Tom Mosley:

Hey, welcome. Today’s question is how do you make your retirement income last? When people come to see us so many times, and I’ve been doing this 28 years, however they phrase their question their real question is, “Can I retire?” But a deeper question is, “Can I afford to retire?” Which really means can I afford to retire and have enough income for the rest of my life? And if you’re married or you have a significant other, the question is, “Will I have enough income for the rest of my life and their life?” So that’s really the question. How do you make your retirement income last? Let me see if I can help you in the next few minutes. I have some things here for you. Okay? Number one, you got to look at how many things do you have that are going to bring in income in retirement, because your job is most likely not going to anymore. Time out.

Tom Mosley:

42% of the people who are in retirement still have a job. Now, it’s not all because they’re destitute or they need money, but they have a job just simply for more money. They have a job for more enjoyment or they have a job so that it’ll make their marriage last. Because so many times you go home and you’re there 24/7 and you’re just around the house in retirement. So they have a job. It’s a part-time job in many cases, so you could get income from an actual job. But most of the ways that you’re going to get retirement income is going to either come in the way of, let me start with the middle one, Social Security, because more people have that than any other one of these three that are up here. You have Social Security. If you’re married, you have two Social Security’s.

Tom Mosley:

If you’re single, you have one Social Security. If you’re single and you’re divorced, you could play your Social Security off of your ex-spouse if you’ve never been married again since that time and you were married at least 10 years. So Social Security is a big part. Again, it’s over 40% of the average American’s retirement income. And the question is, “How do you make it last?” Well, make sure we do the best on Social Security. A lot of question marks there. Pensions. Now, not everybody has a pension, but you may. And you may have a pension that pays you out a certain length of time, or it may pay you out over your lifetime. It may pay out over your lifetime. And again, if you’re married over the lifetime of your spouse. If you’ve got a pension, that’s good. You’re double dipping. You’ve actually got two annuities.

Tom Mosley:

You’ve got an annuity that’ll pay you something every month for the rest of your life in Social Security. You’ve got an annuity in most cases that’ll pay you something every month for the rest of your life in a pension. And then some of you have rental income. I’m one of those weird investment advisors that I don’t believe you should necessarily sell all of your rental property, and bring me all of your assets. Because a lot of times if you’ve got a good renter or a good system and you’ve had it all put together for many, many years, just don’t sell the rentals until you get to the point where you just don’t want to deal with them anymore. So where could retirement income come from? It could come from all of these. Now, let’s talk about how important income is. In retirement, it’s your income that’s more important, not your lump sum.

Tom Mosley:

We have a very good client who came to us a few years ago, and this very good client came and he only has a little over $100,000 to his name, and he got laid off suddenly by the company that he had worked for 34 years. In our marketing events where we go out all over Southern California and we hold live events, I normally ask and I say, “Is this guy in trouble?” And the whole crowd says, “Yes, he’s in trouble, because he doesn’t have much of a lump sum.” But let me tell you some other stuff about this guy. He’s got an $11,400 a month pension from the governmental [inaudible 00:04:11] that he worked at. He’s got full Social Security because he was able to pay in it while he was still getting a pension. And he’s got three rental houses that pay him a positive income of about $6,000 a month.

Tom Mosley:

So does this guy need income? No. He’s got more income than he ever needs. And even though he is got a very low amount of lump sum, he is in good shape. See, when you’re growing most of the time, and maybe you don’t have all of those sources of income, you think, “Well, it’s my lump sum. It’s how much do I have in my 401k? How much have we put away for retirement?” You’ll see articles in the Orange County Register and the Wall Street Journal. Those are those newspapers we used to get that were made in paper and they were dropped on our doorstep every morning a long time ago. Okay? But you would see an article about every year or so that do you need $1 million to retire? But it’s not your lump sum, it’s your income. Now, how much do you need in income?

