Are you the 'better' half?

Heads you can afford retire, tails you can't.  50/50 shot.  Sound good? No?

Well... 47% of households won’t have enough income to support their standard of living in retirement.  That's almost half!

How do you know if you are one of them, and what do you do about it? Join us for some tips!

May 23, 2023

Transcript

 Shah Plan-it for May 23rd, 2023. We are almost up on Memorial Day and I think Memorial Day is on this Monday. Yeah, it is this Monday. You know, incidentally, it was probably shared with me way later in life than it should have been that Memorial Day and Veterans Day are distinct cuz it was really common and, and I used to always thank folks for their, thank our, our veterans and our service folks for their service.

On Memorial Day, and although there's never really a bad time to thank somebody for their service, Memorial Day, as it was explained to me, is really for those who have given everything they're given out, their lives in service and for the family members of those who have fallen as well too. So for those that gave everything.

Thank you for your sacrifice. Thank you for reminding us of course, that the price of freedom is not free. And really no, no other words out there too. You know, in addition to obviously the most important part of Memorial Day, it's also that our 25th. Soft 25th anniversary of a softball game that we've been playing every year, and, kind of gives me an idea of how old I am and the games have gotten progressively shorter for, so for those of the you friends out there that I'm gonna be seeing on Memorial Day, I'm looking forward to seeing you as well.

So what are we gonna talk about today? We're gonna talk about this study that came outta Boston. It's this wicked awesome,  survey, which actually didn't have such wicked awesome, results. So out of the Center for Retirement Research outta Boston College, Boston College, get this, 47% of households will not have enough income to support their standard of living in retirement.

Isn't that crazy? 47. Okay. So a lot of people are gonna think, well, you know what, maybe, maybe that's just folks who don't have a whole lot of money. Maybe we're talking about folks who are, maybe lower income, right? But when you, when they broke it down by Wealth group, that national research, sorry, center for Retirement Research, and R r I, they found that 73% of those low wealth households don't have enough, won't have enough to income to support their lifestyle, but.

28% of high wealth households won't have enough to support. So it's not, it's not unique to a demographic. What are we talking about? We're talking about like one out of every three, households, of those high wealth households still won't have enough retirement income to meet their household income.

So it's kind of crazy. And, but that being said, they're not new results. This has actually been the case for some time now. So the report did note that there's some improvement over time. But this brings me back to a question that we get pretty often. A lot of times we'll be handling folks wills and their trust and we'll finish up their estate plan.

And now we're gearing into the retirement planning, financial planning, tax conversation. And the question is, well, how much can I spend in retirement without using up all of my assets? And, and that's a pretty common question. So how do we, how, how much can I spend? And it's important because they want to know, well, how do I avoid running outta money?

So there's a couple of things that we need to keep in mind. First of all is how long are you going to live in retirement and how much are you gonna actually spend during that period of retirement? So let's talk a little bit about that, because we have a couple of conversations here. So the first unknown is how long are you gonna actually live in retirement?

Now that's a huge factor because the longer you live, the more money you need. I know Captain obvious, right? Yes. But it's important. We wanna know how long we're gonna live because we're gonna, it's gonna basically be a dick big indicator, and then we don't know how the markets are going to factor during that time.

So that stuff is not really out of our control. But if we look at some of the population level data, and let's see if this works. As my computer's been kind of glitchy this morning, so I'm going to try to share my screen and we have this handy dandy slide. Out of the folks at Buckingham, hopefully you're seeing this life expectancy slide here.

It basically is telling us a couple of things. It's telling us that there's a pretty good likelihood that you've got these folks, this 97% chance, there's a lot of numbers here, but 97% probability that a couple is gonna have at least one person live until age 75. Okay? But the part that's really interesting for me is this 90 to 95 window.

So there's a fif, almost a 50% chance that somebody in a couple is going to live to age 90 and one in five chance that out of a couple, one of them is gonna live to age 95. That is not a insignificant number. Basically telling us that hey, there's a good chance that you need to make sure that money stretches if you retire at 65, you need to get that money stretching for at least 30 more years.

