We’re exploring a crucial aspect of retirement planning that often goes overlooked – cash flow. Whether you’re close to retirement or already retired, understanding this strategy is essential. Let’s delve into this simple yet highly effective approach that can significantly impact your retirement success.
The Emphasis on the Number
Many financial planners stress the importance of reaching a specific monetary goal, like amassing $5 million. While having a target is reasonable, solely focusing on the number can lead to emotional insecurity. Fluctuations in your portfolio may cause anxiety, affecting your overall well-being.
Shift in Perspective
Smart retirees prioritize cash flow over the nest egg. By concentrating on cash flow, you gain greater contentment and confidence in retirement. Identifying your expenses and passive income sources, such as real estate or social security, forms the foundation for your retirement plan.
Two Cash Flow Strategies
Long-term Cash Flow Plan
Define your desired cash flow needs, considering future growth and inflation. Create a withdrawal strategy, investment plan, and tax plan to ensure financial security for you and your loved ones.
Short-term Cash Flow Buffer
Maintain a readily accessible buffer in your bank account, equal to one to three months of regular expenses. This allows for easy management of unforeseen expenses without dipping into emergency funds.
TL;DR
In your journey toward retirement, avoid getting fixated on a specific number. Instead, focus on cash flow planning, which will bring peace of mind and clarity to your future. By implementing these strategies, you can confidently embrace the next stage of your life and enjoy a fulfilling retirement.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
Financial planning is not just about numbers and data; it’s also about our mindset and emotional well-being. Before diving into the statistics, let’s explore the crucial aspect of gratitude and contentment. In retirement, the ultimate goal for many is to increase peace of mind and reduce financial anxiety. One powerful way to achieve this is by daily practicing gratitude and reminding ourselves of the things we are thankful for in our lives, both financially and in other areas. By adopting this mindset, we can make smarter money decisions aligned with our true values, leading to a fulfilling retirement.
The Reality of Retirement Savings – Ahead of the Curve or Behind?
When it comes to retirement savings, the statistics may surprise you. While it’s common to feel like we should be doing more, the reality is that you might be ahead of the curve. Over half of Americans lack enough savings to cover an unexpected expense of a thousand dollars. However, if you can cover at least six months of expenses, you’re already in a better financial position than most. Similarly, the median retirement savings for Americans is $134,000, with the average being higher at $408,000. If your savings are above the median, you’re already doing better than many others.
The Importance of a Formal Retirement Financial Plan
While you might be ahead in certain financial areas, there’s one critical aspect where many people fall behind: having a formal retirement financial plan. Shockingly, according to a recent study from Schwab, only a third of individuals have a documented financial plan. Moreover, far fewer have a retirement-specific plan that addresses income withdrawal strategies, tax planning, and risk reduction during retirement. Having a comprehensive retirement plan is essential for optimizing your financial future and ensuring a smooth transition into retirement.
Embrace Gratitude and Plan for a Secure Retirement
Even if you feel like you should be doing more, take a moment to appreciate how far you’ve come. Practicing gratitude and contentment can have a profound impact on your financial decisions and overall well-being in retirement. While the numbers may show that you’re ahead in some areas, remember the importance of having a solid retirement financial plan. By combining gratitude with strategic planning, you can achieve the financial peace of mind you desire and enjoy a fulfilling retirement.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
How much does it take to be considered wealthy? There is an answer, and it might surprise you.
It surprised me because when Schwab did this survey asking people how much they thought they needed to be wealthy in the US, their answers led to something called the Wealth Paradox Effect. I’m going to share some of the top findings from this study so that you can improve your financial life and then find out how to achieve that feeling of wealth that you might be looking for.
Time Is Money
When they asked, “At what level of net worth would you say a person is considered wealthy,” the average answer that they gave was $2.2 million. They also asked those same people, “Do you feel wealthy?” And almost half (48%) of the respondents said, “Yes.” The average net worth of those people that said yes had 560K, much less than the $2.2 million in the previous answer. There are a few important parts of the survey that you should know, especially if you are retired or you’re thinking about retirement, and a few thoughts you probably have not heard before coming from a financial advisor and a CFP professional.
The first thought is that time is more important than money. Americans feel that having time is more important than money, especially for people who are 57 and above. Our clients often spend more money in retirement on things that save them time because they’re at the point where their money is making more money, but it’s not able to make more time. As you get older, we’re reminded how much time we actually have left, and time becomes our scarcest asset – more so than our savings in the bank or our investments.
What’s More Important Than More Money?
