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Retirement Planning Do's & Don'ts · Retirement Answers

• 0:02
  Jacob: Build a plan, trust it, go live life, enjoy it, and and live your best life. You only get to live once, and so I would say, that that's probably more important than managing the dollars and cents every single day or at least looking at it every single day. Welcome to Retirement Answers, a podcast built to answer your most pressing retirement questions. If you're someone who's either thinking about retirement or already in retirement, well, you're in the right place. Hey there.
• 0:32
  My name is Jacob Duke, and each week, I'll be walking through different tips and strategies to help you succeed in retirement. So let's go ahead and get started with today's show. Hey, friends. Welcome back to another episode of Retirement Answers. My name is Jacob Duke.
• 0:48
  I am your host as always. And today we're gonna be talking about retirement planning do's and don'ts, the things that you should be aware of, some of the mistakes that I commonly see that maybe you need to be thinking about that way you can avoid them. Before we jump in, I wanted to say a quick thank you to everyone who is constantly listening or avid listeners of the show. It really means a lot that I'm able to hopefully impact you in a positive way or hopefully educate you on all the things that retirement has to offer in terms of the questions that have to be answered, some of the fears, the concerns and how to overcome them. So thank you so much for listening.
• 1:20
  It means a lot to know that I help you at least in some way. If you are benefiting from the show and you are enjoying it, I'd really appreciate it if you could give a rating or review there on either Apple Podcasts or Spotify, wherever you listen. It, definitely helps other people just like you find the show. So if you could do that, it would mean a lot, because you wouldn't understand how much it actually matters or impacts how many people find it. So thank you so much for doing that.
• 1:43
  Let's go ahead and jump into the retirement planning do's and don'ts that I think you should be aware of. All right. The first one is do get a good understanding of your expenses. Don't use rule of thumbs when it comes to estimating how much your expenses will be in retirement. So what do I mean by this?
• 2:00
  Well, the way I like to approach how you can get a good understanding of your expenses is you have to know what you're currently spending before retirement. If you think about it, why would it change a whole lot pre retirement and post retirement? Why would your spending change a whole lot? It probably won't. So what I say is this, I like to find two different numbers.
• 2:18
  The first one is what is the absolute minimum amount of money you have to have on a monthly basis to get to the next month? So that can be the bare necessities. We've got to get food. We've got to pay either a mortgage or rent. We've got to, if we have one, we've got to pay a car.
• 2:31
  What are the base expenses we have every single month and how much is that? Then the second number we want to find is, well, how much do we want to spend? How much can we spend or what is our portfolio like? What is our desired income that we need in retirement? Those two numbers can be anything from $3,000 a month just to get to the next month.
• 2:49
  That could be our minimum need. And then our desired spending is $10,000 a month. So there's a $7,000 difference there between those two numbers. But the key is I want you to know what your minimums are and then what your desired income is. And then you can build a plan around that.
• 3:03
  But it also gives you a little bit of flexibility. I talk about flexibility a lot. I talk about how important it is to you and actually achieving retirement success, meaning never running out of money, being able to move the needle a little bit as necessary if markets are up or markets are down, or if things are changing in your world, can pull that lever, pull income back if you ever had to. But having a little bit of wiggle room and flexibility is huge. Now, the reason I don't like to use rules of thumb here is because I feel like rules of thumb just aren't helpful in a lot of situations when it comes to retirement planning.
• 3:33
  Maybe they can guide us in the absolute general direction, but beyond that, they're just really not helpful. So what are some of these rules of thumb? Well, you can have things such as minimum income needs based on your expenses pre retirement. So a lot of people are like, well, hey, you should have 80% of whatever your pre retirement income is. That's how much you need to have in retirement.
• 3:55
  So 80% or some percentage of your income, maybe you need to have some multiple of your income saved. So sometimes like we need 10 times or 12 times your annual income the year before you retire, you need to have that much saved to create that income that you need. And I would say that all these things are maybe helpful, but you definitely shouldn't base your retirement income decisions based on it. And the reason for that is a lot of people have social security. Some people have pensions, perhaps other sources of income, maybe rental or real estate income.
• 4:24
  And so whenever we think about it that way, our portfolio doesn't need to be as large if we do have all of those other sources of income coming to us. In fact, I have clients that have $2,000,000 that don't need any of it because their normal income needs are met by their other fixed income sources from their previous working career and different things they have going on. And that's without social security even starting, right? So they have a lot of money saved, but they don't necessarily need any of it. So does that mean that they should follow these same rules of thumb?
• 4:51
  Well, absolutely not. So number one, I think that you should have a good understanding of your expenses that way you can build out your your income plan and don't necessarily follow rules of thumb because they might not apply to you. You need a custom plan instead. Number two, do have a good understanding of how Social Security works. Don't just take it at 62 so that you can get what you can while you can.
