What obstacles stand in the way of your retirement? If you’re like most of us, too many to count! Not having a formal plan, overspending, and not having retirement savings are the top 3 for most people. On this episode of Your Money, Your Wealth, Joe Anderson, CFP® and Big Al Clopine, CPA show you how to break through those retirement barriers.
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Important Points:
- 00:00 – Introduction
- 00:33 – Top 3 Retirement Barriers: No Formal Plan, Overspending, No Retirement Savings
- 01:24 – How to Start Planning: Net Worth, Cash Flow, Savings, Goal
- 02:40 – Overcome Negative Thinking
- 03:42 – Understand Market Volatility and Risk
- 05:12 – Start an Emergency Fund
- 06:02 – Get Professional Advice
- 06:40 – Calculate your free Financial Blueprint
- 07:56 – True/False: 80% of Americans say they have a budget
- 08:53 – Reduce Credit Card Debt
- 10:22 – Manage Childcare Costs
- 11:25 – Manage Healthcare Costs
- 11:55 – Pay Down Student Debt
- 12:45 – How to Avoid Outliving Your Savings
- 14:35 – Cut Overspending
- 15:10 – Calculate your free Financial Blueprint
- 16:27 – 20% of Americans age 50+ have no retirement savings
- 16:56 – How to Boost Your Savings
- 19:45 – Making Up for Lost Time
- 20:57 – More Ways to Save
- 22:17 – Calculate your free Financial Blueprint
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Transcript:
Joe: Do you have a lot of barriers when it comes to your retirement plan? Well, it’s time to break through.
Welcome to the show everyone. Show’s called Your Money, Your Wealth®. My name’s Joe Anderson. I’m a CERTIFIED FINANCIAL PLANNER™, President of Pure Financial Advisors. Of course, I’m with the big man. He’s going to bust through some boulders. We’re going to break through your retirement barriers today. That’s today’s financial focus.
All right. What are we talking about in regards to barriers? Here’s the top 3, folks. 77% of people do not have a formal written plan. It doesn’t have to be a 500 page document, but you have to write it down. Number two, we’re overspending. When aren’t we? And then you have a retirement saving strategy. Here are the barriers. Let’s break through. Let’s bring in the big man.
Al: Getting through those retirement barriers. Okay. Planning, spending, saving. We’re gonna figure out how to do better on each of these. Joe, it’s a little bit like trying to lose weight. We know what to do, eat less, eat healthy, exercise more.
Joe: Yep.
Al: But there’s books and books and books. And this is kind of the same thing. There’s a lot. It’s simple, but there’s a lot to it.
Joe: Right. It’s simple, but it’s not easy to execute.
Al: Correct.
Joe: Yeah. Let’s get into it. Planning. 76% of people feel overwhelmed. It’s like, man, there’s just too much here. I don’t know where to start. Well, let’s get you started, Big Al.
Al: All right. Thinking about written plans. Only 21% of you have a written plan. 28% of you have no plan. And 51%, Ah, I kind of have something in my head. Joe, we need to do a little bit better.
Joe: Yeah, you have to write it down. What does that actually mean? What do you need to be doing here? All right. Start planning. Net worth. What is that? That’s your assets. That’s your liabilities. Take your assets minus your liabilities equals your net worth. Start there. Don’t care what the number is. Start there. Understand what you have. So that you can build and grow it. Number two, cash flow. What does that mean? Well that’s income coming in. Expenses going out. What are you making on a monthly basis? What are you spending? Are you spending more than what you’re making? Well then you have some work to do. Is there some excess cash flow? Well then you can start putting that to work. Start a target savings plan. If it’s $50 a month or $5000 a month, you need to start paying yourself first and then looking at the end goal. What are you trying to accomplish and bring everything back to today.
Al: There’s a lot of negative thinking where people just don’t get started. They procrastinate. That’s the number one problem. They avoid it. They feel overwhelmed. Joe, what are the steps?
Joe: You know, it’s looking at, man, there’s always tomorrow to get started. But you can’t, right? It’s like you’re in your 20s. Next thing you know, you’re in your 30s, 40s, 50s, and wow, what happened? I’m in my 60s and retirement is knocking down the door. Start now with your automatic payments. Get those dollars going. If it’s a 401(k) or if it’s just a savings account, take it from your paycheck and put it somewhere. Don’t touch it. Pay yourself first. The future you! Think about what you are going to look like and feel like 20 years from now when you’re broke. You probably don’t want that feeling. Start thinking about the future you. Don’t let that person be neglected. And just stay educated. Stay on top of things. You don’t need a PhD in this. Just understanding what you need to do. You’ll make it.
