International strife, wars, elections, tax changes, social security changes, add onto that market volatility, inflation. People who are planning to retire right now or people who are in retirement have a lot of issues that they must deal with. It’s not a matter of choosing whether you deal with that or not. Let’s talk about 10 different things you can do to prepare for uncertain times in retirement. The very first thing you can do is make sure you have a well-diversified portfolio. And what I mean by that is the old saying that mama used to tell us “Don’t put all your eggs in one basket.” We recently had a client that came to us, maybe a few years ago now, but he had $1.8 million and it was all in Apple stock. In times past, I’ve had people come to me with $800,000 in their retirement and it was all in Boeing stock, and at that time Boeing stock was $400 a share, not like it is now, below $200 a share.

So having all your eggs in one basket, not diversifying, can really hurt you in uncertain times. What if the stock market goes down but the bond market goes up? It doesn’t happen a lot anymore, but it could happen that way. What if stocks go down but gold goes up? It could happen that way. Also, one thing when it comes to diversification that people don’t think about, is you need money that’s in a pre-tax account, like in your 401(k) or your IRA, where you save most of your money for retirement. But when you get to retirement, you also want to be sitting there with some money, at least, in an after-tax account. After-tax means it’s already been taxed. And so therefore, when you need a pot of money, when you need to replace the roof, when you need to replace the car and you need $30,000 or $40,000, maybe more, sometimes, you don’t always have to take it out and raise your income by taking it out of a pre-tax account.

You might have an after-tax account, and sure you’re going to have capital gains within that account, but it’s not getting taxed on the entire amount when you take it out. So diversification is not just what kinds of things do you have, but diversification is also what kind of tax treatment do you have with those things that you have. Here’s one other thing. Sometimes people don’t make the transition and diversify between those things that they have that are producing income, and those things that they have that are producing growth. Now, if I were to ask you where social security fits, you’d say, that’s easy, that’s income. That’s an annuity that pays you every single month for the rest of your life a steady amount, increasing amount, even with social security. If you have a pension, that is an annuity that pays you every single month, that’s your paycheck, that’s your income, and your income is what’s so significant.

It’s not in retirement are you going to run out of your lump sum? The biggest thing in retirement is are you going to run out of your income? Those sustaining things in life. So it’s really important that you diversify, not only among stocks and bonds and the bank and other things like that and taxes, pre-tax and post-tax, but it’s really important in retirement that you’ve diversified and solidified your income. And then whatever left over, that’s your paycheck, and whatever’s left over is your play check to enjoy retirement. You have to diversify your investments. The second thing you need to do in preparing for uncertain times in retirement financially, is you got to have an emergency fund. It’s like I need some lumber and I don’t have any lumber in the backyard, I don’t have any two-by-fours, I don’t have any plywood, so I tear part of my house off to do whatever I need for two-by-fours or for plywood.

You wouldn’t think of doing that. Well when you build a retirement plan, let that be your retirement plan. But in that plan, you also need a side account over here, probably in the bank, in a money market or somewhere, that’s there for emergencies. Because as we said in the first segment, stuff still happens. I feel like every single show, regardless of the subject that we talk about, we always drive home the point that you need probably a minimum of three to six months, some people go six months to a year, of money that’s in an emergency fund that’s set aside so you can get it without tearing down your plan, without tearing into the retirement house that you’re building to live in for the rest of your life. You need that go-to money. Hey, start with a thousand dollars. Just build something and set it aside.

Don’t say, “Well, I’ll keep that in my checking account.” Nobody’s successful with doing that. Okay? Put it into a separate account and that’s your emergency fund. And then allow that to start building through the months and through the years, and then you’ve got enough to handle your emergencies without tearing down your plan. Third thing you need to do for uncertain times. You don’t need to be carrying debt. I think of… Maybe you’re on an African Safari and you see a lion. And it’s the old story that if you’re with somebody else, you don’t have to outrun the lion, you’ve just got to outrun the person you’re with. Okay? And that’s a big joke, and a lot of people like that. I like that. I think it’s a good joke, but it’s really you don’t, in retirement, if you’re running, you’re carrying a big heavy weight, you’re not going to win the race.

You’re going to be the one that gets eaten by the lion if you’re carrying a lot of debt that you have to pay month to month, and you’re paying interest on that debt. So instead of having an emergency fund or money set aside, that when you need money, you go to yourself to borrow money and you’re just not making money, but you’re not paying debt on it, you’re not paying interest on it, and you’re not going into debt for it. Don’t laden yourself with debt when you’re trying to run the retirement race. It’s just going to slow you down, and for some of you, it’s going to stop you and it’s going to cut you short, and your income’s not going to last the rest of your life because you’re carrying too much debt. It’s got to be a focused, concentrated effort to get rid of that debt.

