Ep. 11 suddenly single

Ep. 12: Family & Retirement – The Elephant in the Room

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Hi there. Welcome to this week’s episode of Walk the Talk. I am Lynn Toomey, your host, and also the founder of Her Retirement. So this week, I want to talk about the elephant in the room. And what I mean by that is family and retirement. And this is going to be based on a report from Merrill Lynch and Age Wave. And the survey included a total of about 5,400 respondents age 25 plus, including 2100 respondents among the boomer age and the silent age. And we also had millennials and we also had Generation X. In addition, select findings are based on an oversample of 2,800 affluent respondents age 50 and over, with at least $250,000 in investible assets. Among the affluent respondents, 2,500 had assets from 250,000 to 5 million. And over 300 had assets of 5 million or more. And although this survey was conducted about seven years ago, it is still very relevant today because none of the things that it talks about have changed. In fact, they may be even more exacerbated.

And so I’m going to be quoting from this survey, I’m going to also be throwing in some of my own perspectives. And like this podcast is called Walk the Talk, I’m often experiencing a lot of the things that I talk about in my podcast. So it makes it very real to me, but it also should lend some credibility because it is in fact happening to me or has happened to me in the past. So with that, let’s just jump right into kind of what I call the executive summary of this elephant in the room of family and retirement. For most, family is life, right? And life in retirement is made more richer and more enjoyable with family, studies have proven that. But family can also complicate retirement or at least for some preparing for retirement. Retirement planning has traditionally centered largely on the needs of an individual or couple. However, this study reveal that the impact of today’s family complexities and interdependencies, what effect they have on retirement outcomes and they can be pretty significant.

So we’ll talk about those and I will talk about a few ways that you can try to avoid some of these situations that will potentially adversely impact your retirement and your ability to save retirement. And we will talk about how pre-retirees and retirees can better plan and communicate, collaborate, and engage with their family members, so that there’s a nice balance between family priorities and your own long-term retirement security, and articulating that to family members is really important, but oftentimes it’s a very hard conversation to have, because if you are a giver and you’re generous, like I am, you want to help people, you want to be there for them, but there is a line in the sand that you must draw so that you can protect your own future in retirement.

There’s three converging trends that really complicate the lives of retirees and pre-retirees. One, is parenthood doesn’t retire. So in today’s uncertain economy, adult children and other younger relatives are sometimes struggling with career stalls and financial difficulties. And they increasingly turn to older family members for helping them through these periods. Number two, extended lives and extended needs. So at the same time, rising longevity is introducing new twists in our retirement. While it can be a blessing to have longevity, there’s also some potential pitfalls of it. And parents of today’s, pre-retirees and retirees are living longer. So for instance, my father-in-law and his significant other are, he’s 91 and she’s in her late seventies. My parents are both in their mid-eighties and all are doing, knock on wood, very well and relatively speaking, healthy, thriving, and surviving. And I think that’s pretty commonplace these days. We, Gen Xers and early baby boomers are having parents that are living longer, and in some cases, these parents need financial support.

So in my particular case, my significant other slash husband, he helps his mother out financially. So the money that he helps her out is not going toward our retirement. So this very often requires, this longevity of our parents requires greater emotional, physical, and financial support. And thirdly, what’s called stretched and stressed. Many retirees and pre-retirees have insufficient savings, putting them on really shaky ground as they attempt to balance the competing priorities and trade-offs of preparing for and financially managing their own retirement while also helping family members. So this major study from Age Wave and Merrill Lynch identifies these pitfalls. And I’m going to review some of the pitfalls that fall within these trends. And one is finding oneself in the role of family bank, the impact of providing family support and what that can have as an impact on retirement. And why ground rules and boundaries are more important than ever when providing support for family members.

Next, the financial challenges of blended families and divorce. So in my case, we are a blended family. He’s got three children, he’s got a big family, I’ve got three children, I’ve got a big family. And that extended family, siblings, so on and so forth, periodically they’ve needed our help. And we both have wanted to help them. And then certainly, the impact of divorce, which is probably one of the greatest impacts, negative impacts on preparing for retirement. And again, in our cases, we both have been divorced and it definitely caused some issues. But in addition to that, people that have been married for a very long time are finding themselves getting divorced as they enter in retirement, or in retirement, they call it the graying of divorce. And that has also had a significant impact on people’s livelihood and relationships with their family in retirement.

Also, what does it mean to be a burden on one’s family and how is that changing? What steps are people taking or not taking to avoid becoming a burden on family? And the impact family challenges and crises can have retirement preparedness is another very important pitfall that is revealed in this study. And then how discussing planning and coordinating with family members around important financial topics really can increase everyone’s peace of mind, but those conversations are extremely difficult for many people to have. And we believe, and I believe that it’s very, very important to have these conversations. In fact, our two youngest are now adults, so we have six adult children. And very soon I do want to have a family meeting with all six children and just explain everything going on in our financial lives.

What is our goals, what do we hope to achieve, and what are our expectations for them as adults. And I guess explain to them that we’ll always be there for them emotionally, but that we will prioritize our retirement and that we have to prioritize our retirement, and their job as adult children is to be independent, be self-sufficient, and in some cases, figure it out on their own. Certainly, we’ll be there to give them guidance, but we will probably draw the line on some financial support and making them understand as well that we are planning to be financially independent so that they won’t have to worry about us as they become… As they do later into their lives, we want them to understand that our plan is not for us to be financially dependent on them when we are no longer working, and to articulate what we plan to do as far as our independent living and healthcare and those types of things, and also wills and that type of thing. I want to be very open with my six children, stepchildren and my own biological children.

So I think it’s important to consider having that family conversation. I actually am working on a guide to how to have those family conversation. So if you’re interested in that you can email me at lynnt@herretirement.com, and I’d be more than happy to get you that guide as soon as I have it completed. And I will be my own guinea pig. I will be testing it with my family and also doing some research from some other experts who have gone before and have had these conversations. So I want to give you the statistic, six in 10 people age 50 plus today are providing financial support to family members in need. And the support is often leniently and generously given. Half of pre-retirees age 50 plus say they would make major sacrifices to help family members.

So with this statistic, I’m not sure if you’re surprised by that statistic, I am a little surprised by the major sacrifices. Some of this support may be to meet a one time need, or it could be ongoing assistance over the course of many years, and it’s often offered without expecting anything in return, but those providing support to family members are often not accounting for in their retirement planning, nor are they talking with family members about it, which can pose a hidden risk to their own retirement. So back to my comment about talking about it, that is key. Talk about it. Okay? Talk about it with your spouse, with your significant other, talk about it with your kids, talk about it with your parents. So financial help can go off in many different directions, including adult children, grandchildren, parents, in-laws, siblings. The amount of support provided by people age 50 plus to families can be thousands of dollars a year. And averages right around $15,000 among people with less than $5 million in investible assets, according to the study.

So my question is, are you the family bank? And three out of five people, age 50 plus believe a member of their family is the family bank. Meaning someone who their extended family is most likely to turn to for financial help. And I know prior to meeting my significant other, he probably provided more help than he does now. He has differing priorities, he has myself and my children, and we created a new family. But I think if you would ask, he may have been seen as the family bank. The role of the family bank is often assigned to those who have saved and invested responsibly or who a family sees as someone that has the means to help out, and therefore they’re asked for support more often.

In fact, the more financially responsible you are, the more likely other family members are or will be likely to consider you the family bank. And there’s generational generosity, it’s called. So half of pre-retirees age 50 plus say they would make a major sacrifice as I stated earlier. Among these pre-retirees, three in five say they would retire later in order to help that family member or make that sacrifice. Four in 10 would return to work after retirement. And more than one third say they would accept a less comfortable retirement lifestyle in order to help families financially. Another concept I want to talk about is the family bank being open 24/7 and very lenient terms. In addition to being willing to make these major sacrifices to their own retirement, financial security in order to support family members, many pre-retirees and retirees also cite that they give support without even knowing how the money is being used.

So, basically it’s kind of like an ATM. An ATM doesn’t know how your money is being used. It just dispenses the money to you. So, these people that are the family bank are dispensing the money and they’re not even asking how it’s being used. That to me, is an issue. If you are going to extend financial support, I would definitely ask how it’s being used. But again, it’s a very personal decision. I’m here just to give you my perspective and to give you some ideas for how you can change some of these behaviors, because my job at Her Retirement is to help you know more and have more. So those helping family members really do so because they expect future help or financial payback. Older adults are 20 times more likely to say they’re helping family because it is the right thing to do, then because family members will help me in the future. They are five times more likely to stop family support because the recipient is not using the money wisely, then because of worries about being paid back.

So one of the focus group participants in this story, in this survey said, “I’m not looking to get back the money I loaned my daughter. I’m just happy I could help her when she needed it.” And I think that’s great. It gives me great pleasure to help my kids when I can. And to be honest, I do get nervous when I’m looking at how I could help a child or a sibling and saying, “I just need to make sure that I am taking care of my future and my retirement.” And in some cases, that might be seen as being selfish, but I think there is a level of selfishness you need to have. And then once you have your needs covered, then you can be as generous as you want. That’s my perspective.

I was actually raised by two very different parents. Although, actually I wasn’t even raised by my father. He was somewhat present in my life, but he was not generous at all. He did not help me with anything other than giving me some money for my wedding. And it was a very small amount, to be honest. My mother on the other hand has given her family, her children, the shirt off her back, literally. But in her case, she didn’t really have a lot of money to give, but she has less now as a result. And fortunately for her, she has a pension, so she’s still able to live a comfortable retirement, not an affluent retirement by any means, but she has a cute house, she has a new car, she has what she needs and she’s comfortable and happy.

Does she have extra at this point? No. She has given away some of her extra. Would she change anything? I’m not sure. I’ve never asked her. I think she would, say at this point she’s saving $200 or $300 a month. And every time she tells me she’s doing it, she just says, “I don’t know what I’m saving it for. I should be giving it away to my family.” But anyway, those giving money to family members are three times more likely to feel appreciated than taken advantage of. So I guess if you’re going to be generous and you’re going to be giving, it’s better to feel appreciated than taken advantage of. And hopefully the family members that you are helping out are showing that appreciation to you.

So this generational generosity also extends to a shift in mindset regarding inheritance and giving to family. Three in five, or 60% of people age 50 plus say it is better to pass on their assets now rather than waiting until the end of life. So in my mother’s case, like I just said, she doesn’t have assets per se to give away, but her feeling is, I’d like to help out. I’d like to help out people with a couple hundred dollars here and there rather than taking it with me. I’d like to see them happy. My father-in-law is kind of in a similar boat. He’s been very generous. He’s helped his children and grandchildren quite a bit. And I, again, I’ve never asked him per se, but I feel like he gets pleasure in helping them and seeing them use the money to put themselves in a better position or help themselves through a tough situation. But again, in his situation, he has a pension, he has social security, he is able to do it without impacting his wellbeing, his retirement.

So again, I’m all for it if you can do it and you have the extra, do it. But I am against it if it’s going to put you in a bad way financially. So let’s talk about family support, unforeseen and unprepared. Unfortunately, very few people have prepared financially for potential family events and challenges. The vast majority of people age 50 plus have never budgeted and prepared for providing financial support to other family members. So let’s talk about blended families after the face of retirement. Rising divorce rates, which peaked in the 1980s have created more complex families among today’s pre-retirees and retirees. Roughly three quarters of people who divorced remarry, often introducing stepchildren, step parents, and step siblings into the family and the financial mix.

This is another reason it’s very important to have that plan, have that will, have that trust, so that that blended family, everybody knows what they get, what they’re going to have access to at the passing of their family members. So nearly one third of people over 50, who have stepchildren say it definitely complicates financial planning. Three in 10 also say that they and their spouses have different financial priorities for their own children than they may have for their stepchildren. And those with stepchildren are less likely to divide their assets equally than those without stepchildren. And fathers are more likely than mothers to say that their financial plans treat their stepchildren exactly the same, and that they feel financially responsible for their stepchildren.

So now I want to talk about gray divorce. Divorce is becoming increasingly common among older adults, which can have a significant impact on retirement savings and plans. Overall, the percent of people who divorced per year in the U.S. among all ages was essentially unchanged between 1990 and 2010. However, during this time period, the divorce rate among those age 50 plus doubled. One in seven people age 50 plus who were once married are now divorced and single, a seven fold increase from 1960. Divorce and maturity often creates substantial financial hardships, especially for women. And I was recently listening to a webinar on how to become a millionaire. And basically the gentlemen giving the webinar said, “One of the most important things is don’t get divorced.” So clearly he was talking to younger people, but in this case he could be talking to older people as well, that if you have quote, a gray divorce, it can leave you very financially vulnerable.

In fact, we have a certified divorce consultant in our network, and I always encourage women to talk to such a person, in addition to a divorce attorney, because a certified divorce consultants can look at the financial aspects of your divorce and make sure that you are protecting your financial situation through that divorce process. And the attorneys will look at it, but not to the level of a certified divorce consultant. So where was I? Overall, the percent of people who divorce per year in the U.S. among all ages, like I said, was essentially unchanged. Oh, I know what I was talking about. I was talking about women, that they are experiencing financial hardships because of divorce. Household income drops by more than 40% for women, and by about 25% for men after divorce. That is a pretty significant difference.

So one of the things I talk about in Her Retirement is that women have these financial challenges and divorce is clearly one of them. And that’s because there’s that 15% gap. But now on the other hand, let’s talk about marriage. Marriage gets better in retirement. So while divorce may be becoming more common later in life, overwhelmingly retirees are more likely to say their marital satisfaction has improved, not diminished since retiring. Close to half, say that their marriage is now more fulfilling and loving in retirement.

So let’s talk about being a burden. I know this is something my mother talks about frequently that she never wanted to be a burden. Her mother used to tell her that she didn’t want to be a burden. And she says that all the time to me, “I don’t want to be a burden.” Even if I offer to stop in, she’ll say, “No, you’ve got your busy life. I know how it was when I was your age. I can take care of myself. I don’t want to be a burden.” As people age, being a burden on family and running out of money, become top concerns. Older adults are most likely to define being a burden as having family members providing hands-on care. Well, the number one choice for long-term care, if needed, is in their own home. Two thirds of people age 50 plus admit that they have taken no steps to maintain their independence.

So again, we want these things, but we’re really not addressing them. And this is another clear case that we want to have that independence as we get older, but a lot of people aren’t addressing it and preparing for it. So let’s talk about retirement’s two greatest worries. There are two top worries in retirement, which could change in priority as people age. Younger generation say their greatest worry about living a long life is running out of money to live comfortably. But in later life, another worry weighs just as heavily. Older adults say being a burden on family is of equal concern. Women age 50 plus are even more likely than men to say being a burden on family is their greatest worry.

What it means to be a burden on family. Older adults are most likely to define being a burden as having family members physically take care of them. The need for elder care can have repercussions across generations. While family members may need to pay for or coordinate care, asking family members to provide hands-on care is a top anxiety. So now let’s talk about parents moving in with you, and that fathers are more likely to feel they will be a burden. Among those age 50 plus, men are likely to have greater anxiety about how their adult children would feel about the moving in later in life. Fathers are more likely than mothers to believe their children will feel burdened by such responsibility. And more mothers and fathers believe their children would say they are fulfilling their obligation.

Now let’s talk about Alzheimer’s, the case, excuse me, the cost of longevity. So worries about Alzheimer’s disease escalate as people age. Well, younger people consider cancer to be the greatest health-related worry of later life. Older adults unequivocally say Alzheimer’s is their worry, because it can require years of caregiving and cause tremendous distress and rapid depletion of financial resources among close family members. And Alzheimer’s is far too common in later life. Nearly half of people age 85 plus have Alzheimer’s or related dementias. Currently there are over 5 million people with Alzheimer’s, but as we continue to live longer, and as the age 85 plus population increases, more and more people will suffer from this disease unless a cure or treatment is found. So let’s talk about home, and that being the number one choice for long-term care. The vast majority of older adults say they would prefer to receive care in their home, if needed. Just 2% say their first choice would be to receive care in a family member’s home. A choice is unpopular as moving to a nursing home.

Although nearly all older adults say they would prefer not to have to move in with family members, two thirds of people age 50 plus admit that they have taken no steps to avoid having to live with a family member, if unable to live on their own. In part, inaction, maybe driven by lack of awareness or worse, denial. Well, 37% of people age 50 plus believe they may need long-term care in their lifetime. The reality is that 70% will eventually need some type of long-term care. So I believe silence is not golden, and proactive communication is really key to preventing catastrophes.

