EP02 - WealthSmarts - The Retirement Conundrum | WealthSmart

EP02 – WealthSmarts – The Retirement Conundrum

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Too many people are running out of money in retirement and needing to compromise their lifestyle. No one envisions this. In this episode, Matt and Richard dive deep into the problem and suggest strategies to solve it.

Transcript:
You know, a lot of people say, Well, I don't like to be restricted by a plan, but you actually don't have the freedom to do the things you want when you think you have the freedom. This is, well, smart, where you will gain the financial capabilities and confidence to achieve the goals that matter to you. Now, here are your host, Richard and Matt. So there's one big problem out there. People are running out of money in their retirement. Ouch. It's either they're running out of money where they can't live the retirement that they envisioned.

So there's, like, more life left at the end of their money. Yeah, Essentially. Who? That's scary. Yeah. So they're forced to compromise their lifestyle. What does that look like? Well, in many cases, they're asking these questions. Will I have enough money? How long will my money last? How much can I spend to not go broke? And is it too late for me to get started? Whoa. You know, we did that seminar, um, in the late nineties, and, um, the questions haven't changed, You know, people would, and we did it.

The seminar again in the late two thousands, and the questions didn't change. You know, throughout this, and not just through the seminar, but in planning meetings, the questions are the same. How do you think these questions make people feel? Well, they're coming to us because they're feeling uncomfortable with some of the answers that they might have. There might be questions about the answers, so they're asking the questions, will have enough money along with my money last. How much can I spend to not go broke? And is it too late for me to get started there asking those questions because they want answers and it's always been that way, right?

So would you say that they're They're they're worried about their their future security, they are. The lack of the confidence level is low sometimes, right? And the thing about confidence is you don't get that right away like we're not born into this world with confidence. There's a cycle that we have to go through in life that gets us to confidence is number one. We have to make a commitment to do something, and after that we have to have some courage because it requires some work and we've got to do some things we might be uncomfortable with, and everybody likes seeing that and other people like they like seeing other people make commitments and have courage and have courage.

But when it comes to us like we don't want that for us because that stuff sometimes it's scary. We just don't want to do that. We want confidence first. But the thing about making the commitment and then taking on some courage is that when we go through that cycle, that's where the learning lies. So we establish some capabilities, and as we establish those capabilities, we build up a whole quiver full of capabilities, lo and behold, when we're feeling confident, like we're good going forward. So what would you say people need to do in order to feel confident in their retirement?

The first thing that they have to do They have to make a commitment to ask the questions and to begin pursuing a plan. But the plan does not happen without the questions. People can't come to us or anybody else for that matter and say, Give me a one of those financial plans you got on your shelf there, like I'll take that financial plan there. How much you want to charge? It's no, no, there is a template, sir. So they have to ask the right questions. I guess we'll get into a few of these questions because maybe these questions can help guide people's conversations towards, um, clarity and confidence.

Yeah, so one question. Will you have enough money to do what? Well, that's a good question. Because, you know, people often put a dollar tag on that. Or they might say, um hey, like, how much money do I need? And they focus on that lump sum like, Do I need a million dollars doing a $2 million? Like what? No, no, no, no, no. We got to focus on what we want to achieve first, right? And I think this comes down to life style, right? Yeah. It's like, what type of lifestyle do you want to live in the future?

Because we see a vast range of lifestyles. We see people who are very good with their money and people who aren't right, like people who live very simply, and people who live very extravagant, right? Yeah. You know, um, insurance companies have kind of nailed that whole situation quite well when they build. These group are as P plans these group of pension plans that they bring to employers. And, um, when they're dealing with hundreds or thousands of people in a company, they have to roll out a group of pension plan.

And employees have to make a decision on how much they're going to contribute, how much the company co contributes etcetera. But the employees are actually required to provide a base level of financial advice. So they actually ask people, Where do you see yourself? Um, you know, family number one, which is, Well, we like taking walks along the beach in the forest and, you know, we like enjoying each other's company and having picnics and and playing sports. And, you know, these are all kind of low cost activities that we can almost do for free.

And the template then says, Well, you know, you probably need 2500 to 3000 spendable cash coming in every month and then versus family number B, which might be well, we like doing those things, but we also like going out for dinner once a week. We like taking an annual vacation to someplace warm We like, you know, having a new car every, uh, four or five years and then family be which might be well, we like to spend, like, half the year something else Family, family, family, family, losing track.

