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Retirement Income: The Tragedy of Retirement

Finishing Well / Hans Scheil
The Truth Network Radio
February 22, 2020 8:30 am

Retirement Income: The Tragedy of Retirement

Finishing Well / Hans Scheil

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February 22, 2020 8:30 am

The number one worry retirees face is outliving their money. Hans and Robby go through 2 examples of clients who faced this fear, one who did it early and one who did it late. While it is scary to face this fear head on, it is only going to benefit you the earlier you start the process of planning. While annuities get a bad rap, Hans goes through how, with the right plan and policy, annuities can give you a guarantee that you cannot outlive your money.  

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on for free!

You can contact Hans and Cardinal by emailing or calling 919-535-8261. Learn more at  

Finishing Well
Hans Scheil
Finishing Well
Hans Scheil
Finishing Well
Hans Scheil
Finishing Well
Hans Scheil

You're listening to the network and welcome to finishing well brought to you by Cardinal Certified financial planner belongs agile, best-selling author and financial planner helping families finish well over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started with finishing well, welcome to finishing well with my good friend.

They this show we're going talking about like the tragedy of retirement and I find it fascinating that we actually talk about every show we have the seven worries with the reason why we talk about that. Is it really when you think about it. Hans that the tragedy of getting to this point in your life and living in worry is is just like that's just what a slap in God's face. The word saying he can't take care of us.

That's what it is and you know people that worry is that in you know specifically what were talking about here is people that are in retirement and they worry about money or they really worry about running out of money or outliving their money right. What happens is that when you're worried you generally can make poor decisions yeah and and it almost seems like that rather than confront the reality is that the situation you you 10 didn't let it just sit there and fester and you know we have a few stories that shows people that have let it fester to the just point of paralysis of you know, scary decisions that are being made well and here's the problem that were all trying to sell retirees me as a financial planner you as a person that's close to retirement and then you know are close to retirement age for Social Security. You're probably not gonna retire until you have to like me that the real problem is is that we've accumulated retirement money, retirement funds, IRAs, 401(k)s generally other savings so we we have what we have.

We've we've accumulated.

And the problem that needs to be solved is how do we distribute that. How do we withdraw from that how we create an income from that. How much can that income be and then the ultimate problem that were worried about is what if I spend too much. What if I lose money in the stock market what if I have some gigantic expense that comes up to me, that I just have to pay for or to help when my children and so I spend all my money and yet I'm still alive and need an income and can be brought to me like you said, people are not as specific.

I've never had anybody articulate that to me so I just have to guess at it, but I think I'm pretty close.

There now. In fact, it's one of the seven word tabs talk about the date it is that all worry of investments and and how does that figure into this situation of them I can outlive my money was my wife can outlive her, you know it's it's not just me right it's it's it's what about my family and as you mentioned, my children and of setting up some type of structure to where I feel like you know God can infect you network through this will yeah so so what happens then is some people were really talking about here's how much my principal, can I spend every year from now till the end and still be okay at the end and which is hard to do since I don't know how long and not none of us know right will worried about this week we somehow we we we just taken for granted that there's some data out there that I might live beyond and when were making this decision.

I mean, a lot of people just decide on the stucco spend any of us can live on my Social Security. That's it that's all I have money for this role of function and then I'm just can pull out little bits of that retirement money just when I absolutely have to. But I just can leave it there when I ask you as you think that's what God wants us to do with her retirement savings. Yeah, I remarried outlets. What is God how I know one thing, he doesn't have in mind forces worry so I think that one of the things that would I be able to provide you with and stay show some hope and it of one of the big hopes I have is to hear this one lady story that actually did do some planning and and not looking at her situation should she really would have no cause for worry at this point in time she there's no way that she will outlive her money so she's made a good income and I sense that that income has been made in the last 2025 30 years. I don't know that for sure, but I don't think she did a lot of retirement savings during early years. I think she was raising her children that she's now 72 and she's worked and been very successful as like the lady in an insurance agency originally answering the phone and then writing insurance. After a while, if she got licensed and then coming an agent for the guy that owned the agency than the agency gets sold to another insurance with big insurance company or insurance agency, and then they hired her.

