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How much do I need to retire? Should I retire in a bear market? How will I pay for medical expenses? These are a few of the common questions we get from viewers so today we will answer these questions and a few more.
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- Johnathan Rankin CRPC® CEPA®, Founder & CEO
- Melissa Rankin - Wealth Management Advisor
- Theorem Wealth Management, Financial Advisor Dallas Texas
- Retire Once Show - 2022 Retirement Podcast Series
0:00 - Introduction
1:46 - How long will my money last?
8:50 - How Much Do I Need To Retire?
9:48 - How Will I Pay For Medical Expenses?
14:59 - Should You Retire In a Bear Market?
17:12 - What Can I Do To Combat Inflation?
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Disclaimer: Johnathan Rankin is a Registered Representative of Sanctuary Securities Inc. and an Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.
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Hello, and welcome to the retire. Once show the show designed to help you get to retirement, but most importantly, stay retired. I'm your host, Jonathan Rankin. I'm the founder and CEO of theorem wealth management. And I'm joined as always by my lovely co-host. Hi, I'm Melissa Rankin. Thank you for joining us and just start off happy birthday America, right?
Absolutely. I mean, 4th of July week, hopefully everybody had some fun watching fireworks, uh, that got day. Got the day off. And, you know, as we know fireworks, get old after about what? 30 seconds you see two and you go, Ooh, that was nice. Well, until the finale, of course. Yeah. So why don't we just skip to the why can't the whole thing, be the finale, because then you'd feel like that about the whole thing.
You'd be like, it's the same, the whole way through. See if they did like just a minute of the bad stuff. And then they just did a much shorter finale. And I think that, but it wouldn't look like that. You would be like, well, why don't they just cut out that minute? Nobody wants to see that anyway. Okay. Well, agree to disagree here.
Just like our air conditioning, we will agree to disagree on firework. I think they're pointless, but that's just what I think they're pretty. I like to see them, you know? Yeah. Well, our kids hate 'em so, you know, that's just, that's just our kids. So today we are here to talk about the most common retirement questions that we are getting right now.
So we are happy to be here before we jump into that, make sure that you hit that subscribe button. You don't wanna miss an episode of this. You wanna be notified every time it comes out. So hit the subscribe button. We're here building this community. We're having a lot of fun and we appreciate you being a part of this.
All right. Let's top in most common retirement questions that we're getting right now. Where do we start? So let's just knock'em out one by one. Okay. Let's go with the most common question. How long will my money last? So there was actually an interesting study that came out recently that showed that many younger baby boomers could actually outlive their 401k.
And now going a little bit into the study. They, what they did was. looked at, uh, draw down speeds of 401ks for individuals with pensions and without, because a lot of older baby boomers were part of the generation that their companies provided those guaranteed pensions. Well, you know, when you, if you were born in the sixties, it's down to somewhere around 5%, five to 10% of companies that provide that.
So it's a thing of the past. Unfortunately, it is a thing of the past. So they, what they found is that most retirees. With pensions didn't even spend any of their savings at all. They essentially let it grow while in retirement. Well, which, I mean, that seems fairly obvious, right? Yeah. I will say this study did seem kind of common sense because if you have a pension and it's able to help cover your your life expenses.
Yeah, of course. You're not gonna draw down your 401k, but because pensions are no longer as prevalent as they were before, it's something to consider, you know, and one of the examples they looked at. Households that had $200,000 when retiring and at, by age 70, what they showed is that people with no pension had $28,000 less than those with pension.
Which doesn't seem like a huge amount. No, but at age 75, that gap widened. And now those people with no pensions had $86,000 left or less, and that's a much bigger number, much bigger number. And one of the quotes from the article was, or the, the research was, uh, the fast drawdown of savings in 401k accounts means that many retirees, depending on them may be at risk of exhausting their funds entirely by the age of 85.
