Episode #67 The 5 Legs of Planning For A Rock Solid Retirement!

Speaker 1: 0:00

So guys, I'm planning to retire next month. Why don't I come in sometime after my last day at work and we can talk, uh, start talking about planning for retirement.

Speaker 2: 0:10

That should give us enough time, right? Wrong.

Speaker 3: 0:14

Are you ready? It's the on the money podcast with Jerry and Nick Warrior Authors Radio Show, host TV personalities, retirement wealth coaches on the money. Jerry and Nick Warrior starts right now.

Speaker 1: 0:29

Welcome back to another episode of the on the money of Jerry Nick Royer podcast. We're broadcasting as we always do coast to coast, live right out of the studios here at group 10 financial, the headquarters, uh, right here in central Florida. This is Nick Royer and I'm joined as I am each week right here at summertime. Right. I'm joined here by Jerry Royer. And um, you picked up a nail outside on your car, picked up a nail that ended up costing me$714. You know what I don't get is how hard is it if you, you know, you would think it's a safety hazard if you drive down the road with a nail on your car. It should be easy to find a place that will actually fix it. But how many places did you end up going through? I had to go to

Speaker 2: 1:10

the replaces the first one that a onstar sent me to, uh, was about just about a mile from here at the office. And I got there about four o'clock yesterday and they sent her and says they could get to me by eight o'clock. I went two doors down and they could get me at seven o'clock this morning. So I ended up having to drive with[inaudible] tire all the way down to champion's gate.

Speaker 1: 1:39

Which, which for you though, those who don't know, that's literally an hour away from Orlando with a nail in your tire. Well, at least it wasn't that bad. I mean, you, you, you still ended up pulling in with a, with most of your tire pressure. But I mean that's a, that's a hazard right there in itself. You know, it always surprises me is here you got a, a hazard by driving down their street and, um, you even went to one place and they had all their bays open and they still wouldn't serve you.

Speaker 2: 2:07

Yeah, they were, they were having a break in the air conditioned. But again, you know, you're talking about summer and that, and it's amazing today. It's gonna be a, they were saying 98 degrees, but the heat index is 114

Speaker 1: 2:24

one 98 time. Why do they have to always make it worse? Who came out with that? Right? That's a news, right? Let's make it sound worse than it really is, but I mean, literally when you go outside, it's like the stick, the shirt sticks right to you. And, and, and my son's been in camp this week and so, uh, he's out playing golf in this and so, um, but he hasn't complained about the heat at all. I'm just making sure we're putting the SPF 1 million on him as we, as we send him out out in this stuff. So, but anyway, folks, you know, welcome to the podcast. Uh, this week, uh, and last couple of weeks we've had some really good podcasts. Uh, last week we had David Bach, uh, on, and he was talking about some books and some summer reading books. Oh yeah. It was why we want to do is he's written many books and it's a good opportunity during the summer I think to, to grab a couple of those books, read some of the books that he's written. He wrote the automatic millionaire, um, and some other books. That's a fact. Yeah, that's a new one. The latte factor is a really new book that he just came out with. So take the time. I mean, read this great summer reading there. And then the week before that we did a, an interview on the Pete Paquette show. And um, it was a, about over was a two hour show, but once you work into commercials, it was about an hour and 10 minutes of content. And so, uh, some great information there, you can check out that podcast as well. We talked about a whole bunch of things doing with finance. But this week what we're going to do is we're gonna take one of the questions that we get most on the show, and that is what are the steps I need to be taking as I plan for retirement. What should I do? When should I do it by? And, um, you know, at the outset, uh, I kind of made the little joke, um, I made the joke of, of a person who legitimately came up to one of our live events and he said, you know, I'm blind planning to retire next month, guys. Uh, why don't I come in sometime after I retire and then we'll plan on my retirement. Okay. And so, I mean, I got to kind of a chuckle out of that, but yet a, you gotta do the final do that. Yeah. You can't, you can't have the body of an, uh, of a Donna's a Greek, a Greek God. You can't have a, a, an incredible body and say, well, I'll, I'll, I'll start exercising after I get the body, you know, let's do it that way. It's not how it works. So again, one of the questions that we get a lot is, you know, when should I start playing for retirement? When should I do it by, uh, you know, and again, here's the, my initial thought on this is, is it okay to start doing the planning when you were a month or two from retirement?

Speaker 2: 5:00

I would say absolutely not. You still need to do it, but it should be better late than never. It should be gin, you know, and we talk about it so often and that's the financial red zone and that is the 10 years before you retire is, and it's just as important to 10 years after mistakes you make in that window can really haunt you've sir out to 30 plus years that most people are going to be retired.

