Work has changed a lot over the last few years. It may seem like that retirement date you chose can’t come soon enough. Maybe you don’t need to wait. In this conversation, we talk about whether it makes sense to reconsider when to take that opportunity.
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Speaker 1 (00:06):
Welcome back to 30 Minute Money, the podcast that delivers action oriented smart money ideas in bite-size pieces. Joining me is Steve Wershing. Great to have him back in studio because he's
Speaker 2 (00:18):
Awesome. Come right here. You can say this. Oh, wait,
Speaker 1 (00:19):
You, I was telling the audience. Oh, okay. You know, you know, I
Speaker 2 (00:23):
Feel come. I do. Yes. And it's nice to see you too, Scott. I love being here
Speaker 1 (00:26):
From focused Wealth advisors, and, uh, boy, this is, this is the best question that I've seen on this podcast so far. , why are you still working? I ask myself that every
Speaker 2 (00:37):
Day. I think a lot of our listeners probably do. And so we wanted to talk a little bit about that. Yeah. Because, um, you know, because workplace stress is, is, you know, is an issue again. And, and, and, you know, with, with all the changes that have happened over the past few years, you know, we'd, we had, uh, the pandemic come and then suddenly people had to get used to working, you know, from home. And once they got used to that, they, a lot of 'em decided it was pretty good. And now a lot of 'em are being called back into the office and, you know, so there's a lot of stresses out there. There are a lot of issues. And, you know, so the, the question has been floating around out there, you know, why are you still working? And so I wanted to talk a little bit about that because sometimes people just, you know, sort of, they, they've got this idea in their head that they're gonna work to a specific age, but they don't go back and question that. And you know what, sometimes it's a good thing to go back and review and question and, and work through, because if you're facing a lot of stress at work, if you're really not happy, well, maybe you don't need to be working there. So
Speaker 1 (01:35):
I will, I will say that, uh, since I started this studio, I've never been happier.
Speaker 2 (01:40):
Speaker 1 (01:41):
Yeah. So even though there's that, that stress that goes along with being a small business owner, still, it's, it's, uh, yeah. It's my stress. It's, it's exactly, it's my, you know, I'm not, I'm not stressing for somebody else's wellbeing or whatever.
Speaker 2 (01:55):
That's right. It's, it's, it's, you know, it's like going to the gym, right? Right. It's like, it's stressful and you get all sweaty and you get achy and that kinda stuff, but totally worth it,
Speaker 1 (02:02):
Right? Yeah, absolutely.
Speaker 2 (02:04):
So you're choosing to do it. But this, this kind of came out of a, of a situation I had just really recently with a client. I had a new client come in, start a plan, but one of the big things on his mind was, how long do I have to keep working? Because, you know, just the work situation is bad and he, he doesn't get along with his boss. And Yeah. And he's, he's under a lot of pressure and they give him an, you know, they're just increasing his workload all the time. And he's just like, I just, I don't know how long I can take this. I just wanna, how long do I have to keep doing this? And so we started working on this, you know, in response to that to say, let's take a look. Let's see, let's, let's find out how long you need to work.
And so, you know, so where I would start would be, you know, if, if you're planning on retiring at a certain age, why did you choose that number? Is it because that's where you thought you should retire? Is it where your dad retired? Is it, you know, is is it, uh, you know, is it an age that think has, you know, is it like an official age, you know, to do it? So, you know, you, you going back and questioning, you know, if, if you really have your sight set on something and you're determined to that, well, why is that? You know, because maybe it's worth it. Maybe it's worth questioning that maybe it's worth rethinking that a little bit. Yeah. If you're not happy where you are, um, now there, there are a couple of really good reasons why you might need to continue working.
You know, you might have chosen that age, or you need to, might, you might need to keep working 'cause you don't have enough to retire. You know, that's perfectly legitimate. You may be waiting for social security. That may be, you know, that's a good reason to do it. For some folks who, you know, like, um, teachers, uh, are often in this situation. Um, if you work at a company that still has a pension, you might choose an age because you need to get a certain score before you can get full pension benefits. So, you know, typically it's age plus years of service, and that has to come up to a specific number before you get your full credit for your pension. That, that's, that's it's worth, it's not necessarily a good reason to stay there, but it's a good thing to consider when you evaluate whether or not this is a good, you know, when, when you really need to step away or wanna step away. Mm-hmm. ,
Speaker 1 (04:08):
There's a lot fewer jobs that have pensions now. Yeah. Than, than than used to
Speaker 2 (04:13):
Be. Yeah. The pension's going away. Yeah. Um, if, if you have a pension, you are in among the lucky few because,
Speaker 1 (04:20):
You know, they're mostly government jobs and, and military and things like that, or public service. Yeah.
