July 5, 2020

How much money do you need for retirement? What should you do when you retire? Why do people feel empty after they retire while some people thrive when they retire?

Do you ever wonder what’s the secret to living past 100? If so, then you will enjoy the book I recently came across - Ikigai by Hector Garcia and Francesc Miralles 

In this video, you will find:

  • What is Ikigai?
  • Why do some people live past 100 years old?
  • What’s the secret to having an amazing retirement?
  • How much money do you need for retirement?
  • How can a US Ohio grandma makes 1 million dollars a year during her retirement?
  • What you can do to ensure you have an awesome, fulfilling, stress-free retirement?
  • What can we learn from Okinawa, Japan?

90% correct transcript

Hey everybody. So do you know what is the secret to long life? And if you search on the internet, you will find the secret to a long life is to not stop breathing. That's pretty straightforward. Right? So welcome back to my channel. And today we're going to talk about the five tips to figure out what to do when you retire. And it's actually about a book I recently read called ikigai. You're gonna actually have it right here. This is the book. But before we start, I just want to celebrate another success story within investing accelerator, where Chris made 14.3% from air Canada in four days. And now I have the money to buy a return ticket to Hong Kong. The balance of the money can invite Eric Seto for lunch or dinner. This is the beginning of my investing journey. So I got to say so far, Chris has taken quite a quick profit, you know, as a longterm investor.

And nevertheless, congratulations, Chris, this is an awesome return in the middle of the coronavirus pandemic and 14.3% in four days, that's halfway to your goal of 30% a year. So good job, Chris. And I look forward to your next successful trade. Now back to ikigai, this is actually a book about the Japanese secret to a long life and happiness, and it is an international bestseller and I have it right in my hands is actually quite small. It only has around what 194 pages. So it's actually quite a quick read and quite an easy read as well. But the message in there is quite important because as we are living in a society where we're just focusing on getting busier and busier and busier, we often lose sight of the real goal is to live a long and happy life. So if you're interested in learning more about this topic, you can definitely pick this book up.

So in terms of this video, we're going to talk about, for example, what is the lifestyle of people who have a long life that's actually covered in the book? Where should you live? If you want to have a long life, what do people do to live past a hundred years? And what did they eat? What are the exercises that people who live past 100 years old do as, should you drive, if you want to have a long life and how should you think about having a long life and how to prepare for it? So we'll actually cover some of the questions in this video as a summary, but if you want to know the full blown answer, then definitely read the book. Now I have pull up some interesting statistics from the internet ad. It is the average retirement age for various countries is increasing over time.

Now, in this case, I pull up Australia, Canada, and United States. And you can see that from 19, the average retirement age for men is actually men and women. But they were pretty similar was around 66 to around 68, depending on which country you live in. Now over time that actually got earlier and earlier in the 1990s or so you can see it dipped and, and now it's increasing again. And with the recession coming up, I would think that this number will continue to go back higher to back when we are at 1970s. So you can see that with your planning for retirement in the next 10, five, maybe even 20 years, you need to think, well, this is an uptrend right now. So chances are, if you are living in United States, you're going to retire past 67. Your chances are you're going to be retiring around 68 or 69, which is slightly above here.

If you just extend this graph a little bit more, so what are you going to do if the average retirement age is increasing? Now, on the other hand, I actually pull up another statistics, which is your life expectancy. So how long should you expect to live? And this is increasing over time to now I pull up a couple more countries here. So the green line is the United States. Canada is the light blue line you can see is increasing. Australia is the red line and Japan is the yellow line. And Hong Kong is the dark blue line. Now I added these two countries in the charts. And that is really because when you read the book, you key guy, they actually covered that Japan, Okinawa which is a city has the highest life expectancy. And if you compare at the country level, then you'll find out of the five places, United States has the lowest life expectancy, but it's still around 78.

Okay. And then Japan and Hong Kong have the highest life expectancy close to 84, 85. So depending on where you live, you actually get an extra five, six years or so. So that's actually quite significant if you compare it between United States and Hong Kong this is actually around 78. So it was around eight years of difference or so, so nevertheless I think, you know, planning for retirement planning for the years when you stop having a full time job, it's actually quite important. So here, here are a couple of food for thoughts. So how many years of retirement should you be prepared for? You know, what is the minimum number of years you should be prepared for? How many years should you be prepared for realistically? And how much would it cost you if you don't invest and what happens if you live longer then you expected and what are factors would cause that?

