The Power of Compound Interest and the Rule of 72

We kicked things off by highlighting compound interest, famously referred to by Albert Einstein as the “eighth wonder of the world.” Unlike simple interest, compound interest grows your money exponentially over time by earning interest on both your initial investment and accumulated interest.

They broke down the Rule of 72, a simple formula to estimate how long it takes for an investment to double. Divide 72 by your expected rate of return: a 7% return means your money will double in about 10 years. But at 2%, it takes a staggering 36 years. Clearly, rate of return and time are your biggest allies.

Start Early, Save Consistently

To drive home the importance of starting early, they compared saving $100 a month beginning at age 25 versus age 35. That 10-year head start could result in an additional $100,000 or more in savings over a lifetime thanks to compounding. Even modest annual increases in savings can have a profound impact on retirement outcomes.

Calculating Retirement Spending and the Shortfall

Next, we explained how to calculate retirement needs. Start with your current expenses and adjust for 3% inflation. Subtract expected income like Social Security, then multiply the annual shortfall by 25 to find your target retirement savings. For example, someone expecting $144,000 in annual expenses with $55,000 from Social Security needs to fund an $89,000 shortfall. Multiply by 25, and you get a $2.2 million savings goal.

Understanding the “Retirement Smile”

Spending in retirement isn’t linear. I want to introduce you to the “retirement smile”: higher spending in early retirement (“go-go years”), a dip during the “slow-go” years, and a rise again due to healthcare costs in the “no-go years.” Many retirees spend more in retirement than they expected, making accurate planning crucial.

Applying the 4% Rule

The 4% rule remains a helpful benchmark. If you retire with $1 million, withdrawing $40,000 per year (4%) gives you a strong chance of not outliving your money, assuming a 6% return. However, the duo stressed that withdrawals should be adjusted dynamically based on market performance and personal needs.

When to Claim Social Security

Social Security claiming strategies also play a huge role. Claiming at age 62 could reduce benefits by 30%, while delaying until 70 can boost payments to 124% of your full retirement amount. We suggested evaluating factors like health, income needs, and whether you’re still working when making this decision.

Reevaluating the Rule of 100

The traditional Rule of 100, which suggests subtracting your age from 100 to determine stock allocation, was challenged. They argued that allocation should reflect individual risk tolerance, goals, and legacy plans. For example, a risk-tolerant investor may opt for more stock exposure, while others may want more cash for security.

Tax Planning and Roth IRA Conversions

One of the most actionable strategies they shared was Roth IRA conversions. With tax rates expected to rise in 2026, converting pre-tax retirement funds now could yield massive long-term savings. Converting in lower tax brackets (like 12% or 24%) today helps reduce your required minimum distributions (RMDs) and future tax bills.

Tax Allocation Across Account Types

Understanding how different accounts are taxed is another key strategy. Use tax-deferred accounts (like IRAs) strategically during low-income years, and prioritize Roth IRAs for tax-free growth. Taxable brokerage accounts provide flexibility but may generate capital gains.

Plan for Longevity

With life expectancy on the rise, couples have a 50% chance one partner will live to 92. We emphasized planning for a longer-than-expected life to avoid outliving your money, especially considering rising healthcare costs.

Use the Retirement Readiness Guide

Finally, the team encouraged everyone to download their Retirement Readiness Guide. It’s packed with practical tools to calculate savings targets, plan withdrawals, and optimize investments for a confident retirement.

Bottom line: Retirement success is about more than just saving—it’s about making smart decisions across the board. The earlier you start, the more prepared you’ll be to live your best retired life.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post The Formula for Retirement appeared first on ROI TV.

In this Money Makeover session, financial experts we broke down how to build a stronger retirement plan that balances smart saving, smart spending, and smart investing.

Here’s what you need to know to get your finances makeover-ready.

1. Retirement Planning Starts with Setting Clear Goals

Many people enter retirement without a clear plan—and it shows.

• Between 2016 and 2021, the average retiree’s monthly expenses rose by $1,000.
• 49% of retirees spend more than they anticipated.
• Retirement often feels like “Saturday every day,” leading to more discretionary spending.

The first step: get clear on your goals.
When do you want to retire?
How much do you want to spend?
Do you plan to travel, buy a second home, or fund grandkids’ education?

Answering these questions is the foundation of a sustainable retirement plan.

2. Budgeting: Needs First, Wants Later

Americans are currently spending $7,400 more per year than they earn—a dangerous trend.

A simple rule can help you stay on track:

• 50% of income for needs (housing, healthcare, food)
• 20% for savings
• 30% for wants (travel, hobbies, entertainment)

Following this structure before and during retirement helps prevent lifestyle inflation and debt accumulation.

3. Retirement Savings: Employer Matches and Beyond

Good news: 52% of employees are now saving above their employer’s match.

Vanguard’s study shows that raising your contribution rate even a little each year makes a huge difference.