Speaker 2 (04:25):
Most of 'em are like that. Uh, but there, you know, there are still some, you know, big old companies that still have pensions. Yeah. Um, but they are getting rarer and rarer. They're, they're, they're very expensive for the company. They're expensive to fund, they're expensive to maintain. You know, there's, you know, it, once they introduce the 4 0 1 k and, and the, and the company could just say, listen, we'll just budget 4% of our payroll to go into this. That's way easier for them to deal with. So unfortunately puts all the investment onus on the participant. Another episode, different question, right? But yes, pensions are getting, getting fewer and far between. So, uh, if you have one, you definitely want to take a look at when you get the full credit for it, because it's worth hanging onto. So, um, so why might you consider retiring a little bit earlier?
Well, you know, for most people, the biggest reason is from stress. And then if you have, if you're, if you're working too hard, if you have, you have, if you have a difficult work environment, if you know a lot of those things go on, there are lot, there are lots of studies out there now that show that it can hurt your health, it can hurt your sleep, it can hurt, you know, all kinds of things. And so it's worth reconsidering what that, what that projected age should be. And so when you think about that, what kinds of things do you need to consider? Well, if you are vesting in retirement benefits, like that pension thing we were just talking about, that's a, that's something you want to consider. You wanna evaluate that before you make a decision to change your retirement date. Um, you want to, uh, you wanna take a look at when you can qualify for social security.
So you can qualify for social security as young as 62, but it's rarely the right choice to file. We had a whole episode about that, about when to choose it. So what date you choose to retire, when you can get social security benefits and not lose benefits or get penalized. That's something that should go into that calculation. Um, Medicare is often a consideration. So if you leave where you're working before you're 65, typically you'll go, you'll have to provide your own health insurance for some period of time. It's, and it's very expensive. You know, I've, I've had a, you know, a bunch of clients retire in the past few years, and as soon as they leave, they can either buy the insurance for 18 months, they can buy the insurance that the company had under what's called cobra, right? Yeah. Still very expensive. Yeah, very expensive.
And you can buy it on the exchanges, but still very expensive. So, you know, a lot of people wanna hold on until 65 so they can get Medicare, that's legitimate. And you, you wanna weigh that in the mix. And, uh, and of course, you know, when can you afford to retire? So that's determined by how much it re how much it takes to keep your household budget put together and what kinds of sources of income you'll have. So if, if you do have pension, if you do get social security, then you need to figure out how much you're gonna have to pull out of your nest egg every year to be able to make up whatever difference there is. And you wanna make sure that you sit down with somebody who's competent at projecting this stuff, because you need to factor in things like inflation.
You know, I've known a few people who have retired because they looked at their nest egg, and their nest egg was generating however many dollars per year, and they're like, well, I don't need that much. That'll be fine. And they forgot about inflation and they retired relatively young. And so 10 or 15 years later, all of a sudden now expenses are higher than the income they can get from their nest egg and they're depleting it. That's bad. So you wanna make sure that you project that ahead of time. And in terms of that household budget, this is one thing, we had a whole other episode about this too. When you project, you wanna make sure you're dealing with real data of how much you actually spend, because most people are off. If you don't have something, if you don't use a software to track it or whatnot, right?
Most people are off. And I think the studies that I've seen have, you know, the people are off by as much as 30% on average. Well, if you're off by 30%, your plan's not gonna work . So if you're considering this, if you're considering, well, maybe I should rethink how long I wanna work, sign up for something that will track your expenses for you so that you can get six months, a year, two years worth of data. So because of, regardless of what you think you're spending, you need to know how much you are actually spending. And that's, that's the basis of a financial plan, is that income need. If you don't have that right, your plan's not gonna work very well. So you wanna make sure that you, um, that you do, that you wanna make sure that you've also assessed the risk of possible health incidents, because that's a lot more likely to happen in retirement.
