Like this episode? Leave a review and give a 5-star rating on the Apple Podcast app. As always, share with a friend!
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA) and Certified Financial Planner professional (CFP). Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
For more information, visit Medina Law Group or Palante Wealth Advisors.
Click here to listen to the episode!
Click below for full transcript…
Announcer: Welcome to “Make It Last,” helping you keep your legal ducks in a row and your nest egg secure, with your host Victor Medina, an estate planning and elder law attorney, and certified financial planner.
Victor J. Medina: Hey everybody, welcome back to Make It Last, the only show that takes you on a fun and exciting journey through the world of legal and financial retirement planning. I’m your host, Victor Medina, and I’m really glad you can join us here today. I’m excited for today’s show, as I am for many of the shows.
More and more I’ve been interested in the soft part of retirement, less about the numbers and whether or not you’ve done the right calculations. More about signs that you’re ready to retire or the emotional components around that.
In today’s show, I’m going to be attacking how to evaluate or see if you contain any of the signs that you aren’t yet ready to retire. Like, how are you going to know when you’re ready to call it a career. The thing about it is that, retirement is such a big decision. It shouldn’t be taken lightly. For most people, the decision itself to retire doesn’t come easy, it is full of all kinds of emotional input on there.
A lot of people are defined by what it is that they do. Even if they’re not consciously aware, or that it’s defined that way. They are by how they spend their time up until that point in time, in which they retire.
They get up and work, five days out of the week for most people. That means that the majority of time that they spend, even the majority of those days in which they’re working, they spend doing something that defines their existence.
I’m of a mind that people should take their time and consider all of their options and make the best decision for them and their family, both financially and emotionally. How does one really know that they’re ready for retirement? How much money is enough? How can you prepare for the social and emotional side of the equation?
Today’s show is all about being prepared, or to the contrary I guess, how to know when you aren’t quite ready. There are some signs that you can catch on to that could indicate that the timing isn’t quite right. I’m here to help you identify some of those signs that say that you’re not quite ready to retire.
I’ll tell you there are all kinds of things that are going to factor into making that decision. What I want to do is try to help you get some of the information to understand whether or not you’re ready. I have created a number of different reports that are out there, that are available for you to download. They’re 100 percent free.
I want you to have these so that you can have the best information about retirement and getting ready for that.
One of the ones that I want to help you understand more about is called the income bridge. There is the need for people to understand how they’re going to live on a day to day basis.
For that reason, we want the opportunity to know that they’re going to have enough income to last their entire life. For that reason, I want to give that report. If you’re looking for it, what you need to do is text the word “income” I‑N‑C‑O‑M‑E to 609‑554‑5936. That’s the word “income” to 609‑554 5936.
If you do that, we will send out to you by email, our report on the income bridge. It’s a really important part about making a retirement decision.
Today I’m going to talk about a question that, I am sure many of my listeners have asked themselves or their advisor. That question is, how do you know when you’re ready to retire? Of course, the question itself is pretty subjective.
I mean, it could mean a lot of different things to different people. Like, are you financially ready? Are you emotionally ready? Are you socially ready? What are you unsure of? You might be thinking that it comes down to a financial decision and to a certain extent, you’re right. I mean, that is kind of what we do here when we crunch numbers and help people understand can they make the decision to retire.
Many times, it’s just around the numbers discussion, but there’s much more to it than that. I’m going to examine today some signs that may point to the fact that you might not be ready to retire. My goal here is to help you identify some of the warning signs and I guess, on the other side of it, help you re‑install your confidence, either way, in your retirement decision.
In this, I’m thinking about a very particular client, who has been wrestling with the decision to retire. I’m not aiming this show at that client, whatsoever, should they happen to be listening. I have been struck with the difference that different people will evaluate making that decision.
Some of my greatest inspiration in and around retirement comes from evaluating my parents. My parents were ready to retire for a few really good financial reasons. They were both school teachers, and had put in the minimum number of years that it took to get the maximum amount of pension for the rest of their lives, and be able to secure health insurance.
From everything on the outside, it was a really great financial picture that they were making a decision that says, “Look, I’m ready to retire.” The social and emotional side of it, I think that they wanted to get away from doing their job but to doing what, was still very much influx.
