SPEAKER_00: 0:24

Welcome back to the Make the Most of Your Money podcast. Uh I'm your host, Colin Page. With me is my co-host, Taylor Stewart. How are you, Taylor? Doing good, man. Great to see you. Yeah, good to be back after a holiday break in which every single person in our household, save my wife, got the flu. And you know, it's only a matter of time. Yeah. It's coming for her. It's coming for her. Yeah. She knows it too. Um Yeah, so it's good to be back in the in the saddle.

SPEAKER_02: 0:53

And um I just say holiday breaks aren't the same as they used to be. It's not a break at all with kids. It's a it's a lot, it's more work.

SPEAKER_00: 1:02

Yeah, I mean, and and I think I I think like this is my problem. Like I I remembering back to how much I look forward to breaks and and how freeing it was, you know, even through college and whatnot, you know. Now it's just like I dread, I dread it because it means 24 hours a day and childcare.

SPEAKER_02: 1:24

Especially in our job, like year ends a busy time. And for like a lot of our clients come to us kind of when they have time. So it's like everybody else is off. Let me ask a question, be like, no, I don't have time anymore. Because I and so love hanging out with the kids, but it's hard when the job is calling too. And so yeah, it was just uh it's a lot of work, especially if you're somebody like you were.

SPEAKER_00: 1:44

Email on yeah, December 30th. Hey, can we do one more QCD? No, you can't. The window's closed. Yeah. Can't do it anymore. Uh well, speaking of QCDs, uh, qualified charitable distributions for those wondering. So thank you. Uh yeah. So I was thinking about what to talk about today. And um this is kind of one of the bigger topics in in my world or in my practice. Um I I focus primarily on retirees and people, you know, uh within five to ten years of retirement and into retirement. Um and and the number of people that reach out uh in this time frame who have never worked with a financial advisor before is is it's a significant number. So, you know, it seems like a natural break point in someone's financial life where the game really changes, and and maybe the things that got you to this point, uh, you know, you've been successful in your career, you've you've saved the right amount, you've um, you know, invested and not touched it, uh and you've paid down debt, but now you're you're you're staring down um retirement in the next few years, and and that just hits different. Uh you know, going from saving to spending, you know, will we have enough if if we turn off the the income spigot, so to speak? Trevor Burrus, Jr. You're talking about people reaching out when they get a few years from retirement. Right. Yeah. Yeah. I feel like that's that's like a a natural point that that a lot of people look for help uh from an expert. Sure. So I wanted to talk this this episode, kind of break down the areas of your financial life that change when um you retire. You know, how does the game change? Um we did an episode, you know, a little while back about how the game changes when you have kids and and what are kind of the big areas of your financial life to think about at that point. So this seems like an another, you know, another natural break point in your financial life to to kind of zoom in on.

SPEAKER_02: 4:02

Yeah, I I think it's great. And I also like there can be this is a very legitimate change. Like it's a actually very real, real change. Like, yeah, kids is yeah, I that whole mountain analogy of like climbing up the mountain, then down the mountain, it's very true. Like having kids is just another part of climbing up the mountain in a lot of ways, but like truly, there it is a completely different to use the mountain analogy, like technique going down versus up. And so it's good to start preparing for that a little bit ahead of time. And so um definitely better late than never. And so um, yeah, there's a there's a lot, a lot to talk about here.

SPEAKER_00: 4:37

Yeah, so um let's let's start it off. I mean, I think one of the biggest things that people don't expect, maybe right off the bat, is is kind of the more emotional um side of retirement, um, especially when you're in, you know, you're coming to me in your mid-50s, probably at the top of your career, you're in management, you're running things, um, you have people working for you. Work provides a lot of structure and social connection and and meaning, and then, you know, then retirement happens, or at least, you know, if we're talking about the classic kind of retire at at 62, 65, and and you know, get the company get the company watch and and hit the golf course, you know, who there's this big question of like who are you without your job?

SPEAKER_02: 5:28

Yeah.

SPEAKER_00: 5:29

And and that's, you know, not necessarily on the financial side of things, but but super important because it does impact the the financial side, um, for sure.

