Ep. 202 – I’m 66 – Can I Retire?

In this episode of the Secure Your Retirement podcast, Radon and Murs discuss the question of whether you can retire at age 66, using a specific example from an article in Market Watch. They provide insights and advice on retirement planning and financial management.

If you’re feeling anxious about whether it’s time for you to retire or not, you’re not alone. Retirement planning can be a nerve-wracking and overwhelming decision for many people.

Listen in to learn the importance of considering all the elements involved in retirement planning and seeking professional advice when necessary. You will also learn why you should consider expenses, taxes, and potential long-term care costs in retirement planning.

In this episode, find out:

●     The Market Watch article scenario plus why savings isn’t the only determining factor of retiring comfortably.

●     The importance of income planning for retirement and how it involves more than just numbers.

●     The GPS analogy – the process of building a retirement-focused financial plan.

●     Avoid a higher rate of return in financial planning and, instead, use a conservative approach.

●     The impact of travel expenses on retirement planning and how to have a realistic budget.

●     Consider how taxes can affect your overall retirement plan.

●     The importance of considering long-term care insurance.

●     Establish a baseline to understand how to plan for a long-term care scenario.

Tweetable Quotes:

●     “It’s not all about the numbers; it’s also what you want out of retirement and what retirement is going to look like for you.”– Murs Tariq

●     “If you don’t think about the taxes and you don’t consider them, it can be devastating to your overall retirement plan.”– Radon Stancil


