How to Not Run Out of Money in Retirement
One of the big questions we all have in retirement is, do we have enough money to retire? And how do we ensure that it lasts? Join us as we walk through how to answer these important questions in this week's episode of Leibel on FIRE!
Why is it that it seems like every advisor has a different answer?
Shouldn't there just be. One answer one size fits most isn't retirement planning, isn't it just math? How is it that every advisor can seem to give a different answer?
When, you go to school to become an accountant, you'd like to think that every CPA learns the same material and that they have the same abilities, but anyone who has worked with multiple accountants can tell you...that simply isn't the case. Some are better than others. Often by wide margins.
Some are more creative than others. Some are more knowledgeable than others. And when it comes to financial planning, where there are infinity more moving pieces than a tax return...isn't it a wonder that there is so much variance in ability.
Compounding the issue, we have an unknowable future! Will inflation continue? Will inflation be high? Will inflation be low? Will the stock market, return the same, nine 10% that it has historically done, at least in the United States, or is it gonna reduce, will you know? You got all kinds of questions. And the thing is, when it comes to financial planning, the answers to those questions are extremely important.
And so everyone has their own perception. They've got their own filter, their own lens that they look through the world at. And when it comes to the question of, should you take social security early or late? What's happening in the market? What should you do? What should you know? Do you have even enough money saved for retirement? Those questions require a little bit of an art artist touch in answer.
Since we don't know what the future holds. Because there is no magical formula that we can plug-in and know the future. If there was a way to know the future, we would all be really wealthy. Oh but the future is unknown.
And because it's unknown, we have to do the best that we can to protect ourselves and create a plan that, a plan really to, hope for the best, but plan for the worst. Every financial advisor has their own approach, they have their own take, they have their own solutions. Some are better at different stages in life than others. So it is no wonder why every financial advisor, every media outlet, every article you read seems to have a different answer, it is because there are lots of different answers and everyone's trying to figure out what the answer is and only time will tell time. Time and some good planning to help protect against being wrong.
How to Have Confidence In Your Financial Strategy
All this doubt and uncertainty of the future begs the question, "how do you have confidence?" How do you create a plan that doesn't keep you up at night, tossing and turning, wondering if you will run out of money in retirement?
The way I like to approach this problem of confidence, is through overwhelming firepower! I am a firm believer that no matter the financial decision, the choice needs to be obvious! It needs to be so overwhelmingly obvious that you feel like there is no other answer. And that's when you know that you have the right answer. That's when you have confidence in your financial decisions.
The way we achieve this nirvana, is by sitting down and creating a plan. The plan needs to say, this is what we have a reasonable belief that our expenses are gonna be, what we're gonna do, and what the results of that are gonna be.
Your plan needs to anticipate, what if we're wrong! How do we protect ourselves? Think of your plan like an onion. You want to have layers of protection, so that no matter how wrong you are or how many things you missed, that your plan is still going to protect you.
Protect The Essentials
You need to know that you're still gonna have a roof over your head, you're gonna have food on the table and the essentials that you need in order to feel like life is worth. And whether that means being able to take a vacation every year, whether that means giving the grandkids presence every year, whatever it is to you that makes, life worth living, you need to make sure that's part of your plan and you need to protect it at all costs. And then you need to reevaluate that all the time.
Create signposts for yourself. Decide what your check-in points are. What is going to tell us if we're right, this is gonna tell us if we're wrong, and this is what we're gonna do if we're wrong. And it's hard work. You can't just blindly trust that your advisor is doing this for you because, it's human nature to take the easiest route possible. And if you're not asking these questions, your financial advisor might not be asking them either! This is why having a written plan is so important!
Have a Written Plan!
You want to have in writing, this is what our plan is, this is what we're gonna do and this is how we're gonna reevaluate it. And you want to feel comfortable with it. You want to feel comfortable that no matter what happens you're gonna be protected. Because if you don't feel confident in it, then you're gonna be up on night tossing and turning, wondering what's gonna happen every time there's some headline that you didn't expect.
What Happens When Life Goes Off The Rails?
Yes, you can do everything right, and still go wrong! This is one of those things that change during retirement. During our working years, we were able to create a plan, set it and forget it! We checked a box on a form that said how much of our paycheck we wanted to go into our 401k. We told our 401k one time, how we wanted invested. And it didn't really matter what we put down on that form. Because we had enough time for it to work for us. In retirement, we don't have that luxury.
