The X’s & O’s

When it comes to planning for retirement, there are a lot of potential pitfalls, and oftentimes these mistakes are hard to recover from. So let’s talk about the five key retirement planning mistakes that we see people making on a regular basis, and what you can do to avoid them in your own financial life.

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The Hosts:

Brent Pasqua, Matthew Theal and Joshua Winterswyk




Matthew: Welcome to the Retirement Plan Playbook by Matthew Theal, certified financial planner, financial advisor with RPA Wealth Management. As always, I’m here with RPA Wealth Management founder, Brent Pasqua. Brent, what do we have on deck for today’s show?

Brent: Today we’re going to talk about the five retirement mistakes, and these are mistakes we see our clients consistently making across the board.

Matthew: Awesome. That sounds really interesting. We’re also joined by Josh Winterswyk, certified financial planner and financial advisor at RPA Wealth Management. Josh, what topic are you looking forward to discussing today?

Josh: Hi Matt. I’m most looking forward to talking about too much debt, just hot topic recently, and we’re experiencing a lot in our client meetings, so just really excited to talk about too much debt.

Matthew: Yeah. Debt, the evil killer of Americans. Right? And I think that leads into our first topic though in the first mistake that we see a ton of clients making is reckless spending, right? They’re retiring and they’re spending more money than they have coming in. Brent, what’s some of the reasons why this is happening?

Brent: I think some of the reasons why this happens is let’s say a husband and wife are making dual income and they’re making $150,000 a year together or they’re making $200,000 a year together, 300,000 whatever it is, they have dual incomes. They get used to that lifestyle when they have that dual income. But once they stop working and that work wages stops, then they start collecting social security and now they have what, 25%, 30% of their income in retirement that’s fixed? How do you adjust to that? And I don’t know if you guys see that across the board with your clients, but that’s a major drop in income.

Josh: Yeah, we see it all the time. And to me it’s like they can’t turn the faucet off, right? It’s like they got this faucet that’s spraying water and they don’t know how to shut it off.

Brent: Well, I guess, how would you though, because if you’re used to spending so much money for so long and you’ve been working 30 years, how do you just shut it off all of a sudden when your income does drop? How do you change that behavior?

Matthew: There are some strategies you could use for one, you can create a budget. Budgeting is big. I’m not your traditional, what is it Josh? 30, 20, 50 budgeter?

Josh: 50 30 20.

Matthew: Yeah, I think that’s stupid. I’m more in the line of automating your finances and spreading money to your savings account, your retirement accounts, paying off your debt or paying your fixed debt expenses, and then whatever’s leftover, that’s what you could spend on your monthly expenses. I don’t care where you spend it.

Brent: Right. And I think what we are seeing today, and with some of the reckless spending topics that we have, I think there are some ways that you can be prepared so that when you do retire you don’t have some of these reckless areas of spending. Some of those that we see, Josh is helping their kids out, and I know you’ve seen that a lot recently.

Josh: Yeah, I think that’s a big problem with not only pre retirees or retirees, but helping adult children in that statistic continues to grow with them pouring more money into children or indirectly helping them or grandchildren and it’s taking away from their discretionary spending, which can lead into other issues. But that is definitely something that we’re seeing a lot of with the baby boomer generation that’s taking away from their discretionary income.

Brent: I mean, what kind of expenses do you see clients spending more on for their kids or continuing to spend on for their kids?

Josh: I think it’s just even in times of need for them. It’s $1,000 here, it’s $5,000 there. I know that age wave did a statistic or a study and found that parents right now of the baby boomer generation, four out of five of them provide some support for adult children. I mean, that’s a lot. That’s a huge statistic that they’re still giving support. This isn’t just gifting or helping them. Occasionally, they’re supporting their adult children’s lifestyle or helping them through a time of need and that is really detrimental to their retirement plan.

Brent: Yeah. I see a lot of clients too also carrying their kids medical insurance later. They’re still paying for it, their cell phone bills, car insurance. There’s just so many areas where I’m still seeing clients as they get transitioned to retirement, they’re still paying. These kids could be in their thirties or late twenties and they’re still paying for some of these things.

