Lessons From Today’s Retirees with Matt Bell

This faith and finance podcast is underwritten in part by Soundmind Investing. For more than 30 years, do it yourself investors have relied on SMI for proven strategies and trustworthy guidance. SMI helps people build wealth so they can provide for their families, prepare for the future and give generously. Learn more at soundmindinvesting.org. Are you confident you'll be able to retire comfortably someday? Are you taking steps to make that happen?

Hi, I'm Rob West. Inadequate savings, faulty assumptions and high inflation could create barriers to a comfortable retirement. Can we learn anything from today's retirees? Matt Bell thinks we can and he joins us to talk about it. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, it's always a treat to have Matt Bell on the program. That's the managing editor at Soundmind Investing and underwriter of this program. And Matt, great to have you back. Rob, it's always great to be with you. Matt, the Employee Benefit Research Institute does the retirement confidence survey every year, and I'd love for you to share with us what the latest data shows about how people are feeling about their retirement prospects.

Sure. Yeah, fairly high levels of confidence is kind of the bottom line. In the latest report, nearly 70% of people in the workforce today and a little bit higher numbers of those who are now retired say they feel at least somewhat confident they'll have enough money to live comfortably throughout their retirement. Now, not surprisingly, Rob, one of the top retirement-related concerns to come out of that survey among both groups centers on inflation. Today's workers say higher prices are simply making it tougher to save for their later years. And another concern from both groups is the possibility that the government may make changes to the American retirement system.

Interesting. Well, I don't think it's a bad thing to be concerned about those things because it inspires folks to prepare for whatever might happen in retirement, although I don't think it will be easy for lawmakers to make wholesale changes to retirement laws and regulations. Nevertheless, what lessons can workers learn from this survey? What stands out to me, Rob, are several areas of disconnect, either between worker optimism and their actual preparedness or between worker expectations and the actual experiences of today's retirees. So, for example, while high numbers of people in the workforce are confident about how well their finances will hold up in retirement, a large number of today's oldest workers, 43% of those aged 55 or older, have less than $100,000 saved for retirement. Yeah, that sounds low, and yet that's something many people could probably do something about.

Yeah, that's right, Rob. I mean, while we can't control how the stock market performs, a lot of us do have some control over how much we're setting aside for retirement. Another area of disconnect, Rob, has to do with the fact that a lot of today's workers say they intend to work past the traditional retirement age of 65, and yet just 19% of today's retirees actually retire that late. So I think it's important for all of us who are working today to see that many of today's retirees stepped out of the workforce earlier than they had intended to. And while some did so simply because they could afford to, most in that situation had to retire because of health issues or changes at their workplace. And one related note, Rob, large numbers of today's workers, 75% in fact, are counting on being able to work for pay to some degree in retirement, whereas only 30% of today's retirees actually have.

Interesting. Now, Matt, you mentioned about the actual date they plan to retire. I know one of the disconnects in marriage is often spouses don't know when their other spouse plans to retire. We've actually seen some studies on this, haven't we?

Yeah, that's right. And that's kind of surprising. I mean, it really shows the lack of communication about really, I think, a lot of financial topics, but it's interesting and it's noteworthy that, like you said, high numbers of married couples report that they're not sure when their spouse intends to retire. So can you imagine seeing your spouse head out the door in the morning someday with the golf clubs instead of the briefcase, and that's your first hint that they've retired? Yeah, definitely a breakdown in communication there.

So make this one of the notes along the way here from today's broadcast that you need to have that conversation if you haven't already. Now, Matt, what are the takeaways from these two areas of disconnect that you highlighted a moment ago? Well, I think they both have to do with setting realistic expectations. I mean, you don't want to create a retirement plan that's based on an absolute best case scenario. For example, a plan based on having to work until you're age 70 or having to be able to generate some work-related income in retirement. The ideal would be to build a plan where those things will be helpful if they work out, but they're not absolutely necessary.

Yeah, that's exactly right. Well, Matt, we've just scratched the surface on this. I know we're going to continue to unpack this. In fact, folks, after this break, we'll talk about Social Security. What do retirees need to know? Also, how can you use a calculator to estimate how much you need, and what about debt in retirement? We'll even talk about a biblical perspective on retirement.