• 5:14
  Okay. This is a, a big, big deal. A lot of people are curious about social security and understanding how it works and what the best thing might be for them. In fact, I've done case studies on YouTube. You can go watch those there many people having questions and how we can help solve those things.
• 5:29
  But the most common sentiment I hear, most common thing I hear is, Jacob, I'm just going to take it to 62 so I can get what I can while I can. And I get it. I understand why that might be the case. Most of us are like, Well, we're not guaranteed tomorrow, so we probably just need to get what we can before we pass away. And I totally get that.
• 5:46
  Here's the problem is you're going to be penalized by doing that. So if you have a full retirement age of 67, you're going to get 30% less than what you should be getting if you take it at 62. Now, every month that you delay past 62, you're getting a slight increase getting closer to your full benefit. And if you delay past 67 up until 70, you can get even more than your full benefit. But just know that if you take it early, you're gonna get a reduced amount for the rest of your life.
• 6:12
  Now this impacts more than just your benefits. It impacts spousal benefits. It impacts survivor benefits. And so understanding how spousal benefits work for social security or survivor benefits if you're married, all these different things are important. And so what I like to encourage is don't just think about, don't be shortsighted and think about, Hey, I'm just gonna get what I can while I can.
• 6:32
  Think about the whole picture. Think about everything in regards to social security. Like what is the total benefit for you and your spouse if you are married? But we also have to think about it even more than that. We've got to go down the path of things like tax planning and saying, Hey, should I delay my social security so that I can do more tax planning in my gap years so that I can do more Roth conversions and ultimately lower my future social security taxation because I have less in tax deferred accounts.
• 6:56
  And so that's number two, understand how social security works so that you can make the most educated decision. Don't just say, I'm gonna take it at 62 so I can get what I can while I can. Number three, do create a comprehensive plan. Don't get caught up in all of the minutiae or the details of that plan. Now, wanna be cautious when I say this, because it is important to dig into the details.
• 7:20
  It is important to understand what is going into the plan, why things are the way they are, why you're doing one thing versus another and the math behind it. The math is very important. We wanna make sure we do that correctly and well based on your specific set of circumstances. The problem that I see most of the time is whenever someone tries to create this comprehensive plan and never actually settle on a plan. What they do is they keep redoing the scenarios.
• 7:45
  They keep rerunning the analysis. They keep redoing the math and they get too overwhelmed with the details and it leads to analysis paralysis. And having this analysis paralysis ultimately leads to no decision. So maybe you've heard it said before, the worst decision is no decision at all. And so for you and for us, what I say is this, let's create a comprehensive plan.
• 8:05
  We have to run the numbers, we have to do all the math, we have to do all the planning. But once we've established that, we have to just say, we're gonna trust it. And so we've gotta do it that way, or else we get caught in this constant revolving cycle of, well, we could update that or we could change that. And that's true. We want to make sure we monitor it over time, but we actually want to go enjoy life, right?
• 8:25
  We want to go do the things we want to do instead of sit here and look at the details of our plan every day. So don't get caught up in the minutiae of all the details. Actually say, get 90% of the way there, which just take the big chunks, the big rocks, the things that are actually important, get 90% of the way there and the other 10%. Honestly, it's not going make a huge difference in your retirement success. It could optimize it slightly more, but you're not going to die with no money or have a ton of money left over one way or another.
• 8:51
  If you can get 90% of the way there, that's the way to do it. And then let the chips fall where they may on the other 10%. And you can tweak as you go. Just know that analysis paralysis is not the goal. We wanna make sure we determine the plan and stick to it moving forward.
• 9:04
  Number four, do have a plan for all the what ifs that might come up in the future. Don't think that you're just going to figure it out as you get there or when you get there. This is a big, big mistake and I see it all of the time. People think that whenever things are going good, they don't need any help. They don't need an advisor.
• 9:21
  They don't need second opinions. They don't need anything, right? Because they've got it all figured out. Market's going up. We've got enough income to live month to month.
• 9:28
  Like it's really not a big deal. It's easy. The hard part is whenever things get tough, markets down thirty percent two years in a row, inflation's at all time high. We have a lower or smaller portfolio than we've ever had in our retirement years so far. And that worry kind of kicks in.
• 9:44
  The fear start to kick in. The problem is, is that's whenever people start reaching out and they say, Jacob, can you help me? And I say, well, I can, but not as much as I could have two years ago. Right? And so the problem is, is many people, they're not considering all of the what ifs that come up.
• 9:58
  They're not considering all the things that could go wrong. And so what I say is this, use the good periods, use the good times whenever the market is going up into the right. And whenever you do have plenty of income, whenever everything feels really good, use that time to help prepare for the hard times. And the reality is that no one needs an advisor until it's too late, to be honest with you. And this is something that I run into all the time.
