Am I Behind In My Retirement Savings? What To Do If You Are Plan With The Tax Man podcast

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Am I Behind In My Retirement Savings? What To Do If You Are

7d ago 14:10

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Nothing will mess with your financial confidence faster than comparing your savings to your brother, your coworkers, or that guy on YouTube who claims he retired at 38. Your retirement number isn’t a competition. Let’s talk about what really matters when you’re trying to figure out if you’re behind on your savings goals…and what to do if you actually are.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Speaker 1:

Nothing will mess with your financial confidence faster than comparing yourselves to your brother, your coworkers, or that guy on YouTube that claims he retired at 38. Your retirement number isn't a competition, so let's talk about what really matters this week on the podcast.

Hey everybody, welcome into Plan With The Tax Man, with Tony Mauro and myself to talk investing, finance, and retirement. And am I behind in my retirement savings and what to do if you are, that's the topic of conversation this week. Tony, my friend, what's going on, buddy? How are you?

Tony Mauro:

I'm doing well. And just back from the Thanksgiving break, trying to get reignited for this last month of the year.

Speaker 1:

Yeah, it's upon us and always fast and furious, always something going on, right?

Tony Mauro:

Yeah.

Speaker 1:

So we got to dive in and tackle the work, get it done, especially right after holiday break. It seems like everybody's always like, "Oh my God, I'm so overloaded."

Tony Mauro:

That's right. Everybody's got a ton of stuff to do.

Speaker 1:

Yeah, got to catch up from the half the week you're off or whatever. So listen, we got an email question in. And so it kind of sparked the conversation here, Tony. So we'll throw this up here. I'll state it for the listeners and then let's just kind of break it down a little bit. So the person says, "Look, I thought I did a good job saving over the years, but it seems as though I'm behind. My brother's got nearly two million saved and it seems that a lot of my colleagues or coworkers are in that similar kind of stratosphere. The husband and I barely have over a million bucks and now we're in our early 60s and wondering what do we got to do to get caught up?"

So it's kind of like, well, is a million not enough? With all these conversations period, so whatever the number, forget the number for a second, what to do if you're feeling behind, period. So where do we start with this? How do we identify the real issue, Tony?

Tony Mauro:

Well, I think the real issue, and this is a good topic for this time of year, because I think everybody, at least the clients that we serve and prospective clients are all looking at their financial situation. Another year's gone by, another year older and people start to ask these questions. And so I think some of the real issues here probably in this writer's email is basically they're trying to, just like you said, they're trying to compare themselves in a number to other people. And you don't want to do that. You want to get with your advisor and really talk about where you're at with your plan because just because... Well, I guess I can back it up and say, somebody's always going to have more than you, whether it's money, whether it's this, that, things, you've got to really hone in on the real issue of, in your situation, are you going to be ready?

And you got to... I mean, the number is important, yes, but it's not the primary factor, I don't think. A lot of times, because, for example, client A might be very happy and very well off with a million dollars, client B, not so much, which I think we're going to talk about a little bit more in depth here. So really the only benchmark is what you're doing with your plan and what it requires and try to figure out then from there, is what you have enough?

Speaker 1:

Great point. So you've got to really kind of break each of those pieces down and look at all of them and get the numbers. I mean, ultimately, you've got to have this conversation based on numbers and not how you feel about it, and we'll talk about that in just a second. But if you're reframing the conversation, so what is enough, Tony? What's enough for you? Everybody's different.

Tony Mauro:

Everybody's different, so you really have to, again, get with your advisor. I think I've said it before, it's where an advisor lends a lot of value is to take you through these exercises for answering what's enough for you. It really is dependent a lot on type of lifestyle that you want to lead, what your monthly expenses are going to be in retirement, do you have any outstanding debts and other commitments, things like that. You also got to think about too, how long you're going to live. Obviously nobody knows that for sure, but you can kind of make some estimated guesses based on your family heritage and whatnot, who's still maybe alive. And then I think lastly, when it's all over, what kind of legacy do you want to leave? When it's your turn, I think all of these things have to come into play to answer what's enough for you. Because again, what might be enough for one person is definitely not enough for another and not enough for another. So this is where you got to have some good conversations.