Anyhow, she's just gotten up to a pretty pretty nice income and become accustomed to living that way, but she's been smart enough to save that proper amount of 401(k) money and really if you look at the last 2025 years, 30 years in the market. Just buying little bits of it every time she's done quite well and she's got about three quarters of $1 million in IRA money. She's a widow she's just retiring now at 72 she has a very high income expectation, meaning that she basically wants to replace what she was making or most of it and she's getting from Social Security about three grand a month and so what I'd like to do as a financial planner courses. I love her to get the three grand a month tax-free right by sheltering this other money but it's just is just in it in the scheme of things is that stucco workouts is you have to pay taxes on that were replacing taxable incomes, at least in her mind my job as I'm set out is to have her after she retires no longer get the paycheck.

She's getting one from the government now and she's getting. She's going to get one from her retirement account or several paychecks from retirement account and they need to add up to about $80,000 K this out will evidence how hard you know you take what seven grand a month and yard got three of it coming from Social Security so you need to come up about four grand a month is a little less than four 3500 is what we needed to solve for 3504 grand a month and then as soon as we start withdrawing from this account matter what we invested in. There is a point in time working or you just calculated with a calculator. She lives to be actually be out of money was an unknown is the investment return for the investment loss so I could go on and on and on with the story and I'll just, speeded up is she's not really interested in investing in something with any substantial risk of occasionally losing money was. She knows she can't make anymore. So that's gonna rule out any sort of a high return for her. So now we gotta take this money and make it last over a lifetime with a with a very simple and safe return for safer return and so where we solve this whole problem is route with three buckets of money into the three buckets of perk bucket one bucket two are pretty similar because you even asked me in preparation for the show walk. What's the difference in the two annuities that you put in a civil, not much at September the buckets are annuities correct and for those who are like me a year ago had no clue what the word annuity means to its mean the first thing I want to get mine is the word guarantee.

The only thing we sell other than life insurance, life insurance, we can do this to where we can guarantee you amount of money in the future that no matter what happens you can have this amount can't do that with stocks can't do that with bonds. We can't do that with alternative investments. We can't even do that with a CD at the bank beyond the term of the CD mean within annuity or life insurance but in her case it's can be. It is an annuity in her plan. That's gonna be able to guarantee an interest rate and 11 be less than us and it comes with a guarantee of principal comes with a guarantee strike and withdraw anything out either one of these two annuities for at least five years and maybe longer than in the reason we did two of them instead of one of them is she may want to put them on different timetables for starting the payments. You may want to start at one.

Later, the other one of the cool things about annuities from my point of view that I did not know is that you put this money into this account and after period of time you turn on an income and then they continue to pay you that income as long as you ever so it's impossible outlive your money if it's like your Social Security check.

Right you turn it on and so the longer that it this money bakes is what you call a nurse is sitting there creating interest inside the account more that those payments are going to be when you finally do turn it on because are increasing in size exactly every year you way you had one more year to gain guaranteed up to and you're also one year older so the insurance company is insuring the risk of longevity. You know she waits five years to 72 now should be 77 before she starts withdraw so they can give her a whole lot more by the month for life at 77 than they could 72 and when she gets to 77. If you find still need the money yet. We could delay it to 78, nine or 80 and it will be way more because she has a shorter life expectancy.

