Running Out Of Money Late In Life

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This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Well.

Well, welcome to Finishing Well with certified financial planners, Hans Scheil and Tom Griffith. And so today's show, I just simply love the title, is running out of money late in life. The object here is not to have that happen. And so we're going to discuss all sorts of things along those lines, but I was thinking about this topic and there's this idea that we end up with so many times in our life, we end up with what I call the orphan spirit, where we think that if it's going to be, it's all up to us.

And we lose sight of Psalm 68 five, which God told us he's the father of the fatherless and he's watching over widows, right? And we have all sorts of resources in him. And one of those resources you have is in listening to this show, because I can't tell you the times I've heard of where people have listened, called in when they needed help to make sure this situation didn't happen. And people that were terribly worried about running out of money found out that there were all sorts of resources, you know, when they asked God and then looked to him for answers.

And so Hans, what a great topic. Yeah. I mean, it's just, it's pretty universal.

People that come in to see us or we meet them through Zoom and we get to know them pretty well. And this is the thing that's out there is they have this fear of running out of money or running low on money or not having the resources needed. And the fear is not in the right now for a lot of people, because if they were out of money right now, they got their social security check and they would figure out how to live on whatever they have. This is for people that have savings and they've saved.

And maybe part of it is they've saved so diligently because they do have a concern about old, older age and running out of money, or it could be for their spouse or for their widow they leave behind. I mean, this is a pretty universal fear. So we just thought we'd do a show on it and talk about it. I mean, first in the first part of the show here, we're going to talk about practically speaking, we're not talking about the fear.

We're talking about real world. When we find people that do run out of money at 80, 85, and believe me, there's plenty of them out there. What are the causes of that? What are the things that happened to them or by them that caused them?

And so I just got a list. I mean, number one is just spending too much money in their 60s. I mean, when they didn't have an income anymore after they retired, there's some people that just spend foolishly and they're borrowing money or they're giving money to their kids or they're paying for their kids' education out of their retirement money.

They're taking trips. They're starting a business that maybe is following their dream and doesn't have a good, just for whatever reason, they're spending principle of their savings and the interest early. The second one that gets people there is long-term care expenses.

And these don't necessarily happen in the 80s. I mean, the first spouse can get whatever's going to happen to them in their 60s or 70s. And a lot of them, it happens in the 70s where one of the two spouses needs care and it wears down the other one and then they've got to put them in a facility or pay for expensive care and it'll wipe out a savings pretty quick. Next one is health care costs.

It's just, I mean, that's a reality. I mean, most people have Medicare and then they have a Medicare supplement or Medicare Advantage plan, but still people can spend themselves low and spend their savings on health care costs. Another one that's really tough is taxes is that all their money is in an IRA or 401k and it's not been taxed and they start or they pull out a whole bunch in one year to pay for something because it's only their savings and their savings get swindled down through the taxation. Starting social security at age 62 and, you know, taking the money early and then, you know, when they have a lower social security check, then they got to start drawing down their savings to put the two together and then they get to older ages and they've got a low, much lower social security check and a drained account.

So I like waiting a little longer than that if there's any way possible. Investment losses. We see that where people are just insistent on taking a lot of risk and, you know, maybe they've had a period of just in the current times. I mean, we got last year where people, most people have money invested.