Speaker 1: 5:26

Yeah. And when you were retired for 20, 30, 40 years, it requires a lot of planning and you can't do that planning afterwards. I mean, you think about Michael Jordan Gretzky's the tiger woods is to the world. I mean these guys in preparation for success in what they did had to prep for it spent years prepping ahead of when they actually went out and did it.

Speaker 2: 5:47

You mean Mary Lou Retton Moon, she won the gold medal in gymnastics. She just didn't go and just didn't just show up and do it now. Yeah, she was probably maybe a little bit of planning and you know, they didn't just become

Speaker 1: 5:58

successful overnight and retirement takes some prep. It takes a little effort too. And so I think a good key tip here, like you started out with their day with the financial red zone is your retirement timeline should start 10 to 15 years prior to when you retire, not the day of or the day after. If you have a choice, start at 10 to 15 years before you retire.

Speaker 2: 6:20

Yeah. That's just like saying, well, you know, I'm going to do the will after they put me in the ground. Oh yeah, yeah. And[inaudible]. Yeah, you got to do some planning. It may not be the most enjoyable planning in the world, but again, it's something it really needs to take place because you know, you've worked 2030 40 years of your life to accumulate your wealth, and you don't want to blow it at the last minute because you just didn't plan.

Speaker 1: 6:51

No. So I mean, the planning and phase should start 10 to 15 years before your retirement. We could call this phase one, right? The start.

Speaker 2: 6:57

And that usually starts when you're about 50.

Speaker 1: 6:59

Yeah, that's it. It's not. Some people will come in and they'll say, well, I'm too young to start planning for retirement. Wow. Are, how old are you? Well, I'm 55 well, and I'll ask them, I'll say, well, why do you think you're too young? And they'll say, well, nick, I think I'm too young to re plan for retirement because I don't have my 401k money available

Speaker 2: 7:17

to me.[inaudible]

Speaker 1: 7:19

and, and, and so, but that's not, that's not the good way to think about it. Eventually that money will come available. And so you have to plan in advance of when those things happen. So you're, you're kind of ready to go. But yeah, you're in your fifties that's a good timeline.

Speaker 2: 7:32

And again, take 50 and subtract it from a hundred using the rule of a hundred and basically should tell you, but 50% of your dollars should be in something that's relatively safe. So you want to start decreasing your risk in your portfolio when you, you know, just keep using that rule of a hundred as you get older, start tweaking in a way. Start putting more and more dollars into something that is safe that you can take that vacation and not have to worry about, oh my gosh, what's the market going to do to me today?

Speaker 1: 8:06

Well, and something else that you need to do is discover what retirement income streams you're going to have. So alerts had coming from. Yeah. So if you have a pension, start analyzing how much is this pension going to bring in a, do I have any annuity income? Do I have any rental income? What's Social Security gonna be like for me? Start figuring out what incomes you can depend on so you can start thinking your budget through on what kind of lifestyle you can have

Speaker 2: 8:30

and start in a numbers thing. Next would be to start eliminating debt and start chipping away. It was amazing. I just read a study where very, he said 80% of the people that have credit card debt don't know the interest that they're paying on those credit cards. They just say, oh my gosh, I can't pay it off. But they don't realize that they may be paying 14 18% interest on those dollars. They know it's, it's called a lot. Yeah. That's a bunch of my, it's called I'd wanna don't, I don't want to find out because I know upset me. Just think about it. You know, we, we talk w you know, we're all in finance, but look at the banks. Why in the world would you want to raise interest rates when people are, are happy or don't, maybe not happy, but they're making a half a percent, one, one and a half percent on cds, but yet they're paying 18% interest on credit cards. Oh, I know. It's absolutely nuts. Which usury, you know, it's, it's not, so you've got to get your, I mean, you gotta look at your eliminating debt. That's a great thing. Another thing too, and let's talk about this for a little bit, is, is what's the rule that we follow dad on, on getting your 401k so you know, what's, what's the rule? How much should I put it in my 401k let's, let's suppose that you work for a company and they put in, they're going to match 3% or they're gonna match 6% of what you put in, put in all you can to get their percentage or 3% or 6% because regardless of how pathetic the 401k, what they're offering may be paying, if somebody you know, is going to match 100% of your first three or 6% that's 100% return on your money. Yeah. So I mean, you put that amount in up to what they'll match you. Okay. I mean, if you think about it, if you invest$10 in a match, you 50% and they give you$5, you just made a 50% return. You bet you that's pretty sweet. That's a good thing to do. But then some people put more in their 401k than that amount. And I say the next thing that you should do, cause a 401k is typically pretax dollars, um, is to start saving in a Roth Ira. If you can. If you're 50 and you know, years of age 50, 55 in that arena, you put in all you can to get the matching contribution. But if anything else, you don't, wouldn't necessarily want to stick it in the 401k simply because you can't do an, uh, an inservice distribution, which means while you're working, you could take the money out and put it into your own plan until you're 59 and a half. So you won't really want to talk about that. Find out what your tax, uh, alternatives are and start to diversify. And outside of the 401k, okay, if you have some money in, say a Roth Ira, you're diversifying your taxes in retirement, a 401k typically tax, you put all that money in there and it's going to be taxed whenever you take a dollar out. But if you start saving while you're working in a Roth Ira, and you can put anywhere between, depending on your age, 6,500 to 7,000, you know, anywhere between six to$7,000 that you can put in a Roth. But then that money in retirement is completely tax free. Well, and it's just like, I was talking with a gentleman, the other David, he's putting in$500 a month into his credit union at work. And I said, does that an into an IRA or indoor? No, it's just in a savings in case, you know, I want to go out and buy a car and I got to thinking,