They spent some time living in Florida and living the golf retirement life. That had its own schedule, its own routine, and only lasted for a period of time before there was time to do something else. Was their decision to retire the wrong decision because they didn’t stick with the life that they set out to have as a moment that they had retirement?
Probably not. It’s not a big deal to change. In fact, there’s probably a lot of value in changing. There’s a lot of worth in being able to make a different decision and to be flexible about it. It’s probably something that should be held up as an example, for sure. It did raise the question for me, “Were they, in fact, ready to retire?”
As I said, I’m trying to help you make that decision as I think about my parents on one hand, this other client that’s wrestling with that decision on the other hand. As an extension of this show, I want to make sure that you know that I can potentially help you examine your own retirement situation more closely.
You’re welcome to call my office and schedule a consultation if you’re ready to explore that. I want to help you examine the topic today as it pertains to your individual and unique situation. If you’re interested in that, our phone number at the office is 609‑818‑0068. Again, the number is 609‑818‑0068.
You can also visit us online by going to our brand‑new website. I’m really excited to show this one off. In fact, we haven’t had a full launch of this. You, my podcast and the radio show listening audience get advanced notice that it exists. You go to palantewealth.com. That’s P‑A‑L‑A‑N‑T‑E W‑E‑A‑L‑T‑H dot com, and that will help you understand more about the services that we provide.
Either way, if you’re interested in exploring that with us, remember we’re one of the very few, if not, for sure, the best when it comes to being able to handle both the legal and the financial parts of your retirement planning, making sure that you have a plan that works together across the board. If you’re interested in doing that, just reach out to us at 609‑818‑0068.
In my experience, as I mentioned, retirement means a lot of different things to different people. For some, it may mean starting a brand‑new career.
One of the shows that I did about a year ago that I love to recommend to other people talks about the different kinds of retirement. It explores a form of retirement in which you retire from what you were doing to doing something else. Maybe that can happen very early in your life. That is not an age 65 decision.
For some people, retiring is starting a brand‑new career or trying something new in the workforce. For others, it may mean kissing work goodbye forever, and finally living their lives without having to punch the clock ever, ever again.
My parents, when they retired from being in the school system, they were basically saying goodbye to waking up at 5:30 or 6:00 in the morning, and working a job that required them to be there 184 days out of the year and that they couldn’t set their own vacations. They were always already set by the school calendar.
They did different things from there. My mom started volunteering holding some babies in the NICU, in the ICU for neonatal. My dad ended up working the front desk at the hospital to help surgical patients and their families know what was going on at any point in time. They were doing other things, but they definitely kissed their work life goodbye.
For others, it can be a combination of those two, whether it’s starting a new career or saying goodbye to something, but what I like to explore is what retirement means to you. Have you thought about that? Because if not, you might not be ready.
Have you considered, for instance, how much income you might need in your retirement assets to produce regularly to support your lifestyle on these. That’s why I offered that report, the income report.
You can text the word “income” to 609‑554‑5936, but if you haven’t considered that, you might not be ready for retirement. I can go on and on and on. What are these signs that you’re just not ready.
I want to talk about that in today’s show to make sure that you hear about the signs that might be pointing the fact that you aren’t quite ready to retire yet.
When you are ready, then you want to explore that with somebody that can help you do that. Get some professional advice. The first thing that I want to do is, I want to talk about the major components of retirement planning.
We focus so often on the financial one. I’m going to get to that today as well, but I want to talk from a very high level on the main components. I’m not talking about investment decisions between stocks and bonds or tax sufficient strategies.
I’m talking about three main components to drive retirement and planning for it. There’s a social part, an emotional part, and a financial part. Each one of these are considerations of retirement planning, and they need to have their own evaluation.
Each one of them individually to know that, in fact, you have considered the biggest the blocks that are necessary to being in determination if you’re ready for retirement or not. Let’s start with the social component first.
This one might be overlooked most often. The question that I want to put in front of you is, have you thought about how quickly your social life may change when you retire? How long have you been working? 20 years? 30 years? Likely more?
I know that my parents couldn’t retire until they had gotten 35 years in, 35 years for many people. You’ve most likely tailored your entire routine on a weekly basis, maybe even monthly, seasonally, annually to your job, and the time that you spend there.
If you’re the typical worker, but this, of course, doesn’t cover everybody. Do you work from Monday through Friday from 9:00 AM to 5:00 PM? You’ve been doing this for the last 30 years, even if your job has changed.