So let’s talk about the family factor. Family challenges and crises can derail years of responsible retirement preparation. While already a mere one-third of people age 50 plus say that they feel well prepared for retirement if everything goes as they expect, less than a quarter would feel prepared if they are the spouse needed to retire early for health reasons, or if a spouse died. Only about one in 10 would feel well-prepared if they had to provide extended care or support to a family member. Unfortunately, family related events can create financial hardship in retirement. And let me give you a few examples. Half of women over age 70 have been widowed. One third of people who retire early do so for health reasons. One in five people age 50 plus have boomerang adult children who’ve moved back in with them. And there are 66 million people in the U.S. providing extended care to loved ones.

So I believe there’s a troubling lack of discussion, and like I said earlier, lack of communication. There’s a dangerous absence of planning, discussion, coordination, and establishment of safe boundaries as people navigate these new family interdependencies. This lack of proactive engagement, discussion, collaboration, can negatively impact every aspect of your retirement. Very few people talk with close family members about important financial topics, such as a level of financial security, plans for living arrangements and retirement inheritance or longterm care. So in the case of my parents, I have one parent, my mom, who’s very open. We’re having conversations, we’re meeting with an attorney, I’m talking to her about Medicare, Medicaid, what her wishes are. In the other hand, I have a father who I have never really had much of a relationship with, let alone talking about his plans. When I’ve mentioned a nursing home or those types of decisions, he simply says, “I have no plans to go to a nursing home. I am just going to drop dead.”

So he has a plan. His plan is to drop dead and not require any of these long-term care facilities or help. I do not know if his multiple properties are in a trust or protected. I know nothing. And it’s sad, but I have to respect his wishes, but I’ve learned from it and it’s something that I don’t want to do to my kids. I want to be an open book. I want them to know everything. I want them to be a partner in my future. I am their parent, and I want them to be a part of my life, of my financial planning, of my priorities, and to be honest, they could be very much a part of that process someday, because the likelihood is that I will outlive my significant other, and I will be a woman, an elderly woman, and I will potentially need their assistance.

So like I said, very few people talk about this. Very few people talk with close family members about these topics, and they don’t talk about financial security, plans for living arrangements, inheritance. 70% of those age 25 plus have not had an in-depth discussion with their parents about these retirement issues. More than half of those age 50 plus have not had such discussions with their adult children and nearly one third, 50 plus have not even had a discussion with their spouse. So step one, talk to your spouse. Step two, talk to your parents, if your parents are still living. Step three, talk to your children or reverse that order. But most importantly, talk to your spouse, but perhaps even more important than that, is have a conversation with yourself first, right? Understand what it is that you want, then talk to your spouse or your partner, so that you can find out what he or she wants and then you can come to some planning together.

Just one in four of the survey participants have discussed how their parents will be financially provided for or cared for as they get older. One of the survey participants said, “I just have never wanted to talk about things with my sister. It was the elephant in the room. We both knew mom’s health was failing, but it was like we pretended it really wasn’t happening. Then when she gets sick, we wish we had talked about it sooner. It was an absolute nightmare.” Worry about causing family conflicts is the top reason for not discussing important financial issues with family members. In fact, these discussions often don’t start until confronting the crisis such as a death or an illness. Unfortunately, the lack of proactive discussion today can cause even more difficulty in conflict when a family crisis arises. It can also lead to people becoming a burden on their family, the very thing they want most to avoid.

So let’s talk about the payoff of proactive planning and discussion. Certainly, there is a need and there’s a payoff. There’s a payoff for thoughtfulness and discussion and collaboration and communication about retirement as pre-retirees and retirees and as you plan for how you’re going to support your family as you move to and through retirement. Those who have had financial discussions with their spouses or their adult children are almost twice as likely to say they would be well-prepared if they were to face family challenges. People age 50 plus report that having a retirement specialist or an advisor engaged with multiple generations within a family has various benefits, including helping family members communicate better on important financial issues. And most of all, it increases financial peace of mind for the entire family. So let me wrap up today’s podcast because I know it’s going a little bit longer than some of my other episodes, but this is such an important topic.

Our families are a source of happiness, fulfillment, and pride, but also sometimes financial stress when planning for and living in one’s retirement years. It’s in these challenging economic times, older adults are increasingly playing a role in supporting their family members, not only emotionally, but financially as well. They often do so generously and under lenient conditions. And too often family challenges are neglected or unanticipated during retirement planning. This podcast and this study by Merrill Lynch and Age Wave reveals some very important insights and recommendations to prepare you and your family for your hopes, your dreams, and your needs in connection with retirement. And I want to go over six things that I think are important to be done, and this study concludes these things as well.

So like I like to say at Her Retirement, a lot of what we talk about and articulate to you through this podcasts, through blogs, through our classes that we teach, is that it’s all research-based and this is just, it’s definitely sponsored by Merrill Lynch, but the point of this is that it’s based on what people are saying, it’s based on survey data, research. And that’s why it’s really important for you to pay attention to this. And look at your own life, right? Are you prepared? Have you had these conversations? Do you have a plan for long-term care? Do you know how being generous is going to affect your retirement? Are you contemplating or in the middle of a great divorce? And do you know how that’s going to affect you? Have you talked to your children, to your parents?

So let’s go over these six things. Anticipate and budget for support you may provide to multiple family members, adult children, parents, siblings, and grandchildren, before and during your retirement. So if you have a budget or you’re putting down your expenses, set aside some money for that, adjust in case fund, right? Two, the more financially responsible and secure you are, the more likely you are to be considered the family bank, something to keep in mind. Balance your family needs with your own retirement financial security. Giving too much without accounting for your future needs may jeopardize your retirement, and ultimately require you to rely on family support.

Number four, recognize and plan for the unique challenges that blended family and divorce can have on retirement preparedness and family financial decisions. Five, prepare early to avoid being a burden on family, especially regarding help and your care needs. Too often, the default is relying on family members to coordinate or even provide care. And six, discuss, plan, and coordinate with family members to effectively prepare for family challenges. Reduce their emotional and financial costs and create greater financial peace of mind for both yourself and your loved ones. So I appreciate you taking the time to listen to today’s episode of Walk the Talk. I am your host Lynn Toomey. I looked forward to recording this podcast and presenting it because it is a very important topic. It is something I am experiencing myself and I really like sharing things that can help you avoid pitfalls. And it’s all about communicating, and it’s all about making sure you go out and you’re proactive in preparing. And that’s why I like to say, go out and get her done. Until next week, have a great day. And we’ll talk to you soon.

 

Ep. 11 suddenly single

Ep. 11: Suddenly Single

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No amount of planning can prepare you for the loss of a husband or life partner. Either through death, abandonment or divorce.

In 1983, after me, my mother’s last child, left the roost for college, her husband of 10 years left the house and the marriage with nothing but a note that said, “By the time you read this. I’ll be gone. The good news is we’ll be able to stop taking Alka Seltzer.”

A shocking and sad end to a marriage that didn’t really seem doomed. In fact, I didn’t even know my step-father was unhappy. Nor did my mother.

I never saw my step-father again. Neither did his four biological kids. He disappeared forever. Although we did hear that he settled and remarried in Florida.

All loss hurts: death, divorce and abandonment. The financial fall-out can be devastating and hard to recover from. The mental fall-out can be much more damaging.

Lucky for my mother, she recovered and moved on. Although the pain has never really gone away. The financial fall-out was not devastating, but it did set her back and she would be better off financially today if she wasn’t abandoned. As for me, my stepfather was helping me pay for college so I left school, regrouped, worked, saved money and eventually returned to school and got not only one degree, but two. My mom and I made a pact to not let this “crazy” man bring us down.

As Anna Byrne, an estate planning attorney from Cambridge, MA stated in her article: 7 Steps for Widows and Widowers to Manage Their First Year Alone… Nothing quite prepares you for the dark and debilitating grief of losing a spouse or life partner. The beginning of every widow or widower’s journey is about picking up the pieces and finding the strength to keep going even when your “other half” has passed.” Or in my mother’s case, when the other half up and leaves. In both cases, you’re left suddenly single.

 

Going through this experience with my mother taught me many things about life, people, marriage, divorce, and money. But most importantly, it taught me two things 1) Life never goes as planned; and 2) You can’t always count on people. This is just one of my life experiences that has motivated me to start a movement to help women know more and have more and to be independent and confident in their life…no matter what life throws at them.

Statistics prove that women are more likely to be suddenly single due to our longevity, and with the graying of divorce, along with the number of baby boomers continuing to retire over the next 10 years, many women will be left solo to make all of their financial decisions.

I know the grief between death and abandonment and divorce are all different, but many steps to recovering are similar.

In the case of my mom and I, we had immediate issues to face, like paying my next college bill and paying the next mortgage payment without his income. Our phase 1 was about getting by with the lost of step daddy’s income. Phase 2 was about grief (and feeling sorry for ourselves)… we were both sad, but she lost a husband and I lost a dad. Our grief was similar but different.  Phase 3 was about becoming the “her” in hero and deciding to never be even the slightest bit dependent on a man. Phase 4 for me was to find trust in any man and to eventually find my own secure relationship (although it took 2 failed marriages to find). Mom’s phase 4 was to focus on other things in her life that would bring her joy and to continue to prepare herself financially and mentally for the future as a single woman with four adult children. Which, now at 85, she continues to rock her single life…although I’m sure she dreams of what a long term happy marriage would have been like.

Ms. Byrne outlines seven steps she recommends people take after the death of a spouse or partner in her article.  I’ll paraphrase them and add my commentary. I’m actually witnessing and helping a friend through some of this process. She recently lost her husband very suddenly at only 58. In fact, in last week’s podcast, I talked about how we watched her spread his ashes at the top of Big Mountain in Whitefish Montana two weeks ago. She’s managing to hold her life together but I’m sure sometimes it’s feels like she’s dangling from a thin thread.

So let me summarize the steps…

Step 1: Take Care of Immediate Things

Although hard, there will be immediate things you’ll need to take care of. Although it might feels more overwhelming than anything you’ve done before you don’t need to do it alone. Make sure to ask for help as this first step can be mentally exhausting. And remember, you are stronger than you think and you’ll get through it.

You’ll need to notify family members, loved ones and family advisers and make decisions about organ donation, burial vs. cremation and funeral arrangements.

If you know what your partner or spouses wishes were for end of life, these decisions will be much easier.

You’ll also have to make sure you are okay financially and with your work, etc. if you are still working…taking time off as needed. Make sure to delegate as much as possible and stay organized.

Step 2: Find and Organize Key Documents

Becoming suddenly single means that you will be responsible for your finances. Perhaps you were already the CFO of your partnership/family or perhaps your spouse/partner managed all things financial. You may find yourself particularly stressed if the latter is true.

Make sure you to prioritize locating documents such as will, trust, life insurance policies. Call your estate attorney if you have one. Many attorneys retain their clients’ original estate planning documents in their vaults and have useful information to guide clients.

As you assemble these legal documents, don’t write on any and don’t remove any staples. These innocent actions can inadvertently create issues concerning the validity of the documents.

Step 3: Take Inventory, Get Financially Organized and On Track

Next, you’ll want to take a complete inventory of your assets and liabilities so that you can identify your current and future situation, priorities and plan. If you and your spouse/partner already have such and inventory, you’ll need to review it and create a new plan for yourself for now and in retirement.

The Retirement Solved software I’ve recently launched is a perfect platform to take this inventory, keep track of things like your cash flow and net worth, while also having the software identify any gaps you have in your inventory/plan. The software will also help educate you about your money, retirement and strategies that can help you retire with more. You can learn more and access a free trial at www.RetirementSolved.io.

Here’s a list of all the documents you’ll want to gather in this getting financial organized and on track phase. Examples of these are as follows:

  • Tax returns
  • Bank statements
  • Real estate deeds
  • Mortgage documents
  • Investment accounts
  • Retirement account statements such as from IRAs and 401(k)s
  • Pension information
  • Social Security information
  • Annuity contracts
  • Life insurance policies (check with your late partner’s employer to see if there are any group benefits
  • Credit card statements
  • Other information pertaining to things of value

You may need to contact an accountant for help with tax documents. If your partner/spouse owned a business, there’s a completely separate set of steps you’ll need to take.

Since many people have switched to paperless documents and statements, you may need to figure out how to access his/her online storage vault, and email accounts. Once you’re organized and know what you have and what you’re missing you should connect with a financial advisor/CFP and/or retirement advisor who can help you pull together your new financial plan.

Step 4: Pull the Pieces Together

You’ll need to familiarize yourself with your state’s laws and procedures regarding wills and probate.

A good reason to be familiar with your state’s laws is in the case of there being no will. If this happens, “your partner’s state of residence intestacy laws will determine who can serve as the personal representative to manage the financial and legal affairs of the estate.” Each state also has probate laws that outline what must be done and when and who has the authority to handle the estate.

The probate process exists “so that once the court can confirm the will is valid, it can appoint the personal representative or executor named in the will who will collect, manage and transfer estate property.

There are some assets that can pass outside of probate, if beneficiaries are named:

  • Retirement accounts
  • Annuities
  • Life insurance policies
  • Joint accounts

Taxes also need to be addressed during the settlement of an estate. In addition to income taxes, there may be federal and state estate taxes. Some states don’t impose estate taxes, so it’s important to ask your attorney or research this to find out.

Generally, as a surviving spouse, estate taxes are not likely. However, if you were not married or if you were part of a blended family where there were children from a prior marriage, the estate tax is something to address with your advisers.

Estate taxes are calculated based on the values of a person’s assets at the date of death, so knowing these values is critical. Under current law, assets passing through the estate receive what’s called a “step-up” in basis. The step-up rules adjust the tax base of assets to the market value at death, which reduces the amount of income taxable gain on the sale of assets like the family home and stocks.

To ensure you are properly handling this step, consult a tax adviser who specializes in estate-related tax issues.

Step 5: Build a Team of Trusted Advisors

One of the most valuable resources you can have is a trusted team of advisors. With so many decisions and so much at stake, including your mental wellness most importantly, having a team of experts is a no-brainer in my opinion.

Your team should address all of the steps for completing probate and administering your partner’s estate, including a financial advisor, tax advisor and in some cases a business advisor if you and/or your spouse/partner were in business together.

Taking the time to build this team could be instrumental in protecting your money, your own estate, and your sanity down the road.

 

Step 6: Plan for Your Immediate Future

After the addressing your immediate short-term financial needs, you’ll need to create a plan B for the plan A you may have had as a couple. I strongly suggest that before any sudden loss of either spouse, the other spouse has this plan B and knows what the financial picture looks like as a single person. It will be important to create a new spending plan and to understand what your current and future financial situation looks like, as well as your retirement. A financial advisor and/or retirement advisor will be a key asset to you.

Step 7: Plan Things for Your Loved Ones

Finally, make sure to get your estate plan in order so your loved ones have a road map upon your own death. As you will have experienced in this process, having everything organized and in order helps the dealing and healing immensely.

You will want to have each of these estate planning documents created and keep them updated every five years:

  • Health care proxy also known as an advance health care directive
  • Financial durable power of attorney
  • Will
  • Revocable trust in which you designate who you want to be in control of your estate when you die and who will receive your estate
  • Tangible personal property memorandum that allows you to designate how you want your personal items to pass

This is also the ideal time to check and update all beneficiaries on your retirement, annuity and insurance policies.

Once you have all the documents in place to address disability, incapacity or death, communicate your wishes to your loved ones and let them know if they’ll play a role in your plan. Tell them where your documents are located, your wishes pertaining to health decisions and whom to contact if something happens to you.” One of the benefits of the Her Retirement membership program is that we offer a discounted subscription to a program called Everplans where all this information can be easily stored and accessed.

These are the seven step Ms. Byrne alludes to in her article, but I want to add a Step 8 and I’m sure there’s other steps other experts would add. But Step 8 is to take time to yourself. Self-care is so very important including trying to sleep well, eat well and exercise. Spend time with friends and family. Start thinking about how you want to live the rest of your life…in it’s new form. Take all the time you need to grieve…the process is different for everyone.

And finally, for those who are listening to this podcast that aren’t suddenly single, let these steps be a reminder to get your personal life in order so that at your passing, your executor and heirs have an easier time finalizing your affairs and your estate so that they can focus on getting through the grieving process and celebrating your life. No one looks forward to planning end of life, but it will be so helpful to those you leave behind.