The next thing I liked was how, for those 57 and above, they cared the least about how they compared to others. This is great because we know that comparison is the thief of joy, and feeling wealthy is up to you. It’s not a number that somebody else tells you you should be. Now the third surprise was how only a third of these individuals had a financial plan, but of the people that did, 92% of them felt confident that they are going to reach their financial goals. That feeling of confidence is just so important for overall wellbeing and not feeling stressed about money. This brings us to the next point in this study that says over 70% of people said not stressing about money is more important than having more money than others.
It’s become clear in helping hundreds of people achieve their retirement that peace of mind and contentment becomes more important, especially as we get into retirement, because it could be scary for some to switch from working and saving for 30 years to all of a sudden having to spend those savings. You might think that sounds crazy, but it’s a common feeling for many people. Those who have a level 10 out of 10 confidence about their spending and their plan have a much better retirement overall.
Now, the next thing that stood out was the importance of fulfillment and purpose in your personal life over “working on my career.” The secret here is to finding a career that can really provide purpose and fulfillment where it actually doesn’t feel like work, but that’s not easy for everyone to do.
Fulfillment in Retirement
I talk a lot about these four things: finding something that you are good at, that you love doing, that the world needs, and that also pays you to do it. That’s really the ideal career. Then when you get to this point of financial independence, you don’t need the money anymore, so you might find something new here in retirement. The three Cs is something we talk about a lot on this channel and with our clients, and it’s that idea of if you can achieve these three things (creativity, curiosity, and connection), you’ve unlocked the secret to a fulfilling life. The next thing I like from this study is seeing that wealthy means different things to different people. More people referenced wellbeing over money when it comes to describing wealth. When describing wealth in their own words, Americans referenced wellbeing over money and assets. This harkens back to the four types of wealth that I talked about in a recent video if you want to check that out next!
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
The financial world is overly complex on purpose, not always to your benefit.
As you’re doing the research to improve your retirement plan, you might start to feel overwhelmed. There are thousands of investment options, whether it’s ETFs or funds or alternative investments. And then there’s also these changing tax rules or account rules. And there’s also the ever-changing economic and market landscape that can cause you to just kind of say, “You know what? I’ll just forget about it for now and figure it out later.” Or you might decide to talk to a professional to help you make sense of everything, but when you meet with them it feels like they’re speaking a different language.
We’re going to focus on the three most important things to get right when planning retirement, and then if you desire to, you can always build on top of that and get more complex if you find it necessary. Before we get into the three factors, I want to make sure you know which type of investor you are.
Which Type of Investor Are You?
The DIY investor realizes that what got them here might not be the best thing moving forward into retirement, but they really love the learning; they love the research and the studying, strategies, and the implementing of ideas. That’s the DIY investor.
Next we’ve got the DIY investor that really wants a one-time travel agent. Sometimes when you’re traveling, you get to this new country and something changes that you weren’t prepared for. In real terms, the economy, the markets, or new laws impact that financial plan, or your life changes and the plan needs to be adjusted. It’s kind of like the travel agent does everything set up beforehand, but it’s up to you when you get to that foreign country.
Then finally, the third person is someone who is the traveler, and they would rather have a tour guide go with them, and the tour guide speaks the language and can change the flat tire when the bus breaks down.
Out of the three, who are you most likely to be?
Step 1: Track Your Expenses
Number one is just getting the income plan set. If you haven’t already or you don’t know, track the expenses to find out what it takes to run the household so you can figure out how much you need. Usually it’s whatever you need to run the household, and then some of the wants – travel, entertainment, eating out, etc. Let’s say you need 5K a month, or 60K a year. Subtract what social security might be and that’s how much you need per year from investments.
For this first step, keeping it simple, use the basic 4% rule to see where you’re at. Divide that number of 40K, divide it by 0.04. Although it’s not perfect, the 4% rule is not perfect, don’t base your whole plan on this, it gives you the first simple foundational step.
Step Two: Your Investment Plan
Number two, the second thing you want to get right is get the investment plan. For the majority of people, a simple four fund solution could accomplish what they need. In order to have diversification and multiple asset classes to handle these different economic seasons, there’s a lot of low cost funds and companies out there that can provide that solution for you.
The second part of the investment plan is to think about the risk factor. You’ve heard about the bucket strategy – a conservative bucket, a moderate bucket, and a growth bucket. This can bring peace of mind to know how much you have saved in the conservative bucket so that when things aren’t looking good, you can reassure yourself.
Thinking about this bucket in terms of number of years is helpful. For instance, if you needed that 40K per year and you had 200K in this conservative bucket, then you’ve got about five years’ worth of income to ride out whatever downturn we have. You don’t want to have to sell the growth or moderate buckets when things are down.