What hasn’t changed is that you have had to work, and you, in fact, have been working. If that’s true, or even partly true, you’ve likely developed a lot of social relationships through your work.
These are the people that you spent the most time with, and they started out as co‑workers, perhaps became acquaintances and now are friends. I just attended a church block party this Sunday. It happens to be that one of my wife’s co‑workers is also a member of the church.
Here we are, we’re sitting in the grounds of the church. There are tables that are up. Kids are out there playing. They’re on the Slip ‘N Slide. There’s cornhole tournaments. There are food trucks there. It was really a fantastic time. We’re sitting at the table and over comes the co‑worker.
That’s the person that my wife spends most of the time with, nothing wrong about that, that she’s not spending time with other people in the church, but she is. What are they talking about? They’re talking about work‑related stuff. For them, everything around that related to the work and you have to understand that. My wife, she runs a schedule that goes from September to June. She’s off right now.
She’s not working in the school system, and by the way, neither is this other co‑worker. Here they are, hanging out with one another, socializing. It’s Sunday afternoon. There is a pizza food truck. There is a burrito food truck, and there they are, socializing, talking about work‑related stuff. It’s not going to restart until sometime in September.
You can imagine their entire world centers around this. This probably is you in some fashion, that there are these friends, that are all around work. Imagine that you aren’t going to see them on Monday. Let’s say that my wife and this co‑worker were hanging out on Sunday, but that Monday, they’re not going to see them a whole lot.
They’ve gone from seeing each other and talking to each other, and being with each on a regular basis, too, pretty much not at all. Certainly with nothing in common to talk about any longer because if my wife has gone ahead and retired from her job, what’s going on in the job…between you and me, a little pathetic. Let’s move on. There’s nothing there that you should be linked to.
This is a huge change, and I want to ask you the question, are you ready for the social change that you’re very likely going to have to go through?
I believe that planning your social life in retirement and the changes that are surely going to take place is almost as important as the financial part. Why is that? Why do I think that?
Because part of the decision to retire should be in and around, making a decision to at least maintain your level of happiness going forward.
Your social connections, knowing that you belong to a tribe of sorts, that you belong to a group, and that group accept you for who you are, and that you can have interaction with other human beings at a level that matches what your needs are.
If you want to have intellectual conversations, you are. If you want to share an experiences, you’re doing that. If you’re contributing in some fashion, and giving to others that you’re able to do that, as part of a group with other people, so that you have that sense of belonging.
That is so important to the joy that you can create and have in retirement, that it has to be considered. It has to be factored in, as you start to evaluate whether or not you’re ready for retirement. You have to take this into consideration and make sure that you’ve planned around it because if not, why retire whatsoever?
Why even go through that exercise if you’re going to move from a state in which you were previously happy, at least you were meeting your social needs.
Every human being figures out how to meet their social needs, their emotional needs. They figure a path through. You just don’t sit there miserable all the time. At least I don’t meet those people. They’re not my clients. If you’re one of those people, remember what I said about calling us and schedule, but don’t call me. I don’t want to talk to you if you’re miserable like that.
I actually only want to work with the people that aren’t miserable.
Victor: If that’s who you, are in a state where you’re comfortable and happy, why would you move to one in which you’re not happy? You’ve got to nail this part of it down if in fact, you’re going to be ready to make a decision, to move into retirement
Let’s do this. I’m up against a break here. I’m going to cover the next two parts of retirement planning, the components, the emotional and financial part when we come back from this quick break. Stick with us on, “Make It Last.”
Announcer: Imagine, if the attorney you trust to protect your legal interests could also be trusted to protect your retirement wealth. One trusted advisor, dual‑fiduciary roles, Victor J. Medina. Mr. Medina is an estate planning and certified elder law attorney with a national reputation. He is also a certified financial planner professional.
Through his law firm and independent investor advisory company, Mr. Medina 360‑degree wealth protection strategies for individuals in or nearing retirement. His unique approach offers advantages to high wealth individuals seeking conservative advice and a professionally managed approach to their retirement wealth.
Learn more. Call 609‑818‑0068. That’s 609‑818‑0068. Or listen to the newest episode of Make it Last Radio Wednesday mornings at 11:00 on 1450 Talk Radio. Investment advisory services offered through Palante Advisors LLC., a New Jersey and Pennsylvania registered investment advisor.