So thanks once again for listening to this week’s episode, Suddenly Single. I hope that if and when you are faced with being Suddenly Single you remember this podcast or print out the blog version of this podcast and save it in your important papers. And I encourage you all to put together your end of life plan and documents, talk to your spouse/partner and make sure you each know where all of this important information is and you understand each other’s wishes.

I want to end this podcast on a lighter note and circle back to my mother. I called my mom the other day (who is very much a planner and very organized). I asked her what she was doing. Her reply, “Oh…just planning the playlist for my celebration of life. It will be in my file cabinet with the rest of my funeral plans. I did say she’s a planner, right?

So thanks for listening. Remember: Pain makes you stronger. Fear makes you braver. Heartbreak makes you wiser.

As always, my team and I are available to help you in any way we can. You can email me at lynnt@herretirement.com anytime. Until my next week’s episode, here’s to knowing more and having more…now and in retirement. And if you’ve listened to my other podcasts I always  leave you with one final thought…Let’s Get Her Done.

Ep. 10 Podcast

Ep. 10: Retirement Portfolio Design for a Changing Economy

Check out all episodes here!

Click here for a downloadable PDF. 

Planning for retirement can be confusing and a bit scary. How do you manage your money now so you can be well-prepared financially for retirement? And how do you ensure that your retirement income will last throughout your life? With increased life expectancies, it’s critical that you weigh all your options and plan carefully. This paper will discuss traditional retirement strategies, as well as introduce you to a less conventional but potentially more effective and efficient approach to help you reach your retirement goals.

The Problem

Often, “the way we’ve always done it” is no longer the best way to achieve something. In retirement planning, a traditional portfolio uses only conventional stock and bond investments. In this paper, we refer to this as the Traditional Asset Allocation 6040 Portfolio (TRAA 6040). The problem? Traditional stocks and bonds on their own are not efficient for 100% of a retirement income portfolio. They expose a retiree to lower return potential and higher risk.

The Solution

Historically stocks and bonds have been the mainstay of a typical retirement portfolio. The Hybrid Income Portfolio offers a change in product allocation to reduce portfolio risk and increase the rate of return potential. The HIP strategy utilizes a combination of Traditional Investments (stocks & bonds), Structured Investment Products (SIPs) and Fixed Indexed Annuities (FIAs).

In addition to adding SIPs and FIAs, other strategies should be incorporated to lead to a more efficient retirement outcome, including:

  • Social Security Timing: Utilizing the proper strategy to maximize this guaranteed income source
  • Tax Planning: Reducing taxes in retirement to increase the net after tax income annually
  • Prudent Use of Home Equity: Incorporating HECM loans as a tax-free income source or portfolio safety net
  • Alpha Portfolio Management: Utilizing active and passive portfolio management in the proper asset classes to add manager alpha to potentially increase returns

Definitions

The following definitions explain some of the concepts and terms used in this paper:

Safe Withdrawal Rate (SWR) is one of the most important factors when creating an efficient retirement income strategy. The SWR is the amount of annual income that can be distributed “safely” from a retirement portfolio under all market conditions (negative markets, average markets or positive markets) with a high probability (typically 90% probability or higher) the income will last a lifetime. Historically, a traditional stock and bond retirement portfolio could yield a 4% SWR from a portfolio, but recent studies have lowered the SWR to around 2.5%. This reduction in SWR equates to a lower income level realized from a traditional stock/bond portfolio. It is essential to employ strategies that potentially can increase the SWR and create the most efficient retirement income possible.

Multi-Disciplined Retirement Strategies (MDRS)TM is the integration of various financial disciplines such as banking, traditional investments, taxes, insurance and annuities to create an efficient retirement strategy to maximize a retiree’s outcome. Most advisors are biased toward their own financial discipline (stocks & bonds, insurance & annuities, taxes or banking products) and this traditional siloed approach offers retiree’s an inefficient retirement strategy. The proper integration of MDRS strategies can dramatically increase the SWR from a retirement portfolio to ultimately increase retirement income. Tax-efficient distributions, reduced portfolio volatility, prudent use of home equity, positive alpha-portfolio management and proper Social Security timing can increase SWR by 1 to 4% by applying all strategies in aggregate.

The Hybrid Income Portfolio (HIP) typically can add 1% or more SWR to a retirement portfolio. Integrating traditional stocks (aggressive risk), structured investment products (moderate risk) and Fixed Indexed Annuities (conservative risk) can increase portfolio return and dramatically decrease portfolio volatility versus using a traditional stock/bond portfolio approach employed by most traditional investment advisors.

Investment Volatility can harm a retiree when withdrawals are taken from a portfolio systematically. Mathematics prove that the portfolio with the lower volatility or risk level will last longer when taking withdrawals, all other factors being equal.

Introduction

In 1964, Bob Dylan released an anthem called The Times They Are A-Changin’ and while Dylan’s message was about his views on social injustices, the message of change is relevant to our economy today and to the 78 million baby boomers who are preparing for or already in retirement.

Our economy has experienced many changes over the last decade, and we’re currently seeing more changes with interest rates at all-time lows and volatility on the rise. Our boomer population faces changes and risks unprecedented in history. In response, retirement-savvy boomers are embracing a new investment approach to secure and protect an income that will last a lifetime. Investments and portfolio design strategies prior to retirement are very different from those after retirement.

Ten years prior to retirement, the focus is on maximizing portfolio returns with a conventional investment approach. Meanwhile, five to ten years prior to retirement, the approach should be shifting from maximizing your portfolio growth to transitioning the portfolio to an efficient income-producing strategy. Endeavoring to solve the income-for-life equation within ten years to retirement requires a completely unconventional approach.

Understanding Retirement Risks

A recent survey by The American College of Financial Services identified 18 distinct risks[1] that retirees face—any one of which, if not addressed with careful planning and portfolio design, could irreparably damage a retirement nest egg. Below, we explain the major risks, if identified and controlled in advance of retirement, will reduce or eliminate many other risks.  These major risks—longevity, inflation, volatility, sequence of return and bonds and interest rate risk—must be addressed in order to give a retiree a much higher probability of success.

Longevity Risk & Inflation Risk

With life expectancy continuing to rise and many retirees living well into their 90s and beyond, the risk of outliving retirement income sources is a real possibility (see Life Expectancy chart below). Coupled with the effect inflation will have on a retirement potentially spanning 20, 30 or more years makes it essential to account and plan for this possibility. Yet many investors plan for a shorter retirement after exiting the workforce. After all, they figure they did their job by saving money in their 401(k) and building a nice nest egg. With the population living longer, that short-sightedness could come at a cost. Both longevity risk and inflation risk are real, and without proper planning, many retirees will face a big shortfall between the amount they save and how much they need.

For example, let’s say that a retiree begins retirement on a total income of $3,000 per month. That same retiree would need $5,432 per month in 20 years at a 3% inflation rate just to maintain their same standard of income. To put it another way, a loaf of bread that cost $3.00 today would cost $5.00 at a 3% inflationary increase over a 20-year period.

“It’s imperative to account for longevity and inflation risk in a retirement strategy since many retirees will be funding a retirement that spans longer than they were employed.”

What’s a retiree to do with this unenviable predicament? The only asset that has historically outpaced inflation has been stocks. However, the downside to stocks is that they are typically extremely volatile and risky on a year-by-year basis. Therefore, any long-term retirement planning strategy must include a diversified portfolio of stocks to help reduce the effects of inflation and the effect of longevity risk. The portfolio must also have some type of risk-control measures to reduce risk and volatility. 

Life Expectancy [2]

65-Year-Old – Man65-Year-Old – Woman
50% Chance of reaching age8790
25% Chance of reaching age9296

Volatility Risk

When in retirement and withdrawing income from a portfolio, it’s imperative to reduce portfolio volatility. Recent studies have proven that when withdrawing income from a portfolio, the portfolio with lower volatility will experience a longer lifespan than one with higher volatility. A recent study completed by Sure Dividend titled Why You Must Care About Volatility in Retirement concluded that “simply put, the greater the volatility of your portfolio, the greater chance you have of outliving your money all other things being equal. By its nature, higher volatility means greater swings in the value of your portfolio.”[3]

Standard deviation is a statistical measurement that can be applied to assess a portfolio’s volatility or risk level. It is used to determine how much the returns of a portfolio will deviate from the mean or average rate of return from year to year. The higher the standard deviation number, the higher the volatility or risk in a portfolio.  

The higher the standard deviation or risk the shorter a portfolio will survive when taking withdrawals. The math proves that the portfolio with the lower standard deviation or risk will last longer when taking withdrawals for income in retirement, all other factors being equal, as shown in the following chart.

Sure Dividend Study Results

“Simply put, the greater the volatility of your portfolio, the greater chance you have of outliving your money all other things being equal.”

Sure Dividend Research Study

The Sure Dividend study assumed the following:

  • Retirement portfolio value: $1,000,000
  • Withdrawal amount: $3,333 per month or $40,000 annually (4% withdrawal rate)
  • Inflation factor: 3% increase per year
  • Rate of return: 9%
  • Retirement duration goal: 30 years (age 65–95)

The results of the study concluded that the higher the standard deviation or volatility in a portfolio, the greater chance of portfolio failure or financial ruin. As standard deviation or volatility was lowered, portfolio failure rate was decreased and a higher degree of success (or portfolio survival) was realized.

Sequence of Return Risk

Sequence of return risk is a major risk that must be mitigated by retirees when beginning to take withdrawals from their retirement portfolio. Sequence of return risk is defined by Investopedia as, “the risk of receiving lower or negative returns early in a period when withdrawals are made from an individual’s underlying investments.” Dramatic portfolio losses early in retirement will reduce the lifespan of the portfolio. Understanding this requires a different way of thinking than when money is invested while accumulating for retirement (without any withdrawals). In the accumulation phase, the sequence of return makes no difference; at the end you wind up in the same place with the same dollar value.

While sequence of return risk cannot be controlled any more than market volatility, its effect can be mitigated. Having a safe money bucket of funds to draw income from in the event of a dramatic downturn in the stock market can be an effective strategy to protect the portfolio from negative sequence of return risk. Research studies have concluded that having this buffer to draw from when market losses occur can have a positive effect on the long-term survivability of the overall portfolio.

A major psychological benefit of the income buffer strategy is that it will enable a retiree to withstand the temptation to exit the stock market with their retirement funds during a period of market losses, which might put the retiree in a market timing guessing game. Such an approach often leads to selling at the market low and buying at the market high and dramatically underperforming a long-term buy-and-hold strategy. Numerous studies have shown that the average investor has dramatically underperformed the market returns due to irrational selling and buying decisions.

As an example, during the 2007–2009 stock market downturn, having a safe money buffer or reserve account to withdraw income from (until the stock portion of the portfolio rebounded) would have been a positive step to protect against negative sequence of return risk. As a reference, in an article dated February 2015 by Wealthfront’s Andy Rachleff and Duncan Gilchrist, PhD; the 2007–2009 market loss was 56.39% and took the market 1,485 days or 4.06 years to recover. Since 1911, the average recovery time after a stock market downturn has been 684 days or 1.87 years![4] Based on this fact, it’s prudent to have a buffer in place three to five years before retirement begins, and it should cover approximately four to five years of retirement income. A proper buffer can consist of life insurance cash values, a reverse mortgage reserve account, cash or CDs, a guaranteed annuity, or any other account that will have a limited negative effect when there is a stock market downturn.

In conclusion, portfolio losses just prior to retirement or early in retirement can have a dramatic effect on portfolio survival rates and having a safe money buffer[5] in place can have a substantial effect on reducing potential negative sequence of return risk.

Bonds and Interest Rate Risk

Bond Overview

When interest rates rise, traditional bonds lose value. For example, an interest rate rise of 1% will cause a 10-year duration bond to decline by approximately 10% in value. From a historical perspective, current interest rates are at the lowest levels we’ve seen in more than 50 years. Historically, high-quality US government and corporate bonds have had a 5–6% rate of return, which in today’s low interest rate environment may be hard to find. In addition, our safe bonds are susceptible to substantial losses when interest rates potentially rise.

Most retirees do not invest directly in bonds, but rather through bond mutual funds or exchange-traded funds (ETFs) that offer professional bond management and immediate diversification. Utilizing bond funds or ETFs in the portfolio can complicate whether the portfolio is truly a lower risk, high-quality bond fund or a high-quality bond fund integrated with lower quality bond issues to potentially add yield or return. Many bond funds blur the lines by attempting to add yield or return by purchasing lower quality bonds or utilize longer duration bonds to attempt to add yield to the portfolio. This practice of trying to “juice the portfolio” or add additional short-term return can cause a bond fund to be more aggressive and be more susceptible to risk than is deemed appropriate in a retirement portfolio. It is imperative to understand the type of bond holdings within the portfolio to assess the risk within the bond component of the retirement portfolio.

While a direct buyer of bonds may be able to control the quality of the holdings within the portfolio, they may lack the necessary skill or management expertise to properly diversify the portfolio. Another pitfall of managing individual bond holdings is the lack of diversification and flexibility since bond funds typically purchase hundreds of bonds within the portfolio while an individual bond investor may only have enough capital to purchase minimal bond holdings.

Historical Bond Returns

It is important to understand the long-term historical returns that have been generated by bonds to evaluate what the current and immediate future holds for these investments for retirement investors.

The chart below shows the 10-year treasury rate at 4.08% on January 8, 1962 and moving up to a peak of 14.94% on October 12, 1981. During this dramatic rise in interest rates, bonds produced a return well below the historical average. As previously discussed, bonds have an inverse relationship to interest rates; as interest rates rise, bonds lose value and returns are reduced. As interest rates decrease, bonds will gain value and their returns will increase. Additionally, the bar chart shows that from October 12, 1981 to December 31st of 2018 interest rates declined from 14.94% to 2.69% which caused bonds to generate returns well above their historical returns.

10-Year Treasury Rate—54-Year Historical Chart (1962–2018)

Current Market Environment – Low Bond Yields

In our current historically low interest rate environment, since January 1, 2012 to December 31, 2018 the 10-year US Government Treasury Bond generated and average rate of return of 1.043% dramatically underperforming the return from January 1, 1962 to December 31st, 2018 of 6.042%.

US Treasury Bonds Returns

 Average Rate of Return
  
Full Interest Rates Cycle

(01-01-1962 to 12-31-2018)

 

6.042%

 
Last 8 Years

(01-01-2012 to 12-31-2018)

 

1.043%

Last 10 Years

(01-01-2009 to 12-31-2018)

 

3.179%

Source: https://www.staern.nyu.edu/~adammodar/.pc/datasets/histretSP.xls

In conclusion, investors expecting bond funds to perform as well in the next ten years as they have in the past could be disappointed. As previously discussed, bonds can play an important role in retirement portfolios, reducing volatility and increasing the predictability of returns.

With the current low interest rate environment (10-year treasury yield of 1.61% as of February 4, 2020) it’s imperative to find a safe alternative or accept much lower overall portfolio returns. Another alternative is to utilize a more aggressive portfolio mix and accept greater volatility. This more aggressive strategy could be detrimental to the survivability of a portfolio when taking with withdrawals, as previously discussed.

Changes to the Retirement Portfolio

The Safe Withdrawal Rule

The safe withdrawal rule is the percentage of a portfolio that can be safely withdrawn annually (adjusted for inflation), keeping the portfolio intact for a retiree’s lifetime. The widely accepted 4% withdrawal rule was established by William Bengen’s research in 1994. Bengen based his findings on historical data dating back to 1926 and a portfolio that was invested 50% in S&P 500 stocks and 50% in intermediate term government bonds. Based on today’s low interest rate environment, many recent studies have refuted the 4% rule and Bengen’s findings. A 2013 landmark research report conducted by Morningstar Investment Research entitled, Low Bond Yields and Safe Portfolio Withdrawal Rates belies the 4% rule and adjusts the safe withdrawal rate down to 2.4% when investing in a portfolio comprised of 60% equities and 40% treasury bonds with a 30-year retirement time horizon.[6]

The Morningstar executive summary states the following:

Yields on government bonds are well below historical averages. These low yields will have a significant impact for retirees who tend to invest heavily in bonds. This is because portfolio returns in the earliest years of retirement have a larger impact on the likelihood that a retirement income strategy will succeed than returns later in retirement; this is known as sequence risk.

