Power Up Wealth podcast – Stepping Off the Edge Into Retirement – Episode 59 transcript:
James Derrick 0:00
Stepping off the edge into retirement feels like a lifetime of work is culminating with a single trigger. Hello, I’m James Derrick, Chief Investment Strategist of Smedley Financial Services. And today, my guest and colleague will be Sharla Jessop, and we will discuss how you know when you are ready to take that step into retirement.
Sharla Jessop 0:30
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.
James Derrick 0:53
Sharla, thank you for joining me.
Sharla Jessop 0:55
Thanks for having me, James.
James Derrick 0:56
Sharla is the President of Smedley Financial Services. She has a CFP, CERTIFIED FINANCIAL PLANNING, designation. And we’re just grateful to have her here. She recently wrote an article called “Stepping off the edge into retirement.” And Sharla you in it, you discuss a lot of fascinating things. One of these is different segments of retirement. And, you know, I typically just think of retirement as one time period. And but you’ve subdivided it, would you explain the the Go Go Years and the other categories you have?
Sharla Jessop 1:32
Sure. You know a lot of our retirement is the reason it’s good to put it in stages, because our energy and our health, and so many things change throughout retirement, you know, it’s going to be over a period of time, it’s not just one thing, like when you’re a child, you don’t just start in first grade, and you’re there for the rest of your life, you know, things are gonna change. Same with retirement. So we look at it in stages, such as the Go Go years. That’s when you first retire, and you probably have more energy, you know, you’re excited, worked hard, and you saved money and have big plans, you’re gonna do all these things that you didn’t have an opportunity to do because you were busy working. That’s how people typically view retirement in the beginning. And so their spending is a little bit higher, because they’re doing more things.
James Derrick 1:32
Do you find people have different interests in the Go Go years? I mean, the stereotype might be like a lot of doing a lot of travel, finally, but what other things do people love to do in the Go Go years?
Sharla Jessop 2:29
Well, a lot of them will start classes. A lot of people take up new hobbies, things that they’ve wanted to do, but didn’t have the time to do before. A lot of people are taking classes, I’m always impressed with so many people who are taking courses from the University on different things. They’re traveling. Sharing time. A lot of them spend time with children and grandchildren that they couldn’t do while they were working. So there’s just many things all involve a lot of activity, you know, a lot of doing a lot of going not a lot of sitting around.
James Derrick 2:56
In the past. I know you’ve talked about an encore career. Could you just briefly I know this goes outside the scope of your article, but could you briefly explain what an encore career is?
Sharla Jessop 3:04
Sure. Many people are ready, maybe not ready to retire, retire, you know, they have a lot of a lot of information, knowledge and experience that they want to contribute. Still, some people will continue working, but at a reduced number of hours, maybe on a consulting level, some people will do things that they have never done before that they’ve really enjoyed doing. For instance, maybe teaching kids how to fish or something that someone is passionate about. And they’re gonna turn that passion into doing something, not necessarily for an income, but because they enjoy it, and then they want to do it.
James Derrick 3:39
Now that actually sounds like a lot of fun. And so I see that you want to figure those things out ahead of time, so that you’re retiring to something not just away from something what follows the Go Go years?
Sharla Jessop 3:52
After the Go Go years, then we come to the Slow Go years. And the Slow Go years, you know, immediately when you retire, you have a lot of energy, you do a lot of things, you’re traveling a lot. And just as is normal, our energy level switches, maybe we don’t need we maybe we’ve seen all the things we wanted to see when we travel, maybe we’re not really interested in learning a new hobby or picking up a new class. And so we start to reduce the things that we do, we’re not going out as much and traveling or spending more time at home. We call those the Slow Go years. You’re still able to if you have good health, you’re still able to do things but you’ve just the desire changes.
James Derrick 4:27
Yeah, well, I like how you call that you know, desire changing. And then what comes after that?
Sharla Jessop 4:32
Then we unfortunately call the last segment the No Go years. The No Go years are at the end of your retirement and oftentimes because of health issues, or mobility and age, you know, you just don’t really want to get out and do as much. You might still have the same expenses because all those things you were doing when you were living in your same home and still taking care of your home, mowing the lawn you know doing the cleaning, the dishes, the shopping, all of that. Maybe you don’t have the energy or the ability to even do those things. And now you have to have someone come into your home and help out maybe with the cleaning, maybe you have somebody does your grocery shopping, and maybe you don’t really mow the lawn anymore. Maybe you’ve even moved to a place where you don’t have to worry about yard care. That’s how we describe the No Go years.
James Derrick 4:35
As you were describing the Go Go years, I was thinking this sounds expensive, right? But then when you got into the No Go years, you also talked about a lot of expenses that didn’t exist before. How do you plan for retirement, when the spending can be heavy at the beginning, and at the end? It can really change a lot.