Matthew: Yeah. I mean, I didn’t go on my own cell phone bill until I got married, but it was just we were on one of those family plans, but then my parents also never came to me and asked for me to write them a check. I mean, I’ve had before to pay for it, but I didn’t. I think what’s happening is these parents, they’ve coddled their kids too much and they don’t know how to say no to them.

Josh: Right.

Matthew: And it’s super sad, but their kids are affecting their retirement plans.

Josh: Right. Because then there at some point a decision is going to have to be made is if we run out of money is our kids going to pay for us then, and if you’re constantly taking care of your kids, are they going to even have the means to be able to take care of their parents later on?

Matthew: That answer’s probably no.

Josh: Right.

Matthew: Anything left on spending that you guys want to hit on?

Brent: Yeah, I think that there are some other things, some important topics that we see a lot of clients make and that’s not really having spending awareness. Not really knowing as they’re working what they’re spending money on. I mean, being, Josh, in meetings together when we asked a client, well, how much do you need monthly to sustain your lifestyle? And this is just a basic question that we’re just trying to get a feel for a client on what they’re spending. What do they usually say?

Josh: They don’t know.

Brent: They don’t know. Or the commenting they always say is, we don’t spend a lot.

Josh: Yeah. That’s also very common. And it’s surprising too, because I feel like a lot of times when we’re meeting with clients and we’re asking them even about what their net income is, that awareness isn’t even there.

Brent: Right.

Josh: I think it would be easy in that client meeting if I was the client being asked that question to say, well, I know I’m not saving any money, but I make $5,000 a month net. That’s what I need because I spent it all every month. But that’s not the conversation we’re having.

Brent: No. In 15 years I’ve never had somebody sitting in front of me and say, well, you know, how much money do you spend? Oh, I spend a lot of money. No, they’re always saying, I don’t spend that much money.

Matthew: Right? That everyone’s a great budgeter, right? Very conservative. For those of you listening in your car, the easy way for you to figure out what your spending is to first look at how much is going into your retirement savings. Maybe it’s a couple of hundred dollars a month, and then look at how much you’re putting in your actual savings account. Maybe it’s $100 a month or whatever’s left over in my checking account at the end of the month. And then look at your monthly check and take your monthly check and subtract it by what’s going on in your savings account. And that’s how much you’re spending.

Brent: Right? And if you don’t have a lot in your savings account, then chances are you’re spending all of that money, and if you have credit card debt, you’re probably spending more than you’re actually making.

Matthew: That’s a great point. And that’s another thing that we see that really buries retirees. A mistake that they make is they’re carrying way too much debt.

Brent: Right. One other question that I also have met is because people of the past used to balance a checkbook, right? That was the old school way of making sure that you’re still having some savings and budgeting plan. But what are some solutions now for people to use since we don’t budget using our checkbooks anymore?

Matthew: You could use That’s a great one. Free website. They’re going to … Once you sign up, you’re going to get bombarded with ads, which is always fun, right? Credit cards, home equity loans, all that stuff. They’re basically getting paid to advertise to you. If you want to pay for software, they call it, why nab? But it’s you need a budget.

Brent: Yeah. I saw it.

Matthew: That’s a good one. And then one thing we do for our clients is we offer them ad free client portal with a budgeting tool.

Josh: But what I’m thinking I saw too when I was googling and researching out different budgeting softwares is there’s different softwares for different styles. I mean just depends on how much hands on that you want. Working with advisor, these are things that we work on with our clients constantly, syncing their accounts up, helping them budget, helping them in getting an understanding of what they’re actually spending. So when they do transition from work to retirement, there isn’t that big adjustment period you’ve been preparing for last year, two, three, four years for this transition. And then hopefully that transition is nice once you stop working.

Matthew: All right, so moving onto our second mistake. Too much debt. And this is obviously a huge problem for a lot of retirees and even pre retirees as well. The American system is really set up for if you want more, you take on debt to get it. Josh, what are some categories you see your clients having a little too much debt in?