Although half of them will live. Beyond then. So if you're thinking that, you know what age 85, I'm never gonna make it there. The amount of times I hear that I'm never gonna make it there. You don't know half you are half yard, but to think that you might deplete your entire savings by then, this is where you wanna start thinking about, okay, I don't have a pension.
I want, I don't wanna be in that position where I'm depleting these assets. What can I do now? Okay. So. That leads us to the next point. What can you do? So I think the first thing it really starts out with is being very realistic with your spending and your budgeting and how you're tracking that, you know, the amount of people that we talk to when running retirement plans, you ask 'em, how much do you want to live off of in retirement?
They'll give you some number, but it's just a general number. And it's usually based on their current salary today. There's no deep dive into. Okay. Let's look at the past six months of our bank statements, where did we actually spend money month over month? What expenses are going to continue in retirement?
What expenses are going to go away? What things do we need to factor in? Because the reality is a lot of people think they're gonna spend less in those first few years of retirement, but they end up spending more because we talked about before you got five extra Saturdays to fill, got more free time, got a lot more free time.
So the last thing you want to do. Sit at home and do nothing. So you end up filling that with things that cost money. So starting to factor that stuff in and being realistic is I think the most important thing you could do. So really taking a deep dive into your budget. The next thing you should do is make sure you're updating your retirement plan.
I mean, the amount of people that we talked to that say, oh, I did a retirement plan. It was years ago. Well, the reality is the market's different. Your life's likely different. You gotta update that thing on an ongoing basis because. That will give you the most up to date information on how long your money's going to last.
But if you're just blindly going into it saying, well, it, it was good a couple years ago. I should be good now really diving in and being granular with how much you're analyzing your spending and your current account values and all of that stuff needs to be taken into consideration. So keeping up with exactly where you're at and kind of going through again, all the different options.
I don't know potential outcomes. I mean, that's important. Yeah. And that leads us to the next thing you should do, which is be flexible in your distributions. Uh, and we'll get to this just a bit, but having a flexible distribution during retirement will really help in markets like we're going through right now, right now, obviously the markets are down and there's a lot of concern about how is this going to impact, you know, the, my money long term, is this going to cause me to run outta.
So being flexible in your distributions will help. And that will also be a part of that, updating your plan and analyzing that budget, being flexible and being prepared, kind of go hand in hand mm-hmm , especially when you're talking about your retirement. Yeah. And that leads us to the next part of something you could do, even if you're not retired, start stress, testing your retirement plan as early as possible.
We talk about this a number of times before. Throw in things like the bear markets that's going on right now. What if we have higher than normal inflation for a longer period of time, you know, run these, what if scenarios that really, you know, are scenarios that you hope never come true? The worst of the worst things to see if you're in danger of running outta money.
However, if you run through the test, no matter what, you're gonna be a little bit more prepared, even if it does happen, because you've already. Thought about that as a possibility. Yeah. You found, you found the chinks in your armor. You found the, the places where, okay. If this goes wrong, then I'm gonna have to adjust my retirement lifestyle.
And then that kind of leads us to the last thing that, you know, we put together on this list that you can do to, you know, help preserve the longevity of your portfolio is you can also do some part-time work. I mean, the amount of people in retirement. Our working part-time to help supplement their income continues to grow.
And that is it. I mean, it could also be because they're bored. I mean, we talked about you have a lot more free time and I don't know, this could be especially true. If one spouse is retired and the other's not, you might just need something to fill your day and then if you can help kind of offset some of your retirement that way, too.
Good on all friends. Yeah. So if you love cooking, you can always become a sample preparer at Costco. I mean, that is that I think that's the new version of the wall. That's an interesting, okay. I think that's the new version of the Walmart greeter, the sample preparer at Costco. Yeah. They are definitely the popular ones, which by the way, is where we went on our first.
I took her to Costco before our first date, because I had no money at the time and I want her to get kind of full. I consider those appetizers beforehand. She didn't know this until later on when we went out and she's like, I'm not really that hungry. I think I'm gonna get a salad. It really helped that night.