Much more to come with Matt Bell today. He's managing editor at Sound Mind Investing and underwriter of this program. And by the way, there's a helpful article. It's titled Helpful Lessons from Today's Retirees. You'll find it right there on the homepage. It's soundmindinvesting.org. Back with much more right after this.

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With me today, my friend Matt Bell. He's managing editor at Sound Mind Investing and underwriter of this program. By the way, we're talking about an article you'll find at soundmindinvesting.org. It's called Helpful Lessons from Today's Retirees. Now, before the break, Matt was sharing with us some of the data that came out from the Employee Benefit Research Institute's Retirement Confidence Survey. And Matt was sharing with us a bit of the disconnect between worker optimism and their actual preparedness. Matt, anything else that stood out to you from this study we need to know about?

Sure. One other thing that stood out to me is the benefit of running the numbers on retirement. That means using a retirement calculator to estimate how much money you'll need in retirement and how much that means you should be investing right now in order to give yourself the best chance of achieving that goal.

Surprisingly, from the survey, only half of today's workers have taken that step. But those who have run the numbers, it really shows the benefits. They tend to begin saving more. And that just makes sense. I mean, the more real we can make retirement, the more we can see what we need to do in order to retire successfully, the more likely we are to take those steps that we need to take.

There's no doubt about that. Now, Social Security is, of course, a big concern for retirees. So what should future retirees know about this area? Well, for starters, it would be helpful to find out how much you're likely to receive in benefits. The Social Security income that people will receive, the benefits they'll receive, that'll be an important source of income in retirement for most of today's workers. However, back to the survey, fewer than half know what their benefits will amount to at their planned retirement age. And less than 60%, according to the survey, have thought about how the age at which they claim benefits will impact the amount they receive.

And now all this information is readily available at the Social Security Administration's website, which is SSA.gov, or by looking at your Social Security statements. Yeah, that's helpful, Matt. Of course, one of the biggest hindrances to a comfortable retirement is debt. So let's talk about that area and perhaps anything the survey revealed.

Sure. For some reason, this year's survey apparently didn't even ask about debt. However, last year's survey did. And during that survey, nearly two-thirds of workers acknowledged that debt is a problem for them. And that issue is not likely to have disappeared between that survey and this survey.

So we can assume it's still present for a lot of people. Now, while last year's survey didn't break down debt into specific types, other surveys I've seen point to an increase in the number of people bringing a mortgage into their later years and how that can really hinder their financial freedom. So, Rob, as we've recommended before, it's wise to plan to retire your mortgage by the time you retire. And if rates ever go down again and you decide to refinance, be careful not to reset the 30-year payoff clock to a date that's past your intended retirement age.

That's great advice. And that may lead some retirees to extend their years of work so they can sync up that retirement date with their payoff, right? Yeah, that's right. I mean, the mortgage is typically people's biggest expense. And so, wow, if you can get that taken care of by the time you retire, that just gives so much more freedom and flexibility in your retired years. Yeah. That also takes us back to what you talked about a moment ago, and that is Social Security. We tend to recommend that folks who don't need the Social Security money right now, especially if they're continuing to work, that they delay taking Social Security to get those guaranteed increases. Would you agree with that?

Yeah, absolutely. And one other benefit of doing that is that if a man is perhaps earning more in his lifetime than his wife is, and he's got the bigger Social Security benefit, typically men pass away earlier than women do. And so, she would be able to move into his benefit. And so, it benefits her if he delays his benefits as long as possible so that she'll be able to make use of that larger benefit.

That's great advice. Let's stay with that, though, for a moment. You mentioned that we men will just, based on the averages, pass away before our wives. What's important for this season of life to think about, Matt, so that a spouse, perhaps a wife who was not as involved in the finances, is prepared to take over that responsibility?

Sure. And that's typically the case. I mean, it's not the case in every household, but it often is the case that the man is making some of the financial decisions, maybe has those relationships with a financial advisor, with a lawyer, with an accountant.

So, one really, really beneficial, really helpful step would be to make sure while you're both alive that you both have a relationship, that your wife has a face-to-face relationship with these various financial professionals so that things can continue on after you pass away. Yeah, that's really helpful. And Matt, of course, just doing the blocking and tackling of making sure that for whatever spouse is not as involved, whether it's the man or the woman, that there's a comprehensive listing of all the professionals, all the financial accounts, login information.

