Winning Financially in 2025: Setting Yourself Up For Retirement

Summary

Summary of "Winning Financially in 2025: Setting Yourself Up For Retirement"

Podcast: Money Rehab with Nicole Lapin
Host/Author: Money News Network
Release Date: January 8, 2025

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Introduction

In the January 8, 2025 episode of Money Rehab with Nicole Lapin, host Nicole Lapin delves into the critical topic of retirement planning. Acknowledging the often daunting nature of preparing for retirement, Nicole provides listeners with actionable strategies to set themselves up for a financially secure future. This episode is particularly valuable for individuals seeking clarity on how much to save and how to structure their retirement goals effectively.

Understanding Retirement Needs

Nicole begins by emphasizing the importance of knowing how much you'll need for retirement. She introduces listener Mara's question about determining adequate retirement savings, which serves as the episode's catalyst.

“[...] the very first step in making a successful retirement plan is to know how much you'll actually need for retirement.”
— Nicole Lapin [03:18]

Three Levels of Retirement Wealth

Drawing from her upcoming book, Ms. Independent Mara, Nicole outlines three distinct levels of retirement wealth:

1. Rich Enough: Covers all basic expenses without extras.

   “Think of the brown rice and beans diet.”
   — Nicole Lapin [02:42]

2. Pretty Rich: Maintains current lifestyle with occasional splurges.

   “Being pretty rich in retirement allows you to live comfortably with some indulgences...”
   — Nicole Lapin [02:42]

3. Super Rich: Possesses more than enough to live extravagantly.

   “Super rich level which entails having more money than you can reasonably spend, AKA baller status.”
   — Nicole Lapin [02:42]

Steps to Calculate Retirement Savings

Nicole provides a step-by-step guide to calculating the necessary retirement funds for each wealth level:

1. Rich Enough Budget:

   • List all essential monthly expenses.
   • Multiply the total by 12 to get the annual** rich enough budget.**

   “[...] write down all of the monthly expenses in your bare bones budget.”
   — Nicole Lapin [03:34]

2. Pretty Rich Budget:

   • Start with the rich enough budget.
   • Add mid-level financial treats (e.g., dining out, gym memberships).
   • Multiply the extras by 12 and add to the rich enough annual budget.

   “Your pretty rich budget is going to be your rich enough budget plus some pretty rich extras.”
   — Nicole Lapin [03:34]

3. Super Rich Budget:

   • Begin with the pretty rich annual expenses.
   • Add high-ticket items (e.g., vacation homes, yachts).
   • Multiply the total monthly costs by 12.

   “Estimate how much per month you think you'd shell out to maintain that fleet of jet skis.”
   — Nicole Lapin [03:34]

Realistic Goal Setting

Nicole underscores the necessity of a realistic retirement roadmap:

• Determine Retirement Duration: Typically, plan for 20 to 30 non-working years.

  “I recommend that they anticipate spending 20 non-working years in retirement.”
  — Nicole Lapin [04:20]

• Compute Total Savings:

  • Multiply each annual budget by the number of retirement years.
  • Example calculations provided for median household incomes and varying lifestyles.

  “The median household income in the United States is about $63,000 a year before taxes... we get $600,000.”
  — Nicole Lapin [04:20]

Strategies Beyond Savings

Concluding her financial breakdown, Nicole advises leveraging additional financial strategies beyond mere savings:

• Investment Vehicles: Utilize index funds and retirement accounts.

  “Make part of your retirement nest egg through index funds and chilling...”
  — Nicole Lapin [05:00]

• Compound Interest and Investment Gains: Emphasize the power of compound growth in building retirement wealth.

  “…with the beautiful, beautiful forces of compound interest and investment gains.”
  — Nicole Lapin [05:00]

Conclusion

Nicole Lapin's episode serves as a comprehensive guide for listeners aiming to secure their financial futures. By categorizing retirement goals into three distinct levels and providing a clear methodology for calculating necessary savings, Nicole demystifies the often complex process of retirement planning. She reinforces the importance of early and strategic financial planning, encouraging listeners to take actionable steps toward achieving their desired retirement lifestyle.

“Remember, this is your retirement budget we're talking about. You won't be working. That's kind of the point.”
— Nicole Lapin [05:00]

Listeners are left with a practical roadmap and the motivation to engage proactively with their retirement planning, ensuring they can enjoy their post-working years with financial peace of mind.

