Transcript
Speaker: I've met people with millions of dollars who are terrified to retire and others with far less who retire confidently. So what is the difference and how much money do you truly need to retire?
Speaker: Welcome to the Future of Finance podcast, where we break down investment strategies to help you live a better financial future. I'm your host, Marissa Wood, financial advisor and one of the owners of Union Financial Services. And today I'm sitting down with my business partner, Lisa.
Speaker: to react to some popular clips and uncover what it actually takes to retire comfortably. It's always a question that we get asked, how much do I need?
Speaker: So let's dig into that a little bit. Yeah, that does seem to be everyone's burning question. How much money do I need to retire with? And can I retire? Will I be OK?
Speaker: And as you said, retirement is not an age, it is a number. It's a number, right? If you don't if you don't achieve that number just because you're 60 and you thought you were going to retire at 60,
Speaker: Sometimes it doesn't work out. So you have to work a few more years till you achieve that number. Absolutely. And so there's been a lot of talk about the percentage of your retirement assets that you can withdraw every year in order to never run out of money.
Speaker: And so let's watch a clip from someone that our audience might recognize. His name is Ramit Sethi, and he actually hosts a Netflix show. He's an author, financial expert, internet personality. and He's going to be speaking about the 4% rule, which some of you might have heard of in the past, some of you might not have.
Speaker: That has been around for quite a ah while, the 4% rule. And sometimes it doesn't take into consideration sequence of returns. Sometimes it doesn't take into consideration inflation.
Speaker: But you have to start somewhere. So let's hear what Ramit has to say about that 4% rule. How much do you really want to retire with and how much do you need?
Speaker: According to a recent study, the average American believes they need $1.46 million dollars in the bank to retire comfortably. How do we get the real numbers? We need to talk about something called 4% rule.
Speaker: The 4% rule means you should be able to safely withdraw and live off of 4% of your savings each year for a period of 30 years when you retire. First, find out how much you spend every year, including rent or a mortgage, utilities, groceries, gas, etc. But I'll use $73,000 just to make it simple. divided need million to retire comfortably. Well, those numbers are a bit staggering. $1.8 million. That's scare some people. Yeah. You know, the magic number years ago used to be a million, just because it was that nice, big, round number. Well, a million dollars isn't what it used to be. 1.8?
Speaker: one point eight Wow. that's That's a lot. It's discouraging, honestly, because, okay, I can't retire unless I have $1.8 million. dollars That means i'm going to work till I die? Well, no, i don't think so. and No, and and he was pretty close, though, with that $73,000 a year. You know, when you talk to a lot of people and we we work out a budget or we try to work out a budget and we try to add up what their needs are, what their bills are, and that number...
Speaker: You know, is is kind of close to what we see a lot of. Most people underestimate what they spend every year and they underestimate what they're going to need in retirement. So I don't mind that that 73,000.
Speaker: The 1.8 is a bit, like you said, staggering. So what can we do with that? Yeah, the first step is really finding out what the expenses are that we have to cover in retirement.
Speaker: I think you hit the nail on the head that people underestimate what their expenses are going to be. They're saying, oh, you know, I might spend $70,000 now, but I'll spend way less in retirement when it's probably the opposite. Especially the beginning years. Mm-hmm.
Speaker: we We have a ah nice little saying, the beginning years of retirement are the go-go years. Every day is Saturday. The next phase of retirement is the slow-go years, where you've done a lot of things on the bucket list, but you still want to have some fun, but you slow down a little bit.
Speaker: The final phase is the no-go. Yeah. And it's just the way it is. Your body kind of says, OK, we're going to just sit and watch TV. We're going to hang out. We're going to see the family. We're going to we're just going to have a no go type of retirement. And that's, of course, at the end.
Speaker: But it still doesn't mean your expenses are going to go down in the no go years because. At that point, you might not be traveling as much or going out to eat as much, but your health care expenses and your care expenses are probably going to make up for that travel that you're not doing. That's right. And people don't anticipate, don't plan for the health care.
Speaker: Yeah. And so thinking about that 4% rule, I think it has been an industry standard for a reason. i think it still is a decent plan.
Speaker: If you have that level of assets where 4% of them is going to easily cover your expenses, then sure, that's that's a great plan. you can You can stay in the market and and take a little bit more risk because you have a lot more money to work off of. But it's not foolproof.
