At 60 With $1.5M? You're Beating The $5M Retirees

Taylor has seen retirees with $5 million feel broke and retirees with $1.5 million feel free. The difference isn't their portfolio — it's five planning pitfalls that smart savers make over and over.

In this episode, he walks through the 5 retirement pitfalls he sees every week as a Certified Financial Planner working with pre-retirees. If you're within 5 years of retirement and sitting on a solid nest egg, these are the blind spots that quietly decide whether the next 30 years feel abundant or anxious.

He also shares the bonus pitfall most advisors never mention- the one that has nothing to do with your portfolio but determines whether retirement is the best chapter of your life or the loneliest.

Watch next: How the Retirement Readiness Roadmap works https://youtu.be/iQB5tdDXuc8

0:00 Why more money doesn't always mean a better retirement
1:15 Pitfall #1: Picking tools before drawing the blueprint
2:55 Pitfall #2: "You're fine" isn't a retirement plan
4:25 Pitfall #3: The silent partner (Uncle Sam) you forgot about
7:20 Pitfall #4: The stress test most plans skip
8:45 Pitfall #5: The accumulator mindset that robs you in retirement
10:45 Bonus: The ceiling of YouTube-only planning
11:10 How the Retirement Readiness Roadmap works

Resources:

Website:  https://www.demarsfinancial.com/

Phone: (509) 536-9556

Schedule an introduction call with Taylor: https://bit.ly/demarspodcast

Check out Taylor's YouTube Channel: https://www.youtube.com/@TaylorMadeRetirement

Taylor's Newsletter: https://demars-financial-group.kit.com/827c64fe0e

Disclaimer: Since we don't know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Demars Financial Group, LLC or its members cannot be held liable for any use or misuse of this content. Advisory services offered through Demars Financial Group LLC, a Registered Investment Advisor. Demars Financial Group is not affiliated with LPL Financial.

Transcript

SPEAKER_01 0:00

Today's content is pulled from Taylor's YouTube channel. If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description. Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life. With third generation certified financial planner Taylor DeMars.