SPEAKER_02: 5:40

Yeah, the financial side we which I'm sure we'll talk about, but this is Yeah, the the re retiring is a very dangerous thing for a lot of typically men, is what I found. Uh, but it's it's very it's it's dangerous because I firmly believe retiring to do nothing is the maybe smoking cigarettes is the quickest way to shorten your life expectancy, but retiring to doing nothing will just knock five to ten years off your life. Like this whole idea of like I'm gonna just do nothing, I'm gonna think about nothing, I'm gonna do nothing is the quickest way to atrophy and die. Now, doing it for a year or two is fine to take a little break and a breather from grinding for all your life, but like the idea of I'm just gonna do nothing all day is a horrible retirement I plan. It may sound like a dream right now. And so this like concept of retiring to something, I think is so important to think through. Um, and having that something to retire to, it does not have to be a paycheck. Uh, it can be kids, it can be grandkids, it can be charities, it can be freaking, we've got retired people in our neighborhood who like his thing is like cleaning up the park, like having that something to do um is just so important and for for a lot of reasons. But um, yeah, I feel very strongly about this. The like I when I hear people talk about like I want to retire and do nothing, I'm like, I hope that's just for a short term because that's just not gonna work out very well in the long term, in my experience.

SPEAKER_00: 7:08

Yeah, and and and I mean you think during your career, all the trips like you couldn't take because you were too busy or you know, had kids at home and and you know, that those big um European vacations where you you know now you finally have the time to do it in retirement, but you know, maybe that uh it takes up a month of your of your year. Like what are you doing the other 11 months to keep to keep busy or to stay fresh and you know, stay engaged. So yeah, I I feel like most people uh once you get to a certain level of affluence, most people don't fail retirement by running out of money, like they fail retirement because of of you know lack of purpose or identity or or things to do, you know. Um and many of them end up going back to work not because they need to financially, but because like that that would has been the source of their stability and connection.

SPEAKER_02: 8:09

Maybe it's an influence of my dad telling me my entire life that he never wants to retire, like never does. Like in that the idea of a traditional retirement makes me deeply uncomfortable of sitting around and doing choosing to work is totally fine. You know, it's not like if you're working at 75, that doesn't that's not a bad thing. If if if somebody does go back to work, it's okay. It doesn't mean you you're poor and don't have money. It can just mean you're you're uh you know, you're you still have value. Like you're not dead. Like 62 is so young nowadays. You're at your prime. You know more than you've ever known. Hopefully you still have some physical abilities left. Like just I love it. And so again, it doesn't have to be a paycheck, but if some people like talk about, oh, I might have to go back to work. I don't know, man. I I've seen more people two, three years into retirement, choose to go back to work because they miss it. And they're and it's so different choosing to work than having to work. And I think it's really cool. I think we're both very blessed that we we love what we do. Like I I love my job. I don't I it makes me sad when people talk about, oh no, Monday's coming. Like I I that's a I don't hope I understand you gotta do what you gotta do, but like find a job you're super passionate about and make working not a bad thing. It's fun. It can be fun. And so I think that's yeah, like if you do find yourself having to go get choosing to go back to work, that's great. That's great.

SPEAKER_00: 9:31

Yeah. And I I like to think of it through the lens rather than you know using the word retirement, um thinking about through the lens of financial independence. You know, it's it's not it's it's the freedom to go do something or to not do something. And so maybe it's you know, maybe maybe you're not fully retiring, you're still working some, but like what are the parts of your job that you hate doing that maybe if if you were to, you know, what what would it look like if you only did it part-time or only did the things that you really enjoy doing and shifted some of those, you know, more mundane or taxing responsibilities to somebody else? Or yeah, like you said, you still have a lot to offer. Um, you have a lot of wisdom, your skills, you know, the technical skills, you know, the cut kids maybe run in circles around you know, by that point, but you still have the wisdom and the temperament to to lead and to contribute. And and so yeah, I think the the the whole idea of retiring at 65 or whatever and and you know, never working again or completely disengaging, that's just not the reality for most people anymore. Retirement, especially now, like it's it's a 25, 30-year period, potentially. Like it's it's possibly a third of your life. Um and and so if you're going into that without much of a a notion for where you're going to find meaning and purpose and structure and and things in that in that, like you're you're you may be disappointed after, you know, you can only play so much golf, uh, Taylor.

