Sheree:
Unless you live under a rock. You know that there has been a pretty drastic rise in global inflation. In the past year, you may have read that social security will run out by 2034. If taxes are not increased or benefits reduced. And if you’re at or nearing retirement age, those sorts of headlines do more than give you pause. They can keep you up at night, but we’re not here on this series to be pessimistic. And our guests today will help us shake some of the gloom and fear that watching the news can stir up. Lynn Toomey is the founder of Her Retirement, a financial education and coaching company. What I like about Lynn is her focus on the wholeness of our retirement years. She encourages questions about money. Financial literacy is her thing after all, but she also talks about happiness in retirement. She’s even got something. She calls the good life pyramid and while your financial wellness is at its base at the very top is your purpose. Lynn, welcome.
Lynn:
Hello. Thanks for having me.
Sheree:
You’re welcome. You and your crew. I can hear your backup band. I love that, Lynn <laugh>. Many people are afraid of what they’re going to find out when they take a financial inventory. They worry that when they project their expenses and contrast them with their income sources, the reality’s gonna hurt. So they avoid it. What do you say to them?
Lynn:
Yeah, I know it’s really, really tough to look under the cloak, right? The cloak and see, oh my, you know, and I think oftentimes people become pleasantly surprised and sometimes just knowing is such a relief, right? You’re stressed because of the unknown. And just coming into knowing and understanding gives you so much relief that you’re like, why didn’t I do this sooner? So yeah, sometimes, sometimes the reality can shock us and scare us. But I think at the end of the day, knowing is better than not knowing for our health for our, you know, financial comfort and you know, eventual, financial wellness. You have to take a look. You have to face the reality, the good, the bad, the ugly.
Sheree:
Yeah. It’s really, I understand, I hear you. It’s like the peace of mind and it’s not because the numbers are gonna change when you look at ’em, they’re gonna grow or get better, but it’s, it’s what you don’t know that can get you.
Lynn:
Yes, exactly. And, you know, I believe that. Those things can just sneak up on you, you know, in a, in a not good way. So this is, this is the path forward. As much as it might be uncomfortable at the beginning I am 100% a believer that you have to understand what you have.
Sheree:
Yeah. I think everybody worries about the possibility of running outta money before our time here on earth is up. No matter how much they have or don’t have, what other major concerns about life after work? Do women have, or should women have, what do we need to be thinking about?
Lynn:
You know, there are so many different facets of it. So many women do worry, quote about being a bad lady. I know it was an expression I heard growing up. My mom was like, get your education, get a good job. You don’t wanna be a bad lady. And I know that’s something women worry about. I think women also worry about, “who’s gonna take care of me if they are single and don’t have big families?” And on the flip side, you worry, “oh, I don’t wanna be a burden to my children or my family or those around me.” And I think that women think of that more because perhaps they’ve been the primary caregiver and they think, okay, if I’m not the primary caregiver, who’s going to step into that role and take care of me. Or I really don’t want to be a burden.
Lynn:
My mother says that to me, she’s 86 years old. She said that in her entire life, she’s going through chemo treatments now. And she said, “I don’t wanna get to the point where I’m a burden.” And I think women carry that, carry that worry. So it’s not just a financial worry, it’s a health worry. They worry about not being able to take care of their families. If they become ill. I know at one point in my life I was ill and I couldn’t take care of my family and that was worse than the illness. So, that stress isn’t good for us as we get older. So I encourage women to take the approach of, yes, you need a financial foundation, but you need to try to address those other concerns. Make sure you have those healthcare proxies and those, those plans for your healthcare in place before one, you get older or two before you become, you know, maybe mentally or physically incapacitated where you can’t make those good choices for yourself and your family.