Speaker: No. When we think about sequence of returns, it's it's not an end-all, be-all guarantee that you'll never run out of money. What is that guarantee? using some type of lifetime income annuity or vehicle that provides lifetime income. And what's interesting is with annuities, for example, that have lifetime income features or riders on them, they will often guarantee you 7% 8%, maybe even
Speaker: payout rate of your account for as long as you live. Okay. So now you just doubled that 4% to 8% guaranteed lifetime, not 30 years, lifetime. lifetime So if that person lives 40 years in retirement, that's guaranteed. So now what does that do with that original number of the 1.8?
Speaker: Well, I mean, it cuts it in half. So instead of needing $1.8 million dollars to get that $73,000 a year in income to pay your expenses, now you can get that $73,000 having invested. that's So exciting to me. Yeah, less than a million yeah now for the same a year for life not for ah a definite 30 years of of retirement, maybe. you know This is a lifetime guarantee.
Speaker: And that's that's a nice word. yeah you know we have We as a society are living longer. So longevity has to be brought into the conversation.
Speaker: And it shouldn't be a stressful thing to bring longevity into it. It should be an exciting possibility. You know, so the only way that you can truly guarantee living longer with the right amount of money is with lifetime income.
Speaker: Absolutely. And so There are solutions to paying those expenses forever with less than a million dollars. And I mean, say if someone's expenses are 50,000, now we're looking at way less than that 900,000. And so there is hope There is. There's plenty of hope with the right investment vehicles. And that retirement can be in your early 60s. And you can live to be 100, because a lot of people are. Let's just face it.
Speaker: Science is making it so. I just read in Time Magazine, they said ah the there was a baby, say born in the beginning of 2026, who could live to be years old.
Speaker: That's our life expectancy wild for some of us that are just, you know some of these babies that are recently born. So we can't plan on 30 years in retirement. We need to extend that to accommodate.
Speaker: our longevity. And we win we want that life to be, you know, a dignified, confident life. We don't want it to be a worrisome life.
Speaker: and Especially for married couples, there's a good chance that one of them is going to live past 90. Yes. It's just statistics. And what we don't want to do with married couples is have one of them spend down all their savings, you know whether it's with a healthcare event or something like that.
Speaker: Each person needs to have at least one guaranteed income investment. You know you have your social security, that is guaranteed income.
Speaker: I have my Social Security. Whether you have it, I'm not quite sure. yeah so So we need to supplement and we need to understand pensions are kind of a thing of the past.
Speaker: So let's let's put that investment in place that's going to sustain our lives for as long as we live, our lifestyle for as long as we need it to.
Speaker: Why do you think people don't expect to live long? I mean, it's where we laugh about it, but we meet with hundreds of clients a year and a good bit of them, we sit down and we have this longevity conversation and what do they say?
Speaker: I'm not going to live that long. yeah I'm not going to live that long. And it's like, well, how do you know that? You know, unless you have some sort of ailment. But most of these people are perfectly fine. You know, and we say, well, how long did your parents live? Well,
Speaker: In their 80s, maybe one of them reached 90. Well, okay, so you have longevity in your family. why do you always say Why do people say, I'm not going to live that long? It's some sort of a defense mechanism where they're like, yeah, I can retire with this amount of money because I'm going to die in 10 years.
Speaker: Well, that's not our goals to plan on that. We don't want to do that. No. And we want to prepare much better than I'm going to die young. That's not. Yeah. Because then what if you don't? Right.
Speaker: You're going to be alive and broke. I mean, like, what what is the plan there? Yeah. It's um it's but it's a it's a funny it's a funny mindset that that a lot of people have. hmm. I have friends that say it. and And every year they say it. Oh, I'm not going to live that long. And they keep living. I'm not going to live. And here they are living. Yes. Yes. So let's prepare for longevity. Yeah. let's Let's assume that we're going to be the lucky ones and we are going to live long. And we can live with confidence that our income will sustain us. Yeah. Now, someone who is a huge proponent of guaranteed income, and he's a financial expert and author that we personally love always watching his clips and his videos. He's got super educational information out there, and he's not a financial advisor, so he really has nothing to gain except spreading information. um And that is Tom Hegna. Yeah, we've had the opportunity to see him in person numerous times. He's brilliant. he's I could listen to him all day. He always has great information. And let's share some of that. Yeah. So let's watch a quick clip from Tom Hagna and see what he has to say about income and retirement.
Speaker: Stocks cannot guarantee income for life. Bonds cannot guarantee lifetime income. CDs cannot do it. Bitcoin can't do it. Real estate can't do it. Managed money can't do it. Now, look, some of those are great products. I'm not bashing stocks. I'm not bashing bonds. i'm not even bashing crypto. Some of them are wonderful for growing money.
