10 Commandments - Planning Matters Radio - 20

If you fail to plan, plan to fail.

How do you want your future to look? We want you to plan for success. Welcome to Planning Matters Radio.

Welcome into the program. This is Rich on Planning and Planning Matters Radio. I am Peter Rishon.

And I'm Amber Rishon. I am the founder and advisor for Rishon Planning, handling your investment and retirement planning needs. As Peter's wife here in the office, I handle all the group health insurance, the supplemental and life insurance. And together we try to help savers and investors make sure that their plan is on track to achieve and secure your goals into the future. Today we've got an important show. We're going to be talking about the 10 commandments of retirement.

This is a list of 10 things that you absolutely need to have addressed in your planning in order to make sure that your plan does work to help you achieve and accomplish your goals. Before we get into that, I do want to address a little bit of the elephant in the room. Amber, which is the fact that we've seen a lot of market volatility here in 2018. I totally agree.

And as we go through these commandments, Peter, I just want to let everyone know that I'm the voice of the people. So when you say things like market volatility, what do you exactly mean by that? Well, the market has been up and we've, we've heard that the market always goes up and a lot of us count and rely on the market going up for our financial progress, but it doesn't always go up. There are times like several times this year where we've lost a significant value in the market.

Between October and the end of November, the market indices actually fell more than 10%. So if we had $100,000 invested in the S and P for example, one of the major market indices, then at the end of November we might've only had 90,000 left. And when people say, well, I want to take risk in order to get better returns or rewards, a lot of times they focus only on the returns or the rewards and they forget that risk means the possibility of having less money than you started with.

And not a lot of people would feel comfortable having their a hundred thousand turn into 90,000. But how are investors handling the volatility in their investment portfolio? Well, it really depends on how well they are allocated and how good of a handle they have on their portfolio. If they are allocated correctly, meaning in line with their risk tolerance and only taking appropriate and necessary risk, then temporary fluctuations in the market might not affect their day to day lifestyle. In fact, it is fundamentally an opportunity for workers who are still earning a paycheck and that paycheck covers their bills and their standard of living and they're making contributions to their retirement savings in a plan like a 401k, downturns in the market actually present us with an opportunity. It's called dollar cost averaging. We get to buy things on sale today for something that we could sell at full price at a later date. So as long as we are appropriately balanced and understand the amount of risk that we're taking and only taking that risk, which is necessary or appropriate for our situation, then we shouldn't panic when we see short term downturns in the market. We should feel like that's par for the course because it's going to happen today, tomorrow, and it points into the future.

It's going to continue to occur as long as we are invested, as long as the market is the market, we'll have some volatility. Kaitlin Luna What if someone is not sure if they're taking the appropriate amount of risk, Peter? Well, that's why we offer one of the services that we do extend to listeners here on the radio program, which is the opportunity for that complimentary portfolio review.

If you are uncertain of the amount of risk that you're taking, or if you've seen a lot of gains in your portfolio over the last 10 years and want to make sure that you protect some of that principle, or if market volatility does give you any kind of apprehension or nervousness, that's probably a pretty strong indicator that you do have a large amount of risk in your portfolio, and you owe it to yourself to review that and check it out. We do offer the opportunity to do a risk assessment, help you understand the amount of risk that you're taking and gauge whether or not it is appropriate for your time in life and your risk tolerance and your need for taking risks. So, if you'd like to take advantage of that opportunity, give a call, 919-300-5886. Again, you can give us a call at Rashaan Planning, 919-300-5886.

You can also always go online, richonplanning.com. Kaitlin Luna You will gladly sit down with them and speak with them and map out everything and make it more simple for them to understand. Is that correct, Peter? Peter That's what makes it your plan. If you leave your investment advisor's office and you feel like, it was a great conversation, I understood absolutely none of it. That's not your plan. That's their plan. So, we want you to understand your plan.

And in fact, it is of benefit to us because if you can turn around and you can explain the conversation that we had to your friends or family, then they get it and they understand that, hey, maybe this is a person that I can relate and talk to. Kaitlin Luna Then you did a good job. Peter It's mutually beneficial for you to understand your plan and not just have it be your financial advisor's plan.

And I feel like the financial world is like overly complicated a lot of times to the detriment of the advisor and of the client. Kaitlin Luna You know, I 100% agree with that, Peter. And that's why I am here as the voice for the people.