Al: Just get started. I mean, that’s probably one of the main things. Now here’s another one is the market. So a lot of us don’t really understand how the market works. It tends to go up more than down, but it does go down. And in fact, if you look at a 5-year period, one or two times on average, the market will go down at least 15%. This is not something you freak out about. You be, you’re aware of it, but you want to invest accordingly, Joe.
Joe: Biggest problem we have is that we never get started because we’re afraid of the markets. Well, it’s gonna go down. Oh, it’s really high, or it’s at its low. We have a president election. Oh, what’s gonna happen to taxes?
Oh, we’re coming into the new year. There’s always excuses. What’s the solution is, hold a bunch of, a lot of different things. Have a little bit of cash, have a little bit of stocks, maybe a little bit of bonds and alternatives, but the percentage of what you hold here is really going to determine on your goals. What are you trying to accomplish with the money that you have? If you have a short-term goal, that’s next year. That’s cash. If it’s retirement for the next 30 years, Well, that’s probably stocks and bonds and alternatives, but you have to get started. Don’t let fear kind of run your overall financial plan. Have the appropriate asset allocation, stay invested, and then stay educated.
Al: Yeah, and it’s all about diversification. You’ve heard that term before, but stocks, for example, there’s foreign stocks, domestic stocks, large and small companies, value and growth, and they all tend to go up and down at slightly different times. So make sure you’re diversified. It keeps your portfolio less volatile.
Joe: And then as we were talking about the lack of savings that you have, right? So you want to make sure that you have a nest egg here for emergencies, opportunities, you know, is it one month salary? Is it 6 months? Is it 12 months? It really depends on the overall income that you have and your expenses, but you want to make sure that you have that nest egg. Most people don’t have it, Al.
Al: Well, they don’t. And so number one thing to do is to start an emergency fund. That’s the most important thing by far. Make sure you have 3 to 6 months saved. So if something happens to your car or whatever, medical, you’ve got money to pay for it without having to tap your credit card. Now, just so you know, if worse comes to worse, you can borrow against your 401(k). We don’t recommend it except in extreme emergencies. But you can borrow up to 50% of your balance up to $50,000.
Joe: Looking at getting advice. Most people really don’t even sign up for any type of advice. And maybe it’s just kind of the do-it-yourself type of program that you have through your 401(k) plan. 53% of Americans do not sign up for any more than just a basic self-help group.
Al: Yeah, and there’s plenty to look at, right? There’s do-it-yourself platforms on custodians. Gosh, there’s so many apps and tools and things to help you invest. Just take a look at them. Of course, there’s also advisors, financial advisors. But if you go to advisor, make sure that they do financial planning as well as investments, not just one or the other.
Joe: You know, if you want more help, you know where to go. Go to YourMoneyYourWealth.com. We have our Financial Blueprint. So if you’re looking at some of these roadblocks and how to break through, go to our Financial Blueprint, get your roadmap set, YourMoneyYourWealth.com. Click on that special offer. It’s a Financial Blueprint. It’s your personalized blueprint that you’re gonna fill out, your own overall situation right there. It’s your own financial blueprint that you could do laying in bed. I don’t care where you can do it, but you can get the answers that you’ve been looking for.
Hey, when we get back, we’re gonna talk about overspending. How do we curb that? Stick around and find out.
Spending
Hey, we’re breaking through some of these retirement barriers today. To help you even further go to YourMoneyYourWealth.com. Click on our special offer. It’s our retirement blueprint. Do you have a roadmap for retirement? Do you know the pluses and minuses of your overall situation? Are you on track, not on track? What are some situations and strategies that you should be utilizing? Go to YourMoneyYourWealth.com. Click on that Financial Blueprint. Get yourself informed today. Let’s see how you did on that true/false question. If you failed this thing, you’ve got to get that Financial Blueprint.
Al: 80% of Americans say they have a budget. True or false. Well, the survey says true. 80% of you have a budget. Although I find that a little hard to believe, but let’s go with that. More importantly though, from this survey, 80% of you are not following the budget that you’ve set up. So it’s same/same. If you have a budget, you need to follow it.