The executive summary continues, “We find a significant reduction in ‘safe’ initial withdrawal rates, with a 4% initial real withdrawal rate having approximately a 50% probability of success over a 30-year period.”

In today’s low interest rate environment and the high probability of increasing interest rates (interest rate risk), where do we find a viable alternative to safe money bonds?

The Traditional 60/40 Portfolio Doesn’t Work in Retirement

Using the conventional 60/40 portfolio (60% stock for growth/40% high quality bonds for safe money) reduces the probability for success for today’s retiree. Research studies prove that today’s markets are more volatile than ever and utilizing a traditional stock and bond portfolio is not the most efficient method to reduce the volatility and sustain portfolio life. As previously discussed, the portfolio with lower volatility, when taking withdrawals, will survive longer in retirement.

As we all witnessed during both the 2001–2002 and 2007–2008 economic downturns, a portfolio of stocks and bonds lost more than 30% value. A Morningstar analysis indicated that a portfolio consisting of 60% global stocks and 40% high quality bonds experienced a 30.12% loss in value from March of 2008 to February of 2009. A traditional 60/40 retirement portfolio employed by most advisors or individual retirees yields potentially higher volatility and dramatically reduced bond returns. This conventional portfolio does not bode well for today’s retirees.

A New “Safe Money” Strategy

Considering the current interest rate environment, many individual investors and advisors are looking for a “safe money” alternative to traditional treasury bonds. It’s imperative to understand that there are many different types of bonds and each has its own unique risk and return characteristics. Many advisors and individuals utilize high yield bonds, convertible bonds, and floating-rate loans as a replacement for the safe treasury bonds to increase the yield and total return potential. These aggressive bonds do offer much higher yield and growth potential than traditional “conservative” treasury bonds. However, as evidenced in the 2008 market downturn (see chart below), they expose investors to much higher volatility and loss potential.

Historical Return Chart: Morningstar Data as of Release Date 06-30-2017

 

Asset Class2008 Return
Aggressive Stocks
S&P 500 Index-37.00%
Aggressive Bonds 
High Yield Bond Index (HYBs)-26.13%
LSTA Leveraged Loan Trust (FRLs)-29.10%
Bank of Am Convertible Bond Index (CBs)-29.44%
Conservative Government Bonds  
Barclays Govt Bond Index – 1–5 Yr. Trust8.41%

Like stocks, high yield bonds (HYBs), convertible bonds (CBs) and floating-rate loans (FRLs) are susceptible to high volatility. In the market downturn of 2008, HYBs lost 26.13%, CBs lost 29.44% and FRLs were down 29.10% respectively. During that same year, low-risk government treasuries gained 8.41%.  It’s important to understand that there are many different types of bonds, and each has its place in a retirement strategy. However, these aggressive bonds are better utilized for the aggressive portion of the portfolio to diversify within the stock component, rather than as safe money alternative. Trying to obtain extra return from these aggressive bonds adds additional risk of loss and increased volatility, which is never good for a retirement portfolio. On the surface these bonds may look attractive, but after further review they are not suitable as a replacement for the safe portion of a retirement portfolio.

In today’s low-interest-rate environment and with the potential for rising interest rates, the traditional solution should be to utilize ultra-short duration, high-quality corporate or government bonds. These ultra-short duration bonds will offer less return potential but will have much less negative effect in a rising-interest-rate environment. The consequence of low bond yields is the need for larger amounts of retirement savings to generate the desired retirement income.

Enter a New Asset Class: Fixed Indexed Annuities (FIA’s) Offer a Viable Alternative

Fixed Indexed Annuities (FIAs) can be an exceptional non-traditional bond alternative because they offer principle protection with reasonable returns, and work well as a safe money alternative.

A 2009 University of Pennsylvania Wharton School of Economics study suggested that “the fixed indexed annuity may be considered a separate asset class, when compared to taxable bond funds and fixed annuities.”[8]

 The study concluded:

  • FIAs are designed to have limited downside returns associated with declining markets, while achieving respectable returns in more robust equity markets;
  • The returns of real-world fixed index annuities analyzed in this paper outperformed the S&P 500 Index over 67% of the time;
  • The FIAs studied outperformed a 50/50 mix of 1-year Treasury bills and the S&P 500 Index 79% of the time.

FIAs are a type of fixed annuity that is backed by some of the largest and most financially solid life insurance companies in the world. FIA’s interest is tied or plugged into an external index like the S&P 500, the EAFE international stock index, or a combination stock and bond index. An FIA

credits interest as a percentage of the index return that they are plugged into. Typically, the more aggressive the index, the lower the participation rate or percentage of gains in the selected index. Conversely, the lower the volatility of the index plugged into, the higher the participation rate or percentage of gain the FIA will credit to the account.

In an article entitled “The Tortoise and the Hare, Consistency Pays Off,” Wealthvest, wrote, “The Fixed Indexed Annuity (FIA) product design is unique. Using FIAs, retirees have the potential to receive a percentage of the index return as interest credits with no risk of loss due to market declines (guaranteed principle). Returns from FIAs have been steady since 1999. Fixed indexed annuities averaged a 4.63% annualized return for all five-year holding periods from 1999–2015.”[9]

It’s very important to understand that FIAs are a safe money alternative to bonds offering absolute principle guarantees. This means that if the index loses value, the FIA will receive a 0% interest credit in that year but will not suffer a loss to the original principle value. They are designed to offer competitive returns commensurate with bonds and are not an alternative to the stock market. FIAs calculate interest based on the insurance companies’ hedging strategy utilized to protect the principle value of the investment. Ultimately, the cost of the hedging strategy to protect against loss from the index selected will determine the crediting rate paid to the FIA owner. Various forms of crediting strategies exist from the FIA contract universe such as participation rates, caps and spreads. High-quality, low cost FIAs designed for accumulation can offer highly competitive interest rates with absolute guarantees.

A recent research report (January 2018) written by Roger Ibbotson, PhD from Yale University, entitled Fixed Index Annuities: Consider the Alternative[10] concluded that

  • FIAs help control financial market risk and mitigate longevity risk,
  • in simulation, using dynamic participation rates and uncapped index crediting designs, a generic large cap equity FIA using a large cap equity index outperformed long term bonds with similar risk characteristics and better downside protection over the period 1927–2016, and
  • an FIA may be an attractive alternative to traditional fixed income options like bonds to accumulate financial assets (tax-deferred) prior to retirement.

Fixed Indexed annuities: Be careful before you leap

FIAs can offer growth, but it’s important to know what you’re purchasing. As with any product, insurance companies price annuities to make a profit. Expenses, including commissions, are included in that pricing. The higher the commission for a product with the same contract provisions, the less money is left over to credit interest on the policy or provide other policy benefits.

Therefore, it’s imperative to utilize high-quality, low-cost FIAs. Many FIAs pay high commissions, which ultimately reduce the effectiveness and the return potential. Additionally, it’s important to utilize high-quality, low-cost FIAs that are consumer friendly. FIAs have many moving parts and are complex. It’s extremely important to understand the nuances between the many contracts and company products available. As with any investment (stocks, bonds, mutual funds, ETFs or annuities) there are the good, the bad and the ugly, and proper due-diligence and analysis is essential for optimal performance.

Liquidity

Typically, FIA’s have contract terms ranging from 5 to 15 years in duration. Most FIAs have a penalty for withdrawing money made during the initial contract term. Although, during this contract term most have a liquidity feature allowing for a 10% penalty-free withdrawal annually that can be utilized for income needs. After the initial contract term 100% of the funds in the FIA are accessible.

Bonds have no such liquidity feature guaranteed. A bond investor can realize a capital gain (if interest rates are decreased) or suffer a capital loss (if interest rates are increased) if the bond is sold prior to the maturity date of the bond.

The Optimized Retirement Portfolio

A recent research study commissioned by Nationwide Financial and completed by Morningstar Investment Management LLC, compared a traditional 60/40 stock and bond portfolio to a portfolio consisting of stocks, bonds and Fixed Indexed Annuities (FIAs). The study concluded that by repositioning a traditional retirement portfolio consisting of 60% equities and 40% bonds to a portfolio consisting of 36% equities, 24% bonds and 40% Fixed Indexed Annuities offers virtually the same return, but with a 40% reduction in potential portfolio risk and volatility…both of which are the number one objectives for your portfolio as you head into retirement. The study utilized Nationwide’s New Heights fixed indexed annuity in combination with stock and bond indexes to compile the results.[11]

This new, unconventional portfolio design integrating traditional investments (stocks and bonds) with an allocation to FIAs (for portfolio volatility reduction) offers the optimum blend of growth and risk reduction for maximum retirement portfolio sustainability.

Additionally, this alternative portfolio addresses the challenges of the economy and the myriad of risk retirees will face as they enter a new phase of life. This combination approach of turbo charging a portion of the portfolio through stocks, while providing for safe money through bonds and insurance (FIAs), strikes the proper balance between risk and return to provide a reliable and sustainable income stream for life.

 FIAs Versus High-Quality Government Bonds

Interest Rate Effect

Bonds have an inverse relationship to interest rate movements. As interest rates rise, bonds will lose value. Conversely, as interest rates decrease, bonds will typically go up in value and benefit from an increasing-interest-rate environment.

An FIA’s interest crediting strategy will typically increase as interest rates rise, while the FIA’s interest crediting strategy will be reduced in a declining-interest-rate environment.

Relationship to interest rate movements:

  • Bonds have an inverse relationship to interest rates.
  • As interest rates rise, bonds generally lose value.
  • As interest rates decline, bonds generally gain capital appreciation.
  • FIAs typically have a positive relationship to interest rate movements.
  • As interest rates rise, FIA interest crediting rates will generally increase.
  • As interest rates decline, FIA interest crediting rates will generally decline.

In summary, if interest rates hold at the current 1.79% level (as of 12/11/19) or increase over the foreseeable future, FIAs will offer additional value over high-quality bonds. If interest rates decline, bonds will pick up capital appreciation and will be a viable safe money alternative again. In this historically low-interest-rate environment and with the high probability of increasing rates, FIAs are a viable safe money alternative to bonds for the foreseeable future.

Another Alternative to Consider: Structured Investment Products (SIPs)

What Are Structured Investment Products (SIPs)?

Structured investment products, or SIPs, are types of investments that meet specific investor needs with a customized product mix. SIPs typically include the use of derivatives. They are often created by investment banks for hedge funds, organizations, or the retail client mass market. –Investopedia, May 14, 2019

Understanding Structured Investment Products (SIPs)

Structured Investment Products are created by investment banks and insurance companies and often combine two or more assets, and sometimes multiple asset classes to create a product that pays out based on the performance of those underlying investable indices. There is no single structure in Structured Products and they all have different rules and functions. There are no uniform set of standards in these packages. SIPs can be designed to be aggressive and leverage returns or conservative to reduce risk or volatility in a portfolio.

SIPs can be designed to reduce investment losses while participating in a percentage of the investment gains on an investable index. Utilizing a conservative or moderate SIP program in a retirement income portfolio offers reasonable growth potential while reducing overall portfolio volatility.  When taking withdrawals from a retirement portfolio, integrating a conservatively structured SIP can reduce overall portfolio volatility increasing the probability of portfolio survival.

It is extremely important to understand that SIPs are complex vehicles and should be purchased with reputable companies that offer contractual guarantees and have the breadth of operations to back those guarantees.

The Unconventional, More Effective Portfolio Solution…      LESS is MORE

When in retirement and taking withdrawals, LESS is MORE…LESS risk brings MORE portfolio value. The truth is in the research that backs the Optimized Retirement Portfolio to create an unconventional 36/24/40 portfolio design as validated in the Nationwide/Morningstar study. This multi-discipline approach (traditional investments, structured products and annuities) includes both guarantees for safety and security (FIAs and structured products and globally diversified stocks for growth and inflation protection. Rational retirement solutions backed by research and retirement analysis are what retirees need, not fear.

As concluded in the research, a combination of stocks, bonds and FIAs can potentially offer better risk-adjusted returns than a traditional stock and bond portfolio alone. Reduced portfolio volatility leads to longer portfolio life expectancy when taking income from the portfolio, which in turn could offer retirees a better retirement outcome.

Adding conservative/moderate SIPs to the optimized portfolio will further reduce risk and enhance return potential and, as discussed previously, lower portfolio risk will increase portfolio survivability. It’s important to understand that the combination of Global Stocks/Bonds, FIAs and SIPs is not a one-size-fits-all proposition. Depending on the retiree’s income requirements, risk tolerance and other variables, the combination will vary to determine the optimal mix.

Additional Income Guarantees

Some individuals require more guaranteed income sources within the income distribution strategy developed and would like to incorporate either Single Premium Immediate Annuities (SPIAs) or Guaranteed Minimum Income Riders (GMIBs) to accommodate this requirement. Others are more aggressive and would like to utilize more traditional investments that can offer more growth potential, but with less guaranteed income. Regardless of the strategy utilized, it’s imperative to “stress test” the strategy, utilizing sophisticated retirement planning technology to assess the effect different economic conditions will have on the retirement outcome. This process is designed to test each retirement strategy to assure the portfolio, and ultimately the income stream, will last a lifetime under all circumstances.

Proponents of the Unconventional Optimized Retirement Portfolio

So, who are the proponents of the Optimized Retirement Portfolio? Certainly not insurance agents and certainly not investment advisors. Why? Two possible reasons: they aren’t properly licensed and/or they don’t understand the interrelationship of traditional investments, SIPs and FIAs in retirement planning and the intricacies of each discipline.

We believe that any advisor or company that discounts or dismisses an entire discipline or industry as “bad for you” is either ignorant to the research or just simply biased to one extreme or the other. The empirical research as discussed in this whitepaper (and a myriad of additional academic retirement studies) indicates that a strategy that employs both insurance-based products and traditional investments will offer the best retirement outcome in almost all retirement situations. It’s a travesty when an investment professional proclaims that “annuities are bad” or when an insurance agent claims that “the stock market is too risky.” These false, biased claims have no independently backed research, and ultimately harm retirees trying to find the proper retirement solutions.

Retirement Stress Testing

Significant portfolio losses or lower portfolio returns early in retirement can have a detrimental effect on the long-term outcome of a retirement. This phenomenon is known as negative sequence or return risk. For example, a retiree who retired in 2008 and experienced a 20%, 30% or even 40% portfolio loss in a traditional portfolio will be hard pressed to recover and portfolio failure is a real possibility regardless of the market returns moving forward.

Conversely, a retiree who was fortunate to retire in 2009 and experience one of the longest “bull markets in US history has an extremely high probability of enjoying a very prosperous retirement for the remainder of their life.  This is known as positive sequence of return.

Sequence risk, also called sequence of return risk is the risk of receiving lower or negative return early in a period when withdrawals are taken from individual’s underlying investments. The order of the sequence of the investments returns is a primary concern for retirees who are living off the income and capital of their investments. It’s not just the long-term average returns that impact your financial wealth, but the timing of those returns. When retirees begin withdrawing money from their investments, the returns during the first few years can have a major impact on their wealth.[12]

We have utilized a sequence of return stress test analysis to analyze a retiree’s personal retirement situation in many different market environments.

A previously discussed, a negative sequence of return market environment is one that experiences very negative returns in the first 10 years of retirement. This potentially is the worst-case scenario a retiree can retire into, and stress testing in this negative market environment will offer the ability to see how the retirement plan would fare in such a market environment. An example of a negative market environment would be retiring into the 2000–2002 market downturn that had experienced over a 50% total market loss during this timeframe. Another recent example would be retiring into the 2007–2008 market environment when the S&P 500 Index lost more than 40% of its value during this timeframe.  These dramatic losses would have a lifelong impact of the withdrawal rate that could be realized by a retiree.

On the opposite side of the equation is a Positive Sequence of Return market environment. In this market environment the retiree would enjoy a much higher than average rate of return on investments early in retirement. An example of a Positive Sequence of Return environment would be retiring into the latest bull market from 2009 to the present. The stock market, during this timeframe, has experienced one of the best market environments in our nation’s history with the S&P 500 exhibiting more than a 13% average rate of return with very little volatility until recently. These dramatic gains would have a very positive effect and offer a much higher probability of retirement success (not running out of money) than someone who retired in a negative market environment.

We cannot control the market environment we retire into, but we can mitigate sequence of return risk by employing buffer strategies, proper asset allocation and product allocation. Retirement stress testing can be conducted utilizing sophisticated technology to assess what strategies offer the highest SWR based upon a retiree’s specific variables, asset levels and income needs.

A retirement stress test will help a retiree understand what initial withdrawal rate can be taken from the portfolio without running out of money in each market environment. Balance is of the utmost importance when developing a retirement income portfolio. An ultra-aggressive all stock strategy may be best in a positive market environment but will offer no protection in a negative market environment. On the other end of the spectrum is the ultra-conservative portfolio that will protect in the negative market but offer no growth potential. It is this delicate balance between aggressive stocks for growth integrated with principle protected investments for portfolio risk reduction that offers the best outcome across all market environments (negative, average and positive sequence markets).

In Retirement Safe Withdrawal Rate (SWR) is the New Rate Of Return (ROR)

When approaching retirement or in retirement, Safe Withdrawal Rate (SWR) is more important than Rate of Return (ROR). We see many pre-retirees and retirees attempting to create the highest ROR in their portfolio by trying to get the last gasp out of the stock market with little or no concern on the risk they are exposed to. Approximately 5 years prior to retirement, it is important to shift this paradigm from creating the maximum ROR to creating the maximum SWR from the retirement portfolio. As we have discussed in this paper, market volatility is a portfolio killer in retirement when taking withdrawals. That’s why it is imperative to be concerned with how much income your portfolio can safely create in all market environments versus getting the maximum return at the expense of market risk.

Hybrid Income Portfolio (HIP) Strategy

The Hybrid Income Portfolio (HIP) strategy is a retirement portfolio solution that offers growth potential and volatility reduction for those nearing or recently retired. Following the research (as highlighted in this paper), our HIP integrates FIAs, Structured Investments, SPIAs and Globally diversified stocks in combination to offer the lowest potential risk, highest potential return and highest probability of retirement success.

HIP Strategy Highlights

  • Combined Traditional Stocks/Bonds, SIPs & FIAs to reduce risk & potentially increase returns
  • Utilize Alpha Generating strategies to add positive manager effect to a portfolio
  • Combination can increase Safe Withdrawal Rate by 1–2% over a traditional 6040 stock/bond strategy 

A Case Study

Introduction

To illustrate the impact the HIP Strategy can have on a retirement outcome, the following case study was completed. This case study utilizes the Retirement Stress Testing technology[13] used by Her Retirement to assess what is the best portfolio design to use in retirement for each client. This study will compare the outcome of using the HIP 402040 strategy versus the Traditional Asset Allocation (TRAA) 6040 strategy.

The combination of Global Stocks/bonds, FIAs and SIPs is different for each retiree based upon the variables, income needs and asset levels to create the most efficient retirement outcome. In this Case Study, the HIP 402040 retirement model incorporates 40% Global Stocks, 20% Structured Investment Products (SIPs) and 40% Fixed Indexed Annuities (FIAs).

TRAA 6040 Vs HIP 402040

Retirement Stress Test Variables

Current Ages

Mr. Smart – 60

Mrs. Smart – 61

Retirement Age

Mr. Smart – 65

Mrs. Smart – 65

Total Assets

Current Investable Assets: $1,950,194

Home Value: $357,902

Required Income Target

Net Income: $13,500/Monthly (net after tax)

Rate of Return Assumptions Utilized

Global Stocks @ 8.0% net

Bonds @ 2.0% net

Equity Index Annuities @ 4.5%

Structured Index Products (linked stock market indices) @ 8.0%

Inflation Assumption Utilized

Inflation @ 2% annually

Additional Expenses

Health Care $18,000/Annually per couple @ 3.6% inflation

Retirement Scenario Overview

Below you will find a summary of each retirement scenario. The Income Stability Ratio is the amount of retirement income that will not be affected by the stock market volatility.

Plan A: Current Scenario – TRAA 6040

  • Retirement Income Generated: $13,500 Monthly (net after tax)
  • Retirement Income inflated @ 2% annually
  • Current plan with traditional 60% stocks & 40% bonds
  • Social Security filing –– Both on own benefit at age 65
  • Rate of Return estimate = 5.50%

Plan B: Hybrid Income Portfolio (HIP) 402040

  • Retirement Income Generated: $13,500 Monthly (net after tax)
  • Retirement Income inflated @ 2% annually
  • HIP Plan with 40% Global Stocks, 20% Structured Investments & 40% FIAs
  • Social Security filing –– Both on own benefit at age 65
  • Rate of Return estimate = 6.50%

Optimized Retirement Income Grid

Optimized Income Level = The maximum net monthly income (inflation adjusted @ 2%) that can be generated by the scenario, leaving a minimal portfolio balance at the end of the projection (Mr. Retiree’s age 95)

 

 

 

 

Negative

Sequence

Average

Sequence

Positive

Sequence

Safe Withdrawal Rate
PLAN A

TRAA 6040

 

$9,450$10,800$14,8504.11%
PLAN B

HIP 402040

 

$12,825$15,525$20,9255.70%

 

 

Changing the Variables

The Safe Withdrawal Rate can be affected by changing variables, which is a very important fact to understand. For instance, in this case study Mr. & Mrs. Smart wanted to assume a 2% inflation adjustment instead of a 3% adjustment, as was utilized in the Morningstar and Bengen studies. This changes the entire dynamics of the SWR calculation offering a higher SWR with both scenarios. 

In conclusion, the safe withdrawal rate for the Traditional Asset Allocation Portfolio (TRAA 6040) is 4.11% versus 5.70% for the Hybrid Income Portfolio (HIP 402040).

Change in Product Allocation

A change in product allocation can have a dramatic impact on reducing portfolio risk and enhancing portfolio returns. It is important to optimize product selection to maximize returns for the risk assumed in the retirement income portfolio.

  • Traditional Asset Allocation 6040 Portfolio

In this scenario, the Traditional Asset Allocation 6040 (TRAA 6040) utilizes only traditional stock and bond investments. Traditional stocks and bonds on their own are not efficient for 100% of a retirement income portfolio. They expose a retiree to lower return potential and higher risk, which will reduce the SWR to 4.11%.

  • SWR: 11%
    • Assumed aggregate Rate of Return:50%
    • Assumed Risk (with a hypothetical 40% stock market loss): -28%
  • Hybrid Income Portfolio (HIP) 402040

The Hybrid Income Portfolio offers a change in product allocation to reduce portfolio risk and increase the rate of return potential. The HIP Strategy utilizes a combination of Traditional Investments (stocks & bonds), Structured Investments and Fixed Indexed Annuities (FIAs).

This reallocation to the HIP 402040 offers a more efficient portfolio with higher expected returns and lower risk or portfolio volatility than a traditional stock and bond portfolio.

 

  • SWR: 70%
    • Assumed aggregate Rate of Return:50%
    • Assumed Risk (with a hypothetical 40% stock market loss): -18%

Other Considerations to Raise Safe Withdrawal Rate

In addition to changing variables and product allocation there are additional strategies that should be incorporated to dramatically increase a retiree’s Safe Withdrawal Rate. We have identified four additional strategies that can be a major factor in raising a retirees Safe Withdrawal Rate. These additional items should be addressed and potentially included in your retirement plan to lead to a more efficient retirement outcome:

 

  • Social Security Timing: Utilizing the proper strategy to maximize this guaranteed income source
  • Tax Planning: Reducing taxes in retirement to increase the net after tax income annually
  • Prudent Use of Home Equity: Incorporating home equity as a tax-free income source or portfolio safety net
  • Alpha Portfolio Management: Utilizing active and passive portfolio management to potentially increase portfolio returns

Conclusion

Understanding your personal Safe Withdrawal Rate is paramount to creating an efficient retirement strategy that will last a lifetime. Utilizing a retirement stress test technology can help identify how much you can withdraw safely and identify how different strategies can affect your overall outcome in various market environments (negative, average or positive).

Efficiency in retirement and increasing your Safe Withdrawal Rate is accomplished through proper product allocation (not just stocks and bonds), tax planning, prudent use of home equity and creating a portfolio with alpha generating managers. This combination can have a dramatic impact on your portfolio survivability creating the maximum income with what you have.

How to Implement the HIP Strategy?

How can you implement this progressive, unconventional, research-based portfolio design? You can try to do it yourself (which is quite complex and requires a deep understanding of the many financial disciplines) or you can work with a qualified retirement advisor who understands how each discipline integrates together. It’s important to make sure that he/she is experienced not only with this type of portfolio strategy, but also in retirement planning and in the use of sophisticated retirement and investment planning technology. Few advisors have the knowledge in both insurance and investment disciplines to offer this truly objective retirement solution.

The Multi-Discipline Retirement Strategy (MDRS) is employed by an affiliated network of retirement specialists that are vetted and trained on the intricacies of this strategy. Our mission is to help you better prepare for and prosper in retirement.

Her Retirement affiliated advisors are available for complimentary income and portfolio assessments. You can read more about the importance of working with a Hybrid Retirement Advisor.

 

[1] David Little, “Retirement Risk Solutions,” The American College, accessed November 11, 2019, http://retirement.theamericancollege.edu/sites/retirement/files/Retirement_Risk_Solutions.pdf.

[2] “Longevity and Retirement,” Fidelity Viewpoints, March 16, 2018,  https://www.fidelity.com/viewpoints/retirement/longevity.

[3] “Why You Must Care About Volatility in Retirement,” Sure Dividend, October 14, 2014, https://seekingalpha.com/article/2560525-why-you-must-care-about-volatility-in-retirement?page=2).

[4] “Celine Sun and Andy Rachleff, “Stock Market Corrections: Not as Scary as You Think.” Industry Insights, accessed January 11, 2017, https://blog.wealthfront.com/stock-market-corrections-not-as-scary-as-you-think/.

[5] Wade Pfau, “4 Ways to Manage Sequence of Returns Risk in Retirement,” Retirement Researcher, accessed November 11, 2019, https://retirementresearcher.com/4-approaches-managing-sequence-returns-risk-retirement/.

[6] David Blanchett, Michael Finke, and Wade D. Pfau, “Low Bond Yields and Safe Portfolio Withdrawal Rates,” Morningstar Investment Management, January 21, 2013, https://news.morningstar.com/pdfs/blanchett_lowbondyield_1301291.pdf.

[7] Morningstar® Advisor WorkstationSM, Morningstar Analysis Snapshot Report, June 23, 2017.

[8] Wharton Financial Institutions Center, accessed October 5, 2009, https://fic.wharton.upenn.edu/search/#q=fixed%20index%20annuity&t=All

[9] Rethinking Retirement: The Tortoise and the Hare, Consistency Pays Off, Wealthvest, 04/16.

[10] Roger G. Ibbotson, PhD Chairman & Chief Investment Officer, Zebra Capital Management, LLC Professor Emeritus of Finance, Yale School of Management Email: ZebraEdge@Zebracapital.com, Fixed Indexed Annuities: Consider the Alternative, January 2018.

[11] Shift Away from Potential Risk and Toward Potential Return, Nationwide (Morningstar), June 2016.

[12] https://www.investopedia.com/terms/s/sequence-risk.asp

[13] Case Study Technology: RetireUp Classic Edition, https://www.retireup.com/classic.

Sources

Allianz Life Insurance Company of North America. “Does Your Portfolio Have Too Much Interest

Rate Risk?” September 2013.

Armstrong II, Frank. “The Retirement Killer: Volatility.” Forbes Magazine, December 6, 2013.

Blanchett, David, Michael Finke, and Wade D. Pfau, “Low Bond Yields and Safe Portfolio

Withdrawal Rates.” Morningstar Investment Management. January 21, 2013,

https://news.morningstar.com/pdfs/blanchett_lowbondyield_1301291.pdf.

Case Study Technology: RetireUp Classic Edition. https://www.retireup.com/classic.

Ibbotson, Roger G. “Fixed Indexed Annuities: Consider the Alternative.” Zebra Capital

Management, January 2018.

Kagen, Julia. “Sequence Risk.” Investopedia.

https://www.investopedia.com/terms/s/sequence-risk.asp.

“Longevity and Retirement.” Fidelity Viewpoints. March 16, 2018,

https://www.fidelity.com/viewpoints/retirement/longevity.

Little, David. “Retirement Risk Solutions.” Accessed November 11, 2019,

http://retirement.theamericancollege.edu/sites/retirement/files/Retirement_Risk_Solutions
.pdf
.

Morningstar® Advisor WorkstationSM Morningstar Analysis Snapshot Report, June 23, 2017.

“Must Bond Investors Fear Rising Interest Rates? Insights from 1958 to 1982.” Hedgewise,

December 3, 2014, https://seekingalpha.com/article/2728105-must-bond-investors-fear-
rising-interest-rates-insights-from-1958-to-1982.

VanderPal, Geoffrey, Jack Marrion, and David F. Babbel. “Real World Index Annuity Returns.” The

Journal of Financial Planning. Accessed November 11, 2019, https://www.onefpa.org/journal/Pages/RealWorld%20Index%20Annuity%20Returns.aspx.

Pfau, Wade. “4 Ways to Manage Sequence of Returns Risk in Retirement.” Retirement Researcher.

Accessed November 11, 2019, https://retirementresearcher.com/4-approaches-managing-
sequence-returns-
risk-retirement/.

“Shift Away from Potential Risk and Toward Potential Return.” Nationwide (Morningstar). June

2016.

Sun, Celine and Andy Rachleff. “Stock Market Corrections: Not as Scary as You Think.” Industry 

Insights. Accessed January 11, 2017, https://blog.wealthfront.com/stock-market-corrections-
not-as-scary-as-you-think/
.

“The Tortoise and the Hare, Consistency Pays Off.” Rethinking Retirement. Wealthvest, April 2016,

https://charteredadvisorygroup.com/_images/2017_TortoiseAndHare.pdf.

U.S. Department of the Treasury. Resource Center. https://www.treasury.gov/resource-

center/data-chart-center/interest-rates/Pages/TextView.aspx?data=longtermrate.

Wharton Financial Institutions Center. Accessed October 5, 2009,

https://fic.wharton.upenn.edu/search/#q=fixed%20index%20annuity&t=All.

“Why You Must Care About Volatility in Retirement.” Sure Dividend. Oct 14, 2014,

https://seekingalpha.com/article/2560525-why-you-must-care-about-volatility-in-
retirement?page=2
).

 

 

take the trip

Ep. 9: Take the Trip!

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Lynn:

Hey there, everyone. This is Lynn Toomey with the Walk the Talk podcast, and I am excited to be recording this week’s episode from Whitefish, Montana. So it was a last minute decision, but I had some great friends that were coming out to Yellowstone and to Whitefish for a two week trip and my significant other and I were invited. But we had a lot of conflicting things going on in our life, so we declined the trip. And then in the 11th hour, we decided life is short, take the trip. So here I am on a hot, hot day in Montana, recording this broadcast, and guess what? It’s all about making the trip, because I do believe that as much as we want to save and make sure that we are preparing for our retirement, I believe that before you retire, you need to make sure that you prioritize some fun, right?

Lynn:

You don’t want to have all work and no play. And you certainly don’t want to miss out on those special moments, those special vacations. So one of the things that I like to tell people is that in your pre-retirement life, you need to think about what are those non-negotiables in your life. And one of mine non-negotiables is certainly travel. I don’t go nuts with travel. It needs to be budget-friendly travel. I’ll talk about that in a few moments, and we’re not taking Greek island cruises or traveling around the world, certainly with COVID we’re not anyway. But I like to think of it as budget-friendly travel that allows us to get out from our everyday routines, make some time for friends, make some time to see the world because life is short and I believe that you should make the trip, eat the cake, and sometimes buy the shoes too.

Lynn:

So that’s what this week’s podcast is all about. Because here I am in this beautiful place that’s always been on my bucket list and my friends were coming. They had reserved the Airbnb, they had the cars reserved, and I sat in my living room at home in Massachusetts and said, what am I doing? Why are we not going? So we didn’t join them for the whole two weeks, because that was a little exorbitant in a year when I have twins that are going to college, but we did decide to join them for the second part of the trip. And we have spent the last few days in Glacier National Park. And I must say it is the most spectacular place I have seen in my lifetime. And I am so glad that over a week and a half ago, as I sat in my living room with my laptop on my desk, looking at Travelocity tickets, that I made the decision and I bought the ticket and here we are.

Lynn:

So I would encourage you all to make sure that you are making time for those special moments, making time that you spend, whether it’s a vacation an hour away from your home or across the country, whatever your budget allows you to do. This podcast is about making that time, making it a priority to make memories. So one of the things that we did that helped us in this decision is we sold a sports car and we refinanced our SUV. And I guess in doing that, I eliminated some servicing to some debt and I freed up some cash each month. So it made me feel a little more comfortable in spending some money to do this trip.

Lynn:

So to me, getting rid of that sports car, lowering our payment on our SUV, if that allows me to do a couple of things, one is save a little bit more for retirement, save a little bit more for a down payment on a house because we currently rent and three, give a little extra money to my girls who are going to college and four, allow us to enjoy some summer fun. Then to me, it was worth exchanging the sports car. And of course the big payment on the SUV didn’t make a lot of sense when we could refinance and significantly cut our payment. But I am so glad that we made that decision because at the end of the day, the car just kind of sat in the driveway. We drove it occasionally, certainly my significant other loved the car, but I think he’s going to love the other things that it will afford us even more. And now when I get back from vacation, I’m on a mission to see what else I can cut from the budget, because I think there’s always fat that you can trim, especially prior to retirement.

Lynn:

And if you take a look at what you are spending on a monthly basis, write down everything, track everything, I’m sure you’re going to be able to trim some fat and allow yourself to use those monies in other ways that are important to you. So I wanted this podcast to happen because I am dedicated to recording every week. So even though I’m on vacation, I wanted to make it a point to record, make a recording and put it out there for everyone. But one of the highlights of our trip was today where we rented e-bikes and we rode up to the top of what’s called Logan Pass. And it was one of the most invigorating, exciting, physically challenging things that I’ve done. And I think that if I had seen pictures on my friend’s Facebook pages of this bike trip and this entire week trip here in Whitefish, Montana, I would have regretted the decision not to come.

Lynn:

So I can’t even say enough about Montana. It’s been on my bucket list. And I knew that my friends probably wouldn’t be coming back here anytime soon. And this was my window of opportunity to check something off of my bucket list. So I would highly encourage you to do what you can to make sure you check things off your bucket list. One of the friends that are with us on this trip, her husband passed away about a month and a half ago, suddenly 58 years old. And he was supposed to be on this trip. So tonight we are taking a gondola up to the top of big mountain and she’s going to spread his ashes. And it just makes you realize that life is very short and you need to appreciate every moment, make those memories. And in a lot of cases, although we need some material things in our life, I think memories are more important than material objects.

Lynn:

So with that, I am going to go because we need to get ready to take that gondola ride to spread Brian’s ashes and to remember him and to cherish the memory he left with everyone. Although we wish he was here on the trip, he is here in spirit. So like to remind you to make the trip, eat the cake, by the shoes if they’re on the sale rack. I’m famous for buying shoes on sale racks so I had to throw that in there. But anyway, I look forward to next week’s episode and I appreciate you listening in and I hope this inspires you to make some time to make those special memories and to look for the fat in your budget where you can trim out some things you really don’t need so that you can afford to have those moments, have those memories, create those memories with your friends and family. So thank you for listening and I will speak to you next week. Have a great day.

 

Ep. 8 Create a Retirement Income Plan

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This week Lynn covers some steps to go over in creating a retirement income plan. Join her as she dives deep into each step of the process. At the end of the podcast, she shares exactly what she thinks you need to do next to create and implement a retirement income plan.

Lynn Toomey: Hello, everyone. Welcome to this week’s episode of the Walk the Talk podcast, I’m your host Lynn Toomey. And this week, I am going to be talking about creating a retirement income plan, and I have some steps that I’m going to go over, that I’m going to dive into each step in the process. And at the end of the podcast, I will tell you exactly what I think you need to do next so that you actually create and implement a retirement income plan. So let’s get started.

First off, I have a retirement readiness software platform. It is called Retirement Solved. And one of the very cool things about the software is it has something called an assessment module. And in that assessment module, you can go in and enter all your financial inventory. You go through a number of exercises, a number of questions. The software walks you through. You fill in all of your information, all of your inventory, and then it will give you a single view into everything you’ve got. So you’ll be able to look at your net worth, your cash flow, your income, your expenses, income and expenses currently, income and expenses as projected in the future. And it will identify any gaps, risks, and opportunities that you have based on how you answer those inventory questions and those exercises you go through. So it’s a very powerful retirement income planning tool. It doesn’t tell you how to fill the gaps, but it’s going to identify those gaps so that when you do this, either working with your existing advisor or you work with an advisor in our network, or you decide to do this on your own, it’s going to form the basis. It’s going to give you that data and that view into what you’ve got and what you potentially are missing and it can form the basis of your retirement income plan.

So I like to tell people get started with the software or at the very least, get a spreadsheet. Put all this down, write it down so that you see everything you’ve got and potential gaps, but the software does this for you and I offer a free trial to the software so you can check that out at retirementsolved.io, so www.retirementsolved.io, and you can start a free trial and to your inventory, see what you’ve got, see some potential gaps, and then continue on with the retirement income planning that I’m going to talk about next.

Step two in retirement income planning and retirement planning in general, I want you to get serious about your physical and mental health, because one of the major costs in retirement, and one of the major things that you may need to spend your retirement income on is your health. So rather than spending more than you need to on your healthcare, get healthy, or if you’re already healthy, stay healthy. So get serious about your physical and mental health.

Number three, there’s some preretirement optimization tasks that I’m going to give you. We’re going to talk about those in a second. Number four, I want you to consider your goals and your lifestyle desires. One of the cool things that I didn’t mention in the software is there is an Envision module, which when you have a paid subscription to the software, you can go in and actually go through a number of different exercises that helps you determine what are your goals and your priorities from a lifestyle perspective in retirement. So what do you need that retirement income to fund? And by going through those “Envision exercises”, you’ll be able to come up with some answers.

And I encourage you, if you have a partner or husband that you should do this together, because you definitely want to try to be on the same page as to what your priorities, your objectives and your goals are as you enter into retirement. And that’s what that module in the software is designed to do, very, very important as part of your retirement income plan is to determine those goals and those lifestyle desires. What do you want your income to allow you to do in retirement basically? Next is you must understand and address all the risks of retirement. And I have talked about this in another podcast. I’m going to talk about it again in the future, but there are a number of risks that you must identify and you must address. You’re not going to be able to eliminate most risks, but you can mitigate them to the greatest extent possible.

And again, not to beat a dead horse, but in the software, there’s a whole section on the identification of those risks and how you can overcome them. It’s part of the report that the software provides, which is a GROW report. GROW stands for gaps, risks and opportunities for wealth building. And that is a 40 to 50 page report that will identify those risks that you’re most likely to encounter in your retirement and how you can overcome them. Really powerful stuff.

Next, you want to create as part of your overall plan, an income distribution plan, and the income distribution plan identifies your sources of income and expenses. It addresses any gaps. It will help you refine your retirement portfolio to balance growth and guarantees because many people require that portfolio, which is generally a portfolio from their retirement savings, like a 401(k), but you’ll need that portfolio to become a retirement paycheck for you in retirement, and in order for it to last as long as possible, you need to balance the growth of that profession, so you want your savings and investments to continue to grow in retirement, but at the same time, you need to protect your portfolio from things like market volatility.

So you may need some de-risking of that portfolio, so there’s not so much at risk to the markets. And some people may want some guarantees pulled out of their portfolio, so you may want to create some guaranteed income streams in the form of an annuity. Next, you will want to make sure you understand your fees and your portfolio costs. That is also a critical part of your plan, making sure you know what you’re paying in fees and what your portfolio is costing you. And finally, as part of your income distribution plan, you’ll want to make sure you have tax efficient withdrawal strategy defined, understood, and that you’re committed to it. And by tax efficient, we mean that when you start withdrawing monies for that “retirement paycheck”, you’re doing it in a very efficient tax, a tax efficient manner.

So why pay Uncle Sam more than you have to? There is some very interesting strategic tax efficient tactics that you can deploy so that you pay as little taxes as possible. And this is something that a tax aware retirement advisor is worth his or her weight in gold, because they are going to save you so much in taxes if you are withdrawing from your portfolio efficiently. And then after you’ve created your income distribution plan, you want an income protection plan. So it’s great to optimize your distributions, be tax efficient, have your portfolio allocated properly, but there’s things that can happen to your portfolio, such as a long-term care incident not properly covering for healthcare costs. There are things you can do to protect your income distribution plan, including estate planning.

And then finally in the steps outlined as part of the income planning process is getting reliable guidance or if you’re going to DIY this whole thing, making sure that you get the proper education so that you are equipped to do it yourself. Those are the steps.

Now we’re going to dig into each one of them in a little more time detail for you. But first, I want you to think about how you’re going to live your life now. So retirement income planning, one aspect of it is you’re figuring out what doing for your current self and how are you going to take care of your future self? Well, current self is just as important as future self. And so you don’t want to sacrifice so much of current self and current life enjoyment that you don’t really live. So I believe in a balanced approach. I believe that you should enjoy life. Now you should decide what those priorities are and that’s why the software helps you identify what is your cash flow now? What are your expenses? What are your income sources? How much are you saving for retirement? Is it enough? Can you save more and still live the comfortable retirement that you want now? And what are some things you should be doing now in order to better prepare for future self?

But I like to say, don’t forget to enjoy life now because the future isn’t promised, but today is today and today is the day that you should definitely live and not sacrifice too much. So now I want to talk about preretirement optimization. First in preretirement optimization, you are doing whatever you can to better prepare yourself for retirement. So number one, you want to reduce debt as much as possible, such as credit card debt, number one. Number two, a lot of people choose to double down on their mortgage balances and really try to get their mortgage paid off prior to retirement. There’s some different schools of thought about that, but one of the benefits of having your mortgage paid down so that you have at least 60% equity in your mortgage is that you can at 62, potentially take out a reverse mortgage, which is a strategy in retirement income planning. It provides you a retirement income buffer for emergencies to pay for long-term care and other things.

So there are some benefits for sure for paying down your mortgage balances. There’s some other experts that believe it’s certainly okay to take a mortgage into retirement, but again, the right answer for you, the answer to that is it depends. And it depends on some sophisticated analysis by a retirement advisor.

All right, number two, maximize your contributions to tax deferred plans. Especially if you have company match, you want to make sure you’re maxing that out. The current contribution limits are $19,000 a year with a $6,000 catch-up if you’re over age 50, and for a simple IRA, it’s $13,000 max contribution annually with a $3,000 catch up if you’re 50 and older.

Number three preretirement optimization tactic is tax diversification. So you want to take a look at diversifying to traditional and Roth options, and that is highly dependent again on your situation, but something you do need to talk to someone about or consider if you’re a DIY-er, what is your tax diversification strategy prior to retirement, and is there a way to get more money into Roth or do Roth conversions? So important to check that out.

And then fourth is consider portfolio reallocation, consider the correlation of asset classes in your portfolio. Think about ways that you could start to minimize risk, consider bringing down the allocation of global stocks in your portfolio, those types of things. So definitely consider some portfolio reallocation, and depending on how far away you are from retirement, there’s some different schools of thought on how to do that now.

I’m going to go into four more in the optimization category. The fifth would be to increase your cash flow by reducing your expenses or increasing your income, starting a side hustle, a side gig, part-time job, in addition to your full-time position. And I like to encourage people to use a longevity calculator. We give people access to it in our membership program at Her Retirement, where you can go in and try to scientifically determine your longevity. And we also have another calculator that determines scientifically how predisposed you are to needing long-term care support in retirement. So both of those software programs are available to people that are in the Her Retirement membership program.

You’ll definitely also want to check your 401k allocations. Back in the day when I was in corporate America, I actually just guessed on my allocations. And in hindsight, I wish I had talked to somebody, an investment advisor who really knew what he or she was talking about and could have helped me really optimize my 401k allocations, because it’s your money, it’s your investments, and there are ways to maximize it. And finally, like I said, the number one step of building your income plan is to take an inventory, really identify what you have. Do you have some 401ks that you’ve left behind at previous employers? Do you really know what your current expenses are? Have you determined your number, the retirement number? How much do you need in retirement? And when can you retire? So by taking an inventory, using the software like I suggest, you’ll be able to answer a lot of those questions or at least get on a path to answering those questions.

And once you have those answers, once you have the data, once you have the analysis and the gap analysis, you’re going to feel so much better. Trust me. Okay, so we talked about envisioning your retirement. So I want you to think about what you want for retirement as part of this step in the process. It’s so easy to just go into retirement and not have done this “homework”. It’s very important. You’re going to have 2,000 hours of time in retirement. You need to think about how you want to spend that time. You don’t want to waste any time and by thinking about it in planning and having at least a plan A and then a plan B for how you want to spend your time in retirement, you’re going to really enjoy that time of your life. That’s what it’s all about.

So think about what your retirement looks like. What does it feel like, and how committed are you to making this a reality? And like I said, in the Retirement Solved readiness platform, there is an Envision module that takes you through a number of exercises, no brainer. You just go in and answer the questions. It really gets you thinking, and then it summarizes everything for you, and you’ll have a much clearer idea of what it is you want for your retirement.

A lot of people want financial independence. They want freedom to travel, pursue hobbies. They want to be able to live what they want, maybe have a vacation home, maybe move to their vacation home and sell their current home that they’re living in. Maybe they want an opportunity to provide financially for their children or their grandchildren. Like I said, it’s so important to take the time to determine what you and your spouse want in retirement. Sometimes I like to call it my why. So what is going to be my purpose? What are my hobbies that I’ve always wanted to pursue? Those types of things.

So next step, okay, is determining what amount of money is going to be enough for you. You must have a retirement income plan, no getting around that. And you must have a retirement income projection analysis. The number one financial concern of people of working age at 64% is do I or will I have enough saved for retirement? Yet more than 80% of Baby Boomers haven’t calculated how much they need for retirement. So again, the software is going to help you calculate how much you’re going to need for your retirement. Questions like, do I have enough? Am I saving enough? Many people haven’t determined what they have, what they’ll need, and if they have a gap or how to fill a gap. And that’s where some of what I call multidiscipline retirement strategies, these are retirement optimized strategies that a lot of people don’t know anything about, they come into play. And I’m going to talk about those in next week’s podcast.

So let’s talk about the steps of the retirement income planning process. Number one, you want to calculate your expenses. Number two, you want to calculate your guaranteed income sources, and guaranteed income sources are primarily social security, which makes up about 33% of a retiree’s overall income sources, and pensions, which a very small number of people have pensions these days. So what we find is that most people do have a gap between their projected retirement expenses and their projected retirement income sources. And so they have to figure out how they’re going to fill that gap. So you’ll want to have your plan be able to create an efficient and sustainable retirement paycheck. That’s what it’s all about. We don’t want to run out of money in retirement and be forced to live with our kids. So that’s the whole idea of doing this planning process and doing the projections and using the software.

So creating your retirement budget, so that’s step one. And creating your retirement budget, it’s basically just an estimate of your future expenses. It serves as a roadmap for your savings and your strategies, but nearly 60% of Americans don’t use a budget. So sometimes I like to refer to it as a spending plan because to me, spending plan sounds much less restrictive than a budget. So in the Retirement Solved readiness platform, we have a smarter spending tracking tool. And it allows you to identify all your different expenses by category, and it allows you to identify your income sources. And one of the key components of the spending plan is that there are categories for retirement savings and investments. So you’re going to treat your savings and investments as just another expense prior to retirement. And some people continue to save for retirement after they retire. But anyway, creating that spending plan or budget or whatever you need to call it to trick your mind into doing it is what I want you to do.

Particularly important for projecting for retirement, you might not be doing it in your current preretirement life, but looking forward to retirement, I want you to at least get a general sense for what your retirement expenses might be, because so many people have no idea what they will be. So some of the general guidelines, if you didn’t want to get into like a detailed spending plan, but general guidelines say that you need 60% to 90% of your preretirement income for expenses. So if you’re making $100,000, you need 60,000 to 90,000 in retirement to cover expenses, but you’ll want to think about what expenses might change. Your mortgage may decrease. Healthcare costs may increase. Certainly, caring for children will decrease, if you’re not providing for adult children. You’ll also want to include costs for special retirement pursuits, like travel and hobbies. And again, the smarter spending tracking tool and the Retirement Solved software really helps you define the spending categories and put a number next to these categories. So again, you have that number. You have a really good, a good estimate, if you will, of those retirement expenses.