Sharla Jessop 5:42
You have to plan for that. You have to understand what your expenses are going to be throughout your life. You have to understand that and plan for I want to do more things. This is the when I first retire, I want to spend this much money doing these things, then you have to build that into your plan. And the same with the Slow Go years and the No Go years. The No Go years, you’re going to have to plan, you know, do I am I going to need to have long term care at some point in time do I need to have a plan or a policy that’s going to help compensate for those increased medical and health expenses that I might have? Or having someone come in and help me with things I can’t do daily.
James Derrick 6:20
I can see how the expenses would fluctuate a great deal. And do you find that they stay pretty constant? Or does it? Is it different for everyone?
Sharla Jessop 6:30
It’s different for everyone, you know, everyone has a different ideal of retirement, and what they want to do. Some people in their Go Go years, they still are, you know, stay at home quite a bit. That’s what they enjoy. They are more at home spending time with family doing things like that, not traveling as much their spending might be more consistent throughout their retirement years, but for most we see that they spend more in the beginning years of retirement, and then it levels off.
James Derrick 6:59
Okay, that’s fascinating. Let’s talk about healthcare, because, as you mentioned, it is a major expense. You’re no longer getting it through an employer. And so what are your options? And when do you start planning for healthcare changes?
Sharla Jessop 7:16
Well, you should start planning for healthcare changes when you’re young if you have a health savings account that you can contribute to that doesn’t require that you use it every year. That’s something you can use in the future to help offset some of the costs and expenses with healthcare and you know when you retire. But for most people, when they’re getting ready to retire, they’re looking at, I’m going to retire at 65, I’m going to be able to go on to Medicare, and I can get a Medicare supplement, or I can go with an advantage plan which capsulates all of the Medicare together, then we’re having to make those types of decisions Part Part D prescription drugs. But if you are retiring early, which is often the case, when you look at a couple, it’s not uncommon to have a younger spouse and an older spouse. And so if someone’s retiring at 65, then the other person is going to continue to work or if they retire, they’re going to be without insurance completely. So then they have to look at either continuing insurance through an employer plan through COBRA, if it’s available. They are on the company plan, but they pay all the premium themselves. You have to budget for that. Or you have to get insurance on the open market, you have to think about that and plan for that because it can be a huge expense.
James Derrick 8:30
So the one spouse will be on Medicare, because they are of age, and the younger spouse might not be.
Sharla Jessop 8:39
Right.
James Derrick 8:39
And they won’t have that option until they turn 65.
Sharla Jessop 8:42
That’s correct. So they’re in that window of time when they have to have insurance separate from generally any employers.
James Derrick 8:48
Do you have a rule of thumb of how much money people need to retire? How much they need for health care?
Sharla Jessop 8:57
There was a recent study by Fidelity and they determined that at age 65, someone a single person retiring would need $157,500 to cover health care expenses throughout retirement. Now that’s going to change based on your individual health, a married couple would probably need about $315,000. That’s money that’s completely separate from your living expenses, the ongoing living expenses. So that’s something to think about that you need to plan for.
James Derrick 9:25
So that’s going to be a big part of your nest egg that you’ve saved up over time.
Sharla Jessop 9:31
Right.
James Derrick 9:31
Anything else you want to touch on Sharla about preparing for retirement and taking that step?
Sharla Jessop 9:38
We didn’t really talk about the emotional side of retirement. You know, I recently heard a woman speak who had built a business over many years, and done all of the number crunching. Did everything financially right to retire and did that and then went into a deep funk because of that. Because she was not emotionally prepared for those changes, and what it would mean to her how much she was tied up and invested emotionally in her business. The same can be said of a career, you know, we spent many years working in a career and that becomes a part of our daily life, you know, we have a social environment around that we relate to on a day to day basis when we’re working. And when we don’t have that, you know, we might feel a void. So we have to plan to retire to something. You have to have an idea of what your retirement looks like, what it’s going to do, how are you going to spend your day, you know, it’s easy when you’re working, you know what you’re going to spend your day doing, you’re gonna get up at six o’clock, you’re gonna have breakfast. I mean, it’s very, very specific. But in retirement, you don’t have those bands anymore. So you have to think through emotionally what you’re going to do and what retirement is going to look like to you. And I think that people that we know who retire, who have thought that through and are prepared, are much more successful financially and emotionally when it comes to retiring.
James Derrick 11:00
It seems like that is an essential part of the planning and one that is not typically mentioned.
Sharla Jessop 11:07
Right.
James Derrick 11:07
So thank you for joining me today, Sharla.
Sharla Jessop 11:09
Thanks, James.
Shane Thomas 11:16
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.
