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.
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 recently spoke with someone about a year from retirement who had a big problem that wasn’t being addressed, so I wanted to share it with you in case you find yourself in the same situation as them.
During this free retirement planning session, this couple said, “We’ve had an advisor for years and they do a great job, we really like them, but we’re a year or two from retirement. We started doing some research on retirement planning, which led us to your YouTube videos. After watching a few, we wondered: Why isn’t our guy bringing this stuff up?I shouldn’t be discovering this on my own.”
How can you really know if your advisor, or someone who’s going to do a quick checkup for you, is bringing up all the important things that can improve your retirement? I wanted to share two things to use as a filter when you’re talking to an advisor.
Do I Need a Specialist or a Generalist
Number one is getting clear on what you need. If you’re close to retirement you might realize it’s not just about maximizing returns anymore or building up the nest egg to get as big as you can but rather how to create tax-efficient withdrawal plans, and then how to take the least amount of risk possible when it comes to investments with the highest chance of success. Make sure you’re talking to a specialist versus a generalist.
Specialists typically work with one type of client instead of anyone and everyone. The problem for you is that specialists may cost more. The way I think about it is if you absolutely needed a very important surgery, and you found a general surgeon five minutes from your home who’s done the surgery you need one other time, and then you found a specialist surgeon who only does this one type of surgery and has done over 2,000 of them, but he’s located on the other side of the country.
The chance of success in the surgery is so much higher for the person who’s done it over and over again, so the value is so much higher too. That’s why knowing what you need and then finding that specialist can be really important. The second important thing to find out is how many clients they help.
How Many Clients?
We’ve seen a lot of people come over from some of the big firms that you see on TV because they realized after six months or a year that their advisor wasn’t being proactive. Don’t get me wrong, these massive firms are really needed for the majority of people in this country because most people don’t have or need custom planning to really optimize their retirement. However, specialty firms are necessary for those people who aren’t too worried about running out of money but know that there are things that they can do to optimize their plan and reduce the amount of tax that they pay, etc.
When you’re thinking about big firms, it’s hard to be proactive when you have more than 100 clients. It’s hard to think about and plan for them all. We just know that through how many relationships we can have in our life. Everyone wants something different, but going deeper with fewer people allows your advisor to be thinking about you when they’re looking at or reading about wealth transfer strategies – it’s more likely that you’ll pop into their head if they have fewer people to think about because it’s so custom.
For us at least, it’s more about relationships than revenue because when you work with a select few people, it allows us to go to the funeral of a client who passed away or to go visit a client who has recently been admitted to a long-term care facility.
TL;DR
To recap, if you’re doing research and getting knowledge about retirement and looking at your retirement more closely, and if you’re going to think about talking to an advisor, find out if they specialize in retirement planning and then make sure they’ve been doing it for a long time, 10 years at least. It doesn’t have to be, but it’s always nicer that they’ve had experience. Then, find out how many clients they have helped do what you are looking to do.
Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA. Streamline Financial Services is not affiliated with LSS or affiliates. Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products. Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.
The information by Advisor (“we”, “us”, or “our”) is for general information purposes only. None of this information should be construed as tax, legal, financial, insurance, financial advisor, 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. It is solely at your own risk. 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. All information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind as a result of the use of the site and reliance on the information provided.
This site may contain testimonials by clients who are users of our products and/or services. These are non-paid either directly or indirectly testimonies that reflect their real-life experiences and opinions. These experiences are personal to those particular individuals and may not necessarily be representative of all clients who use our products and/or services. Your individual results may vary.
This site may contain endorsements by non-clients who are not users of our products and/or services. These endorsements reflect their own opinions or views and may not be representative of our own. We are not affiliated with users who provide endorsements and they are not paid or otherwise compensated directly or indirectly for them.
There are some changes coming to social security in 2023 that will affect both those approaching retirement and those already in retirement and receiving social security. See below our quick breakdown of those changes, what you should know, and what you should do in light of this information.
