Today, Peter Lazaroff is sharing the 10 things you should be doing if you’re 10 years from retirement.
Only 10% of people are confident they have enough saved for retirement, according to CNBC.
Even more, 41% said they hadn’t taken any steps to address their savings concerns.
If retirement is on the horizon and you need an action plan to boost your confidence, Peter is breaking it all down for you today in plain English.
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10 Things You Should Be Doing If You're 10 Years From Retirement
Peter Lazaroff: The Roth is like retirement account gold. If it costs you nothing to get assets into that bucket, you should try to do it. The thing is, it always costs you after-tax dollars, and so trying to stay below certain thresholds is important, but once you do have the Roth account, this is probably going to be the last bucket that you tap in retirement, and so you should have your highest growth assets there.
Taylor Schulte: Welcome to the Stay Wealthy Podcast. I'm your host Taylor Schulte, and today I'm joined by my good friend Peter Lazaroff. You might remember Peter from episode 43 way back in April of last year.
Well, Peter's episode from last year still remains the most downloaded episode to date on this podcast, so I invited him back for round two and today we're talking about the 10 things you should be doing right now. If you're within 10 years of retirement. Peter has all sorts of unique action items and free resources and downloads, so be sure to check out the show notes and get everything by going to youstaywealthy.com/65.
Really quick before we dive into the main topic for today. On the last episode of this podcast, my guest and I talked a lot about renting versus buying, and as you know, it's a pretty controversial topic. I'd always trigger some people, and I know you've personally spent a lot of time exploring it for yourself and your clients, so I thought I'd just kick it off there.
I would just love to hear your approach and philosophy to rent versus buy and if you think that there's one that's better than the other.
Peter Lazaroff: So I think that the decision to rent versus buy is going to vary based on who you are, where you are in life and literally where you live because the equation is a lot different for somebody living in the heart of San Francisco than it is for somebody living in St. Louis where real estate is pretty cheap.
I would say that when you're in retirement if you don't own your house outright, if it's the difference between having a 30-year mortgage versus renting, renting might become more attractive.
But if you already own your house and you can comfortably live there and you don't think that you'll have to do major renovations that would be required from aging or health concerns as you start getting older, I don't see any problem with buying.
Now, you will reach a certain age in life where maybe nursing homes come to the equation because you can't do upkeep or you have to hire someone for the home.
But again, a lot of that's personal and it's how much money do you have and how important is it that you come to the house and maybe all your kids are out of town and you love it when they come and stay at your house over Christmas or Thanksgiving or whatever the holiday is. That's a pretty valuable thing. That's a lot harder to accomplish when you rent a place.
So all else equal in terms of building your net worth. I do think that buying over time, as long as you aren't changing homes every five years, I think that buying can really add to your overall net worth because someone is giving you money, it's money, it's value that's being created somewhat out of thin air.
Now of course you're paying interest costs for that, but I do think over time, particularly if you are living in your home 10-plus years, you're going to end up adding to your net worth. If you stay in one home your whole life, you're probably going to do really, really well, but it's going to be different for everybody. The most important thing is it comes down to rent or buy for someone entering retirement probably is you just want to be debt-free by the time you go into retirement if at all possible.
Taylor Schulte: How do you think about the rent versus buy conversation in terms of buying a home because it's a good investment?
Peter Lazaroff: Well, that I'm pretty against. I think that most real estate investing success comes down to timing and price. And if you're a professional real estate investor, you know how to get good price and your time horizon's different.
So I moved last year with my family and the timing of it was pretty random. I didn't decide that the home I lived in was suddenly overvalued or fully valued and I was buying a house that was undervalued. It was just time for me to move. I needed a different house. It was where my kids were going to school. It just made sense.
And so timing is going to be really what determines a lot of the outcome of an investment. And the other thing that's really confusing is people forget what the rate of inflation was. So typically most of your home appreciation is compounding inflation.
So if you bought a house 20 years ago and the inflation rate over the last 20 years has been 3%, when 3% compounds over 20 years, those price gains are pretty substantial. And when you look at housing data going back more than a hundred years, you see that most of the price gain is inflation.
When you subtract out inflation, prices of homes are usually flat. But here's the kicker, there is nobody in the history of home ownership that's lived in a home for 10, 20, 30 years that didn't spend money on their house.
So while prices net of inflation may remain flat, you had to put a lot of maintenance into your home in order to keep it at that level. So when I think investment, I don't want to have to put money into something just to have it maintain its purchasing power. I would hope that I would invest in it and the value of it would grow over time.
