Latest / On Course: Navigating Wealth On Your Terms / Ep.1 Have You Saved Enough to Retire? Now What?

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Ep.1 Have You Saved Enough to Retire? Now What? · On Course: Navigating Wealth On Your Terms

• 0:00
  Andrew Tenenbaum: So I recently had a conversation with a buddy
• 0:02
  of mine who's also a client, and he's done a phenomenal job.
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  He's saved his entire life, he's invested very well, and he's
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  gonna be ready for retirement.
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  He's in his mid-fifties.
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  But it brought up a really interesting conversation and
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  a point while we were talking.
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  What happens when you've saved enough?
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  Is it actually enough, and is it gonna stand up to any kind of
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  stresses that may test your system?
• 0:23
  Welcome to On Course Navigating Wealth on Your Terms.
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  I'm Andy Tenenbaum, and we're exploring the conversations and decisions that
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  shape how we build and use wealth
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  Andrew Tenenbaum: I decided to start the podcast because I have some really
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  good conversations with clients and other financial professionals that
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  are out there, but too often those conversations stay close hold and they
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  don't get out there to the masses.
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  So the goal here is gonna be pretty straightforward.
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  I'm gonna take conversations that I've had, and I'll have guests on as well at
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  certain points, but I'm gonna take out the questions that the client actually asked
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  as well as questions that I had for them in the hopes that you can learn from other
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  people and what they're actually doing.
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  All right, let's get started.
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  So this client, like I said, he's actually been doing very well for himself
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  He's in his mid-50s.
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  He's an airline pilot.
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  He has a military retirement coming in as well, and he's at a point
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  now where he's transitioning from actually saving to looking at
• 1:13
  spending and how that's gonna work.
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  So we got to talking, and I have a few questions here, actually more than
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  a few, quite a bit, that we actually discussed, and I think you're gonna
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  take something away from this and see how your own system is and whether or
• 1:24
  not it's gonna be ready for retirement yourself All right, so let's get into it.
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  First question, uh, and this is from the client.
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  How do I know when I've actually accumulated enough?
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  And this is a great point.
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  A lot of times people will throw a number out there, but what does it actually mean?
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  So I like to look at this through a few different lenses.
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  It's gonna be the needs and then the wants.
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  So what do you actually need to retire?
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  If, no kidding, everything were to go upside down, what do you need monthly,
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  annually figured out to actually survive?
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  And then on top of that,
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  If you've taken the time to save and get to the point where you're ready
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  to retire, you wanna make sure that you can actually do it and not just
• 1:58
  survive, but you wanna enjoy your life.
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  There's a reason why you've worked so hard And when you do this, if you're talking
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  to somebody, there's gonna be a lot of assumptions that actually go into it.
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  You wanna make sure that you understand what those assumptions are, because if
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  you get them wrong, they can have dire consequences later on as you actually
• 2:13
  start withdrawing and pulling money out of these retirement funds to live.
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  All right.
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  Next question: If I've already accumulated enough, why would I keep
• 2:21
  saving and investing the same way?
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  This is really important to think about.
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  So first off, make sure you're not doing it just because it's a habit.
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  Obviously, when you're younger or you're middle-aged, you wanna keep saving to
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  make sure that when you get to those later on years, that you're gonna have
• 2:34
  enough passive income to survive, and you're not gonna have to go back to work.
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  But you don't wanna become so ingrained in what you're doing that you don't
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  take the time to actually transition and do something where now you can
• 2:46
  actually start enjoying those years
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  The other part of this is depending on the assumptions, you may assume that
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  there's gonna be growth in a certain manner, and if you start reallocating
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  your assets, well, maybe you don't actually have enough, or maybe you're
• 3:00
  gonna miss out on some significant gains.
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  If you think about the last few years that we've had, if you're at a point
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  where you're coming up on retirement and you went ahead and reallocated
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  your assets to something a little bit more conservative, you probably
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  missed out on some significant growth.