If you guys have any questions at all whatsoever, they can give us a call at 919-300-5886, 919-300-5886. And again, we are here on planning matters radio. I am Amber Rochon and let's go ahead and get into those Ten Commandments.

Peter Absolutely. Yeah. So this list, it was featured actually I pulled this from a recent market watch article and it outlined the Ten Commandments for retirement. And I took some of these a little liberally and gave some twists or my own perspective on what we need to be doing or thinking about as we prepare for or make our way into or through retirement. So that's what this Ten Commandments of retirement is about.

Number one on the list, Amber, is plan with lifestyle in mind. And what I mean by this is that so often I see investors worrying about the lump sum that they have or the rate of return on their investments. And they're not really thinking about what those dollars are going to provide for them into the future. They're not planning based around what they want to do with their time in retirement and then reverse engineering and thinking, well, what is that vacation going to cost?

What is that extra trip a year? What is my time and what I envision spending doing with it actually going to cost me? Because that's much more important than the rate of return that we have made this year.

Obviously that is important. Rate of return is something that we do need to understand. But number one on this list of Ten Commandments of retirement planning is plan with lifestyle in mind, not age or lump sum or rate of return.

But what do you envision doing with your time? Really what you're saying simply in your rate of return explanation is, is if I sit on the couch and I watch TV, but yet I want to go to the Bahamas and I want to spend extra money, whether it be now or later, then I need to get up and work hard for it now. We need to have the financial ability to afford the things that we want to do. So I meet a wide dynamic of different people, a variety of different goals for retirement. Some people want to travel every day and make life a vacation after they quit working. Some people are very content living at home, living conservatively and frugally and doing a few things around the house, but mostly just filling their time with reading or volunteer work or things like that.

Different goals, depending on what you want your lifestyle to be, that's what we need to plan based around. And so many people get caught up. I saw this clever commercial a few years ago. What's your retirement number? And it had this big green number floating over people's heads. Well, it's not about a number. It's not about a number that's a lump sum.

It's not about a number that's an age. Another group I see, I'm going to retire at 65 or I'm going to retire at 67. Well, does that lump sum that you envision or does that age that you see yourself retiring at truly indicate if you're ready to retire?

No, it doesn't. Planning based around lifestyle will indicate if we are truly ready and prepared to retire or not. And the foundation for a lot of people's retirement in America is Social Security. So number two on this list, understand Social Security. Not a lot of people do.

There's a lot of different choices and options. Remember, Social Security is designed to replace no more than 40% of your working career income. So less than half of what you've been used to living off of. And for most people, not even 40%, especially the higher income earners. If we've been blessed to be a little bit more affluent, earn a higher income, Social Security is going to replace a smaller portion of that working career income. And so we need to understand Social Security. We need to understand that there's complex lifelong decisions that we are making when we go to claim Social Security. And we've all had decisions that are life impacting, lifelong decisions, that decision to get the nerve to ask our spouse out on the first date that ended up in a happy marriage. Good lifelong decision, right?

Or that, whoopsie, we messed up, bad lifetime decision. We don't want Social Security to be the bad lifetime decision. But it's to my understanding, and a lot of people that I speak to out in the insurance world when I'm out doing the group benefits is, can we, or the biggest question is, can we depend on Social Security?

So they don't try to sugarcoat this or false advertising. They state in two places right on your Social Security statement, one on the front cover, and then again in bold when you open it up that by the year 2033, Social Security trust fund will only be able to pay out about 77 cents on the dollar of promise benefit. Here's the thing, they've made changes to Social Security before. And those same changes, I am fairly certain they're willing to make again, making it taxable, extending the retirement age.

It used to be 65, now it's 67. You know, I wish they would address these sooner rather than later, waiting until it's a kind of a forced move. But I think that what will end up happening is, yeah, they probably will only be able to pay 70 cents on the dollar of promise benefit, but they're going to pay the full promise benefit to those people who are already in the system counting and relying on it. Where they're going to reduce the benefits is for the younger generation. They're going to tell them, hey, you know, you guys are living longer. We're going to push that retirement age out till 70 or 72. And so they'll balance the equation while maintaining their ability to stay in power because that's, you know, every politician's number one job is getting reelected.

So they'll kick that can down the road and adjust it. But people are worried about it. Valid point. You know, you need to be concerned about it, but social security does not stand alone.

It's not an island. It doesn't mean everything. It's not in a vacuum what you're going to depend on in retirement. You need to also plan and save and have a backup plan. Absolutely. No, it's the primary plan.

