Do you know, right now, if you’ll run out of money in retirement? There’s a quick and easy way to find out! Using their free retirement calculator, Joe Anderson, CFP® and Big Al Clopine, CPA look at the income, savings, and expenses for a couple of YMYW viewers, calculate their retirement readiness, and spitball financial moves that can help them meet their retirement goals. Try out the free retirement calculator for yourself and send us your feedback:
EASI Retirement Spitball Analysis:
- Reality Check
- EASIretirement.com Case Study
- Retirement Spitball Analysis
Important Points:
- 00:00 – Intro
- 01:02 – Retirement Readiness
- 01:50 – Retirement Savings Needed
- 02:30 – Achieving Retirement Income
- 03:06 – Average Retirement Age
- 04:40 – Free Retirement Calculator
- 05:17 – EASIretirement.com
- 06:00 – Case Study
- 07:00 – Input info into Calculator
- 11:37 – Calculator Results
- 12:11 – Free Retirement Calculator
- 13:45 – Save More Spend Less
- 14:48 – Work Longer
- 15:15 – Maximize Social Security
- 15:54 – Tax-Smart Strategies
- 17:22 – Improper Asset Allocation
- 18:34 – Market Volatility
- 18:58 – Required Minimum Distributions
- 19:48 – Health & Employment
- 20:40 – Free Retirement Calculator
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Transcript:
Joe: Do you know if you’re gonna run out of money in retirement? There is an easy way to find out, folks. Welcome to the show. Show is called Your Money, Your Wealth®. Joe Anderson here, CERTIFIED FINANCIAL PLANNER™, President of Pure Financial Advisors. And of course, I’m with the big man sitting right over there, Alan Clopine, CPA. Hello, Big Al.
Al: Hey, how are you doing, man?
Joe: Good. Hey, we got a great show lined up for you today, a little bit different. You heard the phrase simple but not easy, right? If you think about retirement planning. There’s simple concepts that you have to follow. You gotta save money, hopefully it grows, and then by the time you retire, it comes out as income. Pretty simple, right? But it’s not easy because you have to figure out how much money you should be saving? What rate of return? What does a portfolio look like? What about taxes, inflation, healthcare and everything else in between? Well, we got the answer for you today. It’s called EASI Retirement folks. That’s today’s financial focus.
Here it is. Go to EASIretirement.com. We’re gonna do a little case study for you today. It’s a software. It’s your five minute financial plan or less. It is super easy to follow and it’s a lot of fun to do, and you’ll get the answers that you’ve been searching for. So to break things down, let’s bring in Big Al.
Al: Alright. I’m excited about this show. It’s a little bit different. We’re gonna go over your EASIretirement. We’re gonna go through a case study. But first, let’s see how you’re doing with a reality check. Then we’ll get into the case study. How can we make it better? So we’ll kind of spitball at the end. Joe, this is kind of, I think the first time we did a show like this.
Reality Check
Joe: Yeah, without question. It’s going to be great. And I think all of you will enjoy this as well, because here’s the disconnect. People think, hey, I need about $1 million – $1.2 million to retire, but the average assets is $400,000. We get to get a reality check. Is it really $1.2 million that you need? Or is it $400,000? People put these numbers in their head, Al. It’s like, well, do I actually need $1.2 million? But it really depends on so many different factors.
Al: It does. And I know that’s kind of an average, which is kind of a dangerous number to use. But the trend is right. The trend basically is saying we’re probably not saving enough.
Joe: Most surveys out there, they use an income need of about 67% – 70% of what their current income is. So they surveyed a bunch of people and they looked at who’s on track. Well, only 25% of people that they surveyed are on track. 44% is not even close to being on course here. 32%, you know, they don’t know. So let’s try to figure this out. 41% of people, Big Al, think, Hey, man, I’m going to run out of money.
Al: Yeah, well, it goes kind of hand in hand with the other slide, but that, uh, that’s a lot of people are nowhere near being ready for retirement. So that’s why we kind of want to go through the show and show you how to kind of think about it.