If you're buying a home for an investment, it's a single bet on a single neighborhood in a single geography and city, and it's just a single type of real estate. I mean it's single-family home real estate, it's not multifamily home, it's not office building, it's not storage, it's not senior living, it's not hospital.
There's a lot of different types of real estate, and so it's very indivisible. So you can always sell a part of your portfolio and go buy some milk, but you can't slice off a piece of your kitchen counter and go buy a loaf of bread.
And so I think there's a lot of things, there's no liquidity there that make it not a great investment. It's arguably the largest piece of consumption you'll ever do. It's an asset on your balance sheet and the mortgage is a liability, but in reality I view your primary home as a form of consumption and not an investment.
Taylor Schulte: And then lastly, before we move on, how do you think about when somebody asks about buying a home or keeping the home that they own for the tax benefit?
Peter Lazaroff: I again fall back on you do keep the home for the tax benefit because you have a mortgage and if you're entering retirement, is that really something that is worthwhile? And that's what a good financial planner will do. They'll map out whether or not that makes sense.
More often than not, the tax benefit is not enough to keep a mortgage or certainly a big one because to have a tax benefit, the mortgage needs to be pretty big. And then there's other places like say Texas, where most of the taxes come through property tax.
Well, maybe renting there would be better than owning something outright because if you don't have much of a mortgage deduction and there no state income taxes there, but they really get you through your property tax, that's a different set of considerations. Same with Florida to some extent.
So I don't think the tax benefit is enough of a reason to buy a home, whether or not you should stay in a home or rent a home, that's really something that could only be answered with someone building out a financial plan first to understand the needs objectives and then doing the break even analysis on a tax benefit versus maybe some other interesting tax planning opportunities.
Taylor Schulte: For sure. I think we see eye to eye there and I know we're going to be sharing a bunch of worksheets and downloads for people and you do have a rent versus buy worksheet that I'll be sure to link to in the show notes.
So if you don't have a financial planner, you don't want to hire one, you want to kind of crunch the numbers on your own, you can check out Peter's rent versus buy worksheet. So I appreciate you sharing all that. That was interesting actually, you shared some things that we didn't get into in the last episode, especially around liquidity.
We don't really talk about it being an illiquid asset. That's certainly something to keep top of mind as you explore that conversation for you and your family. Alright, let's move into today's topic, which is 10 things that you should be doing right now if you're within 10 years of retirement.
And you shared this recent Northwestern Mutual survey that said only 10% of the respondents were confident that they had saved enough money for retirement and then even more, 41% of them said they're not even doing anything to address their concerns.
So here's what I know many of the listeners of this podcast that I've heard from at least are on a really good path towards retirement, but I know that they want to continue to optimize and improve things to create just as much flexibility as possible. I like to call it making work optional in retirement.
So a lot of what we're going to talk about will help listeners do just that as well. So let's just not waste any time. Let's tackle these 10 things that people should be doing right now and then we'll kind of dissect everyone.
Number one is about as boring as they come, but it's the perfect starting point. We have to start somewhere, which is to assess your financial situation. Talk to us about what this means to you and what action people can take to complete this first step.
Peter Lazaroff: When I made this list as a quick bit of context, I tried to think of when people show up to Plan Corp roughly 10 years away, what are the steps we're taking? Because when someone shows up to Plan Corp 30 years away from retirement, we actually tell them to think of the end goal first.
Not where are you today, where are you trying to go? So I do think it's an interesting change in the saving process that as you are nearing retirement, you pretty much know where you're going, so you need to know where are you today to get to where you're trying to aim towards.
And so by assessing your situation, it's really just taking tally of what is it that you own, where do you own it, how do you own it? As you mentioned, I have some worksheets. You can go to wealth worksheets.com to download a net worth statement. I mean it's really basic stuff.
So your house, your mortgage, your credit cards, your investment accounts, whether they're a 401K or an IRA or just a trust, these are all things that you need to really know what you're starting to work with before you can do anything meaningful for planning for retirement within the next decade.
Taylor Schulte: I would argue too, I think there's some power into having a physical worksheet and writing these numbers down. And then in addition, having your spouse involved in this conversation. I know you and I hear a lot from people that one spouse takes the lead in the financial situation and the other doesn't really know or they're in the dark around all this.
So I think as you go through these 10 steps, it being really critical to involve your spouse. And again, it kind of feels archaic to print out this worksheet and write it down, but it really does bring these things to life and forces you to really see this and really assess your current situation.