Little strategic tip there for, uh, the younger viewers who are dating on a budget and next week dating on a budget. so, okay. That leads us to the second, most common question that we're getting about retirement planning. How much do I need to retire? Okay, so we cover this in episode two. We're gonna link to it up here or up here.
Some we're gonna link. So click that if you didn't listen episode two, that, because we went over that in great, great detail, great detail. But just to summarize, there's not a one size fits all answer for every. Everybody's different. Everybody's retirement is different. The amount of things that we see that are well, it's a, you know, 80% of how much you make or this percentage or this guideline, no, it comes down to your personal spending, your personal savings and really your lifestyle going through.
That realistic budgeting exercise is very, very important because that's gonna tell you how much you need to retire, but make sure you check out episode two. If you have questions about that or need help going through any of those budgeting exercises, we'll link to a, uh, a way for you to schedule an assessment with us in the description below.
And we'd be happy to help you with that. And then that leads us to the next common question. How will I pay for medical expenses? This is huge, huge factor for people. It is. And there was a study that was recently released by fidelity that showed that a married couple whose aged 65 and 2022 would need about $315,000 of after tax savings to cover healthcare expenses in.
That's an ungodly amount, 315,000 just on medical expenses. And so for single retirees, uh, it was $150,000 for men and $165,000 for women. Makes sense. Women go to the doctor, get physicals. They're a little more. Proactive, if you will, with their health, just because I haven't been to the doctor in four years, I feel like I'm in peak physical shape.
Mm-hmm , mm-hmm again, physicals are, you know, a good, good thing. But yeah, I, I, I don't like going to the doctor cuz I don't like needles, but um, that's just, that's just me. So, uh, at 65 you will likely have Medicare, but you can also buy additional coverage through what's known as Medicare advantage plans or UE plan.
And one of the things that we discussed before is in our view, one of the most overlooked account and retirement planning, which is the HSA account, the health savings account, that is something that if you haven't started participating in one of those, and it makes sense for you and your family, that is an account you could take advantage of.
Uh, those are very important for hearing these numbers alone. You might wanna look into that if you haven't before . Yeah. And part of that is also looking at long-term care and determining. Looking at your, your family medical history and, and looking at the cost of long term care. It is staggering in 2020, a, uh, a nursing home cost between 93,000 and a hundred, $5,000 for that year.
So imagine if let's say in 40 years, I need, you know, a nursing home and you're perfectly healthy, cuz you've been to the doctor. Well, we still have your expenses to maintain the house. But now we've just picked up my guess is with inflation, a lot higher of a number than a hundred, 5,000, but a much bigger expense for that nurse com on top of the only our regular expenses.
Yeah. So for home, for homemaker services, it was over 53,000. for health or for home health aid. It was over 54,000. And for assisted living facilities, it was 51,000. And this is as of 2020. Yeah. So, you know, we're at record high inflation. My guess is that those numbers are obviously going to go up. So, you know, there's, that is something to consider.
Absolutely. So with those high numbers that we're hearing, what can you do? Okay. So what you can do is obviously you can look at taking advantage of the HSA account. Like we talked. But this is goes back to that retirement planning plan for these different scenarios in your retirement plan before you're even retired and see how it impacts your long term wealth.
So, uh, what I like to do is you let's just run a scenario where what if you need exit amount per year? What, 15, 20,000 pick a number on top of your living expenses to handle medical costs. What does your life look like? What does your net worth look. Does that put you in danger, running outta money? What if you need long-term care insurance?
So run scenarios where, okay. What if you need that nursing home? And it's a hundred, $5,000 adjusted for inflation in 20 years. What happens if you need that plus your current living expenses that just don't go away. So modeling these out will give you a realistic idea of what this is going to take, you know, 20 years down the road.