Step Three: A Simple Tax Plan
Number three is to create a simple tax plan. The key here is to not pay more tax than is necessary. Say you’ve got your pre-tax accounts – let’s just call it IRAs or 401(k) – you’ve got the Roth, which is the after-tax, and then the non-retirement. Plan out how much you’re going to be pulling from each account during the retirement years to be as efficient as possible.
The withdrawal strategy of traditional planning will say don’t touch your IRA and 401(K) or your Roth because it is tax deferred or tax-free. You might try to let it accumulate and grow, but that doesn’t always make sense for everyone. It may be better to use this money first, especially if you’re thinking about converting money in that Roth IRA sweet spot a lot of people find themselves in after they retire once their taxable income has gone down.
TL;DR
Start thinking about these three things – tracking your expenses, a simple investment plan, and a tax plan – and focusing on the most important parts of your retirement journey. You can always build off of this and get more complex if you need to.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
I want to share three lies that pre-retirees tell themselves that cause them to delay their retirement. Behind every lie there’s truth, which is why so many people believe these things. We’ll go over the three lies and then I’ll share what to do so you can break through them and feel confident in what you’re doing to make the best of your unique situation.
The First Lie
Lie number one will cause you to delay retirement, and it’s that, “Oh, I’ll just work one more year so I can save a bit more, and then retirement will be more secure.” While it is true that if you work an extra year, you’re gonna have a little bit more saved, but is working one more year really what you want to do? In the past, we’ve seen people lose their drive to work (depending on their career) when they get to a certain age. Maybe things start changing at work that they aren’t a fan of and they begin looking forward to other areas of their life that they would rather spend their time in, but they continue to work because they don’t feel 100% percent confident.
Then a year later, the story repeats itself. Every retirement plan will look better the more you earn, but what you need to do is actually look at the real numbers. Pull up a what-if retirement plan and actually test it to see what it would mean to retire sooner. Knowing that and seeing it is helpful because then you can decide if that money is really worth it.
You start to realize as you get older that time does not equal money. Time is infinitely greater than money. Don’t get me wrong – if you run the numbers and look at your retirement plan and you’re not close to being financially independent, then work may be a necessity.
The Second Lie
The second lie is one that might just be echoing in your back of mind: If I’m not working, will I still be as valuable? Throughout your career, you’ve been continually creating and providing value to others through your work, your clients or customers, your coworkers – whoever it may be that you’re helping, and that’s why work can be so fulfilling. However, when you get to this place of financial independence where you can now make work optional, one of the things that may hold you back is feeling like you have less significance in this next stage.
A way to break through this and find fulfillment is by taking some time to find what it is that you love to do; find out what your skills are. Even if you retire from the moneymaking activities, you can still use those skills you learned in your career and your life to continue helping people. Maybe that means becoming a mentor or giving advice. Regardless of what that looks like for you, don’t pack up your wisdom and all the things that you could do to help others and just put it on the shelf.
That’s what we’ve seen provide fulfillment for clients as they get into retirement, seeing as contribution is one of the three keys to a happy retirement. The other two are creativity and connection. These all come together to make up the three Cs to retirement.
The Third Lie
The third lie that stops people from retiring or delaying retirement is the idea or the fear that retirement will be boring. The only time I’ve seen this come true is if you spend zero time thinking about what you’re going to do in retirement. It’s those who just work with their head down all the way up until this date and once they’re done, they’re a little caught off guard. This also happens to people who have a job that they just do not like, and rather than thinking about what they’re retiring to, they’re only focused on what they’re running away from. Don’t just retire just from something, retire to something that you’re looking forward to.
Let’s not have that happen to you. And if you’re still working now, make sure that you invest time, invest time now to explore those three Cs that we talked about. What are the three Cs gonna be for you? That idea of contribution, connection and creativity. Maybe even think about purposely, uh, uh, doing them.
TL;DR
To recap, think about these 3 lies retirees tell themselves. Number one: I’ll just work one more year. Is that really true? Run the numbers and see what the dollars are. Number two: I won’t be as valuable anymore. That’s only true if you don’t plan. Decide on what the three C’s look like for you. Number three is: I’m going to be so bored. That’s not true either – there are so many people that are retiring well. Let’s learn from them.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
There are 23 retirement habits of wealthy retirees. These 23 habits are going to fall into four categories of wealth – financial, relationship, health, and spiritual. All four of these are important to living out that ideal retirement.