Sheree:
I’m so glad you said those things, you know, it helps normalize it for the rest of us when we, because we think it in our heads, everything that you said, I was nodding along like, yep. Yep. I’ve thought that. And I have a pet, a dependent pet, you know, I think about what’s gonna happen to him if IES him. Right. And it sounds, it sounds crazy to think about that, but it’s not,
Lynn:
Nope. Have a plan for your pet. You know, I have one that’s eleven years old and one’s a year old. I became an empty nester and got the crazy idea to get a dog. But I think about him and I was like, geez, I need a plan for Finley. Like, I really want him to go to a good, happy home. So yeah, I’ve got my kids and my parents and my dogs. <Laugh>, it’s a lot, but yeah, it always comes back to planning for me. Life will happen, whether you have a plan or not. And at Her Retirement and in my personal life, my professional life, you gotta have a plan. And so many people fail to plan and life really comes down to planning, obviously implementing the plan, following it through, and being consistent with taking action on that plan.
Lynn:
Consistency is my buzzword actually, you know, people at the new year pick a new word. Consistency is mine for 2022 because whether you’re working out eating you know, worried about your financial wellness, or following a financial plan, you need to be consistent staying in the stock market, right? Staying invested, not jumping in and out it’s if you know, hopefully, more women are becoming investors, but that’s key for investing and growing your money. The long term is staying consistent, saving starting early 20 years old, right? As you graduate from college, or you start your career in the trades or whatever it is, what you’re doing consistently. If you stay the course and stay consistent, stay, you know, keep saving, keep investing, you’re going to be so much better off. So that’s my, that’s my global buzzword for everyone I meet is have more consistency in your life and you’ll be better off. And I
Sheree:
Love that. Well, I’ll add flossing to that. So I’m trying to, oh, yes. Assist it with my flossing. So <laugh>, <laugh> what are the risks we face in retirement as women?
Lynn:
Yeah. You know, I read an article once where it was like, okay, risks that you need to address, you know, everything from being at risk to being in the sandwich generation, which many of us women I’m 55. Many of us women are in a sandwich generation. I have college kids and I have aging parents that, God bless them, they’re still alive, but they need my help. And so do my children. And I’m kind of this, you know, in this sandwich generation, but you know, I really don’t want people to be overwhelmed by 123 different risks. I think there are some that you really need to focus on. And so, you know, there’s probably five or six that are most important that women really need to understand, learn about, understand and make sure they have a plan for addressing those risks. So, number one is healthcare risk.
Lynn:
You know, that’s a, we typically live longer than men typically. We are living longer as a society. You know, I don’t know if we’re, if medicines are just keeping unhealthy people living longer, but healthcare risks. So anything you can do to prevent health issues, taking good care of yourself, putting yourself first, mentally, physically eating the right foods. And then obviously getting exercise. But healthcare risk is a big one because healthcare costs are a lot and women need to prepare for those. Then there’s market risk like inflation and market volatility. We have much less control over some of those risks than another one that’s called sequence of return risk. It basically talks about what the market’s doing when you retire. Like what you retire into losses sustained early in your retirement are pretty detrimental to your retirement. So you need to look at and understand inflation market volatility and sequence of return risk.
Lynn:
This long-term care risk. You know, what is your likelihood of needing long-term care? I’ve actually uncovered a pretty interesting and powerful science-based software program that can help people, women in this case look at their long-term care risk, and what’s the likelihood of them needing long-term care. And then you can make a more educated decision about whether you want to actually invest in long-term care insurance. So it’s, it was built by a team from Harvard, pretty interesting stuff. And, you know, I think there’s, there are other risks that are less, you know, not in our control, like social security, you know what you mentioned that what’s gonna happen to that it’s, you know, 30% of most people’s income and retirement. So we need to make sure we understand those income sources. I hear people say, oh, I’m getting an inheritance.
Lynn:
You know, I may be, I may get an inheritance if I outlive my father. Those types of things where it’s risky to count on some of those income sources because they are quite not guaranteed. So you need to be careful of what income you’re counting on. Another risk is that a lot of people think that they’re going to work in retirement maybe because it’s a necessity or because they want to, and they’re counting on that income source. Well, the reality is, I don’t know the numbers off the top of my head, but, you know, it’s something like 40% of people that think, or maybe even higher 60% of people that think they’re going to work in retirement, actually don’t. So I think there’s a risk of overestimating your income sources in retirement. So I like to be more conservative. You know, the inflation risk is something we can’t control.