Their families say it might be We like spending like, 33 to 6 months, a year, someplace warm in a vacation place that we've got down there and then when we're in town, Well, we like to go out for dinner really quite frequently. And we actually like really expensive imports. Every car, every well, you know, you're going to need this package here that's going to give you, like, 8 to 10,000 per month. But it can't be that canned. It has to be customized to exactly what do you want to achieve? And then we have to work it backwards and determine what's going to be the price tag behind that, right?

And then once we know that that amount of cash, spendable cash that we need, then we just work it backwards. So I think this goes into the next question which people need to consider is, um what sources of income and cash flow will you have? Because this really determines what people can do with their lives, right? Like with their lifestyle? Yeah. Taking an inventory and clearly understanding it. Um, you know, fortunately, a lot of people have company pension plans, but unfortunately, they don't quite know what they look like.

So, um, it involves getting familiar with that pension plan. Um, having frequent updates from the pension department and factoring that in it involves, you know, signing up with Canada pension plan with H R. D. C. Human Resources development Canada, and getting a projection of what your Canada pension plan income is going to look like. It involves deciding. Do I take it early at 60 or do I defer it until later on? It involves understanding. Okay, if you've been in this country for at least 40 years the level of old age security income that you have it.

So when you take a look at all of those income sources that are a given, um, you might come up to the conclusion that well, I actually have a lot already. And so that picture that people are painting for us, saying you need a million dollars, you need $2 million. You know, for a successful retirement, it might not be entirely act for what, exactly? Yeah, so it's like, Let's take stock of what we have already what income sources. And then how can we convert the other wealth into income sources?

And this goes into the next thing we need to consider, which is life expectancy, right? And the different stages. So in one of our planning Softwares, they make a distinction. It's active retirement and passive retirement, right? I got some issues with that. Go for it, right? What does passive mean? I don't know. When they say that, I'm like, you know, I think at any given time we're being as active as we can exactly. And even if we're in a state where we might be incapacitated physically or mentally as we're doing the best we can, Yeah, we're doing the best we can.

And we're being as active as we can. So so passive or active retirement. I don't quite buy into that, but I'd rather take a look at what is going on in our lives. And so when when we say okay, active retirement might be, let's say, between 60 and 75. Well, maybe, you know, let me ask you this realistically, how long do you expect to live to what age? Probably 1 25. You're an optimist, man. Okay, you know, But let's think about that. Because the fastest growing age cohort is actually Centenary A. This is true people that are turning age.

100 or more is the fastest. And the reason that's happening is because medical advances. I was listening in on a talk with Peter Diamandis of Abundance University, and he has this conference once a year, where they have a bunch of speakers that are talking about future things, things of the future. And many of them are speaking about medical breakthroughs. The medical breakthroughs that are happening right now are happening at an exponential pace to such a degree that they will, in very good likelihood, be extending people's lives in the future by helping the body regenerate more effectively, whereby in the past the body has really continued to atrophy past a certain age.

So it's not beyond the realm of possibility that people can be living to age 125 or more. So you're you're 100 25 years old. And when you're 100 25 years old, how would you like to be feeling at that time? I know exactly where you're going with this, but hopefully sharp, strong, agile. Alright, alright, so I'll let you move on to your next point. Well, if you're feeling that good at age 125 why not continue on for a few more years? Okay, I think that's a long time, you know, in today's time framework, we might We might be stretching the truth in today's time frame, but especially in your generation, the younger generations, those are distinct possibilities that are going to happen.

But let's think about it in today's time frame, in the ways that people are thinking. You know, if if you're thinking that your life expectancy is going to be, you know, maybe 85 to 90 and we have to ask that question, how do you want to be feeling? Well, I want to be feeling sharp and alert and relatively healthy. Well, then you shouldn't be dying at 85 or 90. Why not extend that outwards? So we like to think in long time frames and make an assumption that people are going to be living long ages if they live their retirements, as we call them, if they live their financial freedom phase in a healthy in vibrant way, so as to help extend their life.

So I get the big thing that factors in with this in life expectancy is while you're going to need more money to support you for longer. Yeah, essentially, yeah. So another factor that we need to consider is How much longer do you have to save until, for example, you retire right? Because that factor influences how much your money can grow. How much more you could save, right? Absolutely, absolutely. Warren Buffett, in a conversation recently, was talking to, I guess, a group of university students, and he was basically relating that the biggest advantage that he's had in his success as an investor is time like he actually started when he had his first paper wrote.