Something else, Joe, is that people tend to retire sooner than they expect. The average planned retirement age is 66 right now, the average actual age of retirement is 61. So if you’re going to work five years less, your plan may come out a lot differently than what you expect.
Joe: Yeah, this is a big one because it’s like, all right, well, here I’m going to work till 66, 67 or even 70. But still people retire a lot earlier and there’s a lot of different reasons for that. One could be, you know, you have to take care of a loved one or be a caregiver. Uh, number two is. You might get laid off and you can’t find that next job or you can’t find that next gig. Healthcare issues. I mean, the list goes on and on. So you want to make sure that you get this thing buttoned up now, because who knows really what’s going to happen in the future.
Al: Well, and that is true. And I think it’s a surprising thing most people don’t really think about. I mean, whether it’s your own health or you’re taking care of somebody like a parent or a spouse, or maybe you get laid off. The world is getting more and more complicated as we get older. Many of us keep up with the job. Some don’t, right? So just be aware that when you’re doing retirement planning, there’s things that can go wrong. So you gotta kind of figure out ways to mitigate that.
Joe: Yeah, there’s no cookie cutter approach to this. It’s gotta be very specific to your overall situation. That’s why we partnered up with this great firm, New Retirement, really to help you out to button this thing down. When we get back from the break, we’re gonna do a case study. We’re gonna walk you through this software. That you could do at home for free, right? EASIretirement. com is their website. EASIretirement. com. Go to that website. It’s going to be very easy. Hence the name. We got to take a break. We’ll be right back.
EASIretirement.com Case Study
Joe: Hey, welcome back to the show. Joe Anderson, Big Al. We’re going to break it down. EASI Retirement. You want to have an easy retirement? Who doesn’t. Go to our website, EASIretirement.com, but it’s spelled E A S I. Right. Little play on words here, Big Al.
Al: You know, and that probably is going to lead to an acronym. Everyone likes acronyms, right?
Joe: People are like, wait a minute. That’s not how you spell “easy”. Well, here’s what we’re looking at here. First, you have to be educated. Right? You want to make sure that you understand the inputs. You understand what you’re doing. Second, you want to have a full assessment. All right. So I’m educated. Now I want to assess my overall situation. Okay. And then I want to come up with some different strategies to help me accomplish the overall goal. And then finally you have to implement. This is by far the most important because if you do all of this legwork up here. But if you don’t put things into action, then all of this is worthless.
Al: Implementation also means monitoring. So you got this plan you implement, but you want to watch it. You want to watch over it. You want to make course corrections as necessary because life changes. But yeah, these are the main steps you got to go through on this.
Joe: Let’s go through a case study here. Lisa and Mike. Lisa is 60 years old and Mike is 58. They want to retire at 67. They have a combined income of $106,000. Their expenses are $70,000. Right now their current assets are about $400,000 in a 401(k). That they’re saving $300 a month too. They also have$60,000 in a brokerage account that they’re also saving about $200 too, and then they have an expected social security combined of around $50,000. Average couple here looking to put a plan together to make sure, Hey, are they on track given what they’re currently doing?
Al: Yeah, Joe. And the interesting thing about this case is the case study that we used falls in line with the national averages. So maybe you’re somewhere in there.
Joe: So first step, you go to EASI Retirement. E A S I Retirement. Alright, absolutely free. You get, click to get started. Tell me about yourself, so you put in your name. Alright, okay, well here’s Lisa, here’s Mike. Alright, Lisa’s female. Mike is male and so on and so forth. What is your age and then longevity? Because all right, men tend to die a little bit sooner than women. And so Lisa’s thinking, Hey, I have longevity in my family. I think I’m going to live to 92. Maybe it’s 95. Maybe it’s a 100. Right. Mike’s like, well, you know what, I’ll probably die a little bit before you 87, maybe he’s got a shorter life expectancy.
He’s got some health issues so he could pick maybe 80, whatever your family dynamic is. You can just kind of plug it in the overall system.