Victor: Hey, everyone. Welcome back to Make it Last. Today we’re talking about the signs that you may not be ready for retirement. My goal here is really to outline for you those things that we see in everyday when we evaluate retirement for other people. It’s not just the financial component of it, although we’re about to get to that in today’s show.
We also want to make sure that everyone that we see is ready for retirement in every capacity, in every way. We spent some time in the last segment talking about the social components of that. And whether or not that says that you are ready. The next component I want to talk about is the emotional component.
So another component, it deals with the emotional element of being ready for retirement and this is a tough one for a lot of people. I think it’s filled with all sorts of concerns about the decision they are about to make because while they might be socially ready to retire and/or physically ready to retire, the emotional card might want you hanging on for a little bit longer.
Think about it this way, if you are someone who has taken a lot of pride in their work, it might be difficult for you to let go. You might have become a very reliable asset to your company and you’ve developed relationships with a lot of people who know that.
It is, as I mentioned earlier in the show, a component of your identity. You spend a lot of time defining yourself as someone who not only just works and works at what you do, but likely does it at a very high level.
If, for no other reason, then you’ve been at it for some time. My parents were there for 35 years. I imagined they were good at what they did over that course of time. If you’ve gotten good at doing something, it is a way of defining your value and worth.
You’ve spent so much time getting good at what you do, you rightly see yourself as somebody worth respecting for that. If that’s the case, it is entirely understandable that making a decision to let that go is hard and it will impact you.
It could be something that the definition of who you are and losing that might hang you up in your course of making a decision to retire.
The other thing that you might be wrestling with, and this is also really understandable, is that you might feel like you are letting certain co‑workers, your departments, or your branch down or the people that you served down.
Here I am, spending day in and day out, dealing with families who are wrestling with retirement and the fear that long‑term care costs will devastate their estate, that it will leave them penniless or leave their spouse penniless.
A time in which I decide to retire, I’ve got to contemplate the fact that I’m no longer going to help these people. A big part of how I define who I am and what it is that I do is in the way that I impact the lives around me, positively impact them.
I spend a lot of time considering my actions in relation to the way that they improve the people’s lives around me. I do that in lots of settings. I do that at home. I’m considering that with my kids and with my wife. What do I do? How do I serve them? That’s a consideration of mine.
The other way that I do it is with my team members…the people that come and work with me in Medina Law Group and Palante Wealth, two companies under the same roof. Those folks, they’re here sacrificing to assist me.
Yes, I’ve given them a job. Yes, they get a salary, but beyond that, they could get to those other places. I’m really taking them on to help improve their lives. They put a lot of faith in me. What am I doing to serve that?
Finally, of course, with my clients. Here I am with my clients trying to figure out how to help them lead great lives as well. The time in which I decide to retire, is a time in which I have to wrestle with this idea that they’re going to have to go on without me. What does that mean? Am I letting them down? How many people am I letting down?
That’s a big component of the whole. I can definitely see why people are emotionally tied or could be tied to their work and the fact that leaving that work is a function of letting the people around them down.
In addition to the emotional component, there is the financial component. Put this in whatever level of importance that you want. It could be the most important. It could be one of the most important. You could be socially and emotionally ready. However, if you are not financially ready, it won’t make a hill of beans difference.
If you’ve already considered what your new retirement lifestyle will look like, you have friends that are retired, you’ve trained a good replacement and you know that you can leave your work behind, but if you haven’t wrestled with and dealt with the financial component of your retirement life, that’s not in order.
You might be forced to stay longer than you want. If that’s the case each passing day that you have to wake up and go back to work is going to be harder, and harder and harder. It’s going to be the part of the factoring in of what your retirement life is going to be like, how joyful will it in fact mean.
You have to make sure that the financial component of your life is there because unlike the other social and emotional components, which you might able to figure out during those introductory years of retirement, if you move into retirement trying to figure out the financial component, you could be making a huge mistake. We’ve talked about why.
There are very few ways to come back from that kind of mistake. You don’t have the opportunity to go to work for a longer period of time or make up additional money if you’ve already separated from service that way.
