Lynn Toomey:
Hey there, everyone. This is Lynn Toomey with Walk the Talk by Her Retirement. Welcome to my new episode, where I am going to be talking about the commitments we make to our retirement, to knowing more and having more and getting her done. I don’t know if this is you or not, but 80% of Americans don’t have a financial plan for retirement. About the same number suffer anxiety about retirement and they simply don’t know what to do about it. If this is you, I encourage you to stick around, get up, and walk, and listen as I talk about the commitments you need to make to yourself into your retirement.
Lynn Toomey:
Let’s talk about the typical hardworking Americans scenario. You work your butt off for most of your life saving and investing consistently, hopefully. Earning your social security benefits along the way. And maybe if you’re lucky, a pension too. All of this in order to enjoy your retirement. The day comes and you decide to call it quits. Well, this all sounds pretty simple, right? You work, you earn, save, retire, collect, and reap the rewards of all that hard work and hard savings. However, the harsh realities of preparing for retirement for many can be stressful, complicated, and overwhelming.
Lynn Toomey:
In fact, a recent survey found that 80% of Americans have expressed anxiety that they have not saved enough to be financially independent in retirement. And they don’t have a plan for retirement. Another 61% of people have stated that they’re more fearful of running out of money than they fear death. These are some startling numbers. It just goes to show me that people kind of have ignored the whole preparation stage. Maybe they’ve done a good job of saving. Maybe they’ve done it on their own. Maybe they’ve done their own investing. They socked money away in the 401(k). Maybe they’ve even had a retirement advisor or a financial advisor. One that’s helped them grow their assets.
Lynn Toomey:
But then it comes time for planning for retirement. And if they’ve just had that “traditional” financial advisor, he or she has probably helped them with accumulating their assets, but they may not be well-versed in how to deaccumulate those assets or how to create that retirement paycheck. It’s different. It’s more than just saving in a 401(k). It’s more than just drawing money out of your IRA, blindly. There’s a number of different strategies that must be deployed when entering retirement. A lot of those strategies, the average traditional investment advisor is not well versed in how to implement those.
Lynn Toomey:
The accumulation phase pre-retirement is different than the deaccumulation phase. Deaccumulation phase are where you want to create that retirement paycheck that’s going to be efficient and sustainable, represents a whole another set of planning strategies. In the accumulation phase, it’s kind of easy. You put your money in, you diversify maybe in some global stocks, maybe of index funds, whatever it is, and your assets grow, then you’re feeling pretty good. Well, then it comes time to figuring out how to turn that investment into that retirement paycheck. That’s where I see a lot of people dropping the ball.
Lynn Toomey:
So I want you to think about what kind of commitment you’re willing to make to change your retirement outcome, because it is going to take a commitment, okay? If you’re one of those people that don’t have a financial plan, what are you willing to do to change that? What are you willing to do to create that financial plan and then stick to it, okay? It’s not about just creating it, but it’s about implementing it and sticking to it. And sometimes that requires an open mind. Sometimes it requires an attitude adjustment. Just kidding, kind of.
Lynn Toomey:
Okay. We’re going to get past here by a post office truck, and then I will continue on. All right. So, do you have a plan? Well, let’s assume you do, right? It’s proven that people that have a plan have a nest egg 445% bigger than those who don’t. And remember, not just any plan will do. A lot of people think, “Well, I have a 401(k). I’m all set.” No, no, and no. You are not all set. You did a great job of saving and investing, but you’re not all set. You need what’s called a distribution plan. You need a plan that’s tax efficient. You need a plan that incorporates Social Security timing in the proper way. Because the fact of the matter is, most Americans leave over 100,000 dollars on the table by not claiming Social Security at the right time. A lot of people don’t take their portfolio and prepare it for retirement. They don’t optimize their portfolio for retirement.
Lynn Toomey:
A lot of people don’t prepare for the shocks of retirement. Market volatility, sequence of return, risk inflation, tax rate risk. So many factors that many pre retirees don’t account for. And the average or traditional investment advisor, again, is not skilled in optimizing or even implementing these strategies. The bottom line is, you want to make what you have more efficient and sustainable. What about things like home equity? There’s another opportunity. There’s so many different opportunities to make your income and your savings and investment so efficient and sustainable.