Al: Yeah. See how it comes out. And what I would encourage you to think about is if you’re going to think you’re going to live to 85, maybe use 90 to be on the safe side, right? Because you don’t want to have this great plan to get you through 85 and then whoops, still alive. Got no money.
Joe: Then the next step is, here’s your income from work. Put in what you’re making, $5,000, $5,300 a month, $3,500 a month. And then this is the starting, 2023. They want to retire here. And then this is going to basically add this up. So they’re going to make roughly $1 million of total income from now until their retirement date. So when people take a look at that, I mean, that’s a big number Al.
Al: It’s very big.
Joe: It’s like, okay Well, what do I want to do with this $850, 000? Of course, you’ve got to spend some of it just to maintain your lifestyle, right? You also want to have a little bit of fun, but you also want to make sure that you’re saving some of this as well. This is the driver, here’s your income. How are you gonna get to your goals? Right. Are you saving enough or do you need to save a little bit more out of this kind of nest egg here?
Al: Another thing to think about is, how much is this going to grow? The assumption is 3%.
Joe: The software will give you a raise. If you work for a company that doesn’t give you a raise, then you probably want to toggle that. Maybe you might anticipate some other income. Maybe you have real estate income. Maybe there’s part-time income after you retire. All sorts of different variables that you can put in here. But we’re just kind of giving you the bread and butter right now. All right, so then Social Security or what your fixed income sources are going to be in retirement. Let’s say if you don’t know what your social security benefit is, they’ll just take an average based on what your current income is, and they’re going to look at that and try to plug in or estimate what your social security benefit is.
Al: You can get that from the Social Security Administration and I think once you’re over 60, you get it in the mail. You can also request it at ssa.gov and they will send it to you. It’s important to have it because the amount that you’re gonna receive is different depending upon the age that you collect it. The earliest is 62 and the latest is 70. Each month you wait you get a higher amount.
Joe: All right, retirement savings – what are you currently putting into your 401(k) plan? Do you have other savings that you’re putting into another account? A brokerage account, Roth IRAs, you know, things of that nature. Plug that in. They’re putting in $300 a month, $210 a month. All right. Tell us about your home. So their home is worth $600,000. They have a mortgage on it. Here’s their mortgage rate and here’s their payment. So this is all going to go into expenses. So here’s your housing expense. That’s your mortgage. Then you look at health care expenses before 65. If you’re going to retire before 65, you probably want to toggle this. So understanding what your expenses are is also a little bit of homework.
Al: In some cases, people have no idea. So if you do know, that’s great. Maybe you have Quicken or something like that. But if you don’t know, at the very least, go to your net paycheck. If there’s two of you, add those together. Multiply if it’s however many paycheck paychecks you get each year to figure out the annual and that’ll give you an idea how much you’re spending. If you’re saving extra, then, of course, you’re gonna spend a little bit less. If you’re going into your credit cards or incurring debt, you’re probably spending more than your income. Another thing, Joe, is that it’s important to separate the expenses because everything depends. housing tends to be fixed, it stays the same with interest rates. Medical expenses tend to increase higher than inflation and other expenses are assumed at inflation.
Joe: Yeah, really good point and also with your other expenses here, you probably want to look at what is discretionary versus non. You need the essentials. But some of this could be play money. Hey, maybe you’re going on vacation or doing different things. Understanding what is left over. In this example here, out of the $5,800 that they have in expenses, about $1,700 is discretionary. Alright, hit solve. Here’s their plan for wellness. In a bad outcome, they will run out of money in 2041. But given our standard assumptions, they’re out of money in 2043. So we gotta do some work here, right? This is no good, but this helps people start taking action. How do I get this to solve? How do I make sure that I don’t run out of money before I run out of breath? And so when we get back from the break, we’re going to show you some simple techniques, what they can do to make sure that they can have a healthy retirement. So don’t go anywhere.
Retirement Spitball Analysis
Joe: Welcome back to the show that’s Big Al and I’m Joe Anderson and we’re talking about an easy retirement. Retirement doesn’t have to be complex. It can be very easy. So all you have to do folks is go to EASIretirement.com, EASIretirement.com. You click on the button and just get started.
Al: Yep. Let’s see how we’re doing.
Joe: I mean, the toughest part about all of this is just getting started doing something. Al and I have said for years that everyone doesn’t need a financial planner, but everyone needs a financial plan. This will help all of you that are watching this here today to start your financial plan on your own. Then you can kind of see, all right, well, are you on track, not on track? What are the things that you have to do to get on track? We went through this case study and we found out that what the current assumptions that they’re currently doing, Ah, it doesn’t look so good here. They’re going to run out of money roughly around age 81 and 79. Right. So we need to push these dollars out a little bit more. And so there’s a few different things that you can toggle.
Al: That’s the good thing about planning. And in fact, the good thing about planning is the earlier you do it, the more time you have to do these, these course corrections. So you’d be in a better spot.
Joe: Real quick, simple. And you can make several different iterations here, but they’re saving 6% of their income. Let’s bump that up to 20% because we know that they have a little bit of discretionary income. And so, all right, well, here, I’m really committed to my goals, I want to make sure that I don’t run out of money, I want to spend what I want to spend in retirement, so maybe you can tone back your spending today and increase your overall savings over the next couple of years. Well, let’s see what this does. Here’s their expenses, we reduce their expenses. And then increase their overall savings $1,200 a month. Okay, boom! One thing, it looks pretty good. Right, so maybe you can’t save another $1,200 a month. So what does it look like if you save another $200 a month, or $400 or $500 a month, whatever the case may be. That’s the first part. Can you reduce your spending to increase your savings? Not a great option.
Al: Well, most people will say, forget it. I’m not doing that. I mean, but here’s the point. The point is, maybe make steps towards that direction, right? And maybe you save a little bit more this year, a little bit more next year, a little bit more the following year. But that’s not the only thing you can do, right? Another thing, Joe, is you can, you can work longer.
Joe: Yeah, I mean, right now, their combined income is $106,000, right? That’s $106,000. All right, well, what am I going to do with this? Can I work a little bit longer because now I have the income to cover my overall expenses? So let’s say I work two or three years longer. Okay. Well, what is that going to do? Well, that’s gonna change the overall Social Security amount, right? If I push out my Social Security, you’re gonna receive a lot higher benefit because they get this 8% delayed retirement credit for each year that they wait after their full retirement age.
Al: Yeah I mean if you look at that you’re ending up with another $1,100 or so per month Right. Just for, just for waiting three years, plus you save more. And you didn’t get into your savings because you had, you, you kept saving. Another thing is if you don’t necessarily want to work three more years, or two more years, or even one more year, how about working part time? Maybe you extend that, maybe you make half your income, but have a better life. All kinds of choices here.
Joe: Next thing you want to look at is your tax situation. This will help extend your money because most people save here in the tax-deferred accounts. Your 401(k)s, 403(b)s, IRAs, so you receive that tax deduction as it’s going in. But then when you’re receiving your retirement income, you’re going to be taxed on that. Depending on what your tax brackets are in retirement and where you are currently today, it might make sense to diversify a little bit. Because if everything is sitting here, well, you’re going to be stuck at an ordinary income rate. But if you have money in a tax-free account, such as a Roth IRA, those dollars come out to you tax-free. Let’s say if you have a brokerage account, those dollars could come out to you tax free. Or at capital gains, it’s a better tax rate than it would be here in your tax-deferred accounts. So looking at can also stretch those dollars out.
Al: It does. And I think it’s such a good point because most people do have their savings in their retirement accounts. You take those dollars out, you pay ordinary income taxes. Those are the highest rates. Even if you just have money in a brokerage account, you could invest in municipal bonds, that’s tax free, or you could have stocks, or mutual funds, or ETFs, right, that go up, and when you sell them, it’s a capital gain. Capital gain is about half the tax or less, of income. Then the Roth IRA, if you can get money to a Roth IRA, either through a contribution or a conversion, all that money in the Roth grows tax-free, the principal interest and growth, For you, your spouse, your kids, whoever inherits it.