Lynn:
Inflation’s been pretty, pretty good actually for a very long number of years. You know, it was two to 3%. And I believe because I’m an eternal optimist that this is a short-term spike and inflation, and it will settle down. I know people are pretty worried about it. If you’re retiring, you know, or when you retire, inflation eats away at what you’re, you know, able to spend in retirement. So whenever you do projections, you need to make sure that you are incorporating all these risks. So when you do a retirement income projection, and you estimate your expenses, you need to be realistic in those expenses and then incorporate these risks so that you project out. Okay. If I retire into a negative market, if inflation is high, if I need long-term care, if my medical costs, you know, typically are 140,000 out of pocket, estimated for a woman over the life of retirement.
Lynn:
So assume worst-case, hope for the best, plan for the worst run, have those projections run, or run your own projections, considering the effects of all those risks. Those are the primary risks that you need to think about. And the major one that we really don’t have as good a handle on is longevity risk. We don’t know how long we’re going to live. And so longevity, again, plan to a hundred [years old], you know, that’s a safe number these days. I read an article about how we might live to 150 and I was like, oh, dear Lord, we’re gonna be working a long time if we live to 150. But you know, right now it’s safe probably to plan to a hundred for your projections and see how your money lasts if you project out to a hundred. So those are the major ones that I think are most important for women to address immediately. And within five to 10 years before their retirement.
Sheree:
Wow. I’m taking rabid notes. <Laugh> thank you. Appreciate it. Thank you. How important are taxes in retirement, and is our CPA the best person we should be looking to for guidance?
Lynn:
Yeah. I’m glad you brought that up. Because taxes, you know, the tax rate is, is another risk. I think tax planning and I would’ve at some point circled back to that. So I’m glad you brought it up, but at some point, you know, for many people, depending upon your tax bracket, tax planning could be one of the most powerful things you can do in your retirement planning process. And the reason I say that is because you can take what you have, you know, you don’t have to add anything else. It’s, you know, obviously, you want to save as much as possible, but you can take what you have. And by deploying some tax planning strategies, you can make what you have more efficient. So it’s like squeezing more lemon out of a squeezing, more juice out of a lemon, right? So by doing tax planning, you can be much more efficient with what you have and until you get that tax planning analysis actually completed, you’re kind of in the dark, right?
Lynn:
You, you can people think, oh, I don’t have enough. Well, wait, like, look at some various strategies first and then figure out, okay, where am I at? Right. So you do your retirement income projection, and then you can deploy all these strategies. So one is tax planning, and another is social security optimization. There are a number of different strategies. You may even be able to take a reverse mortgage on your home and create an income buffer. So oftentimes people look and go, oh, no, like I’m in trouble. However, I always say there are some little-known strategies that you should look at before you panic about tax planning, social security optimization, and looking at how your portfolio’s allocated. Like there’s a whole bunch of things, but, I wanted to address your question about a CPA. CPAs are great. Often more CPAs are reactive. And they look at what’s happened in the past.
Lynn:
They’re not as forward-thinking. I haven’t found too many CPAs that do retirement tax planning, which is different from tax planning for an individual or a small business owner. Really what you need to find is a tax-knowledgeable retirement advisor, you know, there are so many different names for different advisors. My significant other is a retirement advisor. He does very sophisticated tax planning like Roth conversions. You know, tax planning could be if you believe tax rates are going up, which with the deficit at where it’s at, you know, I would say a good number of people believe that taxes are going to have to go up. So how can you maybe not, maybe not put as much in tax-deferred accounts? Maybe you look at something like an index universal life plan or a variable universal life insurance policy because those are good tax planning strategies for some people.