I mean, that can be a missed step very often. Isn't that right? Yeah, for sure. And I mean, things like beneficiary designations and having a will in place or a trust, if that's appropriate for you, all of these things that we feel like are backburner sorts of things, we'll get to them someday, one day. But I'll tell you, it truly is as boring as some of these documents can be. It's really an act of love to have all these things in place so that things are just easier for those you leave behind.

Yeah. Matt, let's finish today with a biblical worldview of retirement. As believers, we don't subscribe to the same approach to retirement that the world does, that there's some sort of expiration date on our calling, that at 65 we just automatically move to a life of leisure. That's not the biblical model. So what then is a biblical approach to retirement?

Yeah, it's an interesting tension that I think Christians, that we as Christians live with. So the culture kind of defines retirement painted in a certain picture that really we don't find any evidence for that picture in Scripture. So our whole lives are intended to be, are designed to be lives of service and contribution. However, the fact is most of us will one day retire from a paid job, whether for health issues, the health issues of a loved one, a change at work or God redirecting our efforts toward more volunteer work. For one reason or another, most of us, the statistics tell us, will in fact one day retire from paid work. So it's important spiritually, it's important vocationally, it's important emotionally to plan to continue to work as long as we possibly can, but it's important financially to plan to retire perhaps earlier than we thought we might.

Yeah, I love what Ron Blue says. He says we should think about retiring to something and not from something and really talking not only to our spouse but to the Lord about what that season of life should look like. Matt, do you think it's possible that we could even over accumulate and miss out on an opportunity to do some more significant giving during our working years?

I do think so. I think too often we succumb to fear. You know, we read headlines about how people are just not well prepared for their later years and so we just assume that we need to be accumulating more and more and more. And so there too, it's kind of a tension we live with. We want to be wise, we want to provide for our family's needs long term, so we want to make sure that we're thinking and being very intentional about setting aside enough resources to provide for our families long term. But we don't want to live in fear, especially if that makes us over save or under invest in God's kingdom work while we're still alive.

Because I think in part we miss out on the joy that way. You know, what a joy it is that while we're still living, we can see and we can participate in the contribution to God's kingdom work. Such important lessons to learn about retirement. Matt, thanks for stopping by and sharing this with us today. My pleasure, Rob.

All right. That's Matt Bell, managing editor at Sound Mind Investing. You can read a lot more in this helpful article. It's titled Helpful Lessons from Today's Retirees. You'll find it right there on the home page at soundmindinvesting.org. Again, soundmindinvesting.org.

Just look for Helpful Lessons from Today's Retirees. All right. Your calls are next, 800-525-7000. That's 800-525-7000. And if you prefer not to call, keep in mind, you can always send us an email at askrob at faithfi.com. That's askrob at faith, the letters F-I dot com. We'll be right back.

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Welcome back. This is Faith and Finance. I'm Rob West. We're going to take your questions in this segment. Eight hundred five to five.

Seven thousand. Let's go to Westfield, Indiana. Hi, Alison. Go right ahead.

Hi. I have a question about the comparison between the TSP and a Roth IRA. Like, are there differences in how you can use the money or when you can take it out or anything like that?

And there really aren't on those two things that you just mentioned. I mean, they're both pre tax retirement savings vehicles. The TSP, the thrift savings plan is just the government form of a 401K. So think 401K, except in the government environment. It's called thrift savings and it offers several options for investing, just like a 401K would. The IRA is similar in terms of the tax treatment IRA standing for individual retirement account. But you have many more options for investments because depending on where you open it, you can basically invest it in anything.

Any stock, bond, mutual fund, exchange traded fund. You're not limited to the investments inside the plan like the TSP or the 401K. Now, there's one big difference, and that is the TSP offers matching contributions while an IRA does not. So with a TSP account, the first three percent is matched dollar for dollar by your agency or service. The next two percent is matched 50 cents on the dollar.

So if you put five percent of your basic pay, your agency or service contributes an additional equal amount, equal to about four percent, I think it is, of your basic pay to your TSP. And that's free money. So if you have the opportunity, I would certainly maximize that.

Now, in terms of how and when it has to come out, exactly the same. So, you know, you it grows tax deferred. You can take it out without penalty after fifty nine and a half. As you take it out, it'll be added to your taxable income and you'll have a required minimum in your 70s today at seventy three.