Josh: Home mortgage is just the start. If we’re talking entering retirement, and still having a large mortgage payment, you could just piggy bank that with having a second mortgage that they took out for a remodel before retirement as well. And just to start there, if you’re talking about having $1500 to $3,000 worth of liability payments towards a mortgage, and now you’re going into retirement and relying on only fixed income, what a huge expense to battle over the next 10, 15, 20 years? And we’re seeing more and more of that of couples and singles that are entering retirement with a lot of liability payments coming out.

Matthew: Totally, Personally, I love it when I’m sitting with a perspective client and their home mortgages paid off and they’re ready to retire because I know that’s going to be such a much smoother transition than having 10 or 15 years left on their mortgage.

Brent: Yeah. Why is it a smoother transition?

Matthew: Well, you’ve got to plan for the income, right?

Brent: Right.

Matthew: And most likely, depending on the home size or how much their payment is, most likely social security’s probably going to only cover 70% of that amount.

Brent: Right.

Matthew: And I mean, that’s a huge negative.

Brent: Yeah, I think it’s such a nice feeling when you’re meeting with a client, they have their house paid off and they’re going to have some fixed income. You just know it’s going to be a lot less stressful than the client who comes in with a tremendous amount of debt. And that doesn’t make for an easy transition.

Josh: And I think it opens up more possibilities for them. If they have other goals that they want to utilize some of that equity in retirement or you’re looking at even a reverse mortgage strategy, there’s just so many more opportunities. I’m not saying that that’s always the right solution, but not only does it have less expenses, it just creates more flexibility with their retirement plan going forward.

Brent: Yeah, makes sense.

Matthew: One of the other issues we see is this whole obsession with the rental economy, and this is like Josh was saying, maybe you take out a second on your primary home to buy a rental or you take out a small loan and go buy a rental property. What are some of the problems we see with clients who are coming in with these rentals?

Brent: I think one of the biggest problems that we see with people having rentals is first of all, the rentals are usually not paid off, and so they think they’re making some positive return on their rental. But when you factor in what the taxes are, the insurance, the mortgage payment, what they’re getting in rent, and then any factors of having to pay a management company or anything that you’re going to have to fix up when the person renting the house moves out, most of them are in a negative return. A lot of them think it’s a great idea to have these rentals, but for the most part, Josh, you and I have seen this time and time and time again, they’re not making any money on them, and most of them are losing money.

Josh: Yeah, and I think then because of that, they hold onto the rental because it might be at a net operating income at a loss and they’re holding onto the rental because eventually it will be paid off if they continue to make the mortgage payment and they want to rely on that income in retirement. But in the meantime, to go back to the too much debt problem, it’s leading to them overspending, charging things on credit cards because they’re trying to hold on to this rental property when their liability payments are also stacking up behind them.

Brent: Yeah, I mean, how did we get here where so many people think the general knowledge is, Oh, I need to get some rental properties.

Josh: I would think probably previous generation. That was the model from my parents or that was the model from an uncle or a neighbor that gave me advice.

Matthew: Right. I could be wrong, but I think this is a problem stemming from the late 90s, early 2000s housing bull market. We saw ourselves in before the bubble burst in our sets.

Brent: Right?

Matthew: It was very easy to buy multiple properties and some people made money on them. Monkey see monkey do. Right? Neighbor makes money, they go do the same thing.

Brent: Yeah. I mean if you have three, four, five rentals and they’re all paid for, I mean, that can provide a fantastic lifestyle and a great income. The challenge is I think when people have one or two rentals and then they’re over leveraged with them, and there’s all this debt, and they’re not profitable, they think they’re profitable because they have a check coming in but they don’t really pay that much attention to what’s going out. They aren’t making any money on these rentals. And then so they’re in this position where they think they have this great asset but really, just like you said Josh, they’re just running up all this other debt.

Josh: Yeah. And they go hand in hand. When we’re talking about overspending and the lack of awareness or the lack of awareness of the rental property actually benefiting them not only now but in the future and understanding their situation because you’re right. You have this mortgage the cash flow doesn’t support, not only yours and the rental, and now you’re running at this net red, red, red on both your personal life, the rental property, and it’s just leading to this bad situation.