Once we get there. So you got all kinds of guarantees baked into these annuities and what what I want to share is everybody out there listening you got an annuity to its culture. Social Security check in on annuity in its purest form is a series of payments, either monthly or yearly, or quarterly. I guess you could throw that most of her monthly for the rest your life. You just can't outlive the insurance companies guarantee and will not pay you to go Saturday shall worry the tragedy of retirement, certified financial planner Honda Shiloh court for time but investments today, which is one of the seven worries and we come back we got more stories and more ideas so that you don't have to worry and then be robbed of what God would have you to enjoy his bounty and grateful finishing well is not what we have a call that something Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hahn's expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care. Just go to cargo and contact Tom to schedule a live recording of finishing well at your church Christian or civic group contact on the Cardinal that's Cardinal welcome back to finishing well with certified financial planner Honda child today show, the tragedy of retirement being worry and if your benefit as well, which is you know, the whole reason I think that that were here is to is to hopefully to turn on some lights so that we all could be free from this thief, Robert. I mean it did it it it will take all your joy. It will. I can't even imagine Tom so yes plantings involved that there is nothing like trusting God is this thing called faith and and he could take care of the that the flowers of the field and the birds you know the EE cares even way more about you, but still I love some of the strategies and thoughts of how we can. Not only you know replace worry in our own life, but in our cases you know Hans, we got wives and you know they're just like us. If we don't give them a reason for faith like that like you know what happens. Sure, and so this lady is a widow and so she is. She's very much in tune with being able to enjoy her money in retirement, which I'm thankful for as many times people there. They're not in tune with that there there there preparing to be misers and that's what they want.

You know I can help them get there and you know to leave an inheritance or give it to the church or just some people, it's just a thing about saving money and once you get into retirement.

You really need save money so yearly cost less to live okay now you want to save money go for, but it's it's you, you no longer have a retirement to save force of the problem were trying to solve. Here is how much of your money can you spend and know that you and I can run out of money and so the solution for her was three buckets of money.

250,200 50,200 50,000 K and the first two buckets are annuities very similar to annuities and say why two annuities when we went over the number one is there with different companies so's little diversification there, but it also allows us to turn on the income of these annuities, which is within her choice at some point in the future we can do on different schedules part and that is real important. With our plan and the third bucket is just invested. She has that with our sister firm and their investing that for her very conservatively on my dad but there still some risk there. She's got some market risk, which she is fine with that.

On a portion of some of her money in the third bucket and we need to get a reasonable return and what were needing to get is between will say 35 and $45,000 a year. Not sure the exact amount that we set it up for but she's going to just make withdrawals that fund that sitting at TD Ameritrade. We just set that up to center a checklist is a $4000 month. I'm not convinced that she's going to spend all that money that Social Security check, but consented to or will withhold the taxes for her do all the stuff and would discriminate, assuming the plan assumes that she is and then we'll look at that every year as often as she wants to and see if she's really saving money. We may lower that a little bit. She may elect to lower the amount that she's pulling out of that and they'll just make that $250,000 plus its growth. Minuses is withdrawals were to basically spend all that money over 4567 years depending on how much she takes out of the mess can be our source of income and it's gonna take until it runs dry.

She has some other savings that are in retirement money as well that she can come to rely on for emergency funds working around that third bucket dry. We can't tell you exactly when that can happen, but we can do it within a range and so this can depend upon her income choice and then when that happens now. If it happened it the end of five years. We already know that bucket number two that annuity at the beginning of the 60 year is guaranteed to pay her $25,000 a year is guaranteed for the rest of her life now bucket number one. Like you said it was similar but the payment on that beginning of the six year is about 20 almost 24,000 so it's lessons are what inches cell at all and bucket number two and again I told you that diversification is with a much larger company, a higher rated company and they're also not charging her as much for the rider inside. It answers little bit complicated, but that's going to be the second bucket that we turn on because we may get to some point down the road and we may decide that will offer us to turn on one of these buckets and not the other. We may still have some money left in bucket number three is winding down and so we can put those whatsoever whole range of options. We also could get to the point where she could be sick in five years and she could have really a perception that she's not can live up into her 90s and that your life expectancy is much less will then we may want to reshape these annuities and and not take advantage of the lifetime income we could even cancel the lifetime income riders on the whole range of options offer her the insurance company has basically your little options with the saying because of the guarantees and that's about it, as it were just in a manager income through that knowing when we turn on bucket number one in bucket number two. She cannot live so what happens if she does pass away say in three years and here since all this money in these annuities when well she did her beneficiary is going to get on of all three buckets of payout so I bucket number one in bucket number two. If we never turned on any income and take anything out of him, then that'll be each of them will be somewhat bigger than 250,000 and assist gas like 272 80 of each item. Bucket number three which is the investment account. TD Ameritrade will just be whatever it is will it groaned whatever is grown or could lose money and then it will certainly have withdrawals for three years.