SPEAKER_02: 11:10

Well, okay, so careful there, because I was gonna say I want to soften my stance a little bit. Like some jobs you can't go back to. Like I I I have a dear friend who was a surgeon before, and he can't go back to being a surgeon. Yeah. Like, but he he's done some teaching, which is really cool. Yeah, like so again, it's retiring to something. It doesn't have to be a job. But speaking of golf, his thing, he wants to play a thousand golf courses across the world. That's become his thing. And he's chasing it, he's loving it, he's seeing the world, he invites friends on it. That's so cool. So he is playing a ton of golf, but it's not, you know, the same foresome every morning. Now, like I love golf, like that'd be pretty cool. But like, I'm saying, like, you can you can that's a great example of like you might think, oh, he just plays golf all day. I'm like, man, he is seeing the entire planet. Like he's all and he's blessed to be able to do that, and but he he's just made it this adventure. He's retired to this for this stage of his of life while he does have his physical abilities to be able to do that. And I think that's so cool. And like, so I encourage people like think like what are you gonna do with all that time? You know, you get if like typical if you were if you were blessed to be able to work nine to five, four to five days a week, like what are you gonna do with all that time now? You gotta fill it with something. Doesn't have to be a job, can be a job, don't feel bad. I just think um if your plan is to just wake up every day and figure out what you're gonna do, I would encourage you to think that through a little bit more.

SPEAKER_00: 12:28

Yeah. Um yeah, so let's let's talk now like financials. You know, what in your financial life changes? How does the game change? Um, and I think you know, ob obviously the big thing is the paycheck stops. Um and uh and and so now you are creating a stream of income from your investments, from you know, maybe a pension if you have that, or an annuity if you if you gotten into that, um, Social Security at some point, um, or or you know, maybe like like we were talking about, you've got a part-time job. Maybe you're you're you've got kind of an encore career where you went back and and you're teaching or giving back or and you've got a little paycheck from that. Um but you were you move from one source of income to to multiple sources and and managing that transition um is is a change. Um and so you know, in your working years, your income was mostly fixed. You know, taxes are are reactive. You um in retirement, your income's much more flexible. You know, you you're the one deciding how open or shut the spigot is. And and taxes can be more proactive as you're deciding, you know, what income sources you're gonna pull from and when. Um so yeah, this is a big topic, but you know, this this I think is like the key change um when when we're talking about uh you know how what what changes in your your balance sheet or your your cash flow.

SPEAKER_02: 14:05

Yeah, and that's where like it it is it is completely different because assuming you are spending assets, most likely, you're going to be drawing down on some of your assets. That is like is if if you've been a diligent saver and you're so used to seeing that number increase every year, every month, if you're lucky, it's wild to start to see it go the other way. Because a lot of people kind of have that like, oh, yes, I hit this figure, then I hit that figure, and they can feel really good. Um and it's just inherent uncertainty in this process. It's a little bit like getting on a plane with a tank of fuel and you're not sure where the destination is, but you're gonna start flying. And like, we're pretty sure we'll make it. But things could happen, maybe we won't, and that's just gonna be really hard. And there's like there's there's the biggest variable from just a math perspective, if you're modeling this, is when are you gonna die? If we knew that, retirement planning is so easy, but you don't know it. And so you've got to reach a point of like just understanding that that uncertainty is going to exist and there's going to be trade-offs. You might not be, you're not gonna spend the optimal amount. Uh, it's just it just I think getting comfortable with nobody can know. No modeling machine learning predictor can know with certainty. And it's just it's just gonna be there. There's just gonna be that uncertainty. And there's gonna be, if you want to trade off, get rid of that uncertainty, you're gonna make a trade-off to do that. Um, and if you want to take on more there, so just embracing the fact of the uncertainty is so, so important.

