1 00:00:00,059 --> 00:00:03,126 Speaker 1: Hi, I'm Stacey Hyde and I'm back for another episode 2 00:00:03,126 --> 00:00:07,341 of Better Financial Health in 15 minutes or less, and today I 3 00:00:07,381 --> 00:00:11,128 want to talk about something that comes up a lot in meetings 4 00:00:11,208 --> 00:00:16,164 that we have at client workplaces how much money do I 5 00:00:16,245 --> 00:00:17,228 need to retire? 6 00:00:17,228 --> 00:00:21,809 Well, I'd like to turn that a little bit on its head and focus 7 00:00:21,809 --> 00:00:26,827 on the timeline of retirement, because retirement is not just a 8 00:00:26,827 --> 00:00:29,521 number, it's a timeline. 9 00:00:29,521 --> 00:00:34,773 And if we look at what most of our retiree clients timeline 10 00:00:34,832 --> 00:00:38,506 looks like is, the first few years of retirement are kind of 11 00:00:38,587 --> 00:00:42,805 expensive because there's this sort of pent up demand for 12 00:00:43,307 --> 00:00:45,915 taking a trip, things I've always wanted to do. 13 00:00:45,915 --> 00:00:49,828 You know, I want to get a shop built or I want to remodel my 14 00:00:49,868 --> 00:00:54,360 kitchen, I wanted to go visit this big trip to Europe, but 15 00:00:54,381 --> 00:00:59,710 I've never had time, and so it tends to be pretty expensive in 16 00:00:59,752 --> 00:01:00,753 those first few years. 17 00:01:00,753 --> 00:01:04,566 But then as those things get done and taken care of and sort 18 00:01:04,605 --> 00:01:08,793 of checked off the proverbial bucket list, expenses sort of 19 00:01:08,832 --> 00:01:12,626 trend downward over time and sort of level out and it's not 20 00:01:12,665 --> 00:01:17,001 to say that you don't still travel, but generally speaking 21 00:01:17,281 --> 00:01:21,748 it's not as much and in many times not quite as expensive. 22 00:01:21,748 --> 00:01:28,415 And then as we get older, then expenses start popping back up. 23 00:01:29,319 --> 00:01:35,117 So one of the things that you need to realize and sometimes I 24 00:01:35,137 --> 00:01:38,864 have a hard time convincing people of this is you really do 25 00:01:38,944 --> 00:01:43,233 need to plan for 25, 30 years in retirement. 26 00:01:43,233 --> 00:01:45,680 And if you're one of those folks that's like I want to 27 00:01:45,721 --> 00:01:51,263 retire at 60 or 59 and a half or even 55, well, you're 28 00:01:51,284 --> 00:01:54,641 potentially looking at a 40-year retirement, because the 29 00:01:54,701 --> 00:02:01,003 statistics show that a 67-year-old couple, there is a 30 00:02:01,103 --> 00:02:05,144 greater than 50% chance that one of them lives to 90. 31 00:02:05,144 --> 00:02:10,765 That's a pretty big number, and so you don't know which one's 32 00:02:10,806 --> 00:02:11,407 going to be you. 33 00:02:11,407 --> 00:02:15,568 So you need to plan for that, and one of the things you can do 34 00:02:15,568 --> 00:02:18,299 for that if you're already retired is sort of put your 35 00:02:18,338 --> 00:02:19,401 money into buckets. 36 00:02:19,401 --> 00:02:24,355 You have your spending bucket, you have your income bucket, 37 00:02:24,415 --> 00:02:27,508 that's, your investments that are going to generate income, 38 00:02:28,110 --> 00:02:31,284 and then you have your growth bucket, because, guess what, as 39 00:02:31,324 --> 00:02:35,299 you spend from the first two, you need the growth in that 40 00:02:35,359 --> 00:02:39,294 third bucket in order to replenish so that that cycle can 41 00:02:39,294 --> 00:02:39,936 continue. 42 00:02:39,936 --> 00:02:44,709 Because if you don't have growth, chances are your income 43 00:02:44,769 --> 00:02:46,532 is not going to keep up with inflation. 44 00:02:46,532 --> 00:02:49,066 We did have a lot of years where we didn't have a lot of 45 00:02:49,086 --> 00:02:51,872 that, but it is important to look at it. 46 00:02:51,872 --> 00:02:57,491 The other way you can generate your income is if you're lucky 47 00:02:57,570 --> 00:03:01,265 enough to have a pension you worked for the military and if 48 00:03:01,306 --> 00:03:06,169 you did thank you for your service, you're a teacher or you 49 00:03:06,169 --> 00:03:09,445 worked for some government agency likely you have a pension 50 00:03:09,445 --> 00:03:12,698 and that's what I refer to as mailbox money, like your social 51 00:03:12,717 --> 00:03:15,283 security that shows up every month. 52 00:03:16,205 --> 00:03:18,250 Some people will look at annuities. 53 00:03:18,250 --> 00:03:20,313 Just understand those have trade-offs. 54 00:03:20,313 --> 00:03:25,931 Most annuities don't increase with inflation, but most 55 00:03:25,972 --> 00:03:27,054 pensions don't either. 56 00:03:27,054 --> 00:03:30,270 Unless you work for a government agency or the 57 00:03:30,312 --> 00:03:33,743 military, those will have an inflation adjustment in most 58 00:03:33,804 --> 00:03:34,224 cases. 