Confident Spending in Retirement [On-Demand Webinar] Video

[Music] Download our complimentary guide books, checklists, and other useful financial resources at savantwealth.com/guides. Good afternoon, everyone. Good to be with you this today. My name is Joel Cundick. I’m in Savant’s Vienna, Virginia office. We have advisors at this point in many parts of the country.  I I feel privileged to be in the DC area. I’ve lived here most of my adult life and I love talking about personal finance topics. So, and this is one that’s near and dear to my heart that we’re going to be covering today. We’re going to be talking about strategies for spending confidently in retirement. Many of these webinars that we put on are are ones that kind of the team comes up with and thinks, “All right, we should have something on this.” This one is near and dear to my heart. I I   have zeroed in on spending confidently as one of my focuses and there’s a number of adviserss at Savant that feel the same way. we see that people end up with a lot of money left over at the end  because we get to work with many families and see you know for for you this is going to be what your one retirement for us we kind of get to see this movie played a number of different times and so one of the things we want to be able to do I many I started working with in their 80s and wish oh if I could started working with them in their 60s what could have been different and that’s the genesis of this kind of a webinar all right so the topic for today is is really to zero in on identifying when you’re in a position where you’re actually far more comfortable for retirement than you feel like you are. And because feelings in reality can have a wide difference between, you know, the a gap, a chasm sometimes. So, we have to first figure out as with any set of goals that we’re trying to reach, we want to figure out where we are right now, and we want to figure out where we’re trying to go. That’s what’s going to best build the arc for how to get there. I know that we’re going to have some attendees on here today that are a few years before retirement. We’re gonna have some people on here who are right at that retirement transition. And we’re probably going to have some people on here who are a few years into retirement. This is hopefully going to be relevant information for all of you as you try to decide what’s the best actions you can take from this point forward. We’re not going to look back. We’re going to look forward together. So we’ll figure out, you know, how to figure out where I am, where I’m headed, then kind of evaluating what’s the point at which there’s enough. And after that, we’ll look at the kinds of things that lead us to make mistakes at that point where we cross over enough into, I don’t want to say too much but certainly living below our cap capacity and how what steps we could maybe take towards building an ideal future from there. So how do we evaluate where we’re at right now? There is a journey toward toward retirement that all of us are have walked or are walking and everyone starts from a place of not enough. You come out of first come out of school. There’s it feels like a maybe even an imaginary point of retirement in the future. And so we start saving and many get in a habit of disciplined saving from a young age. That’s a good thing. And there’s a lot of positive reinforcement may come from parents. It may come from just internally trying to be the best you can be. But there ends up being this positive virtuous cycle of reinforcing that, oh, you saved. Good job. Well done. Check the box. And there’s a point at which maybe we reach to, okay, we’re we’re we’re in a good habit. We’re in a good pattern.  we got enough. We’re or we’re going to have enough. For some of us, we’re going to then cross over and we’re going to kind of hyperdo that checklist and say, “Oh, no, no, no. We’re not enough yet. We got to get to more and more and more”, and eventually at some point I ask some some of the people that I’ve talked with, you know, when is the party? We look, I can see there’s a lot of of funds here. When is the party? Now, where you’re going to be on this path is highly personal. I can’t give a dollar amount at which by age. age. I mean, you’ll all of you undoubtedly have clicked the articles that say here’s how much you should have at age 30, at age 40, at age 50, at age 60. , I am not a fan of rules of thumb. Rules of thumb completely ignore the reality of many people’s lives in that some people are going to spend far less than others in retirement. Some people are going to spend far more, some people are going to have access to a pension, some aren’t. Some are married with two social security benefits, both from work history. Some are single and going to have one source of income in retirement and no pension. All of those numbers are going to result in very different paths towards what is enough. But what I can tell you is that as you seek to gain comfort either in the future or at the point of or years into retirement, for many of us, there’s going to come this question of do I have enough? Do I feel like I have enough? Why don’t I feel like I have enough? And one of the lessons I’ve learned about money that is counterintuitive maybe, but it’s very true is that if you don’t feel like you have enough money, more money is not going to be the answer to that problem. Not not in the context of of approaching retirement, right? If you feel like, oh, I will be happy when this is true with incomes in in in our country. There are studies that have come out that everybody generally thinks, “Oh, everything will be okay once I’m earning 20% more than I’m earning right now.” This is very true with retirement as well, at least for many of us. We can get into a pattern where we’ve been disciplined at saving and we say, “Well, just one