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  At the same time, if there was a drop, you probably did preserve a lot
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  of your assets So what we're gonna do here is we're gonna look at a few
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  other options so that you don't have to reallocate, and maybe you have something
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  else that's in your portfolio that allows you to ride those ups and downs
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  So what should someone actually evaluate before deciding that they have
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  enough to retire or stop accumulating?
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  And so this is important.
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  I actually have a retirement calculator.
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  I will have people fill out several questions, and then I'll
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  run that through a, series of tests that I've set up myself.
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  And then we'll look at the assets that a person has to actually see what they're
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  trying to accomplish, and then we'll look at worst case scenarios in there.
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  But when you're doing this, in order to actually decide if you have enough, you
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  need to look at your entire portfolio.
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  You wanna look at expected stuff that's coming in versus
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  what you think might come in.
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  So in this case, I'll look at this specific client.
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  He's in his mid-fifties.
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  He's gonna have a military retirement.
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  He may or may not have Social Security.
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  We're gonna plan on it, but I don't actually factor that in because
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  I don't wanna get into that now.
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  But obviously, Social Security, there could be issues with that down the road.
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  He is gonna have a defined benefit and a pension through the airline that he
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  works for, and then he has qualified plans as well as investments outside of that.
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  So looking at these, it's important to know what's one
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  hundred percent the guarantees.
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  Nothing's a hundred percent, but most likely gonna be there.
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  And then on top of that, the stuff that he expects.
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  How does he expect his portfolio to actually perform?
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  Then we can look at the most likely and then potentially the most dangerous.
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  What happens if it doesn't perform as you want?
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  What if we're in a significant downturn like an '08 or a COVID-type setup?
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  How is your portfolio actually gonna perform?
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  What can you actually expect to have coming in, and how
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  is that gonna change things?
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  And then besides just looking at the assets that when you have coming
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  in, you wanna look at other people that are maybe relying on you.
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  So it could be a spouse, it could be children.
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  Whatever the beneficiaries are that are expecting income from you, you wanna make
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  sure that your portfolio can not only support yourself, but them as well So what
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  are some of the biggest things that could derail an otherwise solid retirement plan?
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  One of the big things I like to talk about, and when I was talking to
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  this client, this came up right away, and he actually had not heard of it
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  before, was sequence of returns risk.
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  And essentially here what we're talking about is market volatility.
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  So you have a plan for your portfolio, but what happens as you're
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  approaching retirement or maybe just after retirement if we have
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  a significant dip in the market?
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  Well, if part of your plan was to actually withdraw those funds
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  and take out X percent, a lot of times it'll be around four percent.
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  I don't want to go off on too much of a tangent there, whether that's good or
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  bad, but we'll just keep that for this, uh, argument here or this discussion.
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  If you have a significant dip at the wrong time, that can really impact what
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  you're planning to do in retirement.
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  And so if you have that dip and you still have to draw on those funds, you're not
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  going to have the growth long term like you expected, and you're probably still
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  going to be paying taxes on those as well.
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  So not only are you pulling the funds out, but you're paying taxes on it.
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  And it can be a double whammy at a point where you really may not be
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  able to afford that, especially if you end up living for quite a while and
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  you're planning on using those funds for your long-term financial stability
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  Another one that comes up a lot is your health or long-term care.
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  You may be very healthy right now and think that what you've
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  got right now is completely sound for what you're trying to do.
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  However, you don't know what tomorrow holds, and if you have an unexpected
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  life event that alters your health, you may have to dip into your funds,
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  or maybe your spouse has something that goes on, and that could significantly
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  alter what you're planning for.
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  So once again, when we talk about this, we're looking for hopefully the best-case
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  scenario, but we really need to look at the worst-case scenario and see how
• 6:37
  your system is gonna perform under these stressors Another thing that pops up
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  is what happens if your spouse dies?
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  So in this case, let's look at this example.
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  We have somebody who has a defined benefit both with the
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  airline and with the military.
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  Depending on how that's structured, when that person passes away, that, capital
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  that's coming in may not be there anymore.
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  So if you don't have anything to replace that, you could be in a
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  world of hurt, or your spouse or your beneficiary could be in a world of hurt.