SPEAKER_00: 15:43

Yeah, I mean, you you're bringing up like right away the the kind of psychological effects of of transitioning from saving to spending and potentially seeing those balances go down for the first time ever. I mean, sure, you know, balances went down during the great financial crisis, but you were still saving, you still had many years till retirement, and and you saw them rebound pretty quickly. And so, you know, kind of while you're working, you're rooting for those big downturns in the market because that gives you, you know, stocks are on sale, it gives you a chance to buy in lower. Um and you, you know, you don't have a definite end date for when you're gonna retire. But then, you know, things, things change when you when you are are actually getting ready to retire and and thinking about those two big unknowns, like you said, A, how long am I gonna live? And B, what's the market gonna do? If I knew those two things, like it'd be easy to model out a spreadsheet for here's how you spend down your assets um during your lifetime and you know, have a nice, have a nice retirement. But instead, you know, we we've got um uncertainty on both of those fronts, longevity, market returns, and you know, some uncertainty on the expense side, too, uh, around what kind of uh care you may need at the end of life, or or if we start talking about disability and things. This this I think is is all of that is what produces the anxiety uh in in folks that in my experience leads to underspending. Totally. In like 95% of cases. You know, what what we do in reaction to those uncertainties is we we don't spend. We don't want to see the account go down, or you know, we we we really severely limit um what we you know the either we we work longer um and could have retired sooner, or or we're limiting the type of retirement um that that we could have had had had we um you know tried to to deal with some of those those season of smart.

SPEAKER_02: 17:55

Underspending is completely logical. That's rational. That that behavior of wildcards, I don't really know. It is completely rational and logical to want to underspend. So I just kind of like give people a break. Like it's understandable why you feel that way completely, because you don't know. What if I live super long? What if the market crashes? What there's things you can do, but they're yeah, like that's um Yeah, it can and also like let's just be fair to the you can't know that you underspent until it's all over. That's the other thing about that's what I was trying to say. Like you can only know, oh well, if you know, we could have spent more because the market you just market returns and longevity. You don't know. You don't know, you don't know, you don't know. And you there's you can't there's not a retirement plan that exists that can give you the highest spending in hindsight with no risk in today's like you gotta you like you can remove the risk today, but you're gonna give up probably optimal in hindsight. I don't know, that that's not may probably not totally making sense, but just there's just you're gonna make trade-offs across the board. Um see if I can firm that example up in a few minutes.

SPEAKER_00: 19:06

But yeah, I mean I think so so the key question is what do we do with that uncertainty? Um how you know how do we both like get our arms around what are the the levers that um we have to pull in terms of spending and and what um what if if you know we experience a bad string of market returns or a a health event or um you know what what how do we manage risk? Um and that's that's really I I think the bread and butter of what I'm helping clients manage every day. Um you know, how how do we deal with uncertainty? Um and and that's you know, that's nothing new. That ex uncertainty existed before you retired as well. It just it hits a little bit different when you don't have the the expectation of a continued paycheck and outsourced outside is outside source of of income.

SPEAKER_02: 20:11

Um how how um how much does modeling projecting retirement how much does that help with uncertainty in your opinion?

SPEAKER_00: 20:22

Ooh, good question. It it it definitely helps. Has a role. If if usually when clients come to me, you know, if I were to ask them, well, how much do you want to spend in retirement? And then I can plug that into my model and we'll see, you know, could can you do that? Response is not usually to lead with a number. It's like, well, how much could I spend? That's, you know, and so where I think modeling is helpful is framing that decision. Um and and then showing you know what happens to kind of an initial plan under certain scenarios. Um, say a market downturn for the next five to ten years, or or what if there's a health event or a long-term care need, that sort of thing. You know, how how how do that's where I think modeling can help, you know, framing what's what's the impact of like, well, what if our assumptions for market returns are 1% below what we were expecting? Or what if they're 2% below, or you know, just to give people a framework for how to think about the impact of those those various levers. Um I'll tell you what I don't like is is in in retirement is is like the the classic Monte Carlo framework, uh, which is, you know, we'll we'll we'll come up with a plan, we'll plug it into a random number generator that that's going to simulate market returns, and then boil all of this down to some probability of success. You know, you're you have a 90% chance of not running out of money, or you have a 60% chance of not running out of money. Um I think that type of modeling, while it's it's interesting, you know, from a uh maybe a mathematical standpoint, like it it leaves clients not knowing um, you know, what to what do I do with that number. You know, you're conditioned all through grade school to to want, you know, think of 90% above is an A. So like I want to get an A on my retirement, and and therefore anything less than that must be really risky. But you you know, that's a it's an overly simplified view of what that kind of modeling is really doing and how we would react in a in a in a real-world scenario where you know market doesn't return what we think it's gonna return. You know, we don't just keep plugging away blindly and roll the dice.

