So, You’re a Decade From Retirement

Today, we'll be discussing what to do if you're a decade away from retirement. Hello and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting. If you'd like more info about what you hear on the show today, give us a call at 586-226-2100 or visit us online at summitfc.net. While you're at the website, be sure to check out our podcast page. Check out all the past shows. You can subscribe on Apple Podcasts, Spotify, or Amazon Music. So saving for retirement is one of the biggest financial challenges that are facing Americans. And for a lot of people, it's a little bit more exciting or a little bit more stressful than all these wonderful market swings that we've had this year, or maybe even more important than inflation. So today we're gonna be going over what to do if you're 10 years, To go here before retirement. But before we jump into that, let me introduce our co-host, Tony Shore. Tony, once again, you have dropped the ball and did not get me a present. This is our nine-month anniversary of doing our show. This show's been growing for nine months. We birthed a baby, a baby show, I guess. We named it Money Talks. So, yeah, I guess we're going to have to wait until the one-year anniversary before we sort of celebrate this formally, right? We're not nine months.

I'm a little hurt, Ken, that you don't realize the most amazing gift that I have given to you, and that's me. Your gift is knowing me. That is. Put a bow on it, put it under the tree. Your gift is knowing me, Ken. That's... And it's the gift that keeps on giving, Tony. The whole year round. That's the gift that keeps on giving the whole year round, Clark. Yes, it is. All right. Well, yes, we're not quite at Christmas time yet, but yeah, I guess we'll wait until next year. We'll wait until we, let's get a year under our belts in this relationship before we start the gift exchange. All right. That sounds good. Yeah. We got a mid February, so you got some time to shop. Yeah. Plus, plus you need, you're going to need that money to spend on your brother, Jim, your brother's gift. I mean, Jim, he deserves so much, right? Also the gift that keeps on. Yeah. Jim is yeah. The Jim jokes, the gift that keeps the Jim comparison. Ken, why can't you be more like your brother, Jim?

That's just the echo chamber in this office every day, Tony.

It is not. Ken, you're the top dog. We all know it. You're the man there at Summit Financial Consulting. So, Ken, you're a decade from retirement. What do you do in those last 10 years? What do you need to get done? What are we talking about here today?

Yeah. Just for the record, I think it's an equal dog show. We're all great dogs.

Right. I know you're trying to clarify. You're like, Tony, you can't put that out there.

No. Well, I studied from 2000.

Your dad, your brothers. Yeah.

Yeah. Thanksgiving will be so awkward if. We walk away saying we all we all work our tails off here. That's right.

Well, I give you so much. I give you such a hard time about Jim being so far superior that I thought I'd try to give you some accolades.

Yeah, well, I appreciate that.

And the whole thing about Jim, my joke teasing you about Jim, it's really I mean, looks aren't everything, Ken.

That's true. Yeah, that'll help me, you know, just feel better about myself.

I'm writing in my diary about today's podcast. That's what I'm here for, Ken, make you feel better about yourself. You know that. I might be failing miserably, though, today. Seriously, though, where do you begin here? You're a decade out from retirement. What do people need to know? What should we be doing? I'm about that. Not quite. I'm not quite a decade out yet. Or maybe I am.

Yeah. I'm about a decade out. We'll figure it out. Yeah. Maybe after the show today, you'll know exactly how far you are. Yeah. Yeah, I'll listen. I'm taking notes, buddy. All right. Sounds good. I found a go banking rates study that found that 30 percent of workers have absolutely no retirement savings whatsoever. And 40 percent are currently not contributing to a retirement plan at all. So that's a really big percentage of the United States. Population that's just sort of at a standstill. Pensions are very rare. A lot of people don't have that safety net. We've done shows about social security. We know that there's going to be some money there for social security. We just don't know exactly how much it's going to be or whether it's going to be reduced or not. So here's the good news. Even if you only have 10 years left until retirement, even if you're just getting started saving for retirement, it is never too late to build a strong financial foundation and start working on closing that savings gap, start heading in the right direction when it comes to retirement. So that's our message for today. It's never too late. We'll get this ball rolling the right way.

