Ep. 269 – Understanding Holistic Wealth Management in Retirement– Beyond Just Investments

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In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss holistic wealth management, which goes beyond just savings and investments. While an investment manager looks at your investments or savings in your wealth accumulation phase, a holistic wealth manager helps you build a comprehensive retirement-focused financial plan.

Listen in to learn all the data points we collect and focus on to help you build a comprehensive retirement-focused financial plan. You will also learn the advantages of having a holistic wealth manager to help you make major financial decisions in retirement that you might otherwise hesitate to make.

In this episode, find out:

• The role of an investment manager in guiding you to properly save and invest in the wealth accumulation phase.
• The difference between an investment manager and a holistic wealth manager.
• How a holistic wealth manager will help you build a comprehensive retirement-focused financial plan.
• All the data points we get and focus on to help you build a comprehensive retirement-focused financial plan.
• How holistic financial planning covers all the financial concerns that bother people in retirement.
• The advantages of having a holistic wealth manager to help you make major financial decisions in retirement.

Tweetable Quotes:

• “When you work with a holistic wealth manager, they’re going to begin everything by building a comprehensive financial plan and, in our case, a comprehensive retirement-focused financial plan.”– Radon Stancil.
• “Just because you may have done a good job of saving the assets, a lot of time you need a lot of help getting all the way to the finish line and understanding some of the major financial decisions.”– Murs Tariq

Resources:

