8 Tips to Retire Successfully
Lee Micheal Murphy:
So going back into our 8 tips. For those that enter retirement, if they don’t have the right habits and do the right things, they can quickly end up getting out of retirement. We’ve all seen people that are the greeters at Wal-Mart, no disrespect to those people, but I guarantee you, a majority of those folks did not want to go back and be working at Walmart in their 70’s and 80’s. Right. Maybe some of them do it for the joy, but that’s a very common thing is people don’t handle their retirement properly and then they have to go back to work. So, these 8 tips, they are gonna help you stay retired.
Lee Micheal Murphy:
So Tip no. 1: Create financial goals that are written down. People always have thoughts of what they wanna do financially, things that they wanna accomplish, but are they written down on paper? So when you are entering retirement, you need to revisit your financial goals and write them down. Have a written financial plan with goals of when they are gonna be accomplished and how you are gonna accomplish them. Right? So you gotta have your short term goals. Those are everything under 12 months. You have your mid-term goals for retirement. They’ll go about 1-3 years and then your long term would be 3 years out. And these are all gonna be things about, maybe they can be personal about the things that you wanna do but they also should be around, like you know, budgeting goals and you know, still being in the mode of trying to accumulate some wealth, save some amount and you need to have these written out.
Sergio Patterson:
Yeah. When I think of retirement, it’s like: Things stop. But what I am hearing from you, this is like: No, things aren’t stopping. You need to continue, keep the habits that have gotten you to retirement so that you can stay retired.
Lee Micheal Murphy:
Yes. In a lot of ways, you need to have more discipline, right. Because if you are retired, you are not bringing in a regular paycheck. If you plan right, you are relying on your investments, maybe some Social Security, but it’s a different ballgame. So you need to have a different level of discipline. You need to have goals in terms of what you are spending is gonna be like and you know, also you have to have goals about what you wanna do in retirement because it’s important to find things that you enjoy. Create goals, right? That’s tip no.1.
Lee Micheal Murphy:
Tip no.2: Budgeting. Budgeting is always important but is extremely important in retirement because of the reasons that we mentioned. You don’t have income from an employer. Your income is coming from Social Security, is coming from your investments. So you need to be extremely disciplined with your budgeting. Make sure you are on the same page if you retired. Make sure you are on the same page with them as extremely important. Make sure you are budgeting together, have an emergency fund. We also talked about that, three to six months. Make sure you are following into the, you know 50’s, 30, 20 rule but on retirement, you can take your foot off the gas a little bit and you could, you know, turn into a 50, 40, 10 rule. So 50% essential, 40% may be discretionary, 10% you still should have some sort of saving there. Budgeting is gonna be key. You wanna have a good budget, be very disciplined to it.
Sergio Patterson:
You mean budgeting doesn’t go away once we retire?
Lee Micheal Murphy:
No. It becomes even more important, right? And that’s the reason why retirements fail. Maybe depending on the people, as you retire, you have less to do. People tend to say that what can I do to pass the time. What can I do that’s fun? So that generally involves a lot of people saying, look, let’s plan a bunch of trips, right? Let’s do this. Let’s do that. Because they have all this extra time. So it’s very important that you have a budget, can understand what those numbers are. So you don’t fall into that trap. Because if you do, you could drain your bank account from all the extra time and extracurricular activities that you now have retirement.
Lee Micheal Murphy:
Tip no.3: Income planning. Make sure you calculate what the income is gonna be coming in and you have to look at things like inflation. We’ve talked about this before in the show. One of the most dangerous things to your finances is inflation, right? I am not concerned or worried about, you know if you have a good portfolio, it’s designed the right way, volatility doesn’t really concern me that much. But inflation is something that’s very scary. Right. Especially now you think about how much money that we’re printing due to COVID-19, there’s always been a fear that our future would involve higher amounts of inflation. Right now, inflation is reasonably low, but a lot of economists believe that in the future, inflation will be even more of a problem. And that just erodes the overall money that you have. Figure out your essential expenses in retirement and determine how you’re going to pay for them.
Sergio Patterson:
I like that.