Lynn Toomey:
Let’s talk about opportunities. Lots of people just don’t know what the opportunities are, number one. Number two, they aren’t willing to make that commitment. It takes time to understand these strategies. It takes time to look into them. It takes time to find the retirement advisor who you can trust, who listens to you, who understands your objectives, who can implement the plan that you not only understand, but that you’re 100% confident in.
Lynn Toomey:
I like to consider the number of commitments that you need to make for yourself. As the first commitment you need to make, is to understand your retirement needs and your possible gaps. We all aspire to financial independence or a retirement at some point. The average person spends about 20 years in retirement, and many spend 30 or 40 or more. Especially, we women, we’re living longer, and this is one of our realities of retirement.
Lynn Toomey:
This is a significant amount of time to be living off your Social Security, your pensions, and your savings, and investments. It’s critical to understand and properly plan for your needs, i.e., your expenses. And then understand all your income sources and know if you have a gap between those income sources and what your needs are. And then, how are you going to fill that gap? There’s a number of ways you can do this. If your savings and investments aren’t enough to fill the gap, what are you going to do? Are you going to work? Are you going to get an inheritance? Do you have other assets that can be leveraged? Can you use the equity in your home as an income buffer? There’s all sorts of things you can do, but most important is to make sure you look into something I call Multi-Discipline Retirement Strategies.
Lynn Toomey:
I have several sources of information on what we call MDRS, Multi-Discipline Retirement Strategies. By implementing these strategies, you may negate the need to work in retirement or to tap other sources that you aren’t willing to tap. Maybe you want to leave some of those sources on as a legacy to family, friends, charity. Well, incorporating these MDRS can maybe get you to that point. The Department of Labor recommends that pre retirees prepare to live on 70 to 90% of their pre retirement income in order to maintain their standard of living. Therefore, I recommend you start planning early and know what you, what you’ll need, and if you have a gap. Knowing this important information can help you adjust your plan and also help you create a just in case plan B. Plan Bs are important because you could suffer some what ifs in retirement, or some unexpected shocks like a global pandemic. Hopefully, that never happens again.
Lynn Toomey:
If you’re living comfortably now and then saving and investing, what you should ask yourself is, will I have enough to support the lifestyle I want in retirement? I’m going to tell you at the end of this podcast about a very special software platform that I’ve just launched that’s going to help you identify those gaps. And then, it suggests some ways that you can fill your gaps. So commitment number two that I want you to continue to make is to contribute to your 401(k) or your savings plans, or opening an IUL, whatever methods of retirement savings that you prefer. I want you to keep, keep on, keeping on, right? That’s the most important thing, consistency and getting the benefit of that compound interest.
Lynn Toomey:
In 2018, almost 30% of private industry workers had access to one of these 401(k) plans or a defined contribution plans at their job. But surprisingly, they did not participate. But it’s important to note that women actually have lower balances in their 401(k)s, but they are more likely to participate in their 401(k). So whether you’re on track or you feel like you’re behind, it’s important to at least make the contributions to your employer plan and get your employer match. It’s free money. Very, very important. I’m not saying the 401(k)s are the only way to save for money or the best way to save for money, but if you get that free money from your employer match, it’s a no brainer. Take advantage of it, okay?
Lynn Toomey:
The other option is an IRA. There’s traditional IRAs and there’s Roth IRAs. If you work for yourself, you can do a SEP IRA, you could do a solo 401(k). But you really need to seriously consider the Roth IRA. I want to talk to you about that in a few minutes. But the 401(k) is really important because it allows you tax deferred savings. If you want to reduce your taxes now, do a tax deferred 401(k). It is definitely one of the tax deferred buckets you should consider for your retirement. And of course, the earlier you start, the better off you’ll be because of that magical term compound interest. And like I said, money contributed to a traditional 401(k) or an IRA is tax deferred, which makes it really appealing for those looking to lower their tax obligation current day.