The primary plan should not be to depend on social security. There you go. Right. Again, the voice for the people.

Once again, if you are tuning in for the first time or just tuning in, I am Amber Rashaan. This is Peter Rashaan. We are talking about the 10 commandments for retirement. We are onto number three on the list, which is retirement planning requires estate planning.

Sure does. So my dad's estate plan was he planned on bouncing his last check, right? And he had that conversation with me many years ago. I'm going to bounce my last check. My response was no problem. So long as you make sure it's the last check you needed to write because we don't want to bounce that last check and then have five, 10 more years where we've needed to write more checks. So when you plan for your retirement, you're also planning for a legacy and whether it's for your children or your spouse, maybe more importantly for your spouse, you need to understand the consequences of the decisions that you are making and their impact after your own lifetime.

Okay. Because going back to social security, not a lot of people understand that up to half of the social security income is going to disappear when their spouse dies. So if you have social security and I have social security and I pass away first, most often it's the guys that pass away first, you only get to continue receiving the higher of the two social securities. So if we have even social securities, you have a 50% drop in your income when I pass away, right? And at the least it's going to be a one third drop in income.

But guess what? You're surviving spouses need for income, their expenses, they're not going to drop in half. They're not going to drop by one third. In fact, they might go up because they need to fill their time with something other than spending their time with you, right?

They've got to find fulfillment. And a lot of times not only is that social security affected, but what if there's extenuating healthcare expenses for the last couple of years? Now you're leaving your spouse with a depleted asset base and decreased income. And you've depleted your legacy.

Right. So when you're making the decisions, preparing for retirement and getting into retirement at 50, at 55, at 60, at 65, understand their implications at 80, at 85, at 90 might be something that you need to be aware of and concern yourself with. Estate planning is a part of retirement planning. And even for those among us that say, I don't care about leaving something for my kids, you know, that's not a selfish statement.

If you've worked hard to save and build wealth for yourself and you want to enjoy it by all means, just so long as you have a plan that continues to provide for self-sufficiency, you don't ever want to risk becoming dependent. So retirement planning does require some amount of estate planning and they need to compliment each other. So Peter, where does the life insurance play into that? Hmm.

You know, tricky. I see a lot of people on the day that they retire, they've paid off their debts. They've got a paid off house.

The kids are out of the house. They no longer have to replace an income. They're going to quit their job anyway.

And they've built up the largest amount of personal wealth that they've ever seen in their life. And they say, I no longer have a need for life insurance. Well, our needs change and evolve. And don't allow that to fool you into thinking that your plan does not need some amount of life insurance. Because again, you know, covering the spouse and especially if you do have a spouse that depends upon your income. You know, life insurance at different points in our life serves different purposes. And maybe where, when we were younger, life's insurance purpose was to replace income, to take care of children, to pay off debts, to provide for our spouse. Towards the end of life, life insurance is still very valuable for estate and legacy planning. It's a much better tool to leave behind money than your IRA or your 401k.

Life insurance passes tax free. And also think about your family and if you spent down your money, what would that leave them with a lasting memory of you, right? If you left your spouse with that decreased amount of income. So, you know, it's more than money. Number four on our list, and this is why we circled around, is that planning is about more than money. Money, as a financial advisor, I can tell you it's important, but it's not the most important thing. Money is a tool to support the values that are important to you.

And if taking care of your family is a value that's important to you, you know, you might want to consider the planning tools that are available and make sure that you've got a cohesive plan that provides for the support of your values while you're here and even after the time that you're gone. And if you feel like you want to look at life insurance or might be underinsured, we can do a quick comparison and get you quotes and prices from over 50 different companies in under five minutes. So it's absolutely something that we do. So once again, I am Amber Rashawn.

This is Peter Rashawn. We are on Planning Matters Radio. Number five on our list, which is urgent message. I do group health insurance.

We do a lot of supplemental insurance as well for groups and individual life insurance. I strongly, strongly recommend that you just listen to those communications from your employer. You're never going to be financially successful without opening your mail. I promise you'll never be financially successful without opening your mail to see who's trying to tell you that you owe what and to understand the communications that are coming to you. Those messages are urgent and we get a deluge of messages, you know, a million text messages a day, a thousand emails in an hour and 50 pieces of junk mail in our mailbox all by the time we get home.

Right. So it's easy to just get overwhelmed by that amount of communication. But Medicare, social security, your personal advisor, your employer, especially around the time that you're about to retire, are sending you some pretty important communications that ultimately if you miss deadlines or, or miss executing certain things might make or break your financial success. So we need to make sure that we're paying attention to those urgent messages, executing things by the deadlines that they need to be executed by.

