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Retirement Questions People Hesitate to Ask · Retire and Thrive

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  Welcome back to another edition of Retire and Thrive, where we
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  help you build your life with purpose, wealth, and confidence.
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  Thanks for joining us this week. I'm Cami alongside Dan and this
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  week we are having some fun. Dan deals with a lot of clients.
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  You've worked with folks for 30 plus years and I'm sure you get
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  so many different questions when it comes to money, but there are
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  some questions we've learned that folks are maybe scared to
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  bring up or scared to ask you. So today we are going to address
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  some of those questions and I'm going to ask a few of them to
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  you and we look forward to your your response.
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  All right, Are you ready? Are you scared?
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  I never know where you're going to come from.
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  I mean, that's in fact, I was just telling Noah about this at
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  break. I said, you know, we have a
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  headline, and the headline is questions that plants are maybe
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  afraid to ask. But I never know where you're
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  going to come from. Sometimes you come in left field
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  and I'm like, OK, well, let me think.
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  About that, think of a question that I have.
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  After I get your response, I'm like, oh, I'm wondering about
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  this. I feel like some other folks
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  might be wondering too. Yeah.
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  No, I'm I'm ready. And in all disclosure, it's
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  great that I've got a wonderful editor Noah, because if I go off
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  the rails, he can kind of cut that out.
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  But but yeah, so I'm interested to hear what you've got.
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  So let's as. Ready as you'll ever be.
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  All right. First question, Dan, this is one
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  that I think I've even asked you.
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  How much money do people actually need to retire?
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  OK, so I feel like you're throwing me a lob and softball
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  because you knew I could handle that one.
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  I don't know how much harder they get, but but that is that
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  that is a good starter. And I think I don't remember,
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  you did ask me this question, but it might have been 20
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  episodes ago. But the, the the start of the
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  answer is it does depend. It depends on your livelihood
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  and what you need. But let me just break it down
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  just just on a very surface level.
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  So how much you need to live on in retirement?
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  The first thing I always say is oftentimes it's similar to what
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  you're living on now. So the way we start things out
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  is we say, what is your net paycheck right now?
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  So by the time they withhold, you know, taxes and they
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  withhold maybe health insurance, all of this stuff, what do you
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  what gets deposited into your bank account?
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  So that's kind of where we start.
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  And then we go a little bit deeper and say from there, is
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  that usually enough to pay the bills?
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  Are you a little bit short? Are you saving a bunch?
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  And so we just kind of break it down kind of on a surface level
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  to figure out where they're at. Then we go into a little bit
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  deeper discussion and say, OK, so if it turns out that you're
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  receiving $4000 a month and you're putting in $500 a month
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  into the savings account, let's just call that $3500 a month.
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  Is what you're living on annualized?
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  It's 42 grand. So then we take it to the next
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  level. And obviously we've got software
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  that does all the math for us, but in this case, I'm just doing
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  the math out loud. We take that $42,000 or $3500 a
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  month and we figure out how much is your Social Security?
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  Do you have other sources of income like pensions?
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  And we kind of break it out from there.
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  And let's say we get down to the the bottom line between Social
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  Security and maybe a pension and they're short by two grand a
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  month, let's say. And then we figure out what
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  their portfolio values are and can we sustained pulling out
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  $2000 a month or $24,000 a year. So that answer your question,
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  but it does depend and a lot of it's based on your budget and
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  other income sources. But that's just kind of a
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  general way to kind of look at it from a planning standpoint is
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  to kind of back into it. All right, again, we are
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  focusing on these questions that people are maybe too scared to
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  ask. So I'm trying to put myself in a
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  position where I say I'm walking into your office as a financial
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  advisor and I had, I really want to this question but I'm too
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  scared too. So next question is, do people
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  really run out of money in retirement?
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  The answer is yes. If your follow up question is
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  have you ever had anybody and the answer is yes,
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  unfortunately. And then what?
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  Yeah, I don't, I don't really know how to articulate that.
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  I can tell you that in the rare occasion it happens, they don't
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  stick to their plan. Sure.
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  And inevitably what happens, I would say it's not they run out
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  of money because the markets dropped or they made really bad
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  decisions other than the ones that I've experienced in my
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  career, Cammy, are because of they typically didn't stick to
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  their budget and maybe they didn't view us quite as much of
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  A partner. Like, oh, by the way, I just
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  bought this condo down in Florida for 300 grand.
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  I didn't have the money. So I've got it financed.
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  And because I didn't, you know, I'm retired, I didn't have the
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  income. I'm paying 7 1/2% on it.
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  And we're like, OK, well, that's X amount of dollars per month
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  that we got to figure out. And then they got to furnish the
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  place and next thing you know, they've kind of derailed their
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  whole financial plan. Sure, sure.
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  So that's a pretty sad story if something like that were to
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  happen. So that leads to my next
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  question. Again, pretend I'm someone
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  coming and I have all my paperwork, I have all my
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  finances figured out, but I need some help.