Lynn Toomey:
Now, Roth on the other hand means your contributions are made with after-tax dollars. So if you think tax rates are going up in the future, it’s probably a good idea to begin putting your money into a Roth. And there’s very specific rules around a Roth, like a five-year look back. So you can’t withdraw monies from a Roth for five years. It’s better to start it sooner rather than later. And you have to be 59 and a half before you withdraw from a Roth. But when you do, it will be tax-free. It also doesn’t have any impact on your provisional income for Social Security purposes, nor do you have to do RMDs from a Roth. There are also 401(k)s with a Roth inside the 401(k), so you can contribute to that. And down the road in retirement, again, you’ll be able to withdraw those monies tax-free because you didn’t take the tax deferral upfront.
Lynn Toomey:
These plans offer an extremely simple way to save for money, but it takes commitment. And that’s what a lot of people don’t do. They don’t make that commitment to saving for retirement. To simplify the process, you can establish automatic contributions, which in my mind is a no brainer. Out of sight, out of mind. It’s just money that comes off the top and you never even see it. Just pay yourself, pay your retirement savings.
Lynn Toomey:
In the software platform I mentioned, we have a Smarter Spending Tracking tool. Basically what it does is each expense that you have in your life for living, for saving and for investing, you have a line item and you just assign a dollar amount to that, hopefully 10 to 15% of your income. If you’re behind you probably should consider saving more. It’s just another expense item in that Smarter Spending tool.
Lynn Toomey:
Commitment number four. Another very important commitment that you need to make to yourself is not to tap your retirement savings. When you withdraw from savings prior to retirement, you’ll lose valuable principal and interest that compounds and could have been used in retirement. So really resist the temptation to withdraw those monies. Additionally, you’ll lose valuable tax benefits. You’ll pay a penalty. You’ll pay fees. And it’s just not a good scenario.
Lynn Toomey:
If you change jobs, you can leave your savings in your current plan or you can roll them over to your own IRA, and even in your new employer’s plan. You must consider the investment options for all these scenarios and pick the best one for your retirement goals and your future savings. Every plan offers a different set of opportunities, investments that you can choose from. So you really need to look at them and consider what’s going to be best for you. The more variety that you have, I feel the better because you’re allowed more choices where your moneis are being invested. So make that commitment.
Lynn Toomey:
I would also have what’s called Is my 401(k) okay? You can get this kind of portfolio review from a retirement advisor. He or she can look at your allocations and determine how you’re doing, how you should change. If you’re getting closer to retirement, should there be changes made before you withdraw those monies or before you consider a rollover? So I think Is my 401(k) okay? assessment, a very valuable assessment to look into.
Lynn Toomey:
The next commitment I want to talk about is understanding your gaps, risks, and opportunities for wealth building. I like to say that fortune favors the smart and the bold and the prepared, and that preparation is in the details. My getter done financial wellness and retirement approach is just one example of this. It helps you uncover and understand the details of your current financial picture. And the approach which includes coaching and the software gives you a full view into what you have, what you might need, and what you might be missing. It also includes planning by a vetted network of planners and advisors, but it will give you the detailed insight you need for wealth building now and in retirement. The approach also provides some really important educational content, e-classes, online Zoom classes, and a private Facebook support community. And you’ll get actionable steps to create and implement your plan for retirement.
Lynn Toomey:
This is what I like to refer to as The Get Her Done approach. And that leads me to my next commitment, which is getting smart about retirement. Make a commitment now to take classes, read books, take e-classes, learn about personal finance, learn about retirement. There are so many options out there to get educated, but I suggest you avoid the sales pitch dinner seminar, and those educational events guised as sales pitches, or sales pitches guised as educational events.
Lynn Toomey:
Basically, you get invited to a dinner, they feed you and then they try to sell you something, pretending to educate you along the way. I really don’t like this format. Instead, look for more educational objective classes. Google retirement researchers like Dr. Wade Pfau, Moshe Milevsky, Larry Kotlikoff, and see what they’re saying about the best practices in retirement planning. These are people that are in this industry doing the research and writing about these best practices. They’re blogging, putting out really good information for pre retirees and people in retirement. All the classes that we teach at Her Retirement is based on this retirement research and not based on the biased opinions of the investment industry or the insurance industry. So make a commitment to read the research versus meeting with a sales person or an insurance person or an advisor who just wants to take your assets and have it be done.