Do you have any thoughts on using technologies as something you discourage? What do you guys do at Plan Corp? Do you actually use a physical piece of paper?
Peter Lazaroff: So I often use a physical piece of paper at the onset, particularly if I'm not certain how interested someone is in becoming a client. Once you become a client, we have some proprietary software that we've built that does build out a balance sheet for you. And so once you enter your accounts, you're sort of linked up to us and we can see live what it is you have.
But I am a big fan, particularly if not on the net worth side, but definitely on the goal side and where that will apply. And I know it's not really on this list, so I might as well spend a little time there is what are the big things you want to do in retirement besides just kind of living the life that you live with your family and friends? What are the special things you want to do?
And I do think that putting pen to paper is meaningful both from a commitment standpoint as well as a sort of level setting practice with you and your partner because oftentimes things come up when you start putting in paper that will surprise the spouse that they didn't know was important to you in the goal setting.
On the net worth side, usually I know my wife and I go through the worksheets once a year and I get caught off guard despite the fact that this is my profession. Once I see it on writing, I'm like, I will say, huh, that's interesting. I didn't really think that that's what that was going to be.
Or it allows my wife to ask questions, Hey, what is this line item? Why is there so much money here and not so much over here? So I definitely think it's very real when you put the worksheet out there. And so we do it often when someone is coming in, but once they are onboarded as a client, we have technology that makes it a little more automatic for them rather than manual.
Taylor Schulte: So after somebody's assessed their situation, number two is to project your future expenses. And this can be a little challenging and there are some misconceptions. So talk to us about that exercise of projecting future expenses in retirement.
Peter Lazaroff: The one common thread when we meet with new clients is that all underestimate how much they spend on a regular basis. And even when you enter retirement, suddenly you have free time. So there's usually even a little bit of a bump in what you're spending month to month.
In those early years of retirement, you start doing more recreational activities that cost money, you do more travel, it costs money, you start gifting to other generations, which obviously requires capital with projecting expenses. If you have a really good handle on how much you save, you can take your after-tax income, subtract out what you know that you are saving, and then that's a really good rough estimate of what you spend.
However, if you notice that your bank account is always $25,000 higher at the end of the year, well then maybe you can back out that $25,000. There are a lot of methods to trying to figure out what do I spend every month or every year? And I think if it's too daunting, just take your after-tax income, so tracked out what you're putting away for savings and then that's going to be a really conservative estimate of your future expenses.
I mean, some people think that you're going to spend 70 to 80% of your past expenses, but healthcare costs go up over time. And again, these one-time items end up driving expenses higher than most people expect.
Taylor Schulte: Yeah, I was going to ask how you view medical expenses in retirement, which is a little bit harder to predict, right? It's uncertain exactly what's going to happen. Long-term care, most people are going to need some form of long-term care.
So is that built into that exercise that you just mentioned? Do we need to be budgeting more for that? And then lastly, and this might kind of offset some of it, but things like travel, yes, you might travel maybe a little bit more in retirement, but we all know that we're not going to travel until age 100.
Travel is going to end at a certain point for some of those more nuanced expenses. How do you think about that when you're projecting or working to project your future expenses?
Peter Lazaroff: As it pertains to healthcare costs specifically, Vanguard has someone named Jean Young who wrote a really good paper that I think is really digestible to all audiences on healthcare costs and retirement. And we head her to the office and we're actually having her back again for a client event and to have her consult on the process that we're using.
And ultimately what we do is, like you mentioned, you don't travel to age 100. So we have both spouses live out to age 95 in our financial planning and we have expenses rising by 3% every single year no matter what.
And people will build in, well, I want to spend $50,000 on a car every five years and I want to take $20,000 worth of travel vacations on top of these, but those all stay in place and by having this inflation compounded life expenses going to age 95, yes, you start substituting out the travel and the restaurants and the clothes or whatever for healthcare expenses.
So by making a conservative estimate of your future expenses, that's what's really important to make sure that you do cover something like healthcare costs, which is such a big unknown today. Not only because we don't know what the state of our government's programs might be, but we don't know how long we're all going to be living.
And the longer you live, the more expensive the treatments come out, and I expect science to continue to advance and introduce new expensive ways to keep us alive longer and healthier. So I think it is a major wildcard. It's probably the biggest reason why it's important to be conservative and overestimate your expenses if anything, rather than underestimate them.