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  So I'm coming to you and I really want to ask this
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  question. What is the saddest retirement
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  situation that you have seen? Asking that question because I
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  don't want it to happen to me. Can't believe you just asked me
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  that question. The saddest?
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  We tend to be in the happy camp, not the saddest camp.
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  Which I prefer, but sometimes these sad stories can help us
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  down the road. I'm just just thinking for a
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  minute. I, I think I've got a handful of
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  them and I'm just trying to think through.
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  I think, I think this is a lesson to came.
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  This goes back I think 2 podcasts ago we talked about
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  this. We had a client of ours who had
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  a business, sold the business and it was a public company, and
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  in turn received a bunch of stock.
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  And he held that stock and the stock did well and it kept going
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  up and up and up. And over time the company that
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  bought him out stumbled and went down and went down and went
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  down. And we're talking a lot of
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  money. And so my client who had a very
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  successful business, sold it to this company, got a bunch of
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  stock, but he never sold it. And that goes back to what we
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  talked about two episodes ago called diversification.
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  And it totally, totally changed his entire life financially.
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  And it was very, very sad. I mean, the house got sold,
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  completely downsized, had two homes at the time, ended up with
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  one much, much, much smaller. And in essence, I don't want to
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  say he lived completely on Social Security, but close.
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  And it was all because, I don't want to say the word greed, but
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  there was no diversification that happened.
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  And in this case, he was just expecting it to keep going up
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  and up and up and up. And it didn't.
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  Yikes. Yeah, that is sad.
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  So I, I think diversification is real, yeah.
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  And I and it again, it's like if you're getting a 7% rate of
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  return and you got half your money in stocks and bonds and
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  diversified portfolio and you're talking to your neighbor and
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  they got 9, you're just like, well, what'd you do to 9:00?
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  Well, I invested in this thing and said, well, I'm gonna invest
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  in that thing too. It's like, don't get caught up
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  in that. Stick to what works and has
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  tried and tried over time. That's effective.
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  Sure. Sure, OK.
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  Can we move on? We're going to move, not
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  necessarily to a happier place, but these are the questions that
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  people want to ask but they're too scared to.
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  So this next question has to do with children.
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  Do kids ruin retirement plans? There's many different ways you
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  could take this question, but I'm thinking more along the
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  lines of do kids ruin retirement plans?
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  Because you think, oh, I have to give, you know, Sally this,
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  Johnny this, Timmy this when you're looking to your
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  retirement. But you can take it a different
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  way. Yeah, you're right.
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  I mean that question is wide open.
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  You can, I could answer that many, many, many ways, but I'm
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  going to stick with what you said.
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  I think that's probably more relevant.
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  I don't. What's interesting about
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  families is that every family's different.
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  And unless you're on the inside, you have no idea what goes on
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  behind closed doors. And I can speak from personal
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  experience, I can speak from hundreds of clients of
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  experience. And I'm not 100% sure if this is
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  where you were going, but there are clients that are retired and
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  we have some to this day, quite a few actually that are funding
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  their kids lifestyle. And is that kind of where you
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  were going with this sort of? Yes, yes.
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  And we have seen that change things drastically.
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  And what's really sad to me, not the saddest thing in retirement,
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  but it's a close second is when I see people that are retired
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  and they've worked very hard to save all of their life.
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  And now they're having to forgo doing the things they want to
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  because they are supporting some of the behaviors of their not so
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  minor children that are in their 40s and 50s.
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  And there's, you know, again, we've seen a lot of different
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  things. We've seen it where clients of
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  ours children have gotten in trouble and they bailed them
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  out. And that's fine.
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  Could be financially bailing them out.
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  It could be all kinds of things. But I feel like I have seen it
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  where the parents feel like, or if one of them is past the
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  single parent feels like, and I just want to make sure that my
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  son or my daughter is taken care of.
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  And you know, they end up putting them through private
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  schools, you know, like when they're 16 years old and they're
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  right now checks for 7000 bucks a year or 10,000 or whatever the
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  numbers are. But yet they don't take that
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  trip because they just don't feel like they can afford it.
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  So I don't know if I've officially seen it where it's
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  totally ruined a financial plan or retirement, but I've seen it
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  where it definitely has a negative impact and it is, it is
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  kind of sad. Yeah, that's frustrating.
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  Anything happy for me? Not really, because the next one
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  isn't that happy either, but it's a question that people want
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  to know the answer to. Maybe you have an answer for
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  this. What's 1 mistake?
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  Just the one that cost people hundreds of thousands of
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  dollars. I would say, you know, I gave
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  the example about not being diversified and that cost
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  millions. So that was a big mistake.
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  But most people aren't like that.
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  Most people don't have the majority of their net worth tied
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  up into one stock or something like that.
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  So I would say in a general term, the biggest mistake is
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  trying to time the market, which I'd mentioned before.
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  And I'm going to just go a little bit deeper this time.