Joe: You know Al, like, you know how many times I’ve done this? It’s like you get excited, you go to the app store, you know, there was like Mint.com.
Al: Yeah, right.
Joe: And then there’s RocketMoney. And so you start putting all your stuff in and then you’re like, okay, we’re really going to buckle this thing down. And then after like two months, you’re like, oh my God, we’re spending way too much. I don’t even want to look at this anymore. Right. Don’t be like everyone else. 80% of us are doing this. Okay, so it’s very normal, but you got to reel it back in. You have to understand what you are spending so that you can have a good retirement. Credit cards. Big Al.
Al: Yeah, credit cards. So the average debt right now, at least 2023, $6000 per person in the United States. And in many cases, it’s a lot more. If you find yourself with a lot of debt, over $10,000, and you’re having trouble making those payments, a couple things you can do. The easiest one is to try to get another credit card with a zero interest rate. Maybe you’ll have free interest, zero interest for 6 months, 12 months, 18 months, right? But if that doesn’t work, there are plans where you can consolidate your debt with a debt consolidation loan, maybe get a home equity loan or in some cases, debt relief with credit card companies. If you’re having major problems, they will work with you.
Joe: You know, if you have multiple cards, here’s a couple of different tips here too. There’s like the this snowball effect. So sometimes the experts will say, well look at the one with the highest rate, right? So if you have a card with 22% and then 12%, 6%, and 0%, we’ll pay the one that’s, you know, the highest interest rate. Intuitively, that makes a lot of sense. Another way to think about it too, is then you can match up your credit cards or your debt with that lowest debt to the highest. And then so with the lowest debt, you want to pay that one off and then hit another one and hit. So there’s like this snowball effect that people get a little bit more motivated when they can start checking these boxes to get the debt off their balance sheet. So a couple of other tips there, if you do have some debt on how to take control of it, and get rid of it. Childcare, Big Al, I’m in this land of fun stuff.
Al: You are. 27% of your income spent on child care. That’s a lot, Joe.
Joe: That is a lot. I’m telling you kids aren’t cheap.
Al: Anyway, what can we do about it? So a couple things. You can set up an FSA plan at your employer if you have it. If the employer has it, that could be up to $5000 per year saving into that plan to use for child care. That’s a tax-free benefit to you, right? Or potentially you can get that child care credit of up to $1050 per dependent up to two dependents, a couple thousand dollars. So make sure you’re taking advantage of these benefits.
Joe: Yeah, Flex Spending Account. So just understand if you don’t use it, you lose it, right? So these are a little bit different than the, popular HSA, health savings account. These flex accounts are great though. You get a tax deduction going in that you can use that gross tax-deferred that you can use for, pre-tax health care- or child care costs. So, really good benefits for those. Health care costs is coming right down the pike for you, brother.
Al: Speaking of health care.
Joe: Speaking of, right, I got this, Al, you got this.
Al: I do, and it’s only going up. It’s like getting older. Anyway, so, but what can I do? What can you do? You can set up a health savings account, right? If you have a high deductible health savings plan. So that allows you to put in 2024 $4150 into the plan, $8300 if you’re family, and you can put in an extra $1000 if you’re 50 and older.
Joe: Okay. Student debt, a lot of us still have some student loans to pay off. The average federal student loan debt is almost $40,000.
Al: Wow.
Joe: $40,000 grand. So, you know, we’re still trying to chip away at some of that student loan debt. You know, what can you do Big Al? There’s some things that we can do.
Al: Well, if you find yourself where you just really can’t afford the payments, there’s tuition assistance, potentially. It’s called Income Driven RePayment Plan. You can go to StudentAid.gov and apply for this, and then this will allow your payment to be in line with what your discretionary income is. In other words, it could be quite a bit lower than what you’re currently paying. And then also, in some cases, you may have a benefit at your job where your employer will pay up to $5250 tax-free, Joe.
Joe: You know, as we’re accumulating wealth, there’s all these different barriers that come into play, right? You have college debt for your kids. You have health care, you know, as you get a little bit older, or maybe you have credit card debt that you’re chipping away at. You still have a mortgage. You know, once you get control of that, and then you approach retirement, now you have all sorts of other fun stuff to consider, right? We’re living a lot longer. That’s really good news. But it’s also the bad news is that your money has to continue to last. So if you don’t get a hold of your spending, right, you’re going to need those dollars for a lot more years. Looking at females, life expectancy in 1940 was 78. In 2050, it’s expected to be 87, 2050 for a male, 85. That’s getting pretty old.
