What If Things Don’t Go According to Plan? Ep 04

What if life doesn’t go according to plan?  We take the time to plan for our retirement. But often times, life doesn’t happen as we draw it up on paper.  We may find our nest egg isn’t as big as we need it to be. Or, we may be forced to retire earlier than we expect.  And for some, we may have to support our kids or our parents when we retire.  What if life doesn’t go according to our plans?

We’ll talk about it in today’s episode of Monday Morning Money.

Video:  What If…

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We all have visions of what our ideal retirement should look like.  Perhaps its traveling a little bit, maybe playing a round or two of golf.  For some it’s volunteering.  For me it’s making sawdust and scrap lumber.  But sometimes life has other ideas and throws a wrench into the works.

Life is what happens when you’re busy making other plans (John Lennon)

So much of what we do is helping people plan for the financial part of retirement.  And those plans center around what our clients want to do when they leave the workforce.  But sometimes, many times, real life doesn’t always work out as we draw it up on paper.

Less in Savings Than Expected

It could be that future returns on our savings are well below what we expected.  Or maybe, a major stock market crash happens right before we retire.

In either event your savings may not be what you were expecting.

Does this mean you delay your retirement? Maybe you work part-time for a while.  Or maybe you figure out ways to adjust your lifestyle.

Maybe you’re forced to retire earlier than you planned.  37% of retired Americans reported they retired earlier than expected.  Health problems, early buyout offers, layoffs and family issues were the reasons given.

Retiring Early

A forced early retirement creates its own set of challenges.  You have less time to save, so you could have a smaller nest egg.  This could also force you to start your Social Security before your normal retirement age.  This results in a smaller benefit, in some cases up to 30% less.

It could also mean a significant expense for health insurance until you are eligible for Medicare.

Family Matters

And for many, family can be the disruption.  A study revealed for people over 50 nearly 15% have a child or grandchild under the age of 18 living with them.  Approximately 10% had another family member living with them.  This could be adult children, parents, or other family members. And roughly 28% support someone outside their home in some way.

Helping the people we care about the most can also change your retirement.

What if

We need to plan for the possibility of a significant disruption in our lives.  The specifics are nearly impossible to identify or predict.  But as we’re thinking ahead we need to ask ourselves the “what if” questions.

  • What if we can’t save as much as we need?

  • What if we have to retire early?

  • What if we have to help support our kids or our parents?

  • What if things don’t go according to our plans?

Sometimes when life happens we have to adjust, chart a new course,  and figure out how to use what we have to create the best situation for both today and the future.

Are You On Track To Retire? Ep 03

People want to know if they are on track to retire.  And often times, they are looking for a quick and easy way to tell if they are doing enough, or if they need to do a bit more.  Fidelity created some general guidelines.  to help you quickly identify if you are making significant progress.  We talk about it in this episode of Monday Morning Money.

Video: Are You On Track To Retire?

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Are You On Track? Here are the Guidelines…

Multiply the factor by your annual household salary.  This is the level of savings recommended to be on track to retire at your normal retirement age.  For most people, normal retirement age is now 67 years old.

Example:  

Bob is 35 years old.  He earns $65,000  per year.  According to these guidelines, he should have $130,000 saved.

on track to retire

(The following is the transcript from the video shown above)

I recently met with a couple who was my age, 47 years old.  And the husband asked the question am I on track?  Have I saved enough at this point in my life to be able to retire?

It’s an interesting question, we dug into the numbers to see just where they were and where they might end up. But what if you are looking for something simple to see if you are on track? Stick around, we’ll share an idea with you.

Hi there, welcome to Monday morning money. I’m Neal Watson.

Are you on track to retire?

It’s a pretty common question. Sometimes people just want to have an idea if they are doing enough to be able to retire.  Something simple, where they can look quickly and say to themselves either I’m in good shape
or I really need to do more.

Well Fidelity has done some research on this topic, and they have come up with a measuring stick to help you quickly identify if you are making progress.  Let’s take a look.

  • By the time you are thirty, you should have one year’s salary saved.
  • By the time you are 40, you should have 3 times your annual salary saved.
  • That increases to six times by age 50.
  • 8 times by age 60,
  • and 10x by the time you reach your “normal retirement age.” Which for most people is 67 years old.

