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2019 Retirement Checklist, Part 1


As we start this brand new year, let’s make sure that you’re on track for a successful and stress-free retirement. Isaac will give you the rundown on the most important things to focus on in your retirement planning checklist on this first episode of two-part series.

Transcript

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John Stillman: Welcome once again to Wright Money Tips with Isaac Wright, President of Financial Dynamics and Associates, chartered financial consultant and author of Navigate Yourself to a Secure Retirement. I'm John Stillman. Isaac, how are you?

Isaac Wright: Doing great John. 2019, we're here, gonna try to make this a successful year for all involved.

John Stillman: Well this will be a two part discussion that we have. We'll have the first part today, we'll have the second part in a couple of weeks. We're talking about your 2019 retirement planning checklist. All the things, well all the things might be an overstatement. There's probably a 147 things that we could put on this list, but we've narrowed it down to the nine or ten most important things that you wanna be focusing on in your retirement checklist. We're going to start today Isaac with do I know exactly how much income I need every month?

John Stillman: Now that is not necessarily the same number of what have I been earning. It's how much money do I need every month to maintain lifestyle as I know it.

Isaac Wright: Well and before we get to that John, let me just say, because I thought what you said was pretty good. I mean, we have narrowed this down inside of 10 things. We're gonna cover this over a two part series here in January and we want people to kick off 2019 in a way that they feel like in the world of maybe complications when it comes to financial issues, retirement, just building and maintaining a financial plan. I mean it sometimes can sound daunting, overwhelming. I wanna break this down into some manageable components. We help families each and every day here at our firm to do these. But I think this will get some good value and going into your first one here as far as exactly how much income you need every month and I want you to listen to this because we all are going to spend various amounts of money month in and month out. But there's two types of ways to be able to do this. What I call getting to the 99 yard line, 'cause you're never, ever going to have an exact figure.

Isaac Wright: But you have fixed expenses, you have costs that are associated with running your household each and every day, each and every month. Then you're gonna have discretionary expenses. Then you're gonna have things that you don't know, that you don't know and in our firm, we build what's called a buffer amount inside of people's monthly/annual budget.

Isaac Wright: Now let me just say this. We do this typically inside of an hour and we actually get most people involved in the fact of when they put together what I call a "budget," because that word is a four letter word to most people. I want people to start realizing instead of thinking about the word budget, think about "lifestyle". What is that monthly "lifestyle" gonna look like? I like the word lifestyle because quite honestly, that's what we're trying to accomplish. So you have to have a way in our complete planning review process, we do this in the front end of our planning, of helping people through that exact conversation but that is number one on the retirement checklist. If you are transitioning into retirement, you have to take a realistic view of what that's going to look like and we help families. I look at more budgets than you wanna shake a stick at and we know when we have the experience to bring out the things that most people don't know what they don't know. And it's a good team environment. And I think it's important to have that if you're moving in the direction of your retirement.

John Stillman: One of the things that I think tends to get lost in some of the retirement planning discussion is just the sheer mechanics of where the money's gonna come from and how those paychecks are going to arrive. And so a lot of focus gets on, well do I have enough money or not? But item number two on our checklist really deals with the mechanics of that. Which is, do I know which account I should withdraw from first? Let's say you have a Roth and an IRA and a brokerage account and a 401K and all of this other IRA over here that we forgot and yes, I've been contributing for my spouse in this Roth over here. Where does the money come from first?

Isaac Wright: Where does it come from first? You're exactly correct. I think I've tried to put this, and you and I both have worked on this in a manageable order because I think expenses leads the conversation. From there, you can engineer where your income is going to come from and the thing that I feel like we get a lot of good feedback on, is it's not how much you make, it's how much you keep and trying to figure out a way of establishing an income that nets you the most amount of money.

Isaac Wright: And sometimes even though you may have a situation where you can "gross a larger amount," it does not make sense depending on your situation, tax brackets, social security, all these other types of income sources may have penalties, drawbacks and additional taxes if you don't plan that out correctly.

Isaac Wright: So number two on our checklist is, do I know what account should I withdraw from first? And that does not mean necessarily that is your social security check. That does not necessarily mean right out of the gate taking that benefit. Maybe you have a pension plan. Maybe you have additional income. Maybe you're expecting an inheritance. Maybe you have trust income. You know, you may decide to work part-time. All of those things are gonna become what I call various schedules that you're gonna have to attach your monthly income to and we can help organize that. And let me just say this, I work with a lot of accountants. They are so busy. You would think accountants really in the world of today, 'cause people can use Turbo Tax, say hey listen, they're not busy. I will tell you this John, unbelievably the accountants that I know that are good at what they do, have very little time to do what I call tax planning. It's more about tax preparation.

Isaac Wright: And so what we try to accomplish is providing an almost team approach, we try to quarterback this to where if we have to incorporate your accountant great and if not, then we don't need to do that either. But I think it's important that you have an income that nets you the most amount of money per month and addresses that income shift each and every year. 'Cause as you get older, you may have different things you have to do like take minimum distributions from your IRAs. If like you mentioned earlier, Roth IRA, that's income tax free potentially if you've done it correctly. So you have to know where that income is going to come from.

Isaac Wright: Now these are just the top two steps, and I want to be clear. We handle all of that in our complete planning review process literally within about a meeting, and a conference call. Because the way we've structured our planning, is to make things simple, and we can get to the truth of whether or not you need what I would call some assistance and/or possibly a long-term relationship. Most families that we choose to work with, and they choose to work with us, want a true relationship with somebody that knows who they are. But I think John, even these two things, I think if people have any questions, feel free to reach out, and you know you can always call us at 804-777-9999. You can also text that word. If you text the word tips, we'll know that you've listened to our show and we're happy to help you even before you walk in the door about learning more about our firm.

Isaac Wright: So I really specifically want this show here for the month of January, to give you the power and the control necessary to make some decisions to make certain that your retirement is in a progressive state, not necessarily not knowing where we're going.

John Stillman: Again, that number to call, 804-777-9999, if you'd like to get in touch with the team at Financial Dynamics. Isaac, you referenced our next checklist item in passing when you said, social security, starting that check may not be the first money that you should rely on in retirement and that's checklist item number three. Do I know the ideal time to take social security?

Isaac Wright: Yeah, it's not as simple as some people may or may not even think. I'll tell you actually, most people think it's more complicated than it needs to be, depending on your age when you retire, whether you're "full retirement age," which is the definition that social security uses to allow you to maybe accomplish a little bit more in the flexibility of how you collect your social security or how your spouse may collect his or her social security. That's a big income stream and it's an important income stream because at least as of today, it does have cost of living adjustments and I think these type of things do matter.

Isaac Wright: So without being long-winded on step three, part of the income and netting the most amount of income is, understanding the pros and cons and the break even points of when you would likely want to collect your social security and our office is literally right beside the social security office here in Chesterfield. So we have many people that run up and down here from having the convenience of having a financial planner, having a team and understanding a whole let's call it retirement forecast and then from there, being able to execute that. They can walk down the street here about 50 yards and go into the social security building. So nice to have that as close as it is, but just wanna be clear about social security making certain you know when to collect it.

John Stillman: And then item number four on our checklist, Isaac. Have I addressed longevity risk so that I don't outlive my money? Sure if you have that social security benefit coming in, that's going to last as long as you're alive. It won't necessarily keep up with inflation and if you get to the point in life where that's your only income stream, you're probably in trouble. So that's item number four. Do I know that the paychecks are going to come in as long as I'm around?

Isaac Wright: Well then you start considering all income sources. Again, whether or not you take social security, eventually you will. But you'll have other income streams hopefully, whether again if it's part-time income, if it's a pension. Most people have accumulated money in investments in retirement accounts and other vehicles. But you got to know when it comes down to it, all of that income, how are you gonna sustain your lifestyle and how much risk are you taking relative maybe to your investment portfolio generating enough income and also looking at what we kind of already covered here in the first steps, is that budget. And also if there's gonna be any potential changes to the income streams you are thinking about using and for example, if you do work part-time, you're not gonna work part-time 'til probably 100, I mean you won't be working your entire retirement most likely. I mean, that's just a small example.