just one more year or oh, let’s let’s let’s do a little bit more savings, you know, than we did last year. I know I know we we’re doing more, but we should save even more.” And the answer here is not going to be save more at at a certain point. Why is that? One of the big reasons is because the heavy lifting on saving for retirement is done early on. It’s not done in the last 5 years prior to retirement. We actually just did a a new provision in the tax code now where folks with retirement plans from age 60 to to age 63 can do a supercharge save for retirement that you know a catch-up provision where they can save extra funds into their retirement plan and and that’s great. I I I love that you know we’re we’re focusing on people being able to save. However, you talk about a point of saving at which is going to have the least impact to the success of your retirement. It would be saving from age 60 to 65. That is a time frame when really what you’re going to have put put in is mostly what you’re going to be taking out, right? At some future point, you’re not going to massively increase the amount of money you’re going to be able to spend in retirement by saving a massive amount in the last couple of years. Generally, there’s going to be somebody who sells a business or somebody who has substantial stock options that maybe we’re having a different conversation. But for most of us, the heavy lifting is done early on. So, how is that done? It’s done by developing a pattern of saving a lot. And the flip side of that coin is that when we’re saving a lot, we’re keeping spending low. And that’s a very virtuous cycle again, right? The idea of saving a very high percentage of what we earn and keeping our expenses low is a great pattern.  I I tell people you who are 10 years away from retirement, hey, that’s a place to focus in on. Let’s think about maybe keeping our savings high and keeping our spending low. Why? It burns the candle at both ends, right? We we end up saving more for retirement. We get used to living on less. And so that can be good to a certain point, but there’s a point beyond which it’s all of a sudden becomes something that self-reinforces and and maybe without any need. So how do I evaluate where I am on that? Am I am I too far? Am I not close to enough?  the way that we best do this is with retirement scenario modeling.  and I would say that retirement calculators on the internet do a fair job, but they’re going to miss a lot.  and I’ll tell you a few things that they’re going to miss. One is they’re probably going to assume the same investment returns for the future that have happened in the past, which is probably not the right assumption. They’re also going to assume that whatever spend you have at the the year that you retire, you’re going to inflate that with the CPI every year throughout retirement. That’s also, if you look at the best retirement research, not true. In actuality, people who retire tend to have a lower inflation rate on spend than regular workers. Their expenses, the expenses of retirees are lower than workers earlier in their earning career.  they’re also going to not spend as much at some f future point in their lives. There’s going to come a dip at which they don’t want to spend as much as they pre previously did. For some people that’s going to happen at age 75. Some it’s going to be age 80. Some it’s going to be age 85. I don’t know. I mean I have I have 90-year-olds who are going out on big vacations. So it’s not to say it happens to everyone, but all most people are going to have this dip in their spending at some future point. And the danger to that is in in the context of retirement calculators is you could plug numbers into a retirement calculator that tell you you need to have a certain level of savings that actually if you look at the true spending arc of the like probability of your money, you’re you’re being forced to spend too little in your 60s and 70s in favor of an 85year-old being able to like maintain the same level of spend that the 65year-old spent, but the 80 or 5year-old doesn’t have the interest. And and I’ll give an example of this, you know, and someone I knew was in a situation where well, they were in their early 80s, and we went out to lunch together and they talked about being in their 20s many years ago with their sister and standing outside the Ritz in Paris.  they they traveled to Europe on a shoestring kind of with a group of friends and and they had stood outside the Ritz in Paris and she said to her sister, “Someday we’re going to stay in that hotel.” And I saw the twinkle in her eye and I saw that wow this was something that was precious and important to her and I said well why don’t you go do that like there’s ample funds here why don’t you go do that and and her response was h I don’t really feel like doing that anymore and that was a classic case of there was plenty of money left over and she’d reached a point and she was okay with it right just to be clear that that 80 plus year olds tend to be about the happiest class of of of people if if you do studies right they tend to be very comfortable satisfied with their lives, but they also looking back, it would have been nice if somebody had told them at age 65, hey, you actually have enough to do some more now, and this is the time that you’re going to want to do it. So, when we plug into a retirement calculator though, we’re going to do a base scenario, at least the way that we think of it at Savant, we’re going to do a base scenario that says, what do you think you might want to spend in retirement? We’ll check the assumptions for health healthcare expenses and what the likely inflation rate is on healthcare.  