SPEAKER_00 0:28

You'd think more money equals a better retirement. It doesn't. I've watched couples with $5 million retire miserably and others with $1.5 million retire well. And the difference is five mistakes. Mistakes that even smart savers make without knowing it. I'm Taylor Demars, CFP and third generation retirement planner. And the last mistake is the one that almost no one in my industry is talking about. Because most people I sit down with are in their late 50s or early 60s. They've done everything right. Maxed out the 401k, paid the house down, live within their means. And now that they're just a few years from pulling the trigger, something's shifted. The confidence they used to feel about money isn't there anymore. And that's the problem. You can still save your whole life and walk into retirement with blind spots that quietly cost you hundreds of thousands of dollars, years of stress, or worse, the retirement you actually wanted. And the first pitfall is one that trips people up before they even get started. They shop for tools before they've drawn the blueprint. Many of the conversations I have open the same way, where someone sits down across from me and the first thing they ask about is the portfolio. Should I be more in stocks or bonds? Should I buy that annuity that my neighbor has? Is this ETF better than that one? And those are real questions, and eventually we'll get to them, but I feel they're being asked in the wrong order. Imagine if you're walking into Home Depot on a Saturday morning, you're filling your shopping cart with a circular saw, nail gun, and a stack of two by fours, and then someone taps you on the shoulder and says, Hey, what are you building? And you pause because you actually haven't figured that part out yet. You just knew the tools were on sale. And that's how unfortunately I feel too many people are approaching retirement. They're picking the tools, like the accounts, the funds, the products before they've drawn the blueprint. The blueprint is the plan, the roadmap, as I call it, which answers how much does your retirement actually need? What does it look like month to month? What about your trips, time with the grandkids, the projects you want to do, the giving? And what does just a normal Tuesday morning feel like? We build a client's retirement readiness roadmap by defining purpose, then designing the plan and only applying it to the portfolio in that order. If the portfolio comes first, you're building someone else's retirement, not yours. The second pitfall is one I hear almost every week, and that might be the single most common frustration that walks through our door. People sit down and say, my advisor tells me I'm just fine. But that's the entire plan. When clients ask, can they retire next year versus a few years from now, or how a 30% market drop might impact their exit? Should they pursue Roth conversions? The answer is always the same. You're fine. If you took your car in because something fell off and the mechanic didn't hook it up to a single diagnostic, didn't open the hood, just looked around it and said it's fine, hopefully you'd get a second opinion before driving it home. But somehow, when it comes to the biggest financial decision of our lives, a lot of people accept fine as the answer and move on. Real income planning isn't a gut check, it's a year-by-year picture from retirement to age 95 of exactly where your income is coming from. Social Security, pension, portfolio withdrawals, part-time work if applicable. You gotta know where your income is coming from in what order and why. Without that level of detail, the actual dollars, years, and sources, it means you don't yet have the comprehensive plan you deserve. Number three is the elephant in the room. Most of you watching already know it's there. The question is whether you've looked at how big it's gotten. You already know your 401k and IRA and other tax-deferred money isn't entirely yours. You have a silent partner sitting at the table, and his name is the IRS. Every dollar you pull out from those accounts, he gets his cut. He lets you defer tax while you've been saving, and he's been patient, but he's been waiting the whole time. And now that you're approaching your 60s, he's getting ready to collect. And here's the part most people haven't actually done running the math on what that silent partner, Uncle Sam, is going to collect over the next 30 years. When you do, the number tends to be bigger than anyone's willing to sit with. For example, that $2 million 401k that you're picturing in your head, over the next 30 years, your withdrawals, RMDs, with the account still growing, the cumulative taxes often total $400,000 to $600,000 or more. That means instead of the full $2 million nugget you were working for, you're really sitting closer to $1.4 million after the silent partner takes their cut. And the rest belongs to the government. That's real money. Money that could have gone to your lifestyle, kids, grandkids, your legacy. And the craziest part is most people don't run these numbers until it's too late. But it gets worse where those pre-tax balances will keep compounding until you do something about it. When those RDs kick in at 75, your Social Security becomes more and more taxable, Medicare premiums get more and more surcharges, and suddenly the window where you could have done something smart has closed behind you. I had a client couple come in recently, and having been great savers with around $3 million in their pre-tax accounts by their early 60s, but not much in their Roth or non-retirement accounts, their wife looked at me and said, the tax side is what scares me because no one's explained it. And the reason for this is pretty simple. Most tax preparers who most think are there to help you lower your retirement tax bill, they actually are just looking at your taxes through the rear view mirror, meaning they're just focused on last year, where the numbers are already locked in. The year is done. As a tax planner, my job is to look through the windshield forward, not just to forecast what's coming, but to figure out what we can actually do about it while they're still trying to be proactive. The most crucial tax planning opportunity tends to be the low income window that exists between early retirement and claiming social security. This allows for strategic growth conversions at today's 12% brackets, for example, paying off the tax bill now to avoid much higher rates later. If you're thinking, I've never actually had someone walk me through what my lifetime tax bill looks like, you're not alone. You can click the link in the description to book a call with me where we can look at your specific situation and see if tackling this is something that I can help you with. Now, the fourth pitfall is the quiet threat that keeps you up at night. It's the worry that your plan looks great only because you never stress tested it for the reasons that could go wrong. We all wish for the perfect retirement where the market is steady, inflation is non-existent, and health issues never come up. That's a beautiful picture, but it's a fairy tale, and we can't bet your future on a wish list. You need a real stress test. And in our opinion, going beyond the standard Monte Carlo projection. This looks like asking questions like, what if the market drops right now or at the time you retire? What if taxes are much higher, Social Security gets cut drastically, and heaven forbid, one spouse passes early and the survivor has to file their taxes single for the rest of their life on less income. By stress testing these specific sort of scenarios, we can pinpoint vulnerabilities unique to your situation. And in my experience, once we have a clear diagnosis, we're already halfway to the solution. For example, for this client scenario, we see how their base plan has a Monte Carlo score of about 82%. From there, some of the biggest threats to their plan is what if inflation runs hotter by just 1% than our base assumptions? What if investments are 1% lower consistently throughout their entire retirement than projected? This gives us the idea of the vulnerabilities to their plan and what we should be doing about it now while we still have the time before we discover when it's too late. The fifth pitfall is the most crucial, and it's when people try to run the decumulation phase, which is retirement, with the same tools, mindset, and approach that built their wealth in the first place. It's this reason someone with 5 million can retire worse than someone with 1.5 million. Because you spent 30 years being extraordinary at saving, accumulating, deferring, and watching your nested grow. That skill, discipline, and identity doesn't translate directly to retirement. Because retirement isn't the peak of the mountain, it's the descent, which takes a different skill set than the climb. For example, I had a client last year, I'll call Luke, who is a 30-year engineer at Honeywell who enjoys building his own retirement spreadsheets from scratch. He tracked every contribution, return, and projected withdrawal for decades. And by the time he came to see me, he had about three million saved. In one particular meeting, he said something I hear rather frequently, which is, I've been banking this money my whole life, but I just don't know how to unravel and spend it. When his daughter offered him a trip to join their family to Italy for two weeks with the grandkids, he almost turned it down out of fear that it wasn't sustainable. But after we ran the numbers to see how much that expense in one year would impact his plan, we actually were able to forecast that it was sustainable to spend around that much on Italy or what other other experiences he wanted to do every year for the next 20 years. The solution for him wasn't more growth, but the precision of the withdrawal sequencing, the tax structure to give him the permission to spend without wrecking the long-term plan. And that's what this pitfall does to accumulators. The same discipline that builds the pile becomes the thing that keeps you from using it. And the consequences of a misstep aren't the same as going down as they were when they're going up. For example, when you're climbing a mountain, a slip is like a skinned knee. You lose a little ground, you can stand back up and keep going, and the markets will recover if you make a mistake in the accumulation phase. Your paycheck keeps coming in because time is on your side. And the descent, a slip isn't just a skinned knee anymore. One wrong step, and the slope can start carrying you off a cliff. Similarly, a bad sequence of returns in the first few years of retirement, a miscalculated withdrawal rate, a tax window you didn't use, those were bumps that turn into something that compounds and cascades into something that can really compound for the worse. The secret sauce becomes in the descent to spend, give, enjoy, and shift from building the pile to actually living on it. Unfortunately, I see too many that don't make that shift, and the accumulator mindset will quietly rob them of the years that the pile was supposed to pay for. There's one more that I want to leave you with, call it a bonus pitfall, which is trying to piece your retirement plan together from YouTube videos. If you're watching this, chances are this isn't your first retirement video, and you've probably hit the ceiling on what YouTube videos can do for you. They're good for frameworks and asking better questions, and I hope this one did that too. But frankly, videos can't build your plan. If anything in today's conversation resonated with you, there's a blink in the description to book a conversation with me. Not a sales rep, not other advisor who will talk to you later. It will be me where we can coordinate to talk about where you are, what's worrying you, and whether we are the right fit. And if we're not, I'll tell you that too. At some point, you owe it to yourself to have a tried and tested plan built specifically for you that's stress tested, tax optimized, and with someone who does this every day. That's the retirement readiness roadmap we build for clients. Before you go, I made a video that describes exactly what that roadmap looks like in action. You can click and watch it on the screen now.