Number four, real quick, and for those of you who listen on a regular basis, every time we talk about making sure you’re ready for retirement, we talk about maximizing what you can put into your retirement plan. If you’ve got a retirement plan at work, take advantage of the match. They’re going to match you 2%. You put in two, they give you two. If they’re going to match you 4%, you put in four, they give you four. You end up with eight. And you’ve put in four of it. Anybody can figure that out. It’s a tough thing to do, but you’ve just got to start doing it because if without it, you’re never going to be able to retire. And you always think, “I can’t afford that much money.” Well start with a little bit. Start with just a little bit and give yourself a raise.

Every single time you get a raise, and you get like a 4% raise, give yourself 2% of that raise. That’ll bump what you’re making, and give your 401(k) 2% of a raise. It will allow you to begin to build and maximize that retirement plan and build your retirement savings without breaking the bank or going hungry or missing out on what you’re doing, because you’ll still get a raise, but your 401(k) will as well. So you’ve got to maximize your retirement accounts if you’re going to make sure and be there during uncertain times. Number five, create a retirement budget. You need to know how much you’re spending. You need to know that before, because if you know what you’re spending, it’ll make you mindful of what you’re spending. So if you’re excessive in one area and you know don’t need to be excessive in that area, at least if you know about it, you’ll probably not do it.

When my wife brings up something that I’m doing that annoys her, I don’t even know that I’m annoying her until she tells me that that’s annoying her. But then after she tells me that every single time I do it, I think, “Wow, that’s annoying, Susan.” And then I can choose to do it or not, if you understand what I’m saying. So if you put together a retirement budget, at least you know what’s annoying your retirement, what’s not helping your retirement, and then you can choose to do it or not, but at least you’re mindful of the fact that when I spend something now I’m taking away from what I’m going to need and have in retirement. So you’ve got to sit down the numbers and say, “What are we going to spend in retirement? Therefore, how much do we need to build up so that we’re prepared and ready to retire?”

Number six, in retirement, uncertain times. You need to review your portfolio, particularly for the risk. Now, there’s two risk scores you need to be aware of. Your portfolio has, in comparison to the stock market as a whole, the S&P 500, a risk score. The stock market is 100 or 1.0 if you did it on a percentage basis. And your risk score might be 50, might be 75. And what that means is your risk score on your portfolio might be 50% as risky as the market or 75% as risky as the market. If you’re 50% as risky as the market, that means that when the market goes down, you should get about half the loss. However, when the market goes up, you should get about, you got it, half the gain. So you need to know the risk score of your portfolio and you need to match it up.

Here’s the other risk score you need. You need you to know your internal risk score. What kind of risk can you take without getting all nervous or upset or losing sleep over it? No investment is worth losing sleep over. So if your portfolio is at a 94 like I had a lady recently, and her risk score was at a 39, she’s out of balance. You need to make sure that you pay attention to that portfolio and it’s in line with the risk level. Sure, you’d like to get all of the stock market gain and none of the stock market loss. Well, we don’t live in heaven yet, so we’re not going to get that. Okay? So on this earth, you’re going to have to subject yourself to the stock market gain, potentially, but also the stock market loss. So it’s just a matter of what risk level you need to take in your portfolio.

And I would be mindful of this, I want you to be mindful of this, be careful for a broker who’ll say, “Well, I’ve got you in moderate.” What does moderate mean? Moderate means different things to different people. You need to actually see a score. And if you’ve got me in moderate, what am I in my heart when it comes to a risk level that I want to take? So you need to make sure and pay attention to your portfolio, and make sure that its risk level is the same as your risk level. Number seven, healthcare cost. So many people come into my office and they say, “Well won’t Medicare take care of that.” Medicare is like a government insured health insurance, and with health insurance you still have costs. You still have co-pays, you still have deductibles, you still have things that Medicare will not pay for, that you’re just going to step out of bounds and say, “No, I don’t care if Medicare will pay for it or not, I want to pay for it.”

A recent study by one of the big box firms showed that if a couple, if they’re both 65 years of age, they’re going to spend over $300,000. If they both live a normal life until their upper 80s. They’re going to spend over $300,000 on healthcare premiums, on all kind of different things. So what can you do? You can build a health savings account. You can set aside money for savings. You can set it for health savings. You could set aside money for any kind of hospital care or outside of Medicare costs. You could set aside some annuities, now will pay an activities of daily living rider, where you’re getting a certain amount for the annuity, but if you hit two of the six activities of daily living, it’ll double the payout for five years to help you through that time period.