Brent: Yeah. I mean, we were doing planning with a client recently and when we are looking at it, but the one thing that we had discussed with them was essentially basically you can solve all of your financial problems and get pretty much close to retirement and live this nice lifestyle in retirement. But in order to do that, you’ve got to get rid of all this debt. In order to get into real estate, you got to sell that rental. And this was a long question mark for our client. Do I actually sell this rental to have a better lifestyle? I mean for us, when we were numbers guys, I mean it seems like a no brainer, but emotionally people are taught that these rentals are these fantastic things to have.

Josh: Right.

Matthew: Yeah. When I was doing do my research on the rental market, what I found was essentially you want multifamily or you want nothing. And multifamily does not mean single family homes. And unfortunately, most of the people who have rentals are just doing single family homes.

Brent: Right.

Matthew: You want four units or more in a building, or you want an office building.

Brent: Absolutely. And most tax people will tell you that also. One other thing I thought on or a couple of other things I thought was great on too much debt and what’s increased right now, Josh, maybe you could tell us a little bit about credit cards and how you’ve seen credit cards grow.

Josh: Yeah, credit card debt has really been increasing with the American public year over year and because of that credit card debt, also personal loan debt is also increasing. You see a lot of commercials about SoFi and all of these personal loan consolidation companies. Not only is credit card debt increasing amongst baby boomers and millennials, but then now also consumer personal loan debt is increasing because of, I’m going to consolidate all of my credit cards into this personal loan because that’s really being marketed highly right now. And one common statistic that we see amongst not only the pre retirees, but even the younger generation is, we talked about it in our last podcast, which is keeping up with the Joneses. And a lot of the surveys that are being brought out right now are saying they’re overspending because we want the next new item, we want to keep up with the Joneses or we want the bigger house. And that’s just leading to a lot of overspending. It’s leading to a lot of credit card debt and a lot of consumer debt as well.

Brent: And I mean, how easy is it to buy things nowadays? I mean just online spending is so simple. You don’t even have to go anywhere. You don’t have to do anything.

Matthew: You could spend $100 on Amazon with a couple clicks.

Brent: Yeah. And then it’s literally at your door in a day or two and it’s just so simple to get into debt now. And they save your credit card, so you don’t even need to pull your card out of your wallet.

Matthew: Yeah. You don’t even need a wallet near.

Brent: No.

Matthew: Then you can even buy stuff from your Apple watch now. Right?

Brent: Yeah. It’s amazing.

Matthew: So far we’ve gone through two mistakes, reckless spending, and too much debt. This third mistake is one that’s really close to my heart and in my opinion, if you are making this mistake, you’re harming your retirement more than anything else. And this mistake is avoiding the stock market. Not investing your retirement savings in the stock market is going to drag your retirement down. Josh, do you have any thoughts on this?

Josh: I do. Yeah. Just one big mistake. I agree with you about being passionate about that. I know that we’re financial advisors, but avoiding the stock market can really, really hurt someone’s financial and retirement plan. And a lot of that I feel stems from fear. And I think we’ve talked about this before. Tell me if you feel differently, but Brent, fear driving one of the big factors of people avoiding the stock market?

Brent: Yeah, and it’s just their unknown. I mean for a lot of these people who are afraid of that market, just haven’t had the experience in the market of staying in. They would get in and get out throughout their entire life, and now that they’re close to retirement they just decided, well, there’s ups and downs in the market. What happens if the market’s down when I go to transition to retirement? And then this leads into this entire other fear based investing that could then lead to a problem.

Matthew: Yeah. Unfortunately, the news media doesn’t help with this. Right? Whenever the stock market’s going down, that’s the number one story on the local news, on CNN, on Fox News, whatever your news channel of choice is, and it’s just down to create fear. And that fear creates products and it could lead to, I think you called it Josh, the too good to be true investment pitches. Can you tell me what that is?

Josh: Yeah. I’d like Brent to answer this question. But I can get this started on the too good to be true. This is that magic pill investment product. The magic pill that’s going to solve all of your problems with one solution which can lead into a variety of different products, and I’ll let Brent discuss that. But that too good to be true, it usually is investment products. They are out there. We’ve all seen them. There’s tons of marketing around them and I’ll let Brent.

Brent: Stock market upside with no downside?

Josh: Yes.

Brent: Is that what we’re talking about?

Josh: Exactly.