Taylor Schulte: Well, you told me you wanted me to disagree with you today, so it's going to be hard for me to do, but.
Peter Lazaroff: Let's have it.
Taylor Schulte: Why do you run plans out to age 95 and not 100 or 105 or 110 based on everything that you just said?
Peter Lazaroff: I may get the statistics slightly wrong, but I think that once a couple has made it to age 65, that one spouse has a 50% chance from that couple of living to age 95, and I think we took that from census data and just ran with it.
Now, there are people who seem to have longevity running in their family and they request that it goes out to a hundred. We have other clients who say, Nope, no one's ever lives past the age of 70. Why don't you drop mine down to 80? Whether you run from 95 to 100 to 105, there are so many unknowns when you're projecting out even 10 years in advance, more or less 40 years in advance.
And so if you're in your thirties and we're doing planning work for you, an argument could be made that we ought to put the number at over a hundred, but we can always adjust something as we go.
And that's the beauty of financial planning. It's a fluid process. It's a living, breathing plan that changes and updates as circumstances change. And the real goal is for you to really protect the comforts that you've worked hard to earn and live the lifestyle you want to live without ever worrying about running out of money or having to sell your house to make ends meet.
That's sort of what we're going for. And we bake a ton of conservatism into the model because that would be the worst thing to run out of money or even we are talking about rent versus buy even. We want to see you not only not run out of money but not have to sell your house as a result of meeting your needs.
So that's probably why we're going so conservative. You bring it out to 120 years, if that's the new benchmark, and we previously said 80% success was good, suddenly everyone's success rate would drop down.
So we'd probably have to change what's the benchmark of success? And then once you're changing the benchmark at that point, I'm not sure that we've done anything of value, but I think an argument could certainly be made to go out past 95. There is no right or wrong there.
Taylor Schulte: And I think 120 is a little much, but yeah, it's excessive. But I always think the way I approach it, like you said, there are so many uncertainties. We don't know what inflation's going to be in the future. We don't know what tax rates are going to be healthcare costs.
Something unexpected just could happen to you or your spouse or somebody in your family. And so I always think if I can create a successful plan that gets this client to age 100 or 105, we're accounting for a lot of or some of those unknowns.
So yes, I don't think they're going to live to 100 or 105, but it just adds some extra flexibility in that plan in case one of our assumptions is wrong or again, something major changes in between now and then. So I'm sure you agree with that, but just kind of curious what you think.
Peter Lazaroff: It's interesting. Yeah, I do agree.
Taylor Schulte: Okay, so we don't disagree.
Peter Lazaroff: I want to be more controversial and find a way that we can disagree more, but maybe we'll find something here.
Taylor Schulte: Alright, number three, which is my favorite topic is running a tax projection so taxes can make a huge impact in your retirement. Talk to us about running a tax projection, why you would do this, and then more importantly, how would somebody go about running a tax projection?
Peter Lazaroff: Well, let's start with that one because I personally in my role here at Plan Corp as chief investment officer, I don't run anybody's tax projections. We have CPAs to do that, and I remember being in a training where they were trying to show us how to use our software, which is BNA.
It's the same software like the big four accounting firms use, and that's what we use. I have no idea how you'd do this on your own. I don't really think it would be possible. The software itself is very pricey and we're going through tax returns in great detail.
So I really mean it's not maybe the most helpful response, but I do not know how you would replicate this unless you have access to this type of software that the huge accounting firms are using. Now, why do we do this? Why is it so important? Why have we made this investment for our clients?
Well, really you have a huge opportunity in the years leading up to retirement and then the first few years in retirement to lower your tax bill, both at present as well as in your retirement years. Because once you reach retirement and you reach that RMD stage where you have to pull money out of your IRAs and you have social security, suddenly you have a lot of income that you have no control over.
And so the biggest thing when you run a tax projection is it helps eliminate surprises come April 15th every year, but it does introduce ways to say, okay, making a partial Roth conversion might make sense or bunching some of your charitable contributions into a donor advised fund in this specific year would make sense.
And if you're a business owner in particular, you can suddenly start accelerating or even delaying I guess income and expenses just to try to stay below that 3.8 net investment income tax threshold.
And so the tax projection I feel like is one of the most valuable things that an advisor can do, and I cannot strongly enough say that you should not be doing it on your own if you are not a trained professional.
I mean, it's something where big dollars at stake and mistakes are easily made, and so I would highly advise that you speak to someone who's knowledgeable and tax and has experience doing these types of projections.