So that's actually what I want to cover in this video for you. And let's start with the first one. Now your life expectancy minus your retirement age is how many years do you need to live with your nest egg that you built up over time? Now, if we use to stats, I just showed you earlier. The average life expectancy is approximately 80 years old. I just routed that number average across Japan, Hong Kong, Australia Canada and United States. And let's say your retirement age is 67. You know, we're looking a few years into the future because the retirement age statistics I got was back in 2017 and now we're in 2020 20. So if we just do a simple calculation there that a number of years you need to live with your net egg is approximately 13 years. So that is the number you want to keep in mind for.

Now. Now this is our base case. You know, this is an average, of course, some people live longer. And if you read the book, you key guy, you're probably gonna live even longer. But let's say you want to live for 13 years after you retire, or you will live for 13 years after you retire your annual expenses around $50,000 us a year. Now, depending on where you're living, it's probably cheaper or more expensive. But let's use that as an average. And if you are calculating this for yourself, then obviously you can adjust this because I'm going to show you how to calculate it. And if you just take $50,000 times, 13 years, and you'll get the number of dollars that you need without investing, which is $650,000, and this does not include inflation. I'm assuming this is inflation adjusted. Assume you're not going to invest at all. If you're not even going to put it in a savings account where you get 0.5% interest, this is pure the amount of money you need to survive for 13 years. Okay? Now let's look at the base case again, and this will increase if you are well, a healthy person technology improves over time and healthcare improves. Or if you decide to retire early, for example, you decide to retire at 65 or 62 or 63. This will increase your base case on the amounts of money you need in order to retire comfortably.

And thus say, we, you know, be more conservative and let's say you retire at 62 and you decide to, to survive or live for another 20 years. Then you need 20 years worth of annual expenses now, or you can retire at 67 and decide to exercise every day. So then that will increase your life expectancy as well. So there's really two sides of the equation. And if we use a realistic case, let's say it's 20 years. Then the annual expense is around $50,000. We'll keep this constant. So the money you need in order to retire without investing at all is a million dollars excluding inflation. Now this number actually seems kind of big because when you, when you look around how many people really have a million dollars, when they retire, I would say it's pretty difficult. So let's explore this idea further. Now, there are two key questions when it comes to this million dollar figure.

So the first question is how can you reduce the amount of money needed to retire? That's a very valid question. And a second question is what are you going to do during your retirement? Now by answering these two questions for yourself, this will also help you solve the million dollar question here, which is the amounts of money you need to retire. Now turns out if you know the answer to the second question and you read the book, you key guy, and this will actually help you as sort of first question. So that's what this video is about. And we're going to focus on the second question is what are you going to do during your retirement? And here are the five tips to figure out what to do when you retire. Now, tip number five is to subscribe to this YouTube channel and learn more about investing.

So if you haven't subscribed yet, you can click on the like and subscribe button below and you'll get more videos every single week and month. Now tip number four is to hire your return. The less you need to save. Now, this tip really comes from when you go to a financial analyst or a financial planner, or like a bank teller and you ask them, well, how much money do I need to retire? What they are going to do is they pull up their Excel sheets and help you do a calculation on how much money you need to retire using the average return of the stock market. Now, depending on where you live, the average return for S and P 500 is around 7% a year. The average return for the Australian stock market is around 8% a year. And I think Canada is somewhere in between.

Okay. So I would say on average mature market, it's like US,, Canada, Australia has a return of around 7% a year. And that's what they're going to use to help you calculate your, the amount of money you need to save. Now, here, I actually explained the portfolio and how much money you need in order to retire. Yeah. Now on the right there are three columns in this table. The first one is the portfolio size. You need to have the return you need to make. And the annual return in terms of dollar amounts, you will get now. I actually held the record, right hand side constant. So the annual return, it's actually a hundred thousand a year and you can actually change this and do this calculation yourself. It's very straightforward, but let's say you want a hundred thousand dollars per year when you retire and you don't want to touch any of your principal, which technically you can.