Brent: I think one of the easiest sells in the whole financial industry is for an advisor to sit down with somebody who is getting closer to retirement and say, well how would you like it if the stock market dropped 30%, and you lost all of your money or 30% of your money? What do you think the answer to that question is? Of course nobody wants to lose money, so they lead this fear based conversation with the client about how if the market goes down and this is going to happen and that’s going to happen to their retirement and all of us would think, well, we don’t want to lose 30 or 40% of our money.

Brent: Well here’s their solution. They’re going to recommend you a commission based insurance product called an annuity, and for the record, annuities as a general concept are not bad. It’s the types of products that you can get into that are the problem in that the industry is driven by commissions. And people when they put $200,000, $300,000, $400,000 into these annuity contracts, the agent could be making 6%, 7%, 8% commission. They’re getting a very large paycheck for putting their money into it. What the person doesn’t realize though is that the rate of return that they’re going to receive from the annuity most likely is going to be very low.

Matthew: It’s going to be about CD rates, right? 2% to 4%.

Brent: Yeah. And that conversation can get in so much more depth about the different types of annuities from fixed, index to variable and the different products and terms and surrender charges. There’s just so many factors that go into it. However, in general terms, when you’re talking about fear based sales and somebody selling based on fear, you’re talking about index annuities, you’re talking about insurance products that pay commission that are going to give you those types of rates of return. And the problem that I have with that is it changes people’s destiny. It changes people’s life because do you think when someone’s making 2% return on their money that they can’t get out of their product? That they’re going to go take that vacation that they always want to take, or they have a dream of taking their grandkids on a vacation? Do you think they’re going to do that when they’re getting in 2% return?

Matthew: We’ll then in my opinion, they’re going to run out of money if they do.

Brent: And they know that. Most people know that. That they can’t afford to take that trip, they can’t do that.

Matthew: Yeah. Well put Brent. I think it’s important that a lot of people who are investing their retirement savings in the stock market, they don’t understand rates of return. So historically, if you just bought an index fund in the S&P 500, and held it over a 20 to 30 year period, your rate of return is nine to 10% per year.

Brent: Right?

Matthew: If you drop it down and you do 100% in bonds, you’re probably somewhere between four to six. If you go lower and you do, let’s call them insurance-based or CD products, you’re probably around two to four. And then if you’re in cash, you’re not investing it, you’re at below one.

Brent: Right?

Matthew: And that makes a huge difference.

Josh: I think what many people need to do is interview and sit with an advisor who can help also educate them about how these things actually work, and then be able to find where the client is actually comfortable with, with their money and not only with where their plan is going and what their goals are. But I think it is so critical for people just to have some knowledge and understanding about how do markets work? How do annuities work? How do all of these different options work? And then help them very much decide where they fit in. But if you look at the headlines, like if we looked at the headlines at the end of last year in the stock market, right? US indexes closed with the worst yearly losses since 2008. What do you think most people are going to do at the end of the year hearing those headlines?

Brent: It’s creating fear of the market with not understanding what the market did over the last three years.

Josh: Right. And then you go see an advisor and they say, well, do you want to lose more money?

Brent: Can we clarify something though? You’re probably not seen in an advisor. You’re probably seen an insurance agent who’s selling you a steak.

Josh: Right. I have a crazy statistic. So over about 38% of the complaints filed to the Federal Trade Commission were from clients being sold investment products over 60. That’s alarming to me. You’re talking about 40% of all complaints to the Federal Trade Commission are coming from seniors. What a horrible thing to be dealing with in that next transition of life is then to be filing complaints about an investment product that you-

Brent: Yeah, they’re filing complaints because these things are impacting their life.

Matthew: Right?

Brent: These investments products that say they were put into or impacting the life that they want to live. Here’s the headline. at the end of January. US stocks posts best January in 30 years. So you went from the worst loss of since 2008 to the best January in 30 years.

Matthew: It tells you, you got to ride it out. Ride the ups and downs. It’s like a roller coaster.

Josh: What happens if you missed a headline, right? You’re working 40 hours a week, and you miss the headline. How does the sock market make you feel?

Brent: Right. I mean, and what’s your general thought about what somebody should do to have a better understanding of how their money should be positioned?