Cost-of-Living Adjustment
If you’re already receiving social security, you already know about the Cost of Living Adjustment (COLA). This adjustment will increase the social security benefit you’re currently receiving by 8.7%. For example, if you were receiving the average social security benefit of $1,850 per month, this adjustment will make your new social security payment close to $2,000.
Taxable Income Adjustment
There’s also an adjustment for those who are not retired yet and are still earning an income and paying into social security. The amount of your income that’s subject to social security tax was previously $147,000 per year. Any income above $147,000 than was not subject to social security tax. In 2023 that number is going to change to $160,200 per year. So, going forward, up to $160,200 of your annual income will be subject to social security tax at a rate of 7.65%. There is not anything you can do strategically to avoid this change, but it is something to be aware of. That said, if you’re in your 60s and starting to develop a game plan for social security, you should pay attention to this next change.
Beware of Starting Social Security Early
If you’re under your “full retirement age” by social security standards and you are still earning some level of income from something like consulting or a part-time role, then you need to think twice before choosing to start social security early. Here’s why: if you were making more than $19,560 per year in 2022, you might actually be subjecting to a withholding that is the equivalent of $1 for every $2 you make, which often makes taking social security early a poor decision mathematically. In 2023, that earning limit will actually increase to $21,240.
This consideration can get a little complex but it’s very important to understand, so we recorded a separate video explaining it in more detail and even walking through a real-life example from one of our clients. You can review that video here to see if this consideration would apply to you.
Meeting With an Advisor Consultant
It’s important to note that like many financial-related issues, there are quite a few factors that impact your financial plan, whether it’s Social Security planning, maintaining your lifestyle, or income in retirement. Like many of our clients, you might not be too worried about running out of money in retirement, but there might still be tax planning opportunities to optimize your financial situation even further. related to tax planning.
If you’re not sure how to model out different scenarios related to social security decisions, retirement income planning, or tax planning, see if you can reach out to a Certified Financial Planner™. Our recommendation would be to try to find someone who has been working specifically with retirees or who has at least 10+ years of experience. Many of them have a free consulting session that you could take advantage of to get a better idea of your situation and your options. Obviously, our team at Streamline would also love to serve you. We don’t always have the capacity to serve everyone that contacts our team, but we’d be happy to point you in the right direction no matter what.
Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA. Streamline Financial Services is not affiliated with LSS or affiliates. Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products. Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.
The information by Advisor (“we”, “us”, or “our”) is for general information purposes only. None of this information should be construed as tax, legal, financial, insurance, financial advisor, 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. It is solely at your own risk. 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. All information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind as a result of the use of the site and reliance on the information provided.
This site may contain testimonials by clients who are users of our products and/or services. These are non-paid either directly or indirectly testimonies that reflect their real-life experiences and opinions. These experiences are personal to those particular individuals and may not necessarily be representative of all clients who use our products and/or services. Your individual results may vary.
This site may contain endorsements by non-clients who are not users of our products and/or services. These endorsements reflect their own opinions or views and may not be representative of our own. We are not affiliated with users who provide endorsements and they are not paid or otherwise compensated directly or indirectly for them.
The Best Retirement Advice: Five Truths Every Retiree Faces
I want to share one of the most valuable pieces of retirement advice that I’ve ever heard. If you’re thinking about your retirement and wondering if you’re doing the right thing, or think that you should be doing something different, or if you’re just worried about all the things going on right now – whether it’s the economy, the markets, or the value of your accounts – I’m going to share the retirement truths that every retiree goes through.
The negative of these retirement truths that we’re going to look at is that many of them lead to increased uncertainty or worry about your retirement. One of our goals is really the opposite of uncertainty or worry in retirement. It really should be more about confidence, right? The next years, really all the way up until you pass away, are the magic years. These could be the best years of your life, and I know that because there’s an actual study proving this. People were asked to score their life satisfaction from 0 to 10, where 10 is the best possible life and then 0 is the worst possible life. I thought it was encouraging to see that life satisfaction tends to increase as we get older.
Truth #1 – Should I Be Doing Something Different?