All right, what are the signs that you’re there because I want to give you some guidepost, see if you can see yourself in this. If you can, maybe you’re not ready. While I admit that the social and emotional components are important areas to focus on, we need to be thinking about some of these signs that point to the fact that you simply aren’t ready for a financial standpoint.
By the way, I want to be clear I’m not talking about just not having not enough money for retirement, I’m also referring to not having a plan or clear direction with your investments in retirement savings. Let’s go through one of these first signs.
The first one is that you haven’t created or looked at your monthly retirement budget. Now, watch how we put all of these things together under a heading like this, which sounds ostensibly like a financial component.
I’ve talked about this time and time again. I can’t stress the importance of it. I’m not going to stop repeating it until every person who walks into my office actually already has a budget drawn up prior to retirement.
I’m not sure that’s going to happen anytime soon. Get yourself ready to continue to hear about this as we explore. I don’t care, by the way, whether you’re actually following your budget to the letter or not.
When it comes to planning for a pending retirement date, you need to at least look at your budget and determine how much income you might need or want to spend from your retirement. You might be thinking to yourself something like this, “I’ve never had to live on a budget so why should I start looking at one now?” That’s pretty common.
These days, people live for their cash flow. Meaning that if there’s enough money coming in at the beginning of the day, they’re just going to continue to feel like everything’s OK. They’re not going to sit and put aside envelopes that say, mortgage, and that’s got cash in there for utilities.
They’re not going to go through that exercise. If they haven’t done it before, why is it that they need to do that now? Here’s the thing. Your spending is likely to change when you hit retirement. It could be that you have more time on your hands, what you spend your time on is going to change, and what you’re going to do with that time is going to change.
Here, we come back to this idea about being socially and emotionally ready. Defining how it is you’re going to be spending your time to fill those needs is the important part of the budgeting exercise because you’re not going to be doing the same things.
I hope you’re not going to be doing the same things. If you just retire, and what you do with that is sit at home and stare at your grass growing, that’s not really a great retirement. I think you ought to go back to work. I’m just going to lay that out there right now. Your time and the way that you spend that time is likely going to change.
If that’s the case, then we’re also going to need to factor in how your budget is going to change, and this idea that you are going to have to pay attention to one. Why do you have to? The reason is that your income and the amount of money that your retirement paycheck provides is likely going to have to change. For most people, it’s not going to be less.
If you’re someone who’s always had more money coming in on a monthly basis than the money that’s going out, savings came very easy for you. Now that you’re retired, and the amount of income coming in doesn’t cover the amount that you want to spend, i.e., you claim Social Security, which is a fraction of the money that you were making when you were working.
When’s the last time that you’ve had to deal with that as a lifestyle and budgeting your lifestyle? Probably not for a super long time. I know that, for me, the last time that that happened was when I graduated college, and the only job that I could get was working for a copier company that was in a competitor’s hometown.
I worked for a company named Pitney Bowes. They are most famous for making mailing machines. I don’t even know if people mail things any longer. I’m kidding. I know that they mail things. We don’t have a machine any longer, but we do put things in envelopes and send them out the door, in addition to scanning, emailing, and uploading everything.
Anyway, I had to work for Pitney Bowes. My job was to try to get people to like Pitney Bowes in the town of Stanford, Connecticut. Stanford, Connecticut happens to be the hometown of Xerox, little company that specializes in the area of copiers. Here I was trying to persuade people that Pitney Bowes copiers were somehow better.
That wasn’t the reason why I needed to live on a budget style, that I wasn’t successful in my job in selling these copiers. That wasn’t the reason. The reason was that job paid $16,500 a year so I was living at home. If I wanted buffalo wings one particular week, there were sacrifices that needed to be made in order to make that happen.
I had a weekly tradition of watching football games with a couple of guys friends when I was home, which by the way, was one of the few things that could get me out of the house because I was otherwise living with my parents at that time. It had to be in the budget, and we had to go to a place where I could afford the mozzarella sticks if that’s what I was going to be doing.
The point was, it’s been a long time, if I’m going to go into retirement, sometime, somehow, I’m going to have to start thinking about the budget. Because the income that comes in after retirement is not going to be the same income that came in before, and I’m going to have to create that.
Here’s my tip. Create the budget even if you don’t plan on using it to monitor your monthly spending. In and of itself, it’s an eye‑opening experience. Create the budget with the idea in mind that you are going to try to have to imagine the lifestyle you want to live in retirement, and all of the expenditures that come with it.