We have to be on top of our finances. Now that doesn't mean checking your account balance every single day, because that will drive us insane. But, you do need is a systematic approach to making decisions. You need a way to ensure that you're always making the best decision for yourself and your loved ones. You need a context for looking through things and those signposts that you're looking for, that says oh, "the Fed is saying that they're gonna increase interest rates, this is going to affect my plan."
How many financial advisors move their clients out of fixed income, before the bond market tanked in the last 18 months? We knew that interest rates were gonna go up. The Federal Reserve communicated that, like to the nth degree. They were telling people that they were gonna raise interest rates. Yet how many advisors were still allocating their clients to Interest sensitive investments, things that had nowhere to go but down?
We need to be forward looking.
We need a plan that tells us when the Fed says they're gonna raise interest rates, this is what you do! This the assumptions that we have in our plan are based on and if they change, our plan needs to change with them!
What happens if the market goes down? What happens if it goes sideways? What happens if inflation keeps going? Something that, that most people just like gloss over. Five years ago, if you came to me and we did a financial plan, the assumed interest rate in our plan would've been two and a half percent or 3%. Now, if we do a financial plan, the planned interest rate is three and a half to 4%. Why? Because. the average in interest rate over the last 20 years was 2.5%.
In fact, excluding the last few years, over the last a hundred years was an average of 3%. Now, just because of the last year and a half, the average inflation is 4%. It jumped an entire percentage point over a hundred year period because of two years. That's amazing.
When it comes to our retirement, we need to plan for these scenarios. What if inflation stays persistently high? What if the stock market doesn't, continue to return 10% a year? What if, fixed income isn't a viable investment option, right? What if the market changes direction? What if...and so in retirement, we find ourselves keeping our ear to the ground, because that is the only way that we're gonna have a plan that really works over time.
The Yields for You Process for Retirement
The Yields4U Process is designed to help you take control of your financial future and ensure that you are making the strongest possible decisions today, tomorrow, and long into the future.
Step 1: Getting To Know Each Other
In our first meeting, we will get to know each other. We will briefly discuss your financial situation and goals and see if the Yields4U team is the right fit for your financial needs.
Typically the first meeting is scheduled for about 15-minutes.
Step 2: Building Your Financial Plan
In our next meeting, we'll work on building your financial strategy, which includes:
- Income Planning
- Social Security Timing
- Advance Tax Planning & SWOT Analysis
- And Investment & Risk Management Review
We'll cover Social Security, Pensions, 401k's, and Medicare, as well as your lifestyle and other aspects of your life that can affect your retirement income. We will also discuss how to protect your financial future from unexpected expenses and life events.
By the end of our meeting, you'll have a solid understanding of your current financial standing and actionable steps you can take to help you improve your finances and achieve your long-term financial goals with confidence.
Step 3: Implementation
If you decide to work with us, we'll help you implement the action plan we've created for you. We'll work with you to take control of your finances, reduce risk, protect your life savings, pay less in taxes, and live the life of your dreams.
Step 4: Ongoing & Proactive Management
As life changes, so should your plans.
We will meet on a regular basis and re-evaluate your financial plan, make adjustments as necessary, and always ensure that you are on target to achieve your objectives.
In addition to our regular reviews, our team will be actively managing your accounts to help protect and preserve your hard-earned assets.
Our strategies are chosen based on their ability to protect our client's assets during times of market volatility while still capturing market upswings during times of growth.
As your financial advisor, we will work hard to protect, preserve, and grow your hard-earned assets.
Step 4: Legacy Planning
As your investments grow and your wealth accumulates. We will help you turn your savings into a living legacy for your spouse and future generations.
We'll help you create a private wealth management team consisting of attorneys, accountants, estate planners, bankers, and other financial professionals. As your advisor, we will help you build and coordinate your team to help you manage your wealth and leave the legacy you deserve.
Our Commitment To You As Fee-Only Fiduciaries
Our commitment is to be transparent, honest, put your interests first, and help you make the best financial decision for yourself and your loved ones.
As fee-only fiduciaries, we do not accept commissions or kickbacks for any products or services we recommend, and we are committed to treating and protecting our clients like family.
Rediscover what it means to have Confidence and Peace of Mind again.
Click here to book your free, no-obligation strategy session, or check out our Frequently Asked Questions for more helpful information about how Yields4U can help serve you.