Lynn Toomey:
Next thing I want you to do is get guidance or at least talk to what I call a retirement advisor versus a traditional financial advisor. When I ask people, if they have a financial advisor, I often hear, “Oh, I don’t need one. I have index bonds” or, “I’ve always managed my own investments.” That’s not what I’m talking about. That’s the accumulation phase. Great, good for you. I’m glad you’re a DIY investor, but a DIY investor does not make a good retirement planner. It makes you good at accumulating your assets, but it takes a whole another set of skills, a lot of skills to figure out how to take that nest egg that you’ve done a good job of accumulating and make it last throughout retirement.
Lynn Toomey:
And why just be okay? Maybe you could spend some time and make some guesses at when you should claim your Social Security or whether an income buffer from your home equity makes sense, but why risk it? Why not hire a retirement advisor who’s spent his or her career learning about how to optimize your retirement, how to make it as efficient and sustainable as possible? And to do this, you need a lot of knowledge in a lot of different areas. Tax planning is one. That’s huge. Having access to certain investments that you can’t get as an everyday person, that’s another one. Minimizing the fees. If you don’t know the fee landscape, how do you know what you’re paying for? What about your returns on your portfolio? Are you benchmarking it? Are you really benchmarking and understanding if you’re above the benchmark in your returns? So many things that a retirement advisor can help you with.
Lynn Toomey:
A traditional investment advisor, like I said, focuses on your investments. An insurance agent focuses on insurance. A retirement advisor has both insurance knowledge, investment knowledge, as well as tax knowledge, Social Security knowledge, income protection strategies like annuities and things like IULS, long-term care, how to fund long-term care, special products like IULs that have a long-term care rider in addition to a death benefit. So many options and so much knowledge that you can tap and take advantage of. And the fee should not be an issue in the absence of value. The right retirement advisor is going to provide so much value and keep you in such a great position for retirement, the fee is not going to be an issue, okay?
Lynn Toomey:
A retirement advisor, like I said, is focused on the deaccumulation phase, trying to meet both your objectives and your goals and then matches up with your needs and what you have, okay? The deaccumulation phase requires a little bit of experimentation, a lot of data, a lot of consideration of what you’re trying to achieve, what you want to do in retirement and how you want to live. The right retirement advisor is going to work through all those questions with you. They’re going to take the time to listen. They’re going to offer different solutions that you might not have even known about and make what you have more efficient and sustainable. They’ll also consider those Multi-Disciplined Retirement Strategies that I mentioned earlier to make what you have last as long as possible. Like my mother used to say, “I never want to be a bag lady.” So this is the bag lady syndrome preventative measure, okay? All right.
Lynn Toomey:
Next thing. Make sure you take some time to consider what the advisor can offer you and give it serious consideration. Because even if you’ve done this yourself, it’s not an easy road to go. All right. Next question. Or next commitment I should say. Make a commitment to at least checking out my Retirement Solved software. It’s a personalized retirement readiness platform. It has so much capability within it.
Lynn Toomey:
I’m going to do another podcast to go into details, but briefly, there’s an Education module where you can quiz yourself in 15 different categories and then it will present a personalized education plan with e-classes that you can take. There is what’s called an Envision module where you can go through a number of different exercises that will help you envision your life in retirement, which is another very, very important area that a lot of pre-retirees simply don’t take the time to think about. They just retire and then go, “Oh, what was it that I wanted to do in retirement? I haven’t even taken the time to think about that.” The Envision module takes you through so many questions, so many exercises, so you can really get a good handle on how you envision your life in retirement and how you want to live life in retirement.