Joe: Pitfalls. Improper asset allocation. Now we’re getting into the nitty gritty here. What does the overall portfolio look like? The portfolio that you’re using now to help you accumulate wealth, as you’re growing your wealth, as you’re still working, probably needs to shift a little bit as you transition into retirement. Because now that money needs to be preserved, and some income needs to be generated from this. So improper asset allocation is a huge mistake that a lot of people make.
Al: We see this all the time. We see people that have portfolios that are way too aggressive, that they need to pull money out. And if the market… Craters, crashes and goes down at the time they’re pulling money out. It’s very hard to recover. Market goes down and you take money away. There’s not enough to recover. On the other hand, we see people that are way too conservative, right? And so right now, CDs are paying pretty well, but that’s not been the case for many, many years and probably won’t be in the future. So if that’s your strategy, you may not even keep up with inflation.
Joe: Yeah, people are chasing returns and I get it, right? Let’s take yesterday’s winners and buy them today. Or here’s the current market environment, but we don’t know when it’s going to shift. Market crash. What is your strategy when the market crashes? Because we know it’s going to happen. We just don’t know when. So when that market goes down, what do most people do?
Al: Yeah, well, they panic and they sell and they lock in their losses and they never recover.
Joe: That’s why having the right asset allocation, having your strategy in place. Understanding what that portfolio is going to do in good markets and bad markets. Then some people get confused about RMDs. Now we’re getting into jargon, but these are just required minimum distributions. That’s when you have to pull money from your retirement account. Sometimes with people that have large balances in retirement accounts, it pops ’em up into a higher bracket.
Al: Well, it does, particularly people that have pensions and higher social security. They’ve got all this fixed income, maybe real estate income, and then there RMDs on top of that, get taxed in very high tax brackets. If you’re in a case like that, that’s where Roth conversions, maybe paying a little bit of tax now or each year to get more money to a Roth, we’ll save you from higher tax brackets later
Joe: Health issues, a huge concern for a lot of us. Well, what is going to be the largest expense in retirement? It’s the unknown, right? Someone could get hurt. Someone could get sick. And what is that going to do to the overall nest egg? Maybe one spouse is really healthy and one spouse kind of turns ill and then all of a sudden your asset allocation or your Portfolio is now there to support your failing spouse’s health and then that leaves less Or, hey, I plan on working till age 70, but oops, I lost my job at 62, and it’s pretty hard for me to find another job.
Al: And if it does happen to you, you can either, of course, you can retire. If you retire too early, you may have to reduce your lifestyle, and maybe that’s okay. Or, like I mentioned before, a part-time job to at least kind of get you through to collecting Social Security, or whatever it may be. But just kind of have a plan. Particularly if you’re in a very technical position and things are kind of moving along and you’re feeling like you’re not quite keeping up, then have a plan for that.
Joe: Go to EASIretirement. com, E A S I, educate yourself, then assess, come up with some different strategies, and then start implementing. Great tool to get you started. Once you know where you’re headed, it’s a lot easier to get there. Go to EASIRetirement. com. It’s our gift to you. It’s absolutely free. If you want to get more information or if you want to dive way deeper in the overall software. There’s a Planner Plus button that you can get it to, and we can give you access to a lot more.
Al: Yeah, Joe, the Planner Plus, I do like that feature because, I mean, this is kind of a simple test to see if you’re on track. Many of us have a little bit more complicated life, whether it’s real estate, rentals, or whatever it may be, pensions that aren’t necessarily all in here. So that Planner Plus, that’s where we can give you a little bit more information on your situation to make sure you’re really on track.
Joe: All right, go to EASIretirement.com, E A S I retirement. com, a little bit different show today. We’re pretty excited about this software. We want to get financial planning too everyone and anyone that wants it and needs it. No cost. Get in there, start playing with it. Let’s see how you do. That’s it for us today for Big Al Clopine, I’m Joe Anderson. We’ll see you next time.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience, and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.
AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.
CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.