Matthew: That’s a great question. You could start with educational content. Unfortunately, there’s not a lot of good stuff out there. The best thing that someone could do is really to sit with a fee only financial planner.

Brent: Right?

Matthew: And that’s because we really can’t trust all the information we read online. And then we have clients who come to us who say that there’s going to be a single currency and the dollar is going to be worthless. And there’s all these types of pitches and schemes on YouTube, on Facebook, and unfortunately there’s no one regulating the educational content online.

Brent: Right.

Josh: So bitcoin is not a good investment.

Matthew: No, it’s probably not what you want to do with your retirement savings. Anything left on the investment side?

Brent: No. Let’s progress.

Matthew: All right. Moving on to our fourth mistake, and this is a tough one. It’s a lot of opinion, but what we see is generally, our clients who retire early, and early meaning, let’s call it before full retirement age 65, 66 anytime before that. Is that fair boys?

Brent: Yes.

Matthew: They struggle a lot more than the clients who work a little longer. Fair to say?

Brent: They can. Absolutely.

Josh: Yeah. I agree.

Matthew: What are some of the reasons this is happening, Brent?

Brent: Well, the first misunderstanding that many people have that can either cause them to not retire early when they can afford to or when they retire, they just really have no real knowledge about, and that’s what medical cost is going to cost them in retirement. What is insurance going to cost them? A lot of people, a lot of our clients will come in here and they’ll either say it’s going to be very, very expensive and I don’t know if I can afford it or they think, oh well I can collect a medicare at 62, can’t I?

Josh: Yeah. I see the same thing with the health care assumption and not understanding what it actually consists of when you do retire early. And even harder is retiring before 62, and not planning that whole system out. I had a client also, that the husband was a lot older, wife was younger, he was able to go on to Medicare and wife had to go onto an exchange and get normal health care from the healthcare market.

Matthew: Can I interrupt you real quick?

Josh: Sure.

Matthew: What are the options for someone to get health care if they’re retiring before Medicare age 65?

Josh: Well, there are multiple options that they can get COBRA, right? They leave their work, they can have a COBRA plan. They can go on Covered California if you’re in the state of California, which is also part of Obamacare. Those premiums are determined based on your income, whether you’re single or married. I mean those premiums and how much you’re gonna pay is going to be based on how much money and income that you have, which brings up another planning tool when you’re trying to figure out what’s my medical premium going to cost me? Well, let’s determine how much your income’s going to actually be and what sources you’re going to be pulling your income from.

Matthew: We’ll put. Another thing that I see, it’s a big disaster, is the client who retires before 59 and a half. Brent, what’s the reason why that’s a struggle for people?

Brent: Well, for most people, if you retire before 59 and a half, you don’t have access to all of your retirement assets. If you have money into IRAs, if you have money in two other retirement accounts, you’re not allowed to take money out of an IRA until you are 59 and a half without a 10% additional tax penalty. That brings on another complexity of where are you going to be taking the rest of your money out that you need to sustain your lifestyle from if you don’t have access to all of it.

Matthew: Yeah. So essentially, you need to have your money in a after tax savings account or a brokerage account or even maybe you inherit is an IRA, you could take money out of those, but those are really your only options to get money that you need to live off of.

Brent: Yeah, I mean if you’re under a deferred comp or you know of deferred comp plan, you can take out of your plan at 55 years old, and so there’s a little bit of leverage there, but that doesn’t pertain to many people.

Matthew: Yeah. So that just means there’ll be a higher withdrawal in their savings accounts. Anything left on the retiring early, Josh?

Josh: No. Just one thing to think about when you are retiring early is taxes of course.

Matthew: That’s a good point.

Josh: Clients not understanding taking money out of their IRA to pay for the supplemental healthcare or they’re spending, all of that stuff has a tax consequence. That a hundred thousand dollar withdrawal from your 401(k) plan to buy the boat, to pay for the next three years of income is actually a $130,000 from the portfolio that you didn’t expect. So just a lot of complications with retiring early that has to be planned for.