Al: That’s yeah, that’s my target. Yeah, maybe 90.
Joe: 95.
Al: Yeah, we’ll see.
Joe: That green juice you’re drinking, you’ll make it to105.
Al: It’s all good at 10,000 steps a day. But here’s the problem is about half of you plan to work past 65, but it’s not always available. In fact, probably at least half of you retire earlier than you want to because of health, because of job loss, or because of caregiving. Currently, only one in 5, 65 plus are working. Although, Joe, I looked at that survey. It’s a little misleading. That includes my mom, too, who’s 91. She hasn’t worked for 25 years, so just take that grain of salt.
Joe: Get out and sit. But, you’re right though, because I think a lot of times people will be like, well, I’m going to continue to work. You know, I’ll work until I drop or whatever those stupid sayings are, but Al hit it on the head. It’s that sometimes we’re forced into early retirement, even though we want to work a little bit longer to save and protect that nest egg, unforeseen things happen. So just being prepared because we are living longer. And then finally, Al-
Al: Spending in retirement, spending a lot- volatility.
Joe: You got to buy the RV. We got to go on vacations. I want the timeshare in Dominican.
Al: We do. We’ve been, waiting and we want to do these things, but here’s the problem. If you overspend too much, then later on, it could be a problem. Like here’s just a little quick example. So you’re spending $60,000 a year, and you project it out at 6% rate of return, 3% inflation. That’ll last to age 85. But if you could just trim that back 10% to $54,000 a year, you get an extra 5 years to be able to not outlive your money.
Joe: Go to YourMoneyYourWealth.com. Get that help that you need. Get your Financial Blueprint. It’s going to give you 3 scenarios. Are you doing things excellent? Are you fair or are you good? So we’ll give you that range so that you can focus on the things that you need to focus on. It’s very specific to your situation. Go to YourMoneyYourWealth.com. Click on that special offer. It’s our Financial Blueprint. You’re going to love it. And when we get back, we’re going to talk about the big one, savings. Are you saving enough and where should you be saving and you know, where to start and how to do it.
Saving
Hey, welcome back folks. Show’s called Your Money, Your Wealth®. We’re talking breaking through your retirement barriers. It’s that overspending, it’s the planning. And then now we’re gonna get into savings. Are you doing the appropriate thing when it comes to savings? How much should you save? Where should you save it? If you wanna get very specific help, and if you wanna do it yourself, go to YourMoneyYourWealth.com, get our Financial Blueprint. It’s a phenomenal tool. It’s quick and easy. It’s gonna give you the scenarios that you need to see. If you’re on track, not on track, or are you in the middle of the road to help you focus on the things that you need to do. YourMoneyYourWealth.com, click on that special offer. But now let’s see how you did on the true/false.
Al: 20% of Americans age 50 plus have no retirement savings. That’s actually true. One in 5 people over age 50 have no retirement savings at all. We learned at the beginning of the show about half of you have no retirement savings, but that includes all ages. At least by the time you’re 50, you should at least have some retirement savings and Joe one in 5 don’t.
Joe: Well, that’s okay. You gotta get to work, right? You gotta start plugging away at some, point, you know? But we’re living a lot longer, so that’s the good news. So if I’m 50 years old and I don’t have any savings, well, I can work until I’m probably 70, and so I have 20 year runway and then have another, you know, 15, 20 years in retirement. Let’s get started here. Savings plan, Big Al.
Al: Yeah, so about 69,000,000 workers have no savings plan at all at work. There’s no 401(k), nothing like that. So what can you do? Well, certainly you can set up an IRA. That’s currently $7000 per person. If you’re over 50, you can add another extra hundred, $1000. Of course you can always set up a brokerage account. You can save outside of retirement. And Joe, if you’re self-employed, you got a solo K and other plans.
Joe: I mean, these are crazy numbers, right? 56% of workers do not have a 401(k) plan. So if you take two individuals and you put ’em in the same occupation with the same income, one has a 401(k) through their employer, one does not, you fast forward 20 years if they stayed in that employer. Who’s going to have more money?
Al: Yeah, the one with the 401(k).
