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The Retirement Danger Zone

The Retirement Danger Zone

Common mistakes and considerations for the years right around the time of retirement.

In this episode, we discuss different mistakes and considerations on how to make retirement enjoyable so you can sleep well at night.

Here are a few topics we will cover:

  • Plan for a longer than planned life expectancy - it's better to be overfunded
  • Having the right numbers
  • Cost of living increases
  • Having a handle on any debts
  • Medical costs
  • Insurance coverage
  • Getting too conservative too soon
  • Put together a plan that makes sense to your particular situation

Our Podcast – Your Investment Partners

Sit down with Paul and Garrett of Ascend Investment Partners for a bi-weekly conversation about all things financial. Focusing on helping you plan, keep, and grow for a bright future.


Thanks for tuning in. Questions about today's episode let us know.


(801) 476 - 1200

Full Transcript:

00;00;06;29 - 00;00;24;01

Garrett & Paul

Hello and welcome to your investment partners with Paul and Garrett, where we talk about all things financial, focusing on helping you plan, keep and grow for a successful future. If you're new to the podcast, welcome. And if you're tuning in again, welcome back and thank you for listening. Hello and welcome to your investment partners with Paul and Garrett.

00;00;24;10 - 00;00;43;21

Garrett & Paul

Today we are talking about the retirement danger zone. These are the years right around the time of retirement. This is a critical time for your financial plan and your life decisions may have a lasting impact. We share common mistakes that we've seen and a few considerations before you decide to retire. My name is Garrett Smith, and we look forward to having you with us today.

00;00;43;24 - 00;01;07;13

Garrett & Paul

Well, welcome back. Episode nine We're doing I guess we're on number nine. Well, here we go. This is another good one. So we've kind of been building up to this point of of, you know, information in your twenties and thirties, questions to be asking yourself thirties and forties, fifties kind of through through the ages. And today we wanted to talk about kind of right around retirement.

00;01;07;14 - 00;01;26;23

Garrett & Paul

I like to think of this as kind of the danger zone, if you will, the three years before retirement, three years into retirement. And this is when the numbers get real, the math gets real. And and it's a real exciting day for a client. Well, it's exciting. It's scary as you know, for advisors, it's it's a little scary.

00;01;26;23 - 00;01;49;04

Garrett & Paul

You got to make sure the numbers are right. And, you know, everything. Everything works. You just don't want to be the guy that says you need to go get a job at Wal-Mart. You know, that's just is nobody wants to have that conversation. So and so far, we haven't had to have that conversation. So that's good. Yeah. The main goal is always to not go back to work if you don't want to.

00;01;49;13 - 00;02;12;29

Garrett & Paul

Yeah, that's that's that's the last thing you want to do. And and you know, when it comes to this, there's kind of three parties involved, right? There's obviously the person retiring, there's the advisor sitting there with them. But then there's also the market and, and it's all kind of based on assumptions going forward, you know, past performance, the market, future assumptions of of income and spending and health insurance.

00;02;13;06 - 00;02;43;19

Garrett & Paul

You do you know from a planning perspective, there's a lot of kind of assumptions and questions and best guesses you have to make in this time frame as well. Yeah. And because the you know, we're just working with math and and that the numbers can you know, you can you can manipulate the numbers to kind of tell you whatever you want it to tell you about what what we really want to know is, you know, what's what's real and what's possible and and what are the risks involved with the current situation.

00;02;43;19 - 00;03;07;25

Garrett & Paul

You know, for example, you know, on my planning, I, I just plan on living to be 100. I want to make sure that that in my retirement plan that I'm that I'm funded through age 100 and some clients come in and you know, they've got you know, maybe they're not in the best of health and they've got some issues and or something.

00;03;07;25 - 00;03;31;04

Garrett & Paul

And they say, well, you know, I'm just be surprised if I live past 80, so we can use that number. But, you know, people need to understand that's a more aggressive posture when you're using a shorter, you know, life expectancy, because what happens if you end up living longer than than you plan, then it kind of throws the the math of fear of your plan off a little bit.