He started investing at that time, and so he's totally had time on his side and he hasn't stopped. So whereas a lot of people stop the investing process when they retire, Warren Buffett hasn't retired, so he's continuing to, Of course, he's going to build a lot of wealth. So it's It's completely a function of time. Absolutely so I guess the big question now is what can I do? If I find that I'm short money, what can I do? If I find that I'm not securing my financial future, what can I do if these questions are bothering me?

Well, we often begin with lofty goals, and then, like Mike Tyson said, and then somebody punches in the face, right or something happens that takes us off those goals like everybody's got a plan until they get punched in the face. Right, Um, but if we're in a situation where we've delayed a little bit too long or a life circumstance happens, that takes some savings out of our nest egg and sets us back, we still have options, right? We often begin with the lofty goals that I want to retire at 55.

Well, you know what? That might not be possible. Maybe it's delaying that retirement age or saying Okay, I'm going to retire at that age, but I need to continue having part time work, so I'm not dipping into my savings quite yet. Okay, so it's delaying longer. It's working during absolutely, absolutely if you're able to Yeah, um, saving more money. Yeah, it's entirely possible to squeeze more capacity to save in most every circumstance. Like when we do a deep dive and do radical surgery on a person's cash flow.

You know, it's really uncomfortable, but there's a number of different things that we can do, and the list is endless. Even when we do examine our own personal cash flow like poof, well, you know, when you guys were young, like things where things were kind of tough, like we had some rough spot and, um, you know, we we really dug deep. We said, You know what? We're not eating out, not even McDonald's or anything. We economize on everything. Costco's our favorite place for clothes shopping, right? We just made the clothes last as long as possible and even down to baking our own bread.

And it got to a point where actually love bacon bread, right? You had quite a kick on that for a while, and that was absolutely, absolutely so I think what you're saying comes back to our final point of what people can do is while they can spend less. Absolutely. Yeah, yeah. There's tons of ways to economize. Yeah, a lot of the conversations we have with clients revolve around Well, you know, have you ever thought about this? I never thought about that. Like what you're currently spending on this year.

What would happen if you renegotiated your cell phone contract? Like Are you really needed all the bells and whistles and I'll give you an example. A couple of years ago, we took a look at our whole cable TV package, which was cable TV and phone and Internet, all packaged together with the same provider. You guys actually put us onto it. Do we actually even, like, Why do you watch TV and you can actually watch TV? You know, it's like every 10 minutes there's a commercial and it completely interrupts the flow.

Why don't you just get like Netflix and and just have an Internet? So we got rid of TV. We renegotiated our phone contracts and everything like that to work well, there's always a way to save money, right? So hopefully we've provided some clarity around the questions of Will I have enough money. How long will my money last? How much can I spend to not go broke? And is it too late for me to get started? We have to understand, with our psychology, our default with our spending, if we have no guidelines, is to spend everything we have.

Let's be honest about that. It's very difficult to be financially, uh, to be financially disciplined. But these guidelines are very important because they act like lane markers on the street. Like, can you imagine if there were no lines on a busy road? You know, it's really interesting. I got a really a story. I've got a good friend of mine that actually came from Syria, and I was asking him once because I wasn't quite sure what the deal is in Syria. Like like where do people drive like on the left side of the right side?

I said so in Syria, like, where do you drive left or on the right? And he says, Yes, right, because there's no lane markers. It's like you're going to drive wherever you want on that road. So that's an example in his particular town of where there wasn't enough guidelines on what to do, right? So I guess not knowing the question or not knowing the answers to these questions is very stressful. Absolutely. And being worried about your financial futures is very stressful, very stressful. And the greatest freedom that we can have is to pursue and achieve the goals that matter.

That's freeing when you've got a plan and you know it's directed towards things that really matter in your life, and you're able to cut out the noise. That's that's freeing. You know, a lot of people say I don't like to be restricted by a plan, but you actually don't have the freedom to do the things you want. When you think you have the freedom, you need that plan, discipline and direction to take you where you want to go, and that will provide immense freedom to actually focus on the stuff that matters.

I love talking about this because the ultimate thing that it does is it takes us back to the reality that we need a proper plan that's going to take us to where we need to go. Thanks for listening to today's episode of well, smarts. Be sure to check with the show notes on our website for more information. If you're not already subscribed, please subscribe or wherever you get your podcasts.