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.
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.
Today’s video is an interview with Chad Willardson, president and founder of Pacific Capital in California. Chad is a certified financial fiduciary and a chartered retirement planning counselor. He has a lot of experience helping people live their ideal retirement and retire well.
Some of the topics we discuss are the differences between retirees who have retired well and those who struggle. Chad also shares a little bit on retirees that have continually grown their purpose and their significance in retirement. Lastly, he shares how to pass values onto your kids and grandkids because as important as the money part is, wisdom is even more important.
Differences Between Being Successful in Retirement and Struggling
Those who are successful focus on the cashflow and that’s their main focus. I think those who are unsuccessful often focus on a lump sum number. They hyperfocus on some arbitrary value of assets and they feel that once they hit that number that they can retire. Those who are really successful are looking at the cash flow planning, their budgeting, income from investments, passive income, real estate income, and they have a handle on what they’re going to spend and what they can earn.
One other trait of the unsuccessful is that they get caught up with whatever is happening in the news, and will shift their investment strategy based on the scary headlines. Sometimes that can cause a very permanent outcome in what they do with their money, which then leads to a much lower cash flow, which then causes a real harm to their lifestyle spending opportunities.
Ignoring the Talking Heads
When it comes to the talking heads on your tv, try to focus on what’s within your control – your spending and spending commitments, memberships, subscriptions, etc. It can be scary to go off the payroll in a sense and become retirees and just live off your assets or your passive income. That’s a big jump.
You’re used to getting a paycheck and going to work, and now you’re constantly asking yourself, do I have enough? That’s the question that will perpetually be in your mind causing anxiety and stress until you’ve gone through some very thorough planning to test that. Look at the cash flow, look at your expenses, look at your taxes. How much income can you rely on?
We certainly don’t discount the big concerns: inflation, interest rates changing, housing market, the depression or recession that may be looming in the background. These are real concerns, but they’re outside of your control. As you’re looking at your retirement plan, you’ve got to focus on things that you can make changes in.
Sense of Purpose In Retirement
You’ve got to retire to something, not just retire from something. As you retire, you need to have a game plan of what you’re going to do. Write out a list of things you’re excited about, new hobbies you’re going to pick up on. Do not just cut the cord and jump. Retirement could be a third of your life. Can you imagine just aimlessly waiting to die for 20 to 30 years? It just doesn’t make sense. Use your wisdom in your experience to do something creative and good. There’s a lot that could be done beyond your full-time career when that’s up.
Creating a Legacy Plan
There’s a lot to be passed on and inherited beyond financial assets. People really do care about passing on a legacy of values and principles, and stories. To be successful and to have an abundant mindset is to be generous and to not believe that money is scarce and that opportunity is a zero-sum game. If you’ve got an abundance mindset and you’re generous, why not teach that to the next generation?
Whether that’s starting a charitable foundation, asking your kids and grandkids, “What causes do we care about as a family? What can we give money to? More importantly, what can we give time and service to?” Think about ways of creating a legacy plan for your family in retirement. What could I do and utilize my abundance of time and money and resources to really leave a lasting impact on the next generation?
Is Retirement Ever the Wrong Choice?
Is not retiring, even if someone has the financial means to and the ability to, ever a good option? You can certainly set up your business in a way that allows you to focus on the few activities that really give you energy.
If you have that fortunate opportunity to be a successful entrepreneur and create your lifestyle and schedule, there’s a way to stay engaged without selling your company or stepping down.
Information Overload
Beware of information overload. Just like with fad diets, there are a lot of fad retirements. There are a lot of myths out there. Be aware of making significant financial decisions without good counsel. There’s a lot of value in getting multiple opinions before you make any big decisions.
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 got advice from a client recently that, in my 14 years of helping people retire, I hadn’t heard before, so I want to share it with you. This client’s been retired for about seven years, and he told me he had a group meetup with his buddies – some of them retired and some of them not – but the topic of discussion was retirement, and they were asking him for advice on how he did it because (according to them) it seems like he’s got it all figured out. He’s a humble guy and he obviously knows no one’s got it all figured out, but he did have some really good ideas, so to share them with you.
The Three Essentials of Retirement
As we were at lunch, I was asking him, “Why do you think they thought that you had it all figured out?” And what makes his retirement experience seem so much better than everybody else’s, compared to people who are not having that same experience? Some of the discussion that we had was on those three essentials, but he also did something a few years before he retired that set him up for success.
Those three essentials are the three Cs. The first one being creativity; we’re creative beings. You got to be creative when you were working, but you also have to make sure that you can continue to create and be curious after work. Some of the happiest retirees that I know are the most curious and creative ones, too.