If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:Welcome everyone to Secure Your Retirement podcast. Murs and I today are going to deal with a question that many people ask, and that is, “Can I retire?” But there’s a lot around that topic and there’s a lot of different situations that Murs and I see all the time. And over the years we’ve seen a variety of these questions, but a lot of times people might say, “How much money do I need to retire?” And we answer that question by saying, “Hey, it doesn’t matter.” We’ve got people with a few hundred thousand, a people with a few million. But that part’s not the big part here. And we’re going to talk through a scenario. What prompted this particular episode is I was reading in MarketWatch and they have a little recurring section called Help Me Retire and here’s the question that came out that this article was written on.  
 It says, “I’m 66, we have more than $2 million. I just want to golf.” And then he says, “Can I retire?” And so again, this is a very, very common question. And some person might read this and go, “Wow, you got $2 million, easily you can retire.” Another person could say, “You’ve only got $2 million. I don’t think you could retire.” Why is there a difference between the two? Well, we’re going to talk about it, but let me give you a little bit of the situation about this particular person. They’re 66 years and four months old. He says he’s going to have social security starting next month at $3,300 a month. He’s a consultant right now, but he wants to retire from that. He is doing it three days a week. So he says, “I want to get out.” He says that he currently has… What? His makeup is about $1.6 million in retirement accounts.  
 He said his wife is 60 years old. She has about $600,000 in retirement accounts. They have a daughter at home still, and then they say they have monthly expenses of between nine and $10,000 a month. They said they have a modest home, no mortgage, taxes and insurance, about $6,000 a year. So now here’s the setup. I will tell you, the person who answers this article says, “I’m not a financial planner, so I really can’t answer it, but I can give you some things to think about.” Well, Murs and I are financial planners and this is what we deal with every single day. So I think what I want to do at this point is I just kind of want to say, Murs, pretend this particular person walked into the office like we have all the time. They laid this little simple approach out. What would we do? How would we deal with it? What would you say to the person?  
Murs Tariq:Yeah. Well, the first thing I would say is congratulations on a job well done to get to where you are so far. I mean, getting to the thought of retiring at the age of 66, to have amassed more than $2 million in worth in retirement accounts, plus a house that’s paid off, I mean, it takes a lot of work to get to that point. So I would say, “Kudos to getting to where you are today. And also kudos to taking the time to sit down with someone that does this for a lot of people to get that second set of eyes on your situation.” But ultimately, at the end of the day what it boils down to is dollars in and dollars out is kind of the way that an income plan is set up. And the idea is that the dollars that are going out, the spending, is not going to overcome what your dollars that you have to work with today, what they’re able to generate as far as growth and are they sustainable?  
 Are the two together sustainable? And so we take a lot of time and we have a nice conversation around it. So it’s not all about the numbers, it’s also, “What do you want out of retirement? What is retirement going to look like for you? Are there goals? Are there travel goals? Are there legacy goals? Are there things that you are concerned about, healthcare issues, long-term care?” All these different things that when it comes to building what we call a retirement focused financial plan. It’s not just about, “Hey, how much money do you have? What are you going to get from social security? And how does this all play together?” It’s multiple different layers of looking at your scenario and understanding, “Well, what are all the bits and pieces and let’s put it all together and then now let’s do some math and see if it all works out.”  
 But having a good understanding of a person’s scenario and what they want their retirement to look like is going to help us think through a starting point. And we talk about a GPS system all the time, and you think about it, you get in your car and I mean, I can’t even think about way back when we had to get a map out and physically use our route and then it became MapQuest was the way to go. And then now with smartphones and technology, everyone just reverts to, “Well, I’ll just put it into my GPS.” But how does a GPS work? And a lot of times if you ask the question, well, first you got to put in, “Where am I going?” That’s what we all go to. “I need to go to the grocery store,” “I need to go to wherever I’m headed, my destination.”  
 I need to punch that in. But none of that matters at all, not one bit, if the GPS can’t pick up where you are right this moment. So I’m sure a lot of you have been in a parking structure or a bigger building where the GPS can’t get through all that concrete and can’t figure out where your car is. And then it has no directions to give you, it just says, “Searching for satellite.” So we make it an analogy to that as well. It’s all about, “Hey, where are we today and where are we trying to go?” Where we are today is just as important as where we are trying to go because it helps us see potential issues along the way, things we need to be thinking about along the way. But we can’t get to where we need to go if we don’t know where we’re starting from. And so part of that is having this fact-finding and informational experience at the beginning of our conversations.  
Radon Stancil:And I think what I always find, when we are looking at these cases, that’s important is that one of the things that we don’t do, nor do we encourage anyone to do, is to say, “Let’s run a higher rate of return to make it work.” And the other thing is… So for example… Let me just finish that. So as an example, we run most of our financial plans at a four to 5% rate of return. And the reason why is not because we think that’s what’s going to be made. It says no. What we feel is if we can run it at four to 5% and it works, well, then it’s going to do obviously good if we make 6, 7, 8, 9. But if we run it at 6, 7, 8, 9, and that’s what you think it should be, and then all of a sudden we don’t hit that or the markets don’t do well for a period of time, it just adds a lot of stress to you.  