Financial Wealth
The first category we’re going to cover is the financial. We’ll focus on the money side and some of the retirement habits that we see wealthy financial people do in retirement. Number one: hold cash because having cash in your portfolio fits into that conservative bucket. If you’re not familiar, there’s a three bucket strategy – one bucket being the conservative bucket, which helps ensure you have enough to weather downturns if needed. It gives you options and flexibility when the markets aren’t cooperating. What’s the right amount to have in cash for you? The answer is, it really depends on your income and investment plan and how they’re working together. You don’t want too much in cash getting eaten away by inflation every year.
Your Time Is Valuable
Onto the second habit that financially wealthy retirees do – they buy back their time. When you’re anywhere from your fifties to your eighties, you realize that time does not equal money, and really, time is a lot more valuable than money. Your money can actually make money while sitting there in your investments, but you can’t make more time.
The happy retirees that we see spend money on things that they don’t want to do anymore so that they can enjoy their time doing the things that they actually do want to do. They might hire that mowing service even if they’ve mowed their own lawn for the last 30 years, or they might partner with a wealth management firm to make sure they’re doing everything they should be and aren’t missing anything.
Diversifying Your Portfolio
The next habit is not buying what they can’t afford. The next habit is to avoid financing and bad debt. They may have debt on real estate or other assets that pay them a positive cash flow, but they’re less likely to go into debt on liabilities (cars, boats – things like that). The next thing is they diversify. This one’s a no-brainer – as long as you’re diversifying among the different asset classes that we need in order to handle the four economic seasons. There’s four economic seasons: higher than expected inflation, deflation, higher than expected economic return, or lower than expected economics. Making sure you have asset classes in each one of those.
You might hear some billionaires and investors recommend that they got rich by not diversifying and really focusing all eggs in one basket or a few baskets, but we’re not billionaire investors. Our goal is to live off our assets in a comfortable way and be prepared for the various economic seasons. The last habit that we see in this category of financial wealth is generosity. Not every financially wealthy person gives, but the ones who do are happier, more content, and more grateful for what they have.
Relationship Wealth
Moving onto the next category – relationship wealth. This is one of the most important areas to a fulfilled life, and it’s really just sharing life with friends and family.We’re made to be in relationships. So onto the first habit that wealthier retirees do: they don’t hold grudges.
Life’s too short to hold grudges as we get older. If reconciliation isn’t possible, they move on; they don’t dwell, they don’t harbor negative feelings. The next habit is that they listen more than they speak. They ask questions in relationships because they’re curious about the other person.
The next habit is to really make an effort in relationships. Remind yourself that if there are relationships that you want to grow, you need to make the effort. You need to reach out and try to do things to help that relationship grow.
Health Wealth
The next category is health. A few of these habits are reading, journaling and writing, learning, curiosity, and then just challenging yourself. Sometimes we think of retirement as this stress-free zone with no more work, but challenging yourself and your mental faculties is really important to maintaining brain health. There are two parts to health, there’s brain health and then there’s body health.
This next habit is crucial, and that is being thankful for what you have. No matter how small, this can really improve your mental wellbeing. Even in difficult times, you’re likely to have some things to be thankful for. Whether it’s being thankful you can hear or see, or that you can move your body. We tend to take these things for granted every day.
The next habit is to play; to have fun and enjoy life. This will look different for everyone. Maybe for you it could just be having fun with friends, doing something relational like biking, hiking, tennis, or swimming. Or maybe it’s board games like chess, or card games. Do something that you enjoy. If you can’t come up with anything, think back to what you were doing when you were a teenager or in your twenties. What were the hobbies that you had back then?
Another habit to think about is taking long walks. There are many, many benefits to regularly going on walks. Another habit of healthy, wealthy people is that they lift heavy things. They incorporate some form of strength training to prevent osteoporosis and frailty. It’s never too late or too soon to start doing this. As you get into your sixties and seventies or on, just make sure you do these things safely and under the guidance of your doctor.
Spiritual Wealth
The last category of wealthy people is spiritual or faith wealth. It’s a crucial part to so many people’s lives. The first habit here is really just a reminder that you are part of something bigger than just yourself, and you can make an impact, no matter how small it may seem.
This aligns with that habit of generosity. You don’t have to have faith to be generous. However, some of the most generous retirees I know have a strong relationship with a higher power, and seem to be some of the happiest people I know.
This next habit to think about is a practice of hope. It’s easy to get discouraged or to feel anxious about what might happen and lose sight of the positive things happening around you. Another habit is reading your holy text, whatever it might be. I didn’t realize really until my mid-thirties how practical and applicable the Bible is to my everyday life. The last habit is prayer, which really aids in that discovery process along with all the aforementioned benefits.
Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.
Affiliate Disclaimer: This post may include affiliate links where we may earn a payment when you click on the links at no additional cost to you.
Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.
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