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. We are going to be talking today about a topic that everybody is concerned about when it comes to retirement and planning for it, and that is, how much income do I need in retirement? How do I figure my income? Now, interestingly, if you go on the web and you start looking for calculators about how much am I going to spend in retirement or how much do I need in retirement, a lot of times you put in your current income and then it is going to say, “Well, if I’m making that,” some of them will say, “I need 80% of that in retirement.” Some of them might say, “I need 90% of that.”
	But that is really, in our opinion, not really the best way to do it because let’s say I’m working today and I’ve got a really good income, very likely I’m not spending anywhere close to that income. I have a lot of different things that are being taken out of my income like heavy contributions to 401k’s, maybe I’m saving or doing other things. And so really what we want to do is take you through how we help a client think about how much income they’re going to need in retirement. And it all comes back to how much am I spending, how much am I going to spend in retirement? And that is really what I look for, not my income, because everything’s going to be different in retirement. What I thought we would do is we’ll start off and I’ll turn it over to Murs and we’re going to talk about maybe just to help you start thinking this through, what are some things that maybe I will not be spending in retirement and that helped me think this whole process through.
Murs Tariq:	Yeah, we’ve got a list of things here, and it’s not an exhaustive list, but it gives you a general idea to start thinking about, well, what are things while I am working before retirement, things that I just naturally pay for without thinking twice about it? And hopefully a lot of these expenses are going to either go down or completely go away when you do actually retire. And so I’ll just walk you through the list.
	One is commuting costs. Depending on where you live, where you go to work. For me, I’ve got a 10-mile drive to the office every single morning and then a 10-mile drive back, actually a little bit longer because I go to daycare to pick up my son and then back to the house every single day, Monday through Friday. That is a commuting cost, which you may have a commute right now and that’s going to drop off. And the cost of gas, the transportation, if you’re in a bigger city, maybe subways and stuff like that, that’s a commuting cost that not saying you’re not going to drive ever again, but you may not be doing something every single day regularly like you are today.
	Another one is, depending on what your work is and how you appear at work, your work related attire. If you wear suits every day or you wear dress clothes every single day to work, once you retire, you may not feel like you need to do that every single day and you dress up for special occasions.
	Another one is professional development. If you are required to maintain licenses or have certain amounts of continued education around what you do, there’s some additional costs there that you may pay for or your employer may pay for, but that would be a cost as well that’s going to hopefully drop or go down for you as you enter in retirement.
	The next one I think is pretty big is a lot of times in the hustle and bustle of working, we have to feed ourselves lunch and usually a lot of people are going to go out to eat for lunch just purely as a convenience and a time saving factor. Maybe your meal cost goes down a little bit because you’re not stressed for time and you’re able to maybe make your lunch at home because you’re not going into the office every single day.
	Another one is payroll taxes that are going to come off. A lot of times people think, Well, I make X and so I need to make X when I retire.” Well, there’s a lot of things that come off of X, your total gross salary, one of which is your payroll taxes. And so once you’re retired, you’re no longer contributing into those payroll taxes.
	A huge one is child related expenses. Hopefully by the time that you retire, the kids are out of college, off the family payroll and they’re off on their own managing their financial lives and doing just fine. And so maybe that’s an expense that starts to wane or completely comes off of your budget as well.
	Travel, if you travel a lot for work or you have a larger commute or anything like that, hotels, meals, all those different things that come with work related travel. Any types of memberships that you have around work, those may go away.
	Another one that we forget about, so go back to your I need to make X, or I make X right now as far as my gross income, I get paid a salary of this amount, a $100, 000, $200,000, whatever it is. What is coming off of that if you’re saving is your 401k contributions or IRA contributions, and so you do those contributions to prepare you for retirement to build up that nest egg. Once you finally do retire, well, you’re no longer expected to be saving, although we see plenty of people in their retirement ages that are still saving, but you’re typically not contributing to retirement type plans at that point. And for a lot of people, if you’re maxing out your 401k and you make $200,000 a year, well, you can put up to $30,000 to max out your 401k. That’s a large chunk of someone’s salary. If that goes off, then that quickly answers the question, well, maybe I don’t need as much as I was earning, or I don’t need to match my salary in retirement because a lot of these things were going towards preparing me for retirement.
	And then maybe if you have a second house or other major expenses that are associated with your work life, that may just go away or again, dwindle as you do enter into retirement. Wanted to throw that list at you. It’s not fully exhausted, but it’s got quite a few common ones that will come off when you do decide to retire, and that can help you start thinking through what you actually need coming in the door when you do retire.
Radon Stancil:	What we will say to folks a lot of times in order to help you start thinking about this is, it’s an easy way to say this. How much money do you have net coming in the door every month? If you get paid bi-weekly, let’s say that you’re… Doesn’t matter what your salary is, it doesn’t matter about how much is going to the 401k. Let’s say that you’ve got it and you’ve got $4,000 every pay period coming into the house. That’s $8,000. Out of that, do you spend it all or do you save some of that? If you say, “No, I put a thousand dollars a month into savings and the rest of it, I spend,” very easy to weigh to say, “I spend $7,000 today.”
	But then if I go through the list that Murs just talked about and I say, “Well, of that list, what things that are there today won’t be there when I retire?” If I’m 60, I’m 55 and I’m thinking about retiring in five or 10 years, what’s there today that won’t be there in the future? And just go down that list that Murs just talked about.
	Now, as you’re thinking things through, there are going to be things there that will continue to be there that are going to be in retirement. Let’s just talk a little bit about a few of those things. Housing cost. Now, if your goal is to have the house paid off, that’s great. That means you will not have a mortgage payment of principal and interest, but you still have housing costs. Well, what does that mean? I’ve got property taxes. I’ve got all of my utilities, like my electric, my water, my gas, my internet. All those things still stay there even if I pay the house off.
	Now, many times our clients might say, “I’m going to have my house paid off at X, and that’s going to be maybe five, 10 years into retirement.” What we do is we say, “Okay, well, for the first five or 10 years in retirement, we’re still going to have that principal and interest payment, but then that’s going to go away. And in our software, we’re able to show that very clearly just going away.
	Healthcare costs or healthcare expenses, might change, meaning if I were paying a big amount of health insurance costs today, when I get on Medicare, that may go down. If I work for an employer though that covers 100% of all of my healthcare, well then my healthcare may go up when I do Medicare. We can talk you through what that looks like. Or if I’m going to retire prior to 65, I may have to cover my own healthcare until I turn 65.
	We then got all of our daily expenses. We’re still going to go to the grocery store, we’re still going to dress in clothes. We’re still going to have household supplies, so we’re not going to take those things off. They’re still going to be there.
	Now, Murs talked about maybe not driving every day to work, but we’re still going to need to drive, which means we’re still going to have a car, which means we’re still going to have some maintenance on the car, and we’re still going to have a gas budget. That’s still going to be in there. We’re still going to have our insurances, our homeowners’ insurance, our auto insurance, potentially life insurance, maybe long-term care insurance. All of those things are going to remain. I’m not going to have those FICA taxes or the payroll taxes that Murs talked about, but I’m still going to have taxes. Don’t forget about that in the deal.
	Hopefully by the time I get to retirement, I’m not going to have any debt. If I have a car payment, it’s there, but hopefully I’ve gotten to a place where I don’t have any of that debt out there. Those are what I call the essential things, but then we might put in there some fun stuff or maybe some wants, like I want to travel, I want to go out to eat. We’re going to do a date night every week or whatever. I don’t care if it’s a date night every other day, whatever it is, just say, “Hey, what kind of lifestyle do we want to live?” And then I can start to put that all together.
	The key though is whatever I come up with, I want to know what is it that I’m actually spending, not what I say my income is, because sometimes we can help you get your income to where you’re really not paying any tax at all hardly, depending upon how your accounts are set up. And so that could really benefit you because we don’t care about so much income tax, we just care about what we’re spending. Anything else on that, Murs?
Murs Tariq:	No, I think it’s a good exercise to do to understand. I tell clients this all the time, is that when you’re working and you’re earning a good income, you’re checking the box of saving into your 401k and everything is working smooth. You swipe the credit card, you’re never worried about how you’re going to pay off that bill, you get into autopilot, and a lot of times we don’t really understand where and how we’re spending.
	I think a good exercise is working through that. Even though it’s not necessary right away, it’s going to help you think through your planning for retirement and living through retirement. It’s going to make the financial planner’s job a lot easier if you understand your expenses going into those meetings, and it makes your plan look smoother too. It also gives you something to dream about, and Radon mentioned the wants. It gives you something to work towards. What do I want out of retirement? Whether that’s the second home or the larger vacations we’ve been putting off or picking up those hobbies we haven’t had time for. The sooner you start thinking about what your life is going to look like in retirement and planning for it and putting numbers to it, the easier it is to make it a reality.
Radon Stancil:	One of the things that we do with all of our clients is we build out for them an actual income plan, a retirement focused financial plan. If you are a person that’s thinking about this, you’re trying to figure it out, we have a way that we can really make it super easy. You can get it as an app on your phone. Once we build it out, you’re able to see it. You can actually start tracking your income and saying, “Where is that money being, where is it going?” And help you to understand how that looks. If that’s something that you think you might want to talk about, feel free to go to our website, top right-hand corner, click on Schedule Call. Our schedule comes right up on your screen, and you can just schedule a 50-minute call with us and we can help direct where to go from there. But we hope that this has been a little bit beneficial to help you think get through this whole idea of income and retirement, and we look forward to talking to you again next Monday.