They lost a lot last year but they lost money that was pretty much gains from the years from the 10 years before or 12 years before. But people that stay risky in the age sooner or later, I mean, investment losses can really eat up in a short period of time a person's savings. Spending money on their extended family members and we're not, you know, we're not telling people not to do any of these things. I mean, it's just when one of your kids is in need, you're going to be there for them and, you know, but we just see this a lot where people have just, you know, give, give, give to their kids and then, you know, it's to their own detriment and then they get to an older age and their money's gone. People that live much longer than they plan to live and that's kind of tied into the first one where people are spending too much early. There's a lot of people that are just convinced that they're going to be gone by the time they're 75 and they spend accordingly and then, you know, they wake up years later and they're, they're still kicking it 88 or 91 or one of the spouses is and they just don't have any savings left. Another one is one spouse dies early and then they're, the surviving spouse is paying higher tax rates, they've only got one social security check, you know, pensions are reduced or gone and so there's just kind of a sampling of how we've observed that people get there in hindsight. Darrell Bock Right and Tom, have you got some insight on that as well? Tom Yeah, I mean, I think when Hans and I sat down to create this list, I mean, we were trying to think through in our practice, what do we see when people are coming in later in life, what has happened that has caused them to run out of money and generally it's not just one of those things on the list. Generally, if you've had two or those, two or three of those things happen maybe not all at once but sort of over their retirement, you know, time frame and that's what has really caused them to run out and so again I think this is the biggest fear that we deal with with all clients this is not you know for the people that have not a lot of savings the people who have a lot of savings still have these same concerns and so when we're sitting down in planning form and we'll get into this a little bit later in the show is we want to do some planning to mitigate some of these big risks that we see you know there's going to be some risks that are just unavoidable there's some things that we can't completely get rid of but if we minimize the risk and we make good decisions early in retirement we can set people up to not have to worry as much about running out I will say even with the plan when someone comes in with the fear and the worry and again we're called not to worry but it's easier said than done is we can never completely get rid of that worrying people and then and some you know healthy concern over you know wanting to make good decisions and live you know just where we're good stewards of our money is important so we're not saying you want to be flipping about it but if we make some good decisions we see the the other side of things too where when this is the driving force of their whole thought about retirement I don't want to run out we have the other extreme where people don't spend any of their money I mean and that's also I don't think is necessarily what we're called to do is they're they're hoarding it right they're not enjoying it they're not you know seeing what fruits can be can come of that and that's also what we want to try to prevent too so I mean it's a balancing act right is we don't want to spend too much too early and too quickly but we also want to set things up where you're not overly concerned about that that is just you know preventing you from enjoying some of it you know when you head into retirement yeah just opens up the door to say you know wow if I can get a second opinion or a third opinion as it as the case may be if you get both Hans and Tom you know to just check in and say you know here's what I've got here's what my plan is like wow that all sorts of ideas and opportunities could open up that that really they'd never thought about right homes oh sure like you take the investment loss this one people come in to see us you know we ask them a whole lot of questions and we listen a lot yeah and what I'm always looking for is somebody that's invested and they have a lot of risk in their portfolio but yet they're they don't really get much out of the game I mean it's just you know in other words they're saving all their all their profits or their perceived profits and they don't really have anything tied to it they're not going to get much joy out of making a bunch of money I mean it's just and the flip side of that is we start talking to them about losing money and you know it just terrifies them and those things don't line up and it's going to be tough on their retirement plan so we're gonna we're going to sit down with that person and make sure that we're we're going to get them a more conservative where we're going to start protecting their nest egg and then creating an income from it so they're comfortable and removing the losses piece of it on some of their money just reducing their risk and so there's there's things we can do about a lot of these things that are like investment losses that we can do now if we catch you in your 60s or your early 70s and we can rearrange things in such a way that if some combination of these things hit you that you're gonna the impact is not going to be to just wipe out your money all right and from my standpoint personally the earlier the better right I mean you can be in your 30s you could be making a whole I mean in Tom's case you know he is making all right Tom think about how lucky you are that you know compared to most people your age to understand these strategies and things that are happening now or you're young enough to do something about a lot of them like life insurance sure I mean I think the with all planning the earlier you can start the better I mean it gives you time to you know one avoid mistakes and two if you've made mistakes and gives you time to correct them right the later you go on the harder it is to make up those things and again let's talk about the investment losses so my time horizon is much longer than what Hans or Robbie yours is right I mean it's just where I am in my life is I got a lot more time to invest it I can be I can afford to take that risk I can take a lot of risk in my investments because I don't need that money until you know 30 years from now whenever I decide to retire on the flip side you and Hans you know if something were to go really wrong in the investments right as you're thinking of retiring and you need it so I don't think either one of you are really considering retiring anytime soon but if that were to be the case and you do that right as investment losses that