In retirement, it will be common to think: should I be doing something different? It’s normal to feel this way in retirement especially when you see the news, or listening to friends talk about their finances. There’s this feeling of doubt about our current plan, which causes some people to make more emotional decisions instead of making smart financial decisions. A good way to avoid this feeling is by having an understanding of your plan, which leads to more confidence with what you’re doing. Specifically, having a plan for both the good and bad market times so that you know you’re prepared for either one.
Truth #2 – Expect Bear Markets
Now onto the second thing that comes up in retirement – we need to expect bear markets. You’ve most likely lived through a lot of them already, but in retirement they feel a little bit different. Creating a plan with bear markets in mind and really big corrections built into the plan is a smart thing to do. That way you don’t have to worry when they eventually come. Now, if you’re not sure how to model these various what-if scenarios or bad market scenarios for your plan, then you may want to talk to a CFP or check out my favorite retirement income planner here.
Truth #3 – Should I Keep Working?
The next thing to bring up is for pre-retirees who are close to stopping their wage, especially if that’s during bad markets. We had a client who was five months into her retirement call us and say, “It seems like so much bad news is out there, and with what’s going on with the markets I’m wondering if it would’ve been better if I had just kept working.” We reviewed her plan, and because we built this expectation of bad markets into her plan, everything looked great. Really, the only reason to keep working would be if she really enjoyed this sort of work that she was doing and it brought her some purpose, but she didn’t. It was great confirmation that she was still on the right track. If this sounds like you, take a look at this video with a few real examples of what working an extra year might look like in a financial plan.
Truth #4 – Spoiler Alert: No One Knows
The next thing to know is that no one really knows what’s going to happen next. It seems like everybody has a prediction on TV, YouTube, or at the dinner table with family, but no one knows what is definitely going to happen. It’s important to prepare your investment plan for the four economic seasons that we may go through in the future since we don’t know which one we’re going to go through next.
The four economic seasons are higher than expected economic growth, lower than expected economic growth, higher than expected inflation, and lower than expected inflation.
Truth #5 – Comparison Is a Thief
In retirement we may have a tendency to compare ourselves to others. The grass is always greener on the other side of the fence. If we mention a dollar amount in a video as an example, we don’t want that to make you feel better or feel worse about your current situation. Because we help high net worth families at Streamline Financial, we sometimes mention big numbers, but we don’t want it to be about the numbers. We really want to communicate the principles and the strategies that can be applied to anybody’s finances.
There are always going to be people with more than us, and then there are always going to be people with less. Comparing ourselves to someone else can hurt our retirement plans because that leads back to that first point that we talked about – feeling like we should be doing something different. One of the most helpful pieces of advice that I’ve heard that we can apply to retirement planning is really the difference between fear and anxiety. When we think about fear and anxiety, we might think of them as being the same thing, but actually, they’re completely different things. Fear is a caution over a real and present danger, while anxiety is a worry over an imagined future danger.
We can’t control the markets or inflation, or what’s happening in the news or the world, or tax laws, or the elections, but a lot of these things actually do relate to things that we can control. You can control when to pay taxes when it’s related to investing. With the news, all we can control is how we consume it. Either find a great certified financial planner who can show you the what-if scenarios, or check out the DIY planner. Anxiety can be the thief of dreams. It takes you away from enjoying the present moment, and it stops you from even taking the right action to make things better in the future because you only focus on the negative as you’re moving through life.
Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA. Streamline Financial Services is not affiliated with LSS or affiliates. Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products. Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.
The information by Advisor (“we”, “us”, or “our”) is for general information purposes only. None of this information should be construed as tax, legal, financial, insurance, financial advisor, 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. It is solely at your own risk. 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. All information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind as a result of the use of the site and reliance on the information provided.
This site may contain testimonials by clients who are users of our products and/or services. These are non-paid either directly or indirectly testimonies that reflect their real-life experiences and opinions. These experiences are personal to those particular individuals and may not necessarily be representative of all clients who use our products and/or services. Your individual results may vary.
This site may contain endorsements by non-clients who are not users of our products and/or services. These endorsements reflect their own opinions or views and may not be representative of our own. We are not affiliated with users who provide endorsements and they are not paid or otherwise compensated directly or indirectly for them.
Recent Comments