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  So timing the market is we go to war with Iran, the markets drop,
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  you know, 5 percent, 10%. I talked to friends of mine,
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  they're scared. They make me scared.
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  So the simple thing for me to do is pull everything I've got out
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  of the diversified portfolio and move it into the money markets
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  because I'm scared. That's probably the biggest
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  mistake. And the reason it's the biggest
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  mistake is a you don't know that the markets not going to go up
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  the next day. And if you're right that the
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  market goes down, you've got to be right when to go back in.
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  There was a continuing education course I took about 10 years
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  ago. It was for one of my
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  designations that I have. And the finance chair from Yale
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  gave a presentation. It was a one hour presentation
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  and that entire presentation was centered around how nobody can
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  consistently know when to go in and when to go out.
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  And he gave all kinds of statistical evidence of why that
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  is a massive mistake. Regardless of what's going on in
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  the world. You can certainly adjust
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  allocations, meaning instead of having 60 stock, 40 bonds, you
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  might go 60 bond, 40 stock. You can make those adjustments,
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  but to go all out of the portfolio and into money markets
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  or cash is a mistake. And his statistical evidence
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  basically showed that very few people know when it's the bottom
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  of the market or when when to get out before the market drops.
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  But he said very, very few times do people get it right when to
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  go back in. So even if you guessed right,
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  so, so let's take COVID, for example.
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  You know, in, in, in one month from March through April, the
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  market dropped almost 30%. So if you got out at the
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  beginning of March and it dropped 30%, COVID was still a
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  real thing into May into June, into July.
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  But within six months, the markets fully recovered.
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  And if you had gotten out in March, you probably still hadn't
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  gotten back in. And then you're like, shoot, I
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  missed getting back in, so maybe I'll wait for it to come down.
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  And from then on, the market just kept going up higher and
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  higher. So I would say in in in a broad
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  sense, the biggest mistake would be thinking that you can time
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  the market when things get scary.
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  Sure. OK.
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  Is that yield guy still at Yale? Does he work at Yale?
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  Yeah, he was finance chair. He's still the chairman there.
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  But yeah, he's. Like an intelligent guy, follow
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  along, follow along with him. One final question.
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  It's not on the board, but we'll go with a positive end here.
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  When many people head to that retirement age, they're going
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  into retirement. Maybe they're coming to you for
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  advice. There's probably a lot of
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  uncertainty in their mind. They're a little bit worried
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  about going into retirement. But what is the great thing
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  about going into retirement? Why is this a positive time?
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  Oh my gosh, it's, you know, that's one of the things I
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  really, really, really love about our job is when people
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  come to us and there's this unknown and uncertainty about
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  what the retirement looks like. I mean, we literally have had
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  people. I mean, this isn't even
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  uncommon. I would say probably 1 out of 10
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  people, something similar like this happens.
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  We build out this plan. We go into grave detail about
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  cash flow and where's the money coming from, Do all of this.
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  We look at the tax implications. We come back and they're like
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  Bill and Mary, you guys have done great.
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  You can retire next year and maybe they're going to retire in
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  three years. But now they found out they can
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  retire earlier. And I would say one out of 10
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  times they come back and they'll say something like this, Cammy.
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  So we've always wanted a cabin. Are we in a position financially
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  we can buy a cabin? And our response is always, I
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  don't know, let's run the numbers.
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  We'll find out. And we run the numbers and we're
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  like, yeah, it looks like you could buy a $350,000 cabin.
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  Here's we'd pull from and it's been game changing for them.
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  And it's not just the tangible cabin or the second home or
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  whatever it might be, but it's a lifestyle thing.
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  And so when I see people that have worked so hard, I mean, we
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  all work hard, right? I mean, everybody works hard,
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  but when they've done it for 30-40 years, sometimes the
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  mindset is difficult to shift to like, OK, now it's time to spoil
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  myself. Now it's time for me to do the
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  things I want to do when I want to do them versus always taking
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  care of other people like my coworkers or my kids or whatever
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  it might be. So when we see people that
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  retire and they do more than just the standard To Do List
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  that they have been used to doing, when it gives them the
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  freedom of their time and they have a well defined financial
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  plan that gives them the freedom of money and the freedom of
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  relationships, which means they can associate with anybody that
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  they want to, whether it's on the golf course or socially or
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  whatever it might be. It's almost euphoric to watch
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  these people in retirement. It's just, it's beautiful.
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  Yeah. Yeah, I go down to Arizona and
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  visit my grandparents and I see all those folks enjoying having
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  a great time and really enjoying, you know, what they've
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  earned. And we see it all the time.
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  And I think it's something everybody aspires to.
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  And that's for us, kind of the next chapter is really helping
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  people, you know, dial in on what does that next chapter look
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  like. Fantastic.
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  All right, ending on a positive note here.
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  Thank you so much for joining us this week.
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  We hope you enjoyed Dan's answers to some of these
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  questions that folks are maybe a little too scared to ask a
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  financial advisor or maybe anyone in general.
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