Then if you earn 5% return that you need $2 million to retire. So the way it works is 2 million times, 5% gives you a hundred thousand dollars. Now, what if you make 10%? And if you invest in technology, stocks invest in the growth ETF funds. Chances are, you can make 10%. I have seen people investing in a stock market get 15% by investing in funds as well. So you would need a million dollars, 10% a year, and you will get around a hundred thousand dollars. Now you'll notice that I actually did not include inflation within this calculation. You can, if you want to be very realistic but for simplicity, I actually just kept it this way. Now, what if you make 20% a year now, this is actually quite difficult. And this is usually a goal that private equity funds or private hedge funds are aiming for is 20% (to 30%) a year.

So in this case, in order to make a hundred thousand dollars a year, you just need 500,000. So do you start to see the pattern here? Is that the higher your return, the less money you need to save. Now, what if you make 30% a year now, in this case, in order to make a hundred thousand dollars with 30%, you just need $333,000. So he can see that wow, set of saving for $2 million a year. You just need to save and get to somewhere between three, a hundred thousand to $500,000. So that is really the difference between making a high return and a low return when it comes to investing in the markets. So this chart is crucial. Now, of course, if you say, well, I only need $50,000 Eric doing to survive and whatnot. Then you can actually reduce this amount by half, but then you also need to take into account inflation.

So for example, let's say you want to make 5%, right? This will actually mean you need a million dollars, 5% is $50,000 a year, but then what if inflation is 3%? So that means you actually need to make 8% in total in order to get 5% in real dollars. So just keep that in mind, because that's actually gonna significantly skew the amount of money you need when you're making a low return, but then it's not going to matter so much when you make a high return. Okay? So that's really, my mission is to help people without a financial background, to target 30% a year and using an hour a week through a coaching program called investing. So if you want to learn more about how I invest, you can actually go to my website called five minute investing.com/free case study. I have the link below and you can watch a four hour webinar where I outline my investing strategy, and you can take multiple sessions to go through the webinar, but it's the best four hours that you will probably spend.

And then afterwards, if you decide that you want to join the full program, you can schedule a call with me to see if you are a good fit. So tip number three, find your icky guy. And that is really the crux of the book is to define the word ikigai. And this word, ikigai actually has a meaning when it comes to Japanese and there is actually a diagram here and actually pull up the diagram from the internet. And that's what you will see on the screen right now. So ikigai is really in short the purpose of your life after you retire or during your retirement, or before you retire, you can find and work on your 80 guy. And this is such an important concept because the offer, thanks, stats. If you know what you're a key guy is you'll live a lot longer.

Basically, if you have a busy and purposeful life, you will live a lot longer. So how do you find your eeky guy? And it is really the center of four things. What you love, what you're good at, what the world needs and what you can be paid for. And these four are actually crucial to having a long and sustainable life. You know, obviously there are a lot of things we love, but then we might not get paid for it. There are a lot of things you might be good at, but the world does not need. So finding the center where all four overlaps is crucial when it comes to retirement. So then you can continue to do what you love while you're getting paid for it. And perhaps this will reduce the amount of money you need to retire. All right. So here are a couple of examples taking care of your kids or your grandchildren taking care of your vegetable gardens, playing a game of chess.

These are great, but it might be something that you love. It might be something that you're good at, but it might not be something that you can get paid for. So these are great statements to have when you're retiring. It can occupy a portion of your day, but it might not fulfill all four quadrants when it comes to the ikigai model. So at this point, before I jump into tip number two, I just want to talk a little bit about my icky guy for myself. It's really about investing and education. I love investing. I'm very passionate about it. I spend thousands and thousands of hours learning, mastering, studying, investing, and trying to become better. And that's actually what I love to do. And you know, I'm good at investing as of this moment, I make more than 30% a year. So I plan to continue to pursue that.

And I'm also fairly good at teaching. Since university I've been a teaching assistant, I teach multiple courses in my full time corporate job. I also teach a lot of people on other topics as well, like data analytics and so on. So when you combine investing what I'm good at teaching what the world needs is, you know, financial education, financial independence, and what people are willing to pay for his education per se. So for my eeky guy is about teaching and helping the world to become better at investing. So that's actually something I'm very happy to continue to work on for many years to come. So I think at this moment, so you can actually pause this video to think about what is your key guy. And if you figure out what your ikigai is, that is fantastic because now you can, you know, what your life's purpose is, and this will actually get you a lot closer to retirement.