Lynn:
But I have to caution women that just because it’s good for you, or for me doesn’t mean it’s necessarily good for them. Everybody’s situation is different. And maybe your brother-in-law says, oh, I would never do a reverse mortgage. Well, maybe it, maybe that doesn’t make sense for him. So I want women to really think one, number one, have an open mind, and number two, be open to understanding all of these issues so that they can take action. And I always like to say that I want women to get educated and to find someone that will help them get educated. And I just don’t think from the tax perspective that most CPAs can help you with that, with that tax planning,
Sheree:
You know, in listening to you, I’m struck by the observation that the important thing is to be able to have a conversation. And I know when you’re talking to somebody, a professional who knows what they’re doing, and you don’t know all the things that they know, why would you, and you’re embarrassed to ask basic questions, you know, like you’re embarrassed to say, like, I don’t even know what is my tax bracket. You know, I don’t even know what, tell me how Roth IRAs work I don’t even understand. And people are so afraid to look foolish.
Lynn:
Yeah. Women, women are. I mean, I can’t speak for men because I’m not a man, but I think women often will start a question like, oh, this may be a silly question. Or this may be a stupid question. Or, and you know, where it’s just kind of ingrained in us or I’m sorry, you know, we started our sentences with, I’m sorry, but, and I think if you find the right person, I really want women to try to seek out the right people where they feel comfortable asking those questions. But I think oftentimes, and I’ve been in the situation where I’m like, oh, I don’t wanna come across as not knowing this is such a silly, probably a silly question. And, I want women to get educated so that they can have more informed conversations. And like you said, the person they’re meeting with is the expert.
Lynn:
I don’t want, you know, I think, for the most part, we women have lives to live. And unless this is something of, you know, great interest, you can learn it, you can learn how to invest on your own. You could probably go study and learn how to do your retirement plan and the retirement. Plan’s more than a 401k by the way. But, you know, I believe that women should seek an expert who can make, you know, make that retirement planning process, both educational for them so that they understand what they’re doing. You know, they, my best friend, she doesn’t, she, she, she works with my significant other. And she’s like, no, I trust him. I don’t really wanna know the details. She knows enough, but she’s a physician assistant. She’s busy. She just, you know, so if you can find someone like that, great, but she came to a class that he hosted.
Lynn:
She understands the basics. So my thing is, understand the basics, understand the questions that you should ask this advisor, right. Really put that advisor to the test and make sure that he or she is going to take the time to educate you and make you feel comfortable asking those questions. No one should ever have an advisor that’s working with you should ever make you feel like, oh, I need to say like, this is a silly question. Maybe you do, but he, or she should say no silly questions. We’re gonna address that. And I’m gonna take the time to make sure you understand a Roth conversion, or I’m gonna make sure you understand why you should reallocate your portfolio and consider maybe buying an annuity versus having all of your money exposed in the stock market. But you know, everybody’s different. I mean, I used to be super intimidated by financial stuff and I just put money in my 401k and hoped it did fine with the allocations I chose. And it was a lifelong dream, I guess, to get more educated about financial stuff, but I’m like, oh, I don’t have a math mind. I don’t, you know, I’m, I’m artsy, I’m more marketing. And that’s a bunch of bull. It’s really not that complicated.
Sheree:
If someone listening is in the critical zone I would call a critical zone five years before retirement. They might be worried about replacing their paycheck during economic times like the ones that we’re in right now, what can you tell us?
Lynn:
Mm, well, very, very important to do that retirement income projection because you know, you obviously don’t wanna run out of money in retirement. So really, really important to do that retirement income projection, which requires you to estimate your expenses. The easy thing to do is just to say, they’re gonna be the same as they are now. Some things go down, some things go up, you know, whether you’ve paid off your mortgage or, you know, maybe your healthcare expenses go up, maybe your lifestyle expenses go down retirements kind of broken into a few different phases. The early phase, they call kind of the Gogo years. And then there’s the middle phase, the slow. And then the third phase is no go. So your spending can obviously ebb and flow throughout retirement. But you know, some experts say to calculate your expenses at 60, 80 to 80%, but once you kind of have a good idea of what your expenses are going to be, then you need to look at your income sources.