Number six on the list. First things first, prioritize your priorities. Yeah. And this is a tough one sometimes because people have multiple financial priorities.

Hey, I want to put my kid through college and I want to save for retirement, right? That's a big one. Okay.

And I get it. I'm a parent. We are parents. We've got a great kid that I would, and I know you would do just about anything for, but at a certain point in time, doing the best thing for him is making sure that he's financially independent at some point in time and then making sure that we're never dependent on him.

Right. I mean, we wiped his diapers as a kid. I don't ever want him wiping.

I never want him wiping my diaper. Okay. Um, and volunteer.

He's such a nice, uh, yeah, sure. Call, call the kids and ask if they want to take an unpaid three, four month vacation to come wipe your diapers. See how that works out. So, um, we need to prioritize priorities and by this and, and that example, the big one of saving for college versus saving for my own retirement college is about preparing for a time when we're going out into the workforce and hopefully earning more money and therefore they give loans for that. Um, retirement is about planning for a time that we don't intend to ever work again and we'll never earn another dollar hopefully. And because of that, they don't give loans out for that.

Uh, I mean if you've got a paid off house, you can ask for some of that money through a reverse mortgage, but that's about the closest thing to a loan for retirement there is. And so let's make sure to prioritize priorities if both of those are goals and we can accomplish both of them. Fantastic. But we need to understand that order of operations like in math class, what do we need to do first, second, last, uh, to make sure that we're taking care of first things first. I know one of the biggest misconceptions is, oh, I'm, I'm too old to plan for retirement or I'm too young to plan for retirement. What would you say to that, Peter? Never too old, never too young. You know, if you wanted shade in your yard, the best time to have planted a tree would have been 30 years ago, right?

But if you didn't plant one, then the best time would be today. So if you started a long time ago or if you're young and you want to get the ball rolling, fantastic. But just because you haven't done it till now doesn't mean it's a lost cause.

You've only lost that cause if you continue to have that realization and then do nothing about it. So let's not be procrastinators. Procrastination is the biggest enemy of progress.

It is not preparation. Let's be a little bit more proactive. And the government actually gives you some opportunity to do that. Number seven on our list, charge up, save as much as possible, as soon as possible, as early as possible. But if you have not, or if you feel behind, after the age of 50, the government lets you charge up your savings. They actually let you do what's called catch up contributions. So if you are maxing out your IRA or your 401k and then you turn 50 years old, guess what? You've got the opportunity to put even more in those accounts. And I think that if you do feel behind or you want to make sure that you're not falling behind, you should take advantage of every opportunity possible to save as much as possible.

People say, save 10%, pay yourself first. Well add up 10% over a 30 year career and at the end of 30 years, you've got three years of income saved for yourself. It's not a lot of money. It's not enough.

And fantastic market returns over that time. Maybe you double that or quadruple that. Okay, now we've got 12 years of income. Still not enough.

Still not enough. We've got to learn that we need to take advantage of each and every opportunity to start and to expand on the amount that we are saving for retirement. This is planning matters radio. I am Amber Rashaan for your insurance needs and my husband, Peter Rashaan, founder and investment visor here at Rashaan planning. If you would like that free complimentary review, pick up the phone and give us a call at nine one nine three zero zero five eight eight six.

And that brings us to number eight on the list. Tax planning. Yeah. So I see a lot of people doing what I call the gross planning mistake. What I mean by that, the gross planning mistake is that they are planning for retirement based off of gross numbers.

All right? So when you earn a paycheck, your pay rate is your gross income. But before you get your money, uncle Sam takes a bite and what you actually bring home is your net income. So let's say that every week you worked and your gross pay was a thousand dollars. But what you're bringing home, your net income was only seven hundred and fifty dollars.

Right. You've budgeted your lifestyle off of seven hundred and fifty dollars per paycheck. That's what you have designed your spending off of. What I see is people have saved this nest egg for retirement. It's five hundred thousand.

It's a million dollars. And they say, well, I'm going to live off of forty thousand or fifty thousand a year. But that's not what you're going to be taking out of your portfolio.