That's something. And the second unknown is obviously portfolio return. How is that market going to factor? Is it going to reward us for the risk retaking? Are we investing properly? So what I usually recommend is we wanna dig a little deeper. And although you can't control everything, you obviously need to control how you're going to manage your portfolio, but what conversations should you be having?

Some of you have heard me talk about this before, but I say think of your wealth planning, your retirement planning, almost like mountain climbing. Okay, so. The conversations you're going to have are going to be different at different phases of your life. So if we think of a mountain climb, I'm gonna show you this strategy tool that we use to explain this too.

But if we think of the strategies that we're going to employ during the span of your life, I want you to think of this mountain climbing sort of vision, if you will. How does mountain climbing work? Well, as you climb the mountain? Where do most people get hurt when they're climbing the mountain? It's not when they're climbing.

So when you think of this mountain, you're looking at this sort of analogy here. You climb, you're just making money, making money, making money. But when you're transitioning from basically making money into starting to think about what that next chapter of life is going to look like, well now we wanna start being a little more intentional about what we're doing.

So we're in this transition phase, and at transition we're gonna have different conversations, and then when we're in retirement, That's when people start getting hurt. They get hurt when they're descending the mountain. Right? So con, continue with that analogy. You stay at the summit too long, you use up oxygen, you use up supplies, or you took too long to get to that level.

Well, in your retirement it might be I've invested differently or I've invested the wrong way. I wasn't mindful of my tax planning. I sometimes let my long-term care expenses get out of way. So the conversations change a little bit based on the different season of life that we're in. So obviously you wanna have different conversations.

So what is the conversation that we wanna have when things are, are well? And what conversation do we wanna have in retirement? Well, this is an example of the conversation, and for those of you who are, it might be a little small on your window, but I just changed slides. So we're looking at the distribution part of our life.

This is the season of our life when we're actually living in retirement. Financial plans don't succeed or fail. It just means we need to modify our behavior. So from a behavior standpoint, and these, some of these numbers have changed, but yes, we've gotta do things like updating our wealth protection documents, but we should be focusing on our after tax risk adjusted market returns.

We should be looking at our fixed income in our portfolio, which equities have high basis because are we gonna be able to do things to reduce that? Capital gains tax when we have to start liquidating things in our portfolio. Assess your progress towards your personal definition of non-financial success.

Is it success for me to not have a mortgage on my home? Is it success for me to have a second home? What if I can go visit my grandchildren? What if I could fly first class? What if I could fly a private jet? So these are the sort of conversations and what charitable causes do we wanna take care of? What do we wanna make sure we're speaking about from a wealth transfer perspective?

Obviously this is all the stuff that we handle in-house, but these are conversations you should be having with your advisors. And look, a lot of us are gonna say, listen, I'm young. I don't need to worry about this. Well, if you have parents, if you have somebody in your life who's not doing this sort of planning, who do you think they're going to rely on when it comes time for this conversation?

This is multi-generational planning when it's done best. So I hope this helps at least give you some idea of the conversations that we need to have, because when we see the statistics about how almost half the retirees in America are not gonna be able to maintain their living standards in retirement, That's crisis level sort of stuff.

And we can do things to head this off. How much do you withdraw? How do you withdraw? How do you plan around it? All plantable stuff. We can focus on the stuff that's within our control. I hope this is helpful. I hope you enjoyed today's edition of Shah Plan-it. If so, please give us a, like, give us a subscribe to us on YouTube or Facebook or LinkedIn or really anywhere else you're watching this, or Spotify if you're listening to us online.

Sorry if you didn't get the visual on there too. But if you have any topics, if you have any questions for us, don't hesitate to reach out. I hope you're getting ready for this gear, and no matter where this, upcoming holiday finds you, I hope you it's in the arms of loved ones. All right. See you guys next week on Shah Plan-it.

Bye everybody.