So you want to cover, account for everything, your fixed expenses, mortgage, credit card payments, utilities, food, your discretionary expenses, the fun expenses I like to call them, like dining out, shopping, travel, and you’ll add these together. And that will be the nut. That will be the nut that you need to plan around and you need then to determine, “Okay, here’s my expenses. What do I need to generate in income in retirement to cover this?” And there are some guidelines for how retirees are spending their money typically in retirement. Housing tends to top the list, followed by food and transportation, which transportation actually is higher probably than some would expect, and then entertainment and then healthcare, clothing, and then typically other.

So I talked about some guaranteed income sources as we move on to determining what our guaranteed income sources are going to be, social security being one, a defined benefit pension income being another. So certainly you can go to the socialsecurity.gov website and identify what your projected social security benefit will be. And of course, if you have a pension, you can research that and find out what your pension will be. But there are some ways to create a guaranteed income source. One is through an annuity. And two, like I mentioned, is through a reverse mortgage or HECM. So before you jump to creating those guaranteed income sources though, you’ll want to understand what potential gap you have. And then potentially, you could purchase an annuity or you could do a reverse mortgage as two ways to close that potential income gap. But there’s some other things you need to consider before jumping to those two solutions.

So what does a complete retirement income plan look like? Well, number one, it’s more than a 401k or an investment strategy. It will protect you, your family and heirs from personal challenges and risks. It will make what you have more efficient and sustainable. It also tries to help you avoid running out of money in retirement. It will ensure to protect you from market downturns, and it should position you to take advantage of market growth and it should allow you to keep more of what you have, i.e. through the tax efficiency strategies we talked about, and I also believe that you should always, always, always have a plan B. So you’ll have your plan A income plan, and you always have your plan B. I believe in plan B for everything in life, because life does tend to throw you those curve balls.

So what are some questions your retirement income plan should answer? One is when you plan to retire, how you want to spend your retirement, how you will support your desired lifestyle. It will define how long your money will last. It will define how you will meet the gap between income and expenses. And it will help you determine if leaving money to heirs is an important outcome for you.

So now I want to talk about options if you do in fact have a gap between your income and your expenses. So there’s a lot of different options, right? There’s working. So some people choose to continue to work into retirement, either full-time or part-time. A lot of people will leave their full-time career and they end up consulting and sometimes even making more money consulting. There are inheritances, although that’s not a guaranteed source. We caution people to count on an inheritance, but certainly an inheritance.

Another way that people close the gap is through rental income. So those are just a few of the ways that people fill the gap. So I hope that this gave you a basic overview of retirement income planning. And again, I do strongly believe in the combination of a tool such as the retirement readiness platform and expertise of a retirement coach like we have at Her Retirement and or retirement advisors who are licensed and registered to provide investment advice. So a coach can coach you through personal finance topics, but they are not licensed to give you investment advice. So when it comes time to allocate your portfolio, they would not be able to do that. They would turn you over to an investment advisor, but certainly outside of investment advice, a coach can take you through this process and keep you accountable, keep you on track, make sure you actually do it right, because so many of us get caught up in our lives. We’re busy and we have every intention of doing this, of figuring this out, but we don’t actually do it. So coach can hold your feet to the fire and make sure you actually do it.

So my next podcast is going to be all about how to create that retirement paycheck from your portfolio, because if you have a gap and let’s say, you think you’re going to work, but you don’t end up working, you think you’re going to get an inheritance, but you don’t get an inheritance, one of the major ways that people fund their gap between their expenses and their guaranteed income sources is their 401k or their retirement savings, whatever type of retirement savings you have, IRAs, Roth, so on and so forth. And what you need to do is you need to take those monies. And let’s say, you’re going to leave your employer. You’re going to retire. You need to figure out how to roll that money over, all that retirement savings investments that you have and create that retirement paycheck.

And you want to create that retirement paycheck that’s going to be efficient and sustainable throughout your life. And there are some very important things that you can do in that process to make what you do have saved and invested as efficient and sustainable as possible. And that’s going to be the subject of my next podcast, but retirement income readiness, I say comes down to this statement, very, very important. And this is going to be a good segue into next week’s podcast so I hope you tune into next week’s, but neither a stock market correction nor rising interest rates will have a noticeable impact on either the amount of income produced by my portfolio or my ability to keep that income growing.

So that is the key. At the end of the day, you want to make sure that if you’re using your retirement savings to create that income, and that is the main part of your retirement income plan is that it is not going to be impacted by the market. Very, very important concept. And next week, we’re going to talk about the concept that most advisors concentrate on managing investments. There’s 300,000 in the industry. Most of them have helped people with their investment portfolio, growing their portfolio. Many of them do not know how to properly plan for retirement so they’re not as well versed in the distribution phase of life as they are in the accumulation phase of life. Most advisors don’t incorporate all the intricate retirement strategies that must be utilized to dramatically increase the probability of a retiree’s success. And I’m super excited to talk to you next week about these strategies and these advisors that are providing these strategies at Her Retirement.

And in this Walk the Talk podcast, I’m all about educating you, making you more aware, helping you get information so that you can make more informed decisions, and so that you can have more informed conversations, but back to step one, make sure you start your retirement income plan by identifying your inventory, identifying what you have, what you’ll need and what your potential gaps are. And then you can move on to working on filling that gap and making sure you are prepared to live as joyful and peaceful retirement doing what you want to do, because you’ve defined your goals and your priorities upfront, and you can live the retirement you’ve imagined. So we are all about knowing more and having more. We believe education is the way to do that. And as I like to say, I believe that everyone should commit to getting her done. So I hope you’ve enjoyed this podcast. I’ve hope I’ve given you some insights into retirement income planning, and certainly giving you some ways to access the retirement readiness software tool that I’ve just launched. And if you have any questions, don’t hesitate to reach out to me at lynnt@herretirement.com. And thank you for listening and we’ll talk to you next week. Have a good day.

Ep. 5: How to Find the Right Advisor

Check out more episodes here!

“The research is unequivocal that a competent financial guide can both help you achieve the returns necessary to arrive at your financial destination while simultaneously improving the quality of your journey.”

-Behavioral Alpha: The True Power of Financial Advice, Daniel Crosby, Ph.D., Nocturne Capital, 2016

 

 

Finding the Right Advisor in a Sea of 300,000

There are more than 300,000 “financial advisors and planners” in the U.S. 80% of them are men and their average age is 60. The title financial planner or financial advisor is used to describe anyone from an insurance agent to a stockbroker to an investment advisor to a Certified Financial Planner (CFP). And there is no shortage of certifications and acronyms on advisor business cards. No wonder people are confused when trying to decipher who they should get financial or retirement advice from.

Many investors assume that any professional who refers to himself or herself as a “financial planner” has received some kind of certification. Unfortunately, there’s no rule governing who can go by the title of financial planner. Anyone can set up shop using that title, whether or not they know anything about finance or have any experience. You’re better off sticking with financial planners who have an actual certification by a governing agency, be it state or federal.

 

Financial advisors used to be hired predominantly by people with upwards of several hundred thousand dollars. No matter if you have $1 million of $1,000 to invest, you still have many options. That’s changed over the last decade as the financial landscape has changed. Among other changes are the self-funding of retirement plans vs. pensions. People are also living longer and the financial decisions that accompany are long life are more complicated. The financial industry and products are also much more complex with many more offerings. Not to mention the complexities around retirement, which are myriad.

 

Here’s a quick overview of the types of advisors and planners and their certifications:

Registered Investment Advisor (RIA): A person or firm who advises individuals on investments and manages their portfolios. RIAs have a fiduciary duty to their clients, which means they have a fundamental obligation to provide investment advice that always acts in their clients’ best interests. As the first word of their title indicates, RIAs are required to register either with the Securities and Exchange Commission (SEC) or state securities administrators.

Registered investment advisors seek to offer more holistic financial plans and investing services. They offer very different fee schedules and are typically fee-based by assets under management.

 

Registered Representatives: Work for a brokerage company and are well versed in investment products including stocks, bonds, and mutual funds. Registered representatives are required to have passed their Series 6 and/or Series 7 exams. They must register with the Financial Industry Regulatory Authority (FINRA) and are governed by suitability standards (which means they ensure an investment is suitable given an investor’s investment profile. Registered representatives, also known as stockbrokers work on commission. Since reps are regulated by FINRA, you can check an advisor’s background on FINRA’s Central Registration Depository at www.finra.org.

 

Many financial advisors or planners attain other certifications (some of which are listed below). So, for example, you may meet with someone who is both an RIA and a CFP or an RIA and an insurance agent.

Certified financial planner (CFP): The CFP certification is offered by the CFP Board and is generally considered the gold-standard certification for financial planners. CFPs are always fiduciaries, meaning they are legally required to put their clients’ interests ahead of their own at all times.

Chartered financial analyst (CFA): The CFA designation is granted only by the CFA Institute. To gain this certification, advisors must meet significant education and work experience requirements and pass a series of three exams. CFAs have expertise in investment analysis and portfolio management.

 

Chartered financial consultant (ChFC): A chartered financial consultant (ChFC) studies college-level insurance, estate planning, retirement funding, investments and others subjects in financial planning.

Retirement Income Certifications: There are three major retirement income planning certifications that many financial advisors choose to attain to demonstrate their expertise in retirement planning. These include: Retirement Income Certified Professional (RICP), Retirement Management Analyst (RMA), and Certified Retirement Counselor (CRC). While these don’t guarantee your retirement advisor will have a full command of retirement planning, they do indicate a level of education beyond the certifications above.  What’s more important than certifications, however, is the process and planning that a retirement advisor offers you. See page 4 for details on finding the right retirement advisor.

 

 

In-Person Advisors vs. Online/Virtual Advisors vs. Robo Advisors

Independent of certifications, you’ll find advice in a few different service delivery models. While most of the advisors today offer their services face-to-face or in-person, serving their local community, there is a new breed of online or virtual advisors as well as what is referred to as “robo” advisors.

In-person advisors typically meet with clients once a year to help plan and organize personal and small business finances. They serve individuals, couples, families and small businesses. Many traditional in-person advisors focus on investing and investment advice.

The whole world is going online…why not financial advice?

An online or virtual advisor is not limited to working with people within his/her local community. They work with your through video chat, phone, email and texting. The benefit of an online advisor is that you can meet with them from the convenience of your couch and you’re not limited to the local advisor talent pool. You may find online advisor’s fees are less than “local to you” advisors. They typically offer the same full set of services as a local advisor.

Robo (as in “robot”)-advisors are a relatively new option for those who want low-cost investing help, want to invest for the long term and don’t need help with other financial decisions. Robo advisors are technology focused companies serving clients online primarily relying on investment software. The investments are either low or no-minimum amounts, are 100% online and offer little to no human interaction. They aim to charge even less than virtual advisors, typically 0.25% to 0.35% of your assets under management each year.  The typical process to open an investment account involves you logging on to the company’s site and filling in a questionnaire on your investment tolerances. You then receive suggestions based robo’s algorithms.

Other advisors you may have on your team:
Insurance agents: Insurance agents are licensed to sell life insurance and annuity products, within their state. They are typically paid by commission based on the products they sell. Insurance agents are monitored by state insurance commissioners. in comparison to investment advisers, the standards are significantly lower. There are consumer protection standards in place which protect you from deceptive practices and misrepresentation of product. However, there is no requirement for agents to act in their client’s best interest. And remember, that some insurance agents call themselves financial planners leading some consumers to be misled on the full capabilities of the agents. Some financial advisers/planners are also insurance licensed, which we feel is a benefit to you when working with someone on your retirement plan since he/she will be able to offer a potentially balanced view between the two.

Certified public accountant (CPA): While certified public accountants (CPAs) are most often associated with taxes, they can also act as trusted financial advisers.

 

Personal financial specialist (PFS): Offered by the American Institute of Certified Public Accountants (AICPA), the PFS designation is an “add-on” certification for CPAs. It’s intended for CPAs who want to branch out into financial planning and requires that the CPA in question have at least two years of personal financial planning experience, either in business or teaching.

Estate Planning Attorney: There is more to estate planning advice than the preparation of a last will and testament. Attorneys help you prepare for the possibility of mental or physical incapacitation and the need for long-term care. They can also advise clients on ways to ensure that their life’s savings and assets are safe from beneficiaries and creditors after your death.

 

 

Trading a Turkey for Some Beef…Finding Real Retirement Advisors

 

I’m sure this fella would agree…it might be time to trade a turkey for some beef.

There’s a whole flock of so-called financial advisors out there professing to provide “retirement advice.”  After all, it’s a giant market of 78 million baby boomers just waiting to be gobbled up. Why not take a shot at gathering more assets and just call yourself a retirement advisor?  The problem with this, for you the person preparing for retirement, is myriad. Thankfully, Her Retirement is here to ruffle some feathers and help you trade a turkey for some beef.

While there are many good advisors out there, some of these thinly veiled, self-proclaimed “retirement” advisors are little more than data gatherers who meet with you a couple times: first, inputting your data into a planning software program and letting it do its thing, and then second, giving you the software’s lengthy printout of numbers and projections in a nice leather folder, without the full array of retirement services you truly need. The cost of this glorified retirement plan can be pretty steep as well. The average advisor, according to Michael Kitces is charging 1.65% on a portfolio of $500,000!1

There’s not a lot of difference between these traditional advisors and the new flock of robo-advisors…which are online software companies doing similar data gathering and investing over the Internet.  While robo-advisors are undercutting the traditional advisor fees for data output, they truly must be on cloud nine to think that the average baby boomer just needs a cheap investment strategy for a retirement plan.

What we’ve found after working with baby boomers over the last 30 years, and more recently with a focus on helping our clients plan their retirement, is that people need more than an investment strategy. Retiring right requires an advisor to be knowledgeable on a myriad of strategies.

The challenge remains, in an industry run amok with myths and misinformation, extreme biases and so many choices when it comes to advice…how do you know who to trust and who to partner with?

We suggest you stay away from the fox in the henhouse and rely on an education company such as Her Retirement. Our mission is to offer unbiased, research-backed guidance while connecting you to the people, content and resources that can help you create and implement a financial and retirement plan you not only understand, but have 100% confidence in.

At Her Retirement we believe knowledge is power so in order to find reliable advice, we believe you must first you must educate yourself. Find a source or sources who consistently deliver objective information. We follow a myriad or retirement academics who are truly objective in their recommendations. Next, make sure to seek out the mathematical proof…every sound retirement strategy has research and data that proves it out. Demand this proof. Do not accept hearsay or conjecture. We call this Retirement based on Research.

Next, be really picky about choosing who you work with for advice. Ask how much time he/she is going to commit to doing your planning… working collaboratively to plan your retirement, not just behind the scenes running software programs in his/her comfy office. Retirement planning is hard work and requires a BIG time commitment on both parties to be done right. Demand this time. Don’t settle for less.

Next, ask tough questions to be sure he/she isn’t a thinly veiled “retirement” advisor. You wouldn’t hire just anyone to take care of your kids or to work in your company…the same time and care should be taken to find the right retirement planning advocate. Aside from asking about his/her background and experience, and getting to know their firm, these are the questions a retirement advisor must answer for you:

  • What’s their approach to retirement planning and their process? Is it well defined and disciplined?
  • Do they educate you in the planning process? How?
  • Do they follow the retirement researchers? Can they name them and quote some of their research?
  • Do they help organize you financially and help clarify your retirement objectives and timeline?
  • How much time do they commit to working collaboratively you?
  • Are they knowledgeable beyond growing a portfolio? What do they know about distribution planning in retirement?
  • Are they licensed to offer annuities and do they educate you on how they work to offer guarantees and protect your portfolio from loss? Or, are they simply an investment advisor who doesn’t understand the importance of de-risking a retirement portfolio?
  • Do they understand how wills and trusts work, and work with you to develop a proper plan to protect your assets from a potential healthcare event?
  • What other value added services do they offer you? Are they comprehensive in nature?
  • Do you like them as a person? Do they challenge you? Are they personable, passionate and excited about your retirement? Can you trust them to act in your best interests…always?

Does Your Retirement Advisor Offer These Services?

If you really want to find out what their stuffing is made of, ask if him/her if they offer these services, critical to a potentially better retirement outcome. In fact, bring this list to him/her and review and understand the responses.

  • Market Volatility Stress Testing (MVST) – a stress test of your current retirement against many different market environments utilizing sophisticated technology. If necessary, proper adjustments should be discussed to increase the probability of a better retirement outcome.

