Is it possible to retire spending more than you earn? – 09/29/2024 – From Grain to Grain

Imagine trying to put together a puzzle without knowing the final image or how many pieces it has. Each piece you fit brings more doubts than certainties: am I close to the end or haven’t I even started yet? For many, planning for retirement is exactly like this. Without a clear vision of how much you need to accumulate or how your income fits together, the process of ensuring a peaceful life in the future becomes a frustrating and even frightening enigma.

If you already have clarity on how to build this security, congratulations. But I know that, for most, this clarity is still far away. This text is for those who know that relying solely on INSS income will not be enough for a dignified retirement.

Maybe the title caught your attention. If you’re hoping to find quick and easy solutions, this isn’t the place. But if you’re genuinely concerned about your financial future, keep going. Like a blue light that attracts insects into a trap, many promises of magical solutions end up electrocuting the money of those who are unprepared.

In my conversations, I see that even informed people often postpone planning. They think: “I can start saving later and everything will work out” or “I’ll leave that for later”. This is the biggest mistake. Not understanding how much equity will be needed and how much this equity can actually generate income in the future is like trying to put together a puzzle without knowing what you are building.

Building a solid asset requires patience, discipline and time, like a puzzle.

Recently, I spoke to a 45-year-old investor who wanted to live on R$10,000 in monthly income. He never saved, but he received an inheritance of R$1 million. The question was: is it possible to retire?

Of course, there is always a small chance that this will work. But, to do so, the portfolio would need to yield IPCA + 12.65% per year, net of taxes, for the next 50 years. Does this seem realistic to you?

Conservatively, it is more plausible to project a yield of IPCA + 4% per year, net of taxes. In this scenario, he could withdraw around R$3,800 per month, corrected by the IPCA, which is far from the expected target.

In both simulations, upon turning 95, he would no longer have a penny of inheritance to leave.

So, don’t be fooled: if you want a comfortable retirement, you will need to accumulate something around 250 times the amount you want to receive as monthly income. Even if you reach this value, caution is needed when stopping work. If you are still young, simple desires such as changing your car, making a down payment on a property, taking a trip or even facing a medical emergency can destabilize your entire planning.

The secret is to start as soon as possible. Small, regular contributions, over time, can turn into a considerable asset. The sooner you start, the smaller the future sacrifices will be. Thus, when the retirement puzzle is finally completed, the image formed will be of a peaceful, well-planned and financially secure life.

Michael Viriato is an investment advisor and founding partner of Investor’s House.

Speak directly to me via email.

Follow and like De Grão em Grão on social media. Follow investment lessons on Instagram.

LINK PRESENT: Did you like this text? Subscribers can access seven free accesses from any link per day. Just click the blue F below.