Lynn Toomey:
Then there’s the Assess module, which is really one of the most valuable part of the software, where it helps you identify those gaps, risks, and opportunities in your retirement. It gives you a 360 degree view into what you have, what you’ll need, and potentially, what you’re missing. It will ask a lot of questions and then present a full view summary right in front of you, right at your fingertips. Then this software will create a multi page, what we call Grow Guide. Grow as in gaps, risks, and opportunities for wealth building. It’s about 40 to 50 pages long, all customized to your particular situation. You can use that guide to go off and work your own retirement plan if you so choose, or you can use it to go and talk to a CFP and get a fee-based plan, or you can get connected up with a subject matter expert, whether that is a retirement advisor or maybe you trust your traditional investment advisor and he’s going to take a look at this guide and help you figure out some of these issues.
Lynn Toomey:
There’s also a Planning module where you can learn about the multi-discipline retirement strategies and how they apply to your top retirement concerns. There’s the ultimate Retirement Readiness checklist, where you can check up all your retirement tasks as you do them. I love to make lists, but I like to check the things off my list more. And that’s what this will allow you to do. You can log back into the software every time you complete a task and check it off and feel that accomplishment that you are making progress toward your retirement plan.
Lynn Toomey:
There’s also what I call the Smarter Spending Tracking tool. It will track all of your income and expenses as I mentioned earlier. It will keep you on track for improving your cashflow, which is really the first starting point in preparing for retirement. Understanding your cashflow now and then taking a look at your cashflow in retirement is a critical first step to wealth building.
Lynn Toomey:
Finally, there’s an Implementation module where it will suggest all the discussions that you should be having with that advisor when you go to implement your plan. It doesn’t leave any stone unturned. It basically helps you determine the discussion and the meetings that you should be having with those advisors. And if they’re not taking all these steps outlined in the Implementation module, then it is not the right advisor for you. The implementation module also connects you with all different types of service providers that you might need in implementing your plan. It gives you guidance on what to look for when working with an advisor. There’s an advisor suitability quiz in there. The suitability quiz will take you through a number of questions. And then at the end it will suggest, “Yeah, you’re probably a good candidate for working with a retirement advisor” based on how you answered these questions.
Lynn Toomey:
There’s the Guide to advisors, which talks about all those different acronyms that are very confusing, like CFP, CFA, IRA. There’s so many different acronyms for the 300,000 advisors out there in the industry. It gets confusing on who to work with, who to trust. But it provides a basic understanding of all of the financial advisors out there and how they are all credentialed. Little bit of basics, but it’s a good way to understand how the industry works and what type of people are available to help you.
Lynn Toomey:
Finally, there’s a dashboard, which is your home base of the software. In that dashboard you can track your team of advisors. There’s a giant resource section which links you to a myriad of outside retirement resources that we have researched and we continue to add to that part of the software, and it will connect you through links to those resources. There’s also access to some discounted retirement programs that you can get through the software. It’s kind of like we’ve done the shopping for you, and rather than going and doing a Google search and getting lost and not understanding and knowing who to talk to, we’ve gone out there and identified some valuable resources for you. They’re there for the taking. There’s actually a really cool link to a longevity calculator where you can enter your information and it will project your longevity. So there’s those types of resources that I think are kind of fun and you can access those on your own.
Lynn Toomey:
So here I am approaching the end of my walk today. Hopefully, there wasn’t too much background noise. There’s a little bit of a breeze, but it’s gorgeous. I need to get going on the rest of my workout. This is kind of my warmup. And then I go over to my gym in my garage. I work on staying healthy and fit, which is probably one of the most important things you can do to eliminate those healthcare costs in retirement or to reduce them, is make sure you focus on your health and fitness prior to retirement.
Lynn Toomey:
Anyway, if you have any questions at any time for me, you’d like to start with some coaching from Her Retirement, you’d like to get a free assessment from some of our subject matter experts, get started with a CFP, or access the Retirement Solved software, please send me an email at lynnt@herretirement.com. You can check out the software at www.retirementsolved.io. Thanks again for listening to this episode of Walk the Talk by Her Retirement. I’m Lynn Toomey. Don’t forget to go out, know more, have more, and get her done. Have an awesome day.