The second C is connection. Your closest friends might be the people you’ve been with between ages 25 and 55 during your working years, and it could be quite an adjustment all of a sudden when you’re not seeing them anymore. It takes effort to keep those friendships going, but you can also deepen relationships with family, with God, or maybe new grandchildren along the way.
C number three is contribution. When we’re not able to help others, there’s something missing in our lives. In some way, your work helped others, but you have to continue that after work ends. It could end up being a contribution to a cause or a charity, a person, or a group of people where you can use your knowledge, skills, or your money to help.
Those are the three Cs, but there’s something else that this client who has given this advice said that I didn’t think about before, and he brought it up in this discussion.
Advice from a Retiree
While we were talking about contribution, he mentioned that he’d started purposefully finding the time and using it for contribution well before he retired. He actively found ways to serve and help others with a small percentage of his working time. As retirement came, it was almost like a natural progression that that percentage of time grew a little bit, and it didn’t feel like a brand-new life he didn’t recognize. Sometimes retirement can feel like a complete transition, but he made it more of a steady transition into this retirement life that was filled with those three Cs of contribution, connection, and creativity.
The piece of advice that he had was to take time before you stop working to just explore these three Cs more, especially the contribution one. Don’t wait until you have free time in retirement and invest it now. Take quiet time to think about life in retirement before you get there. I have a video on prompts to help you think about retirement before you get there. Take some time in the morning, or whenever you have your best thinking time, and start exploring those three Cs. Whether you’re already retired or not just yet, it’s worth the investment.
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.
As you’re planning your retirement, there’s a shift that we should think about as we map out our finances and our life after our career. There are two important things that I want to share with you. The first one’s for everybody, and then the second one is for business owners or entrepreneurs who might have the option to design their day and their week while they’re working.
How Do You Envision Your Retirement?
The first example is a reframing of the way that we’re thinking about retirement. When done right, it can confirm that you’re making the best decision possible about when to retire. Additionally, it can also keep you motivated to actually accomplish the future financial and retirement goals that you want. Last but possibly the most rewarding of all, is that it can also help you to make your future bigger than your past. This is an important concept in positive psychology because if we don’t have hope, or if we don’t have things to look forward to, that can greatly reduce our present life satisfaction.
You know that quote, “Where there is no vision, the people perish”? For some, as they’re planning their future, they don’t like the term “retirement” because it conjures up ideas or images of the opposite of what they want their life to become. It could be the image of an old fogey rocking in a rocking chair on the porch or being unproductive, or maybe a memory of their elderly grandparents just watching TV all day in retirement.
There’s nothing wrong with either of those things, but it’s probably not what we’re looking for, thus causing us to put off retiring or delaying retirement planning out of fear of facing the question: what am I going to do all day? So they keep working because they don’t know how good life can be after we’re done with work.
Finding Fulfillment in Retirement
If you’re anything like our clients, life after work is really about time freedom; it’s about enjoying life while continuing to find fulfillment. I mention the three Cs often: creativity, connection, and contribution. Ask yourself: is there something that might be stopping me from mapping out or getting clarity about what’s possible in this next stage of my life? If it’s a negative feeling about the word “retirement”, what if you just replace that word in your head?
Use “freedom” or “independence” instead because if you’ve achieved financial freedom, you have the option to continue work if you want to, or to stop work. You have the option to explore other pursuits if they interest you if you want to do so. And you have the freedom to decide how you are going to express your creativity, or maybe your curiosity, and who you’re going to connect with more, and what you are going to do to contribute to other people’s lives.
A Different Path for Entrepreneurs or Business Owners
This second part is for business owners or entrepreneurs. As a business owner, your retirement could look quite different. You might have more freedom in your career to decide how you want to spend your time. It might feel like the opposite of that when you look at all the day-to-day things it takes to run the business – you might feel more like an overworked employee than the owner. However, as the decision maker, you’ve got some options.
The concept that I want to share with you is the idea of retiring in your business. Think about it like this – in your business, there are all these things that you need to do right so that the business can run. There’s sales, marketing, product, distribution, operations of people, management – all these things that you need to do. Some of these things you enjoy, and some you don’t, right? You may really enjoy the marketing side or the sales, or talking to new clients or customers if you have them. As you think about your financial freedom and your time freedom, are there things in your business that you do better than anybody else?
Secondly, are there things that you do right now that you could actually spend money on so you wouldn’t have to do them anymore? You’d essentially be lowering your income with the goal of freeing up your time. The idea is to spend your time on the things that are most engaging to you – the things you love doing and bring the greatest return to your business or your life – and everything else is getting handled by somebody else.
The people that can do that are essentially retiring in their business. It’s not for everyone, but it’s an idea to at least think about.
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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