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  Now, you can do certain things and look, well, maybe this person only needs
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  fifty percent of what we were getting before, but it's important to take these
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  under consideration and not assume.
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  That's really what I'm getting at here.
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  And then finally, the big thing with the sequence of return risk, I'm
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  circling back on this one right now.
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  It's not an issue if you don't have to pull in those funds.
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  The biggest issue with sequence of return risk and market volatility is if you are
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  forced to sell when the market is down.
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  If you have another source of income or another way to ride that out, then you
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  will be okay as you let that recover.
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  The real issue is when people have to sell at an unfavorable time.
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  And the other thing to think about here, yes, you can cut back and you can
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  just go to the essential stuff that you need, but at this point in your life,
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  you probably don't want to do that.
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  You still probably want to enjoy yourself.
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  So let's figure out a way that you can still enjoy yourself, but not tap
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  into the assets that you have that are going to affect the long-term
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  outcome of your financial plan
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  All right, I'm gonna read these next two questions here, one after the other,
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  'cause they kind of go together, and I touched on it a little bit, but I
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  wanna elaborate on it a little bit more.
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  So why does the timing of market returns matter so much
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  when someone starts retirement?
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  And I just touched on that.
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  But the follow-up question is a way to actually mitigate it.
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  And it's if someone already owns whole life insurance, how might that
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  change their retirement planning?
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  So if you've been set up and you have whole life, you have something
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  that is not market correlated.
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  And if you have enough cash value in there, and that's gonna vary as
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  far as what enough is for everybody, you could actually use policy loans
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  for a significant amount of time to offset what's going on in the market
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  and let your portfolio recover.
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  So this example is kind of interesting.
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  This guy here, he has a defined benefit, so he has both the airline
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  and the military income coming in.
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  And so with that, we can actually look at his portfolio and go, okay,
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  we know that this is gonna keep coming in, and it may go up with
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  inflation as well, the way it works.
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  Is it gonna be enough or not?
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  That's another discussion, but he will have funds that are coming in.
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  So we have to look at, actually, in this scenario, looking at his
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  portfolio, is how much of his portfolio was he actually relying on to live
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  the lifestyle that he wants to live?
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  Then we can look at that delta there and use that to figure out, well,
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  how much cash value would he need every single year in order to keep
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  living the same lifestyle, and we can adjust that for inflation as well.
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  And once we look at that, we can go, well, based on what you're
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  looking at, do you want one, two, three, five years, you name it.
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  How many years do you want as far as a buffer goes, so that you have something
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  in your portfolio that can actually help mitigate these downturns in the market?
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  All right, this next question was-- I like this because it talks about not
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  just being prepared for stuff and the market when it doesn't cooperate, but
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  a lot of times there's a transition mentally for people where they've been
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  saving for so long, it's difficult for them to get into the mindset where
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  now they're ready to actually spend.
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  So the question here is: Does having a death benefit change
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  how much of your retirement money you can comfortably spend?
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  So what I'm getting at here is sometimes people wanna leave
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  something for beneficiaries.
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  I'm using that term for life insurance, but maybe you have
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  others in your life that when you pass away, you wanna make sure that
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  there's some kind of inheritance.
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  If you have a whole life policy in place and you have a death benefit there, it
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  actually gives you permission to spend down your retirement a little bit more
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  'cause you're not so worried about that portion or those portions of your
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  portfolio going to the next generation or your beneficiaries, whoever they are.
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  You can actually spend those down a little bit more aggressively and then
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  have it so that when you do pass away, now you have this massive death benefit
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  coming in that is income tax-free, going to who- whoever your beneficiaries are.
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  They can be your spouse, they can be your children, they
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  can be a charity, you name it.
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  It's really up to you as the policy owner and where you want those to go.
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  Now, I do want to be clear here with the death benefit, it's not a blank check.
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  You can't just go through your assets.
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  You have to do that intelligently.
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  But it is another asset that you have that, uh, it gives you more options in
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  your overall portfolio, and it's going to be important to talk to somebody
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  to figure out how it actually fits in.