Lynn:
And if you’re five years from retirement, you know, prior to retirement, it’s all about growth, right? And, that’s why retirement planning is different than financial planning in many senses. Because prior to retirement, you really just focused on compounding interest in getting the most out of your investments and there are investment advisors out there. But when, when you get close to retirement, there are so many different things to consider. And so it’s understanding number one, your retirement income sources and your expenses. But if you have access to social security, or if you have a pension, oftentimes we’re heavily invested in stocks prior to retirement to get that growth. But really in retirement, you want to de-risk at least the portfolio, that’s going to be your primary source of income. You really need to de-risk that. And if you have other monies, sure, go play the stock market, buy crypto, whatever, like take, take some chances.
Lynn:
But my, my opinion is, and, and maybe it’s based on my mother being a retired teacher, but she retired at 62 64, excuse me. And she had a pension. Well, she hasn’t, she’s not rich, but she’s never been poor. And she’s slept so well every night of Her Retirement because that check was gonna come in the mail for the rest of her life. So it’s kind of like sleep insurance. And for many women, they’re just scared to death that they’re gonna run outta money. So I’m all about like creating a personal pension from year 401k from your retirement savings, having a part of that as a guaranteed income source. And a lot of women are more conservative than men. You know, men typically say, oh, I’m gonna play the stock market. And they’re not, they’re not as, they’re not afraid of risk as women are. So I’m all about like, if you’re really stressed, try to lock in those guaranteed income sources for yourself so that you can have a little more peace of mind and go off and enjoy your retirement.
Lynn:
And then if you have like as my mother called it you know, a slush fund, then, then go out and play the stock market, buy some crypto, buy gold, you know, whatever it is. But I, I really worry about people being too risky women taking on too much risk, you know, an investment advisor going, oh, no, you should stay in the stock market. It’s historically outperformed any other investment. Well, that’s great when you’re 30 or 40, but when you’re 60 staring down retirement, I don’t know, you know, that you can’t control the stock market, but you can control, you know, getting yourself a guaranteed income source.
Sheree:
Is there one universal piece of advice you would tell us that we need to consider, even whether we’re five years from retirement, 10, it’s not on the horizon.
Lynn:
Yeah. I think my piece of advice for everyone is to make sure that they understand what a retirement plan looks like and all of the components that need to be addressed. You know, life has a lot of things that kind of come up. Life has a lot of things that come up and hit, hit you in the head unexpectedly, and that doesn’t have to be one of them. Okay. You can, you can plan, but it takes a little bit of digging and understanding what is, you know, what you might face understand those risks plan for them get educated, right? Get educated about retirement and what things you may face so that you can plan around those. So that’s, you know, my platform’s about educating women and it’s amazing how many women go, oh, I didn’t, I didn’t even understand that. I thought, you know, I thought social security was taxed, or I didn’t think social security was taxed or, you know, I, I, I had no idea that I could leave my 401k at my current company or that, you know, I had to roll it over within a certain amount of time.
Lynn:
So I don’t get penalized. I mean, we lose so much. I think the average person leaves about a hundred thousand dollars on the table by not claiming the right social security benefits or the right timing of their social security. So I think that a lot could be lost by not understanding what’s going on or finding someone who’s going to help you not get blindsided and have these voids that could have, you know, tax planning, right? Who knew lots of people don’t realize what it can do? And so you can just be much more efficient. And these days, knowledge, knowledge is so accessible, right? It’s it’s there. And women are talking about money, you know, you’re, we’re talking today. Like no one talked about it when I was younger. You know, when I got outta school, nobody, nobody talked about it. We don’t talk about how much money we make and how much money we have saved or, oh, I’m not investing, but, oh, I, I would never tell anyone that, you know, people think all I can do is save money. They don’t even know there’s this whole world of investing. So I just, I, my universal advice is to educate yourself so that you can have those informed conversations, make more informed decisions and you know, people complain, oh, I have this slick advisor who, you know, sold me an annuity or sold me a life insurance policy. Well, no one will sell you anything again, you’ll make an informed buying decision.
Lynn:
Thank you! This has been great. And sorry if I had some puppy barking in the background, but that’s the way of life these days working from home.
Sheree:
That’s our segment for today. I hope you’ll take what you discovered to make plans and take action. I’m Sherry Clark from Fork in the Road. See you next time.