You know, for those born after nineteen fifty one, it's eventually moving in twenty thirty three to eight seventy five that you'd have a required minimum. But that applies to both. Is that helpful, Alison? OK.

Yes. And so I'm in a situation where I'm not eligible for the matching. So really, there's no problem being an IRA rather than the TSP. It's not necessarily a better option.

No, not necessarily. I mean, the only other difference would be the contribution limit. So you can put in twenty three thousand dollars into a TSP this year, twenty twenty four versus the IRA. The IRA contribution limit for the year is only seven thousand for those under age fifty eight thousand fifty and older. So you can just put a lot more money away on the TSP.

So if you're trying to save, you know, we would generally recommend 10 to 15 percent of your income. You may bump into that contribution limit on the IRA and still want to put more money in. And that would mean you'd have to take advantage of the TSP to do it. OK. Are they both limited separately or would I be limited with the total? No, they're separate. Yeah, it's a great question. So you can do up to twenty three thousand in the TSP and then separate from that. You can do up to seven thousand in the IRA.

They don't factor into one another. OK. All right. Thanks for your call. You are welcome. Thanks for being on the program.

Susan, you've been waiting patiently in Texas. Go ahead. Hello. How are you?

I'm well, thank you. OK. My question is, well, we do have the loving our living revocable trust and all of the other things that we need to have. My question, I have a long term care plan on myself, but I do not have one on my husband. So if I had to put him in a nursing home, are they going to take away all of our land and our properties?

Yeah. So Medicaid can't take your home when you apply for or receive benefits. However, your home will be subject to what's called the Medicaid estate recovery after your death. So that means that the state will put a lien on the house to recoup the cost spent on the beneficiary while in the nursing home. Now, you can avoid that with something called a Medicaid asset protection trust, which is an irrevocable trust. So you give up ownership of the asset and therefore Medicaid can't attach it. However, you have to determine for yourself whether this is ethical, something you'd want to do.

And because you're essentially expecting other taxpayers to pay for your long term care, which you can underwrite with long term care insurance. And I know you do have an LTC policy, it sounds like for one of you, but perhaps not both. Is that is that what I'm hearing? Yes.

OK. Yeah. And so, you know, I think at the end of the day, the the answer is to your main question is no, they won't take your home, but they will get paid back in most cases out of the proceeds of the estate after you both die. So that would be the typical way that it's done. Now, obviously, that one policy is going to kick in and that's the best way to pay for the rising costs of long term care, which I realize is really challenging. I mean, you could spend ten thousand a month on full nursing care if you need it. But, you know, you have to you will be reassured that your home is not going to be taken from you while you're both of you are living or either of you are. All right.

My son in law is a hospice person. And he was asking us the other day, do we have we got all of these papers? And we said, oh, yeah, we've got all this stuff. But he was saying that five years in Texas, I think that we have to have had our names off of anything. So does this trust protect us on that? Yeah, there's something called a five year look back that medical Medicaid does when it when it comes to the transfer of assets. And what they're trying to look for there is that, you know, you are not moving assets around specifically for the purpose of avoiding or having Medicaid pay your bills. So, you know, somebody might transfer assets to a child or somebody else. And that look back period is where they will go back and say, OK, you know, were there any assets or money that were transferred to specifically avoid paying out of pocket expenses? When a person has the means to pay at least some of the costs associated with nursing home, senior care and senior living services.

So that's that look back period that he was referring to of five years. Now, you would have to talk to an estate attorney as to whether or not, you know, it makes sense for you, just given your situation to put a Medicaid asset protection trust in place. But in that case, you are actually giving up control of the of the assets when you place the assets in the trust. OK. All right. Thank you so much.

All right. You are very welcome. And thanks for your call today. We appreciate you being on the program.

Hey, folks, our desire for you is that you would see God as your ultimate treasure and that money would be a tool to accomplish his purposes. I hope today's broadcast has been an encouragement to you. We certainly grateful that you've been along with us today. Thanks to my team today. Robert Sutherland, Devin Patrick and Robert Youngblood. Couldn't do it without him. For those gentlemen, I'm Rob West. This has been Faith and Finance. And we'll see you tomorrow. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.