 

  • Tax Efficiency Assessment – a tax efficient income distribution strategy to reduce taxes and ultimately increase the probability of portfolio survival. Will he/she advise you on how much you should convert annually to Roth? Does he/she have technology to assess the proper amount annually to get the best outcome? Will he/she meet with you annually in retirement to develop a tax optimized withdrawal?

 

  • Social Security Timing Strategy – assessment of multiple Social Security filing strategies to determine the most efficient strategy to maximize this benefit. Does he/she understand how timing can significantly impact your total benefit amount? Has he/she included Social Security in a complete retirement income projection analysis? Has he/she analyzed the impact of taxes on your Social Security?

 

  • Portfolio Analysis and Management – a high quality, low-cost, optimized portfolio that combines the growth potential of stocks with guarantees provided by Fixed Index Annuities (FIAs). Can he/she show you how to integrate stocks, bonds, FIAs, and guaranteed income annuities to get the best retirement outcome possible based upon many different market conditions? What is his/her thoughts on using annuities in retirement to reduce risk? What academic research has he/she done to support the opinion? Has he/she done a portfolio review to show the impact of this retirement optimized portfolio vs. a traditional 60/40 portfolio? Has he/she conducted a complete review of your portfolio vs. the appropriate benchmarks?

 

  • Home Equity – a reverse mortgage or HECM loan has been academically proven to improve a retirement outcome. It’s been called the Swiss Army Knife of retirement planning since it can be used a number of different ways in retirement. Has he/she discussed how to use the equity in your home through a reverse mortgage to increase the effectiveness of your retirement plan? Can he/she properly assess the value of using a HECM reserve account vs. a tenure offer to get the best possible outcome?

 

  • Risk Management – a life insurance and long-term care needs analysis to assess and then minimize potential risks. The right advisor should be licensed to advise you on both investments and insurance. Has he/she discussed the cost of long-term care and incorporated this cost into your retirement income projection? Many people are over-insured when it comes to life insurance, has he/she considered the appropriate amount (if any) of life insurance that you need?

 

  • Medicare Planning – a Medicare assessment to help you analyze your options to select and file the best plan. Is your advisor able to help you navigate the Medicare maze to make the right decisions at the right time, and to make sure you’re protected against unexpected costs such as prescriptions?

 

  • Estate Planning – a plan for your estate is critical. Estate planning is more than a will and is also integrated with long term care planning. Do you have a will? Do you have a trust? Has your advisor met with you and your estate planning attorney to make sure everything is properly planned and integrated?

 

Helpful Questions to Ask an Advisor About Their Fees

Fee Transparency Worksheet

 

Finally, get FULL DISCLOSURE of “all” fees you’ll pay your advisor and find out if he/she offers a hybrid fee model, which is designed around your needs, not his sales goals. Understanding the services and fees will help you gauge the value they bring to your planning process and your retirement outcome. Note: if you’re paying more than .9%-1.5% (depending on your amount of assets) in an assets under management fee structure and not getting all the services above, you’re paying too much.

The number one question to ask an advisor: What are the “total” fees to work with you? (it’s critical to receive full disclosure from anyone that is going to provide you financial advice and products).  Use this form to uncover your TOTAL fees, and have your advisor sign it.

 

  • What is your custodial fee? $ ________________ OR  ______________%

 

  • What are your trading costs? $ ________________ OR  ______________%

 

  • What is the advisory fee? (this is the fee that does to the registered investment advisor to manage your portfolio) $ ________________ OR  ______________%

 

  • What are the internal mutual fund, ETF, money manager fees? $ ________________ OR  ______________%

 

  • Are there any other fees such as statement fees, technology fees, etc? $ ______________ OR  ______________%

 

  • What do your fees include for additional services; i.e. Retirement Planning (make sure you get specifics)?________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

 

Advisor Signature  X _________________________________________________

 

 

 

 

 

WalkAndTalk-800sq

Ep. 4: Retirement Commitments You Need to Make

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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.

 

Ep. 3: Retirement planning challenges for women

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Hello, everyone. This is Lynn Toomey with the Her Retirement Walk the Talk podcast. I hope everyone’s having a fabulous day. I’m out walking, even though it’s cloudy and it’s been raining, it’s actually a really, really fabulous time to be outside. The birds are chirping, but it’s really still, and it’s just enough freshness in the air to fill your lungs and clear your head.

I was feeling a little stuck and isolated in the house and needed to get out and get a breath of fresh air. And I decided what the heck, why not get on a recording here and talk and walk and fill you guys in on some important concepts around planning for retirement. And specifically, when we are preparing for retirement, we as women have some extra challenges. Some people refer to them as retirement risks and others, I’ve heard the term, what if scenarios.

In either case you need to understand what these challenges are. You need to properly prepare for these challenges in your retirement plan. You need to really thoroughly understand how they may impact you so that you can mitigate them as best as possible. We’re not going to eliminate them, but we can prepare for them and try to mitigate their impact on our retirement outcome as much as possible.

So if nothing else, I want you to understand that there are some key risks. Now I once saw an article with hell, here’s your 127 risks in retirement. And literally, it was everything from stubbing your toe and not being able to go to your part-time job. I’m being a little facetious, but it literally listed 127 risks. And yeah, if you really want to get crazy and look at every possible scenario, they could probably quickly add up.

But for the purposes of what I talk about and coach and teach around is some of the maybe six to eight top risks that we really want you to focus on. And they are more likely to impact the average person’s retirement. So that’s why we like to focus on those. And also, you got to start somewhere and you can’t really try to plan around a 127 and feel confident, and that’s just way too overwhelming.

So we’re going to simplify it down to … What do I got here? Got about seven, I think, that I want to talk about. So let’s jump in and I hope that as you are listening to this, you’re going to get up and move. As I’ve said in my previous podcasts, this is my chance to get out and walk and talk and share with you all some thoughts and ideas.

And you’ll just have to put up with a little bit of background noise. The beautiful bird singing is actually a really nice background sound and then a little breathlessness for me as I walk and talk. So let’s jump into this. We’re going to talk about life expectancy, the earnings gap between men and women, career breaks, the retirement savings gap, the greater likelihood of women living alone, the tendency to invest too conservatively, and healthcare costs.

So let’s start by talking about life expectancy. And actually, while we’re talking about it, one of the ways that you can live longer is to get up and move, move your body, exercise. My father actually just came home from Florida and he’s a little down in the dumps because here in New England, late April, the weather’s not what it was in Florida. And he’s just been sitting in his chair for about a week.

And I keep saying to him, you got to get up and move. You got to keep … A body in motion tends to stay in motion. So just a side note on longevity, is get up and move. Don’t stop moving. But we women do tend to live longer than men, which creates more years in retirement in which there’s a pro and con to longevity, right? The pro is yes, if we’re healthy and wealthy, it’s a beautiful thing. But if we’re either not healthy or not wealthy or not happy, it’s not such a beautiful thing. So there’s that double-edged sword. But because we do live longer, we will need to generate more income for those years that we outlive men and have that longer life span.

70% of those ages 85 plus, according to the US Census Bureau, are women. And according to the Social Security Administration, the average man turning 65 today can expect to live to age 84.3. And the average woman turning 65 today can expect to live to age 86.6. So that’s an additional 27 months in retirement that a woman must plan for. And if you’re coupled up … Let’s say a couple, they’re both 65 years of age. There’s a 50% chance that one of those spouses will live to 92 in all likelihood it’s probably the woman. And 25% chance that one of those will live to age 97.

So when I am coaching people and teaching people, I say to them, when you work with that retirement planner or advisor or subject matter experts, make sure that you’re running your retirement income projections out to age 100, because there is a very strong likelihood that you could live to a ripe old age, and therefore you would need money to fund your life.

We do have access to a longevity calculator, which sounds kind of morbid, but it’s actually kind of interesting. It is science-based and you complete a questionnaire and then it gives you an assessment of your longevity. And I will be putting this podcast in a blog post, and I will share a link to that longevity calculator, if you’d like to give it a try and see where you come out on that longevity analysis.

But anyway, longevity is an important factor. One of the other things that you could consider, which I’ve heard a lot of people do, is they look at their parents. So my mom is 86, my father’s 84. They’ve got their health issues, but they’re both relatively good. They’re doing well. My significant other’s parents are 91 and 85. And again, they’re doing well.

So when we look at our longevity profile, we say okay, we tend to have some longevity. And my grandmother lived to a ripe old age. So we tend to look at that. Some people will say oh, both sides of my parents’ families. They they dropped dead at 75 years old. I’m not going to project out to age 100, but that’s a personal decision on doing that projection. But at Her Retirement, we err on the side of being more conservative and therefore we project out to age 100.

So next thing I want to talk about is one of the challenges women face is the earnings gap. So women who work full-time earn on average about 82% of what men earn. So this impacts savings, our Social Security retirement benefits and pensions for those who are lucky enough to have a pension. We have increased vulnerability to unexpected economic obstacles, such as job loss, divorce, single parenthood, illness, loss of a spouse, and that obviously impacts our income.

Next, women take more career breaks. I know I did. I actually retired from corporate America to raise my children. Conscious decision, but it impacted my retirement savings. And it was a trade-off, conscious decision that I made. But during that time I was raising twins. I wasn’t contributing to my retirement savings.

So now they’re 18, they’re going off to college and I’m catching up. Or as I say, I just flipped. I flipped my model. I took the time off when I was younger and now I’m going to work as I get older. But thankfully, knock on wood, I’m healthy, I’m energetic. And there’s no one right model. It’s just the flip of the normal model, I guess, is what I’ve embraced. But whatever you do, you do you.

But because of that, we do tend to take more career breaks. And when that happens, whether it’s for caring for your newborn or your parents, you have lost income, lost employer benefits, matching 401Ks, that kind of thing. You might potentially have lower Social Security retirement benefits. And then in the event of a divorce or spouse’s job loss, there’s going to be an impact. And then when you return to the workforce, you may have difficulty getting a comparable position.

So men, who typically don’t take those types of career breaks, they’re slow and steady wins the race, right? They’re just cranking along, they’re climbing that ladder, their income’s going up. Meanwhile, we may be in and out of the workforce and you don’t step back in typically where you left off. So reentering the workforce can be a challenge. And then a lot of us have flexible schedules, part-time schedules, and certainly compared to our male counterparts, that will impact our retirement savings.

So one of the interesting statistics is that according to a Vanguard study, men have 50% higher balances in their retirement plans than women, even though women are 11% more likely to participate in a retirement plan than men. So the message here is that women are more likely to save, we just don’t save as much. And I think women are more conservative, we’re more savers.

Whereas men probably think, Oh, I earn a good living. I’m going to be fine. We’re going to be fine. You know, we don’t have to save as often. They just are earning more consistently and therefore their balances tend to be higher. Next thing I want to talk about is the likelihood of women living alone. Women are more likely, for sure, than men to live alone. We see that for women age 75 plus, only 32% live with a spouse.

And now this could be by choice. This could be by widowhood. I don’t have, for the purposes of this podcast, the details behind that 32%, but I actually tend to call it, when I write about this kind of stuff or talk about it, is concept of suddenly single. And you can become suddenly single in a lot of different ways.

But clearly, women in retirement, a lot of them are living alone and trying to deal with all of those challenges on their own. So when you couple up, sometimes you can split the costs in half and when you’re single, you’re not sharing costs. And therefore, your costs can be higher. So that living alone concept and challenge is very real and very prominent in today’s America.

Next thing I want to talk about is heightened risk aversion. Women do tend to be more risk averse and more conservative. A BlackRock study of 4,000 investors found that women on average hold more conservative investments than male investors. A conservative approach can sometimes be a good thing, because as you approach retirement you certainly want to move your assets into lower risk portfolio.

You want to definitely be more conservative. You want to guard against a very real impact or risk, called volatility. And by being more conservative, you’re going to protect yourself from the risk of market volatility. So just from a basic perspective, volatility is just when the market moves up and down in, in wide swings sometimes, and that volatility can significantly impact your retirement savings.

Okay, so getting back on track here with the heightened risk aversion. I said that being conservative could be a good thing, but also being too conservative could prevent the type of growth that’s really needed for the amount of retirement income desired. So I always say that life is an interesting balance and an important balance.

So it’s very important to have that protection and that being conservative so that you’re not putting your portfolio at too much risk, but it’s also important to make sure that your portfolio has growth. You want to make sure that the growth component of your portfolio is still in place. Your portfolio is still growing because you want to address the impacts of inflation.

So inflation at 2 or 3%, really impacts your purchasing power and will impact the amount of money you have in retirement. So you need a growth component that has greater returns than 3% because otherwise you’re going to be losing money. So your stock part of your portfolio is really that growth part. So on the flip side of being conservative is making sure that you have that growth component and you don’t have too much risk aversion.

The next thing, and I think it’s the last thing I wanted to talk about. Something else might pop to mind, but the impact of healthcare costs in retirement. So I know that healthcare, Medicare long-term care, those types of things are a huge concern to women, because we know that potentially we are going to be alone, without a spouse or a partner. In some cases, people that don’t have children, they are very concerned because they will truly feel alone when it comes time for needing that care and that care costs money.

So making sure that you account and plan and prepare for healthcare costs is … I can’t even understate it enough. And most people underestimate the amount of healthcare and the amount of costs that they’re going to need to cover in retirement. So for example, the average couple will need about $250,000 in out of pocket, will need that amount of money for out of pocket healthcare costs in retirement.

So it’s really important to try to put that money aside or at least plan for it in your expense projections. One of the ways a lot of people aren’t aware of for saving for this is through a health savings account or an HSA. If you have one available through work, it is a tremendous vehicle. I just did a blog post on this that you can go check out on the Her Retirement website, but you can save your money.

It’s triple tax advantaged, so it’s tax-free. You put in money, pre-tax into it, you can withdraw the money tax-free it does not affect your RMDs, it does not affect provisional income for the purposes of Social Security. It’s probably one of the best investments out there for saving for healthcare expenses, so definitely check that out. Because you are going to have healthcare expenses in retirement and potentially those costs could decimate your portfolio if you’re not prepared.

As far as long-term care, 57% of women over the age of 65 will need long-term care. And the average monthly cost across the United States … This car go by, here we go. The average cost of nursing home across the United States is almost $7,000. And that’s monthly. So again, making sure that you understand your options, making sure you understand Medicare, making sure you have a plan for long-term care.

There’s ways to fund long-term care. You can do that through an insurance policy. You can do that through a reverse mortgage on your home, since your home is a dead asset. There’s some fabulous ways to fund a long-term care incident if you happen to be one of those people that need long-term care. So I want to wrap up this podcast to say in summary, unlike our male counterparts, we women do face some formidable challenges when it comes to our financial lives and planning for retirement.

We live longer, we make less, we invest less, we take career breaks. We’re primary decision makers for purchases, but less confident in our financial decisions. Also, over the next 10 years, women … This is going to be a huge wealth transfer and a great many women who are my age or older are going to be inheriting money and knowing what to do with that money and how to protect it, preserve it and grow it is going to be critical.

And that’s actually one of the main reasons I’ve put together my company and this podcast, Her Retirement, and Walk the Talk, so that I can help as many women protect, preserve, and grow their money. As my mother used to say, you don’t want to be a bag lady in retirement. And I want to prevent people from being bag ladies.

I want you to get educated and knowledgeable, and I hope that you really dig into these risks and challenges and talk to your advisor, talk to your subject matter experts. Whoever it is that’s giving you that financial advice, make sure they’re addressing these risks for you. Ask them the tough questions, and then make sure you understand them yourselves.

The good news. The good news with all of this is, we are planners and we’re doers. We research and we seek knowledge. We’re intuitive and determined. And guess what, ladies, we’re not afraid to ask for directions. So get out there, ask for directions, ask for help, ask for clarification, demand the answers that you are looking for. Don’t accept any advice without clear answers without 100% understanding.

Whoever you work with should take the time to explain any idea, topic, advice to your satisfaction, so that you walk away and you don’t have any questions. You’re confident you understand the data, you understand the research, you understand the expectations and you basically can have that peace of mind. You know more, you have more and you’re ready to rock your retirement.

So thank you for listening to this version of the Walk the Talk podcast. I appreciate you walking along with me today. And as you can tell, I entered some flats. So I was less out of breath. Those Hills can be challenging to walk and talk, but again, thanks for tuning in and till next time, let’s go get her done. Have a great day.