Speaker: But growing money and guaranteeing a paycheck for life are two completely different jobs. And your clients need both. So when a prospect says, my money's in the market and I'm doing fine, your answer is, well, that's great for growth. But growth and guaranteed lifetime income are not the same thing.
Speaker: he He is a big proponent of guaranteed income. And I'm a big proponent of guaranteed income. I have multiple, I have probably at least three or four annuities that will guarantee me income in the future, guarantee me income with healthcare features because that's something that I think is super important and that's something that we have in our toolbox. you know we have annuities that will guarantee your lifetime income and then will double if health care is needed. That's an amazing gift that we can share with our clients. Yeah, that's quite the tool. I mean, speaking of a toolbox, it's funny that Tom Hagna said that's great for growth if you have stocks, but that's a completely different goal than having guaranteed income. Getting up that mountain, accumulating, putting money away, growing, saving, that's a different
Speaker: vehicle than distributing your assets um and so if we if we think of an analogy because we always love analogies let's say you know my husband has pretty much every tool you can imagine he's a plumber and he has a toolbox in his truck he has tools all over the garage and every now and then I will take it upon myself to do a little project in the house and try to do it on my own despite what he wants to do. I've seen videos of that. And so I'll go into the garage and I'll start looking for whatever tool I'm looking for. And sometimes I can find it, sometimes I can't. And let's say i need to hang a picture.
Speaker: Well, I'm not going to grab a screwdriver. nothing wrong with a screwdriver. It doesn't mean it's a bad tool. We should definitely keep it in our toolbox, but I need a hammer for that job. It's a different job.
Speaker: And so every tool has its own purpose. Doesn't mean that one is better than the other. Growing your money with stocks and mutual funds and bonds, ETFs is amazing. We need to have that in our portfolio.
Speaker: But those are not the tools that produce income that you can ever outlive. Right, right. Totally different. so So as Tom just said, there's nothing wrong with CDs, mutual funds. Bitcoin, all that, you know they're great investments, but they also serve different purposes. at different So it's so important, at different times in our lives, we need specific investments. you know What you, Marissa, do at your age, um just even in life, you know maybe zip lining and hang gliding, whatever the the risky type things
Speaker: activity may be. You can be risky with your investments at your point in life. I cannot be. You know, i I cannot be risky. I have some in the market, but the majority of my money at this point in time is absolutely in safe investments with guarantees. As I said, a lot of my investments have guaranteed income because what is what is the thing that Tom always says?
Speaker: A happy retirement is about income. It's not about assets. right and And we have to think about that as as people get closer to retirement. The big fear is, i I'm not getting that paycheck anymore.
Speaker: you know I'm used to getting a paycheck every two weeks. What am I going to do? you know And so people continue working because they're afraid of not getting that paycheck.
Speaker: Well, if you can get a paycheck, through your hard-earned money that's invested properly, wouldn't that make you happy? Yeah. Yeah, I mean, we meet people that are excellent at picking stocks and growing their money. And then they get to retirement and they spend nothing because, oh my gosh, I don't want to sell my stock. What if it keeps going up? And I don't want to trigger capital gains. And I don't know how to get to that $50,000 that I need to pay my taxes.
Speaker: And it becomes this really stressful process that was so fun when they were accumulating. And now it's no longer fun. yeah And that's why we have to shift vehicles. We have to change that plan a little bit and cover your basic living expenses with a guaranteed income. And then we can be more aggressive with the fun things. Yes. know, a lot of people still don't know that there are these types of investments out there. We had ah client years ago. She became ah great friend and client. But years ago, she came to us and she had just retired. She was a nurse and she had done an amazing job of saving and accumulating and sacrificing throughout her her working career, you know, and
Speaker: She retired and probably she came to us about six months, maybe a year after she retired. And she said, I'm not doing anything. I have all these things on my bucket list. I'm so afraid of running out of money. And I bring that up because that is such a common, common occurrence, a common statement that we hear.
Speaker: Well, we certainly don't want people to be fearful of spending money in their retirement. Because if they are, what was all this for? You know, well, now this particular client and friend, she travels all over. She sends me pictures. She is enjoying herself and she is enjoying it without that stress, without that fear. Right.