Let’s take a look at an example:

At age 30, Jane and Jim were making $75,000 per year.  To be on track they need to have at least that much in savings.

Over the next decade, they both see their earnings increase, and by age 40 they are earning $90,000 combined.  Hopefully they have continued to save, because to be on track they need to have $270,000.

At age 50, their combined income has grown to $120,000 per year.  If their savings has grown to $720,000, they are in pretty good shape to retire.

Their income increases to $140,000 per year over the next decade.  Their savings needs to improve as well.  The target for this age:  $1.1 Million dollars.

And when they reach age 67, which is their normal retirement age, it is suggested they have at least 10 times their annual salary.

Keep in mind, We are trying to hit a moving target. As time marches on, our wages and salaries tend to increase.  When that happens, our lifestyle—how we spend our money—tends  to increase.  Our savings needs to keep pace.

This yardstick is designed with the idea that you want to build a nest egg which will last for your entire retirement no matter how many years that is.

What About Retiring early?

So what if you want to retire before age 67?  Their guidelines also account for early retirement. Because your Social Security benefits will be lower when you retire early, you’ll need more in savings to create additional income.

So If you want to retire at age 65, you should have about 12x your annual income saved. And if you want to retire even sooner, you should have well over 14x your income in savings, and probably more if you have to buy your own health insurance.

And if you’re thinking about working later, Your increased social security benefits mean you may not need as much in savings to maintain your lifestyle.

Keep in mind this isn’t a perfect system.  Everyone is different and your needs may require a different number.

Are you on track?  If so, keep up the good work, it will take effort to stay on pace.  And if you are behind schedule? Well, perhaps it’s time to step back and look to see what you can do to improve your situation.

If you would, please take a moment to like us on facebook, subscribe to our youtube channel or join our mailing list.

And if you have a question you would like answered on a future episode, send us an email.  We’d love to hear from you.

Thanks for watching and join us next week for another episode of Monday morning money, have a great week.

Monday Morning Money Ep. 02

When thinking about how you spend money in retirement, do you consider what you might spend for healthcare?  You probably should.  Fidelity estimates a couple will spend over $280,000 on healthcare in retirement.  It is a staggering number.  We’ll talk about that in today’s video.

Video: Monday Morning Money Ep. 02: Healthcare in Retirement

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Where the $2800,000 Goes….

healthcare

Plan for A Better Retirement

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We publish a new episode each week.  And, we will deliver it right to your inbox.

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Video Transcript

As your thinking about retirement, how do you see yourself spending your money? A few rounds of golf, maybe some other Hobbies? Travel? Spoiling those grandkids?

Those answers are typically what we hear.  Most people look forward to the good things. But there is something else we need to consider.  It will likely be one of your biggest expenses during retirement.

Stick around we’ll talk about that right after this.

Hi I’m Neal Watson, Welcome to Monday Morning Money. Please take a minute to like our facebook page, And subscribe to our YouTube Channel, A link for all of those can be found below.

Planning for retirement should be something we look forward to.  Once we leave the workforce, we’ll have time to do many of the things we’ve wanted to do, but couldn’t seem to fit them into our daily lives.   And people tend to get excited about those new opportunities.

But there are some realities we must face. And one of those are health care costs.  A recent study estimated the average couple will spend over $280,000 on healthcare in retirement.  That’s a pretty staggering number when you think about it.

It’s even more surprising when you consider this figure doesn’t include premiums for medicare supplements, costs for a nursing home or long-term in home care.

It simply includes things like your part B and part D medicare premiums.  Prescriptions, and other common costs like co-payments, and deductibles.

Over a quarter million dollars on health related expenses.  It’s Mind boggling!  But this will easily be one of your biggest expenses in retirement. And one many people aren’t considering

So what are some of the things you can do to help with these costs?  Let’s take a look.

1.  Invest in a Healthier Lifestyle.

By this we don’t mean putting money in an account.  We mean, make the effort to change some of your habits. Lose weight, exercise more, be more active.  Also take time to give your brain a work out.  Making healthier choices can help reduce some of those expenses you’ll face later in life.

2. Delay retirement to age 65 when you are eligible for Medicare.

Many people want to retire as early as possible, but one of the major obstacles to retiring prior to age 65 is the high cost of health insurance. Health insurance premiums for a 62 year old couple could easily exceed $1,500 per month. That’s over $54,000 total to get to Medicare.