the likely inflation rate on other planned expenses that you have, when you’re going to be buying cars, how much you might expect to need on   for family members, and then we’ll plug that all in and create a base scenario. And sometimes it comes out way above the probability of success zone that it ought to. And people sometimes feel Monte Carlos simulation is the tool that we have used adopted as a as a profession on evaluating whether someone has enough to retire on. But this is not a test you want to get 100 on.  it most software it doesn’t go to 100 by the way only goes to 99. But you want to actually be somewhere between 80 and 90%. And the reason for this is some some people would even argue 75. The reason is the scenarios above 90% in a Monte Carl simulation are highly unlikely. In fact, the worst 5% the 95 plus scenarios are all worse than the time period of the Great Depression. And it this is going to happen when you truly randomize data. you’re going to end up with a very long series of bad years that is not accompanied with a a great year afterward that you look at that and say, “But that’s not how markets behave.” Markets sure sure have vicious downs. They tend to be accompanied by strong upswings. And also in the middle of those times, people don’t tend to want to spend as much as they do normally. Everybody kind of naturally pulls back on their level of spending in a time period like that. And if we don’t properly account for that, then we’re going to shoot to a plan for a highly unlikely scenario that is basically going to overfund the estate goal. Whatever your plan is for your estate, you’re going to leave more money than you intend to leave to either your heirs or or the charities of of your choosing. So then we’ll run other tests, right? Maybe a travel and gifting scenario. Hey, how about we if we traveled more and gifted more to kids?  we’ll run a scenario because many people are concerned about well what would be the impact of having some kind of long-term care need for an extended period of time  and especially happening earlier on in retirement because that’s where the risk point is there right so we can run scenarios for that and test that  and then maybe end of life care at not just age 80 but at age 85 we can do any number of versions here there’s the average version of Monte Carlo simulation and then there’s you’ll see here in the the right two columns that I’ve highlighted. There’s also the bad timing scenarios. What is that? Many pieces of retirement software will not just give you the average. They’ll then say, well, what if instead of running that thousand scenarios, we just say we have a very bad market year in the first year of retirement and then we have a pretty bad market year in the second year of retirement and then we never really make it back from that. We just get average return from that point forward. That’s one of the common stress tests of a portfolio. And so then you look at well what what are what are the outcomes there? How much do I end up with in scenarios like that? Now all that together can end up giving us a pretty clear picture of what would be an acceptable level of spend. And for some people that spend number is going to come in and say, “Wow, that’s that’s all I I I I maybe I need to work more.” For some people it’s going to say, “Oh, okay. That’s about right.” For many, they’re going to say, “Oh, that’s too much. I’m not going to spend that much money.” And that’s where the interesting conversation materializes because that’s what you’ve saved for. That’s what all the work was for, right? Was to get to a point where you would be able to do what you would like to do. And so to look at a number and say, “Oo, I I just I don’t I’m not going to spend that money.” It’s not that it’s not okay. You can, but but you need to be conscious. There there is there are retained risks that are unconsciously retained because we don’t know and then there’s retained risks that are consciously retained. And I’d far rather be in a situation where I’m sitting with we we find out in the analysis that hey, you can afford to spend a lot more than you do and you choose to spend less because you want to leave a lot of money to charity at the end of your life or you want to leave a lot of money to nieces or nephews or children at the end of your life. And then you’re consciously making a decision rather than passively retaining a a what is it’s a positive risk but it’s nonetheless a risk. It’s an outcome that is outside the the the realm of normaly of what we’d like to see. Okay. So, one of the things we’ll see in folks who end up saving too much is that they add on additional layers of conservative assumptions to their plan that end up artificially telling them that they don’t have enough. So, one of the things is they say, “Oh, I’ll need to spend less in retirement than I spent in my working years.” Maybe, but maybe not. There’s many I in indications in some of the plans I I I do that actually someone can afford to spend more than that what they were spending in their working years. They can give themselves a raise to retire. Mind-blowing, totally counterintuitive, but in many cases true. And when it is true, it’s important to figure that out. Okay. Another thing is they they give themselves a rule of, oh, I need to have my mortgage paid off in order to be able to retire. you you you can’t you that’s not necessarily true. There’s many people for which a mortgage in retirement is going to be an acceptable expense. They could afford it in their working years off of what they were earning if they can continue to draw from a portfolio what they were taking in their working years. Then they’re absolutely able to continue paying a mortgage in retirement. I don’t know if that’s in your scenario or not, but it’s worth testing, especially before you get hyperfocused in your late 50s at massively paying down a mortgage, which is significant balance out of a false rule you’ve given yourself of I can’t retire until the