lewit: That I could see.

Gabriel Lewit: That’s also the scary part because that’s how it’s going to take over the world. It can then code its own robot machines.

Steve Lewit: What have you been reading, honey?

Gabriel Lewit: I’m just telling you, man.

Steve Lewit: What have you-

Gabriel Lewit: Just Googling.

Steve Lewit: Are you sleeping at night?

Gabriel Lewit: We’re going down the AI rabbit hole here.

Steve Lewit: The AI revolution is here.

Gabriel Lewit: I don’t really believe that, but I think it needs to be monitored by somebody. I don’t know who. Not me, I don’t have any control over it.

Steve Lewit: Well, it is. Look, everything has plus and a minus, right?

Gabriel Lewit: Yeah.

Steve Lewit: AI is the same way.

Gabriel Lewit: And Suze thinks that 25% of your jobs will be eliminated in the future due to AI, was also in her article.

Steve Lewit: She said that?

Gabriel Lewit: Yeah.

Steve Lewit: Well, that and $1.4- to retire.

Gabriel Lewit: $20 million.

Steve Lewit: $20 million to retirement fall in the same category.

Gabriel Lewit: We’re just having some fun here.

Steve Lewit: Yeah, man.

Gabriel Lewit: All right. Well, that’s our show for us today. Hope you had a good time here with us today. If you have any questions, call us at (847) 499-3330. If you want to comment about how you feel about AI, we’d love to hear your thoughts. We’ll share those on the next show.

Steve Lewit: Do you think AI could do this show?

Gabriel Lewit: Well, it can replicate voices.

Steve Lewit: It can.

Gabriel Lewit: And then it could analyze our speaking patterns and mannerisms.

Steve Lewit: But not our sense of humor.

Gabriel Lewit: Who knows? There was an entire, was it a Simpsons, or South Park? I forget what it was. There was an entire, I think it was South Park episode written by AI.

Steve Lewit: And nobody knew the difference?

Gabriel Lewit: And it was surprisingly, actually humorous. There was a whole thing on, I think it was South Park, I’d have to Google it. Yeah, pretty crazy stuff.

Steve Lewit: Can we have AI clients?

Gabriel Lewit: I don’t think AI has money, though. There’s your problem.

Steve Lewit: There you go.

Gabriel Lewit: No money to invest.

Steve Lewit: Everybody, you stay well.

Gabriel Lewit: Okay, stay well. Have a great day. We’ll talk to you soon.

Steve Lewit: Bye now.

Gabriel Lewit: Bye.

Announcer: Thanks for listening to Our 2 Cents, with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330, or visit us on the web at sglfinancial.com. Be sure to subscribe to join us on next week’s episode.

Prerecorded Voice: Investment Advisory Services are offered through SGL Financial, LLC, an SEC Registered Investment Advisor. Insurance and other financial products are offered separately through individually licensed and appointed agents.