6 Retirement Surprises

Most people like surprises, the good kind at least.

The unexpected birthday party or bumping into an old friend you haven't seen in a while. But a few of us like surprises with our retirement savings. We like to think we're on track to retire someday that we'll be able to support ourselves when we can no longer work. Today financial planner and teacher Rob West has some reasons that may not be the case. Then it's your calls at 800-525-7000.

Your calls on anything 800-525-7000. I'm Steve Moore. Six retirement surprises next on MoneyWise Live. Well Rob, we're not trying to be in a bubble bursting mode today telling folks that their retirement assets may not be all they're cracked up to be. You're exactly right Steve. But better to find out about it now when you can still do something about it rather than later.

Yeah okay. Well the day after you retire as you've mentioned isn't the time to be surprised about your money especially when you have 40, 50, 60 years to plan on it. So we've got or you've got six possible retirement surprises.

So where do we start? Well the first one is good news and bad. You'll probably live longer than you think. Now that's the good part. The bad news is it'll put more strain on your retirement savings.

Now why is this a surprise? Well because we think the average life expectancy is around 79 but that's the average age for all age groups combined and it's misleading. You see you have to look at the life expectancy for those who make it to age 65. Half of women reaching that age have a 50% chance of living to nearly 87 and half of men reaching 65 will make it to age 84. That means younger workers should plan for 20 years or more of income in retirement and that folks currently and those folks currently retired who have all of their assets and bonds should probably move some of it into the market or risk running out of retirement savings someday. Alright so as a guy if I make it to age 65 I no longer have to look both ways before I cross the street because you've guaranteed age 84. Yeah well the word guarantee wasn't in there and I think you're missing the point maybe. Okay what's next?

Alright the next one shouldn't surprise anyone but it does. The vast majority of people at least. Social Security alone will not provide enough income in retirement. Financial advisors recommend having a retirement income of around 80% of your working income that is your pre-retirement income. Social Security won't come close to that and it was never intended to. At most you can look to Social Security for around 40% of the income you'll need in retirement at best. The solution again is to increase your retirement holdings and the sooner you do it the easier it is because of that all important factor called compound earnings.

Yeah and like most things the sooner you do it the better the sooner the better. Alright retirement surprise number three. Alright it's that most Americans aren't saving enough for retirement. The Government Accountability Office what's known as the GAO reports that the median retirement savings for Americans age 55 to 64 is only about $107,000. That might seem like a nice nest egg but here's the reality expecting a 4% annual return and that's what most advisors use as a rule of thumb. That's just $350 a month not much of a supplement to Social Security and that was the median savings meaning half of Americans have less than that.

Well that certainly could bust a bubble. Alright retirement surprise number four. Yeah you might say it's that a surprising number of Americans haven't figured out that pensions are a thing of the past. Today most workers don't have that benefit and for those that do the median annual payout is just over $9,000 a year. Today most workers absolutely must have a defined contribution plan like a 401k or IRA but according to a report by Vanguard a third of American workers have no retirement workplace plan at all.

The solution is obvious though if you're not saving in a qualified plan open one and start it today. Bottom line Steve the days where you get a gold watch and a check for life are pretty much gone. Yeah I guess so.

Alright we're up to number five. Yeah this one shouldn't be a surprise either but since people are caught off guard by surprises one through four many are staying in the workforce well after they reach Social Security eligibility. Bloomberg actually reports that nearly 20% of people 65 and older are still working full or part-time. Now that may be good news on one hand because it seems like the percentage would be higher. The bad news is that one out of five workers of all ages say they'll never be able to quit working.

Okay well let's hope the kids have a spare room. Alright I'll tell you what number six is creeping up on us quickly the way retirement does especially if you don't have any so we'll come back and chat about it right after this. Buying a home is the largest most nerve-wracking purchase most of us ever make. It doesn't help that you're entering a maze of unfamiliar words and confusing options that can leave you intimidated frustrated and afraid you've been taken advantage of. Navigating the mortgage maze by Dale Vermillion helps you clear up the confusion, unrack your nerves and make the best mortgage decisions possible with confidence. Navigating the mortgage maze available when you click the store button at MoneyWiseLive.org When it comes to investing guidance, you want advice grounded in God's Word. That's the approach offered by Sound Mind Investing. SMI has helped tens of thousands of Christians acquire investing wisdom and confidence. Regardless of your investing experience or how much you have to invest, you can learn to be a wise and faithful steward in the area of investing.