The gross and the net are going to be different if you have deferred and delayed paying taxes. Most people have put their money into this 401k because we've been told we're going to save on taxes. Well, I can crunch the numbers on that one and debunk that myth for you. And even if you believe what they've told you is true and that you'll be dropping tax brackets in retirement, I can show you where that's not actually going to be a saving. So I encourage you to re-examine that principle that we've all been taught to save under. But when you're thinking about how much you're going to be able to live off of and depend on in retirement, don't forget to factor in taxation, because if you've got two hundred thousand saved for yourself and you want to live off of forty thousand dollars a year, you're actually going to have to take out fifty thousand dollars a year. That's going to deplete that nest egg a little faster.

Don't make that gross planning mistake. And unfortunately, a lot of people don't think about the debt that they owe to Uncle Sam right inside that IRA. And number nine on the list, a lot of people don't think about the health care expenses either. Amber, can you explain those to us from a retirement aspect?

Sure. Well, I mean, we we think about Medicare, right, is going to cover the cost of care throughout retirement. It has been estimated that a healthy couple that reach age 65 will spend over four hundred and fifty thousand dollars over the course of their retirement lifetime just on routine care and Medicare premiums alone. That doesn't even include what could potentially be a five to ten thousand dollar a month cost of long term care coverage. So health care planning is is critical. I mean, it's vitally important making good decisions with your Medicare understanding how to protect the options available for long term care protection.

And there aren't a whole lot of them. But we don't want to ever become dependent on our family. As we talked about, we don't want to ever become dependent on the government. Even people who are very affluent, well off, have a good deal of money, sometimes tell me, hey, I'm self-insured. Well, you know that for like a percentage of what you have there, one percent per year, which you're going to get in growth, you can actually protect the rest of that nest egg that's giving you that level of financial confidence. Like there's there's a lot of options for how to handle this question. But people take the old ostrich approach.

They duck their head in the sand the same way with the rising health care costs in the individual market or the group market. Right. Well, guess what? With your head buried in the sand, your backside still exposed. I mean, you're not doing anything to protect yourself. So rather than that, lift your head up out of the sand, look at head on, address the issue and decide on how you're going to approach this question. And you know what?

There's probably a reasonable way to do that. Again, you are listening to Planet Matters Radio. I am Amber Rachan. I'm Peter Rachan and we are talking about the Ten Commandments of retirement. And we're rounding out our list here.

Number 10, Amber, withdrawal planning. Now, I've seen literally thousands of different people situations throughout the years. I would say the vast majority of savers and investors do not have a written plan for retirement income, do not understand how to piece together Social Security pensions and withdrawals from their personal retirement accounts, their investments, their IRAs, their 401ks, their bank accounts, their brokerage accounts.

Ooh, you're listing so many accounts there, Peter. You know, the pieces of the puzzle when they're in a box and scattered might not make a lot of sense. It takes time to take all of those jagged edges pieces out and create a picture that makes sense. That's why you need an advisor, right? Well, look, a lot of people are moving into retirement with a jumbled box of pieces. They have never put the pieces of the puzzle together to see what that picture in retirement is going to look like. Before I make that leap and say, I'm never going back to work again, take this job and put it wherever you want, I'm going to make sure I understand what the picture thereafter is going to look like. And that's why at Rishon Planning, one of the biggest things that we offer is that complimentary review including the retirement planning strategy session.

And we'll put in writing that retirement income plan, piecing all of those pieces together, showing you where there could be problems. What if you had a missing piece in your puzzle and you didn't know it until after you quit your job? Well, you don't know what you don't know. Right. And if you've never taken the time to put that puzzle together, you wouldn't know it.

It's just, you know, 49 pieces in the box when there should be 50. So it's not that you necessarily would need an advisor. However, getting a second opinion, getting a second set of eyes on what you believe to be the best possible thing for you and or your family could be a great idea, correct?

Well, the fear of the unknown is real and what we don't know can hurt us. And that's why I encourage everybody to address these things, to take a look at the amount of risk that you're taking, the amount you're paying in fees, how to maximize available sources of lifetime income like social security and pensions, and how to translate and transition that lump sum that you've saved into the rest of your foundation for retirement. We put that type of plan in writing for you.

We do it on a complimentary basis. If you'd like to take advantage, all you need to do is pick up the phone, give us a call. 919-300-5886.

Again that number 919-300-5886. I've always enjoyed being here on the radio talking about how important this process in the planning is. I'm glad to have my wife Amber Rashawn with me.

I am Peter Rashawn. I've enjoyed the time as well. We look forward to hearing from you soon.

919-300-5886. We're talking with you again next week here on Planning Matters Radio. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal.

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