You owe it to yourself prior to retirement to line up the ducks, left, right, where’s money going to be going out to what you’re going to be doing because you need some form a realistic guidepost or template as you explore and enter how to be spending money and how long that money can last.
Next sign we can look at is, OK, you’ve created your budget, but the income shortfall is too large. Now, let’s imagine that you have the budget, and you’re part of the way home to being properly prepared from a financial standpoint.
You have to subtract the amount of income that you will have on a guaranteed basis coming in every month from your needed budget to see how much of a shortfall is it.
By the way, shortfall, simple enough to understand. If you need $6,000 a month coming in from your budget but you only have $2,000 a month coming in from Social Security, many of you don’t have a pension, you’re going to have a shortfall of $4,000 a month.
From there, you’re going to have to consider where are you going to get that $4,000 month from. Are you going to work? Are you going to cut your budget? Are you going to withdraw it from your savings that you have for retirement? That’s basically the only three ways that you’re going to get there.
You’re either going to make money, or you’re going to spend some of your saved money, or you’ll make an adjustment to the budget, and not need as much money.
If you have done things properly, and you’ve identified a shortfall, and you know that you don’t plan on working, and you don’t want to cut your budget and live on less, then you fall to the same category of most of the people that I tend to meet. That’s basically where everyone is.
They’ve identified that they’ve got a shortfall. They aren’t going to go back to work. They are not going to cut the budget. What they want to figure out is how to make sure that the nest egg that they have collected, that represents all of their retirement savings, how are they going to make sure that that’s going to be enough to sustain a set of regular withdrawals to support their needs?
While I could go into the investment side of the discussion and talk about how you’re going to need a diversified and well‑rounded investment plan to help ensure that you can get the income that you need, I’d rather look at the logistics of the need. Let’s go back to the example. Let me flip around the numbers because it’s a little easier to understand.
Let’s say that you need $6,000, but you have $4,000 coming in. You were really lucky. You had a budget. You got a good social security, so there’s a $2,000‑a‑month shortfall.
Let’s imagine that you got a couple here that’s got a million dollars in retirement savings. If we simply take their annual need of $24,000 ‑‑ $2,000 a month times 12 months, $24,000 ‑‑ and they divided it by the asset pool that they have, a million dollars, that they have an annual withdrawal need of 2.4 percent.
Imagine instead of a million dollars, they only had $300,000 saved. If we divided $24,000 into 300, it yields an annual withdrawal rate of eight percent. Based on these two simplified examples, who do you think is in better shape for retirement? Where do you think it’s easier?
Is it easier to sustain a withdrawal rate of 2.4 percent, or 8 percent? Regardless of what the investment options are, they’re the same for both people, which one is easier?
I have a few more signs to go through, but let’s do this, let’s a take a quick break. When we come back, we will continue on with the signs that you may not be ready to retire, and then what you can do about it. Stick with us. We’ll be right back after this quick break on “Make it Last.”
Announcer: Life is better when you have your legal ducks in a row. One area attorney can help you get your financial ducks in a row as well. Victor J. Medina fills dual‑fiduciary roles, an estate planning and certified elder law attorney, and also a credentialed certified financial planner professional.
Through his law practice and independent registered investment advisory company, Mr. Medina serves high wealth individuals seeking conservative advice and a professionally managed approach to retirement wealth management. Learn more about Victor’s 360‑degree wealth protection strategies. Call 609‑818‑0068.
That’s 609‑818‑0068, or listen to the newest episode of Make It Last Radio Wednesday mornings at 11:00 on 1450 Talk Radio. Investment advisory services offered through Palante Wealth Advisors, LLC, a New Jersey and Pennsylvania registered investment advisor.
Victor: Hey, everybody, welcome back to Make It Last. We’re spending today talking about the signs that you may not be ready to retire. We’ve explored the social, emotional, and financial components of retirement. We’ve talked about some of the signs that you may not be ready to retire really focusing in on budget and shortfall.
Now that we’re there, the next sign that I want to talk about is that let’s say you have enough money to cover the shortfall, but you have no plan design to attack it. If you’ve created your budget, you know your shortfall, and you’ve calculated that your shortfall represents some form of an annual rate of withdrawal, you’re getting close.