Right. There you go. It is never too late. And even if you have, you know, 10 years left, that's plenty of time. It's not too late to build that foundation. And you're right. Pensions. You know what I like to say about pensions, Ken? Pensions have gone the way of the pension. And the reason I say that is the old saying was pensions have gone the way of the buffalo, you'd say, right? That was the phrase that's gone the way of the buffalo or the bison. It would be the proper term, but we say buffalo, I guess. That's gone the way of the buffalo. Well, they brought the buffalo back. I mean, there's more and more Buffalo all the time. I mean, Buffalo are actually thriving and being raised in the Midwest, in the Dakotas and in those areas. So I think the new phrase should be it's gone the way of the pension. If something's like, you know. You know, if something's like, uh, we don't use it anymore. Yeah, disappearing and not coming back. Disappearing and not coming back, like Kodak, uh, it's got, it's gone the way of the pension. Kodak went, and camera film went the way of the pension. Yeah, right. I'm trying to get that started. You're gonna help me. That's, I'll keep fighting the good fight with you. It's worth the battle. So, okay. So traditional pensions are rare, but what should we do? What's the first step people need to take then?

So just figure out exactly where you're at right now. So total up everything that you have going for you. Look at your IRAs, look at your 401(k)s, look at savings, CDs, money markets. Just everything that you have going on. Typically, when we're looking specifically at retirement, we do want to take those emergency funds and sort of set them aside. If you don't have an emergency fund, watch our previous show about it. It's a really, really good show explaining how much you should have an emergency fund and how to build that up. So when we're specifically doing this retirement analysis, we just want to look at all retirement assets and just, you know, let's focus in on what you have. So the next step is just identify what your income sources will be during retirement. So this includes money that you could pull from savings or investments, social security, pensions, you know, Buffalo money, potential part-time work. You know, we could use our Social Security maximization report to help you determine when you should turn on Social Security and what that'll look like. So step one, figure out what you have asset wise. Step two, figure out what you have going on income wise. Yeah.

Well, and you're right. Figure out where you're at and you're probably going to need help with that. I would recommend working with a trusted financial services professional, someone like yourself, Ken, and the team there at Summit Consulting, right?

Yeah, yeah. We would love to put a social security maximization report for any of our listeners or viewers. It's great. I just did a report yesterday with a client where the most fun part of the report, Tony, is figuring out how long you think you're going to live. So it's like you figure out this is where my grandparents and parents lived or my parents are still living or whatever it is. Right. And then we figure it out right down to the month. Wow. When you're single or if you're married, sometimes when you're married, we can do some pretty neat scenarios where one turns on their own. Then they start piggybacking on their spouses. So there's lots of exciting options out there to consider. We'll help you figure out mathematically what makes the most sense.

Yeah, I think that's great. So what's next? What's the next step in this process?

I would say it's the most fun step, and that's just defining your goals. So let's put our fun glasses on and figure out exactly what we want retirement to look like. How much are we spending on travel? Are we buying a vacation home or are we downsizing? Do I have bad knees and now I need a house with only one story? Your lifestyle is ultimately going to determine what your budget looks like during retirement. your retirement. And then we'll also take a look at health care costs. Those can a lot of people are surprised to hear that health care costs can be up to one hundred and sixty five thousand per while during retirement.

So we definitely got to keep an eye on. And that's for a person. Yeah, I've read I've read that the average is over three hundred thousand for a couple. Yeah, that you're going to spend in retirement on health care needs. And that's out of pocket. I think a lot of people out there don't factor that in because or think that's going to be an issue because of Medicare. They think, well, of Medicare, that'll cover it. But you still have premiums, copays, deductibles out of pocket. Yeah. Yeah. High deductibles. I mean, that's it all. Yeah. Yeah.

And there's some drugs that people take. I was just actually talking to a client yesterday that has arthritis really bad. And her, the drug that makes her feel a hundred percent costs a seven, it costs $7,000 a month. So, you know, she's not paying that, but she's paying a chunk and it, it's a factor that, That they did not account for when they were preparing for retirement. So she went and got a part-time job just to help with her arthritis drug costs. So yeah, you never know what's going to pop up. Always good to be prepared. We want to set these goals and we want to have some breathing room.

Yeah. Yeah. I think that's that's really important to have that breathing room and set your goals. And you need to have a purpose, too. It's not just financial. It's kind of the fun part where you plan it out, you know, and that's where things come up like, hey, we want to buy an RV and travel the country. Well, you got a budget for that and plan for that. You got to plan for those types of goals or we want to take. our children and all their children, all our grandchildren, and everyone in the family to Disney World for a week. Well, that's real money to you and I, Ken, Disney World. Absolutely.