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  This is more, these conversations are just more about getting you
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  to think about certain things that maybe you haven't thought of before
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  So this was pretty interesting as I was talking to my buddy, and I'm paraphrasing
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  here a little bit, but he actually brought this up, and it's why is it
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  so difficult for disciplined savers to start spending money they've accumulated?
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  And I think it comes down to two things.
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  Number one is fear.
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  I think people are very worried that they are gonna run out of money.
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  We do a very good job accumulating assets if you're a saver and investing.
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  I don't think we do the best job figuring out how to actually spend them, and that's
• 11:28
  a, a, a downfall that is easy to fix.
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  We just need to have the right variables and the right ways to calculate it.
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  But if you've only thought about accumulating, that fear
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  can definitely take over.
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  And the other part of it, and I alluded to it earlier, it's just these habits.
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  We are so ingrained… It's so ingrained in us that we need to
• 11:43
  save and be ready for the future.
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  But when the future gets here, it can be very difficult mentally to make that
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  switch and actually spend and change your habits over time because you've been doing
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  it for thirty, forty, fifty years maybe.
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  And finally, my last question: how do you give yourself permission
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  to spend without worrying that you're jeopardizing your future?
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  And really it comes down to understanding what you have and how it's gonna perform
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  and having the right assumptions in there.
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  If you can set that up and understand what's going on, it
• 12:12
  can really set you up for success.
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  But if you're only focused on accumulating and you're not actually
• 12:17
  stress testing what you have, it could actually lead to some downfalls there.
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  And so with all this, I want to be very clear, I'm not a hundred percent all
• 12:25
  your assets need to be in whole life.
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  I am not a hundred percent you need your investments elsewhere.
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  I think you just need the right combination.
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  That's really what this is all about.
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  If you can have things that balance out your portfolio appropriately without doing
• 12:37
  something where you're hurting the growth of that portfolio, and I think whole
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  life really allows you to do that because you can stay aggressive in the market.
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  You don't have to pull back so much.
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  You don't have to miss out on these big upticks that we're having.
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  But at the same time, you have something in your portfolio that
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  can mitigate that volatility.
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  It puts you in a unique position that you can be aggressive while at
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  the same time being conservative.
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  It's getting the right balance and truly understanding what your objectives are.
• 13:02
  What do you plan on spending in retirement?
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  And something I didn't really touch on before, but this is
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  gonna change as you age as well.
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  Typically, early on in your retirement, you're gonna be spending more than when
• 13:11
  you're older and you aren't gonna be able to probably move around as much.
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  Now, that's an assumption that you can or cannot make.
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  Every situation is gonna be a little bit different.
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  You need to look at your own health and what you plan on doing.
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  But through all of this, it's really important to have a realistic
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  understanding of what you're planning on doing, and then the worst case scenarios,
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  and can your system, your assets actually survive that and give you a comfortable
• 13:33
  lifestyle all the way until the end, while at the same time making sure that your
• 13:36
  beneficiaries and whoever it is that's depending on you is gonna be set as well.
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  So really what I'm getting at here in all of this is you've done the hard work.
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  You've gotten to the point where you've accumulated enough assets, you've
• 13:48
  invested wisely, and you have enough to actually enjoy your retirement.
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  Now I want you to think about how do you actually spend this and use
• 13:56
  your assets, your entire portfolio intelligently to finish out your life,
• 14:00
  live those last years the way you wanna live them, while at the same
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  time making sure that those who are
• 14:05
  relying on you are gonna be adequately taken care of
• 14:08
  when you're not here anymore.
• 14:10
  All right, I hope you enjoyed this, and I hope to see you again on the next one
• 14:13
  Thank you for joining me on On Course.
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  My goal of this podcast is to share real conversations, explore
• 14:19
  different perspectives, and help you think more intentionally about
• 14:22
  the financial decisions you make.
• 14:24
  If you found this conversation valuable, consider subscribing and leaving a review.
• 14:28
  And if you'd like to learn more about infinite banking and how it might
• 14:31
  fit in your own financial picture, head over to blueskiesic.com and
• 14:36
  check out my Start Here series.
• 14:38
  Thanks for listening.