Once we go through tip number two, and if you don't know what our ikigai is, because right now you only have two out of four quadrants or three out of four quadrants, or even just one out of four quadrants. Don't worry. Because as long as you know, one or two quadrants, we can help you get to all four. And that's really where tip number two comes into play is called play in all four areas of the cash flow matrix. So it does point. I just want to introduce another area or another idea to you. And it is Robert Kiyosaki's book called rich dad, poor dad, and Ashley covered the title of the book. But if you haven't read it, it's about Robert Kiyosaki's journey from, you know, being born in Hawaii all the way to a real estate tycoon. And basically the way he understands four ways to produce income is using this diagram.

And if you want to understand this better, you can actually read his book called rich dad. Poor dad is actually quite famous, but basically there are four types of people in the world. Employee, people who have a job, and most people are actually here. Okay. Self-employed people who own a job like doctors who own a clinic or a consultant business owner who owns a system. And these are usually the entrepreneurs and investor who owns investment and chances are, you're going to be in multiple quadrants in your life, depending on which stage you're at most people who have a full time job will be here, employee and investor, where you have a 401k or a TSA or an RSP. So most people will be in two of the cauldron, which is employee and investor. And most people will ignore, you know, self-employed or being a business owner because, you know, it's high risk.

People don't know how to do it. And it's difficult when you are an employee and also having a business on the side. So, but if, when you're retiring and if let's say there's something you love to do, there's something you're good at. I think what you can do is to explore how you can turn that into a business and how you can become self-employed, which can generate a higher income than employee. Now what's interesting is that's Robert Kiyosaki actually included this diagram here for employee. It's all about trading time for money for self-employed. It's also about trading time for money. Now for business owner, it's actually about hiring a team to make money. And if we're investor it's about using your existing money to make money. Now, the biggest problem with employee is, well, you only have so many hours a day. So after you work on a full time job, then you can't really trade more time for money.

And for self-employed, you're going to run into this similar issue as well. But for a business owner, you will be able to scale by having a team now for investor. Your return does not, depending on time is actually depending a little bit on time, but mostly it depends on how much capital you have. And if you have saved up enough capital and you can make a higher return in terms of dollar amount, so on and so forth. But this really requires you to have either a full time, a high paying job to start with, or you own some sort of system or self-employed business that produced you a high income. So the advice is really, you should play in all four quadrants 10 before you retire. You want to play in all four quadrants, such stats, your nest egg continue to grow at a higher return. You're saving money, putting money in. So then you can retire at lot faster.

And if you today figure out what you love and what you're good at, then it's just a matter of figuring out how you can monetize the skill. And I'll give you a couple more examples afterwards. Now tip number one. And that's probably the most important tip. And before this tip, I just want to celebrate Chris success story again, how he made 14.3% from air Canada in four days. And this is truly an extraordinary results. So congratulations, Chris for making such an amazing investment in and take profit in such a short amount of time. I look forward to your next one and tip number one is really start with passion and then figure out how to get paid. And at this point, I just want to go for one interesting. I came across on YouTube and her name is Shirley Curry, and she's a YouTube star. And people known her as the Skyrim grandma.

And if you go search her up right now, we can actually do that. She has 900,000 subscribers. As of the moment I took the screenshots and she's an 84 year old grandma who loves to play and now record games. She lives in the United States and she loves playing Skyrim. And you can think about it. Wow. She has 900 K subscribers and she's a grandma retired as she's doing what she loves playing games. And obviously when you get to a certain point with your YouTube channel, you can actually monetize it. So I did a rough calculation. This is very, very rough, but when I'm analyzing YouTube channels, I just take their subscribers. And I just times it by a dollar, because on average, if you have, you know, a thousand subscribers, you will make around a thousand dollars a year. And since she has almost a million subscribers, it means she would make a million dollars a year. So yeah, at this point, it makes me wonder why I thought her investing. That's all go be YouTube star, but the moral of the story is if you pursue what you love and figure out what you're good at, then you can just start figuring out ways to monetize it. And what's better than to wake up every day, finding and pursuing, working on your purpose and getting paid for it. And here's another main call. What is the secret to a long living life?

About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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