Speaker 1: 11:54

you know, you've got$6,000 a year or 500 bucks a month, he could put that into a Roth Ira. Allow that to accumulate and grow. And when he gets to retirement, hat's all tax free money. Now, unless he only had$20 to his name and he's doing that to start building up his cash stash. We always believe that you should have a cash stash. But in his case, that wasn't, that wasn't the case. So you always got to have a cash stash that you're starting to build up in and you want to retire of a cash stash. Because let's face it, if you're 70 years old and you're retired and you're not bringing in that income anymore, and your AC unit goes out and down here in Florida has a lot of houses that have tires,$714 had to come out of my cash. Yeah, I mean, so I mean, just think about that. If you didn't have a cash stash, it's going to be coming out of someplace you, Ben. So you want to make sure you have that cash. So again, this is the first phase in retirement. You should do this. 15 years to retirement, 10 to 15 years to retirement is when you go through this first phase. But let's now say that you're 10 years prior to retirement. Let's talk about what should happen during this part. So let's say you're planning to retire at 65 you're starting to do this stuff between the age of 55 to 65 now, age wise, you're in your late fifties maybe. Okay? So depending on when you retire, you might be in your late fifties early sixties but again, you need to fine tune, what am I getting from social security? Get your numbers again. Don't just say, well, I got my numbers five years ago. That should suffice. You paying John Duke thousand hours into social security, they will tell us. But from the time we start working till we retire, 90,000 hours, and I gotta tell you it should deserve a little bit more respect than 15 or 20 minutes or less. Looking at a statement saying, well, if I retire at 62 you can get this now. I mean, so social security is a big deal and everyone else is telling you, don't worry about it. Take it when you're 62 or everybody else, maybe even other financial advisors, they're telling you social security, a, you know when you retire, just start taking it. Here's what I'm telling you, social security, if you take it right, you can get so much more money out than if you just turn it on whenever, whenever is not a strategy. So what I'm telling you is maximizing what you get from social security, put so much less stress on the money that you've saved for retirement. It can actually help you not run out of my dream retirement if you choose the right choice. So I throw out everybody, everybody else is saying don't worry about it. Social Security, don't worry about when you take it, that's, you don't need to worry about planning for that or do use doing you. You need to worry about the doomsdayers that or we'll go out there and tell you, oh you better sign up at 62 cause it's gonna go away. I think it will be there. It might not be there in a way that we know it, but it's gonna be there in some way, shape or form. And so yeah, if they took that away from the seniors and started playing a lot with social security and eliminated it, you would see a march on Washington that they wouldn't even be able to record the, and so I mean social security, one thing continue. I mean in this second phase, which is like the 10 years before retirement, continue working on lowering your risk. All that rule of a hundred that we already talked about. Do a retirement income analysis to see if you can retire early or find out if you are, you know, if you're on track to retire or if you need to push back your retirement date a few more years and give yourself some ample time to save up a little bit more money, um, and maybe get some debts paid off. Uh, you know, this is the time when you can figure out, do I need to work till I'm 70. What's that situation going to be? You've got to start thinking about what retirement is going to be like for you. Yeah. What's your what? What if do you sit down today and you thought about your best retirement day? What would it look like? You know what? What would that, that touched your B, but, but I don't know. Do a budget. Yeah, I know. Here's how I think about it. As you quantify it now, some people in retirement, they might say, well, I'm, my wife and I are gonna play golf every day. Okay, well, if you could play golf every day and it's$50 around a golf times to people, it's$100 a day. If you do that five days a week, that's$500 a week times four weeks in a month, that's$2,000 okay? Now, when you start looking at it that way, it's expensive. You might, you might be able to pay for that if you planned for it, but if your retirement is, hey, you know, we're going to go camping, we're going to, we're going to go kayaking twice a week and we already have the Kayak. Well then that's really no expense. So you just got to look at what are your going to do and what does that actually cost. And if you know that there's going to be a deficit. So let's say that you know what you have coming in during retirement is not enough to pay for the lifestyle that you want. Then you need to start creating what we call your own private pension plan, a p p p plan, a private pension plan to where you have maybe social security coming in, maybe a pension coming in and other income, but whatever deficit, you have a short fall every month that you start investing your money in a investment, a private pension plan that can bring in some additional income to help diffuse or de de de help solve for that deficit that you have right there. And then the last thing that you need to do in this, in this point in, in, in this phase, is you've got to work on preventing large drawdowns. The worst thing that can happen in the draw down is how much money you're going to lose in the market. It's just if you're 10 years to retirement and the market goes down 50% you lose 50% you're pushing back your retirement date. For most people, it is very, very difficult to survive and to rebound after a significant draw down. So you need to start lowering the risk in your portfolio, start de-risking, lower the volatility of your investments because you just don't have as much time to make it back. And Medicare should be in place. Oh my gosh. You know, that's a huge thing that people, they retire at 62 and full retirement age is 66 they've got to pay for that until