Lee Micheal Murphy:
Tip no.4: Having the right risk tolerance. So there are two parts to this. There’s been too risky, which we all talked about, you know, having too much money in stocks, not enough money in bonds, that is a real concern. Too much in stocks and they don’t have the financial position to tolerate that sort of portfolio. But there’s also another story- being too conservative, and I would say that this is the one that I see more often. Couples that say, you know, we’re retired, we don’t want to take on too much risk, so let’s keep a lot of money in cash. Right. But the thing is if you’re keeping all that money in cash, how are you making your money work for you? You have to have a ton of cash if you’re going to live out 30 years in your retirement. That’s why it’s almost essential for most folks to be investors, have some sort of investment income, whether it’s real estate, whether it’s stock. But having too much money in cash is a very dangerous thing.
Sergio Patterson:
Yeah, I love that. And I think it’s like if I ever get to the point of retirement, it’s not just about my income or Kimberly’s, it’s about what money are we leaving also for our kids and their kids. Right. So it’s like keeping that money working for you is important because you can spend and go on trips you want. What if all your money runs out like you’re going to leave other people with nothing.
Lee Micheal Murphy:
Yeah, so make sure you have that right risk tolerance, don’t be too risky. Don’t be too conservative. Find that sweet spot.
Lee Micheal Murphy:
Tip no.5: Don’t underestimate what you’ll need in retirement. So, Sir! What do you think the biggest hidden cost is in retirement for the average couple?
Sergio Patterson:
So I’m seeing it. Well, here’s a guess, I think it’s a miracle.
Lee Micheal Murphy:
Oh, you are a very smart man, Sergio Patterson. That’s exactly right.
Sergio Patterson:
I only say that because my parents are dealing with this right now. My dad is dealing with it. And I had a conversation with how expensive medical expenses are. As you get older, you’re at the doctor more.
Lee Micheal Murphy:
Exactly. Exactly.
Sergio Patterson:
Yeah, go ahead.
Lee Micheal Murphy:
The average couple spends about two hundred and eighty thousand on medical costs in their retirement. So you have to think about that, right? You also have to think about other things like house upkeep, you know, redoing the roof, all the regular maintenance that comes with having a house. So really analyze all the things that you really need moving forward. Extra cars here and there. You know, every 10 years you buy a new car. So really take a look into those things and see what hidden expenses there are that you might have not thought about.
Lee Micheal Murphy:
Tip no.6: You have to have a plan to manage your taxes in retirement. Right. So for a lot of folks that have money in 401(k) or their IRA, you know, all that money can be taxed at ordinary income. Right. What strategies do you have in place to reduce your future taxes, right? So make sure you talk to a good financial planner, they can help you put out to build a plan that helps you manage your tax situation.
Lee Micheal Murphy:
Tip no.7: Make sure you have different buckets in retirement, right? A lot of people have all their money, maybe in their portfolio, maybe all their money in a real estate investment. Make sure you diversify it out. And make sure you have different positions in terms of time. Have the money that’s maybe in an emergency fund, right? We also talked about that, that’s important. But then maybe have money for three to five years, then you have a medium-term, which is five to eight, and then there’s long term money that’s eight-plus. And the longer the time goes out, the more risk you can take on. More stocks, more investments, that will generally probably give you a better return. But you’re going to take on more volatility, right? So make sure you layout your investments. Too many families, too many couples, they have portfolios. It’s all grouped in there. And, you know, when the market takes a big hit, like, you know what we saw COVID did you had all your money in that one bucket. You had to take money out, you would take a beating on it. If you had some money that was more conservatively invested that didn’t make a big hit, you’d be in a better situation. So tip number seven is, have different buckets. It gives you better options.
Sergio Patterson:
Yeah, this one’s in short order up to a man. This is kind of crazy for me because I’m thinking you can’t just retire and almost do all these, I feel like you need to leading up to your retirement. You need to have kind of these seven, eight tips ready to go in this plan because I think it’d be kind of hard. I’m not saying you can’t do it, but I’m thinking now, when I’m getting older, like, I want to make sure I have this plan in place. 100 percent that I can execute once I’m retired.
Lee Micheal Murphy:
Yeah. And it’s going to make people’s retirement so much less stressful. Right. You have these sort of things set up, you’re going to have a much smoother retirement.