00;03;31;04 - 00;04;00;04

Garrett & Paul

The same thing. You know, you could you could have an advisor say, well, we can you know, we can get you 12% on your money. And, you know, maybe the last ten years we've been able to do that. But to project that in the future, that's a very aggressive number. And so the you know, the idea is you have to you know, you really should use more conservative assumptions and then with the idea that if I'm overfunded, I can always find a place to spend more money.

00;04;00;04 - 00;04;17;15

Garrett & Paul

That's a much better position to be in, for sure. Yeah. Having the conversation of, hey, we're overfunded. We've got extra dollars in the plan. You know, take your grandkids to Disneyland is a lot better conversation than you know, it's time to give those or Walmart a call and see if we can work 20 hours a week. Exactly. Yeah.

00;04;17;26 - 00;04;37;16

Garrett & Paul

And that's always it with this. It's. It's. It's your life. It's your plan. And you can you can make any of those assumptions that you want. You can say, I'm only going to live five years and and that's one of the challenges with with retirement now people just live longer. We have lots of clients in their nineties. Yes.

00;04;37;17 - 00;05;09;01

Garrett & Paul

It's it's it's becoming less and less uncommon. Right. And and so you have to assume to be conservative, you have to assume lower rates of return, living longer. And then it just gives you peace of mind. It gives you a buffer in the system. It's the same reason why we're fans of, you know, emergency funds and having those in the financial plan as well as of the more slack, the more buffer you have in your system, the more you can handle news events, volatility, uncertainties, because things change.

00;05;09;01 - 00;05;25;19

Garrett & Paul

You know, really, the minute your plan is done, it's kind of out of date the second you walk out the door because life changes. Right. And so the more conservative you can be with yourself, the more options you have. Now, you know, I get you know, a lot of people want to spend the last dollar the day they die.

00;05;26;14 - 00;05;42;29

Garrett & Paul

But the problem is we don't know when that day is coming. Yeah, I think that's a great plan. I want to spend the last dollar the day I die to the the nobody ever answers the question when when are you going to die, You know, so we can help do that math if we can give us a date.

00;05;42;29 - 00;06;05;20

Garrett & Paul

But you know, that's that's a that's a tough one to to deal with. And so you know, the alternative is just to use more conservative numbers and and then be, you know, overfunded. That's that that's the best scenario because it's it's a lot less stressful. And, you know, let's say in a normal emergency fund is, you know, say $20,000.

00;06;05;21 - 00;06;35;25

Garrett & Paul

Well so to take that up a little bit, maybe you have maybe have 30 or 35,000. So there's a little extra buffer there. You know, maybe your math is more conservative rate of return. Maybe you say, well, instead of living at age 85, I'm going to lift age, you know, 93 or whatever. And that way you've got just extra room in the plan for things to go wrong, because the worst case scenario, somebody retires and and then there's a pullback in the market like we're having right now.

00;06;35;25 - 00;07;04;12

Garrett & Paul

If you retired, you know, just a year ago, then things are a little more stressful unless you were you know, unless you had slack in your plan, unless you had an overabundance and you were using conservative numbers, then, you know, everything still feels okay. But if you were just trying to hit that, you know, that finish line and maybe you used more aggressive numbers and then immediately we have a pullback in the market, then it's just a more it's just a more stressful situation.

00;07;04;12 - 00;07;22;02

Garrett & Paul

We don't want people to have financial stress during retirement if we can avoid it. Yeah, that's kind of the main point of retirement, is to reduce some of that that stress. Right. You're not you're not worried about putting food on the table every night. That's kind of one of the main goals, is that little more stress free of a life.

00;07;22;09 - 00;07;43;16

Garrett & Paul

And I think that leads into if if one of the better conversations we've had with with clients at this time, too, is is talking about maybe we take a second employment instead of fully retiring, you know, maybe there's an option to instead of making big withdraws for the next few years, we take partial withdrawals and we work some of it as well.

00;07;43;16 - 00;08;08;05

Garrett & Paul

You know, you can always take a little and work a little. Hey, there's there's options that way in a hybrid retirement work in a job that you enjoy doing at a schedule you enjoy doing, you know, instead of waking up at 4 a.m. and headed out to the, you know, the factory or the plant, you know, you can work on an hours, you can find a job you enjoy, and that improves quality of life without putting at risk kind of the longevity of retirement.