And you can also look at, okay, what happens if you purchase long term care insurance? You know, how much is that going to offset that cost? What if you buy long term care insurance and you don't need it? I mean, there's a lot of different conversations around that, but I would say starting and going back to that retirement plan is.
The most important thing you could do that is, that is by far the one thing that I think a lot of people don't do, they want an easy fix? Like, well, just buy this certain insurance policy, but the one size fits all. Yeah. There is no one size fits all. Do the work, go back to your plan. If you don't have a plan, we'd be happy to put one together for you, but that's where it starts.
It takes work to plan that out and model these things out. And I would go through as many scenarios as you can. and the goal is to run these scenarios to where I wanna know what makes me run outta money. I wanna know what makes you, you know, have nothing left over because then we know what the worst not to not gonna doctor it's.
I mean, it's, you know? Yeah, yeah, yeah. You know, that's, that's another thing that, that we didn't really touch on is take your health seriously. Yes, that is, that is very true. Take your health seriously early and often. I'm not speaking from experience here early and often early and often AF you know, probably the year after this, I'll start next year.
It's like starting a diet. I gotta wait till January 1st to start the diet. So you heard it here first, January 2nd. He's going January 2nd. I will go to the doctor. Okay. 20, 24. Okay. So leads us to the next common question. So that leads into our next question. This is one that's really relevant today.
Should you retire in a bear market? the answer to that. I mean, yeah. It, it. There's more than one, I guess, answer to that. But we found a really good study that kind of hits on some points that we think are very relevant, very relevant. So the Vanguard study estimates that if you enter retirement during a bear market with a balanced portfolio, half stocks, half bonds, and you rely on that for a hundred percent of your income making withdrawals.
When stocks are down could increase the chance that you outlive your money by 31%, that's a crazy high number, and it could reduce your income stream by 11. Yeah. And so this is, this is talking about one of the, one of the risks that we talked about for which is known as sequence of return risks. And that is something that we, we touched on before.
We'll link to that here, but it is important to during bear markets, make sure that you have, what's called an adaptive withdrawal strategy. And this study talks about that. A lot of people enter retirement, thinking that it's going to be this linear equation. I'm going to retire. I'm going to take 5% or 4% from my portfolio for the rest of my life.
Very rarely. Is it a straight line? And yeah, and that my lifestyle's gonna go up by a standard 2.5% per year based on inflation. And it's going to be this linear equation. Well, that's, that's just not the case. And this study found that if you utilized an adaptive withdrawal strategy, that. That, that strategy eliminated the risk, that of portfolio depletion for all bear market retirees, even in the great depression.
Wow. And the sixties and the seventies. So during the worst of worst times, I mean, a lot of people are comparing right now to the seventies because of where inflation's at. And if you utilize and adapt withdrawal strategy, this eliminated that risk for all retirees during that period. So being flexible is going to be the biggest impact to determining whether or not you can retire during a bear market.
Uh, because sequence return risk is a real thing. And thinking that retirement is a linear straight line is just not realistic. It's not very practical. No. Which leads into our next question. What can I do to combat inflation? There was a very interesting article on the wall street journal. We'll link to that in the show description that was, uh, 15 ways consumers can deal with and even benefit from rising inflation.
Now we're not gonna go through all 15 we'll link to the article for you to do that. But some of the interesting ones, uh, were beware of shrink inflation, which is a very interesting, uh, concept if you will. Yeah. So companies use this back in the seventies when inflation was high, like it is today and.
What this concept is, is that they're shrinking the contents of stuff you buy. So think about, you gotta buy a bag of chip. More air, less chips. Wonderbread more wonder less bread. no, no, just no, don't even know what to say. This is how, you know, take the chips. this is not scripted, cuz I had no clue. She was gonna say, and I have no response for more wonder less bread.
So we're gonna move on to the, I think he makes perfect sense. it makes perfect sense. But the next thing they talk about in the article. Is delaying social security. Now we talked about this at nauseam. We did a whole episode last week on social security. Check that out. Well, you say nauseam, I'm gonna say, we talked about this thoroughly, thoroughly.