mortgage is paid off.  another thing we have already talked about is your spending level is not going to stay constant in retirement. So, don’t plan on saving a lot of money by by scrimping early on and having extra money for for someone who’s not going to want to spend. And don’t overestimate long-term care costs. There’s nothing wrong with being realistic about long-term care and the bad things that can happen. In fact, we we’re big believers that Savant. We have software that helps us evaluate someone’s situation where what their personal circumstances, their health, their age to determine a reasonable estimate of likely longevity that we can then incorporate into our retirement planning analysis. This is great. But what people do if they see a number and they don’t know what it is, they can randomly assign a massive number to that. And in in reality, we have to come down to to to think what is the true cost of long-term care. For example, most of the times that you’ve got a long-term care expense, you are not going to be spending on other things anymore. So, some of the money that is going to come for long-term care is just going to be a diversion of money from other sources, other other   spending goals into a long-term care need. Right? Another thing is that it’s not going to go on forever. So we let’s sure let’s plan on the average stay in long-term care is 2 and a half years. Do we want to plan for five? Okay. Do we want to plan for 10? Maybe we’re getting to the point of being overly conservative. And a third element is we think, oh well, we need to plan for long-term care and we need to leave the house to the kids. The house is largely in many financial plans that we’ve done not a source that we draw on for funds for retirement. And as a result, it acts as a very reasonable backs stop for large long-term care expenses later on in life. That if we’re not going to incorporate that into the plan, then we’re being unrealistic about what we truly have accumulated in terms of wealth. The house is no doubt a part of our net worth. Okay. So according to the employee benefits research and this this is institute, and this is a busy chart but let me break it down for you that the the summary of what it’s trying to say here this is telling you how much of retirees assets are left after 17 to 18 years of retirement. And you can see on the the left side here, you know, certainly people who started with the lowest level of wealth are most likely to have less than 20% of their money left over at 17 to 18 years into retirement. But very surprisingly, is that the largest category for all classes, even those who started with the lowest wealth, is they have more than 100%. In other words, they have retired and 18 years later they have more money saved than they had at the point of retirement. and and it’s a huge class, you know, that that have at least 80%. And 17 to 18 years into retirement is kind of reaching the point where we’re not likely to spend that much anymore, right? So, this is very important for us to consider at least like where are we going to stand relative to this? So, why why do we end up building these layers of conservative assumptions for us and feeling like oh, I can’t spend money. , one is I I need to have enough money for future medical costs. We discussed that. Another is I need to make sure that my children are going to inherit funds. We have to examine that assumption. The strong probability is that those children are going to inherit those funds at close to their retirement, right? There will likely be close to 60 or so when they inherit those funds and their retirement may be well determined at that point. And so what we’re doing is in essence kicking a wealth can down the road to some future imagined generation who will no doubt spend that money. Right? I I I always tell people to fly first class or else your kid kids will. Right? They will not feel the same level of attachment to the money that you have accumulated. But most of them most of those children when I talk to them agree hey I want my parents to use that money for them. They sacrificed many years for me in their lifetime. Gave me so much. I want to make sure they are doing what they want to do first. Okay, they another reason is people say, “Well, I don’t know what’s going to happen in retirement. I don’t know what surprises are out there.” And and so let’s quantify those. Let’s quantify what surprises may occur. All right? Figure that out and plan for them appropriately, not end up creating some imaginary huge number that they might be. Because when numbers are in our head, we don’t tend to be very good at human beings at envisioning. Okay? Our brains did not grow to be really good at quantifying general money costs. We’re really good at quantifying, at least worrying about risks. That’s something we’re very good at to worry about risks and and and as a result, we kind of tend to blow them out of proportion. What we find the best answer is to that kind of issue is to get it down on paper because once it’s down on paper, we are good at analyzing and seeing numbers and seeing oh okay this makes more sense. So sometimes data is the answer to overcome layers of conservative assumptions. Another is well what if markets drop substantially and one of that that’s a double concern in a way right you’re worrying about something that is already worried about in the software because when we get to an 80 to 90% probability of success range there are a huge number of negative market outcomes associated with those scenarios we’ve already built into the plan for negativity and one of the things I like doing  as I look through a retirement  analysis is I look at the 90th percentile scenario, just how much money is left in the 90th percentile scenario. And then I I tell the folks I sit down with, hey, let’s give equal playing time to the 10th% probability scenario. And usually that 10th% probability scenario has some ridiculous amount of money left over. And from true statistical probability, we need to give equal time to each of those ends of the spectrum. And that can help us put more in place.    