Taylor Schulte: And one tip for people, if they do want to do a tax projection and they don't want to go hire a full-service wealth management firm, if you have a CPA, sometimes it just takes a little bit of a push to say, Hey, I know you do my taxes every year, but I'd love to do some tax projections, some actual tax planning, and just push them a little bit and see if they'd be willing to put the numbers together for you and review them.
Most CPAs will if they don't or you don't have a CPA, you might reach out to some CPAs in your city and send them a recent tax return and ask them to do tax projection and maybe say, look, I'm interested in potentially hiring you. Maybe you can run a tax projection for me. Show me how you work with your clients. I'm not saying to waste people's time, but you can certainly lean on a CPA for some of this as well.
Peter Lazaroff: Yeah, I think most legitimate CPAs will just do one for a flat fee too, if that's the route you want to go.
Taylor Schulte: Let's keep it moving. Number four kind of falls in the same category, which is partial Roth conversions. Maybe we can add a little bit of a tweak to it given the secure act. RMD age is pushed out so we have more time for Roth conversions, but anything else you want to add here, any tips or tricks or maybe even pitfalls to watch out for?
Peter Lazaroff: Well, I do think that Roth conversions in light of some of the changes with the secure act are more valuable, particularly if you were hoping to leave some of your IRAs behind to your kids.
But I do think that the challenge with Roth conversions again is if you're not super intentional about what you're trying to accomplish, you can make mistakes. You can trigger extra taxes that pertain to your Medicare converting assets. If you have a company retirement plan, if you can somehow do conversions before you roll over that company retirement plan, that can help improve the math behind the tax benefit of making such a conversion.
Another mistake I typically see people make when they do this is that after they make the conversion, they don't necessarily hold what I would consider to be the optimal assets in their Roth account. So the Roth is like retirement account gold.
If it costs you nothing to get assets into that bucket, you should try to do it. The thing is, it always costs you after-tax dollars, and so trying to stay below certain thresholds is important, but once you do have the Roth account, this is probably going to be the last bucket that you tap in retirement.
And so you should have your highest growth assets there. You shouldn't have something like municipal bonds that already have a tax benefit in a Roth. You should maybe be avoiding bonds altogether in your Roth, but I always look at the Roth as the last bucket you would touch. It isn't always the case.
It's kind of one of those personal finances. Everybody has a different situation. However, I think that oftentimes people make a conversion and then don't really think about the location of the assets that they're investing in their different accounts.
Taylor Schulte: Awesome. But yeah, we've talked at length about asset location on this podcast. I'll link to a couple of resources on that in the show notes, but really, really good reminders there.
Alright, number five is to take advantage of tax-deferred accounts and catch up contributions. So talk to us a little bit about what you mean by this and how people can go about approaching this step.
Peter Lazaroff: Sure. So once you reach the age of 50, you can contribute more to your IRAs and Roth IRAs. So instead of $6,000 a year, you can contribute 7,000 for a 401K plan or a 403B or a 457 plan.
If you're a government employee, the normal limit is $19,500. If you're 50 or older, the ketchup contribution pops your maximum contribution up to $26,000. I had a client of mine who turned 50 and they texted me on their 50th birthday, so excited about making their catch up contributions.
That was a first for me. I've never had that happen before, but it is great if the government is basically subsidizing your retirement savings in some form. You need to make sure to take as much advantage of that as possible. And even though there are these bump ups in rates, the other thing is to maybe consider late in life if you access to an HSA plan, that can really be an advantageous account.
We spent time earlier talking about healthcare costs. The tricky part is that HSAs usually come attached to a high deductible plan, so you have to make sure that you get that decision right there. But an HSA could be almost as valuable as a Roth account just because of the double or I guess in some cases triple taxation avoidance or savings that you get out of making those contributions.
Taylor Schulte: HSAs are magical. And I'm going to make a note to text you on my 50th birthday.
Peter Lazaroff: Yeah, please do.
Taylor Schulte: Really good stuff there. And then if anybody missed it, episode 62, so youstaywealthy.com/62. I talked about the order of operations for saving your money for retirement, so what accounts to contribute to first, second, third, fourth. So if you want to go back and listen to that episode, that's where you can find it.
Alright, let's keep moving. Tip number six or step number six is to reduce your debt. And as I've shared with you, the Stay Wealthy listeners are rockstar savers. They don't have a lot of debt, at least the folks that I've heard from.