There are all sorts of rules of thumb that involve how much you should be able to withdraw as a percentage and hopefully not run out of money. You could use, by the way, the old Wall Street four‑percent withdrawal rule. You could use a new method taught by a PhD named Dr. Wade Pfau and others, by the way, that say that it is closer to a three or three‑and‑a‑half‑percent range.
You could do a more aggressive five‑percent withdrawal rate. Whatever it is that you choose to use, if you don’t have a written plan for how you’re going to structure your retirement assets, how you are going to invest your retirement dollars, and how those financial vehicles are going to help you gain confidence.
That your supplemental paycheck, that thing that you’re going to be taking out of your retirement portfolio, the thing that your retirement portfolio is going to be paying you, is going to last as long as you need it to, you’re missing the boat. Every good withdrawal strategy is carefully designed, the financial vehicles are chosen with the need to the adherence of the plan in mind.
Whether it’s an income need or long‑term care planning need or whatever else, it ends up being designed around that. How do you know that you have a plan? Let’s ask these questions. Do you know exactly where your withdrawals are going to come from? Do you have a good idea of how long they’re going to last before the account does not pay any more out?
Do you know how market volatility that is? Do you know how stock market roller coasters will affect your withdrawal ability and how long those accounts will last? Do you know that? Do you know where you will take withdrawals from next if your current bucket is depleted? Or is it all in one bucket? In which case when that bucket is depleted you don’t have another choice off of them.
Do you know which investment bucket will get an inflation adjustment need for the income that might be affected by inflation over these years? You see where I’m going with this? Don’t ever enter retirement without having a definitive game plan for how this retirement check, which is being created by this retirement portfolio that you have, is going to come in and how long it’s going to last.
There are all kinds of ways to skin this cat. No one plan necessarily stands out above the rest. There’s no cookie‑cutter approach that will cover everybody. Your personal situation and needs will dictate which strategy might work best for you.
The point is this, you are going to need that plan. You’re going to need to be able to point to something strategic that you have set up, that is the way that you’re going to navigate this in retirement.
The problem is that I see too many clients coming in, looking at their investment portfolio decisions as the equivalent of a plan. That is to say when they say to me, “I have myself now 60 percent in bonds. Whereas before it was 60 percent in stocks and that is how I’m going to survive in retirement.” It’s almost enough for me to pull my hair out.
Those of you who have seen me in person know that I don’t have any hair left. It’s very little. I keep it short because anything else would just be…It wouldn’t be a farce. My hairdresser, as I was getting older, would still take 30 minutes to cut my hair when there wasn’t much hair there left. So I started cutting my own hair. I said, “The charade is over,” and started buzz‑cutting the hair.
Here’s the thing, I’m driven nuts by the people who come in with their investment decision or investment‑built portfolio as the equivalent of a plan. It’s pretty easy to poke holes in that. I can go ahead and start pulling out statistics and reasons about why having a central bucket isn’t always the best decision and how the math tends to foul that up. That’s pretty easy for me to do.
I can talk about different contingencies that come up and asking clients to help navigate those contingencies. What if this happens? What if that happens? They’ll be able to see how it won’t stand up to that. That simply just having an investment portfolio or something like that or making decisions about 60 percent in bonds ends up being the same.
The point is that we need something better. We need something better than that. We need some form of a plan that takes all of this stuff into consideration.
Here’s the thing, if you’re someone who is in the stage where you’re trying to make sure that you’re ready to retire and you’ve looked at all three components, you’ve taken a look at the social component. You’ve taken a look at the emotional component. You’ve taken a look at the financial component including all of the signs that I’ve talked to you about today.
What did we talk about? We talked about the signs that you may not be socially ready to retire. That you don’t know where your social interactions are going to be coming from. That you don’t know how you’ll be replacing that friend, the community that you’ve come to rely on as you enter in retirement.
To go back to that original part of the show and the topic, you don’t know that in retirement, the people that you used to socialize with, you’re going to still be able do that. Your lifestyles between the two of you may be very different if you are somebody that saved really diligently, and you were ready for retirement, and they weren’t.
It could be that in situations like that, that they are not in great shape. That could be that. You have to be ready to nail down what that social component is, and how it’s going to get served when you’re in retirement. In the emotional side, do you know how you will gain your identity? Where you’ll be taking that from when you are no longer…
Somebody who’s at the top of their game doing a job that they’ve been doing for 35 years, and the skills that they’ve been working at. Do you know how you’re going to plan and adjust for the way you’ll be letting people around you down?