Joe: The one with the 401(k) because they can just check a box and put it into the plan. It’s funny, brokerage accounts should not be scary. A lot of you do not have any money into a brokerage account. All your money’s in a retirement account. If you do not have a retirement account, you can open up a brokerage account at any discount broker, Charles Schwab, Fidelity, Vanguard, whatever. Now put a couple hundred dollars a month into this. So just because you don’t have a retirement plan through your employer, Boom. There’s all sorts of different scenarios that they can at least start and jumpstart that savings.
Al: Yeah, Joe. And the other thing is about 78% of people out there are living paycheck to paycheck. So, what should we do about that?
Joe: Well, welcome to the club, right? It’s like, the more money that you make, guess what? The more money we spend. So, we gotta figure this out. You wanna get that budget app? Yeah, I’ve had a hundred of these apps. And I’m like, well, that one’s not good enough, so I’m gonna keep doing it. At least I’m trying, right? Yeah. budgeting. No one likes to do it. It’s not fun. And then you realize how much money that you spend and then you get depressed. Got to look at needs and wants, Al.
Al: You do.
Joe: But everything that I want, it turns into I need it.
Al: It’s a need.
Joe: I gotta have it. I gotta have it. Gotta start small though, right? Just take one step at a time. How do you eat an elephant, right? Or something like that.
Al: Yeah. One bite at a time?
Joe: One bite at a time.
Al: You know what, I think that’s such a good point because I mean, a lot of times people end up behind and in terms of their retirement savings, you’re not alone. But you just start, maybe 1% of your income and each year you increase it a little bit more. Every time you get a bonus, you increase it a little bit more. Right? And/or raise. Just keep every year adding a little bit more and it accumulates.
Joe: You know, when we’re talking about people over 50 that have very little retirement savings, well, 50% of women, 47% of men are sitting in that camp. So almost dead even here. What has happened over the years is that there’s these catchup contributions. Once you reach your 50s, it’s like you’re in your peak earning years, and so that you’re making a little bit more money, maybe the kids are out of school, maybe all of these larger expenses are going down, so it gives you the opportunity to put a little bit more dollars into your overall retirement accounts, so these catch up contributions are huge for individuals.
Al: They really are, so you think about a 401(k), $23,000 is what you can put into it, but if you’re 50 and older, you can add another $7500. So don’t forget about that. IRA, $7000. You can add an extra $1000. And then we got an even bigger catch up, Joe. And starting in 2025, for 3 years, $10,000.
Joe: That’s a huge number. I like how he said when you’re, you know, in your 50s, your kids are out of school. In my case-
Al: Did that happen for you?
Joe: But I’m 70s, my 3-year-old.
Al: You know what, we’ll have-
Joe: My 3-year old’s finally gonna get outta school.
Al: We’ll have to put in a new catchup for you in your 70s.
Joe: I’m gonna need a giant catchup. Oh, there’s more savings. There’s more things that you can potentially do. Right? So if we exhausted everything, it’s like, ah. Just simple things. If you get a bonus through your employer, just try to bank that bonus or half of it or a quarter of it. You know, I’ve heard this like a quarter to a third of yourself, a third to fund, you know, a third to debt. Rent a room. This is Al’s favorite. He’s got a room.
Al: I can’t wait. Or side hustle. Joe, you and I need to figure out some kind of side hustle when we retire.
Joe: Yeah, when you’re 68 years old, we’re gonna start doing some side hustle. But honestly, there’s some different things that people are doing. They’re starting businesses at all sorts of different ages. So there’s a lot of fun things that you could potentially do to make a little bit of income. Some not so fun. But you gotta start somewhere. You gotta put a plan in place. And depending on where you’re sitting here, there’s other opportunities. Alright, so we broke through those barriers. We talked about planning. We talked about budgeting. We talked about savings. That’s what you need to do. Start with a plan. Big Al.
Al: You do. That’s always first. Make sure you budget. Make sure you save. Make sure you figure out what you’re spending is. It’s not that complicated. But Joe, as you said, right at the start, hard to execute, but not that complicated.
Joe: We’re here to help. Go to YourMoneyYourWealth.com, click on that special offer this week. It’s our Financial Blueprint. See what you need to be focusing in on. Are you on track or are you not on track? Or are you close? YourMoneyYourWealth.com, click on that special offer. It’s our Financial Blueprint.
Hopefully you enjoyed the show. Hopefully you had as much fun as Big Al and I did. Want to thank Aaron for putting together an awesome show. We’ll see you next time, folks.
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.
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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.