Brent: One of the complications that I see is a lot of times what it does is it forces people to collect social security earlier. Instead of waiting to your full retirement age to collect social security at 66 or 67, you’re now collecting at 62, 63, 64 receiving a much lesser benefit, and then you’re locked into that benefit for the rest of your life. So really you’re locking in a lower fixed income for the rest of your life. Then naturally, if you do retire much earlier in your 50s at some point, it really can impact what you’re going to receive from social security because it brings down your average index monthly earnings from social security. And now you’re going to collect so much less from social security. That just impacts your 60s, your 70s, your 80s. Retiring early can have a tremendous impact on a lifestyle and I would ask you guys this, would you rather work a few years longer and be able to live a little bit better lifestyle throughout the rest of your 60s, 70s or 80s, or would you rather retire early and be a little bit more tight and strapped with money and not be able to do some of the things that you’d want to do?

Matthew: I think you have to look at the reason why people are probably retiring early.

Brent: Correct.

Matthew: And I’m going to have to say that from what we’ve seen here is people are retiring early because for some reason they’re sick of the nine to five, it’s the commute, it’s the new boss, it’s the technology. For some reason they’re not happy at their job or maybe they never were really happy at their jobs. The second they hit their sixties they want to retire.

Brent: Right.

Matthew: And that’s fine, but go get work somewhere else. There’s tons of part-time jobs or poverty jobs that you can get in your early 60s that will give you some income so you don’t have to rely on collecting social security. My favorite is Uber driver.

Brent: Right.

Josh: Yeah. Great points. And I think it just puts even more emphasis on planning earlier. Right? These are all mistakes that can be planned for and getting an earlier jump on that planning process. Where maybe we can help avoid having to get that part-time job or pinpointing the right age. I know that I was just looking up Americans in retirement and Statistics and one that was surprising was that only actually one in five Americans actually reach 65, and are still working. For the client that plans to continue to still work, that’s really not the statistic that supports that. We’re looking at people retiring before or at 65. You have to be prepared for it.

Brent: Yeah. One of the things that I was working on recently with one of the clients was we looked at, if they were to retire at 62 here’s the amount of income that you would have that’d be guaranteed for the rest of your life. Here’s where we see that your expenses are, and if you retired at 65 here’s what your income would be in 66 and so on. And it came to the conclusion and said, well, we’re not married to our house. We really do want to retire because we have all these other aspirations and things that we want to do. So why don’t we sell our house, downsize, we could pay off our house, we could afford to live off of this new income and then we can retire. But that took years of planning. That wasn’t something that just they decided and went on a whim on. This is something that we planned and went through for quite some time and they’re prepared. That transition was seamless. But to just pick up and say, you know what? I’m sick of the commute or I’m sick of my boss, I’m sick of my job, you could be hurting herself longterm.

Matthew: Yeah, I agree. And that brings us into our next topic, and it’s our final mistake that people make and that’s retiring without a plan. Josh, what do you have to say about this? People retiring without meaning or with the financial planner.

Josh: Yeah. I’d first like to just start with something that I’m passionate about of developing somewhat of a projection. So like bringing together all the mistakes, right? Projection would entail making sure you know what your income is. Also, making sure that you know what your expenses are. You have pinpointed your retirement date. And using all of those tools to create some idea of what retirement is going to look like because we see so many times when we’re meeting with prospects, they’ve never ran a projection. They don’t have all of that awareness. They don’t know exactly what that consist of.

Josh: And really after that of gathering all of that data … Brent I want you to take over this point that we’ve talked about, which is inquiring about some advice. And once you have organized that financial situation, what’s that next step of looking for advice if you don’t have that time to do that? If you don’t have that resource readily available, how do I go and search that out?

Brent: Yeah, I think one of the first points a person needs to ask themselves is what is important to them? What are their goals? What is it that you want to do when you do retire? Is it travel? Is it spend more time with grandkids? Is it spending more time with family? What is it that you want to do in retirement? And what is important to you? Because ultimately, the type of planning that you should be working on with your advisor should be goal based planning. Is that not correct?

Josh: Yes.

Brent: And when you have all of your goals in front of you, and you know and you have clarity on what it is you want to do when you retire, and you may not know all of them but you know for the most part what you want to do, the planning will start to come around it. The numbers will all start to … The numbers never lie. You’ll be able to see how those goals … Can you accomplish your goals if you’re able to retire and the things that you want to do.