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That's ChristianCreditCounselors.org or call 800-557-1985. Really great to have you with us today. It's MoneyWise Live with Rob West. I'm Steve Moore and today we're taking a brief look at six retirement surprises you don't want to have happen to you. And actually we are up to number six. So that has to do with Medicare, right Rob?

Yeah, that's exactly right. A lot of folks, Steve, think that once they reach age 65 Medicare will cover all of their needs. Well, it won't. One prime example is that it doesn't cover most assisted living expenses and studies show that around 70% of those reaching that age will need some form of long-term care which could run as much as $4,000 a month. Medicare covers only the first 100 days of care at a skilled nursing facility and only then is if it results from a hospital stay of three days or more. The solution there is at least one solution, long-term care insurance which can be expensive. The best time to buy it is in your mid-50s probably up to age 65 and you want to look at the longest term offered probably also an inflation rider. Make sure you get a specialist to help you find the right company that's the right match for you and make sure it fits into the budget because it does you no good if you have it for months or even years and then have to drop it.

That's right. And like all things retirement oriented, you just mentioned here that long-term care insurance is best purchased in your mid-50s but frankly most people in their mid-50s aren't really thinking seriously about long-term care insurance or having to be put in a facility when they're older. And then what happens as again you pointed out you just can't afford it in your 70s and so you just want to get an early jump on all these things. But Rob, hasn't God promised to meet all of our needs and to well use the body of Christ in many cases to do that? So how do we balance those kinds of things? That's a great question Steve. You know I think at the end of the day it's about our posture.

Where is our heart? Are we both truly believing that God owns it all and that he is our provider? Do we truly believe our dependents ultimately should rest solely in him?

Absolutely. Now when we follow his principles and as we talk about often he's given us 2350 or more verses dealing with this subject. When we follow his principles we realize that we should be to the extent we have the ability setting aside part of God's provision today for the future. Remember there's precious oil in the house of the wise. The foolish man swallows it up. So a portion of what God gives us today is not for today and so we should put that aside for the future so we can use it as a blessing for others to give also to provide for ourselves and even care for our family when we're unable to do that through our own work. So it's a balancing act but it's all got to begin Steve with that heart posture that says God I am trusting in you not my bank account not my stock portfolio not even my employer solely you. Well said Rob and if something untoward should happen to me I know you still have that cot downstairs next to the furnace you know just you know I mean if it's empty. It's always empty for you Steve right next to the furnace. Okay.

Plainfield, Illinois. Hello Donna. Welcome to MoneyWiseLive. What's on your mind? Oh thank you guys for using your God given talent to help all of us who don't know how to do with this. Anyway my question is we my husband and I are concerned that regardless of what happens with the election the economy will take a big downturn and we are wondering if we should take out a good number or good amount of money from our portfolio and put it someplace safe.

Yeah Donna I appreciate that. Give me a sense of what you have. Are we talking about retirement investments that you're currently living on so you're drawing an income from them and they're invested in a mix of stocks and bonds or something else? We have a mix of stocks and bonds. My husband is retired army.

I'm a retired teacher. We have not touched anything that we have in stocks and bonds. We are just basically living off of our retirement income. So that's kind of where we are right now. Okay.

Yeah. So you know I would always go back to what is the right measure of risk that you should be taking given your age, objectives, where you feel like God is taking you in this season of life. Not anything else. We're not trying to beat the market. We're trying to accomplish your God given goals and objectives. So we've got to start with Lord what would you have for us? What have you entrusted to us? And then how should we use that wisely? And if your allocation to investments which I think clearly we should seek a return on God's money so that's affirmed in Scripture.

And if our allocation is appropriate for where we're at this season of life, what our needs are and what we're trying to do including your lifestyle, your giving goals, what you want to do in terms of an inheritance or in the future if you have major medical expenses to be able to cover skilled care and those types of things. If your investment mix is appropriate for that, then I would tend not to change that based on near-term circumstances because here's the reality. Could we see some greater volatility in the stock market as a result of the election?

Possibly. But remember the market is very forward-looking and so most of what is expected to happen in the election and the pandemic for that matter is already priced in because the market's not looking out a matter of weeks. It's looking out a matter of months and six months or more. And so even if there is increased volatility as long as you have things like enough cash set aside for perhaps in this season of life as much as a year and not an over-allocation to stocks that are more aggressive that would be perhaps inappropriate for your age and stage of life and a good healthy allocation to fixed income. As long as all that's in place, then my recommendation would be just to let that go because any kind of short-term volatility will take care of itself over time. And if the Lord tarries and you all are in good health, especially since you're not even drawing an income from this money, we're talking about this money lasting for decades moving forward, not just the next six or twelve months. And bottom line is when we look back historically, even in periods heading up into an election cycle and given the other factors we have, there's probably not going to be a whole lot more volatility from here. You know, remember, regardless of what your political persuasion is, it's probably not going to be as bad as you think it might be in one scenario and it's not going to be as good as you think it might be in another and the market tends to take care of itself.