Speaker 2: 17:49

65 for medicare doesn't cover cover while you're still paying for it. They just take it out of your, what you're receiving. But the thing is, you've got a seven month window that's three months before your birthday, the month of your birthday in three months after turning 65 Duh. And if you don't sign up for it, there's a penalty for doing it.

Speaker 1: 18:11

Yeah. So I mean, you just gotta look at it. I, a lot of people say, well, I'm going to leave my job at 62 at 65 I'm, you know, they, they don't realize that between that window of time between 62 and 65 they have no social or they have no, uh, health insurance and they have to pay for it out of pocket because the company's not going to give it to them anymore. And usually that's a big expense. People don't account for it. They forget about that one. So if you think about it, three years, let's say it was$700 a month, okay, we're, we're talking some big chunk of change for you to have to buy your own insurance plan. So if it's$700 a month, that's 8,400 a year in health insurance. And then just the cover years,

Speaker 2: 18:52

that's twenty five thousand twenty five thousand dollars

Speaker 1: 18:55

before Medicare ever kicks in. So that's not something that you can just say, I'm going to retire at 62 because I can, you've got to account for the fact of what other expenses you're going to be on the hook for that maybe your employer had played, had paid in the past. So again, that's a big deal. Start building that private pension in this five year window, five years. This is what we're talking about is phase three, five years before retirement. You've got your retirement income plan in place. You know what your deficit is because you did a budget, you're doing your private pension plan so you, you have some extra income, you know you can count on to fill that gap and then you need to seriously start looking at the amount of money. Again you have in the stock market. I don't mind, I mean dad and I, we, we believe that that is a part of a plan. His investments in the, in the market are, are, are a part of a plan but it shouldn't be the entire thing. Cause if you have 99 95% of your money, which we see a lot of people, they'll have 95% of their money in the stock market all the way up until and even past the time they retire. And that is, to me, that is the biggest risk because you can have so many things happen if the market takes a downturn. And if all of your money's out there at risk, it's just hanging out there to be hit.

Speaker 2: 20:07

Yeah. Folks think at a, you know, I'm diversified, I've got 20 mutual funds. Those 20 mutual funds are all in the market. Okay, so you gotta you might be diversify, but you're still to the vars divide in one specific place, the market. Okay.

