Episode 42

Episode 42: Is Retiring at 65 Possible (and Smart)?

Are you thinking about retiring at age Sixty-five? Is it possible? Is it even smart? Life expectancy continues to increase, which can often mean a longer retirement and may mean collecting Social Security longer. Sixty-five has long been thought of as the magic age for retirement. Join Lynn this week as she explores how this is changing, why it may be harder than previously thought and some tips to help you make the retirement decision.

Listen to more episodes here!

Read the transcription of this episode here!

Ep. 2: Facebook Advisors, Advisor Fees, and the College Financing Conundrum

Check out more episodes here! 

Hello, everyone. This is Lynn Toomey with the Walk and Talk for Health and Wealth podcast. I hope everyone is having a great day. I actually woke up this morning with a fabulous idea, and it involves the name of this podcast. So, I decided to do a little tweak to the name, and instead of Walk and Talk for Health and Wealth, it’s going to be Walk the Talk for Health and Wealth. And the reason being is because I believe 100% that any coach or advisor or anyone in a professional service capacity should basically walk their talk. They give you advice, they should be practicing it. So, you practice what you preach. So I really, really love the idea of walk the talk. So, you’re going to see on future podcasts that that’s the name we’re going to roll with, and I’m really excited about it. So, like I’ve told you in the first podcast, this is a different format. This is me, getting outside, getting fresh air, walking and talking, and telling you about different topics, as it relates to retirement planning, life planning, you name it, we’re going to talk about it.

So, I’m going to try not to stay too out of breath as I talk to you. I might take some stops along the way, sit down, catch my breath and continue on. So, I have a few things I want to talk to you about today with that really loud bird in the background. The first is the concept of what I call the Facebook Advisor. So, I’m in a few different Facebook groups, and I have noticed that they’re around financial planning or retirement planning, and there’s a lot of people in the groups that are asking very specific questions, very specific advice about their personal financial situation. And well, I kind of get it and I love the fact that women especially are in these groups and talking about their financial situation and looking for information.

The one thing that makes me a little concerned is that they’re asking very specific advice from fellow group members. And I just want people to be really careful with the advice that they get, in fact, more importantly, with what action they take on that advice. So, I really don’t think you should make a serious decision about your personal financial situation based on a Facebook financial advisor. And for all intents and purposes, they might not even be true advisors. They might just be everyday laypeople who have a particular interest in the topic of financial issues or retirement issues, but that doesn’t make them qualified to give you advice. In fact, it’s actually illegal to give financial advice if you’re not a registered financial advisor. So, I guess my point is to take whatever information and “advice” that you get in a Facebook group with a grain of salt. Make sure that it’s just information.

You’re looking for some opinions, you’re getting some information, then you need to go out, and if you don’t feel comfortable researching it and making your own decision, talk with that registered advisor. Seek out those subject matter experts who have spent years doing this stuff, and they are licensed, they’re educated, they are qualified and legally, they are able to give you financial advice. So, my first rant for this podcast was to just be careful with getting advice from the so-called Facebook financial advisor.

My other rant for today is that I’ve seen in some of these Facebook groups, mostly from people that consider themselves DIY financial folks, investors, they really have issue with financial professionals and subject matter experts in the financial space basically collecting a fee for their services. Well, I guess my issue is that financial professionals provide a service. They provide value in theory, they provide value, right? Otherwise, if they’re not providing value, you shouldn’t continue to work for them. But the idea is that they are providing a service, and just like any other professional service provider, you’re going to pay them. So, I often find it very interesting that these people, sometimes even get a little angry about financial advisors wanting to get paid for their advice. So, you can certainly just move along. I don’t know why it bothers people that these people get paid for providing advice.

Now, I understand that there are some not very nice people in every industry that take advantage of customers and clients. And of course, those unsavory characters are the ones that you should avoid, but to basically put every financial advisor in one bucket and say that they shouldn’t be getting a fee or getting a commission on products and solutions and services they’re providing to you, just kind of rubs me the wrong way, because like everyone else, they’re there to make a living. And they’ve gone to school. They’ve gotten educated, they’ve gotten licensed and registered. So, I don’t really see any reason why they shouldn’t be expected to earn a living also.

Now, you often hear, “Oh, I got sold a bill of goods.” Again, in any industry, but in particular, in the financial services industry, “I got sold a bill of goods.” Well, the only time you’re going to get sold anything is if you allow it to happen. There’s no being sold to, or having the wool pulled over your eyes if you’re educated. What you should do rather than being sold to, or have someone sell you something is you should make a buying decision. So, no one’s going to be able to sell you anything if you are making the buying decision, an educated buying decision. So, when any salesperson wants to sell you something, whether it’s a car, whether it’s accounting services, whether it’s marketing services, make a buying decision, get educated, understand what they’re offering and whether it makes sense for you. And that way, you will never be sold anything in your life. You will make educated buying decisions.

I think what happens is when the unsavory characters in these different industries meet with what I call lazy consumers, who really don’t want to take the time to get educated and to make educated decisions, when those two clash, that’s what happens, right? Bad things can happen. So, my message for you is make smart buying decisions, and don’t ever get sold to again.

So, my next concept is what I call fees are an issue. So, fees are an issue in the absence of value. So, kind of going back to that example where people have issues with paying for financial services, paying a professional provider a fee. Well, if you’re not getting value, right? Fee is an issue. So, make sure before you write the check, before you sign the contract, the dotted line, make sure you understand the value they’re going to bring you. In the case of a financial advisor, let’s say he or she is managing your assets, and they’re collecting an assets under management fee for managing your portfolio. And that fee is 1%. So, if you have $500,000, they’re charging you 1% fee, understand what they’re going to do for that $5,000, right? And make sure you’re comfortable with what they’re going to give you. A financial advisor who’s worth his or her fee is the one that is going to be giving you, not only the value and services, but also the one that is going to give you a return above what you’re spending for their advice.

So, in other words, if you’re spending 1% for an advisor, they should be bringing you above that 1% in return, right? So, if they’re managing your investments, you want to make sure your return covers that cost. And therefore, you’re not paying extra to get that advice. So, when you compare to doing it yourself, you say, “Well, I could do this myself, save myself the 1%.” But if that advisor is able to get you 2% or 3% more than you could get on your own, then they are providing value. And there shouldn’t be an issue with paying him or her that fee, right? I’d rather pay that fee, that 1% and get a 3% return than trying to do it on my own. But it also comes down to a whole nother set of issues and topics is whether you want to spend the time doing that, right?

So, basic analogy is, “I’d rather pay someone to clean my house because for me to spend time cleaning my house is not worth it. I’d rather pay someone to do that. I’m not sure I’m going to change the oil in my car, I’d rather pay someone to do that. I’d rather pay someone to manage my investments as long as they are covering the fee in the return that I’m going to get.” So, that’s my other kind of rant for today.

Let’s see. Has I take a breath in? Oh, my goodness. This day is just absolutely beautiful. I hope you’re listening to this podcast while you’re out moving, or at least on your bike, stationary bike, somehow exercising, because it’s all about listening and moving. That’s the whole point of my podcast. But the last thing I wanted to talk about today was what I call the college financing conundrum. And for many people, it is a conundrum and this is actually very close to home right now because I have twins that are 18 years old and they are getting ready to go to college in the fall. And they’re getting ready to make those final decisions on where they’re going to go to school.

In fact, one of them has decided, one is about to decide, but the core issue is how are we going to pay for this college education? And the conundrum we face as parents is when there’s a shortfall between what the school’s offering and maybe some financial aid, some loans, federal loans, there’s going to be a gap in a lot of cases. How is that gap funded? Well, I’m here to tell you that I’m facing the gap with two, lucky me and I’m going to try to walk the talk here. So, first things first is don’t jump to funding that gap. Sit back, take a look at what the options are to fund that gap. Number one, as you consider what you can do as a parent. Number one, make sure before you sign on any dotted lines, before you take on any debt, loans and monthly payments, number one, make sure that you’ve got your personal situation covered from a financial perspective. Make sure you have your emergency fund completely funded, six to 12 months of income.

Number two, make sure you’re not way over your head in credit card debt and just trying to stay above water to make those payments and those high costs of that revolving debt. Number three, make sure that you’re consistently contributing to your retirement savings fund, okay? Whatever solution that might be for you, whatever products or ways you’re saving for retirement. I’ll cover that topic on another podcast. But make sure that you are consistently doing that. Those are your three priorities in addition to making sure you’re consistent with your retirement savings is making sure you’re saving enough, right?

So, there’s some ways that you can make sure that you are on track to have the amount you need on that date you decide to stop working and rely on your savings for that retirement paycheck. So really, really important to make sure that you have those bases covered before you even think about taking on debt or coming up with money for your college-bound student. As I like to say, it’s all about college-bound, but being financially sound. And you really, really need to be selfish in this respect. You need to make sure that financially, you are as secure as you can be right now, and you are able to take on that additional debt or that initial withdrawal from your savings to help little Johnny or Susie or in my case, little Katie.

I think a lot of parents, the conundrum is they want their child to have that dream education, to get that dream career. And often they’re willing to dip into their retirement savings and pull that money out, or they’re willing to forego funding their retirement for four or five years, while their child is in college. Well, I’m here to say that you need to say no to signing up for that. Say no, out of love and not yes, out of fear. I actually just… Again, to walk the talk, I just created a big spreadsheet for both kids, put down what all their tuition and room and board costs and spending costs, added it all up, subtracted out all the financial aid, subtracted out the loans that they can take in their own names and said, “Okay, here’s what’s left. How does that get funded?” And we had a three-way conversation and talked about how that money is going to be funded. What can be done?

And so we had a really good brainstorming session. And then we ran some calculators, found some student loan repayment calculators online, and took a look and said, “Okay, for one of you, you’re going to pay $350 a month when you graduate. And for the one that wants to go to the expensive out-of-state school, after four years, you might be looking at a thousand dollars a month payment.” They need to understand the debt and the investment in the debt that they’re signing up for. They need to understand what that number is when they graduate, and how it can impact their future life. For the one that’s going in-state, she was like, “Whoa, if I’m only got $5,000 federal loan, and I’m not going to start paying that till I graduate, any money I make while I’m in school, I could put into investments or a Roth.” And I was like, “100%.” While her sister was like, “Yeah, I’m going to be using all my money to fund my shortfall.” But at least, you’ve had the conversation with your child, and you are helping them make, again, an educated decision.

It’s all about getting educated and trying as best as you can to help an 18-year-old, who is technically an adult, but help an inexperienced 18-year-old make some very adult decisions. And so, be steadfast, make sure you understand what’s going to make you feel comfortable, what’s going to make you happy. But again, I really, really want you to take pause and think about setting those guardrails, if you will, on what you are personally comfortable doing for your child, and make sure they understand what it is… What kind of skin you’re willing to put in the game? You’ve brought these children into this world, make them understand, “This is what I’m willing to do, but I’m also not willing to sacrifice my future, my retirement,” because we don’t want to face down the road that as an adult, you’re going to have to help me fund my retirement because I didn’t make the right decisions now.

And I think that they will respect you at the end of the day for those decisions and the time you spend helping them make the right decisions for the family, for you and for them. So, I hope I’m walking the talk here, I’m going through a lot of the same things many other people are doing. I’m certainly willing to provide some coaching to anyone who’s going through this. These decisions are pretty imminent here as we approach May 1st for a lot of acceptance deadlines. And one thing that I will say is I did hire a college consulting company to help with our FAFSA, help us navigate this whole financial aid situation. They have been awesome if anyone would like a recommendation for next year, because they do help you in subsequent college years, not just the freshman year, or if you have younger children, grandchildren, whose parents are just completely lost with all of this college financing stuff, they’ve been an incredible resource. They have a great software program that helps you analyze schools and costs. And that’s been very, very key to us in our journey to, and hopefully through college.

So, I guess that’s it for today’s podcast. It’s going to be a little shorter than normal, but I hope you got some valuable information out of our chat today, and I appreciate you listening. Here’s to health, wealth, happiness, here’s to knowing more and having more. And like I like to say at her retirement is we are all about getting her done. So, I’m off to add a few more numbers to this college financing spreadsheet and to making some final decisions here so we can all take a break from talking about college and money, and then just enjoy this very special time of proms and graduations. Luckily COVID is allowing all that to happen this spring. And again, thanks for listening in, and I’ll be talking to you on the next Walk the Talk podcast. I’m Lynn Toomey. Thanks for joining me today.