So I'd say at the end of the day, as long as your allocations are right, I'd probably leave your stocks and bonds right where they are and not make any changes based on what you might expect in the near term because that will take care of itself over time. Donna, thank you very much for your call today. It's a question lots of people I'm sure are wondering about and we're glad that you raised it today. You're listening to MoneyWise Live with Rob West. I'm Steve Moore and we're taking your phone calls at 800-525-7000. Here's the good news. There's no expense to you. We have lots of open lines you can call right now and almost, almost be assured of getting through 800-525-7000.

We'll be back with much more after this. Many people are experiencing financial challenges such as credit card debt, downsizing, debt in jobs and depleted savings. In fact, more than half of all divorces are the result of financial pressures at home. But there's hope in Your Money Counts. Biblical financial expert Howard Dayton shows that the Bible is a veritable blueprint for managing your finances and you'll discover the profound impact it has on your relationship with God.

Your Money Counts is available when you click the store button at MoneyWiseLive.org. Hebrews 4-12 says, For the word of God is quick and powerful and sharper than any two-edged sword. Here's Beth Moore with a quick word. We feel better when we go to church. We feel better for a little while.

Feeling better is not the same thing as living successfully according to Joshua 1-8. The word of God really does use the word successful. To be a success. And if you and I are going to be a success, we're going to have to make a decisive dedication.

We're going to have to make up our minds. When I was teaching my girls when they were in high school how to say no to somebody coming on to them, I assure you we talked in strong language. Be decisive. Open your mouth and put some volume to it and go, no. Not, I don't think so. No, no. No.

Young men just as clearly need to be taught. No. Just decisive. Decisive. We're not empowered to say that strong no until every morning of our lives we get up again, go before the altar of God and go, yes. Yes.

Decisive. I'm going to make up my mind, Joshua says, and he's the one about whom the word success was used and inspired by God at the very end of it. He says, you can do what you want with you in your own household.

But that's for me and my house. We will serve the Lord. You've been listening to Beth Moore with a quick word. There are two ways to experience a study of Galatians. You can join Beth for the online experience releasing September 15th at Beth Moore dot org, or you can join us in January 2021 for the release of the printed workbook edition.

See you next time for another quick word with Beth Moore. The financial wealth you leave behind could be the best thing that ever happened to your loved ones or the worst in splitting heirs, giving your money and things to your children without ruining their lives. Ron Blue explains why it's important to make these decisions now instead of forcing your heirs to do it later.

Splitting heirs will foster a real appreciation for the precious resources that God has entrusted to you. And it's available when you click the store button at money wise live dot org. So glad you're out there today. Let us know if we can help you with something financial, a question, a conundrum, some situation you're wondering about. Eight hundred, five, two, five, seven thousand, eight hundred, five, two, five, seven thousand open lines to Ohio now. And Jean, what's your situation?

How can we help? Thank you for taking my call. Yes, I'm in the PRS system in Ohio and I'm getting ready to retire and I'm 67 years old at the present time. I'm renting and I have like four hundred thousand dollars in my PRS retirement. And I would like to know, would it be a good idea to take a big sum of money out and buy a home, pay cash for it?

And this way I won't be paying rent for rental. Is that a good idea? Yeah. For the benefit of our listeners, what Jean is talking about when she talks about the OPERS, that's the Ohio Public Employee Retirement System that she has. And did you say, Jean, you've got about four hundred thousand accumulated there? Yes. Okay.

And you are currently working, but you're about to retire. Is that right? Yes. Okay.

And will you be taking this as a lump sum or are you going to convert that to an income stream? It's a plop. We call it a plop. Yeah. Okay.

So you'll take it as a lump sum. Yes. Okay.

And at that point, based on the expenses that you have, the budget that you're planning on in retirement, not now, do you anticipate needing to pull an income from that lump sum in addition to Social Security? No. Okay. So Social Security will really cover all of your expenses, whether or not you pay off the house?

No. I'm going to pay cash for the house. I don't want any debt.

