Are you 55 years of age or older and you’re worried about running out of money in retirement? Well, congratulations, pat yourself on the back. You’re very normal. That is the biggest fear of people, 55 years of age and over. In this podcast, we’re going to look at some of the reasons. We’re going to look at some of the issues that are involved. We’re going to look at a solution. And then I’m going to show you a case study. So stick around that case study might help you lay some of that fear that you’re going to run out of money in retirement.

First, you have to ask question why. People right now have less savings, less money put away historically than other generations have had put away for retirement. Another reason is people have fewer pensions. They just don’t have that monthly flow of income coming in. And another reason is we’re living so much longer. If you’re 65 years of age right now, regardless of what you have saved, regardless of what pension you have, you likely are going to have, unless you’re not healthy, you’re likely going to have another 20, 25 or 30 years to live off of that nest egg. Aha. That’s why people are afraid of running out of money in retirement.

So just so we’re clear, I want to list a few things that are causing people to run out of money in retirement. We mentioned living longer. Second is inflation because now we’ve had the reintroduction of inflation into our vocabulary. It’s been out of our vocabulary when it came to retirement planning for 40 years, 45 years since the Jimmy Carter days. But inflation is back.

Now here’s the list, healthcare issues. If you’re going to live longer and you’re older and you begin to wear out, then healthcare becomes more of a financial crucial issue. Another thing is market volatility. It seems that markets used to very slowly, just over a period of time, go up with an occasional downturn. Now, it’s not unusual for things to be up 20% one year, down 20% the next year, up 20% the next year. Huge swings in market volatility where a lot of people have their money put away for retirement.

Another thing is people are carrying more debt now. There was a time when people would buy a house, they’d live in that house forever. They’d get it paid off after 25 or 30 years. They would live through retirement with their house paid off with credit cards. They didn’t even have credit cards 50 or 60 years ago. And so credit cards were paid off because they didn’t exist. And that recurring debt at 21, 22, 23% was not a problem.

And then I would add another one because I’ve seen this over 29 years of doing this, the failure of younger people to leave and cleave. The scriptures talk about leave your father and mother, cleave to a wife. Kids are getting married at an older age now. They’re staying home longer. They’re coming back. The boomerang generation where you throw them away to college and they come flying back to the basement even if you don’t have a basement. And that just causes added expense on you as you’re in retirement or close to retirement.

So what’s the solution? Well, it’s pretty easy, but it’s not this easy. Number one, you take an in-depth look at what you have, because that’s your lumber yard and you’re going to build a retirement plan. We call it a retirement blueprint at Mosley Wealth Management. You’re going to build a retirement blueprint from what you have. So you’ve got to look at what you have, how it’s invested, how it’s going to be taxed, has it already been taxed? So many things you’ve got to look at by looking at what you have.

The second thing you need to look at is what do you need each month? I mean, I’ve had people come into my office and meet with me that needed $1,500 a month. I’ve had people come into my office and meet with me that needed $38,000 a month. You’re probably within that range. So what do you need in retirement? Because that’s going to determine the withdrawal rate and how we withdraw from what you have. So two very simple items will help you start to build a very elementary plan for retirement. Number one, what do we have? Take inventory, build it up. And number two, how much are we spending each month?

All right, let me present a case study of a couple that I met with very recently within the past couple of weeks that will illustrate how you put together a plan to address your fear of running out of money and to make certain that you don’t run out of money in retirement.

I had a couple that came into me. They were in their early 60s. She had retired two years ago. He is just retiring at this point. When we collect all of their money out of their 401(k)s, their 457s, every single thing, their IRAs, when we pull all of their money, that’s the lumber yard that we were talking about, what they have, they have $1.6 million. So we’re making progress. We know what they have. We then went to their budget and we found out what they needed to operate on for the rest of their life, at least in today’s dollars. And what we found out was with two social securities and a pension, a small pension that they were $2,000 a month short. So translating that into dollars per year, they were $25,000 per year short. They had 1.6, they needed another $25,000 per year.

We investigated several options and the one they chose was this. We showed them a fixed indexed annuity. Now what does that do for you? That gives them guaranteed increasing income for as long as either one of them are alive. And even after they run out of money, it will pay them that guaranteed increasing income over their lifetime. We discovered that the only needed to allocate $500,000 to that fixed indexed annuity and their income for life was solved. It took care of inflation, it took care of growth, it took care of every single thing. And their income or what we call their paycheck was secure for the rest of their life. You should have seen the Excel.

That’s great because then they had in their plan $1.1 million left for their playcheck. This couple particularly wanted to buy a motor home and they’d already priced them and they found out that they were like $150,000. And they wanted to buy a motor home so they could travel around the country, go to some of the national parks that they’d always looked at going to. And so what they found was we were able to then allocate out of that $1.1 million playcheck $150,000 that they could go and buy the motor home and start their dreams. The lady looked at me after we put the plan together and they bought into it and she said, “We would never have bought this motor home with the uncertainty of just leaving all of our money in investments and not knowing when we were 85 years old, 20 years from now, if we were going to be out of money.” That’s the certainty that putting together a plan will help you with when it comes to the question of, “Will we run out of money in retirement?”

So if you’re about to retire, and that fear of running out of money is something that’s very real to you, very simply take inventory of what you have, take inventory of what you’re spending every month, and you probably need to have the advice at this point of a professional who’s walked through with thousands of people how to do this, how to build that plan so that you can feel secure about it.

And remember, there are all kind of issues that are going to put you in that position, but just knowing what you have and knowing what you need each month can be a major step toward helping put that plan together. Do you know someone who is about to retire who may be fearful of running out of money in retirement? Perhaps you could share this so that they could at least have this amount of input and they could have the advice that we’ve given so that it might help them get to a point where they’re not fearful of running out of money in retirement.

I always promise you, if you’ll give me about eight to 10 minutes every week, I’ll do my best to build your financial knowledge. I’ll see you next week.