are concerns. Are they justified? Are they excessive? One other is that people feel like they’re going to be comfortable if they’ve saved this level of either cash or investments. So, and then this number changes, right? I I’ll sit down with a young couple and they say, “Well, I want to make sure that we have $10,000 saved.” And I’ll sit down with somebody in their 40s and they’ll say, “I want to make sure we have at least $50,000 in the bank.” and I’ll sit down with somebody in their 60s and I’ll say, I want to have at least 200 or 300 or $500,000 in the bank. It’s a goalpost that keeps on moving. And we have to question some of those assumptions and see, is that correct? Was that a good assumption to use? Okay. And and that’s true with a portfolio, too. I’ve sat down with folks who have told me, I will have enough to retire when I have $3 million. and I will ask why is that $3 million the number or five million or 10 million and they won’t really have a reason assigned to it. They’ll just say well that that just feels like that’s when I’ll have enough. We need to get out of the world of feeling and into the world of data because sometimes someone works four, five, 10 years beyond when they really need to work aspiring to have a certain level of savings that they never really needed to have. And when they get in that kind of scenario, then what they’re doing in essence is those last years of work, they’re working for free. They are working accumulating money that they are never going to spend in their lifetime. And if we can question those assumptions and apply data to it, maybe we can get to a better place. Okay. And then the other thing, and this this is the the the irony of ironies, is that sometimes people feel like they need to save when they retire. If if if their their adviser is sending them $10,000 a month to spend, they need to put $1,000 of that per month aside. This comes from that very good, very virtuous habit of saving a portion of what you spent. That was excellent during your working years. But everything changes in your retirement years and the lessons that you learned that were really good at developing the wealth that you’ve got become really damaging and and allowing you to preserve and and steward the wealth that you’ve accumulated. Very different stories. Okay. The muscles that we use to accumulate funds are very different than the muscles we need to learn how to use to spend funds. And there’s many ways that we we can approach this to try and get around that. and and we’ll go into that next. Okay. So, how do we go about building an ideal future? I’ve said, and Savant thinks this way, there are surprises that come every step of the way. When we’re talking about saving for a retirement goal, what we know is that that goal is wrong. Even if we’re three years out from retirement, that goal is wrong. Why? Because life is going to have surprises everywhere along the way. And so some of them are positive ones like you know a sale of a business or an estate being left to us. Some of them are negative. Somebody dies prematurely. There’s divorce. There’s unexpected large investment losses. As I said before, one of our goals is to quantify the things that can go wrong to help you feel more comfortable that things that that you have accounted for those that you have insured in essence self-insured against those potential issues that you are financially independent and can absorb those kinds of hits. So where what do you do then to go about trying to build that ideal future? If you’ve if you’ve if you’ve believed what I’ve said so far and you’ve said, “Okay, maybe yeah, I need to think about additional ways of spending and and not keeping everything so close.” The first exercise that I like for people to do is to map out an ideal day, an ideal month, and an ideal year. And what do I mean by that? I mean to zeroase my my mind. Forget about how much money I have. Forget about how much money I spent last year. Maybe this comes from my days as a hotel director of finance. We had to zero base budget every year, but I like zerobasing. And the idea is, let’s just say, hey, if I had no commitments, no responsibilities tomorrow, what would be my ideal day? What would I do? What time would I get up? What what would my meals look like? What would I what what kinds of activities would be engaged in? Would I read? Would I hike? Would I fish? Would I knit? you know, what are the things that I like to do most that if it was just one perfect day, what would I do? And then we do the same exercise for a month just because there’s some things that we would not do every day, but we’d like to do over the course of a month. And then we do it for a year to capture seasonality. How many weeks would I like to be traveling? Where would I like to go on those trips? Who would I like to be with? Who would I like to travel to see? Would I like to be by by myself and see no one? And there’s no right answer to this. This is a very personal exercise. If if we’re in in a a a marriage relationship, sometimes we’re going to have to compare notes and see like, all right, how can we merge this and and come up with something that works for both of us? But we have to start with a concept of what would I do ideally and throw out the idea of well, I would do this, but I don’t have enough money. That that thought can’t be in the brain while you’re thinking of this exercise because then we have to just look at that and say, well, is there enough? Okay. And that’s a very interesting exercise with with fascinating outcomes. So then what what else can