Speaker 1: 20:22

Now if you've made it to your retirement date, so you've made it through these first three phases, you've turned in your notice, you're done, you're retired. If somebody follows what we've talked about, you've now been doing this for about 15 years, right? So you've been planning in these different phases over this period of time. Here's where you should be by this point in time. Okay. So we've kind of hit on some of these as time goes on, but now you're at that retirement date. What you should be doing is you've got to this written year by year plan[inaudible]. All right? You should have a roadmap so you know exactly what kind of income you're going to be getting. That income should actually be turned on by this point in time. You should know that Medicare situation, you should have a cash stash that's that six to 12 months worth of expenses, so you should have this built up so that if something happens, you've got some easy money to get to. You should have this private pension plan in place. But one thing that we haven't talked about is how when you retire, you're getting a certain amount of income and you've got to remember if retirement is 20 to 30 years, is that amount that you start off with on day one going to be enough to as a far as an income every each and every year, is that income level going to be enough when you're 75 when you're 80 85 90

Speaker 2: 21:34

if interest is z or you know, inflation a zero perhaps. But we all know inflation is that silent mugger that's lurking out there if it's going to take away. So if you retire today and you had 1000 bucks, do you think 20 years from now it's going to cost you$1,000 to buy the same bread and the milk and put gas in your car? Probably

Speaker 1: 21:56

No. We've been around a while. So we've seen people that came in and said, well, you know, as time goes on, my expenses will go down and let me tell you, I know everybody else is saying that too. Everybody else was saying, as you get older, your expenses go down. Here's another thing that we'll tell you is that having the experience of working with hundreds and hundreds and hundreds of families over 54 years, the statistics of what we see in real life does not measure up to that. Nobody is ever calling saying, I'm getting too much income. Can you cut my income level there?[inaudible] never, ever. I can't remember ever getting a phone call where anybody's ever said, can you cut my income? I'm getting too much.

Speaker 2: 22:35

Well, just look at it from one uh, important thing. When you do your taxes, when you were filing single, no deductions, your taxes were greater than when you got married and you had deductions. Same thing's gonna happen when one of us walk out on life, we're going to be back filing a single return and single individual's taxes will go up. And you know, and that's not dimension that you're going to give up. The smaller of two social security checks, all of these things have to be addressed. So

Speaker 1: 23:10

I mean actually a widow, their taxes will likely go up is what we see and that's a bigger expense. So here you think, well, you know, my taxes should go down and they actually go up and that's, that's a big issue too. That's why we talk about spousal planning is something that's incredibly important because the planning doesn't stop the day that you retire, even five to 10 years after retirement. Even when you're in your seventies the planning continues. It just changes. It goes from, from all that pre-work to now how do I make sure my spouse is okay if something happens to me or how do I handle a longterm care expense or a medical, how do I handle passing my money as efficient as efficiently on the next generation? That's where the planning goes. Once you start doing that, planning never ever stops. No, it goes up right until the last day, right? You're always making those durations. You're always making alterations and again, if this folks, if you're shaking your head and you're like, wow, this sounds like something I really need help with or I'm not quite sure. On a couple of these things. You can always give us a call here.[inaudible] the number here at the office is(800) 245-0546 that's(800) 245-0546. You can always give us a call and we can go over some things and, and kind of try and figure out how, uh, you know, when can you retire, we'll be able to help you out with that. If you, if you're not sure when that day, uh, is or maybe you're not sure if you have enough saved for retirement or will that money last. These are all things that we can help you with. Um, and even, you know, our, my loved ones going to be okay if something happens to me, these are all things that we can help you with and make sure that you're on the right track. Again, you can just give us a call. That number is(800) 245-0546 and you can always check our website too, which is www.onthemoneyshow.com and you go there for a bunch of great resources. And of course we also have our on the money retirement toolkit that we send out as well. It's got great information in there. Our book diffuse the seven steps to saving your 401k from the IRS. A bunch of checklists, white papers, reports all shipped to you in this, in this retirement toolkit. So all the, to get that, all you have to do is text the word retire, two, three one nine nine six and we'll ship that box out to you. Absolutely no cost. So again, we're going to be coming back again this time next week for another podcast. Uh, that one is going to be all about big mistakes people are making with their IRAs, a some mistakes that people are making. It's costing them tens of thousands of dollars. We're going to be touching on that and five easy ways to avoid those mistakes. Uh, so we'll be back here again next week. And again, this is a podcast 67 or something like that. So there's a bunch of great content if you just want to binge listen to these shows. Ah, that's all. That's always good. And then so, uh, for us, so we'll see you next week. Dad, anything you want to add as we know? No, no, I think we've covered it and it's been a good, exciting show. And until then, I want to thank our listeners for your time this time. Until next time, so long, everyone

Speaker 3: 26:12

you've been listening to the, on the money with Jerry and nick warrior podcast, catch new episodes every week to discover the latest retirement strategies and tips for retiring. Well from Jerry and nick. Do Subscribe to the podcast, Ted, too, on the money show.com. That's on the money show.com investment advisory services offered through Brookstone, capital management, LLC, sec registered investment advisor group 10 financial and Brookstone capital management are independent of each other.