Same thing. I don't know. I say it the way I say it now you're criticizing the way I say it. You criticize my, you didn't like my Wonderbread analogy. Okay. I love the water bread analogy. I just, I was speechless and I'm usually very rarely speechless. So we've talked about delaying social security a lot, but that is a strategy you can use to combat inflation.
an interesting one. And I know this is relevant for a lot of people that are in retirement, because, you know, we would know a lot of clients that lease cars, but buying the car that you're leasing. So if your lease is ending soon, the price that you can buy that car at, which is known as residual value was set when you sign the lease.
And if you look at the used car market today, the odds are that your car used is worth more than what that residual value is right now. So if you bought that car out, Let's say you didn't even like the car anymore. You can theoretically sell that and capture the difference there. So, uh, that is one benefit right now to high inflation.
If you do lease a car, um, the next important thing that they mentioned that I think is more relevant for retirement savers, don't rush. To add inflation protection to your portfolio. And we've kind of touched on this a little bit also, but some of the specifics of that, what, what does that look like? So they equate this to trying to buy homeowner's insurance when your roof is on fire.
So things like treasury inflation, protected securities or tips or buying gold. Now we hear this all the time, especially gold, gold tips. Yes. Tips, not so much, but gold. Every single time we go through either a bear market. Every single time we have inflation that is, you know, running a little hotter. It is.
Should I buy gold? Should I buy gold? Is gold. The thing I should buy? Well, it's always a hot topic. It always is. And maybe it's because I, you don't see commercials at 2:00 AM for, uh, treasury and inflation protected securities, but you know, gold has been shown to be an actual bad hedge for inflation because you know, what happens is it rises in anticipation of inflation rather than with.
So trying to buy it now and expecting that it's just going to help you keep pacing inflation, or just buying it because you feel like, you know, stocks are going down. I wanna put all my money into gold. Well, if you need to buy one of those more, you know, more wonder less bread packages, less of reference, and you need to flake off a shelling of gold to buy that thing.
Then none of this stuff matters. So, you know, I would say that, uh, you know, rushing out to just start protecting your portfolio against inflation. Is not the right thing to do, maintain your balance strategy, but, uh, it is something that they mention in the article. So then how can you account for shadow inflation?
So that's the, the, the last one that we'll go through in that list of 15, but shadow inflation. This is where. Services that were once included. Now have an extra fee. So you think of you go somewhere that had free bread with dinner, you know, now they're charging you for that or soda refills. I wonder if olive garden would do that if they're because it was limitless bread sticks, right.
Or unlimited bread sticks, I think unlimited bread sticks. You think they put a limit on bread six because of inflation probably. Ooh, war chips and salsa at like a Mexican restaurant that. Right. So these are things be charged for that now. Yeah, I, this happens. You start noticing this and really, I think you've noticed it since the pandemic, um, at hotels where, you know, cleaning the room or fresh towels were.
You know, at request or even an extra cost, whereas before they would just clean it, even when you didn't want it cleaned. Right. like I was using that now you have to beg for it to be cleaned. So, um, you're just being aware that, you know, you're not gonna get the same bang for your buck before. So if you're planning on.
Going out to dinner, just check the menus. If you plan on staying somewhere, see what's included because things that were once included that we all took advantage of just aren't included anymore because of the costs there. So those are just a couple things. Very interesting article, like I said, we'll link to that in the show description and the show notes there, but, uh, those are the five most common retirement questions that we're getting.
Right. Now we hope this was helpful. If you have questions about that, you know, retirement that we didn't cover today, head to retire once show.com. You can ask a question there. You can also schedule some time for us to connect, to go through a free retirement analysis for you. Uh, but with that, I am Jonathan Rankin and I'm Melissa Rankin.
Thank you for joining us.
Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. – Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by email@example.com. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.
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