SPEAKER_02: 23:11

So I I think uh like modeling like doing like a 30-year retirement plan, you know, like the like like people ask for it. I may not like it, but people ask for it. Uh like a 30, 40-year plan is just a sanity check to make sure nothing is glaringly obvious. If you've done enough of them, you really don't need to. But I think what I want to say is retirement, like all financial planning, is a year-to-year thing. Like if you just say we're gonna check in this year, does this number make sense with what we have? Fine. Does this number make sense like next year? Does it next year, next year? That's that's the way to do it. But there's this desire for like, let me see what it's gonna look like. And I'm gonna give some, I'm gonna feel better about this. Um, I think it's so I think it's so interesting. Like, why there's this it's it's it's the desire for certainty. People want to feel like they know what they're what they're gonna get. Look, man, I I yeah, I don't love projections, but like also Monte Carlo is as good as we got. It's better than a straight line, say, like, I'm gonna earn six percent a year and spend this much. That's horrifically wrong. Oh, Monte Carlo's is like as good as we got for simulating random returns. There's a ton of flaws with it, but it's as good as we got. Like, so like I like I think just the end of the day, it's like, okay, you can see that if you want to, but just take it with a grain of salt. Like, this is a rough estimate of what might happen under these assumptions. Okay. Nothing's, you know, the plane's not crashing in year 10, we're probably fine. But really, year to year. Take it year to year.

SPEAKER_00: 24:39

Yeah. Um, and and that's why like the the main way that I do retirement income planning.

unknown: 24:44

Go ahead.

SPEAKER_00: 24:44

Sorry, go ahead. No, no, no, go ahead. I was gonna say the the reason the main way I do retirement income planning is is like with a guardrails reports that approach. There may be a Monte Carlo going on in the background to kind of generate these guardrails, but but the the actual presentation of the plan is much more straightforward. You know, here's our our spending capacity expressed in dollars. You know, you can spend$15,000 a month from here till you know age 97, which is your you know, your planning horizon. And and then here are the the situations in which we would adjust that$15,000 a month. Hey, if your portfolio goes down by 30%, we're gonna cut spending down to$14,000 a month. Conversely, if if the market does better than we've been modeling, we'll raise your income to$16,000 if if if your account balance hits, you know.

SPEAKER_02: 25:45

And that's fine. That's fine. But it's also gonna be horribly wrong. And then when that year happens in seven years, you'll make the decision on the spot. So like that's where like again, it's a year-to-year thing. What's important is the decision you make today, run it out, make sure it doesn't look insane. You make the decision today. Like standing here in 2026 going, well, in 2023, if the market's down, we're gonna adjust your spending. It's it's okay, fine. But like year to year, if if I said how much you're gonna spend today, how much you're gonna spend this year, one year at a time, it's a lot simpler. You can you could, I don't know. I I I um yeah, I just like it's okay. Like that projection's helpful as like a sanity check, but it's still a year-to-year thing.

SPEAKER_00: 26:22

Yeah. Yeah. Um let's let's talk about how I mean we've we've already kind of gotten into it a little bit, but like how how risk changes in retirement. Um we've already talked about kind of the two big ones, like longevity risk uh and market risk. Um, but kind of what other what other risks are there in in retirement that maybe weren't there or weren't there in the same way um before?