Matthew: That’s a great point Brent. And also doing a plan. We’re going to plan for the worst case scenarios, right? It’s like your break in case of emergency. What do we do when you lose your job in your early 60s, which based on the statistic Josh just gave us is quite likely. One in five Americans are only working until 65. Is that correct?

Josh: Yes.

Matthew: They’re probably not working because they’re getting laid off.

Brent: Can you tell us still, what do people do in the planning process? What is a planning process like?

Matthew: A planning process would consist of someone coming in and really talking about their goals, their aspirations, what they really want out of life. And then from there we start discussing the financial details. And our job is to strategize with the client to create a plan that works for them and helps them accomplish their goals, and hopefully their realistic goals.

Brent: What does, Josh, the CFP board say about what is SWOT? Because you hear about SWOT and how the CFP board surrounds our structure around SWOT.

Josh: Yeah. SWAT, I mean for the most part you’ve heard this in other industries too, but it’s just an analysis of the current situation to identify both strengths, weaknesses, opportunities and threats. And this could be even for a do it yourself or out there talking about doing a SWOT analysis to understand your current situation, making sure you create that awareness within the plan. And then that next step is that projection that I had mentioned earlier. And really by doing the SWOT analysis, you’re going to uncover areas that you potentially don’t need to work on as hard at, areas that you need to spend more time developing and creating the plan around more. And then what’s really nice about this is it’s going to open up other opportunities for you, whether it fits investment, whether it fits an opportunity to give money to children, just to give me an example of a goal for retirees that we see a lot of times with.

Josh: And then threats, like Matt talked about. What happens if you get laid off from your job? What happens if there’s a long term care need? What happens in a market downturn? A SWOT analysis will identify all of those key areas so we can help develop the plan even better.

Matthew: Totally agree. Anything else to add Brent?

Brent: Yeah. I think one of the things that provides clarity when doing going through a planning process is a lot of times you’re going through some of these different areas within your planning. You’re starting to understand your cash flow, right? You’re starting to see what sources you’re going to have from income, where they’re going to come from. You’re going to get a better understanding of your expenses, you’re spending, your debts, how much you’re spending on a monthly basis, how that transition is possibly going to go from working to retirement. Then we have strategies on debt payoff. Josh, you have a ton of experience in working in the bank in your past on the debt payoff, and all the different strategies that you’re going to have in the debt. Then you have taxes. So you’re going to have tax strategies, withdrawal savings distributions. And then you have a state planning risk management. You’re going to develop some investment philosophy stuff. All of those are great, great areas where you’re going to have clarity as you to transition from work to retirement and then also have a plan.

Josh: Yeah. It just sounds like there’s so much to it.

Brent: Absolutely. And it’s a long process for someone to transition to one of the most important chapters of their life.

Josh: I agree. And we can’t even touch the surface on everything that we put into that type of plan with all of those factors built in.

Matthew: Yeah. Planning is one of those things where you want to start early. You want to do your research before you hire a planner. It’s like buying a car. Go to the CFP board, go to NAPFA, go to [inaudible 00:39:08] network, even ask your friends for referrals, and from there interview, three, four or five different financial planners and hire the one that fits your personality the best. Any parting thoughts before we go Brent?

Brent: No. I just think these are all such important topics as someone starts to think about retirement. And whether you’re five years out, seven years out, 10 years out or a year out, this can help make that transition so seamless from a very complicated, having wages, working, having a different lifestyle to then transitioning to retirement. It can be very helpful.

Josh: Yeah. Great points Brent, and I think that’s just starting whether it’s with the awareness, we talked about the mistakes today, the no plan being a big one, getting started. Putting some focus on your financial situation in your future because the earlier that you start, the easier it’s going to be. And I think that’s where I stand on those mistakes.

Matthew: Well put Joshua. Well, thank you for joining us on the Retirement Plan Playbook. I’m Matthew Theo, certified financial planner with RPA Wealth Management. You could learn more about RPA Wealth Management by visiting us online, Again, that’s Thank you, and have a great rest of your day.

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