For a week. We're talking $22 grilled cheeses here, Tony.

Yeah, exactly. And that's not even thinking about the airfare, the cost of the Airbnb or resort rooms and everything, and then the tickets. And then you get the $22 grilled cheese. Yeah. And but it's delicious. They're magical, supposedly.

Yes, exactly. So what's the next step then? So then we set a target retirement date. So we want to take a look at how much we have in savings, how long that'll last. A lot of people come in here and tell us, I'm only going to be here 10 years, 10, 15 years. There's just been so many advancements in medicine. In most cases, we're telling people to plan to live for another 30 years after retirement. So

Right. People think, oh, I'm not going to live that long or, oh, I'm going to work. I'm not going to stop working. So I don't need to plan for retirement. And they're really kidding themselves because in that case, you know, you're not necessarily going to choose. Right. Sometimes it's your employer. Sometimes it's your health will choose that timing for you. And so, you know, the old phrase man plans, God laughs. So that's the that's the that's the that's the one, you know, and another great quote, call on God, but roll away from the rocks. You got to take some initiative there and plan, have a plan in place, because if you fail to plan, you're planning to fail, as they say.

I have a client that I met with a couple of weeks ago that was a CFO. He was making really good money. And he something changed at work. He had a new CEO. It wasn't working out. So he decided to step down. But now he's in this conundrum where his health insurance costs are through the roof. It's $2,000 a month because he hasn't hit Medicare age yet. And. No one wants to hire him because he's too overqualified. But the economy is sort of in a pinch. So, you know, he's used to everything was so such smooth sailing, you know, and then just something changed all of a sudden. So he was sort of thrust into this situation where he's considering early retirement or trying to find a part time job. But every wherever you are on the corporate ladder lately, it seems like there's some some roadblocks. So planning for worst case scenario is definitely the best way to go.

Yeah. Yeah. I think so, too. Let's keep going here. What's another step you've got for us?

So confront shortfalls. So let's just say that we, we said, this is what your lifestyle, you know, what we would like your lifestyle to look like during retirement. This is the age, but maybe we're a little bit short. So what can we do to make things work? So you can do debt reduction. So, you know, just trying to pay off as much as you can eliminate high interest balances that can help improve your flexibility during retirement. The big one is just cutting unnecessary spending, you know, Any which way, whether it's spending on clothes, spending on dinners out, cooking in the house a little bit more. There's a lot of apps out there that people are paying for for entertainment. Anything that's an automatic contribution when it comes to expenses, take a look around and see what you can cut. And then also to increase your savings, do automatic contributions. So increase those 401(k) contributions or set it up on your bank account so that money's automatically moved from your bank account To a savings account or an investment account.

And you'll never miss it. You will never miss it. If you set it up to transfer on the day your check hits, you're never going to miss that money. The money that's automatically taken out and put into my 401(k) and our IRAs, we never miss it because it never hits the general fund. What I call the checking account is the general fund. And Ken, we all know what happens to the money That hits the general fund, just like with our government. And just like with my checking, poof, it's gone.

I feel like we should have a soundbite for that. And it's gone.

There's a clip about the bank clip, and it's gone. Oh, that was South Park. Yeah, that's South Park. We'll use that clip. I don't have it loaded up, but we'll use that one. And it's gone.

Well, credit card debt topped over $1.16 trillion at the end of last year. So tons and tons of debt out there right now.

That's trillion with a T?

Yeah.

That's real money even to you, Ken.

Yeah. No doubt.

Yeah. Yeah, that's that's crazy. And that's it. I think the average interest rate on credit card debt right now is 22 percent. It's ranging anywhere from 16 to 31 percent. Yeah. I mean, you imagine paying 31 percent or even 22 percent interest is crazy. You cannot let credit card debt carry over. Absolutely.