I won't be in any debt. Okay. And so you just wanted to confirm that I like the idea of you paying cash and pulling it from these retirement assets? Right. Okay. Well, the only thing to consider there is just the tax implications. How much are you looking to spend on the house?

About $200,000. All right. And do you have any other assets you could use to buy the home with? I could.

Okay. Well, that would be the only thing to look at. I would probably visit with a tax professional just to make sure you understand the implications of that. What I wouldn't want to have happen is you inadvertently push yourself up to a much higher tax bracket by recognizing all of that as income in a single year. And what unless you have just a real conviction about debt for any length of time.

And if you do, then you need to follow that. But if you don't, what you may want to do is maybe put a significant amount down, maybe as much as 50 percent, take a small mortgage and then pay it off in the following year. You just want to compare the cost of that mortgage to the potentially added cost of the taxes.

Now, if the cost basically cancels itself out because the cost of the mortgage is almost offset by the cost of the increased taxes, then you may want to just go ahead and do it all up front. Or if possible, maybe you spread it over two calendar years. So you'd take a portion of it at the end of one year and a portion at the beginning of the next year, and then you buy the house. Something like that would allow you to spread it out over two years. But the bottom line is if you have a conviction about being debt free, I would say go ahead and make that purchase. You still have two hundred thousand left in your retirement account. You've purposed your life so that you can live on your Social Security and whatever else you have coming in, which means this money can continue to grow. So the only other thing I would just say, Gene, is make sure you have an investment professional that can come alongside you to help you manage what's left the proceeds from that retirement plan. If you don't have someone, I'd encourage you to go to our website, MoneyWiseLive.org. Click Find a CKA. And right there in Ohio, I'd interview at least three. Find one that's a good fit for you. Somebody who can help you make the decisions about how to invest that money to protect it, to make sure you maintain a conservative posture, but to grow it.

Over time, because this money, Lord willing, needs to last a long, long time. So hopefully that's helpful to you. Thanks very much, Gene.

Ellington, Florida. Hello, Jim. You have a retirement question as well?

I do. I haven't been putting into my 401K for too long. I just turned forty-nine. I've probably been putting in for about fifteen years now. Last I checked, it had just shy of fifty thousand dollars in it. It is put into a twenty thirty-five retirement account for Fidelity. I do have a pension from my old, from the company that I used to work for.

And I've got one right now called a RAP account. And I don't know how much is in that one. I'm just a little worried because sixty-five seems like it's coming up pretty quick. I don't know if I've got enough to be able to retire on and I'm not sure exactly how to grow it. Because I'm not any kind of good with bonds or whatever. Sure.

Well, a couple of thoughts, Jim. Number one is your income is your most powerful wealth-building tool. So what you have coming in and your ability to live on less than that so that you can put more away is obviously what's going to be the most powerful force to continue to grow that account. On top of the compound earnings that happen when you invest it.

So the key is to maintain a modest lifestyle so that you have plenty of margin. Because ideally we'd like to get you putting fifteen percent of your pay in that 401k up to the max. And then you could open a Roth IRA perhaps alongside it if you maxed it out.

But perhaps you're not putting enough in to build that up over time. Then the second thing is what are the right investments in that. If you want to use the target date fund, what you may want to do is push the date out a little longer. Because remember, the 2035 fund is going to get very conservative within the last five to seven years before retirement.

But remember, that money needs to last you well beyond 65 because if the Lord tarries and you have good health, as we talked about earlier in the program, you're going to need this money to last you for a couple of decades potentially. And so I think the opportunity for you is to perhaps in the target date fund, push it out, maybe do a 2040 fund. Or look at some other investments that have been performing well. Some other mutual funds that maybe could give you a little better return. But the key is to get more money going into it over time. The last thing I might recommend is it would be worth you, Jim, sitting down with an investment professional or financial planner who could help you do some retirement planning so you at least know what your goal is and know what you need to be saving so that you're not wondering whether you're going to have enough in retirement. You'll know what's needed and you can develop a plan to get there and that's going to give you a lot more peace of mind.

And you can find one of those financial planners at our website, someone right there in Florida, when you click find a CKA. And Jim, you are right. Retirement can sneak up on you. You're not prepared for it when you're 40 or you're 50.

Then you kind of close in on 60 and you start worrying. We don't want you to worry. God says leave that part of it up to Him. He does promise to meet our needs but He also wants us to be practical and thoughtful about these kinds of things. So thanks for your call today. 800-525-7000.

More Money Wise with Rob West right after this. ... ... ... . ... ... .. .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .