Power Up Wealth podcast – Guessing Your Way Through Retirement – Episode 58 transcript:
Sharla Jessop 0:00
Retirement is the goal we are all working towards. So why are so many of us guessing our way through retirement? I’m Sharla Jessop, President of Smedley Financial Services. And today my guest and colleague, Mikal Aune, will share some insights on where we might fall short.
Welcome to the SFS Power Up Wealth podcast, where we provide impactful insight and expert opinions on timeless financial principles and timely investment topics, preparing you to make smarter decisions with your money.
Mikal, thank you for joining me today.
Mikal Aune 0:51
Glad to be here, Sharla.
Sharla Jessop 0:52
Mikal is Vice President of Wealth Management team at Smedley Financial Services, and works directly with our clients helping them reach their financial goals. Mikal, when we think of retirement, we’re all excited about what it looks like, the days we’re going to have, the extra time, the things we’re going to do, the not clocking in 9to 5, 8 to 5, just living our life the way we want to.
Mikal Aune 1:11
Get up when you want, go to bed when you want, eat when you want. It doesn’t. Life isn’t prescripted anymore in retirement.
Sharla Jessop 1:18
Sounds like a good vacation.
Mikal Aune 1:19
Every day is a Saturday except for Sunday, maybe.
Sharla Jessop 1:22
What’s wrong with that plan?
Mikal Aune 1:24
It’s a great plan, you just need to make sure that you’re in a good position, and not one of the people that’s guessing.
Sharla Jessop 1:29
Are you talking about financial or time?
Mikal Aune 1:31
Both. So timewise there can be a big balance on time too, because I’ve had some people they’re like, you know what, I’m just gonna work until I’m 75 or 80. And then I’ll retire and I’ll have a decade. And guess what, they don’t make it there. And so sometimes it is retiring when you feel like you’re able, and when you have some time to do things. We talk all the time with our clients about the Go Go years, the Slow Go years, and the No Go years. And as a general rule, Go Go years are age 65 to 75, Slow Go was 75 to 85 and No Go is 85 plus. And so for a lot of people, we’re looking at retirement, like you have all these dreams and aspirations things that you want to enjoy and do. But they don’t feel like they have enough money that we want to save it all until they’re 85. And you’re like by 85, you’re not going to do all the things that you want to do. So there’s a balance between making sure that you have enough money and making sure that you have enough time.
Sharla Jessop 2:24
How do we reach that balance? How do you know? How does someone confidently know, okay, I have what I need to do the things financially, rather than just guessing. I think I’m going to spend this much money.
Mikal Aune 2:34
Well, I think that’s what prompted this is the I saw statistic that 43% of workers guess about retirement and just figure that either they have enough or they don’t have enough. And they they’re just like, oh yeah, I’m good. without really taking into consideration. There’s so many things that you have to really look at to say, do I have enough and one big one that people are finally understanding is inflation. For the last almost a decade, it hasn’t been much of an issue. Now inflation is a big issue. And people are like, oh gosh, yeah, if a cost of living goes up, and then what I spend goes up a lot, so. So one thing that people don’t pay attention to a lot that they need to is what is the impact of inflation on my expenses, over 20 or 30 years, right? In 20 years, you could expect them to double. So if you’re living on $5,000 a month, now, you’re going to need $10,000 a month in the future, just to maintain that same standard of living. So what happens if your pension doesn’t go up? And social security, it usually goes up, but it doesn’t fully go up with inflation. Like usually when we project Social Security, we’re like, it goes up about 80% of what true inflation is. So how do I make sure that I have enough assets for the future and not just guess?
Sharla Jessop 3:40
That makes sense? It seems like oftentimes, when we’re working with clients, and we’re trying to get them to peg down their finances, we’ll ask them how much they need to live on. And they’ll give us a number and then we’ll send them home to actually do the homework. You know, do the project, go through your budget, think of everything you’re spending. And probably 9 times out of 10, they find out they’re spending more than what they initially thought.
Mikal Aune 4:01
Yes, I’ve had that you’ve probably had that experience to where somebody’s like, yeah, I have my home and this and that and the other and so we’re probably spending like four, maybe $5,000 a month and they they come back and they’re like, oh, no, we’re spending like $8,000 a month. And they just had no idea of where all the expenses go. But life is expensive. It just adds up. So you have to plan for that and not just be like, oh yeah, we live on 5000, retire and then realize that you’re burning through your assets too quickly. There’s a number of reasons. I think what people are guessing some of it is just that the they probably fall into several different buckets and some of it is just hey, I think I’m going to be okay. And so I just am not a worrier. I don’t feel like I have to get the details down. Some people are just they don’t know where to start. Like how do I even know if I have enough? Some people probably worry about it too much. They don’t have all the tools and capabilities to really figure it out. And I think that’s one thing that makes us different is it like that’s what we do. That’s a lot of what we do is helping you figure out okay, how much do I have? How much money am I going to need to maintain my lifestyle? And what about if I want to take a trip or buy a car? What about if health care goes up in the future? How do I plan for all those what ifs in life to make sure that I don’t outlive my money?
Sharla Jessop 5:15
And what about long term event? There are so many things to consider?
Mikal Aune 5:19
Yeah.
Sharla Jessop 5:19
That you might not think of.
Mikal Aune 5:20
If I go into a long-term care facility, how do I pay for that? Like, how do I make sure that I am good for the future, no matter what comes? And I think that’s where a lot of our tools come in, that people just they may not have access to. You can find simple calculators on the internet that, you know, when you’re starting out and you start saying, Well, gosh, I’m, I’m at the beginning of my career, I’m putting money away,. am I saving enough for retirement? Okay, this gives me a projection say that I’m getting closer to on track. As you get to retirement, like it becomes more and more critical to nail it down and not just take a guesstimate. We see scary statistics all the time. The one is that the average retirement savings now this is across all workers, so young and old. But the average retirement savings is $95,000. That is not going to last very long in retirement.
Sharla Jessop 5:20
No. Especially when you add inflation.
Mikal Aune 6:12
Yeah, especially when you add inflation. So, you really need to make sure that you’re saving a lot for retirement. But come in and talk to a professional. I think that’s another hang up that people have where they’re like, well, professionals cost too much. And so I don’t want to spend 750 bucks for a plan or hire somebody to manage my money, because that’s going to cost 1%. You know, so people are worried about the cost. But if you go into retirement guessing, and just hoping that you have enough money to last for 20 or 30 years, how expensive can a mistake be?
Sharla Jessop 6:12
Much more than the cost of getting a plan. We talk about the expenses and the budgets and things like that. But there’s so much more that’s important in planning that people don’t even think about, like the impact of taxes.
Mikal Aune 6:54
Taxes, inflation, we’ve talked about this a little bit before, but taxes have a huge impact if you don’t plan for them correctly, right? There are ways that we can do it. And I have plenty of people that they’re paying no taxes at all. And so between social security and income from IRA, they’re okay. And I have others that are paying taxes through the nose.
Sharla Jessop 7:15
You know some of the younger listeners to our podcasts might be thinking, well, you know, I’m just trying to, I’m just trying to pay off my house and get my kids through college.
Mikal Aune 7:23
Yeah.
Sharla Jessop 7:24
When do when does it make sense to start talking about retirement planning?
Mikal Aune 7:28
When you are 20!
Sharla Jessop 7:31
At a very young age!
Mikal Aune 7:32
I used to train 401 k’s and for people that were coming in, they were like, 18, 19, 20, into a company. And I would try to teach them and be like, look, if you just started saving now, even if it’s just a little bit, it’ll put you so much further ahead just because time is on your side. If you wait, and you’re like, okay, I’m gonna pay off my house, and then I’m going to help my kids and then then I’ll start saving for retirement when I’m 50. And you’re like, your runway is short, like you really have to throw money in and putting $2,000 a year isn’t gonna cut it. But if you start putting in $2,000 a year or more when you’re 20, that adds up and the compound interest is huge. And a lot of people don’t understand compound interest in the impact over time. It’s the same conversation with inflation, and you don’t understand how much inflation impacts you over time. But if you can start saving and save as much as you can, when you’re young, you’ll be in a much better position. We worry about the young generation a lot. Because right now we have a lot of entitlement programs where the older generation, they’ve had a pension to go along with their savings and Social Security. Well, there’s a possibility in the future that Social Security benefits get cut. A lot of people don’t have pensions anymore. And so more and more of the onus is going to be on the individual to make sure that they have saved enough for retirement. So in the past, you know, we were telling people oh, save 10% for retirement, that should probably be enough. For the young generation. I’m like, no, you need to be saving the more like 15 or 20% towards retirement, just because things may not be as well funded in the future.
Sharla Jessop 9:03
You know, we talk about the retiring early, you know, it’s it’s nice to be able to retire when you have your health. And if you’ve planned well, and you’re in a good position, then you feel like you can do that. Too many clients we see that haven’t over many years didn’t start saving soon enough and continue to work because they feel like they have to, but they’re in jeopardy.
Mikal Aune 9:23
Yeah you can’t always keep working. I’ve talked to many people that you know, what’s your retirement plan, I’m just gonna work until I die, especially in construction in a physical jobs, and I’ve seen it and other jobs too, where people are like, I’m just going to work until I’m 70 or 80. And you know, then I’ll die and I won’t have to worry about it. And a lot of times you don’t have the choice. Your body tells you when you’re going to retire.
Sharla Jessop 9:45
I think a lot of people in their 50s think I could work forever and I could tell you that when you get past that to your 60s you don’t feel like that so much anymore.
Mikal Aune 9:53
Is it just 60s? I’ve seen a lot of the 50s. We’ve seen clients in their 70s, 80s, and 90s and it isn’t always pretty. So it’s like you have to take advantage of the time that’s on your hand, take advantage of the health. So again, this goes back to good balance to say, okay, when do I have enough? When do I have enough money so that I can do the things that I want to do? That I can live the life that I want to live, and not leave a lot of regrets. So there’s a good balance. And we need to take out the guesswork as much as possible. So that you know and feel confident that you have enough money so that you can do those things and live the life that you want. You know, we joke about lifestyle, we say, if you want a great lifestyle, just take the money that you have and move to Nepal. You can live like a king or a queen, you’d be fine. But that’s not the ideal lifestyle for most people. Right? You want to be able to maintain your lifestyle in retirement. You know, we had a client that came in one time, and she’s like, you know what I visited with somebody a couple of years ago and they just said, I had to work for a long time. And I just need to know, can I even retire. She had a good pension, she had Social Security, she had decent 401k savings. And we’re like, you can retire tomorrow, and still make it on your retirement income and what you need to live on. And she was ecstatic. Like she just, you know, is the drudgery of the every day and then realizing, hey, I have my hopes and dreams that are ahead of me. Like I can live the retirement that I want to live like that’s really powerful. And it’s fun from my standpoint to see and help people realize their dreams.
Sharla Jessop 11:25
It’s nice to work with somebody and say that they can they can continue to work if they want to.
Mikal Aune 11:30
Yes.
Sharla Jessop 11:30
It’s optional.
Mikal Aune 11:31
Yes, it’s so much nicer to have the option than to be required.
Sharla Jessop 11:35
I agree. Mikal, what would you tell someone who has been procrastinating putting together retirement plans?
Mikal Aune 11:41
Don’t procrastinate. Go out and talk to somebody, even if it’s, you know, starting some of the calculators online and just saying, okay, am I at least in the right ballpark to where I need to be for retirement? The closer and closer you get to retirement? Don’t wait. If you’re waiting until you’re 55. That’s too long. You know, a lot of times it’s like by age 50. 50 is when people really start feeling the push and be like, okay, retirement is 10-15 years away, I really need to do something. So it’s 50 kind of at the late point. If you can look at it when you’re 40 better, and when you’re younger, still pay attention to it and make sure that you’re saving enough.
Sharla Jessop 12:19
Good advice. Mikal thank you so much for this important information.
Mikal Aune 12:22
Thanks, Sharla.
Shane Thomas 12:23
Thank you for joining the Power Up Wealth podcast. Smedley Financial is located at 102 S 200 E Ste 100 in Salt Lake City, UT 84111. Call us today at 800-748-4788. You can also find us on the web at Smedleyfinancial.com, Facebook, Instagram, Twitter, and LinkedIn. The views expressed are Smedley Financials and should not be construed directly or indirectly as an offer to buy or sell any securities or services mentioned herein. Investing is subject to risks, including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should only be relied upon when coordinated with individual professional advice. Securities offered through Securities America. Inc., Member FlNRA/SIPC. Roger M. Smedley, Sharla J. Jessop, James R. Derrick, Shane P. Thomas, Mikal B. Aune, Jordan R. Hadfield, Registered Representatives. Investment Advisor Representatives of Smedley Financial Services, Inc.®. Advisory services offered through Smedley Financial Services, Inc.® Smedley Financial Services, Inc.®, and Securities America, Inc. are separate entities.