Yeah, it's you know, you're making that minimum payment and that's you're not really getting anywhere. It'll take no only 30 years to pay off. Yeah, that's that's crazy. What's the next step? So just always keep an eye on your risk tolerance. So there's what do you mean by that? So there's an old rule out there that you could do 110 minus your age. So 110 minus your age, say you're 60 years old. So then 110 minus 60 is 50. So that would mean you'd have 50% in stocks and 50% in bonds or a high yield money market. So it's just the idea that you don't want to be a couple of years away from retirement. And then if the stock market crashes, shoot, now we got to extend our working time just because the stock market didn't work out perfectly for us. So-

So you're talking about managing risk, but when you say risk tolerance, you're also talking about what you personally can deal with, right? Some people are very risk adverse. So you want to make sure your portfolio reflects your own personal risk tolerance. Is that basically what you're saying?

Yeah. Yeah. And basically just take a step back and see for this age, for how close I am to retirement. Usually there's the accumulation phase where you're just typically going for it and trying to make as much as you can. Yeah. Once you get into this window leading up to retirement, a lot of people call it the conservative phase where you just back off a little bit because you don't want to bump into sequence of returns risk. Which is basically the risk that you retire at the wrong age.

Yeah. Yeah. Or start pulling money out of the market when it's down. Like, yeah, let's say you were going to retire and it's 2022 and the stock and bond market is way down. You need to have a plan with a trusted financial professional like yourself. So you have more of an across the board balance in other things where your principles protected maybe. Right.

Yeah, I met with a client a couple of weeks ago that was, you know what? They were short. They're not going to be able to retire on time. So they decided they're just going to go max risk. So they started financially short. Let's clarify. You're not making fun of your client's height. No, no, not at all.

When you talked about coming up short earlier and shortfalls, I thought you were talking, you know, I felt a little conscientious, but then I realized, oh, no, he's not making fun of my height. No, I'm kidding.

So anyway, they were, they were financially short. Yeah, they didn't have enough money for retirement, so they decided, you know what, I'm gonna get over this edge by just going super risky. So they invested in, they invested with leverage. Oh, this is where, you know, the stock market goes up and they make triple what the stock market makes, but then, oh boy, when the market goes down, then they lose triple of what the market, but this isn't a, that's not the plan you put in place for No, absolutely not.

Yeah. You're saying this is what they did on their own without you. Yeah. And and that's why you need someone like yourself to say, hey, let's hold up. Let's take emotional and and desperation out of it and see what can be done. You know, I mean, is it worth risking at all or working two more years? I'd work two more years rather than put everything I've saved at risk. Well, that's the thing.

You can lose five or 10 years if things backfire. So, yeah, that particular client came in waving the white flag saying, OK, can I I need help. So that's actually my last step is just I highly recommend people meet with a fiduciary. Yeah. You know, some financial services professional that can help them look at what risk is appropriate. Are there any tax efficiencies that can be realized? Let's put a long-term plan together. In our case, we can put together a retirement income analysis where we're looking at what are your expenses? What are your income? What are your assets? What do you need? How many vacations do you want to take? Should we do IRA to Roth IRA conversions? That's the big like buzzword now and we're helping people plan for that. So putting together a comprehensive financial plan, taking into consideration healthcare expenses, Taxes, state planning through our attorney partners, financial planning, investments, retirement income planning. It's nice when it's all laid out on the table for you.

Isn't it though? And that's what you get when you work with Summit Financial Consulting. Ken, you and the team there do such a great job. You love to talk to people. So I'm going to encourage our listeners and viewers out there, pick up the phone, give Ken a call and ask your question. Set up that consultation to make sure you are not making costly mistakes or putting your retirement at jeopardy. Get a plan in place or at least get a second opinion. And Ken, the great thing about this is you're not charging for that consultation. Now, if they want to move forward and become a client and have you really help manage their money and work with them long-term, them and their family, then that's another thing. But if they want to come in and get some questions answered, have some reports run, they can do that. How can they get a hold of you?

We'd be happy to have a complimentary meeting with anyone. We'll help you do a Social Security maximization report. We'll help put together a retirement income analysis. Look at your taxes. Look at your health insurance. Look at your estate planning documents. That is a completely complimentary appointment. We'd be happy to do it for any of our viewers or listeners. Give us a call at 586-226-2100 or go to our website, summitfc.net. We'd love to help people put together a plan and help protect their savings.

All right. Thanks, Ken. And listeners and viewers, thanks for tuning in. That does it for today's episode of Money Talks with Summit Financial Consulting and our host, Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit summitfc.net. Join us again soon for another episode of Money Talks.