The one piece of debt that they do have that often brings up a lot of questions is their mortgage. So I'd love to touch on how to manage your mortgage when you're within 10 years of retirement and then any other pieces of debt you think we should be thinking of.
Peter Lazaroff: I'll go back to the disclaimer that everyone's situation is different. However, what you're trying to accomplish as you enter into retirement is to lower the fixed costs that you have as much as possible.
And the people that we tend to work with are rockstar savers and when they're reaching retirement, it's not like they have a big mortgage, they just have a little mortgage, and chances are that means that the proportion of their payment that is going towards interest is so small that it's really not worth the hassle.
I generally think it's just one less thing to worry about. Everyone's situation is different, and if you own multiple homes, then maybe there's a little more case to own debt and with interest rates still at relatively historically low levels, you can make a case sometimes to have that make sense in reality is you think about the assets you have available to use in retirement.
If the interest rate you're paying is say three and a 5% on your mortgage, well your portfolio I would hope can out earn 3.5% on a regular basis. So you would think that, okay, maybe I take the mortgage and let the portfolio run.
The problem is that if you go into a recession and you need to live off of say your cash balances while your portfolio recovers, finding ways to eliminate that sequence of return risk is important, and reducing debt does make a big difference in that.
Taylor Schulte: Any other pieces of debt, I mean it's obvious, right? If you have credit card debt, student loan debt, all of that stuff should be tackled as you approach retirement. But anything else we're not thinking of there?
Peter Lazaroff: No, I think those are obvious car loans. Do you really need a car loan? But a lot of times cars offer you 12 months of no interest, fine, go ahead and do that. I think to your point, most people who are entering retirement and in this frame of mind, most of them are with mortgage, maybe business loan, but you're probably going to sell your business or have a succession plan in place to capitalize on that asset.
Taylor Schulte: I think one thing for people to think about too, you mentioned a home. Being an illiquid asset equity in your home can be challenging to tap into. So if you don't have much saved outside of your home in retirement accounts and taxable investment accounts and all of your money is wrapped up in your home, just think about the challenge of that in retirement if you need to tap that equity for income.
Reverse mortgages are an option, but they are extremely costly and there are some downsides to using them. So something to think about as you think about having this mortgage or owning a very large home that potentially you don't need heading into retirement.
And maybe I'll add because homeownership is such an emotional decision, we're talking about people here within 10 years of retirement, I think it's an appropriate time to start talking with your spouse and with your kids if it's appropriate, how you're going to handle this home.
These conversations aren't quick overnight conversations. So I think starting that conversation as part of this process would be really important.
Peter Lazaroff: Well now I'll add, and I didn't think about it until you said that when somebody passes and they have a home, that's always one of the hardest assets to get rid of. And when you have to pay off debts as part of someone passing, that's just one more thing for your heirs to do. Whereas if it's something as simple as you just writing one single check to take care of it, why not make it a little easier on them?
Taylor Schulte: Number seven, sharpen your retirement budget. Now I know creating a budget, sticking to a budget is really, really important. My question for you around this is what if you hate budgeting or what if you're not good at it? How do you go about tackling and sharpening your retirement budget?
Peter Lazaroff: What I would say particularly if you don't like budgeting is find out at least, and this is somewhat related to the first two items we talked about, find out what you think your expenses are going to be and find a system that sort of gives you a retirement paycheck.
And there are a lot of ways to go about this where maybe you set up an account that automatically feeds you enough money to meet that monthly expense number every other week to if you're used to paychecks on the 15th and 30th, then go ahead and create a strategy that automatically sends you the money.
Then that way you're sort of restricted by what you have. It feels more like normal everyday life and then you aren't really changing anything. The only big difference being that your portfolio is now the provider of your income as opposed to an employer.
Taylor Schulte: So I'm one of those people that hates budgeting. I've never been able to stick to it, but the one thing that works really well for me, and this is how I like to reframe it, is to track my expenses. Just to know how much money I'm spending and just having that knowledge is extremely powerful.
Once you have that knowledge and you know where every single penny is going, every single month, then you can make conscious decisions about your spending and think about your future spending in retirement.
Do I really need to be spending a hundred dollars a month on X, Y, and Z? And you can start to have those conversations and kind of bring those to the surface. So I like to talk about finding a system to track your expenses, not necessarily put yourself on a budget.
Peter Lazaroff: Do you have any favorite technology tools for that?
Taylor Schulte: I'm a tech guy, so I like to do it using technology. We use a financial planning software here at my firm called E-Money. So I use the E-Money client portal to track expenses.