• 10:21
  And I tell people, like I said, I can only help you as much as I can help you at that time. And so if we don't have time to prepare for a market event such as down 40% or a spouse passes away and, or understanding what to do with an inheritance or, or all these different questions, then we didn't plan for it accordingly. So the planning should happen whenever things are really good so that you're ready for whenever the bad things happen. So that's, number four, do have a plan for all of the what ifs or potential, bad things that could happen, but then also, don't think you're gonna figure out all of that whenever the time comes. You need to be ready for it beforehand.
• 10:54
  Number five, do keep a long term or investor mindset. Don't get too conservative. From a retirement planning standpoint, one of the biggest questions is Jacob, how should I invest my portfolio? And it's a really good question. But the problem is, is most of us have the wrong mindset when we're looking at it.
• 11:12
  Let's say you retire at 60, for example. Most people think it was the retirement date of 60, that's whenever you need to have the perfect allocation. You need to be making sure you're really conservative by that point because you can't afford to lose money anymore. You can't afford to go, you don't have any money coming in, meaning you're not earning anything from your job or your career, therefore you can't save it into the portfolio. So at this point, you're going to be dwindling your portfolio down.
• 11:36
  And it's not necessarily wrong, here's the thing. You've got a life expectancy of let's say ninety years old and you're currently 60 at the time. Well, your time horizon is not get it all ready to go for 60 and then just stop. You've got to invest for another thirty years, meaning you have to have your current assets. You've got to have that outlive you.
• 11:53
  You've got to invest it in such a way that will prolong your life and you can sustain your lifestyle for that amount of years. And so what you're really looking at is your time horizon is thirty years, whether you think it is or not. So you have to plan for that accordingly. So the mistake I see most of the time is everyone going to fiftyfifty or putting too much cash in their portfolio. When you think about it, inflation is going to eat away at that cash over time.
• 12:16
  You've got to look at interest rates and whether bonds or T bills or all those things are going to be viable investment products. But I would say build out a plan for your investments that meets a thirty year time horizon. So think about it this way. You want to meet the first five years or the next five years of income. You have to have that set aside in certain things that are liquid or not volatile, not in the stock market.
• 12:37
  But beyond that, you can have investments that are a little more aggressive, a little more volatile because you don't need that money right now today. So that's number five, keep an investor or a long term mindset. Think about it as I'm still investing. I'm not trying to produce income on all of my assets, million or 2,000,000 or $3,000,000 I don't need all of that today. I need that to last me and go for the rest of my life and perhaps my spouse's life or even my kids' lives.
• 13:02
  And So if you think about it that way, it will hopefully give you a better perspective on what investing looks like in retirement. And so I'll leave you with this. Try not to satisfy your short term or your current feelings or emotions by getting in or out of the market or trying to go really conservative so you eliminate volatility. Volatility is the thing that's necessary in order to get the returns long term that maybe you're looking for. So this is what's called the behavior gap.
• 13:25
  Many people make behavioral decisions that ultimately reduce their portfolio or make big mistakes there. So if we can avoid that, avoid going really conservative in your portfolio and do it intentionally, that's the key is have a plan for it, then you'll be better off long term down the road. So that's number five, keep an investor's mindset. Think long term, don't think about just right now today, In some sense, trying to satisfy your feelings or emotions towards this. I get it, volatility is hard in retirement, but if you think about it, I've got thirty years or thirty plus years to have this money last me.
• 13:59
  I've got to invest accordingly to meet those needs in the later years of my retirement. Number six, do create a plan for the day to day or have an idea of what your day to day will look like in retirement. Don't just assume that it's going to be amazing. You'd actually be shocked, think, to hear many people who are like, man, retirement's kind of hard. I'm really struggling with it.
• 14:17
  You think about it, if you go from working all day every day for the last thirty, forty plus years, and you go to nothingness and don't have a plan for what you're going to do or activities you're going to do every day, you could get really down and really depressed really quickly. So for me, I encourage everyone that I talk to and my clients specifically, hey, what are you going to do every day? Like what are the things that you're going to be doing actively? And I want you to write these things down. So don't just assume everything's going be awesome, but I would say dream it up, think think about it, go on a trip and just kind of say, hey, what does retirement look like?
• 14:48
  How do I prepare for the non financial side of things? And so dream this up and then start writing these things down. That could be, hey, every day I'm going to wake up and go eat breakfast at this place, or every day I'm going to wake up and eat breakfast at home with my spouse, or it's going be, hey, every day I'm going wake up and go run, or I'm going to go play pickleball, or whatever it might be. Like, figure out what your day to day looks like. Maybe different days of the week are different, but I want you to figure that out so that you have a plan for the non financial side of things so that you don't wake up one day and you're like, man, I hate this retirement thing.