Lee Micheal Murphy:
And then our last one is Tipno.8: Protect your retirement. So too many of us are focused on what can we cumulate, what money can we get? Have we protected ourselves from disasters? Make sure you have good property-casualty insurance that protects your assets, your home, your belongings. Make sure you have an umbrella policy. For all of you that are out there, if you don’t have an umbrella policy, talk to your insurance provider and get it, because that’s insurance that can really come in handy no matter what point you are. Either you’re in the early part of your career, the middle part of your career, or you’re in retirement. I think that’s something that you need to have. It’s very affordable insurance and it provides a lot of protection. For myself, I have two million of umbrella for my own protection, my assets. So make sure you talk to an insurance professional on that and gauge your situation. And then lastly, long term care, right? Long term care insurance is something that everyone should talk about. It’s expensive insurance, but the thing is, 69 percent of people over the age of 65 will need long term care. Right.
Sergio Patterson:
So pretty much 70 percent?
Lee Micheal Murphy:
Yes, pretty much 70 percent. You have to have a plan, right? Long term care, you know, if you’re going to pay for it, you might not end up using it and then that’s a lot of money that you throw away. All right. So I just want people to understand that, yes, it’s something that you need to at least have a conversation on. Maybe you have family that’s going to take care of you and you’re in a privileged position where you have that support. But maybe you don’t. Maybe you don’t have family or loved ones who can take care of you really probably should consider looking at what long term care could do for you. So those are our eight tips if you want to not end up working at Wal-Mart.
Sergio Patterson:
Nothing wrong, though.
Lee Micheal Murphy:
As we said, nothing wrong with Wal-Mart.
Sergio Patterson:
We don’t want to work at Wal-Mart. Let’s be real.
Lee Micheal Murphy:
If you don’t have to, if you want to make sure it’s your choice, right, make sure it’s your choice and that you don’t have to because you have financial constraints or financial hardship over your head.
Sergio Patterson:
Yeah, for sure. What’s stood out to me man, is we talked about my mom earlier and she’s actually taking care. So my mom’s dad has dementia and he’s in a nursing home. He could have used these tips. I want to be real. Like my grandparents could have long term care thing. My mom luckily was in a privileged position to where my mom has been able to, kind of, cover this for them. But that’s crazy expensive- providing a service for somebody who has dementia.
Lee Micheal Murphy:
You know, in that number I gave, it can be much higher than that in California and maybe New York. But like our friend, you know, shout out to Eddie, you know, great guy, his father, you know, how to utilize long term care and he was telling me, like, it was just astronomically expensive. So in it, you know, if you also are someone that, you know, says, OK, I don’t want to have my family, I don’t want to be a burden for my family. There’s a lot of people that say I don’t want to be a burden to my family. That’s what’s important to me. Then that’s something where you need to say, hey, I need to have a plan in place to handle growing old gracefully.
Sergio Patterson:
Yeah, I started to laugh because my dad always jokes. He’s serious. He’s like, I don’t ever want you guys to have to take care of me. Just throw me in a nursing home or give me a good nurse here at home or whatever. As you said, he doesn’t want to be a burden. And I’m like ninety-nine percent sure that they’ve put plans in place so that they’re not burdens on us as they get older.
Lee Micheal Murphy:
Yeah.
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Disclosures
Securities offered through Securities America, Inc., member FINRA (www.finra.org)/SIPC /www.sipc.org), a separate entity. Lee Michael Murphy is licensed with the California Department of Insurance, License 0H18660. Lee Michael Murphy is an Investment Advisor Representative with Securities America Advisors, a registered investment advisor
The Free Retiree, Securities America Advisors and Securities America Incorporated are separate entities. Career advisor Sergio Pattterson, attorney Matt McElroy are not affiliated with Securities America Advisors or Securities America Incorporated.
Securities America Advisors, Securities America Incorporated, and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.
Third party sourced information or comments are not verified, may not be accurate, and are not necessarily representative of all client or audience experience. All or a portion of this event paid for by a third party.”
The opinions of career advisor, Sergio Patterson, do not reflect the options of FaceBook, Inc. The opinions of attorney, Matt McElroy, do not reflect the opinions of Castaneda and Company.