Isaac Wright: But longevity risks, what we do at our firm, is we can take all those known and recommended income sources and create a probability analysis towards how long your money is likely to last and from there and I think this is the most important thing to say. That it's not, you do that once and you're done for 30 years. You better have somebody no less than on an annual basis, check in, do a financial physical. It's basically what we do here at our firm. It takes us less than an hour in most circumstances to get everything prepped, ready and kind of updated. So you can see that your track is either on track or if you're about to go into the ditch, that there's plenty of time because we've caught it early enough to make some changes. Maybe to make some amendments and some shifts.

Isaac Wright: Again I think people sometimes get so, I wouldn't say anxiety ridden, but I mean some people just bury their head into the sand saying, "It's a lot, don't need to do it, figure it out as it goes." What I'm trying to tell you is you can kinda have best of both worlds and have somebody that can do it alongside you and really take a lot of that stress off you, but that fourth point is an important one John.

John Stillman: All right, our last checklist item for this edition of the checklist series, which of course again, will be two parts. We'll have the next part coming out in a couple of weeks. But the last one for today Isaac is, am I prepared to handle market volatility? Now we could be talking about am I prepared from an actual investment standpoint, but also am I prepared emotionally to handle market volatility in retirement?

Isaac Wright: Yeah and you got both of 'em covered there really because market volatility depending on how much money you're trying to generate from the investments that you have. If you have a high degree of stable income from social security, pensions, again maybe some outside income, rental income, things that you may have in regards to what's been consistent or will likely be consistent through your retirement years. You may be able to take more risk with your investments. Maybe at the core of what you do and who you are. You may be at a point where income needs are being met. But you've made enough money that you don't want to worry about losing so much money and we have a lot of higher net worth families that are doing well, easily paying their monthly expenses and with that being said, they're like, well listen, if I've accomplished that, I've accomplished enough money in my retirement portfolio. If I can make enough money to keep up with costs of living adjustments, make a reasonable rate of return, why do I want to take a lot of risk?

Isaac Wright: And then some people are the opposite. Some people just truly enjoy gambling I guess, for a lack of better term. But you have high and low risk attitudes and sometimes that can be even within a husband and wife and it's good to have somebody outside of the family help moderate some of that. The market volatility question simply boils down to this. Before you get to the point of maybe feeling how much money you want to keep in the market, how much volatility you want to take with the type of investments that you own. You do need to go through the first four steps in my opinion. You have to have known income sources relatively in hand. You have to have expenses relatively in hand. You have to understand lifestyle needs and if you're gonna continue to generate additional income maybe from various things that you may not have for the rest of your life but again things like part-time income. Maybe you have some income coming from an inheritance or a trust. Those things sometimes don't last your entire life.

Isaac Wright: So we're here to help you create a complete plan that's gonna take you to and through your retirement years and give you the higher probability of success. And I want to end on this note. If there is an issue or if something is done right. If you have a true professional, they'll let you know where things are whether it's good or bad. It doesn't mean everything you're doing is wrong and I think, sometimes when you meet with a "financial advisor," they try to be able to put you under this guise of everything's off putting. Everything that you've done is wrong. I find that many people we work with, have done a lot of things right, and there's a just a few small hinges that swing larger doors and builds deeper relationships with people that actually care about who they are and their loved ones.

Isaac Wright: So John, I think it can't be anymore clearer about the things that we do day in and day out here at our office. But this checklist has been a good start.

John Stillman: Very good start and again, we'll have the second part coming up in a couple of weeks. If you'd like to reach out to the team at Financial Dynamics to have a conversation with Isaac or someone in the office, the number is 804-777-9999. We'll help however we can if that means coming in for a visit, you'll more than likely benefit quite a bit from coming in for that conversation. 804-777-9999. Thanks for tuning in. We'll talk with you again very soon right here on Wright Money Tips. Have a great day.

Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action. Investment advisory services offered through Global Financial Private Capital, LLC.

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