SPEAKER_02: 26:56

Well, I think you're the the longevity risk is the biggest one that like when you're working, kind of not necessarily the risk to you, but the risk to the people who are depending on you is that you die too early, right? And your income disappears. Now it's that you live too long. That's like the risk to you, is like, oh you might run out of money if you live to 110. You know, so it's just very different there. I I I think that's just the biggest change. Uh yeah, I mean, the way market returns, like volatility totally changes. Like you said, when you're accumulating, a a 20% drop of the market is a an opportunity. Uh 20% drop when if you're distributing can be devastating. So like that that that's that's very big. Um not sure what else really changes. You know, health is always a risk. You know, that's always expensive. And um, you know, obviously you might be exposed to different types of health care, like a long-term care type thing. But the biggest ones are just the way that volatility affects you and how um now your risk is living too long.

SPEAKER_00: 27:57

Yeah.

SPEAKER_02: 27:57

For your money.

SPEAKER_00: 27:58

Yeah. And to to go back to the market risk um and and to put a put the fancy name on it, it's a it's a sequence of returns risk is the primary issue. Um it's it's what if we experience a bad sequence of returns? What if income what if what if the market returns are negative in the first 10 years of retirement, which are that critical period when you're making the biggest distributions and there's the most uncertainty, versus a down period in the last 10 years of of retirement, at last 10 years of life? It it you can have um two uh market return sequences that have the same average return over 30 years. Um, but if one of them has all those down years kind of concentrated early in the plan, that's gonna be much harder for a retiree to overcome than than one where those down years are sprinkled evenly throughout or you know, concentrated later in the plan. Let's talk about healthcare, because I think that's I think that's kind of the third area, healthcare long-term care, where there's like the most uncertainty. Um we've had some episodes on on long-term care insurance and how do we size the need for that and the likelihood that you would need a significant amount of care and what are some options to address that? So I don't want to get into like the ins and outs of um long-term care, but but I think you know, everybody knows that like you will experience likely the most the most most healthcare spending occurs in the like final years of life. And so how do you plan for um for that? Or you you know, you may die peacefully in your sleep and not have that uh uh have that need.

SPEAKER_02: 30:00

I think you just go broke and have the government pay for it.

SPEAKER_01: 30:06

It's a strategy.

SPEAKER_00: 30:11

Who made that plan for you? Trevor Burrus, Jr.

SPEAKER_02: 30:12

No, I mean long-term care like all these is one it's it's the other, it could it can sink you. Um it's my dad has a saying, it's the torpedo in the water that you don't know if it's gonna hit you or when it's gonna hit you, um, but it could sink you if it does. And it's another one of those trade-offs you have to make that you just have to have to like prudent thing is to set some money aside in some way, shape, or form for this event that may or may not happen. And it's not a small amount of money. And that, you know, you could set that money aside in form in the form of insurance premiums, like paying for long-term care insurance, or just setting aside portion of your investment portfolio for this long for long-term care. But like it's a very, very real thing. Um that man, it's it's like, I don't know what else, like it just sucks to have to prepare for. You're you don't want to have to pay for it, it's not fun, but you need to plan for it. Well, you are planning for it in one way or the other. But like, yes, some money needs to be a set aside, again, whether that's insurance or just investment dollars, but you gotta think you gotta have a plan for it.

SPEAKER_00: 31:12

Yeah. Um Yeah, and the other thing I I think is is uh a big thing to think about and something that you know I'm experiencing in my own family is preparing for the possibility of cognitive decline. And so it's not just you know, most most long long-term care stays or or needs are due to cognitive decline. Um and and you know, so so not only is the care part difficult and the expense part difficult, but just you know, how how do you you you can't predict cognitive decline, who's going to have it, who's not, and and then there's the whole who steps in to manage the finances if if the spouse who who had historically managed those things is not able to do it anymore.

SPEAKER_02: 32:02

See, the the the challenge with the cognitive decline is like a lot of what you think about long-term care, like oh, you can't walk or bathe themselves or dress themselves. That's generally kind of as the body's failing, which is generally when you're getting a lot older. And so it's pretty easy to a lot of like planning software software will model long-term care in the last two to four years of somebody's life. That's the this the typical outcome. Cognitive decline is completely different. It can hit you, as you know, in the prime of your life still. You know, you can be 70 and you can be totally fine. And it's devastating. And that's one of those, like yeah, I mean, it's just it's that's it's the even bigger torpedo that um ca, you know, even if you set money aside, like you might say, like, I'm gonna set$250,000 aside for when I'm 90. Okay, but what if that if what if in seven years you need care because it caught on decline? It's very, very hard. And so that's um a big one to prepare for.

