WEBVTT 00:00:00.059 --> 00:00:17.228 Hi, I'm Stacey Hyde and I'm back for another episode of Better Financial Health in 15 minutes or less, and today I want to talk about something that comes up a lot in meetings that we have at client workplaces how much money do I need to retire? 00:00:17.228 --> 00:00:29.521 Well, I'd like to turn that a little bit on its head and focus on the timeline of retirement, because retirement is not just a number, it's a timeline. 00:00:29.521 --> 00:00:45.915 And if we look at what most of our retiree clients timeline looks like is, the first few years of retirement are kind of expensive because there's this sort of pent up demand for taking a trip, things I've always wanted to do. 00:00:45.915 --> 00:01:00.753 You know, I want to get a shop built or I want to remodel my kitchen, I wanted to go visit this big trip to Europe, but I've never had time, and so it tends to be pretty expensive in those first few years. 00:01:00.753 --> 00:01:21.748 But then as those things get done and taken care of and sort of checked off the proverbial bucket list, expenses sort of trend downward over time and sort of level out and it's not to say that you don't still travel, but generally speaking it's not as much and in many times not quite as expensive. 00:01:21.748 --> 00:01:28.415 And then as we get older, then expenses start popping back up. 00:01:29.319 --> 00:01:43.233 So one of the things that you need to realize and sometimes I have a hard time convincing people of this is you really do need to plan for 25, 30 years in retirement. 00:01:43.233 --> 00:02:05.144 And if you're one of those folks that's like I want to retire at 60 or 59 and a half or even 55, well, you're potentially looking at a 40-year retirement, because the statistics show that a 67-year-old couple, there is a greater than 50% chance that one of them lives to 90. 00:02:05.144 --> 00:02:11.407 That's a pretty big number, and so you don't know which one's going to be you. 00:02:11.407 --> 00:02:19.401 So you need to plan for that, and one of the things you can do for that if you're already retired is sort of put your money into buckets. 00:02:19.401 --> 00:02:39.936 You have your spending bucket, you have your income bucket, that's, your investments that are going to generate income, and then you have your growth bucket, because, guess what, as you spend from the first two, you need the growth in that third bucket in order to replenish so that that cycle can continue. 00:02:39.936 --> 00:02:46.532 Because if you don't have growth, chances are your income is not going to keep up with inflation. 00:02:46.532 --> 00:02:51.872 We did have a lot of years where we didn't have a lot of that, but it is important to look at it. 00:02:51.872 --> 00:03:15.283 The other way you can generate your income is if you're lucky enough to have a pension you worked for the military and if you did thank you for your service, you're a teacher or you worked for some government agency likely you have a pension and that's what I refer to as mailbox money, like your social security that shows up every month. 00:03:16.205 --> 00:03:18.250 Some people will look at annuities. 00:03:18.250 --> 00:03:20.313 Just understand those have trade-offs. 00:03:20.313 --> 00:03:27.054 Most annuities don't increase with inflation, but most pensions don't either. 00:03:27.054 --> 00:03:34.224 Unless you work for a government agency or the military, those will have an inflation adjustment in most cases. 00:03:34.224 --> 00:03:43.526 So that's the way we look at it for folks that are already retired or looking at retiring very soon. 00:03:43.526 --> 00:03:46.794 But what about for our younger listeners? 00:03:47.360 --> 00:03:52.757 You may be thinking you know the idea of ever accumulating a million dollars. 00:03:52.757 --> 00:04:01.775 When I'm staring down the barrel at $50,000 of student loan debt, I can't even imagine saving for a house. 00:04:01.775 --> 00:04:04.788 I've got a car payment and I'm upside down on my car. 00:04:04.788 --> 00:04:07.263 I'm trying to figure out how to dig out. 00:04:07.263 --> 00:04:27.896 Well, what you need to think about is not the $1.7 million or whatever some calculator tells you, it's just look at trying to do what you can do today and looking at replacing one year of your spendable income. 00:04:27.896 --> 00:04:32.629 So you want to take advantage of that 401k at work? 00:04:32.629 --> 00:04:36.923 Definitely get the match dollars, but don't stop there. 00:04:37.564 --> 00:04:54.968 You want to continue to save, you want to fund your Roth IRA, but first of all, always, always, always, have $1,000 at least in your emergency fund so that, if something comes up and happens, you don't wind up paying a lot of money in credit card debt. 00:04:54.968 --> 00:05:10.120 And because I cannot pass up this opportunity, because I'm just amazed at the people who think that they have to carry a balance on their credit card in order to have perfect credit, the answer is you don't. 00:05:10.120 --> 00:05:18.283 As long as you pay your credit card bill in full every month, you don't have to pay any interest and you will still have a perfect credit score. 00:05:18.283 --> 00:05:25.622 It's more important that you pay your bills on time and you don't carry a big balance relative to your credit limit. 00:05:25.622 --> 00:05:27.898 That's what factors into your credit score. 00:05:27.898 --> 00:05:31.819 So just do those little things. 00:05:32.529 --> 00:05:56.915 And so what you're trying to do is replace one year of spending, then you concentrate on the next, and then what's going to happen and I think you're going to be surprised at how fast it happens is you're going to save up and for the first year or two that you're saving, it's going to feel like it all came from you, because pretty much it did. 00:05:56.915 --> 00:06:10.884 But then as your balance grows and as you earn money on your money, the interest and the growth in your accounts are also going to pick up and fund some of those years. 00:06:10.884 --> 00:06:18.651 And as your account grows, the more interest and the more earnings you're going to have that come from your earnings. 00:06:18.651 --> 00:06:23.103 So that's the power of compound interest for your benefit. 00:06:23.103 --> 00:06:25.016 So don't be discouraged. 00:06:25.016 --> 00:06:26.656 Just take that first step. 00:06:26.870 --> 00:06:35.663 And if you haven't already listened to our episode on 1%, go back and give that a listen, because it's got a lot of good tips for how you can get there. 00:06:35.663 --> 00:06:43.096 And the thing to remember if you said I've made a bunch of mistakes, quit digging. 00:06:43.096 --> 00:06:46.432 Just start from where you are and go forward. 00:06:46.432 --> 00:06:49.899 We cannot fix the past, we can only move forward. 00:06:49.899 --> 00:06:57.783 So look at your situation and make better decisions today so that you will have a better financial future tomorrow. 00:06:57.783 --> 00:06:59.391 Thanks for tuning in. 00:06:59.391 --> 00:07:03.437 This has been another episode of Better Financial Health in 15 minutes or less.