My wife and I go through it at least once a year, but there are other ways to do it too. I've had clients, again, there's no one size fits all. So I've had clients just print out every single credit card statement for the last 12 months and go through and take those expenses and put them on a piece of paper.
Pen and paper is just fine. But the trick is finding something that works for you and actually going and tracking those expenses. There's just not a one size fits all solution. And if you don't have access to something like E-Money or financial planning software, there are free tools out there like mint.com.
There's free spreadsheets that you can download that will help you do this. A lot of times your bank or your credit card company will offer tools like this too. So there really is no excuse, but it does take some time to find a system that works for you.
But again, I just like reframing as let's just track our expenses. Let's just know how much money we're spending and where it's going, and then we can make conscious decisions around that. Alright, number eight, and we touched on this briefly, but understand your healthcare options. So what do you mean by this?
Peter Lazaroff: Well, I do think that the healthcare options, particularly when you have to deal with Medicare or Medicare Advantage can be complicated. And if you retire before you qualify for that, it may be the first time you're going on the open marketplace for healthcare options.
So we tend to actually refer out to people who do this sort of planning and help you evaluate the different options, help care brokers for a flat fee. The good thing about using a broker in my opinion is that they will shop multiple different rates and you can go buy a Cadillac of an option or you can go buy a Kia.
And so ultimately understanding what the options are and sort of blending that into what you're going to have to spend is an important thing. I also, again, we'd mentioned the health savings account. I think that has a pretty unique set of tax opportunities. And so if you know that you have an HSA that you haven't previously used, that's really an account to learn more about.
Taylor Schulte: I couldn't agree more on the healthcare broker. They are hard to find. It's hard to find somebody that's willing to talk to individuals. They make a lot of their money working with big companies, but I can't tell you how many times these healthcare brokers have helped clients and get them out of uncertain situations and help them plan for the future.
So find a healthcare broker in your neighborhood, in your city, in your state. If you don't have one, reach out to me. I do have one here in California. I don't know if that translates to other states or not, but yeah, I couldn't agree more there.
Alright, number nine. Coming into the end here, educate yourself on key issues. So talk to us about some of these key issues, how to go about educating yourself. Obviously listening to a podcast like this is step number one, so if you're listening, you've already done that, but what else can people be doing?
Peter Lazaroff: Well, it's funny you mentioned that. So when I wrote an article in Forbes on this topic, I actually referenced this podcast and others in the Retirement podcast network. So I really do think that you do a great job on the show covering the most important issues for retirees.
So all your listeners are doing really well and better off than a lot of people just simply by listening to this. The reason that I think educating yourself on key issues is that the more that I learn at least, the more I realize I don't know.
And it is my job and my team's job to be up on every little thing. And there's tax changes, there's estate planning changes, there are all sorts of changes that if you aren't keeping up to date and you don't have a professional, you are going to miss out on opportunities.
And so the challenge with this is that the internet has now made it easy for basically everybody to have a megaphone. The problem is how do you find someone you can trust? So again, I genuinely think this is a great podcast.
You can go to the Retirement Podcast Network as a place that has other podcasts that I've listened to and think are wonderful. One place for written content that I think is pretty good is Abnormal Returns. It is kind of geared towards advisors. However, if you're a do-it-yourselfer, maybe that makes a lot of sense to be looking in that direction.
Taylor Schulte: Yeah, abnormal Returns is a great website every single day taught us over their links to a bunch of different articles, really helpful stuff in financial planning, investing, real estate, so he kind of curates the best of the best and delivers that every single day. Then you can sign up for his newsletter too and just get that in your email inbox.
So I'll be sure to link to that. Any other places to get information or does that cover it?
Peter Lazaroff: How about peterlazaroff.com? That guy seems pretty smart.
Taylor Schulte: There you go. Yeah, peterlazaroff.com does have an email newsletter, does link out to other stuff as well. A lot of great resources. We'll be sure to share that in the show notes.
Speaking of Peter Lazaroff, number 10 is professional advice, and I do want to walk a fine line here and be objective. There are people out there that don't want to hire an advisor, don't want to pay somebody. They enjoy doing this on their own.
So I do want to acknowledge that, but for people that are interested or do need financial advice or maybe why would someone need financial advice? And then we can share some resources around that.
Peter Lazaroff: Yeah, we're both financial advisors and so we naturally sound biased, but I'll give you a couple of little anecdotes. I usually compare it to the decision I made to hire someone to mow my lawn.