Speaker 1:

Well, again, so are you behind or are you assuming you are? So to this person's question, they didn't really state, "We're probably behind," is one of the words that was used. We're barely over the million dollar mark and probably behind. So have you truly run your projections out? And this goes for anybody listening, how do you know if you're behind if you don't truly know where you stand, period?

Tony Mauro:

I agree. And I think that a lot of people fixate on that big number of the nest egg. But what the writer didn't tell us is, they assume they're behind, but a lot of times we find out when clients tell us this is that, "Well, let's say you may only have a million dollars saved," but, "Oh, by the way, you've got this pension that you can't outlive over here," and they don't factor that in, but that's a monthly income that you can't outlive, so that's very much a factor in, do you have enough to retire? So I like to focus on not the number at the end, but what's your monthly expenses? How much do you want to have to not only pay that, but still be able to go out and have fun? That's the number we're looking at. Now then we have to back into, okay, do we have enough over here with all sources of income coming in, including Social Security and pensions and our investments to figure that out?

Speaker 1:

Yeah. Yeah, so I mean, find those targets, get those numbers specifically and then talk about lifestyle, fixed expenses, those financial commitments, the longevity, all those pieces that we talk about often and then you've got a much better piece of black and white right in front of you, so you kind of know what's going on.

But let's just assume, Tony, for the sake of the argument that you are behind. Well, now, so what's some catch up strategies? What's some things to be thinking about when it comes to how to tackle these and how to maybe shorten that gap? So obviously we should start with you're over 50, most likely, because we're talking about retirement, this listener was in their 60s, so take advantage of the opportunities there, max out.

Tony Mauro:

Yeah, you want to max out things like if you've got a 401k at work, if you don't have that, or even if you do, IRAs, got your HSAs in there, you certainly could, and this all comes down to planning, of course, you don't want to just, throwing these out there, you've got to get with your advisor and check some of this stuff out. But you may want to say, "Well, okay, based on the amount I can safely set aside every month with what I have," maybe you need to delay retirement a little bit. Maybe we just need to move it back a bit to even things out. Maybe it's a fact of we do all of the above and we start cutting back just a little bit, we reduce some things to maybe save more. I mean, without feeling like your retirement savings poor. Maybe we need to reassess our risk. Maybe we need to maybe invest a little more aggressively than you have been depending on how things are looking if you're behind.

Speaker 1:

That's a good point. Now as the advisor, okay, if you have to say that-

Tony Mauro:

[inaudible 00:07:35] to say.

Speaker 1:

Yeah. Well, so if you're the advisor and you say, "Okay, look, you are behind. You want to make up this ground, whatever. One of these places is that you have been very conservative with your portfolio." You don't just move to the higher risk if you're behind because you need to take into account not only as the end user, the client, but also as the advisor, how are they going to feel about this, can they stomach taking that extra risk?

Tony Mauro:

Yeah, can they stomach it and how much will that risk tend to be? How much longer do we really have, because that plays into it as well. But it's weird for an advisor to say, "Well, you might need to take on a little more risk." Most of the time we're saying, "Nah, maybe take a little less," especially towards retirement. But it's an option that you might want to consider if you're getting close and you're behind.

And then the last one is, and I think a lot of people don't give this enough merit is maybe you just take on some part-time work, some mindless type work in your retirement to help fund things with not too much stress, maybe not full-time. And maybe you can pick up 20, $30,000 a year extra just doing that and you might have to find something you really like to do.

Speaker 1:

Yeah, I think ultimately, if you got to do some catch up things, there's these pieces. Obviously we got the catch-up contributions, Tony. Now if you are 60 to 63, you've got this new little funky window that they've added.

Tony Mauro:

A little bit more you could put in.