So again, it’s not a matter of whether that’s going to happen or not. You can’t control that. The question is, do you have, in your plan, built, “How am I going to handle excessive healthcare costs?” Because they may come to you. Number eight, times in retirement may cause you to get a job. That’s what we used to say to our teenagers when they were in the house and they wanted excessive amounts of money. We’d always say, “Get a job, earn something, go earn it on your own.” A lot of people in retirement continue to work. In fact, I saw a statistic recently, people that are 70, there’s 43% of those people who are 70 are still working in some form. It might not be the full-time job they had all their life. It might be a part-time job at one of the home improvement stores.

One of my clients has worked there for about seven years at a home improvement store after he “retired.” And he loves it. He works about 20 hours a week, gives him social interaction. We call it… What do you want to call it? A hybrid retirement, a semi-retirement. But it might be something that will help you through uncertain times, because if you totally retire, think about it, every penny that you have has to come out of your rock pile, your lumber yard. Okay? And it has to come out of your portfolio somewhere. But if you earn $200 a week, $150 a week, that’s $150 a week, at $200 a week, that’s $10,000 a year you don’t have to pull out of your portfolio. That’s going to make it last longer. So in uncertain times when the market’s down, your portfolio’s down, instead of pulling money out of a down portfolio and taking out more shares, you might want to get a job to help you through that time, and it also might help you a lot with social interaction.

Number nine, almost a given. You got to make sure you’re getting the most out of your social security for you. I don’t call it maximizing your social security, I call it optimizing your social security. Anybody can tell you that if you wait till 70, you’re going to maximize your social security. But what if you run out of money in your 401(k) or your IRA waiting till you get to 70? What if you don’t have enough money at 67 to buy groceries or to pay the bills? Social security is an individual thing. You may get advice from a friend or a neighbor to tell you what’s best for them for social, but it may be the absolute wrong information for you as to when you turn on your social security. That’s where you need professional help and guidance. And every other thing in your portfolio fits around social security to give you the optimal time as to when you turn on social security.

I’ll tell you this, in uncertain times, you’re going to want to have the most that you can get for your needs coming out of social security. Hey, let’s bring it home. The 10th thing you need to watch when you’re going through uncertain times in retirement is market volatility. I just alluded to that fact. If the market is down 50% like it has been twice since the year 2000, and you’re taking out X amount of dollars, the same you were taking when it was high, you’re taking out twice as many shares or twice as many of whatever you’ve bought into, it’s costing you twice as much of your equity to pull it out in uncertain and down times in the market. So be aware of market volatility. It’s a good reason to maybe look for the part-time job we talked about. It’s a good reason to maybe have an emergency fund that can get you or assist you through those times.

It’s a good reason, maybe sometimes, to have an annuity in the wings that you can turn on to give you extra income during those down times so that you don’t completely collapse your portfolio. Market volatility can really hurt you. It’s a great time to, before the market goes down, to know what we talked about in another segment, your risk level and your portfolio’s risk level, making sure that they match. So in summary, is the market down right now? I don’t know when you’re going to be looking at this. It could be. Is it uncertain right now? I think overall it is because of the wars and the elections and all of those things. And people come in and they meet with me on a regular basis and they say, “I’m really not sure what the market’s going to do.” You know what? I’ve been doing this 29 years, and at any day along the way, I could tell you that same thing.

I’m not really sure what the market’s going to do. Therefore, therefore, if you’re sure you’re not sure, then you need to build a plan so that when the market does go through uncertain times, you’re ready for it. The time to fix the roof is before it starts raining. And the time to get a plan to make sure you’re prepared for uncertain times in the market is before you find yourself in the midst of uncertain times in the market.

Hey, if you want to know what’s involved in a real retirement blueprint or retirement plan, then check out our show, “How to Build a Retirement Plan”, because it’s a whole show that tells you what’s involved in a real retirement plan. And if you want our individual help, go to the website, www.mosleywealthmanagement.com. There’s a place where you can let us know that you want us to contact you and we can talk to you and talk about your situation. If you like the show, and our blog, click like. That helps us a lot. If you’re just listening/reading because somebody sent you the show or you happened upon this show, then subscribe, and that way you’ll know every time we come out with a new episode. Hey, until next time, I’m Tom Mosley, and I promise you if you’ll give me 10, 15, 20 minutes, I’ll do my best every single time to increase your financial knowledge.