 The other thing that I think is so powerful for people to think about, and I’m just going to go back to one of the things he mentioned, he said his expenses are nine to $10,000. When we hear that, we start asking, “When you say that, what are you talking about?” And what we find is that we might have a scenario there where the person says, “Well, I mean $3000 of that, $2000 of that, whatever that number is, travel.” And so when we have the conversation there, what we find out is that they have these plans. The person says, “I’m going to retire and while I’m younger in retirement, I want to do a bit more travel. And so we have built in a bigger budget.” The problem when you run that out over 30 years is that if I build that into a 30-year plan, it can be stressful to the plan.  
 So what we’ll do is say, “Look, can we have a fun fund, this extra amount of money that I’m going to have for maybe 10 years?” I’m going to tell you across the board about what the situation is. A person goes and does a lot for the first 10 years and then they kind of go, “I have this hobby now,” or, “I have this thing I’m doing here,” and they don’t travel as much and that’s controllable. So we want to illustrate it both ways. Another major issue that has to be considered, it’s extremely important, is taxes. Taxes have to be considered. And if you don’t think about the taxes and you don’t consider them, it could be devastating to your overall plan. Now I’m just going to bring up another topic and I’ll kind of toss it back over to Murs.  
 But this topic that people ask and you look at this and say, “Okay, well maybe I can make it,” but what about healthcare? And really in particular, long-term care? And the cost can be very significant there, but we don’t want to just guess and say, “How can we do?” Or we can’t guess and say, “Everybody needs long-term care insurance.” And so we can model that. Can you just walk us through briefly, Murs, what we do there to help a person that’s in this situation, identical, go, “How do you deal with that long-term care situation?”  
Murs Tariq:Yeah, and the first thing we want to do is get the basics in. If we have a baseline understanding of what the scenario is going to look like, then we can start throwing in what-ifs. Sometimes the what-ifs are negative or realistic of planning for long-term care. Sometimes the what-ifs are really positive and the fun stuff for retirement planning, which is maybe I want to buy a second home or, “Can I afford to buy a boat?” Or we have a client that bought an RV. So once we have a baseline, and here’s what that baseline pretty much looks like, a lot of the data that Radon said at the beginning for the article is in here. So what do we have as far as income that’s coming in the door so security, pensions, maybe rental income, whatever that is.  
 As far as assets saved up, so in this case, the person has a lot in retirement accounts, heavily in pre-tax retirement accounts, which leads to tax strategy in the future. And then how are we going to spend? So understanding that spending part of it. Once we have those basics in there, then we can run a retirement simulation of, “Well, here’s how things are going to play out, dollars in, dollars out, and what do our assets look like?” Assuming some type of rate of return, also assuming some type of inflation and, say, that scenario looks just fine and we’re at age 90, 95, 100 with plenty of assets left over, then the retirement plan looks good. And now we get to throw in the what-ifs. So in the case of what if there is a long-term care scenario, the question is usually, “Can we afford to self-insure?” Or, “Do we need to look at transferring some of that risk to an insurance company?”  
 And so what we are able to do in our scenario is we’re able to say, “Okay, let’s pretend that one of the two go into a long-term care scenario.” Typically, we’ll send them in a little bit earlier, say, at the age of 80. And we have all the metrics as far as, “Well, what does long-term care costs as far as assisted living cost averages?” We have an average of a typical stay, we have the average inflation rate, all that is built into what we’re running. And we say, “Hey, yeah, for four years or so, you’re going to have a very expensive four years, probably going to cost somewhere in the realm of four or five, $600,000 depending on the level of care. And after that, now what happens?” Well, we assume that one of the person that was in the long-term care scenario, they passed away and now there’s a surviving spouse and some expenses are reduced, but ultimately we’re paying for all of that with our own retirement assets and how does that plan work out?  
 And usually the biggest question there is, “Is there enough assets left to support the surviving spouse and get them to age 95 or hundred, whatever they want to look at?” And if there’s plenty by the end of all that, well, then you have a decision to make. It seems like we can self-insure, but again, it’s a comfort level thing. “Do I want to take all that risk on myself?” Or if we’re running shy or we’re getting close to where we’re running really low on assets around age 92, 93, well, now the risk has just gotten much higher and we start thinking about, “Well, here’s what long-term care planning would look like.” And there’s all types of conversations that we have around that. But I think the biggest thing is understanding that we take the time to get a baseline in so that we can then make comparisons off of what that baseline is.  
Radon Stancil:So there’s a lot of moving parts. We understand that. What I’d like to, I think, close with on this episode is this. Sometimes I think people think, “You know what? I feel like I just don’t know enough and maybe I’m a little embarrassed. Maybe I should know more.” And these are people that have been really good savers and they just think, “I just don’t know,” and don’t feel that way. Sitting down, having a conversation and saying, “Hey, I just need to understand the numbers from a perspective that maybe I’ve never looked at. Can you help me?” That is the kind of conversation that Murs and I have every single day with our clients is just to look through this situation, analyze it, and 99% of the time, people walk out with peace of mind because they’re thinking, “I understand it now. I understand how it’s going to work. I can see that what-if.”  
 And so if that is your case and you’re thinking, “Man, I wouldn’t mind just having a little conversation,” feel free to reach out to us. We’d love to be able to have a chat. You can go to our website, pomwealth.net, go to the far right top corner and you can click Schedule Call. We’re glad to hop on a complimentary, no obligation, 15 minute phone conversation, and we’ll talk to you about your situation. And then if it makes sense for us to go further, we’ll talk about how to do that. But we hope this has at least been helpful, maybe ease some stress. Maybe you’re thinking about, in your own case, about, “Whether or not I can retire?” And again, our goal here is to help you make sure that you have a secure, safe retirement. We hope you have a great week. We’ll talk to you again next Monday.