we do? Well, we can engage in activities that stimulate our brain. There are things that we can do there. There clubs we can be a part of that that we’re we’re learning together, book groups, right? We can go to universities. Many states will allow retirees to audit classes at their state universities for free. So some of these aren’t even going to cost any money. But maybe you want to go back and earn another degree out of interest. That could be very productive. If if you want to go back to the worlds of tests and essays, more power to you. That’s probably not me, but I know that there are people out there that want to do that. And it could be fascinating and exciting. We can gift to our children while we’re still alive to see them use those funds. What a benefit to to fast forward money that was otherwise going to go in an estate and get it to kids and see them use the money for productive things at a stage of life at which probably they’re going to need those funds more than the point at which they stand to inherit them at some imaginary time in the future when they’re close to retirement themselves. So that can be to help on education. It can be to help with purchasing a home. It can be help to help them take a big vacation that they could never afford to do on their own but would be beneficial to their family. In fact, while we’re at it, let’s go to the one underneath it at that point. Spend money on things that make the experience better and on experience. We’ll cover both of those at the same time. Spending money on time, doing things that we enjoy, going places, we enjoy, carries what Bill Perkins, which I’ll talk about him a little bit later, refers to as memory dividends. We get to anticipate them, yes, before we go do them, but then after we do them, we get to enjoy them for years to come afterward. And so that’s true for us ourselves. It’s also true for maybe making memories with families where we can go out and spend time together and and have our children and grandchildren know us better and get to know them better. How much more value could that have potentially to a life than a pile of cash left to someone after your death? That could be very meaningful. All right. Spending money on experiences tends to be a high return way of spending money. we can give to meaningful charities and and and some people don’t have charitable intent and that’s okay and this is not giving to charities to save taxes although certainly if you want to give meaningful to charities  you can work with a financial adviser to find out the way that you can save taxes to do that I’m not minimizing that but the idea of thinking of charities you would like to receive funds and then seeing them use those funds and doing good in the world while you’re alive and get to enjoy it rather than in an estate plan where the the funds will be use, but you have no idea. You’re not there to see it. Okay, I’ll cover two more things. One is spending money on things that save time. If you’re retired and you have plenty of money and you’re going out to mow the lawn every Saturday and you love it and you look forward to it, I am not trying to mess with that at all. But if you hate it and loathe it and can’t stand the idea of it, but you can’t bear the thought of paying someone else to do it for you, that’s an assumption that I’d ask you to question. cleaning your home, washing your car, different activities that you are doing that take time that you could pay someone else to do for you if you don’t like doing them. This is a good use of funds because time is the most limited commodity, right? And the last thing that I’d say, which is a very interesting dynamic of people closing in on retirement, there are people who decide that they must stop working because they’re not supposed to work anymore. The studies say that they’re supposed to retire at X age and then what we find actually is that when they retire they didn’t want to and they would have been happier to keep working for an extra couple of years or they would have been happy to continue working part-time for a number of years but they felt guilty like they should stop because of some imaginary rule of thumb and they stop they stop working prematurely for them not because of the money because of life. There’s another sub subset that that we got to watch out for as well. People who continue working out of fear because they feel like either, oh, I don’t know what I would do with myself when I would retire, or oh, I don’t think I have enough money. Topic already covered. But if we’re saying to ourselves, I don’t know what I would do with my time. One of the best things that we talk about together when we’re sitting down is, hey, what could you be doing instead? What would you like to be doing instead? Right? Is there enough here that you shouldn’t worry about this? Do you have an arbitrary savings goal in your head that really is irrelevant that you have for some reason you think you should have $5 million and you only have four? But when we look at the arc of your spending, we you would never use that extra million dollars. So this keeping working out of fear, another another problem potentially is not even the money. It’s the idea of well, what would I do with myself? And if you’re worried about what to do with yourself, then we we can have other conversations about practicing retirement, about spending a couple weeks in a place you think you might move like to move to in retirement, but you’re not sure. And living there as a retiree, not as a vacationer, not as a tourist, and seeing what that feels like. You think you want to retire to Costa Rica, but you don’t think you could ever do that. Go rent a place in Costa Rica and see what that’s like before you do it while you’re still working. That’s okay. dipping our toe in the water before we actually try something