3. Consider Medicare Supplement Insurance.

Some of the deductibles and co-pays for medicare can be significant. These supplements are designed to help cover some of those costs. These supplements do come at an expense, so consider that in your decision making process.

4. Do you have a Health Savings Account?

Not everybody participates in a high deductible health plan that offers health savings accounts.  But if you do, consider maximizing your annual contributions.  This money can be used to pay for health related expenses, and the earnings are tax free.

The cost of healthcare in retirement is not something any of us like to think about.  But it could easily be one of your largest expenses.  And something we should consider in our plans.

Monday Morning Money Ep. 01

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We face a number of financial risks in retirement.  And, when most people hear the word “risk” they automatically think about a stock market crash.  And while those events are possible, one threat always impacts our nest egg.  Every year, everything you buy costs more.  We’ll talk about that in this week’s episode of Monday Morning Money.

Yes there is a Big Mac Index. It was created by the magazine The Economist

Plan for A Better Retirement

We created Monday Morning Money with one goal in mind.  Give you information to inspire you to plan for a better retirement. 

We publish a new episode each week.  And, we will deliver it right to your inbox.

Don’t miss an episode, subscribe today!

Get Free Weekly Tips!

* indicates required

Plan for A Better Retirement

We created Monday Morning Money with one goal in mind.  Give you information to inspire you to plan for a better retirement. 

We publish a new episode each week.  And, we will deliver it right to your inbox.

Don’t miss an episode, subscribe today!

Other things we buy also cost more.

Every Year Everything You Buy Costs More: The First Class Stamp

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Every Year Everything You Buy Costs More: The Big Mac

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When I Was A Kid…

What are some of the things you remember buying years ago?  What are some of the stories your parents or grand parents told you about the prices they paid for the things they purchased?

Leave your comments below.

Video Transcript

We face a number of risks in retirement. Most people focus their attention on another stock market crash like we saw in 2008. Rightfully so. That was rough. But there are other threats we need to consider and plan for. One of the most significant ones: Every year everything you buy costs more.

Who hasn’t heard a parent or grandparent tell us “when I was a kid, a loaf of bread was a nickel and a movie was a quarter. And I had to walk up hill both ways to buy both!”

We all know bread hasn’t been a nickel for decades, and when I was a kid, Buck night at the Athena and Varsity in Athens was a treat.  And my parents dropped us off.

Every year, everything you buy costs more.  It is a simple way to explain inflation. Over time, the prices of the things we buy increase.

But we don’t always notice in our day to day lives. It’s not until we look at the cumulative effect over many years, that we see just how much inflation impacts our wallet.

One of the best ways to illustrate this is a first class stamp.

A little more than a month ago, your cost to mail a letter increased to 55 cents. And while this was the largest increase ever announced by the postal service, it probably didn’t seem like a big deal.

But if we go back 30 years, you could buy 4 stamps for a dollar. Over time the cost to mail a letter has increased gradually.  A penny here, two cents there, And now thirty years later, it will cost you more than a dollar to mail two letters.

Stamps aren’t the only thing which has increased in price.

In 1988 a big mac cost two bucks. Now three decades later, this signature sandwich has more than doubled in price. There is actually something called the Big Mac Index.

The same can be said for

Bacon,
Movie tickets,
gasoline,
bread,
Ice cream
and electricity.

All of these items cost more.

Prices go up, And this impacts how we need to plan for retirement. When thinking about what you’ll spend in retirement, most people look at how they spend their money right now. And that’s a good starting point. But it won’t remain constant over time.

If something costs a dollar today, you should expect to pay more in the future.

If inflation averages 3%,

That same item will cost $1.16 in five years.

It jumps to $1.34 in 10 years.

In fifteen years, you can expect to spend over 50 percent more.

After two decades, that one dollar item jumps to a dollar eighty,

And after 25 years, the price will more than double.

For years, we were able to depend on Social Security to help us with these rising costs.  But in more recent years the cost of living adjustments have been much smaller.  And on top of that, Medicare premiums have been eating up much of those annual increases.

This means we must rely on our savings to provide the raises we will need in retirement. Without a good plan, Inflation could be as much of a threat to your nest egg as a major stock market crash.

So, what’s your plan to deal with this threat?

Leave your thoughts or questions in the comments section below. We’d love to hear from you.

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