59 00:03:34,224 --> 00:03:40,239 So that's the way we look at it for folks that are already 60 00:03:40,299 --> 00:03:43,526 retired or looking at retiring very soon. 61 00:03:43,526 --> 00:03:46,794 But what about for our younger listeners? 62 00:03:47,360 --> 00:03:51,995 You may be thinking you know the idea of ever accumulating a 63 00:03:52,034 --> 00:03:52,757 million dollars. 64 00:03:52,757 --> 00:03:57,747 When I'm staring down the barrel at $50,000 of student 65 00:03:57,766 --> 00:04:01,775 loan debt, I can't even imagine saving for a house. 66 00:04:01,775 --> 00:04:04,788 I've got a car payment and I'm upside down on my car. 67 00:04:04,788 --> 00:04:07,263 I'm trying to figure out how to dig out. 68 00:04:07,263 --> 00:04:13,998 Well, what you need to think about is not the $1.7 million or 69 00:04:13,998 --> 00:04:18,704 whatever some calculator tells you, it's just look at trying to 70 00:04:18,704 --> 00:04:25,954 do what you can do today and looking at replacing one year of 71 00:04:25,954 --> 00:04:27,896 your spendable income. 72 00:04:27,896 --> 00:04:32,629 So you want to take advantage of that 401k at work? 73 00:04:32,629 --> 00:04:36,923 Definitely get the match dollars, but don't stop there. 74 00:04:37,564 --> 00:04:42,470 You want to continue to save, you want to fund your Roth IRA, 75 00:04:42,771 --> 00:04:47,440 but first of all, always, always , always, have $1,000 at least 76 00:04:47,620 --> 00:04:51,189 in your emergency fund so that, if something comes up and 77 00:04:51,269 --> 00:04:54,406 happens, you don't wind up paying a lot of money in credit 78 00:04:54,425 --> 00:04:54,968 card debt. 79 00:04:54,968 --> 00:04:59,778 And because I cannot pass up this opportunity, because I'm 80 00:04:59,798 --> 00:05:04,216 just amazed at the people who think that they have to carry a 81 00:05:04,257 --> 00:05:08,055 balance on their credit card in order to have perfect credit, 82 00:05:08,656 --> 00:05:10,120 the answer is you don't. 83 00:05:10,120 --> 00:05:13,531 As long as you pay your credit card bill in full every month, 84 00:05:13,932 --> 00:05:17,139 you don't have to pay any interest and you will still have 85 00:05:17,139 --> 00:05:18,283 a perfect credit score. 86 00:05:18,283 --> 00:05:21,872 It's more important that you pay your bills on time and you 87 00:05:21,932 --> 00:05:25,622 don't carry a big balance relative to your credit limit. 88 00:05:25,622 --> 00:05:27,898 That's what factors into your credit score. 89 00:05:27,898 --> 00:05:31,819 So just do those little things. 90 00:05:32,529 --> 00:05:39,744 And so what you're trying to do is replace one year of spending, 91 00:05:39,744 --> 00:05:43,232 then you concentrate on the next, and then what's going to 92 00:05:43,331 --> 00:05:46,199 happen and I think you're going to be surprised at how fast it 93 00:05:46,261 --> 00:05:52,454 happens is you're going to save up and for the first year or two 94 00:05:52,454 --> 00:05:55,442 that you're saving, it's going to feel like it all came from 95 00:05:55,483 --> 00:05:56,915 you, because pretty much it did. 96 00:05:56,915 --> 00:06:02,862 But then as your balance grows and as you earn money on your 97 00:06:02,922 --> 00:06:08,478 money, the interest and the growth in your accounts are also 98 00:06:08,478 --> 00:06:10,884 going to pick up and fund some of those years. 99 00:06:10,884 --> 00:06:16,019 And as your account grows, the more interest and the more 100 00:06:16,180 --> 00:06:18,651 earnings you're going to have that come from your earnings. 101 00:06:18,651 --> 00:06:23,103 So that's the power of compound interest for your benefit. 102 00:06:23,103 --> 00:06:25,016 So don't be discouraged. 103 00:06:25,016 --> 00:06:26,656 Just take that first step. 104 00:06:26,870 --> 00:06:30,230 And if you haven't already listened to our episode on 1%, 105 00:06:30,771 --> 00:06:33,237 go back and give that a listen, because it's got a lot of good 106 00:06:33,297 --> 00:06:35,663 tips for how you can get there. 107 00:06:35,663 --> 00:06:41,232 And the thing to remember if you said I've made a bunch of 108 00:06:41,271 --> 00:06:43,096 mistakes, quit digging. 109 00:06:43,096 --> 00:06:46,432 Just start from where you are and go forward. 110 00:06:46,432 --> 00:06:49,899 We cannot fix the past, we can only move forward. 111 00:06:49,899 --> 00:06:54,797 So look at your situation and make better decisions today so 112 00:06:54,836 --> 00:06:57,783 that you will have a better financial future tomorrow. 113 00:06:57,783 --> 00:06:59,391 Thanks for tuning in. 114 00:06:59,391 --> 00:07:02,755 This has been another episode of Better Financial Health in 15 115 00:07:02,755 --> 00:07:03,437 minutes or less.