can really set you up for a difficult you know next stage of your life into retirement so we just want to get things set up properly to avoid some of these pitfalls and if we can avoid some of these big ones like you generally people are gonna be okay it's just as when you go into retirement you don't have a plan you haven't thought through some of these things and a couple of these hits you you know sort of right in a row that could really be a scenario for disaster of you know running out in your 70s ratings right and so we're gonna get at the end of this segment we're gonna be right back with a whole lot more that's gonna talk about these solutions to this and again we want to remind you the show is brought to you by Cardinal guide Cardinal guy calm or you'll find the seven worries tab which this one covers several of them so again it's Cardinal guy calm and we'll be right back with a whole lot more don't worry about running out of money investment advisory services offered through Brookstone Capital Management LLC abbreviated BCM a registered investment advisor BCM and Cardinal advisors are independent of each other insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents Cardinal advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency welcome back to finishing well a certified financial planner Han Shile and today's show is Wow we're afraid of running out of money let's not worry about that today right Hans well yeah let's let's do some preparation based on the experience of others to put ourselves in a position where we're going to be well off and we're gonna finish well in our 80s and 90s and we're gonna be in a position to keep tithing and giving money to our children if it's needed and to leave a nice estate for kids and to be very comfortable in the 80s and 90s and so we spent the whole first half of the show talking about the things or the that happen to people or where they go go astray and it causes people to run out of money we're going to spend the second part of the show going around each of the seven worries and talking about some strategies that you can put in place now to make sure you've got a significant essay still in your 80s and 90s and so we're going to start with Social Security I'm going to take the first one and then Tom and I are going to go back and forth as you can delay Social Security I mean if you if you're in your 60s you haven't fired it up yet if you can well first of all come into us and we can show you how to replace that income out of your retirement account it's it's guaranteed money and it's you're going to be really glad you have that larger Social Security check or your spouse does as a survivor of you so with Social Security is just wait as long as you possibly can to take it yeah I mean I think just one last piece of Social Security is that is the best source of income that you can have in retirement I mean one of the best maybe I shouldn't say the absolute best but it's a very good one it's inflated earth adjusted for inflation so it increases over time the longer you wait to take it the higher the check is and it's backed by the federal government and so you know I think that you know of all the things that you could have it's one of the best things to be receiving and in practice when we're looking at plans that is just the the base level of income we can count on for all our retirees the next section and again if you're on the website or you look at the video it's on the board but the next section is Medicare and so this is really addressing the health care cost because this is another area where if you have really high health care costs that could lead you to potentially run out of money one of the ways we can plan around that is getting you know good Medicare insurance set up Medicare supplement some people that might be a Medicare Advantage plan but for the the people who can afford it the Medicare supplement provides you wonderful coverage the deductibles are very low much lower than you've had while you've been working and you can see any doctor do you want and so if you have especially if you have some health concerns Medicare and a Medicare supplement you get that set up right when you turn 65 or when you retire is it's wonderful insurance if I could buy it right now I'd buy it in a heartbeat I'm just not I'm not quite there yet but that would be if I could I would sign up you know tomorrow okay I'll jump in with the next one this one's pretty easy long-term care get a plan get some insurance we've got plenty of other videos and radio shows where we're talking about long-term care and even if you have a significant nest egg buy some long-term care insurance or get some short-term care insurance get something that's going to cover you for a while so you don't immediately have to go to your savings and if you end up needing it you're going to be really glad you have it the next area is really dealing specifically with 401ks and IRAs and so this can take the form of a couple different ways but specifically with IRAs and 401ks we want to look at the tax implications that these accounts have is essentially an IRA is an IOU to the IRS I mean you in that account you owe money to the government when you make a distribution this these would be traditional IRAs and 401ks and so we want to come up with and we help people come up with a tax strategy how do we withdraw these funds systematically over time to reduce the taxes on the life of time taxes on this money so we're sending less to the government less to the state you which means you get to keep more of it which allows you that money to last longer and so we do a lot of planning around Roth conversions again in the systematic way we look at maybe making distributions and buying life insurance with some of those proceeds to help you know make sure that your spouse or your kids are taken care of after you've moved on and so we want to we want to come up with this strategy and how to take those out you know in a tax-efficient way within the 401k and IRA is also just the investment that you're taking and so again that's we talked about a lot of that in the first part of the show but reducing the risk as you're heading into retirement to lessen the risk of taking big losses right as you enter in retirement and what I would just say finishing up on IRAs is if you stuff money in a Roth and people are always saying I'm doing that so I can leave a tax-free inheritance to my kid which is very noble but I'm always reminding them this is going to be the last money you spend if you need it so you know if you set aside money in a Roth you don't make distributions you're planning to give that to your kids at your death and then the same thing with the life insurance that you bought plan there is to leave it to the kids tax-free but if you go through all your other money and then that's what's left is what you plan to leave to the kids then