out can be very helpful in eliminating fears that we really don’t need to have. Okay. So, I hope that you’ve understood from our conversation today and I I’ll have a little bit of time for questions. Please, if you have them, post them into the chat the Q&A right now and I can answer them. But what I want most of all is for you to understand that retirement and spending is a very personal exercise. rules of thumb are largely irrelevant, especially for those who have saved a lot of money or those who have going to have a very large pension and social security and are planning on just living on those amounts. I work with federal employees. This is true very often for them. They have saved a lot, but they’re only planning on living on their federal pension and their social security, and they’re never going to spend this other money. That can feel like great, a win, a victory. I’m not trying to minimize that, but it could also be a problem, right? It’s the it’s the other side of risk where you’re spending too little relative to what the party that you’ve saved for. There are some resources that I love that that you can reference after this call. Three books I’ I’d like to bring up. One is Victory Lap Retirement that was co-written by our own Rob Morrison at Savant. It talks about spending time at the end of your working years doing the things that you like most about work and cutting out the things that you like least. if you want to experiment with this this partial retirement.  that’s a great book. Another one is Die with Zero. Now, Bill Perkins is not a financial adviser, and there’s no doubt that there’s things I disagree with in in the book. I I list this because it’s so powerful in helping people shift mindset from, oh, I can’t ever spend to realizing, oh, there’s places I can spend. And he talks about a number of the things you can do. Memory dividends is one of my favorite concepts from that book. Spending years of your life enjoying looking back at the fun things that you did with with your significant other, with your family.  he actually, I will tell you, doesn’t say in the book to die with zero. He actually says just like I would say that there’s a reasonable amount of money that you need to keep back in reserve for unexpected living too long long-term care expenses, things like that. And the other one, anything that Morgan Hassel writes, I would suggest that you read. He he’s had many great articles over the years. He’s now turned to writing books. The psychology of money is a masterful work. We read it as an office team a couple of weeks ago for a book club and had a great discussion about it. Morgan Hustell helps you shift your mindset on money because there are a lot of problems in the psychology of money in this country. So, a few good resources for you to look at.  I’d encourage you, you know, if you have questions and you’d like someone to look at your situation and kind of see, well, where where would I stand here? myself, my personal situation. I know I’ve heard in general, but what what what do things look like for me? Feel free in the chat, we’ll post a link to be able to schedule a free 15-minute introductory call with an adviser at Savon. We would be happy to talk you through this. This is this is why we do what we do. This is the joy that comes from our profession is helping people understand what they are able to do with their life. We’re not the ones who created the wealth. you’re the one that created the wealth, but we get to tell you the fun things you can do with it. Okay. So, let me get open the floor for questions here and I’ll close out the presentation so you can just see me for a little while. All right. And let me take a look at the questions that have come in. Okay. We have three different annuities. When is the appropriate time to start drawing income from them? Okay.  that is a personal question. It’s a great question because a lot of people just end up deferring and deferring and deferring their annuities all the way until the end of their life and they’re leaving an income tax problem for their children because unlike many other kinds of assets that get a step up in basis at your death,  they don’t get a step up in basis on their annuity and there’s income taxes to be paid. So, that’s a really good question.  and it’s going to be personal. It’s going to look at well when are you likely to need to spend the most money and what is the appropriate base level of spend that you should layer in be so that you can know that you can count on that throughout retirement and then have your savings be extra. So that’s a really good exercise to go through. I I I wish I could tell you in this setting you know what the right answer is but I can tell you there is a right answer that you can come up with there.  it’s a comment here. Looks like it is helpful to run the numbers for the state you might be thinking about moving to because of tax differences with your current home state. Absolutely. And that’s not just about income taxes, that’s about property taxes, that’s about sales taxes, that’s about gas taxes. There’s any number of things that are important to compare, but one of the most important things to compare when you’re considering moving somewhere else is the friend network that you have in the location that you live and how you’re going to reconstruct that friend network in the destination you’re going to go to. That is an undervalued asset that people don’t consider oftentimes in their financial life. Okay. When you consider what fun things we can do, does that consider annuities and life insurance? Absolutely. Yeah. Annuities and life insurance should be factored into that conversation. Sometimes though, we need to look at life insurance policies and see are these policies going to make it to the end of our life? because of the low interest rates of of last