SPEAKER_00: 32:57

Yeah. Yeah, and and just like the the family dynamics as well of if you can't handle the the day-to-day management of your affairs anymore, like who's going to handle those things? And so there's there's like a legacy or estate planning need there to understand who who steps in to manage your finances or to make healthcare decisions or care decisions and that sort of thing.

SPEAKER_02: 33:24

And talk about what changes between like when you're accumulating versus retirement. These are conversations you need to be having before you need to have them. And that's a dynamic that changes because in a lot of ways, if we're gonna stereotype, it's the kids who end up taking care of the parents. That's super hard to set to have that conversation because most of your life you're setting guardianship nominations for who will take your kids. Now you're going, who's gonna take care of me? And it's it's really, really hard and it's uncomfortable and people don't want to do it, but you gotta do it. Because otherwise, if you wait till it's happening, then you've got a possibly cognitively impaired person trying to sign legal documents and you can't do it. So it's like um it's a big change. And um it's not fun. But yeah.

SPEAKER_00: 34:04

But it's one of those things that can be done well, and and doing it well means like you've thought about it ahead of time, you've talked to your family members, like you've got um, they have an understanding of what your wishes would be in this situation where you can't make those decisions anymore. And and like being proactive about dealing with issues of decline, um, I think one of the biggest areas is you know that also impacts the finance uh financial uh plan is is the house. You know, what what are we going to do with what is likely or was likely your largest asset while you were accumulating and and still is a pretty big asset and and where you will live is a huge question in in retirement.

SPEAKER_02: 34:56

I know we're kind of talking about a sensitive subject with cognitive decline and in long-term care, but I did want to talk about how like things that change your house that that the way you can use your house is very, very different. Um one thing I tell people like my age, our our age, is like property values increasing don't actually help you currently. People say, like, oh property values went up. That's good for us. You know what happened for you? Like your insurance and your property taxes increased. It's not helpful. When property values increasing helpful, or when property values increasing are helpful is when you downsize or sell. That's like when there's a gap. Because especially if you're like, if you're if you're kind of like stepping up houses, like let's say you go from a$250,000 house to a$500,000 house to a million dollar house. Let's just stereotype that. A 10% increase in each of those is hurting you each time because you're falling further and further behind. So it's very counterintuitive. Versus when you're retiring, if you're going to sell the big house and go to the smaller one, that's actually when it's very, very helpful to do that. So that's one like slight reframing there. The other thing is that your house is not a totally illiquid asset. There are reverse mortgages out there that are not a scam, but can be used as a scam. But that is a pool of money that can be accessed. Talking about them right now, but that is a very intriguing tool that is available in retirement. So it's just like a different, like how you think about your primary home is different. Uh as we said, it it's it it's it's not just something that you have to just die and pass on fully.

SPEAKER_00: 36:25

But yeah, I'd say for a lot of a lot of folks, if you're not for a lot of folks, their house is their long-term care plan. Um, it's that uh pile of money or or that uh value that could be used to fund a nursing home care stay. Yeah. And and while that is like it is an important source of of of funds in that scenario, you know, i and there can be liquidity from sources like you said. It's also like you've still got to live somewhere. And um what if one of the the spouses needs care and the other one is still perfectly healthy and wants to stay in the community and in the house, and and then there's there's all of a sudden a problem with with that house trying to to be two things at once, both your career plan and your and your place to live. So yeah, that's super challenging. Like, yeah, definitely.

SPEAKER_02: 37:21

Um what else?