you're going to access it and you're going to live off it and you're going to live off a tax-free so that that's kind of in there and a lot of our plans and the next one is income so we want to talk about an income for life and you know we've got so many ways that we can set up on two people on a couple or on a single person that we can set up the check that starts now or it starts at some point in the future but once it starts the income is never going to stop until you're deceased okay is the month after you die there's going to be no check but every month while you're alive there's going to be a check coming in and even if your balance in the annuity has gotten down to zero that's a certain type of annuity and we write a lot of those and that's a way to prevent being broke in your 80s and 90s you know I put we talked about this earlier Social Security at age 70 is the people that are able and can afford to delay till 70 they're going to be really glad they did if they make it to 90 or their spouse is getting their full check and not getting theirs and they have deceased their spouse is going to be living off a much larger check and then you know being in fixed income stuff that is guaranteed so you know protecting yourself against investment losses the next section is estate planning and this is often confused you know when you hear estate planning most times you're thinking about you know what I'm leaving to the next generation from our planning standpoint the estate planning really comes in when the first spouse passes away or really in capacity as well but when the first spouse passes away there's still a remaining spouse in this in a couple and now the surviving spouse has to pay taxes at that single tax rate and so we want to plan around that because that can all the sudden throw them up it essentially doubles their tax rates just immediately when the you know I guess the year that they passed away you're still filing joint taxes but the following year your tax rates double and if you haven't done some planning around that and the most of your money is in 401ks or IRAs that could really raise your taxes that could raise the amount of taxes you have to pay on Social Security at the same time that you're only getting one check and so you have less money to live and so we want to do some proactive planning for that eventuality because it's pretty unlikely that both spouses will grow old together and die right at the same time and then the last section so the last worry is taxes and income taxes and so what are some things we can do to make sure we still have money around if needed in your 80s and 90s you know number one is we're going to spread IRA distributions over your whole retirement so we're gonna we're gonna start taking up money now even if you don't need it and either convert it to a Roth or we're going to just be taking it out and spending it maybe using it in replacement of a Social Security check because you've delayed your Social Security so we're going to spread IRA distributions over a number of years making them smaller we're going to avoid a large IRA distribution so we have a lot of clients who too high of a percentage of their savings is in the IRA and they just look about I got all that money in there but the problem is is if you got to go to it in one year and take out a big hunk of it that's what you have savings for you're going to have a big huge tax bill with that we want to try to avoid that and there's lots of strategies that we can do to still allow you to access your money but not do it all in one year so and we're going to manage the tax on Social Security and we're going to do that by managing your other income or your other taxable income we're going to get doing some Roth conversions if it makes sense so you've got another tax-free pot to draw on money that you can get that you don't have to pay any taxes and the same thing if we build up some cash value and life insurance that we have access to that through a loan so we just kind of made the circle of the seven worries and just talked about some of the strategies we implement in our financial plans all with the goal of maintaining enough nest egg that we're well off in our 80s and 90s right and the thing is that you know clearly there's no you know cookie cutter approach and so everybody's situation is a little bit different and the number of strategies within you know their particular situation you know there's opportunities this is simply you know go to cardinal guide calm right and and there you know you'll see how to contact Tom how to contact Hans and you know get in touch with them and they'll spend time with you to you know find out what your particular situation is with what your needs are and again it's all there at cardinal guide calm of course you know the seven worries tabs covers all the things we talked about today but is his book complete cardinal guide to planning foreign living and retirement is there as well again amazing stuff because clearly you know we have a father in heaven who's gonna take care of us and it's nice that he's provided all these resources nice that you listen today we're so grateful for you doing that and thank you guys so much for all you're doing to help people with this worry God bless you thank you the opinions expressed by Han Shyle and guests on this show or their own and do not reflect the opinions of this radio station all statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such any statements or opinions are subject to change without notice investments involve risk and unless otherwise stated or not guaranteed past performance cannot be used as an indicator to determine future results any strategies mentioned may not be suitable for everyone information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you before acting on any information mentioned please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation finishing well is designed to provide accurate and authoritative information with regard to the subject covered investment advisory services offered through Brookstone Capital Management LLC abbreviated BCM a registered investment advisor BCM and Cardinal advisors are independent of each other insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents Cardinal advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency we hope you enjoyed finishing well brought to you by Cardinal guide calm visit Cardinal guide calm for free downloads of this show or previous shows on topics such as Social Security Medicare IRAs long-term care life insurance investments and taxes as well as Hans 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 or to get Hans book go to Cardinal guide calm if you have a question comment or suggestion for future shows click on the finishing well radio show on the website and send us a word once again that's Cardinal guide calm Cardinal guide calm this is the truth Network