decade, some of the models that were initially built on a life insurance policy mean that insurance is actually going to expire unless we make some changes to it. Maybe lower the death benefit, maybe change some other terms, potentially add in a long-term care benefit to that. That’s something we can do with life insurance these days. So, yeah, absolutely. Those have to be factored into the conversation. Um, okay. How do I know if I have too much and can spend more? Yeah.  so the the concept there is just making sure that you have captured in one place your full net worth all of your assets all of your liabilities looked at what your planned expenses are and then look at how much how the two compare and that’s going to be done with financial calculators or sitting down with an adviser. That that’s the best way that that you’re going to get that. And I’d say, you know, we we’re going to get to the point maybe someday where AI does that all for us. But AI is not going to understand a story and is not going to be able to communicate at this point what you can and can’t do like a human being can do. There are so many unknowns about the future which makes the planning process frustrating. Practically speaking, how much can we count on an 80 to 90% or any other number confidence level being accurate? It’s a fair question. I think you have to look under the hood at the actual return assumptions involved with those 80 to 90% scenarios. They’re very low relative to historical standards. I mean, if we look at the last 75 years, a 60/40 portfolio of the S&P 500 and intermediate term government bonds, I think the lowest earn annual return for a 30-year time period has been 5.6%. It’s a 20-year time period, but that’s that’s a just it’s a much bigger number than we think. Now, we can make a conversation about what does the future look like? And I sit down certainly and I talk about, well, is it a a 100% probability that the markets are going to continue to go up? No, it’s not. That’s a there’s a nonzero probability that the markets won’t continue to go up. Okay. But that said, how do you build an investment portfolio that is going to account for that? That’s a highly personal conversation that I’d encourage you s to sit down with an adviser and talk about. But the real issue you encounter is how do you build that into your model? What would you do right if I in that case and what kind of investment portfolio would still get you to your goals? Um how do I prioritize the places to spend if I want to shift toward using okay more funds? I’d go through the ideal day exercise. I’ I’d really look at that in more detail and kind of say all right what would I like to do most? Again, very personal question and and really try and wipe out all prior assumptions and just look at what you really enjoy doing. And if you’re not sure, sample, try out. This is something I’m doing at my stage. I mean, I may not looking like it, but retirement is not the farthest away for me. And I am spending time taking time away from work, not going to see sites, but going to see what would I like to do if if I had nothing else that on my schedule, what would I do? All right. And and that’s there never too early to start practicing that at some point you lose one social security because one spouse dies. So to keep a lifestyle at some point what you pull from investments will go up. So what age do you plan on death to figure out when the portfolio needs to give you more money? I just plan on on on on um well my base plan plans on both spouses living for a whole long time. But I will also say that we run scenarios of somebody dying early, right? that that we we we should test that because you may need more, you may not need more. It depends on, you know, generally the the the here I go using a rule of thumb. When I say rules of thumb are inappropriate, the the general thinking is 75 to 80%.  is the a continuing spend when one spouse passes away. I will say in practicality, there tends to be one spouse that spends quite a bit more than the other spouse. And so that may not be equal. So, what you’re really going to want to do is test a scenario in which one of those sources of income cuts off early and what happens? And and the last question is, is the 4% withdrawal rate still reasonable today? I love that question. I’d actually encourage you to Google, it’s a very recent, it just last week and I was reading this article, Bill Bangan, who was that’s ben who was the author of the original 4% rate study. He did that in the journal of financial planning in I think 1992, 1994. Bill’s still around and he’s still writing and actually he has increased that to a higher level. I know I’ve seen articles in the Wall Street Journal saying no that level of spend is too high. It should be lower. So the jury is out on that. But again, this is something that’s a highly personal conversation. I would say in actuality it depending on your pattern that you’re planning on spending the 4% level might not be enough for your beginning of your retirement. Has a lot to do again with that spending arc. Is that going to dip in your 80s and increase? So, I can’t answer that, you know, generally for everyone, but I’d encourage you to sit down with someone who can speak to your individual situation. Getting data is the best solution for overcoming some of these unfounded concerns in our mind. All right, thank you for being with me today. It’s been a pleasure. I love talking about this subject. I’m sure I’ll talk about it again. I hope to see you soon. And please feel free to reach out to us either at sanantwealth.com or let us know in the survey that’ll come after if you’d like to talk with someone. Have a great day. If you enjoyed this webinar, visit savantwealth.com/guides and download our complimentary guide books, checklists, and other useful financial resources.