Let's just guess that that's got 200,000 left hundred and 7080. Whatever the balance is now that'll go to her beneficiary to so that's the good side of things. The person that hopefully there's been a plan put in place to where at least we can't see it a legitimate reason for a lot of worry, it looks like she's gonna be fine, but there's other people that come to you who are legitimately paralyzed with worry, you at at and I wonder about it in a couple of issues within that. But can you speak to that old.

Yeah, I mean generally worry just freezes people and it also buttons them up when they don't talk about because there's no for whatever they did to cause their financial situation. So this others situation comes to mind is the gentleman that's almost 80 and he's only been retired about six years. He has substantial IRA like 600,000 and that's gone or almost gone and he's been spending about $107,000 a year and paprika taxes on that so easily netted about 60 to 70 of that somewhere in that zone, and is just gone. He's been spending it to keep up the pretty hot lifestyle. Okay. And then most of his resources are in real estate. He just of recent head and kept up with his taxes and he came in a year and half ago and we did some things for them but he really just put often didn't show up for about a year. He is terribly worried he's just in a frozen upset or worrying so I'm really almost Heaven shaking a little bit and just taking decision biases we dealt with the tax situation first. That's all we fix now but I prayed with them together and and and and you know asked for God's help with this and we I mean I don't know what more I can tell you about it is, is he's actually living that situation.

I think we are preparing for the show I was telling you sucks out like outliving your money when you're finally broke. I don't think that's as bad as like a year before that happens is in all the worry in and yeah guaranteed like what am I gonna do what Amanda do versus okay now I may have to eat beans for a week or two. Are you know I'll figure out a way to see in a get some done here and there it it's a and having lived through that to some extent my own life on I can relate that what turns out to be the superhuman thing that God gave us his gratitude like you know I'm not gonna start my family isn't enough.

God will take care of them.

Somehow you know in and I will probably sit amazed on the other side of. However, he did it and smile and laugh and have joy again. Not because it all migrate cunning and whatever, but because he just simply loves us and he's not going to let us you know go without me just doesn't I'm I'm with you yet. I I think this gentleman has a degree of gratitude and I think that's a scary and I know he is very strong faith and he's letting his pride really stop him from really getting to somebody talking to the whole family about making some decisions and this is unfortunate and had I been able to meet him six years ago when he still had $600,000 in an IRA. I could've sat down and figured out a way that he still have some money left. But we can't go back and fix things. All we can do for him now spray form and try to make the rest of his life. The best we can pray right so today show, which is been on you know when we talk about worry about their seven worry tabs and the reason why there is because we want to finish well and and and have things in place so you don't have to worry in today's show was that on investments. You can go to Cardinal get the book, the complete cardinal guide to planning for living in retirement with jazz.

Although seven were present at both the book and the workbook available there at the website, you know we'd love for you to come visit there, but I will honestly just email Hans call Hans. Whatever say you know look at my situation got. Here's an opportunity for a dear friend and a fiduciary somebody is gonna work on your behalf to give you some ideas so that you know essentially you can put that worrying as this the robber out of your retirement.

That's great, thank you for listening. Thank you. We hope you enjoyed finishing well brought you by Cardinal visit Cardinal for free downloads of the show or previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows when you get Hans book go to Cardinal if you have a question, comment or suggestion for future shows.

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