Tom Mosley:

Well, that’s answered by starting with a budget. How much are you spending? And in 28 years of doing this, I’ve seen people, and I remember this one little dear lady when I was at my office across the street from where my office is now, she needed $732 a month, and that was it. I mean, she had it down to the T. Okay? But I’ve also had somebody recently who came in and they needed $32,000 a month. So how do you determine your income? Well, it’s specific to you. When somebody starts working with us, we start with a blank legal pad. We don’t have any preconceived notion about you because you could be, probably are, somewhere between that lady at $732 a month and the couple recently that came in and needed $32,000 a month.

Tom Mosley:

But we have to know what your target is. You say, “Well, I’ve got $3 million saved for retirement.” That’s a great lump sum. But if you need $30,000 every single month, it’s maybe questionable if you’re going to retire and have a 35-year retirement living off of $3 million if you need $30,000 a month. However, if you’ve got $3 million and you need $732 a month, you’re going to make it. Okay? You can relax because you’re going to be good. But we have to start with you by working up a budget as to how much you’re spending now. And then if you project out into retirement, we project what are you going to spend in retirement then by seeing what changes when you do retire? Travel, does it change? Not traveling to El Segundo every day, right?

Tom Mosley:

But you might be traveling every year to Europe to do a vacation or Bora Bora. Those are more exciting. I’ve been to all those places, and Bora Bora and Europe are more exciting than El Segundo. So you need to make sure that your budget now reflects then forward to your budget in retirement. So what’s your budget? Now, once we get your budget and we start really focusing on your income, you can use three buckets. And you need an emergency fund. Everybody’s always talked about, put away a year into an emergency fund. Maybe so when you used to get 6% and 7% on money markets, but when you’re getting 0.25% on money markets, maybe put away $15,000, $20,000, $30,000. What’s the biggest emergency you ever had? Put that in an emergency bucket and then work on your income bucket, and then solve the income bucket that we’re talking about right now.

Tom Mosley:

And then you can fast-forward to that other and say, “What’s the other bucket?” Well, if you are worried about the stock market because of volatility and the ups and downs of the stock market, if you have an emergency fund and you have two to three years put away or a lifetime put away of all the income you’re going to need, everything that’s left over can be invested to your risk level in the market, because you’re not going to need that money anytime soon. “Well, I’ve got an emergency.” You’ve got an emergency fund. “I need income.” You’ve got an income bucket.

Tom Mosley:

So working from a three bucket strategy is what we often do with people to give them the ability to sleep at night, and to be able to be comfortable in their retirement because they know each one of those buckets addresses a different thing. Here are the buckets again, you need an emergency bucket for emergencies. You need an income bucket out of which you’re going to draw at least two to three years of income, maybe your lifetime income, and we’ll show you in some other YouTube videos how you can do that. And then maybe one out there for market growth, because the market goes up, the market goes down.

Tom Mosley:

Blessed be the name of the market. No, that’s a scripture. Okay? The market goes up and the market goes down. When the market goes down, is the absolute worst time to get out of the market. I often ask people when they get concerned about the volatility of the market, I say, “When was the last time things were really bad?” “Oh, 2008.” And I say, “Yeah, that was the housing crash.” Let me ask you something. How much money did you lose when you sold your house at the bottom in 2008? And they think about it and they say, “Well, we didn’t sell our house in 2008.” And aren’t you glad you didn’t?

Tom Mosley:

Because what happened to the market? Same thing happens, has historically, at least through the years with the stock market. The market goes up, the market goes down, but overall, the market grows through a period of years. And if you didn’t sell your house in 2008, it’s probably worth twice as much now. Okay? And so if you’ve got a bucket strategy where your emergencies are taken care of, your income bucket takes care of you for at least two to three years, maybe a lifetime, then your market growth can be out there.

Tom Mosley:

And when the market comes back, you’re in the market. You don’t miss out on the big jumps as the market starts to come back and to turn around. Now, if you need more information on any of this, you can contact us at info@mosleywealthmanagement.com, M-O-S-L-E-Y. Our phone number (714) 421-4288. We’ve got a whole team of all-star advisors that work with people starting with a blank piece of paper and say, “What’s your need? What’s your income need in retirement so that we can make sure that you make sure your retirement income lasts as long as you do.”