Speaker 1:

A little bit more, so you could pile it away a little bit and really just kind of close that gap should it actually be there. But if you don't identify the lifestyle and the projections, and granted, I know things change, but if you don't do that, you're really just kind of taking a random shot in the dark at stuff. It's like the people who say, "Hey, we are currently living off $5,000 a month and we know we're close to retirement and we just want to pull the trigger and get into retirement, so if we go ahead and live off of 3,500, we could make our numbers last for our projected lifetime." Well, did you try living off the 3,500 first of all to see if that actually works? And I feel like that's the same kind of thing sometimes when people go, "Well, the million's not enough. I got to push to two million." It's the opposite conversation. What if the million does get it done and you just don't know because you just didn't run the numbers.

Tony Mauro:

You didn't run the numbers. Yeah, and we like to do that exercise with pre-retirees before they even retire and get our plan mapped out and say, "Let's try this kind of fake, if you will." I mean, we make them go through it, but they just kind of report back that, "Hey, we were able to do this on this and we don't think this is going to be a problem." Or sometimes they say, "Oh boy, I want a lot more than this. I can't do it." And then you got to adjust. But again, that's, I believe where advisors lend their most value, especially pre-retiree and during retirement is making sure that, and I would advise all the listeners to, if you have an advisor, especially in retirement, make sure you're talking to them about this kind of stuff. You don't want to go in and just talk about numbers all the time. You want to talk about, is retirement working for you and what do you see as your problems? And maybe they can help you make some adjustments there.

Speaker 1:

Yeah, very true. And don't forget too, there's a whole nother piece of this conversation, like if you... Okay, so this person says her brother's got two million. Well, do you or your husband have a pension, and they don't, right? That's another piece of the animal. What if both couples have good Social Security and good pensions? You might not even need a half a million dollars, right? I mean-

Tony Mauro:

Might need a half. How about another one is, maybe you know that you are going to be inheriting quite a bit of money, you just don't have it yet, but you know it's coming. That could be in play too.

Speaker 1:

Yeah, there you go.

Tony Mauro:

All that kind of stuff.

Speaker 1:

Although don't count on that though, right?

Tony Mauro:

No, don't count on it. But like you say, it's important to get that out on the table that you think that's going to happen.

Speaker 1:

Yeah, exactly. So at the end of the day, do you need the two million? Do you need the one million? Look, Tony, I've been talking about this all week, people have known and said for years, Warren Buffett's famously said things like, retirement planning and all that kind of stuff, it's not sexy work, it should be boring. I mean, in a way it should be boring because if you're too emotionally involved and charged up, you make those rash decisions. It's very much like you just get swayed very easily because we get so worked up about our money. But if it's going well, it's probably boring. But news media of any kind, financial of any kind, can't sell boring.

Tony Mauro:

Nope, can't sell boring, that's why they've got to put some stuff in [inaudible 00:12:11].

Speaker 1:

So it's got to be, "It's a million now. Now it's two million. Oh no, the market's plummeted," when it went down like a half a percent. Things like that. So get the numbers, get the concrete data, and then just make sure that you're making decisions from a place of information, not just emotion. Then you can bring the emotion into it, absolutely. But start with the data. So good stuff, man. Well, thanks for breaking that down this week as we talk about it. Always good stuff. Any final thoughts?

Tony Mauro:

Well, I would just say, I mean, my final thought really is keep on it, keep at it. We get a lot of questions from people in their 50s, and the one thing I don't like to hear people say is, "Well, I'm 50-something, it's too late." I don't think it's ever too late. I think if you sit down and iron out a good plan, it might not be your dream plan that you had maybe when you were young, but I think you can craft a good plan. And I think you should stop, it's hard, stop comparing yourself to others, start getting your plan together and I think you can live a, most people, a very good retirement in America these days.

Speaker 1:

Very true. All right, well, thank you so much for your time. And if you've got some questions, you need some help, as always, reach out to Tony and his team at Tax Doctor Inc. Find them online at yourplanningpros.com. That's your planningpros.com or call 844-707-7381. We'll have links in the descriptions below. Tony's been doing this for 30 plus years, he's a CPA, CFP and an EA, so a great resource for you to tap into again at yourplanningpros.com. And subscribe to the podcast on whatever app you enjoy using. We'll see you next time here on Plan With The Tax Man.

Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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