And if you, if you, if you need long-term care or something like that in retirement, you wanna, you just want to make sure that you've assessed the impact of that because you don't want it to totally blow up your plan. And so when you project what you'll need for retirement and how much your current resources will provide for you, you need to put in there, what if I need long-term care, what happens to this whole projection? What happens to this plan if I need it? And if it totally blows it up, you either need to figure out how to mitigate that, or, you know, you might need to work a little bit longer to save a little bit more. And keep in mind, retiring is not necessarily a, a yes or no kind of thing. Um, let's go back to that client that I was talking about before, who started all of this.
One of the things that he had open to him, one of the options that he had was that he had an offer from a company to come work for him, uh, for them part-time. So it's not a full-time gig. It was, it's, it's part-time. So the question is, well, if I take this part-time job and I begin drawing a little bit from my retirement, can that work? Because what he would be doing is closer to home, less stressful environment. You know, he, it just looked, it sounded like it would be a much better situation for him overall. So one of the things that you can consider is, um, you know, you don't necessarily have to be retired full-time. You can work part-time. And so if you do, how does that affect your social security? How does that affect how much you have to pull out of your portfolio?
You know, you mix all that stuff in so that you might step down instead of going from full-time work to full-time retirement. There might be something in between, right? That you could do it and you might be able, if you're, if you are having a difficult time at work, it may be a way to get out of that without necessarily going full on retirement and having to, having to pull everything from your nest egg. So, uh, so in his case, you know, what we did was, you know, we evaluated Social security and, and keep in mind, you know, below your full retirement age, if you work and you make above 21,000 some odd dollars, they'll begin taking your, taking your social security benefit away. That's not a tax, that's just a reduction in benefit. And so, you know, it, you may retire early or you may just stick it out till full retirement age, or you may retire early and just draw on your portfolio and wait to file social security until full retirement age.
So those are all the things that you want to go through, all those scenarios you want to examine before you do it. But that would be, you know, what we, what you may find is that when you examine all this, and, you know, I've had this situation, a lot of other financial advisors I've talked to have had this situation where people come and they're like, I don't know what to do. I'm just, you know, work is killing me. And we, you know, we go through the whole thing and say, yeah, you could do this now if you wanted to. So, um, so ask yourself, if you're, if you're struggling at work, ask that question, why am I still doing this? And make you know, and take a look at your whole situation project, what you, what you would need to do if you retired sooner than you were thinking about, you might find that it works out for you.
Speaker 3 (12:11):
Your retirement is at risk, not from the stock market, not from inflation. Taxes are putting your retirement at risk. I'm certified financial planner, Steve Waring and I specialize in helping people create low tax retirements. Unmanaged taxes can take 30, 40, even 50% of your retirement income. Learn how to defend yourself against excess taxation. Our complimentary webinar will cover all the principles you need to know to protect your money for you and your family, and keep it away from the government. This free webinar will cover how taxes are different in retirement, the taxes you pay in retirement that you don't have to pay during your working life. How to move ta savings into a tax-free environment. The Widows Tax, the Secure Act, the Secure Act 2.0 and what they mean to you. The webinar is free, but you have to register to save your spot. So go to focused wealth advisors.com/webinars and find out more and sign up right there. Even if you're not planning to retire for the next five or 10 years, this information will be critical for you. The longer you have to put the strategies into effect, the more you can accomplish. That's focused wealth advisors.com/webinars to find out more and to sign up today.
Speaker 1 (13:37):
And of course, if you go back to our, uh, our Library of podcasts, you'll see a lot of subjects that Steve just uh, mentioned that we've covered in, in a little bit more detail. So what's your 30 minute action item?
Speaker 2 (13:49):
30 minute action item. Uh, reconsider what age you're projecting to retire and analyze what a better date might be.
Speaker 1 (13:58):
All right, I'm gonna retire tomorrow now. Excellent.
Speaker 2 (14:01):
Speaker 1 (14:02):
Don't tell my wife. Thanks for listening and watching the 30 Minute Money. 30 minute. Do money please, like, subscribe, and share with your friends for all the best information in the world. Right on this. Can I say that?
Speaker 2 (14:15):
That's pretty big .
Speaker 1 (14:17):
That's my opinion and I'm sticking to it. Steve Wershing from Focused Wealth Advisors and Scott Fitzgerald from Roc Vox. We'll catch you next time on 30 Minute Money.