SPEAKER_00: 37:23

Anything else? Big changes? Um gosh. Uh you know, I think I think we've we've hit on the big ones. I think um just just it's a it's a difficult transition to make for for all the reasons we've been saying. Not only are like the financial decisions kind of different than the ones that that got you here, you know, you can get to retirement pretty well if if you're just saving 20% of your income and investing it in in a low-cost index fund and you're diversified and you're you know you're not overspending your your means and you know, you're you're resisting that that lifestyle creep, like you're probably gonna be fine. Um and and it's kind of a set-it and forget it almost uh way of of managing things. That's not to say there aren't more efficient things you can be doing, but the game does change a lot when you get to retirement and you you've now got more levers and things to pull and different problems and and things to to think about.

SPEAKER_02: 38:26

Yeah. Yeah, I was gonna say, like, you'll that whole when you say if you do all those things, you'll probably be fine. What that means is you'll have enough money to provide for your life, assuming you do the stuff we talked about today correctly, though, that you prepare for these things. Like that's what do that's what being fine means in that when we say that, like you'll be fine, meaning you have enough money. Doesn't mean you just keep going forever. That'd be gotta like play this game the right way. Like the biggest thing I would say is like number one, it's my favorite phrase, embrace the uncertainty of retirement. You can't know how long you'll live, you can't know what the market will do, and you can't know what your health situation will be for the most part. And so just understand there's going to be trade-offs there. If you want to reduce some of that uncertainty, you're probably gonna give up some of the upside. That's completely fine. Accept it. Um, also just give yourself some grace that like being a little scared is uh rational and logical. Doesn't mean you have to operate out of fear and live in that place forever, but it's okay to feel that way. And if you make a few decisions out of fear, it's logical. Like, I mean, it's like you can get some help, but just it's okay. Um and then aside from you like shaming people for wanting to chill out in retirement for a little bit, um it's fine for a little bit. Find that something. Retire to something. It doesn't have to be a paycheck. It's okay if it is a paycheck, you're not like so I I'm sorry, sidebar. Like some people like, oh, I don't want to be seen as going back to work. Whatever, get that out of your head. Like, just find that thing that keeps you motivated and going because if you just retire to nothing, um, like I said, you'll die in your 70s. Seen it so many, so many times. Two years later, gone. You gotta have that something.

SPEAKER_00: 39:57

Yeah. Um yeah, and I think I think this was a good topic, you know, not just for for people that are on the verge of retirement, but also for that uh their kids who are entering the, you know, who are in the workforce now, maybe you know, their career's starting to take off. And and the those those children who are in the the sandwich generation, both you know, caring for kids and now starting to think about you. know, mom and dad are needing a little extra help. And so ha e even if you are not in this situation yet where you've got to be making some of these decisions about where the income's going to come from and what are we going to do about long-term care. And like your parents might be and and uh you know you can you can help them think through that. You can be the one to be proactive in talking about some of these issues about you know health and long-term care and and cognitive decline. And you know those aren't easy conversations to have and it can be helpful to have um you know help with facilitating those conversations but but you know the important thing is is to have the conversation. Even if it starts awkward, you know, don't be afraid to have it because if if you're if if you don't have it, you know, it's going to be too late by the time that um you you need to have it.

SPEAKER_02: 41:17

Or you're just doing it in a really uncomfortable time. Deal with that right now with some family. Like this isn't what we wanted to be doing right now.

SPEAKER_00: 41:27

Yeah. Yeah and one and one of the um yeah there's that there's that and there's you know one one of the the happiest bits of news I get to deliver to people like who are thinking about retirement is like, look, you're going you're you are most likely going to be just fine. Like you could probably sustain a level of spending that's well above what you're currently doing. And so then the question is like what do you want to do with that? What does you know what does your life look like without punching the clock every day or or you know what would you what would you spend your time doing if if you had the freedom to not you know worry about money so much? And that's that's like a that's a fun conversation to have and obviously not everybody is in that in that position, but you know, because of the uncertainty that we're dealing with um you know there's a there's a lot more people who are who are you know probably could make that decision sooner rather than later or have more options than the traditional like keep working till 65. There's a there's a whole lot more flexibility and that's what makes this kind of planning work really fun. Yeah that's great. Good stuff man. Yeah um cool well this this has been great and and um we could dig into each one of these topics and maybe we will on a future episode um but yeah thanks for thanks for the conversation my pleasure see you next time see you next time