Transcript

[Nicole Lapin]

Money rehabbers. You know, I'm all about adding more streams of income and one of my favorite ways to bring in some extra cash is hosting on Airbnb. But when I recommend hosting on Airbnb, some people tell me they get overwhelmed.

[Morgan]

By the idea of being a host.

[Nicole Lapin]

Or they feel like it would be too complicated if say they want to put their investment home on Airbnb but they live full time across the country. I mean, you just can't go back and forth every time you need to change the sheets for your guests. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co host network which is a network of high quality local hosts with Airbnb experience that can take care of your home and your guests. Co hosts can do what you don't have time for, like managing your reservations, messaging guests, giving support at the property, or even creating the listing for you. When I'm hosting, I always want my house to look Architectural Digest esque amazing. But with how busy I am, it always feels like a scramble to get the house ready. So I will definitely find a co host that specializes in cleaning and staging and all the nice things. Net net. I'm matching with a co host so I can still make the extra cash while also making it easy on myself. And you should too. Find a co [e-mail] host nerds hey.

[Maren]

Guys, if you're anything like me, you've got a lot on your plate this new year. You've got college reunions to plan, what feels like 100 destination weddings to book travel for, and a gym membership that just needs to be used like once or twice. Good thing our sponsor NerdWallet is here to take one thing off your plate. Finding the best financial products. Introducing NerdWallet's 2025 Best of Awards. List your shortcut to the best credit cards, savings accounts, and more. The nerds have done the work for you, researching and reviewing over 1100 financial products to bring you only the best of the best. Looking for a lower rate on your auto insurance? They've got a winner for that. Or a balance transfer credit card with a 0% APR. They've got a winner for that too. Know you're getting the best products for you without doing all that research yourself. So let NerdWallet do the heavy lifting for your finances this year and head over to their 2025 Best of Awards at NerdWallet.com awards to find the best financial products today.

[Nicole Lapin]

I'm Nicole Lapin the only financial expert.

[Morgan]

You don't need a dictionary to understand it's time for some Money Rehab.

[Maren]

Hey, it's Morgan, the executive producer of the show and as you know, this week we are playing the Money Rehab episodes that will make the biggest difference to help you meet your financial goals in 2025. Today's episode is all about saving for retirement.

[Morgan]

Enjoy. In the financial world, retirement is a really big deal. So it's a really big deal here on Money Reh as well. Naturally, I have covered it on the show, like in episode 136, the Secret Way to Snag a Roth and episode 63, choose your fighter, 401K or Roth IRA. But the very first step in making a successful retirement plan is to know how much you'll actually need for retirement. Money Rehabber Mara wants to know exactly how the heck to make that prediction. Here she is.

[D]

Hey Nicole, My name is Maren. After listening to some Money Rehab, I'm ready to get serious about planning for retirement. I started making contributions to my 401k, but I'm not sure if I'm contributing enough because I'm not sure how much I should save for retirement in general. How do I know how much is enough? Thanks so much. Love the show.

[Morgan]