And so in my first home I lived on about half an acre. I'm based out of St. Louis so space here is really cheap. And I loved mowing my lawn. I thought it was kind of fun to do. It took about 90 minutes.
I never killed the grass, but there would be times where it would be Saturday and I'd decide to play golf, and then I didn't check the weather, but it rained in the afternoon. Then I couldn't do it Sunday and I had to go back to work Monday. And now the grass is long and it takes longer to cut and it doesn't look as nice and there's lots of little things, but I didn't kill my yard.
It ultimately looked fine. And then one year I was getting too busy and I hired someone to mow the lawn and look, they were doing things I wasn't doing. They were cutting the grass in different directions and cutting at different lengths depending on the sunlight exposure and seeding strategically and edging the beds.
And ultimately, not only did it look nicer, it was much healthier. And so I think this is a simple example of the fact that financial advice is not rocket science. It's not brain surgery, but there are a lot of moving parts. And so anytime that you hire a professional, they're going to do a better job.
They are trained to do it, it's all they focus on. And so I am biased to that sense. However, I hired a financial advisor myself last year, and so here I am eating my own cooking and saying that I got a lot of benefit because despite having the knowledge, I can now focus on things that are more important and it does have someone there to keep me accountable.
Now, if you're approaching retirement, how could this conversation maybe apply to you? Well, we work with a lot of people with as they age, your cognitive ability does decline and you're not conscious of that, decline yourself. And so I do know that some people hire to protect themselves against themselves.
Oftentimes people hire an advisor if they are the lead financial person in their household and the spouse is not, and they need a backup plan, and maybe they don't even move all the assets to this advisor. Maybe they just put enough to meet a minimum and then they have that advisor waiting in the wings in case something is to happen to them.
But I do think something that is really hard to convey and convince someone of is that over time you're going to experience cognitive decline. It's just science and it's unfortunate, but it's also hard to recognize in the moment because it's so incremental.
It's not like one day you're perfectly sharp and the next day you're not. It's just so incremental that you never notice. And having an advisor there can help. It also can help protect against elder fraud. There are things in place that allows an advisor to block out practices that would otherwise harm you.
So I think if you're entering retirement, the important thing from that particular angle, the protecting against aging, protecting against fraud, being a backup plan for your spouse is to work with someone that you think will be there for your entire retirement.
So if you go hire someone who's 65 years old today, they're not going to be there to see you through your whole plan. So I think that does speak to going to a place that has a firm with a deep bench or has a lead advisor that will be there to see you through retirement from day one until the very end.
Taylor Schulte: Yeah, great points. And if you're listening to this and you just don't need a full-service wealth management firm, there are two resources I would send you to. One is a company called Bright Plan, which Peter is affiliated with, and so a lower tier, I don't want to say lower, I don't know how you phrase it, but it's not a full-service wealth management arm. The fees are a little bit lower.
So something to consider there. And then also a network called the Garrett Planning Network, where you can hire advisors and financial planners on an hourly or a project based fee. So something else to consider, you can just put in your zip code and find somebody near you.
So just a couple of resources there if you're just not interested in hiring a full-service wealth management firm. Anything else to add around Bright Plan? I didn't really give it the best advertisement there.
Peter Lazaroff: Well, if you want, I suppose I can give you all a free three-month trial. If you go to brightplan.com/simple, you can get a free three-month trial. That's really intended for readers of my book. But what the heck? We might as well let you all have it too.
Taylor Schulte: We have given away a lot of copies of your book on this podcast.
Peter Lazaroff: Well then you've earned it.
Taylor Schulte: We've earned it. Yeah, I appreciate that. We'll share that in the show notes for people that want to check it out. But it's a great platform that I know Peter and his company have spent years building.
So check it out if you're interested. Peter, as always, I shared with the audience at the very beginning that your episode last year is still the most downloaded episode ever on the history of this podcast.
So we have you back here for round two. We'll see if this episode holds up as well. But thank you very, very much for coming back on and hopefully have you back on again soon.
Peter Lazaroff: Hey, absolutely. Thanks for having me.
Taylor Schulte: Hey, it's me again. I just wanted to say thank you one more time for listening and remind you to please, please leave a quick review if you're on an iPhone, leave a quick review on iTunes if you're enjoying the show.
I'm getting great feedback from listeners just like you, and I really want to keep the momentum going. So if you have a chance on your iPhone, leave a quick review on the Apple Podcast app. And thank you so much in advance for all of your help and support.
Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.