Speaker: We want to take that right off the table in retirement, and we can. Yeah, you don't want the fun years of retirement to be dictated by how well the stock market is doing. Exactly. That's a crazy plan. Exactly. Because we don't have a whole lot of control over world affairs and and things that can make the stock market go up and down. So why should that rule your retirement that you've worked 30, 40 years to get to? Right. Right.
Speaker: and And you could live 30, 40 years after. Yeah. You know, so once again, assets don't equal happiness. Income does.
Speaker: Yeah. Now, before we close, I want you to to share a strategy that we and it's on the top of my mind because we recently put this into place for one of our clients just last week. And it's something that. I think helps give a lot of people peace of mind and less stress in retirement, and that's covering your RMDs with income. Share, first of all, what an RMD even is. Okay, so so we all hopefully have a 401k or an IRA that we've been contributing to all of our working years, and that gets put in pre-tax.
Speaker: So the government says you can save on taxes at this point in your life up until... The year now is about 75. For anybody born 1960 or later, 75 years old is that number that the government says to people, you must now, we we are requiring you to take money from that IRA now. You must start distributing it.
Speaker: Required minimum distribution, r m d Okay, so at 75, so at seventy five no matter what you have in all of your different IRAs, you must start taking money from it. And a lot of people are like, great, this is this is great. A lot of people don't like it so much.
Speaker: But it is something that you have to do. The government now wants their tax dollars. It makes sense. they've let you They've let you put it aside all those years without taxing you on it, and now you have to start taking it. So hopefully at that point you're retired, maybe in a lower tax bracket, obviously, than when you were working.
Speaker: And it stresses people out. they They call us a lot. When do I have to start doing this? and How much? And I understand the when because the government keeps changing the age. It used to 72, so now it's 75. And how much?
Speaker: How much am I going to have to take out? so And if you don't take the right amount, the government penalizes you. There's a large penalty 50%. Added stress now. Right. So everybody knows that there's a penalty. So with most of the investment companies that we work with, they notify the client, they notify us. We get multiple notifications.
Speaker: But the one thing that takes that stress off the table is if they have that investment with guaranteed loans, lifetime income that normally satisfies their RMD. So say they put that I mean, we can pick a number.
Speaker: Say they put that $900,000 in and they're taking out that $75,000 per year. Well, that is certainly going to cover that RMD.
Speaker: um And there's no stress. There's no worry. There's no guessing. you know oh how You've already been taking it. And we recommend that to a lot of our clients if they do have life various lifetime income investments, let's start taking from the IRA first. Let's start taking that now.
Speaker: The government will be happy. They'll be getting their tax dollars. There's no worry. you know And we keep saying that recurring theme of a lot. We want you to have a lot less stress in retirement. We want you to have no worries you know as as much as we can do. And the RMD being satisfied with a lifetime income does that.
Speaker: Yeah. Yeah. I mean, it is full circle with that no worry conversation. I opened this episode up by saying people come to us with millions of dollars and they're so worried to retire because they don't have income set up. And then we have clients with two or three hundred thousand dollars that have guaranteed income from an investment, plus a pension, plus their Social Security, and they are totally relaxed in retirement. yeah It's all about having that income coming in that'll give you that happiness, that'll give you that stress-free retirement. Right. And you know and like you said before, having some still in the market. you know let's Let's still have money that's exposed that's going to give you those great returns and maybe you can take that
Speaker: longer cruise or more cruises. That seems to be the goal. Absolutely. So if you're listening to this and you want to make sure that you never run out of money in retirement or you're curious what that number is that you need to get to to safely retire and never run out of money,
Speaker: All you have to do to is go to our website, union-financial.com, click schedule a meeting where you can book a call, Zoom call, or in-person meeting with myself and Lisa and get your specific questions answered.
Speaker: And if you enjoyed this episode, make sure that you're subscribed and share it with friends and family. We really do appreciate it. Lisa, thank you again for coming on. as always, it's a pleasure. Thank you.
Speaker: Absolutely. And thank you, everyone, for tuning in to another episode of the Future of Finance podcast. I'm your host, Marissa Wood. we look forward to helping you live a better financial future.
Speaker: Investment advisory services offered through Brookstone Capital Management, LLC, a registered investment advisor. BCM and Union Financial Services are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. The opinions expressed by Marissa Wood and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involve risk and otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned and may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. This program is designed to provide accurate and authoritative information nation with regard to subject covered. Indexed or fixed index annuities are not designed for short-term investments and may be subject to caps, restrictions, fees, and surrender charge as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the insurer. Please refer to our firm brochure, the ADV 2A, item 4, for additional information. Any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Brookstone.