00;08;08;13 - 00;08;32;28

Garrett & Paul

And so I wouldn't I would encourage a lot of people to not discount the idea of just changing jobs, maybe right at the finish line to help ease into retirement versus, you know, just flipping the switch. Well, especially if you can find the right situation. You know, and I think the the part time situation, it can help emotionally, too, because sometimes it's really hard to go from, you know, fully engaged.

00;08;32;28 - 00;08;54;06

Garrett & Paul

I'm working, you know, 45, 50 hours a week to two to nothing. That's a that's really a kind of a big adjustment for a lot of people. And I know when my dad retired, we were in business together. And, you know, first we slowed him down to four days a week and then three days a week. And and there at the end it was two days a week and he took a book with him.

00;08;54;12 - 00;09;18;03

Garrett & Paul

But you know, I mean, and that's that's a great way to kind of ease into retirement. And I think there's a lot of employer, especially smaller employers, that value the you know, just the the education that they have invested in employee over time that are probably willing to work with people and say, hey, you know, I want to retire, but I don't really want to retire completely.

00;09;18;03 - 00;09;35;27

Garrett & Paul

Can I just get my schedule back a little bit? And I think a lot of small employers are really open to those kind of situations. So yeah, I think that's a great point. You might not even need to change jobs just can make it happen, you know, right where you are. It's definitely a conversation worth having if you you know, like parts of what you do.

00;09;36;04 - 00;09;59;27

Garrett & Paul

Yeah, I maybe just want to ease back on the schedule. And obviously the biggest point in here is I feel like clients speed up during this time. You're making lots of decision, lots on the line and it seems to be going fast for people right around retirement that you know, this retirement time. And so just being able to try to slow down your thought process, throw it out, slow down the decisions, there's you know, there's nothing that has to be done right now.

00;10;00;07 - 00;10;18;23

Garrett & Paul

They get anxious to reach the finish line and maybe you rush some things right in those last few years and it kind of can just put a hitch in the system. And so just just taking a little extra time, double checking the numbers. And as well as emotionally, too, it's it's you know, people do want to retire. It's what you've been working for years for.

00;10;19;06 - 00;10;35;21

Garrett & Paul

And so just taking that extra beat to double check all the numbers, review the cash flow and and that's something that is easy to overlook of just not having the right numbers when you put things together. You know, I think I'm going to get this so much from Social Security. I think I'm going to get this much from a pension.

00;10;35;21 - 00;10;53;14

Garrett & Paul

I think, you know, this, that and the other. And you need to know exactly what the numbers are. Yeah, it's critical that you need to know what the numbers are as well as, you know, cost of living increases. And and does your you know, if you have a pension, does it does it have a cost of living increase or is it a fixed pension?

00;10;54;17 - 00;11;19;14

Garrett & Paul

What are your Social Security benefits going to be? And, you know, you get close to retirement. You really need to get hard numbers from the Social Security Administration. So you know exactly what those numbers are. And and, you know, sometimes, you know, we we we assume and then we get the numbers and, you know, it might be a couple of hundred dollars higher or a couple hundred dollars lower, which really, you know, that makes a big difference in retirement.

00;11;19;14 - 00;11;41;26

Garrett & Paul

So particularly for business owners, you know, sometimes you show an income differently and not gotten it credited through through Social Security. And so you you know, you may be thinking you're higher than what you actually are. And doing a little income planning in getting ready for retirement can help kind of buffer your your Social Security claiming strategy as well.

00;11;41;26 - 00;11;59;09

Garrett & Paul

You know, this is you know particularly around those who own a business have an escort. Well yeah, business owners. So that's a whole that's a whole nother landmine going on because as a business owner, you want to show as little income as you can, you know, over time because you want to reduce your tax bill. You don't want to pay as much as Social Security, and then you get close to retirement.

00;11;59;09 - 00;22;49;27

Garrett & Paul

You haven't paid very much in.

The commentary on this website reflects the personal opinions, viewpoints and analyses of the Ascend Investment Partners employees providing such comments, and should not be regarded as a description of advisory services provided by Kesler, Norman & Wride, LLC dba Ascend Investment Partners or performance returns of any Ascend Investment Partners Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Ascend Investment Partners manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. 

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