• 15:19
  Part of this is also understanding yourself. A lot of people are what we might call workaholics And so they have to have a mission. They have to have a purpose. They have to have like a thing that they're accomplishing, right? And so it might not be through work anymore, but it might be something different.
• 15:32
  Or it could be perhaps be part time work or perhaps a consulting roles, like something else to kind of slow down, but still kind of keep that going and scratch that itch of like, Hey, I want to be doing something, accomplishing something. So depending on your personality, who you are and what you're trying to do and what you know of yourself, that's also important as well. So maybe take some time to evaluate like is retirement like in the traditional sense, the right thing for me? It might be non traditional. And so that's what I would encourage you with.
• 16:01
  Write down what your life day to day would look like or week to week or month to month in retirement, rather than just assume that it's all gonna be amazing and get there and find out it's not as good as I thought it would be. So that's number six. I would encourage you to write down what your life will look like day to day, month to month, year to year, rather than just assuming that everything's gonna be amazing whenever you get there. Number seven, do talk to others that have gone before you or already in retirement. Don't feel like you have to do all this alone.
• 16:27
  Many people, I would say that they've gone before you, they have really good experiences. You can probably ask them and say, Hey, what have you done well? Like, what are the good things about retirement? What are the things that I need to be aware of or avoid or what's been hard for you? So I would encourage you to leverage your relationships with others that have gone before you.
• 16:43
  That way you can get a good idea of what to look out for or what to do better in your own retirement. That way you feel like you're not doing it alone. Also, you're concerned about the money side of things, would encourage you to speak with an advisor. There are plenty of really good advisors out there. There are plenty of bad ones.
• 16:57
  So be, I guess, diligent there, but make sure you're talking to the right people that have your best interests at heart and can help guide you along the way. So that's number seven. Don't feel like you have to do everything on your own. Talk to others who have gone before you that are experiencing a retirement right now, but also if need help on the financial side of things, get that help. That way you don't have to sit there and worry all day about the money.
• 17:17
  And finally, eight, trust your plan and go enjoy life. Don't get bogged down in the day to day in terms of managing your money day to day. This is one of the big deals. A lot of people they're like, man, I'm gonna do this all myself. But then they look at this stuff all day.
• 17:33
  The market's up 2%, the market's down 1%, and it kind of creates this emotion inside of you and eliminates the opportunity to go enjoy life. I would say this, why would you waste the time you have to go enjoy and live out hopefully the dream that you've thought of, right? You've worked really hard for this moment. You've saved, you've done everything you need to do. Why waste it on day to day being just in tune with the numbers?
• 17:56
  Give that to someone else to worry about, right? You go enjoy. This is your chance to go enjoy his time with family, go on a vacation every other week, like whatever it is for you, go do that. Know, build a plan, trust it, go enjoy life. Don't get stuck in all the day to day.
• 18:10
  If you need help with the day to day, someone to help monitor and manage that for you, then get someone, but don't feel like you have to. And I would encourage you not to because you'll, in some sense, you'll probably go insane by looking at the market every single day if it's up or down. And so I would say, build a plan, trust it, go live life, enjoy it and live your best life. You only get to live once. And so I would say, that that's probably more important than managing the dollars and cents every single day, or at least looking at it every single day.
• 18:35
  So hopefully these do's and don'ts give you some ideas or perspective around what to look for and what to be aware of as you head into your retirement years. And hopefully they're helpful for you to kind of frame maybe some of the non financial side of things, right? But also some of the financial side that you can be aware of and be diligent about. My goal is to help build your confidence as you enter retirement. And ultimately the goal of that is to help you live your best life.
• 18:59
  So life is not about saving money on taxes or doing Roth conversions certain years. That's not the point. Now that's important, absolutely. The point is to save money on those taxes so that you can go enjoy more of your hard earned dollars and doing the things you want to do rather than pay taxes that you otherwise would not have to pay legally. So don't make a retirement about the money so much as about living out the life you want to live.
• 19:22
  So if you're looking for a trusted partner to help navigate all these decisions or retirement plan, feel free to reach out to me. My email should be below. Happy to have a conversation if nothing else. So hopefully this was helpful for you. And if it was, I'd really appreciate if you gave a rating and review there on Apple Podcasts or Spotify.
• 19:38
  So with that, I hope you have a great week and we will see you at the same time next week. Hey, it's Jacob again, and I wanted to extend a quick offer to you. If you have a question and you would like to have it answered here on the show, please email me at jacobretirementanswers dot net. And I'd love to answer that question for you right here on the show. Also, wanted to remind you that nothing discussed in today's episode is meant to be financial, legal, or tax advice.
• 20:04
  Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode. I look forward to talking with you again next week.