In my upcoming book, Ms. Independent Mara, I outline three levels of wealth, but I'll give you a quick sneak peek before it comes out. Here is number one. I affectionately call this one Rich Enough where your super basic expenses are covered without any frills. Think of the brown rice and beans diet. Here's number two. If you feel best maintaining your current lifestyle, complete with occasional splurges like dining out or buying yourself something pretty, we all do. It is the pretty rich life for you. Being pretty rich in retirement allows you to live comfortably with some indulgences, but doesn't factor in a ton of future growth. And here's the third. Last but not least, we have the super rich level which entails having more money than you can reasonably spend, AKA baller status. You may already have a sense of which lifestyle you want to shoot for, but the next step is to crunch the numbers to see how much you need to save in order to achieve this lifestyle. There is no one right answer for how you want to spend when you retire. The only way to get this wrong is to not think about retirement savings at all. Your plans can and will change, but having a realistic idea of what you're aiming for is the only way you'll be able to figure out how to get there so let's make your retirement roadmap. For this, you'll need a writing utensil, a pen, paper, a word document on your computer, whatever you have handy. First, we're going to map out how much money you need per year for the rich enough lifestyle. To do that, write down all of the monthly expenses in your bare bones budget. These are the expenses that are absolutely essential. No more, no less. I'm talking housing, brown rice and beans, utilities, the necessities. Once you have your list, add up all of the expenses in your monthly budget and ta da. You have the rich enough category. Now multiply that number by 12 and you get your annual rich enough budget. Keep that writing utensil handy because we're going to go through this same calculation two more times. Get excited. Next, let's find your annual expenses for the pretty rich lifestyle. To do this, you should take your minimalist rich enough budget and then add on some extra layers of well extras. For this step, list out some mid level financial treats, eating out every so often, signing up for a bougie gym membership, whatever sounds good to you. Then add up these extras and multiply that number by 12 so you get your annual extras for the pretty rich lifestyle. And then on top of that, add your rich enough annual expenses to get your total pretty rich budget. Here do I still have you? See what I did there? Your pretty rich budget is going to be your rich enough budget plus some pretty rich extras. Got it? Got it. Good. Now let's calculate the super rich annual budget. This is where we dream really big with the biggest ticket items you ever think you could possibly want. Again, we'll end up doing some layering here. To find your total super rich budget. You're taking your pretty rich annual expenses and then add on all of the annual expenses for everything else you could possibly think of. A vacation home, a yacht, a fleet of jet skis, a big monument with your name on it. Seriously, go crazy. Now estimate how much per month you think you'd shell out to maintain that fleet of jet skis. And honestly, some of these things are totally within your reach. If you think about the spirit of what you want. Maybe it's not buying a fleet of jet skis, but maybe it's renting at a lake once a year. Then you know what to do. Multiply the total monthly costs by 12. Now you should have three numbers. Your annual rich enough budget, your annual pretty rich budget, and your annual super rich budget. We're not quite done yet. Because this is just the amount you are anticipating Spending in one year. Remember, this is your retirement budget we're talking about. You won't be working. That's kind of the point. So you won't have any income coming in. So your next task is to calculate how much you need saved in total to support your lifestyle throughout the whole span of your retirement. You do this by taking your annual totals for your rich enough pretty rich and super rich levels and multiply those numbers by how many years you expect to be in retirement. Typically, when I coach people on calculating their goal retirement savings, I recommend that they anticipate spending 20 non working years in retirement. Other financial experts Recommend Budgeting for 30 non working years. Really? That's a personal decision. I know you might be thinking, sheesh, warn us before you bring up our mortality. I get it. No one wants to think about how much time we have left. It is the big old elephant in the retirement room though. Here on Money Rehab. I don't let that elephant go unacknowledged. Dumbo can grab a seat and join the rest of us in the pod closet. So, did you do the math? I'm going to throw out some numbers for three levels of retirement wealth. But your numbers might not look exactly like this. I'm just going to make some educated guesses so we can talk hard numbers. Let's start with the rich enough level. The median household income in the United states is about $63,000 a year before taxes. The average annual burn rate, that is how much you spend per month and per year is about half of that or 30,000 DOL. If we go off the average American needs, that's 20 years times $30,000 a year and we get $600,000. We need to live the rich enough lifestyle in retirement. Now let's move on to pretty rich. For the purpose of this example, I'm going to use the $67,000 figure as the target annual spending in retirement because it's the average salary in the United States. So that means you'll need to have $1.2 million for a pretty rich lifestyle level of retirement. Finally, let's check out our super rich option. If you want to be super rich and your annual spending is clocking in at something like 100 grand, then you'll need to aim for around 2 million bucks to live out your days like our patron saint of badass old lady Dom, Betty White. For today's pep talk, you can take straight to the bank. Listen. In today's episode, we face the music. Well numbers, but we'll end with some music. And we started with some too, which is by far the hardest step when thinking about planning for retirement. Crunching the numbers may have made you realize that the retirement life you're envisioning will take more work than you actually thought, or you may need to scale back. That may be the case. But also remember, after listening to the show, you're not going to have just one source of funding for your retirement. I am not saying you have to make $2 million to have $2 million by retirement. Make part of your retirement nest egg through index funds and chilling, for example, and retirement accounts that are growing with the beautiful, beautiful forces of compound interest and investment gains. And rest assured, you are here in money rehab, which makes you in the exact right place to get your retirement shit together.