• Saving 2% of your salary could grow to $119,000.
• Saving 6% could grow to $356,000—nearly triple.

Aim for 15%–20% of your annual income if possible. And always grab the full employer match—it’s free money.

4. Tax Planning: Take Advantage of Current Low Rates

Tax brackets are expected to rise in 2026:

• 22% bracket → 25%
• 24% bracket → 28%
• 32% bracket → 33%

Use today’s lower brackets to your advantage:

• Convert traditional IRA funds to Roth IRAs
• Diversify your retirement income streams
• Invest aggressively in Roth IRAs for tax-free growth

Roth conversions might cause a short-term tax hit—but they can save you tens (or hundreds) of thousands over a lifetime.

5. Consolidate Accounts to Simplify Life

Many retirees have a hodgepodge of accounts—old 401(k)s, IRAs, brokerage accounts.

Consolidating can:

• Reduce management headaches
• Lower fees
• Simplify required minimum distributions (RMDs)
• Make tax filing easier

Consider using low-cost custodians and ETFs to streamline your investments even further.

6. Avoid Early IRA Withdrawals

Need cash? Think twice before tapping your IRA early.

Pulling out $100,000 before age 59½ could cost you $38,000 in taxes and penalties. Worse, that lost money could have grown into hundreds of thousands if left invested.

Build an emergency fund and short-term savings outside of retirement accounts to avoid costly withdrawals.

7. Stress Test Your Retirement Plan

Case studies like John and Sally (age 57) show how easily a plan can fall apart without proper testing.

Their original strategy depleted funds by age 82.
But by working a few more years, saving more aggressively, or reducing discretionary spending, they could extend their nest egg through their entire lifetimes.

Stress testing helps you uncover weak points—and fix them before it’s too late.

8. Use Financial Tools and Get Educated

• Budget templates
• Retirement calculators
• Portfolio risk assessments
• Tax planning strategies

Financial education and action go hand in hand. The more you understand your money, the better decisions you’ll make for your future.

Final Thoughts: Your Retirement, Your Rules

A great retirement isn’t just about how much money you have—it’s about having a plan that aligns with your goals, your values, and your vision for life after work.

With the right mix of saving, spending, investing, and tax planning, you can enjoy the retirement you’ve earned without unnecessary stress.

Start your financial makeover today—you deserve it.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post The Ultimate Money Makeover: Retirement Planning Strategies to Secure Your Future appeared first on ROI TV.

savology.com

Simplifying Financial Planning

To make financial planning more accessible, consider condensing it into a one-page document. This approach includes key components such as:

• Vision and Goals: Clearly define your retirement objectives.
• Cash Flow Management: Track your income and expenses to understand your financial inflows and outflows.
• Asset Allocation: Determine how to distribute your investments across various asset classes.
• Action Items: List specific steps to achieve your financial goals.

This streamlined plan helps distinguish between needs and wants, ensuring that your spending aligns with your priorities.

kitces.com

Cash Flow Management

Understanding your cash flow is vital. Break down your expenses into categories such as living costs, savings, debt repayment, and charitable giving. For example, you might allocate 58% for living expenses, 15% for savings, 15% for debt repayment, and 12% for charitable contributions. This breakdown provides a clear picture of where your money goes, enabling informed financial decisions.

Retirement Savings Goals

Starting early and maintaining consistent savings are key to reaching retirement goals. Depending on your age and expected rate of return, calculate how much you need to save monthly to accumulate a desired retirement fund. For instance, to reach $1 million by age 65, the required monthly savings will vary based on when you start and your investment returns.

Social Security and Retirement Income

Assess your expected retirement income from sources like Social Security, pensions, and personal savings. Understanding these figures helps in planning your retirement spending. For example, you might anticipate $32,000 from Social Security, $10,000 from a pension, and plan to withdraw $40,000 annually from a $1 million retirement account, assuming a 4% withdrawal rate.

Tax Planning and Investment Strategy

Be aware of how taxes impact your investment returns. Different accounts—tax-free (Roth IRAs), taxable (brokerage accounts), and tax-deferred (401(k)s, IRAs)—have varying tax implications. Diversifying your income sources can help manage taxes effectively in retirement.

Asset Allocation and Diversification

Allocate your assets based on your time horizon and individual goals. A globally diversified portfolio might include various types of stocks (domestic, international, growth, value, small, medium, large companies) and bonds. As you approach retirement, adjusting your asset allocation to reduce risk becomes increasingly important.

Emergency Funds

Maintain an emergency fund covering 3 to 12 months of expenses, depending on your income stability. Balancing cash reserves with invested assets ensures financial security during unforeseen events.

DIY Retirement Guide

For those preferring a do-it-yourself approach, resources like the DIY Retirement Guide can assist in creating a one-page financial plan, empowering you to take control of your financial future.

By consolidating your financial strategy into a single page, you can focus on what truly matters, making your retirement planning more effective and less daunting.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post DIY One Page Financial Plans appeared first on ROI TV.