Whether it’s your co‑workers in your department or, ultimately, the people that you serve in your company. Where are you going to find how you define your role in life?
Then all that stuff that we talked about financially. If you’ve gone ahead and you are at that stage, and you’ve looked at all that stuff, it’s time to get a second opinion. You can come in and you can see us. I want to make sure that I help you.
Not only ensure that you’re ready to retire when you look at that social and emotional component, but that you also have the game plan or the written plan that gives you confidence that you need so that you can finally pull the trigger.
The idea here is going to be that looking and meeting with me, analyzing your current retirement position from all different levels, giving you the blueprint for how you can pursue your ideal retirement.
That’s all going to be a way of making sure that you enter into retirement with the highest degree of confidence, with the ability to go in from a position of joy, from a position of optimism. Just that you are so excited for what retirement brings that you are grabbing it with both hands.
I’ll leave you with this story. I’m not even sure how relevant it is but it occurs to me that it’s the right mindset for you. I’m getting ready to give this presentation to a bunch of family law attorneys from across the country. It’s something that I was asked to come and do.
I’m going to be talking to them about something pretty straightforward. Why they should keep their desks clean? It’s a pretty simple topic. When you start to pull the threads on it, there’s a lot of stuff that is wrapped up into that. There is the stuff that’s on their desk that is causing them to have anxiety. There is the stuff in their desk that they just haven’t gotten through.
There’s stuff that if they’re going to have to delegate, they’ve gotten lazy to get rid of. The goal and the point is to be in a position where someone, instead of looking at their desk or walking into their office, feeling this enormous sense of dread because they know that that mess represents everything in their life.
It’s what their business is, it’s talking to them, it’s what’s going on in their home life. All this anxiety that is produced at the office will carry through with them when they’re back at home. The goal is to have somebody filled with energy when they come in.
It can be as simple as the fact that their desk is clean and clear, and they’re ready to go out and do their best work. Your retirement is that same way. You should be coming into retirement with the desk clean and clear. There shouldn’t be tons of baggage all over the place. There shouldn’t be piles that represent planning that hasn’t been done.
Where worry and anxiety that something inside one of those piles is going to come back to haunt you later. You should be engaging with life at that level, at a super high place, where it’s filling you with energy, and filling you with joy.
The way that you do that, the way that you get the metaphorically clean desk in your retirement life, is to look at all of those components, and know that you have them taken care of.
If you don’t have the skill to do that on your own, then you’ve got to get help in order to do that. I want to help you two different ways. The first way is, I just want to give you something that will help you feel comfortable as you get through retirement.
I want to give you our income bridge checklist, our guide. You get that by texting the word, “income” I‑N‑C‑O‑M‑E, to 609‑554‑5936. That will get you started on your way. If you’re ready to jump right to the front of the line, then what you ought to be doing is giving us a call at 609‑818‑0068 or visiting us online at palantewealth.com.
That’s P‑A‑L‑A‑N‑T‑E W‑E‑A‑L‑T‑H.com, palantewealth.com. Visit us there, call us at our number, schedule a time to come in, so that you know in evaluating your retirement that you have all of the little checkboxes marked as done, completed, and ready to go.
Get that second opinion that confirms for you that you’re in the right position. Again, if you want to do that, if you want to reach out to us by phone, that’s 609‑818‑0068. Otherwise, take the guide that I walked you through today and start to evaluate whether or not you’re ready for retirement.
Make sure that you have nailed down those three big components of social, emotional, and financial readiness, including the signs that we talked about today. That’s one of the ways that you can make sure that as you enter into retirement, you go through that full of confidence.
Victor: Full of confident that you’re ready to take on the world and enjoy yourself. I hope it’s been helpful for you. This has been Make It Last, where we help you keep your legal ducks in a row and your financial nest egg secure. We’ll catch you next week on next week’s show. Bye bye.
Announcer: Investing involves risk, including the potential lawsuit principle, any references to protection, safety or lifetime income, generally referred of fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier.
This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation.
The host of this show is not affiliated with or endorsed by the US government or any governmental agency. The information and opinions contained here and provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.